UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT
COMPANIES
Investment Company Act file number 811-05641
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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: December 31, 2004
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ITEM 1. REPORTS TO STOCKHOLDERS.
The Annual Report to Stockholders follows.
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The Park Avenue Portfolio(R)
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Annual Report
to Shareholders
December 31, 2004
The Guardian Park Avenue Fund(R)
The Guardian UBS Large Cap Value Fund(SM)
The Guardian Park Avenue Small Cap Fund(SM)
The Guardian UBS Small Cap Value Fund(SM)
The Guardian Asset Allocation Fund(SM)
The Guardian S&P 500 Index Fund(SM)
The Guardian Baillie Gifford International Growth Fund(SM)
The Guardian Baillie Gifford Emerging Markets Fund(SM)
The Guardian Investment Quality Bond Fund(SM)
The Guardian Low Duration Bond Fund(SM)
The Guardian High Yield Bond Fund(SM)
The Guardian Tax-Exempt Fund(SM)
The Guardian Cash Management Fund(SM)
DEAR SHAREHOLDER:
[PHOTO]
Thomas G. Sorell, C.F.A.
Chief Investment Officer
QUICK FACTS
- - The U.S. economy overcame a number of obstacles and continued to expand in
2004.
- - The stock market rallied sharply during the fourth quarter, helping to produce
solid results for the year.
- - Despite the Federal Reserve raising the Fed Funds rate 5 times and 1.25%, the
fixed income markets performed surprisingly well.
- - High oil and raw material prices exerted inflationary pressures early in the
year that subsided as the year progressed.
- - The U.S. dollar fell in 2004, boosting the returns of international stocks and
bonds for U.S. investors.
- - We believe that the outlook for the economy remains positive, and that stocks
and bonds may produce more modest gains in 2005 versus the previous year.
AN EXPANDING ECONOMY
If you had anticipated all of the headwinds the U.S. economy faced in 2004,
one would have been hard pressed to predict the economy's resiliency and the
market's performance during the year. There were any number of factors that,
individually, could have derailed the economy, including surging oil prices,
rising interest rates, record trade/budget deficits, a falling dollar, higher
inflation, uncertainty surrounding the Presidential election, and threats of
terrorism. Yet, collectively, these issues were still not enough to impede the
economic expansion. Following a robust 4.5% gain in the first quarter of 2004,
gross domestic product (GDP) fell to 3.3% in the second quarter of the year.
This decline was largely attributed to higher energy prices. However, third
quarter 2004 GDP rose a solid 4.0%. While fourth quarter GDP was below
expectations at 3.1% due to higher imports, GDP was 4.4% for the year. This
represents strong growth especially considering fears earlier in the year of an
anemic jobless recovery in 2004. (Gross Domestic Product measures the value of
goods and services produced in an economy.)
As we entered 2004, it was widely expected that business spending would
fuel the economy. This was due to pent-up demand, tax incentives, and the fact
that consumer spending, which had long propped up the economy, would moderate.
Yet, despite high personal debt levels, a low savings rate, less mortgage
refinancing, and fewer tax breaks, consumer spending remained strong and helped
the economy to gain momentum as the year progressed.
A LATE RALLY BOOSTS STOCKS
During much of the first ten months of 2004, stocks treaded water.
Investors don't like uncertainty and many of the issues previously mentioned
provided ample reasons for people to remain on the sidelines. All of this began
to change in late October, as signs emerged that the Presidential election may
be resolved without a prolonged battle. In addition, oil prices, which hit a
record $55 a barrel in October, started to fall, and corporate profits remained
solid. Market psychology and investor confidence improved markedly after the
election and, during the last nine weeks of the year, a strong rally ensued. All
told, the overall stock market, as measured by the S&P 500 Index, generated a
total return of 10.88% with dividends. (The S&P 500 Index is an index of 500
primarily large-cap U.S. stocks that is generally considered to be
representative of U.S. stock market activity. It is unmanaged and not available
for direct investment.) Past Performance is not an indication of future results.
Within the S&P 500, there was wide variation in returns across the economic
sectors. The Energy sector out-performed the broad index by nearly 18%
benefiting from rising oil prices. Utilities outperformed by 9%. Utility stocks,
which tend to be high dividend payers, benefited from the reduction in dividend
tax rate. They tend to move with interest rate expectations and so they rose as
the widespread fears of rising long-term rates did not materialize. The Health
Care and Technology sectors underperformed the broad index by nearly 11% and 9%,
respectively. Lack of new drug products, competition from generics, fears of
drug re-importation and particularly the fallout from the link between
pain-killers and heart attacks hurt pharmaceutical stocks. Technology stocks
were hurt because capital expenditure on technology lagged prior expectations
formed on the basis of a recovering economy.
Value stocks outperformed growth stocks in the U.S. in all size categories
and in foreign markets, both developed and emerging. Stock market volatility
fell, and inflows into equity mutual funds were strong.
BONDS SURPRISE ON THE UPSIDE
As the year began, it would have been difficult to find a financial expert
who thought that the bond market would perform well in 2004. Short-term interest
rates were at a four decade low and there were increasing indications that the
economy was strengthening. As such, it was felt that it was only a matter of
time until the Federal Reserve Board (the Fed) would begin to raise rates. This
came to pass in late
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June, as the Fed raised the federal funds rate by 0.25% to 1.25%--the first
increase in four years. The Fed again raised rates in 0.25% increments in
August, September, November, and December. These five rate hikes were the
highest number instituted by the Fed in a calendar year since 1994 and brought
the federal funds rate to 2.25%.
While short term bond yields rose and prices fell, intermediate and
longer-term bond yields remained surprisingly stable, with 10 year Treasury
yields ending the year just 0.03% lower at 4.22%. The fact that longer term
interest rates moved little was in large part due to two factors: continued
confidence in the Fed's ability to keep inflation from increasing substantially
(so investors' long-term inflation expectations stayed in check), and the
tremendous support provided by the foreign central banks' buying of U.S.
Treasuries related to efforts to slow the depreciation of the dollar versus
their currencies. Despite rising rates, an uptick in inflation, and a solid
economy, the overall bond market, as measured by the Lehman Brother Aggregate
Bond Index, returned 4.34% in 2004. High yield bonds performed even better, as
default rates remained low, corporate balance sheets continued to improve and
demand was strong as investors searched for incremental yield. During the year,
the Lehman High Yield Bond Index returned 11.13%.
ECONOMIC OUTLOOK: POSITIVE, BUT LESS ROBUST GROWTH
As we enter the new year, the U.S. economy appears to us to be on solid
footing. The Blue Chip Economic Indicators consensus estimate for 2005 GDP
growth is 3.5% versus 3.9% in 2004 (Q4/Q4).This rate is substantially higher
than other developed countries and slightly above the country's long-term
historical average. While inflation is expected to rise, we do not expect it to
be a major issue in 2005. The consensus forecast is for CPI to increase 2.5% in
2005. (The Consumer Price Index (CPI) program produces monthly data on changes
in the prices paid by urban consumers for a representative basket of goods and
services.)
To be sure, there are several risks to these forecasts that would result in
weaker GDP growth, such as higher inflation, and more aggressive moves by the
Fed to raise interest rates. Consumer debt is high, and the personal savings
rate is low, and if the wealth effect from a booming housing market cools off,
personal consumption may weaken reducing economic growth. The U.S. dollar, which
has depreciated 17% since its peak in February 2002 on a broad trade weighted
basis, and 5% in 2004, is expected to continue depreciating in 2005. An orderly
decline would not be entirely unwelcome, as it would make U.S. exports more
competitive abroad and help lower the record trade deficit. However, should the
dollar decline sharply, we believe that it would most likely create inflationary
pressures, and reduce demand by both U.S. and foreign investors for U.S.
Treasury securities causing interest rates to rise and adversely impact economic
growth.
In terms of interest rates, the Fed is currently expected to continue
raising the Fed Funds rate by 25 basis points at each of its next four meetings,
bringing the rate to 3.25%. Fed Chairman Greenspan could not have been much
clearer about the direction of interest rates when in November 2004 he stated,
"Rising interest rates have been advertised for so long and in so many places
that anyone who has not appropriately hedged this position by now, obviously, is
desirous of losing money."
EQUITY OUTLOOK: THE POTENTIAL FOR MODEST GAINS
As we enter the third year of the recovery from the bear market, we expect
stock prices to rise, perhaps generating single digit returns. Year-over-year
corporate profit growth will likely be lower, with the Blue Chip Economic
Indicators projecting a 10% increase in 2005, versus a 15% gain in 2004. First
Call consensus calls for a 6% growth in S&P 500 earnings per share during 2005,
after a 19% growth in 2004. At the current level, we believe stock valuations
appear fair. If, as we expect, there are no further gains from P/E expansion,
then the price return would come solely from earnings growth. We believe this
implies that the return is likely to be in the mid single digits. Indeed, the
consensus forecast from Wall Street strategists calls for the S&P 500 index to
rise 3.7% during 2005.
Historically, the first two years of the Presidential cycle have been weak
for the stock market relative to the last two years. It has been hypothesized
that this may be because during the first two years, Presidents tend to do
"house-cleaning" to correct the prior excesses. Then, in the final two years,
they offer fiscal stimulus boosting the economy and thus the stock market. As
2005 begins, the effects of prior tax cuts are now waning and there is no new
fiscal stimulus on the horizon. Additionally, we expect the Fed to raise rates.
This tempers the upside potential for the overall market.
Small cap stocks outperformed large cap stocks during the last five years
(2000-2004). But, during the five years prior, (i.e., 1995-1999), small cap
stocks had heavily underperformed large cap stocks. The stock market bubble
during that period had mostly inflated the large cap names, causing the relative
valuation between the two to diverge considerably from the historical norm. When
the bubble burst, large cap stocks gave back most of the prior gains and small
caps gained ground,
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causing the relative valuation to converge to the long-term norm. Thus, the
recent strong performance of small caps has essentially corrected the prior
valuation. Currently, large cap stocks appear between fairly priced and slightly
cheaper than small cap stocks. Historically, a strong economic recovery has
tended to favor small cap stocks. But, if the dollar continues to fall, interest
rates rise and credit spreads widen, then the financial environment should favor
large cap stocks. On balance, we believe that current conditions call for only a
slight tilt towards large cap stocks.
Given the forecasts of slowing economic and corporate profit environment
(relative to last year), we believe that high quality companies, which have
taken a back seat to more speculative (i.e., lower quality) companies over the
last two years, could outperform in 2005.
Another trend worth noting is the performance of dividend paying stocks. In
2004, an index of high dividend-paying stocks returned 18.1%. Given the
preferential tax treatment of dividends and relatively low interest rates,
demand for these securities could remain strong in 2005.
Looking overseas, international equities outperformed their U.S.
counterparts in 2004. The falling dollar was also a boon for Americans investing
overseas, as returns from international securities were increased when
translated back into U.S. dollars. Looking ahead, international growth rates
should continue to lag those in the U.S. However, we believe that foreign
equities are more reasonably valued compared to the U.S. Emerging market
equities, which generated strong returns over the last two years, could be
poised for further gains, especially countries rich in oil and natural
resources, if commodity prices remain strong. One wild card to keep aware of is
China. The government appears to have effectively cooled its economy and, in
October 2004, raised interest rates for the first time in nine years. However,
should there be a substantial decline in the country's economy, it could have
adverse implications for export-driven and commodity-rich countries.
BOND OUTLOOK: RISING RATES, BUT HOW "MEASURED"
As we enter 2005, the outlook for interest rates is fairly similar to that
in 2004. Despite five rate hikes last year, the Fed is expected to move rates
higher in the coming months. The economy is strong, inflation--the Fed's number
one concern--is rising, and there is the potential that the Fed may move away
from its "measured" policy of rising rates. While this will be data dependent,
at its December 14th meeting, the Fed made it clear that higher rates are
forthcoming, when it said, "With the economic expansion more firmly entrenched,
cost and price pressures were likely to become a clearer intermediate-term risk
to sustained good economic performance absent further reduction of
accommodation."
In terms of the bond market, the potential exists for intermediate and
longer-term rates to follow shorter-term rates higher, with 10 year Treasuries
perhaps moving from 4.22% to 5.00% by the end of the year. This could lead to
weakness in the fixed income markets, with flat or very modest gains during the
year. From a sector perspective, non-Treasury securities outperformed in 2004
and, in the case of high yield and certain investment grade corporate bonds,
these securities appear richly valued. Given the potential for a falling dollar,
we believe international bonds may outperform U.S. fixed income securities in
2005.
DIVERSIFICATION REMAINS PARAMOUNT
In recent years, the financial markets have proven the need for one to
maintain a diversified portfolio. In the last five years alone, we've seen the
bursting of the technology bubble, several years of bonds outperforming stocks,
a speculation driven market rebound in 2003, and investor apathy that suddenly
turned to a sharp equity rally. Trying to predict even one of these events would
be difficult, yet many investors continue to try and outsmart the market in
hopes of generating short-term gains. However, history has shown time and again
that chasing performance and "market timing" can be detrimental to investment
success.
We continue to believe that maintaining a diversified portfolio, one that
contains U.S. stocks and bonds as well as an international component, is
critical to reaching one's long-term goals. Working in tandem with an
experienced financial professional, you can develop an asset allocation strategy
that is tailored to your unique financial objectives, time horizon, and risk
tolerance. Equally important is the need to review your portfolio periodically
and make adjustments based on market returns and changes to your investment
profile. We believe that these strategies provide the hallmarks of sound
investing and are appropriate regardless of short-term market events.
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In conclusion, we thank you for your business, confidence and trust to
manage your investments and look forward to serving your financial needs in the
future.
/s/ Thomas G. Sorell
Thomas G. Sorell, CFA
President, The Park Avenue Portfolio
Chief Investment Officer,
Guardian Investor Services LLC
Please note that the opinions and outlooks about the markets in general and
any specific securities expressed above reflect the viewpoints of Tom Sorell as
of December 31, 2004. Keep in mind that market conditions are constantly
evolving and that past performance is not a guarantee of future results. This
shareholder letter is not part of the funds' financial report and is submitted
for the general information of Park Avenue Portfolio shareholders. This letter
is not authorized for distribution to prospective investors unless preceded or
accompanied by a prospectus. Please consider the funds' investment objective,
risks, fees and charges carefully before investing.
THE PARK AVENUE PORTFOLIO(R) FAMILY OF MUTUAL FUNDS IS SOLD BY PROSPECTUS
ONLY. THE PROSPECTUS CONTAINS IMPORTANT INFORMATION, INCLUDING FEES AND EXPENSES
AND SHOULD BE READ CAREFULLY BEFORE INVESTING OR SENDING MONEY. A PROSPECTUS CAN
BE OBTAINED FROM YOUR INVESTMENT PROFESSIONAL OR BY CALLING 800-221-3253. YOU
SHOULD CONSIDER THE FUNDS' INVESTMENT OBJECTIVES, RISKS, FEES AND CHARGES
CAREFULLY BEFORE INVESTING.
Shares of The Park Avenue Portfolio family of mutual funds are not deposits
or obligations of, or guaranteed or endorsed by, any bank or depository
institution, nor are they insured by the Federal Deposit Insurance Corporation
(FDIC), the National Credit Union Association (NCUA), the Federal Reserve Board,
or any other agency. Investment in the funds involves risks, including possible
loss of the principal amount invested. Fund shares are subject to market
fluctuations and, when redeemed, may be worth more or less than their original
cost.
Guardian Investor Services LLC (GIS) is the distributor of The Park Avenue
Portfolio family of mutual funds. GIS is an indirect wholly owned subsidiary of
The Guardian Life Insurance Company of America (Guardian Life), New York, NY.
GIS is located at 7 Hanover Square, New York, NY 10004. 800-221-3253
GIS is a member: NASD, SIPC.
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THE PARK AVENUE PORTFOLIO
TABLE OF CONTENTS
<Table>
<Caption>
SCHEDULE
FUND OF
HIGHLIGHTS INVESTMENTS
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THE GUARDIAN PARK AVENUE FUND 2 58
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THE GUARDIAN UBS LARGE CAP VALUE FUND 7 60
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THE GUARDIAN PARK AVENUE SMALL CAP FUND 11 62
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THE GUARDIAN UBS SMALL CAP VALUE FUND 16 64
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THE GUARDIAN ASSET ALLOCATION FUND 20 66
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THE GUARDIAN S&P 500 INDEX FUND 24 70
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THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL GROWTH
FUND 28 76
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THE GUARDIAN BAILLIE GIFFORD EMERGING MARKETS FUND 32 79
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THE GUARDIAN INVESTMENT QUALITY BOND FUND 36 82
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THE GUARDIAN LOW DURATION BOND FUND 41 86
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THE GUARDIAN HIGH YIELD BOND FUND 46 88
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THE GUARDIAN TAX-EXEMPT FUND 51 93
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THE GUARDIAN CASH MANAGEMENT FUND 55 96
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FINANCIAL STATEMENTS 98
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NOTES TO FINANCIAL STATEMENTS 107
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FINANCIAL HIGHLIGHTS 126
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</Table>
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(This page intentionally left blank)
ABOUT YOUR ANNUAL REPORT
INFORMATION ABOUT INDEXES:
Index returns are provided for comparative purposes and are quoted
throughout the following fund information. Please note that the indices are not
available for direct investment and the returns do not reflect the fees and
expenses that have been deducted from the Fund. In addition, the return figures
for the index do not reflect sales charges that an investor may pay when
purchasing or redeeming shares of 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 Russell 1000 Value Index offers investors access to the large-cap value
segment of the U.S. equity universe. The Russell 1000 Value is constructed
to provide a comprehensive and unbiased barometer of the large-cap value
market. Based on ongoing empirical research of investment manager behavior,
the methodology used to determine growth probability approximates the
aggregate large-cap value manager's opportunity set.
- 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.
- Russell 2000 Growth Index measures the performance of growth stocks within
the Russell 2000 Index and is generally considered to be representative of
small capitalization growth issues in the U.S. stock market.
- The Russell 2000 Value Index offers investors access to the small-cap value
segment of the U.S. equity universe. The Russell 2000 Value is constructed
to provide a comprehensive and unbiased barometer of the small-cap value
market. Based on ongoing empirical research of investment manager behavior,
the methodology used to determine value probability approximates the
aggregate small-cap value manager's opportunity set.
- The Morgan Stanley Capital International (MSCI) Europe, Australasia and Far
East (EAFE) Growth Index is an unmanaged index that is generally considered
to be representative of the international growth stock market activity.
- 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 of
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 Lehman Aggregate Bond Index is an unmanaged index that is generally
considered to be representative of U.S. bond market activity.
- The Lehman U.S. Government 1-3 Year Bond Index is an unmanaged index that is
generally considered to be representative of U.S. short duration bond market
activity.
- The Lehman Corporate High Yield Bond Index is an unmanaged index that is
generally considered to be representative of U.S. corporate high yield bond
market activity.
- The Lehman Municipal Bond Index is an unmanaged index that is generally
considered to be representative of U.S. municipal bond activity.
- The Lehman 3-Month Treasury Bill Index is generally considered
representative of the average yield of three-month Treasury Bills.
- Lehman Treasury Index is generally considered to be representative of U.S.
Treasury market activity.
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
The views expressed in the "Update from Fund Management" section of each
Fund are those of the Fund's portfolio manager(s) as of December 31, 2004 and
are subject to change without notice. They do not necessarily represent the
views of Guardian Investor Services LLC, Guardian Baillie Gifford Limited or UBS
Global Asset Management (Americas) Inc. The views expressed herein are based on
current market conditions and are not intended to predict or guarantee the
future performance of any Fund, any individual security, any market or market
segment. The composition of each Fund's portfolio is subject to change. No
recommendation is made with respect to any security discussed herein.
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/ / THE GUARDIAN PARK AVENUE FUND ANNUAL REPORT
TO SHAREHOLDERS
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[PHOTO]
Richard Goldman,
Portfolio Manager
OBJECTIVE:
Long-term growth
of capital
PORTFOLIO:
At least 80% common stocks and securities convertible into common stocks
INCEPTION DATE:
June 1, 1972
NET ASSETS AT
DECEMBER 31, 2004:
$1,126,555,890
AN UPDATE FROM FUND MANAGEMENT
The Guardian Park Avenue Fund seeks to invest principally in high quality
companies and is designed for investors who are looking for a core large cap
fund as part of their overall investment mix. We believe that owning companies
that have above average cash flows, balance sheets, and earnings can provide
attractive long-term investment opportunities.
When considering a company for inclusion in the portfolio, our team of
analysts and portfolio managers begins by analyzing its historical operating
performance. We look for companies that we believe: (1) generate consistent
earnings that are driven by strong cash flows; (2) reinvest these cash flows
into the business in a profitable way; (3) have robust balance sheets that are
not overburdened with debt; and (4) have management teams that have proven they
can profitably grow market share and navigate their companies through market
cycles. Our sector analysts utilize an array of financial analytical tools to
study and evaluate the financial reports and determine which companies meet our
criteria.
In 2004 the U.S. equity market had its second positive year in a row. Most
of the year's returns occurred during the latter part of the year after the
conclusion of the presidential election, which removed concerns about contested
results, and gained momentum as energy prices declined from their highs. The S&P
500 Index, which represents the large cap segment of the market, was up 10.88%
for the year ended December 31, 2004, with the value segment up 15.7% and the
growth portion up 6.1%. Looking at the market from a quality perspective, a
comparison of the performance of higher quality companies with that of lower
quality companies reveals that in 2004 lower quality companies outperformed
higher quality companies for the second year in a row (using the S&P Earnings
and Dividend Quality Ratings). This is an example of the willingness of the
market to seek risk and speculate on companies with more volatile earnings. A
good example of the type of sectors whose stocks did well in 2004 would be the
Internet sector, which was up 42% for the year (continuing its momentum from
2003 when it was up 103%).
The Guardian Park Avenue Fund had a total return in 2004 of 5.64%(1). While
this was the second consecutive year of positive returns since the bear market,
we were disappointed that returns were below the S&P 500 Index benchmark. Our
analysis highlighted several factors that played a role in the underperformance:
as described above, our style of investing in high quality companies was out of
favor; in addition, our investments in the financial, technology and
pharmaceutical industries hurt returns; and we underestimated the ability, and
willingness, of consumers to take on yet more leverage to continue spending on
luxury goods. While we are disappointed that high quality stocks have not kept
up with lower quality companies over the past two years, we remain committed to
our investment discipline of investing in these companies. In fact, we believe
that because of their relative underperformance lately, high quality stocks are
currently very attractively valued. In addition, with the market's earnings
growth rate coming under pressure from the high levels seen last year and with
rising interest rates, we believe that companies with strong earnings visibility
have the potential to outperform.
As Portfolio Manager of the Fund, and as a fellow shareholder, I thank you
for your confidence in investing in our Fund. I speak for my team when I say
that we take the responsibility that comes with managing your money seriously.
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1 Total return is shown for Class A shares and does not take into account the
current maximum sales charge of 4.5%.
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ABOUT INFORMATION IN THIS REPORT:
- It is important to consider the Fund's investment objectives, risks, fees
and expenses before investing. All funds involve some risk, including
possible loss of the principal amount invested.
- Please see the "About Your Annual Report" page for a description of the S&P
500 Index.
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2
/ / THE GUARDIAN PARK AVENUE FUND ANNUAL REPORT
TO SHAREHOLDERS
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TOP TEN HOLDINGS (AS OF 12/31/04)
<Table>
<Caption>
PERCENTAGE OF
COMPANY TOTAL NET ASSETS
General Electric Co. 3.17%
Microsoft Corp. 2.94%
Exxon Mobil Corp. 2.69%
Citigroup, Inc. 2.64%
Procter & Gamble Co. 2.37%
Bank of America Corp. 2.28%
Viacom, Inc. 2.20%
Carnival Corp. 2.20%
Wyeth 2.09%
Fidelity National Financial, Inc. 2.09%
</Table>
SECTOR WEIGHTINGS VS. INDEX (AS OF 12/31/04)
<Table>
<Caption>
THE GUARDIAN PARK AVENUE FUND S&P 500 INDEX
----------------------------- -------------
Financials 17.30 20.64
Consumer Discretionary 17.10 11.90
Information Technology 16.50 16.05
Health Care 13.70 12.68
Consumer Staples 11.80 10.48
Industrials 8.40 11.79
Energy 7.40 7.16
Materials 2.80 3.09
Telecommunication Services 2.50 3.27
Utilities 2.20 2.94
Cash 0.30 0.00
</Table>
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3
/ / THE GUARDIAN PARK AVENUE FUND ANNUAL REPORT
TO SHAREHOLDERS
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AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS ENDED 12/31/04)
<Table>
<Caption>
INCEPTION 1 3 5 10 SINCE
DATE YR YRS YRS YRS INCEPTION
Class A shares (w/o sales charge) 6/1/72 5.64% 0.08% -8.59% 8.73% 13.03%
(w/ sales charge) 6/1/72 0.89% -1.44% -9.43% 8.23% 12.87%
Class B shares (w/o sales charge) 5/1/96 4.67% -0.89% -9.45% -- 4.63%
(w/ sales charge) 5/1/96 1.67% -1.56% -9.63% -- 4.63%
Class C shares (w/o sales charge) 8/7/00 4.41% -1.12% -- -- -11.48%
(w/ sales charge) 8/7/00 3.41% -1.12% -- -- -11.48%
Class K shares (w/o sales charge) 5/15/01 5.34% -0.24% -- -- -3.63%
(w/ sales charge) 5/15/01 4.34% -0.24% -- -- -3.63%
S&P 500 Index 10.88% 3.59% -2.29% 12.05% 11.19%
Since Class A
shares inception
</Table>
ALL PERFORMANCE DATA QUOTED IS HISTORICAL AND THE RESULTS REPRESENT PAST
PERFORMANCE AND NEITHER GUARANTEE NOR PREDICT FUTURE INVESTMENT RESULTS. To
obtain performance data current to the most recent month (available within 7
business days of the most recent month end), please call us at (800) 221-3253 or
visit our website at www.guardianinvestor.com. Current performance may be higher
or lower than the performance quoted here. Investment return and principal value
will fluctuate so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
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. 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.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
To give you a comparison, this chart shows the performance of a hypothetical
$10,000 investment made in Class A shares of The Guardian Park Avenue Fund and
in the S&P 500 Index. The starting point of $9,550 for Class A shares reflects
the current maximum sales charge of 4.5% that an investor may have to pay when
purchasing Class A shares of the Fund. The initial investment amount in the
Index is $10,000. This performance does not reflect the deduction of taxes that
a shareholder may pay on distributions or redemption of shares. Returns
represent past performance and are not indicative of future results. Index
returns do not include the fees and expenses of the Fund, but do include the
reinvestment of dividends.
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.
<Table>
<Caption>
THE GUARDIAN PARK AVENUE FUND,
CLASS A SHARES S&P 500 INDEX
------------------------------ -------------
6/1/72 10000 10000
1972 9904.58 10935.5
1973 8341 9320.12
1974 7003.24 6860.77
1975 10291.5 9410.43
1976 14697.1 11628
1977 15861.6 10765.9
1978 18159.5 11454.1
1979 23441.5 13538.8
1980 28484 17907
1981 30129.6 17009.4
1982 37780.1 20656.2
1983 48590.3 25279.7
1984 54742 26822.1
1985 72798 35288.9
1986 86179.1 41837.4
1987 88729.1 43971.7
1988 107166 51153.7
1989 132707 67203.7
1990 116342 65040.9
1991 157248 84769.5
1992 189447 91213.7
1993 227863 100349
1994 224591 101655
1995 301580 139649
1996 381454 171525
1997 514394 228623
1998 623955 294369
1999 812676 356272
2000 661350 323862
2001 517504 285456
2002 405955 222359
2003 496427 286165
2004 535955 317306
</Table>
- --------------------------------------------------------------------------------
4
/ / THE GUARDIAN PARK AVENUE FUND ANNUAL REPORT
TO SHAREHOLDERS
- --------------------------------------------------------------------------------
FUND EXPENSES
By investing in the Fund, you incur two types of costs: (1) transaction costs,
including sales charges on purchase payments, reinvested dividends, or other
distributions; redemption fees and exchange fees; and (2) ongoing costs,
including, as applicable, management fees; distribution and/or service (12b-1)
fees; and other Fund expenses. These examples are intended to help you
understand your ongoing costs (in dollars) of investing in the Fund and to
compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested on July 1, 2004 and
held for six months ended December 31, 2004.
ACTUAL EXPENSES
The first table provides information about actual account values and actual
expenses. You may use the information in this table, together with the amount
you invested, to estimate the expenses that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the
applicable line under the heading entitled "Expenses Paid During the Period" to
estimate the expenses you paid on your account during this period.
<Table>
<Caption>
EXPENSES
BEGINNING ENDING PAID DURING
ACCOUNT ACCOUNT THE PERIOD
VALUE VALUE JULY 1, 2004 -
JULY 1, 2004 DECEMBER 31, 2004 DECEMBER 31, 2004(1)
Class A $1,000.00 $1,048.80 $ 4.53
Class B $1,000.00 $1,043.80 $ 9.45
Class C $1,000.00 $1,042.60 $10.58
Class K $1,000.00 $1,047.10 $ 6.17
</Table>
1 Expenses are equal to the Fund's annualized expense ratio of 0.88%, 1.84%,
2.06% and 1.20% for the Fund's Class A, B, C and K shares, respectively,
multiplied by the average account value over the period, multiplied by 184/366
(to reflect the Fund's most recent fiscal half-year).
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
This second table provides information about hypothetical account values and
hypothetical expenses based on the Fund's actual expense ratio and an assumed
rate of return of 5% per year before expenses, which is not the Fund's actual
return. The hypothetical account values and expenses may not be used to estimate
the actual ending account balance or expenses you paid for the period. You may
use this information to compare the ongoing costs of investing in the Fund and
other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
- --------------------------------------------------------------------------------
5
/ / THE GUARDIAN PARK AVENUE FUND ANNUAL REPORT
TO SHAREHOLDERS
- --------------------------------------------------------------------------------
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads), redemption fees, or exchange fees. Therefore, the table is
useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if transactional
costs were included, your costs would have been higher.
<Table>
<Caption>
EXPENSES
BEGINNING ENDING PAID DURING
ACCOUNT ACCOUNT THE PERIOD
VALUE VALUE JULY 1, 2004 -
JULY 1, 2004 DECEMBER 31, 2004 DECEMBER 31, 2004(1)
Class A $1,000.00 $1,020.71 $ 4.47
Class B $1,000.00 $1,015.89 $ 9.32
Class C $1,000.00 $1,014.78 $10.43
Class K $1,000.00 $1,019.10 $ 6.09
</Table>
1 Expenses are equal to the Fund's annualized expense ratio of 0.88%, 1.84%,
2.06% and 1.20% for the Fund's Class A, B, C and K shares, respectively,
multiplied by the average account value over the period, multiplied by 184/366
(to reflect the Fund's most recent fiscal half-year).
- --------------------------------------------------------------------------------
6
/ / THE GUARDIAN UBS LARGE CAP VALUE FUND ANNUAL REPORT
TO SHAREHOLDERS
- --------------------------------------------------------------------------------
The Guardian UBS Large Cap Value Fund is managed by a team of investment
professionals from the Fund's sub-advisor, UBS Global Asset Management
(Americas) Inc., with many years of experience in large cap value
investment management.
OBJECTIVE:
Seeks to maximize total return, consisting of capital appreciation and
current income
PORTFOLIO:
At least 80% in equity securities issued by companies with a large market
capitalization at the time of purchase
INCEPTION DATE:
February 3, 2003
NET ASSETS AT
DECEMBER 31, 2004:
$99,171,606
AN UPDATE FROM FUND MANAGEMENT
For the year ended December 31, 2004, The Guardian UBS Large Cap Value Fund
had a total return of 13.43%(1) versus a return of 16.49% for its benchmark, the
Russell 1000 Value Index.
In our view, many of the widely perceived risks to the U.S. economy never
materialized. The danger of deflation in the U.S. seemed to have disappeared,
and were replaced by concerns of a new inflation cycle in the coming months,
fueled by energy prices and a weak U.S. dollar. The U.S. election result was
clear-cut, with George W. Bush winning a concession from John F. Kerry the day
after the election, avoiding a drawn-out battle and reassuring financial
markets. Unemployment stayed low, averaging around 5.5%, and non-farm payroll
growth picked up moderately, easing labor market fears. Moreover, private
consumption continued to grow despite a rising debt burden. Geopolitical
uncertainty diminished somewhat, as the situation in Iraq calmed, with U.S. and
Iraqi forces capturing Fallujah, a major center of insurgent activity, and fears
of repeated terrorist attacks receded following the Madrid bombings in March.
Portfolio performance benefited from sector selection, but was offset by
negative stock selection during the year. Although our exposure to
telecommunications was positive for the year, our holding in Nextel detracted
from performance, as it performed relatively poorly in a strongly performing
sector. The Fund was also underweight in energy during most of the year, also
detracted from performance. The Fund benefited by having no exposure to
semiconductors, which performed poorly as concerns mounted regarding future
growth expectations and excess capacity.
Our investment research focuses on identifying discrepancies between a
security's fundamental or intrinsic value and its observed market price. For
each stock under our analysis we discount to the present all future cash flows
that we believe will accrue to an investor, incorporating our analyst team's
considerations of company management, competitive advantage and each company's
core competencies. These value estimates are then compared to current market
prices and ranked against the other stocks in our valuation universe. The
portfolio is constructed by focusing on those stocks that rank in the top 20% of
the stocks under our analysis based on their valuation estimates, taking into
account market sensitivity, common characteristic exposures and industry
weightings.
- --------------------------------------------------------------------------------
1 Total return is shown for Class A shares and does not take into account the
current maximum sales charge of 4.5%.
- --------------------------------------------------------------------------------
ABOUT INFORMATION IN THIS REPORT:
- It is important to consider the Fund's investment objectives, risks, fees
and expenses before investing. All funds involve some risk, including
possible loss of the principal amount invested.
- Please see the "About Your Annual Report" page for a description of the
Russell 1000 Value Index.
- --------------------------------------------------------------------------------
7
/ / THE GUARDIAN UBS LARGE CAP VALUE FUND ANNUAL REPORT
TO SHAREHOLDERS
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS (AS OF 12/31/04)
<Table>
<Caption>
PERCENTAGE OF
COMPANY TOTAL NET ASSETS
Exxon Mobil Corp. 5.35%
Citigroup, Inc. 4.90%
Morgan Stanley 4.18%
Wells Fargo & Co. 4.07%
J.P. Morgan Chase & Co. 3.95%
Nextel Comm., Inc. 3.29%
Federal Home Loan Mortgage Corp. 3.20%
Time Warner, Inc. 2.45%
Illinois Tool Works, Inc. 2.44%
UnitedHealth Group 2.43%
</Table>
SECTOR WEIGHTINGS VS. INDEX (AS OF 12/31/04)
<Table>
<Caption>
THE GUARDIAN UBS LARGE CAP
VALUE FUND RUSSELL 1000 VALUE INDEX
-------------------------- ------------------------
Financials 33.22 36.14
Health Care 10.65 3.91
Consumer Discretionary 9.78 11.53
Industrials 8.66 6.87
Utilities 8.47 5.62
Energy 7.68 11.28
Information Technology 6.93 7.26
Materials 5.24 6.57
Telecommunication Services 4.92 5.05
Consumer Staples 4.45 5.77
</Table>
AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS ENDED 12/31/04)
<Table>
<Caption>
INCEPTION 1 3 5 10 SINCE
DATE YR YRS YRS YRS INCEPTION
Class A shares (w/o sales charge) 2/3/03 13.43% -- -- -- 23.31%
(w/ sales charge) 2/3/03 8.33% -- -- -- 20.37%
Class B shares (w/o sales charge) 2/3/03 12.52% -- -- -- 22.38%
(w/ sales charge) 2/3/03 9.52% -- -- -- 21.06%
Class C shares (w/o sales charge) 2/3/03 12.52% -- -- -- 22.38%
(w/ sales charge) 2/3/03 11.52% -- -- -- 22.38%
Class K shares (w/o sales charge) 2/3/03 13.05% -- -- -- 22.96%
(w/ sales charge) 2/3/03 12.05% -- -- -- 22.96%
Russell 1000 Value Index 16.49% -- -- -- 25.51%
Since Class A
shares inception
</Table>
- --------------------------------------------------------------------------------
ALL PERFORMANCE DATA QUOTED IS HISTORICAL AND THE RESULTS REPRESENT PAST
PERFORMANCE AND NEITHER GUARANTEE NOR PREDICT FUTURE INVESTMENT RESULTS. To
obtain performance data current to the most recent month (available within 7
business days of the most recent month end), please call us at (800) 221-3253 or
visit our website at www.guardianinvestor.com. Current performance may be higher
or lower than the performance quoted here. Investment return and principal value
will fluctuate so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
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.
- --------------------------------------------------------------------------------
8
/ / THE GUARDIAN UBS LARGE CAP VALUE FUND ANNUAL REPORT
TO SHAREHOLDERS
- --------------------------------------------------------------------------------
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
To give you a comparison, this chart shows you the performance of a hypothetical
$10,000 investment made in Class A, Class B, Class C, and Class K shares of the
Fund and in the Russell 1000 Value Index. The starting point of $9,550 For Class
A shares reflects the maximum sales charge of 4.5% that an investor may have to
pay when purchasing Class A shares of the Fund. For Class B shares, the
contingent deferred sales charge of 3% was imposed at the end of the period. The
initial investment amount in the S&P 500 Index, Class B, Class C and Class K
shares is $10,000. This performance does not reflect the deduction of taxes that
a shareholder may pay on distributions or redemption of shares. Returns
represent past performance and are not indicative of future results. Index
returns do not include the fees and expenses of the Fund, but do include the
reinvestment of dividends.
<Table>
<Caption>
THE GUARDIAN THE GUARDIAN THE GUARDIAN THE GUARDIAN
UBS LARGE CAP UBS LARGE CAP UBS LARGE CAP UBS LARGE CAP
VALUE FUND, CLASS VALUE FUND, CLASS VALUE FUND, CLASS VALUE FUND, CLASS RUSSELL 1000 VALUE
A SHARES B SHARES C SHARES K SHARES INDEX
----------------- ----------------- ----------------- ----------------- ------------------
2/03/03 9550.0 10000.0 10000.0 10000.0 10000.0
2003 12537.1 13064.9 13065.0 13121.9 13252.2
2004 14220.8 14259.4 14700.4 14834.2 15438.1
</Table>
FUND EXPENSES
By investing in the Fund, you incur two types of costs: (1) transaction costs,
including sales charges on purchase payments, reinvested dividends, or other
distributions; redemption fees and exchange fees; and (2) ongoing costs,
including, as applicable, management fees; distribution and/or service (12b-1)
fees; and other Fund expenses. These examples are intended to help you
understand your ongoing costs (in dollars) of investing in the Fund and to
compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested on July 1, 2004 and
held for six months ended December 31, 2004.
- --------------------------------------------------------------------------------
9
/ / THE GUARDIAN UBS LARGE CAP VALUE FUND ANNUAL REPORT
TO SHAREHOLDERS
- --------------------------------------------------------------------------------
ACTUAL EXPENSES
The first table provides information about actual account values and actual
expenses. You may use the information in this table, together with the amount
you invested, to estimate the expenses that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the
applicable line under the heading entitled "Expenses Paid During the Period" to
estimate the expenses you paid on your account during this period.
<Table>
<Caption>
BEGINNING ENDING EXPENSES PAID
ACCOUNT ACCOUNT DURING THE PERIOD
VALUE VALUE JULY 1, 2004 -
JULY 1, 2004 DECEMBER 31, 2004 DECEMBER 31, 2004(1)
Class A $1,000.00 $1,101.50 $ 7.61
Class B $1,000.00 $1,097.30 $11.55
Class C $1,000.00 $1,097.30 $11.55
Class K $1,000.00 $1,099.80 $ 8.97
</Table>
1 Expenses are equal to the Fund's annualized expense ratio of 1.44%, 2.19%,
2.19% and 1.70% for the Fund's Class A, B, C and K shares, respectively,
multiplied by the average account value over the period, multiplied by 184/366
(to reflect the Fund's most recent fiscal half-year).
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
This second table provides information about hypothetical account values and
hypothetical expenses based on the Fund's actual expense ratio and an assumed
rate of return of 5% per year before expenses, which is not the Fund's actual
return. The hypothetical account values and expenses may not be used to estimate
the actual ending account balance or expenses you paid for the period. You may
use this information to compare the ongoing costs of investing in the Fund and
other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads), redemption fees, or exchange fees. Therefore, the table is
useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if transactional
costs were included, your costs would have been higher.
<Table>
<Caption>
BEGINNING ENDING EXPENSES PAID
ACCOUNT ACCOUNT DURING THE PERIOD
VALUE VALUE JULY 1, 2004 -
JULY 1, 2004 DECEMBER 31, 2004 DECEMBER 31, 2004(1)
Class A $1,000.00 $1,017.90 $ 7.30
Class B $1,000.00 $1,014.13 $11.09
Class C $1,000.00 $1,014.13 $11.09
Class K $1,000.00 $1,016.59 $ 8.62
</Table>
1 Expenses are equal to the Fund's annualized expense ratio of 1.44%, 2.19%,
2.19% and 1.70% for the Fund's Class A, B, C and K shares, respectively,
multiplied by the average account value over the period, multiplied by 184/366
(to reflect the Fund's most recent fiscal half-year).
- --------------------------------------------------------------------------------
10
/ / THE GUARDIAN PARK AVENUE SMALL CAP FUND ANNUAL REPORT
TO SHAREHOLDERS
- --------------------------------------------------------------------------------
[PHOTO]
Matthew Ziehl, C.F.A.,
Portfolio Manager
[PHOTO]
Greg Tuorto,
Co-Portfolio Manager
OBJECTIVE:
Long-term growth of capital
PORTFOLIO:
At least 85% in a diversified portfolio of common stocks issued by companies
with a small market capitalization at the time of initial purchase
INCEPTION DATE:
May 1, 1997
NET ASSETS AT
DECEMBER 31, 2004:
$226,789,489
AN UPDATE FROM FUND MANAGEMENT
U.S. small cap stocks once again outperformed larger companies in 2004, for
the fifth consecutive year. The Russell 2000 Index returned 18.33% versus 10.88%
for the S&P 500 Index, with most of the absolute and relative gains occurring in
the last two months of the year as the overall market rallied strongly following
the presidential election. The Guardian Park Avenue Small Cap Fund participated
in the strong relative performance of small cap stocks, though its total return
of 14.74%(1) did trail the Russell 2000 benchmark by 3.59%. Small cap value
stocks out performed small cap growth shares in 2004 as the Russell 2000 Value
Index returned 22.3% versus 14.3% for the Russell 2000 Growth Index.
Energy, basic materials and industrial stocks led the small cap market and
were the key drivers of the value segment's relative outperformance. The growth
segment was hampered by the technology sector, which posted a flat full-year
result even as most of the other Russell 2000 market sectors returned more than
20%. The underperformance of growth stocks generally, and technology
specifically, was similar to the behavior of the large cap market.
Most of the Fund's underperformance versus the benchmark in 2004 was due to
stock selection in the financial and consumer discretionary sectors, where weak
results overcame very positive selection in technology. In financials, one large
position had negative fundamental developments, and we sold the stock at a
significant loss. Within consumer discretionary, we had moderately negative
returns in several specialty retail stocks, while retail stocks in general were
solidly higher; this difference cost us substantial relative performance versus
that portion of the benchmark. Several of these retail positions were
liquidated, as we did not expect near-term fundamental catalysts to drive their
stock prices higher. In fact, throughout the portfolio we acted decisively to
eliminate stocks that declined significantly on negative fundamental
developments, if we did not have a compelling argument to hold on in expectation
that the problem was short-lived and a near-term recovery in both company
fundamentals and stock price was likely.
As in the previous two years under current management, stock selection was
the primary driver of relative performance, with little impact from relative
sector weights. This is consistent with our "bottom-up" approach, which
emphasizes choosing the best individual stock ideas while limiting sector
weighting differences versus the benchmark index.
Our strategy is to maintain a highly diversified portfolio of quality small
cap companies chosen for their individual merits by our team of experienced
sector analysts. We do not attempt to predict the direction of the overall stock
market, or which economic sectors will outperform or trail.
- --------------------------------------------------------------------------------
1 Total return is shown for Class A shares and does not take into account the
current maximum sales charge of 4.5%.
- --------------------------------------------------------------------------------
ABOUT INFORMATION IN THIS REPORT:
- It is important to consider the Fund's investment objectives, risks, fees
and expenses before investing. All funds involve some risk, including
possible loss of the principal amount invested. Small-cap investing entails
special risks, as small-cap stocks have tended to be more volatile and to
drop more in down markets than large-cap stocks. This may happen because
small companies may be limited in terms of product lines, financial
resources and management.
- Please see the "About Your Annual Report" page for a description of the
Russell 2000 Index, Russell 2000 Growth Index, the Russell 2000 Value Index,
and the S&P 500 Index.
- --------------------------------------------------------------------------------
11
/ / THE GUARDIAN PARK AVENUE SMALL CAP FUND ANNUAL REPORT
TO SHAREHOLDERS
- --------------------------------------------------------------------------------
CHANGE TO MANAGEMENT TEAM
As Portfolio Manager I am especially pleased to inform you that Gregory
Tuorto was named Co-Portfolio Manager of the Small Cap Fund in November. Greg
has 12 years of investment experience, and joined the Guardian in early 2002 as
the equity department's technology analyst. He has contributed to strong
performance for the small cap funds in that capacity, and in addition has been a
very helpful sounding board on overall portfolio strategy and individual stock
ideas for myself and his fellow analysts. In effect, Greg's promotion to
Co-Portfolio Manager enhances the role he has been filling for quite some time.
I greatly enjoy working with Greg, as he brings to the table a terrific mix of
enthusiasm, ability and experience.
Greg and I wish to conclude this letter by emphasizing that, in addition to
managing the Small Cap Fund, we are your fellow shareholders. We believe
strongly in our investment process and take great pride in what we do for a
living, and we sincerely thank you for investing alongside us. Greg and I will
continue our bottom-up approach to constructing a portfolio of quality small cap
companies that enhance the diversification of our investors' (and our own!)
overall investment strategy.
TOP TEN HOLDINGS (AS OF 12/31/04)
<Table>
<Caption>
PERCENTAGE OF
COMPANY TOTAL NET ASSETS
Century Aluminum Co. 2.64%
Immucor, Inc. 2.40%
Piper Jaffray Cos., Inc. 2.39%
Direct General Corp. 2.25%
American Medical Systems Hldgs., Inc. 2.00%
Sigmatel, Inc. 1.99%
Salix Pharmaceuticals Ltd. 1.80%
Trinity Inds., Inc. 1.74%
Entercom Comm. Corp. 1.54%
Protein Design Labs., Inc. 1.52%
</Table>
SECTOR WEIGHTINGS VS. INDEX (AS OF 12/31/04)
<Table>
<Caption>
THE GUARDIAN PARK AVENUE SMALL
CAP FUND RUSSELL 2000 INDEX
------------------------------ ------------------
Information Technology 21.4 17.6
Financials 18 22
Consumer Discretionary 15.5 14.9
Health Care 14.7 12.7
Industrials 13.7 14.3
Materials 6.2 6.1
Energy 6.2 5.3
Utilities 1.6 3.3
Telecommunication Services 1.1 1
Consumer Staples 0.8 2.7
Cash 0.8 0
</Table>
- --------------------------------------------------------------------------------
12
/ / THE GUARDIAN PARK AVENUE SMALL CAP FUND ANNUAL REPORT
TO SHAREHOLDERS
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS ENDED 12/31/04)
<Table>
<Caption>
INCEPTION 1 3 5 10 SINCE
DATE YR YRS YRS YRS INCEPTION
Class A shares (w/o sales charge) 5/1/97 14.74% 11.57% 4.74% -- 10.75%
(w/ sales charge) 5/1/97 9.58% 9.87% 3.78% -- 10.09%
Class B shares (w/o sales charge) 5/6/97 13.76% 10.54% 3.81% -- 9.33%
(w/ sales charge) 5/6/97 10.76% 9.99% 3.64% -- 9.33%
Class C shares (w/o sales charge) 8/7/00 13.62% 10.36% -- -- 1.22%
(w/ sales charge) 8/7/00 12.62% 10.36% -- -- 1.22%
Class K shares (w/o sales charge) 5/15/01 14.47% 11.25% -- -- 8.61%
(w/ sales charge) 5/15/01 13.47% 11.25% -- -- 8.61%
Russell 2000 Index 18.33% 11.48% 6.61% -- 10.12%
Since Class A
shares inception
</Table>
ALL PERFORMANCE DATA QUOTED IS HISTORICAL AND THE RESULTS REPRESENT PAST
PERFORMANCE AND NEITHER GUARANTEE NOR PREDICT FUTURE INVESTMENT RESULTS. To
obtain performance data current to the most recent month (available within 7
business days of the most recent month end), please call us at (800) 221-3253 or
visit our website at www.guardianinvestor.com. Current performance may be higher
or lower than the performance quoted here. Investment return and principal value
will fluctuate so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
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.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
To give you a comparison, this chart shows you the performance of a hypothetical
$10,000 investment made in Class A and Class B shares of the Fund and in the
Russell 2000 Index. The starting point of $9,550 for Class A shares reflects the
maximum sales charge of 4.5% that an investor may have to pay when purchasing
Class A shares of the Fund. The initial investment amount in the Russell 2000
Index and the Class B share is $10,000. This performance does not reflect the
deduction of taxes that a shareholder may pay on distributions or redemption of
shares. Returns represent past performance and are not indicative of future
results. Index returns do not include the fees and expenses of the Fund, but do
include the reinvestment of dividends.
PERFORMANCE FOR CLASS C AND CLASS K SHARES, WHICH WERE FIRST OFFERED ON AUGUST
7, 2000 AND MAY 15, 2001, RESPECTIVELY, WILL VARY DUE TO DIFFERENCES IN SALES
LOAD AND OTHER EXPENSES CHARGED TO EACH SHARE CLASS.
<Table>
<Caption>
THE GUARDIAN PARK AVENUE THE GUARDIAN PARK AVENUE
SMALL CAP FUND, CLASS A SMALL CAP FUND, CLASS B
SHARES SHARES RUSSELL 2000 INDEX
------------------------ ------------------------ ------------------
5/1/97 9950 10000 10000
1997 13067.9 13046.5 12867.5
1998 12238.6 12126.4 12539.9
1999 16732.1 16405.7 15206.7
2000 16338.6 15895 12247.1
2001 15190.1 14644 12563.6
2002 12835.2 12258.3 9990.07
2003 18529.4 17388.5 14710.8
2004 21260.2 19765.1 17407.1
</Table>
- --------------------------------------------------------------------------------
13
/ / THE GUARDIAN PARK AVENUE SMALL CAP FUND ANNUAL REPORT
TO SHAREHOLDERS
- --------------------------------------------------------------------------------
FUND EXPENSES
By investing in the Fund, you incur two types of costs: (1) transaction costs,
including sales charges on purchase payments, reinvested dividends, or other
distributions; redemption fees and exchange fees; and (2) ongoing costs,
including, as applicable, management fees; distribution and/or service (12b-1)
fees; and other Fund expenses. These examples are intended to help you
understand your ongoing costs (in dollars) of investing in the Fund and to
compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested on July 1, 2004 and
held for six months ended December 31, 2004.
ACTUAL EXPENSES
The first table provides information about actual account values and actual
expenses. You may use the information in this table, together with the amount
you invested, to estimate the expenses that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the
applicable line under the heading entitled "Expenses Paid During the Period" to
estimate the expenses you paid on your account during this period.
<Table>
<Caption>
EXPENSES
BEGINNING ENDING PAID DURING
ACCOUNT ACCOUNT THE PERIOD
VALUE VALUE JULY 1, 2004 -
JULY 1, 2004 DECEMBER 31, 2004 DECEMBER 31, 2004(1)
Class A $1,000.00 $1,104.40 $ 6.40
Class B $1,000.00 $1,099.50 $11.24
Class C $1,000.00 $1,099.10 $11.77
Class K $1,000.00 $1,103.00 $ 8.04
</Table>
1 Expenses are equal to the Fund's annualized expense ratio of 1.21%, 2.13%,
2.23% and 1.52% for the Fund's Class A, B, C and K shares, respectively,
multiplied by the average account value over the period, multiplied by 184/366
(to reflect the Fund's most recent fiscal half-year).
- --------------------------------------------------------------------------------
14
/ / THE GUARDIAN PARK AVENUE SMALL CAP FUND ANNUAL REPORT
TO SHAREHOLDERS
- --------------------------------------------------------------------------------
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
This second table provides information about hypothetical account values and
hypothetical expenses based on the Fund's actual expense ratio and an assumed
rate of return of 5% per year before expenses, which is not the Fund's actual
return. The hypothetical account values and expenses may not be used to estimate
the actual ending account balance or expenses you paid for the period. You may
use this information to compare the ongoing costs of investing in the Fund and
other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads), redemption fees, or exchange fees. Therefore, the table is
useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if transactional
costs were included, your costs would have been higher.
<Table>
<Caption>
EXPENSES
BEGINNING ENDING PAID DURING
ACCOUNT ACCOUNT THE PERIOD
VALUE VALUE JULY 1, 2004 -
JULY 1, 2004 DECEMBER 31, 2004 DECEMBER 31, 2004(1)
Class A $1,000.00 $1,019.05 $ 6.14
Class B $1,000.00 $1,014.43 $10.79
Class C $1,000.00 $1,013.93 $11.29
Class K $1,000.00 $1,017.50 $ 7.71
</Table>
1 Expenses are equal to the Fund's annualized expense ratio of 1.21%, 2.13%,
2.23% and 1.52% for the Fund's Class A, B, C and K shares, respectively,
multiplied by the average account value over the period, multiplied by 184/366
(to reflect the Fund's most recent fiscal half-year).
- --------------------------------------------------------------------------------
15
/ / THE GUARDIAN UBS SMALL CAP VALUE FUND ANNUAL REPORT
TO SHAREHOLDERS
- --------------------------------------------------------------------------------
The Guardian UBS Small Cap Value Fund is managed by a team of investment
professionals from the Fund's sub-advisor, UBS Global Asset Management
(Americas) Inc., with many years of experience in small cap value
investment management.
OBJECTIVE:
Seeks to maximize total return, consisting of capital appreciation and
current income
PORTFOLIO:
At least 80% in equity securities issued by companies with a small market
capitalization at the time of initial purchase
INCEPTION DATE:
February 3, 2003
NET ASSETS AT
DECEMBER 31, 2004:
$48,885,224
AN UPDATE FROM FUND MANAGEMENT
For the year ended December 31, 2004, The Guardian UBS Small Cap Value Fund
had a total return of 18.14%(1) versus a return of 22.25% for its benchmark, the
Russell 2000 Value Index.
The U.S. equity markets rallied broadly in the fourth quarter, resulting in
a very respectable calendar year of investment performance. The energy sector
was a significant contributor to performance during the year, led by crude
producers and offshore drillers. Technology, while finishing the year strongly,
did not fare well over the full course of 2004 as semiconductor companies in
particular were hit by concerns over slowing growth and excess capacity. In a
reversal of 2003, small cap companies with low price/earnings ratios, low
price/book ratios and lower volatility tended to outperform in 2004. The Fund
underperformed its benchmark during 2004 due largely to industry selection.
Specifically, the Fund's overweight to electronic equipment and media, combined
with underweights to hotels and mining and materials, detracted from results.
This offset beneficial decisions to underweight semiconductors and overweight
transportation/freight, medical services and products. The Fund's exposure to
higher quality, less volatile stocks helped results during the year.
Our investment research focuses on identifying discrepancies between a
security's fundamental or intrinsic value and its observed market price. For
each stock under our analysis we discount to the present all future cash flows
that we believe will accrue to an investor, incorporating our analyst team's
considerations of company management, competitive advantage, and each company's
core competencies. We place particular emphasis on fundamental research
conducted on-site at the companies we are covering. We utilize proprietary tools
including our post-venture database/valuation system to calculate intrinsic
value, and rank stocks by their relative price/intrinsic value attractiveness.
We seek to build portfolios with securities that we believe have the potential
to generate positive returns. Portfolios are constructed and monitored with
adherence to risk management and client guidelines.
- --------------------------------------------------------------------------------
1 Total return is shown for Class A shares and does not take into account the
current maximum sales charge of 4.5%.
- --------------------------------------------------------------------------------
ABOUT INFORMATION IN THIS REPORT:
- It is important to consider the Fund's investment objectives, risks, fees
and expenses before investing. All funds involve some risk, including
possible loss of the principal amount invested. Small-cap investing entails
special risks, as small-cap stocks have tended to be more volatile and to
drop more in down markets than large-cap stocks. This may happen because
small companies may be limited in terms of product lines, financial
resources and management.
- Please see the "About Your Annual Report" page for a description of the
Russell 2000 Value Index.
- --------------------------------------------------------------------------------
16
/ / THE GUARDIAN UBS SMALL CAP VALUE FUND ANNUAL REPORT
TO SHAREHOLDERS
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS (AS OF 12/31/04)
<Table>
<Caption>
PERCENTAGE OF
COMPANY TOTAL NET ASSETS
Equitable Resources, Inc. 2.93%
iShares Russell 2000 Value Index Fund 2.80%
McGrath Rentcorp 2.28%
Renal Care Group, Inc. 1.99%
Regal-Beloit Corp. 1.98%
Quanex Corp. 1.95%
Harris Corp. 1.90%
AmerUs Group Co. 1.71%
Esterline Technologies Corp. 1.70%
Gardner Denver, Inc. 1.65%
</Table>
SECTOR WEIGHTINGS VS. INDEX (AS OF 12/31/04)
<Table>
<Caption>
THE GUARDIAN UBS LARGE CAP
VALUE FUND RUSSELL 2000 VALUE INDEX
-------------------------- ------------------------
Financials 27.98 33.69
Industrials 19.68 11.89
Consumer Discretionary 14.09 12.34
Information Technology 11.41 9.55
Health Care 9.65 4.65
Materials 6.41 12.79
Energy 4.84 5.2
Consumer Staples 3.33 3.26
Utilities 2.61 5.63
Telecommunication Services 0 1
</Table>
AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS ENDED 12/31/04)
<Table>
<Caption>
INCEPTION 1 3 5 10 SINCE
DATE YR YRS YRS YRS INCEPTION
Class A shares (w/o sales charge) 2/3/03 18.14% -- -- -- 28.10%
(w/ sales charge) 2/3/03 12.82% -- -- -- 25.04%
Class B shares (w/o sales charge) 2/3/03 17.22% -- -- -- 27.08%
(w/ sales charge) 2/3/03 14.22% -- -- -- 25.81%
Class C shares (w/o sales charge) 2/3/03 17.22% -- -- -- 27.08%
(w/ sales charge) 2/3/03 16.22% -- -- -- 27.08%
Class K shares (w/o sales charge) 2/3/03 18.01% -- -- -- 27.88%
(w/ sales charge) 2/3/03 17.01% -- -- -- 27.88%
Russell 2000 Value Index 22.25% -- -- -- 37.74%
Since Class A
shares inception
</Table>
- --------------------------------------------------------------------------------
ALL PERFORMANCE DATA QUOTED IS HISTORICAL AND THE RESULTS REPRESENT PAST
PERFORMANCE AND NEITHER GUARANTEE NOR PREDICT FUTURE INVESTMENT RESULTS. To
obtain performance data current to the most recent month (available within 7
business days of the most recent month end), please call us at (800) 221-3253 or
visit our website at www.guardianinvestor.com. Current performance may be higher
or lower than the performance quoted here. Investment return and principal value
will fluctuate so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
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.
- --------------------------------------------------------------------------------
17
/ / THE GUARDIAN UBS SMALL CAP VALUE FUND ANNUAL REPORT
TO SHAREHOLDERS
- --------------------------------------------------------------------------------
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
To give you a comparison, this chart shows you the performance of a hypothetical
$10,000 investment made in Class A, Class B, Class C and Class K shares of the
Fund and in the Russell 2000 Value Index. The starting point of $9,550 for Class
A shares reflects the maximum sales charge of 4.5% that an investor may have to
pay when purchasing Class A shares of the Fund. For Class B shares, the
contingent deferred sales charge of 3% was imposed at the end of the period. The
initial investment amount in the S&P 500 Index, Class B, Class C and Class K
shares is $10,000. This performance does not reflect the deduction of taxes that
a shareholder may pay on distributions or redemption of shares. Returns
represent past performance and are not indicative of future results. Index
returns do not include the fees and expenses of the Fund, but do include the
reinvestment of dividends.
<Table>
<Caption>
THE GUARDIAN THE GUARDIAN THE GUARDIAN THE GUARDIAN
UBS SMALL CAP UBS SMALL CAP UBS SMALL CAP UBS SMALL CAP
VALUE FUND, CLASS VALUE FUND, CLASS VALUE FUND, CLASS VALUE FUND, CLASS RUSSELL 2000 VALUE
A SHARES B SHARES C SHARES K SHARES INDEX
----------------- ----------------- ----------------- ----------------- ------------------
2/3/03 9950.00 10000.00 10000.00 10000.00 10000.00
2003 12938.00 13476.00 13476.00 13546.10 15085.00
2004 15284.00 15322.70 15796.60 15966.40 18441.00
</Table>
FUND EXPENSES
By investing in the Fund, you incur two types of costs: (1) transaction costs,
including sales charges on purchase payments, reinvested dividends, or other
distributions; redemption fees and exchange fees; and (2) ongoing costs,
including, as applicable, management fees; distribution and/or service (12b-1)
fees; and other Fund expenses. These examples are intended to help you
understand your ongoing costs (in dollars) of investing in the Fund and to
compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested on July 1, 2004 and
held for six months ended December 31, 2004.
- --------------------------------------------------------------------------------
18
/ / THE GUARDIAN UBS SMALL CAP VALUE FUND ANNUAL REPORT
TO SHAREHOLDERS
- --------------------------------------------------------------------------------
ACTUAL EXPENSES
The first table provides information about actual account values and actual
expenses. You may use the information in this table, together with the amount
you invested, to estimate the expenses that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the
applicable line under the heading entitled "Expenses Paid During the Period" to
estimate the expenses you paid on your account during this period.
<Table>
<Caption>
BEGINNING ENDING EXPENSES PAID
ACCOUNT ACCOUNT DURING THE PERIOD
VALUE VALUE JULY 1, 2004 -
JULY 1, 2004 DECEMBER 31, 2004 DECEMBER 31, 2004(1)
Class A $1,000.00 $1,120.90 $10.40
Class B $1,000.00 $1,116.00 $14.41
Class C $1,000.00 $1,116.00 $14.47
Class K $1,000.00 $1,119.60 $11.03
</Table>
1 Expenses are equal to the Fund's annualized expense ratio of 1.95%, 2.71%,
2.72% and 2.07% for the Fund's Class A, B, C and K shares, respectively,
multiplied by the average account value over the period, multiplied by 184/366
(to reflect the Fund's most recent fiscal half-year).
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
This second table provides information about hypothetical account values and
hypothetical expenses based on the Fund's actual expense ratio and an assumed
rate of return of 5% per year before expenses, which is not the Fund's actual
return. The hypothetical account values and expenses may not be used to estimate
the actual ending account balance or expenses you paid for the period. You may
use this information to compare the ongoing costs of investing in the Fund and
other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads), redemption fees, or exchange fees. Therefore, the table is
useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if transactional
costs were included, your costs would have been higher.
<Table>
<Caption>
BEGINNING ENDING EXPENSES PAID
ACCOUNT ACCOUNT DURING THE PERIOD
VALUE VALUE JULY 1, 2004 -
JULY 1, 2004 DECEMBER 31, 2004 DECEMBER 31, 2004(1)
Class A $1,000.00 $1,015.33 $ 9.88
Class B $1,000.00 $1,011.51 $13.70
Class C $1,000.00 $1,011.46 $13.75
Class K $1,000.00 $1,014.73 $10.48
</Table>
1 Expenses are equal to the Fund's annualized expense ratio of 1.95%, 2.71%,
2.72% and 2.07% for the Fund's Class A, B, C and K shares, respectively,
multiplied by the average account value over the period, multiplied by 184/366
(to reflect the Fund's most recent fiscal half-year).
- --------------------------------------------------------------------------------
19
/ / THE GUARDIAN ASSET ALLOCATION FUND ANNUAL REPORT
TO SHAREHOLDERS
- --------------------------------------------------------------------------------
[PHOTO]
Jonathan C. Jankus C.F.A.,
Co-Portfolio Manager
[PHOTO]
Stewart Johnson,
Co-Portfolio Manager
OBJECTIVE:
Long-term total investment return consistent with moderate investment risk
PORTFOLIO:
Generally purchases shares of The Guardian S&P 500 Index, The Guardian Park
Avenue, The Guardian Investment Quality Bond and/or The Guardian Cash
Management Funds. Also invests in individual securities and uses futures to
manage allocations among the equity, debt and money market asset classes.
INCEPTION DATE:
February 16, 1993
NET ASSETS AT
DECEMBER 31, 2004:
$158,437,199
AN UPDATE FROM FUND MANAGEMENT
For the year ended December 31, 2004, the Fund's return was 9.84%(1)
placing it above the average 8.99% return of the 365 funds that comprise the
Lipper universe of funds having similar objectives. The fund also outperformed
the median return of 8.68% produced by Morningstar's universe of asset
allocation funds, which consists of 951 funds. During this period, the Fund's
return also surpassed the 8.30% return experienced by its not-quite-passive
composite benchmark (60% of the S&P 500 Index and 40% of the Lehman Aggregate
Bond Index, rebalanced monthly without expenses or trading costs). Since its
inception on February 16, 1993, the Fund's average annual return of 8.90% places
it behind the average annual return of 9.67% experienced by its composite
benchmark.
Stock market returns were positive for a second straight year. That said,
the market's returns for 2000, 2001 and 2002 were so poor that the cumulative
return on the S&P 500 Index, including dividends, for the five-year period ended
December 31, 2004 has actually been negative. Over this period, the market has
had to deal with allegations of corporate malfeasance, a mixed economy, the
ongoing threat of terrorist attacks and a continuing unrest in the Middle East.
The Fund's performance was positively impacted by a correctly aggressive stance
on the market. After the declines of 2000, 2001 and the first half of 2002, our
models viewed the stock market as being extremely "cheap" relative to fixed
income alternatives. In addition, the turnaround in the economy led to a
pronounced rebound in corporate profitability.
Our investing was guided by our quantitative model which, as of year-end,
has us invested fully 100% in stocks, 0% in bonds and 0% in cash. This is the
most aggressive position that the Fund can hold.
Most signs indicate continuing economic growth, which hopefully will
continue to feed a rebound in corporate profits. A risk on the horizon is the
extent to which interest rates will rise in the near term, especially given such
exogenous factors as a weak dollar and expensive oil. "Real" interest rates
(interest rates after subtracting expected inflation), however, remain low. On
balance, we remain optimistic, albeit a bit more cautiously so.
- --------------------------------------------------------------------------------
1 Total return is shown for Class A shares and does not take into account the
current maximum sales charge of 4.5%.
- --------------------------------------------------------------------------------
ABOUT INFORMATION IN THIS REPORT:
- It is important to consider the Fund's investment objectives, risks, fees
and expenses before investing. All funds involve some risk, including
possible loss of the principal amount invested.
- The Composite benchmark total return data is comprised of 60% of the S&P 500
Index and 40% of the Lehman Aggregate Bond Index to reflect a 60/40 neutral
weighting of the Fund. Please see the "About Your Annual Report" page for a
description of the S&P 500 Index and the Lehman Aggregate Bond Index.
- (R)2004 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.
- Lipper, Inc. is an independent mutual fund monitoring and rating service.
Its database of performance information is based on historical returns,
which assume the reinvestment of dividends and distributions and the
deduction of all fund expenses. Lipper return figures do not reflect the
deduction of any sales charges that an investor may pay when purchasing or
redeeming shares of the Fund.
- --------------------------------------------------------------------------------
20
/ / THE GUARDIAN ASSET ALLOCATION FUND ANNUAL REPORT
TO SHAREHOLDERS
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION BY ASSET CLASS (AS OF 12/31/04)
<Table>
THE GUARDIAN ASSET THE GUARDIAN ASSET
ALLOCATION FUND, ALLOCATION FUND,
DEC. 31, 2004 JUNE 30, 2004
Common Stocks 98.97% 99.58%
Cash 1.03% 0.37%
Fixed Income 0.00% 0.05%
</Table>
AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS ENDED 12/31/04)
<Table>
<Caption>
INCEPTION 1 3 5 10 SINCE
DATE YR YRS YRS YRS INCEPTION
Class A shares (w/o sales charge) 2/16/93 9.84% 3.68% 0.21% 9.63% 8.90%
(w/ sales charge) 2/16/93 4.90% 2.10% -0.71% 9.13% 8.48%
Class B shares (w/o sales charge) 5/1/96 8.83% 2.75% -0.65% -- 6.89%
(w/ sales charge) 5/1/96 5.83% 2.11% -0.85% -- 6.89%
Class C shares (w/o sales charge) 8/7/00 8.68% 2.46% -- -- -2.06%
(w/ sales charge) 8/7/00 7.68% 2.46% -- -- -2.06%
Class K shares (w/o sales charge) 5/15/01 9.51% 3.22% -- -- 0.62%
(w/ sales charge) 5/15/01 8.51% 3.22% -- -- 0.62%
Composite benchmark:
60% S&P 500 Index,
40% Lehman Aggregate Bond Index 8.30% 4.99% 1.98% 10.66% 9.67%
Since Class A
shares inception
</Table>
- --------------------------------------------------------------------------------
ALL PERFORMANCE DATA QUOTED IS HISTORICAL AND THE RESULTS REPRESENT PAST
PERFORMANCE AND NEITHER GUARANTEE NOR PREDICT FUTURE INVESTMENT RESULTS. To
obtain performance data current to the most recent month (available within 7
business days of the most recent month end), please call us at (800) 221-3253 or
visit our website at www.guardianinvestor.com. Current performance may be higher
or lower than the performance quoted here. Investment return and principal value
will fluctuate so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
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.
- --------------------------------------------------------------------------------
21
/ / THE GUARDIAN ASSET ALLOCATION FUND ANNUAL REPORT
TO SHAREHOLDERS
- --------------------------------------------------------------------------------
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
To give you a comparison, the chart below shows the performance of a
hypothetical $10,000 investment made in Class A shares of each The Guardian
Asset Allocation Fund, the S&P 500 Index and the Lehman Aggregate Bond Index.
The starting point of $9,550 for Class A shares reflects the maximum sales
charge of 4.5% that an investor may pay when purchasing Class A shares of the
Fund. Each Index begins at $10,000. This performance does not reflect the
deduction of taxes that a shareholder may pay on distributions or redemption of
shares. Returns represent past performance and are not indicative of future
results. Index returns do not include the fees and expenses of the Fund, but do
include the reinvestment of dividends.
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.
<Table>
<Caption>
THE GUARDIAN ASSET
ALLOCATION FUND, CLASS A LEHMAN AGGREGATE BOND
SHARES S&P 500 INDEX INDEX
------------------------ ------------- ---------------------
2/16/93 9550.00 10000.00 10000.00
1993 10358.70 11017.40 10705.80
1994 10323.80 11161.50 10393.30
1995 13377.70 15339.10 12313.60
1996 15388.50 18878.50 12758.70
1997 19024.70 25176.80 13994.30
1998 23016.50 32372.80 15208.10
1999 25777.90 39185.60 15081.80
2000 25521.60 35617.60 16836.00
2001 24572.60 31384.60 18254.10
2002 22160.20 24447.20 20128.70
2003 26256.90 31462.50 20955.50
2004 29030.40 34886.20 21864.50
</Table>
FUND EXPENSES
By investing in the Fund, you incur two types of costs: (1) transaction costs,
including sales charges on purchase payments, reinvested dividends, or other
distributions; redemption fees and exchange fees; and (2) ongoing costs,
including, as applicable, management fees; distribution and/or service (12b-1)
fees; and other Fund expenses. These examples are intended to help you
understand your ongoing costs (in dollars) of investing in the Fund and to
compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested on July 1, 2004 and
held for six months ended December 31, 2004.
- --------------------------------------------------------------------------------
22
/ / THE GUARDIAN ASSET ALLOCATION FUND ANNUAL REPORT
TO SHAREHOLDERS
- --------------------------------------------------------------------------------
ACTUAL EXPENSES
The first table provides information about actual account values and actual
expenses. You may use the information in this table, together with the amount
you invested, to estimate the expenses that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the
applicable line under the heading entitled "Expenses Paid During the Period" to
estimate the expenses you paid on your account during this period.
<Table>
<Caption>
BEGINNING ENDING EXPENSES PAID
ACCOUNT ACCOUNT DURING THE PERIOD
VALUE VALUE JULY 1, 2004 -
JULY 1, 2004 DECEMBER 31, 2004 DECEMBER 31, 2004(1)
Class A $1,000.00 $1,066.50 $2.13
Class B $1,000.00 $1,061.60 $6.37
Class C $1,000.00 $1,060.60 $7.36
Class K $1,000.00 $1,064.80 $3.53
</Table>
1 Expenses are equal to the Fund's annualized expense ratio of 0.41%, 1.23%,
1.42% and 0.68% for the Fund's Class A, B, C and K shares, respectively,
multiplied by the average account value over the period, multiplied by 184/366
(to reflect the Fund's most recent fiscal half-year).
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
This second table provides information about hypothetical account values and
hypothetical expenses based on the Fund's actual expense ratio and an assumed
rate of return of 5% per year before expenses, which is not the Fund's actual
return. The hypothetical account values and expenses may not be used to estimate
the actual ending account balance or expenses you paid for the period. You may
use this information to compare the ongoing costs of investing in the Fund and
other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads), redemption fees, or exchange fees. Therefore, the table is
useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if transactional
costs were included, your costs would have been higher.
<Table>
<Caption>
BEGINNING ENDING EXPENSES PAID
ACCOUNT ACCOUNT DURING THE PERIOD
VALUE VALUE JULY 1, 2004 -
JULY 1, 2004 DECEMBER 31, 2004 DECEMBER 31, 2004(1)
Class A $1,000.00 $1,023.08 $2.08
Class B $1,000.00 $1,018.95 $6.24
Class C $1,000.00 $1,018.00 $7.20
Class K $1,000.00 $1,021.72 $3.46
</Table>
1 Expenses are equal to the Fund's annualized expense ratio of 0.41%, 1.23%,
1.42% and 0.68% for the Fund's Class A, B, C and K shares, respectively,
multiplied by the average account value over the period, multiplied by 184/366
(to reflect the Fund's most recent fiscal half-year).
- --------------------------------------------------------------------------------
23
/ / THE GUARDIAN S&P 500 INDEX FUND ANNUAL REPORT
TO SHAREHOLDERS
- --------------------------------------------------------------------------------
[PHOTO]
Jonathan C. Jankus, C.F.A.,
Co-Portfolio Manager
[PHOTO]
Stewart Johnson,
Co-Portfolio Manager
OBJECTIVE:
Seeks to track the investment performance of the Standard and Poor's 500
Composite Stock Price Index (the "S&P 500 Index") which emphasizes
securities issued by large U.S. companies
PORTFOLIO:
At least 95% of the Fund's assets are invested in common stocks of companies
included in the S&P 500 Index under normal circumstances
INCEPTION DATE:
August 7, 2000
NET ASSETS AT
DECEMBER 31, 2004:
$178,552,804
AN UPDATE FROM FUND MANAGEMENT
The Fund seeks to replicate the returns of the S&P 500 Index, a theoretical
portfolio of 500 blue-chip stocks. For the year ending December 31, 2004, the
Fund's return was 10.30%(1). The S&P 500 Index returned 10.88% over the same
period. The Fund outperformed the 10.21% average return achieved by 172
comparable funds in the Lipper universe, i.e., funds having an investment
objective similar to the Fund's. The S&P 500 Index return is theoretical in the
sense that it is computed as though the securities in the Index were purchased
and subsequently rebalanced without any trading costs or fund expenses. For the
period from Fund inception on August 7, 2000 and ended December 31, 2004, the
Fund's average annual return was -3.30% compared to an average annual return of
- -2.90% for the S&P 500 Index.
Stock market returns were positive for a second straight year. That said,
the market's returns for 2000, 2001 and 2002 were so poor that the cumulative
return on the S&P 500 Index, including dividends, for the five-year period ended
December 31, 2004 has actually been negative. Over this period, the market has
had to deal with allegations of corporate malfeasance, a mixed economy, the
ongoing threat of terrorist attacks and continuing unrest in the Middle East.
The stock market rebound has been a product of the turnaround in the
economy in general and corporate profits in particular. In spite of this
strength, interest rates and bond yields remained low in real (after-inflation)
terms. Historically, this has been an attractive environment for stocks.
In keeping with our passive investment strategy, we managed the portfolio
so as to be fully invested in stocks, attempted to match the performance of the
S&P 500 Index and kept trading costs to a minimum. If history is any indication,
this has proven to be an extremely difficult strategy to surpass. In particular,
during 2004, Lipper's universe of 925 "Large Cap Core" funds returned an average
of only 7.79%, compared to the 10.21% average return for the funds that simply
tried to match the S&P 500 Index.
Most signs indicate continuing economic growth, which hopefully will
continue to feed a rebound in corporate profits. A risk on the horizon is the
extent to which interest rates will rise in the near term, especially given such
exogenous factors as a weak dollar and expensive oil. "Real" interest rates
(interest rates after subtracting expected inflation), however, remain low. On
balance, we remain optimistic.
- --------------------------------------------------------------------------------
1 Total return is shown for Class A shares and does not take into account the
current maximum sales charge of 4.5%.
- --------------------------------------------------------------------------------
ABOUT INFORMATION IN THIS REPORT:
- It is important to consider the Fund's investment objectives, risks, fees
and expenses before investing. All funds involve some risk, including
possible loss of the principal amount invested.
- Please see the "About Your Annual Report" page for a description of the S&P
500 Index.
- 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.
- "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.
- --------------------------------------------------------------------------------
24
/ / THE GUARDIAN S&P 500 INDEX FUND ANNUAL REPORT
TO SHAREHOLDERS
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS (AS OF 12/31/04)
<Table>
<Caption>
PERCENTAGE OF
COMPANY TOTAL NET ASSETS
General Electric Co. 3.28%
Exxon Mobil Corp. 2.90%
Microsoft Corp. 2.48%
Citigroup, Inc. 2.13%
Wal-Mart Stores, Inc. 1.96%
Pfizer, Inc. 1.78%
Bank of America Corp. 1.66%
Johnson & Johnson 1.61%
American Int'l. Group, Inc. 1.47%
Int'l. Business Machines 1.45%
</Table>
SECTOR WEIGHTINGS VS. INDEX (AS OF 12/31/04)
<Table>
<Caption>
THE GUARDIAN S&P 500 INDEX
FUND S&P 500 INDEX
-------------------------- -------------
Financials 20.44 20.64
Information Technology 16.27 16.05
Health Care 12.53 12.68
Consumer Discretionary 11.80 11.90
Consumer Staples 10.66 10.48
Industrial 11.87 11.79
Energy 6.89 7.16
Telecommunication Services 3.23 3.27
Materials 3.14 3.09
Utilities 3.17 2.94
</Table>
AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS ENDED 12/31/04)
<Table>
<Caption>
INCEPTION 1 3 5 10 SINCE
DATE YR YRS YRS YRS INCEPTION
Class A shares (w/o sales charge) 8/7/00 10.30% 3.05% -- -- -3.30%
(w/ sales charge) 8/7/00 5.34% 1.48% -- -- -4.31%
Class B shares (w/o sales charge) 8/7/00 9.40% 2.16% -- -- -4.12%
(w/ sales charge) 8/7/00 6.40% 1.52% -- -- -4.34%
Class C shares (w/o sales charge) 8/7/00 9.41% 2.12% -- -- -4.14%
(w/ sales charge) 8/7/00 8.41% 2.12% -- -- -4.14%
Class K shares (w/o sales charge) 5/15/01 9.72% 2.46% -- -- -0.97%
(w/ sales charge) 5/15/01 8.72% 2.46% -- -- -0.97%
S&P 500 Index 10.88% 3.59% -- -- -2.90%
Since Class A
shares inception
</Table>
- --------------------------------------------------------------------------------
ALL PERFORMANCE DATA QUOTED IS HISTORICAL AND THE RESULTS REPRESENT PAST
PERFORMANCE AND NEITHER GUARANTEE NOR PREDICT FUTURE INVESTMENT RESULTS. To
obtain performance data current to the most recent month (available within 7
business days of the most recent month end), please call us at (800) 221-3253 or
visit our website at www.guardianinvestor.com. Current performance may be higher
or lower than the performance quoted here. Investment return and principal value
will fluctuate so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
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.
- --------------------------------------------------------------------------------
25
/ / THE GUARDIAN S&P 500 INDEX FUND ANNUAL REPORT
TO SHAREHOLDERS
- --------------------------------------------------------------------------------
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
To give you a comparison, this chart shows you the performance of a hypothetical
$10,000 investment made in Class A, Class B and Class C shares of the Fund and
in the S&P 500 Index. The starting point of $9,550 For Class A shares reflects
the maximum sales charge of 4.5% that an investor may have to pay when
purchasing Class A shares of the Fund. The initial investment amount in the S&P
500 Index, Class B and Class C shares is $10,000. For Class B shares, the
contingent deferred sales charge of 2% was imposed at the end of the period.
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. Index returns do not include the fees
and expenses of the Fund, but do include the reinvestment of dividends.
<Table>
<Caption>
THE GUARDIAN S&P THE GUARDIAN S&P THE GUARDIAN S&P
500 INDEX FUND, CLASS 500 INDEX FUND, CLASS 500 INDEX FUND, CLASS
A SHARES B SHARES C SHARES S&P 500 INDEX
--------------------- --------------------- --------------------- -------------
8/7/00 9550 10000 10000 10000
2000 8590.39 9000.35 9000.35 8967.15
2001 7538.1 7841.57 7842.07 7903.82
2002 5853.41 6020.82 6021.66 6157.19
2003 7480.05 7643.05 7633.8 7923.11
2004 8250.3 8194.13 8352.04 8785.32
</Table>
FUND EXPENSES
By investing in the Fund, you incur two types of costs: (1) transaction costs,
including sales charges on purchase payments, reinvested dividends, or other
distributions; redemption fees and exchange fees; and (2) ongoing costs,
including, as applicable, management fees; distribution and/or service (12b-1)
fees; and other Fund expenses. These examples are intended to help you
understand your ongoing costs (in dollars) of investing in the Fund and to
compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested on July 1, 2004 and
held for six months ended December 31, 2004.
- --------------------------------------------------------------------------------
26
/ / THE GUARDIAN S&P 500 INDEX FUND ANNUAL REPORT
TO SHAREHOLDERS
- --------------------------------------------------------------------------------
ACTUAL EXPENSES
The first table provides information about actual account values and actual
expenses. You may use the information in this table, together with the amount
you invested, to estimate the expenses that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the
applicable line under the heading entitled "Expenses Paid During the Period" to
estimate the expenses you paid on your account during this period.
<Table>
<Caption>
BEGINNING ENDING EXPENSES PAID
ACCOUNT ACCOUNT DURING THE PERIOD
VALUE VALUE JULY 1, 2004 -
JULY 1, 2004 DECEMBER 31, 2004 DECEMBER 31, 2004(1)
Class A $1,000.00 $1,070.10 $2.76
Class B $1,000.00 $1,064.40 $6.64
Class C $1,000.00 $1,064.60 $6.64
Class K $1,000.00 $1,066.20 $4.83
</Table>
1 Expenses are equal to the Fund's annualized expense ratio of 0.53%, 1.28%,
1.28% and 0.93% for the Fund's Class A, B, C and K shares, respectively,
multiplied by the average account value over the period, multiplied by 184/366
(to reflect the Fund's most recent fiscal half-year).
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
This second table provides information about hypothetical account values and
hypothetical expenses based on the Fund's actual expense ratio and an assumed
rate of return of 5% per year before expenses, which is not the Fund's actual
return. The hypothetical account values and expenses may not be used to estimate
the actual ending account balance or expenses you paid for the period. You may
use this information to compare the ongoing costs of investing in the Fund and
other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads), redemption fees, or exchange fees. Therefore, the table is
useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if transactional
costs were included, your costs would have been higher.
<Table>
<Caption>
BEGINNING ENDING EXPENSES PAID
ACCOUNT ACCOUNT DURING THE PERIOD
VALUE VALUE JULY 1, 2004 -
JULY 1, 2004 DECEMBER 31, 2004 DECEMBER 31, 2004(1)
Class A $1,000.00 $1,022.47 $2.69
Class B $1,000.00 $1,018.70 $6.50
Class C $1,000.00 $1,018.70 $6.50
Class K $1,000.00 $1,020.46 $4.72
</Table>
1 Expenses are equal to the Fund's annualized expense ratio of 0.53%, 1.28%,
1.28% and 0.93% for the Fund's Class A, B, C and K shares, respectively,
multiplied by the average account value over the period, multiplied by 184/366
(to reflect the Fund's most recent fiscal half-year).
- --------------------------------------------------------------------------------
27
/ / THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL GROWTH FUND ANNUAL REPORT
TO SHAREHOLDERS
- --------------------------------------------------------------------------------
[PHOTO]
R. Robin Menzies,
Portfolio Manager
OBJECTIVE:
Long-term growth
of capital
PORTFOLIO:
At least 80% in a diversified portfolio of common stocks and convertible
securities of companies domiciled outside the United States
INCEPTION DATE:
February 16, 1993
NET ASSETS AT
DECEMBER 31, 2004:
$56,891,433
AN UPDATE FROM FUND MANAGEMENT
The Fund underperformed the MSCI EAFE Growth Index slightly during the
year. The return of the Fund was 16.34%(1) whereas the return of the Index was
16.48%. The most buoyant segment of the Index was Asia Pacific which had a total
return of 27.6% over the year while even the laggard Japan recorded a healthy
return of 10.3%. Returns were helped by the weakening of the dollar; in local
currency terms the Index as a whole rose by only 9.1%. The strongest sector in
the Index was utilities where the Fund is underweight compared to the Index. The
sector returned 39.3% over the year as oil and gas prices increased. For the
Fund, strong performance came in food, beverage and tobacco as the peaking of
cyclical profits saw investors favor more defensive stocks.
The main positive contribution to performance came from stock selection in
the UK. The UK economy has been remarkably resilient in recent years with
consumer demand buoyed by strong house price rises and low interest rates. While
UK interest rates rose gradually over the year, they remain at relatively low
levels but appear to have risen enough to cool the housing boom. The greatest
detractor from performance was European stock selection. L'Oreal suffered as
consumer product companies promoted aggressively (and expensively). The weak
dollar was also an issue and negatively affected other holdings such as ABB
(represents 1.31% of the Fund's total net assets as of December 31, 2004) and
Porsche (represents 1.61% of the Fund's total net assets as of December 31,
2004). In industry terms, the Fund's underweight in utilities detracted from
performance while our overweight in energy, particularly emerging market oils,
helped performance.
We are a growth manager with a bottom-up approach to stock picking. We look
for companies that we believe have the potential to generate sustainable
earnings growth. In determining the potential of a company, we pay particular
attention to competitive advantage, management attitudes, financial strength and
the industry background that a company operates in. We regularly meet with the
management of the companies within our investment universe and constantly
revisit the investment case for the companies within the portfolio to ensure
that our expectations are being met.
- --------------------------------------------------------------------------------
1 Total return is shown for Class A shares and does not take into account the
current maximum sales charge of 4.5%.
- --------------------------------------------------------------------------------
ABOUT INFORMATION IN THIS REPORT:
- It is important to consider the Fund's investment objectives, risks, fees
and expenses before investing. All funds involve some risk, including
possible loss of the principal amount invested. International investing has
special risks relating to changes in currency rates, foreign taxation,
differences in auditing and other financial standards, political uncertainty
and greater volatility.
- Please see the "About Your Annual Report" page for a description of the
Morgan Stanley Capital International (MSCI) Europe, Australasia and Far East
(EAFE) Growth Index.
- --------------------------------------------------------------------------------
28
/ / THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL GROWTH FUND ANNUAL REPORT
TO SHAREHOLDERS
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS (AS OF 12/31/04)
<Table>
<Caption>
PERCENTAGE OF
COMPANY COUNTRY TOTAL NET ASSETS
Vodafone Group United Kingdom 3.37%
Total S.A. France 2.86%
Imperial Tobacco United Kingdom 2.69%
BP PLC United Kingdom 2.65%
Essilor Int'l. S.A. France 2.44%
Danske Bank AS Denmark 2.30%
Sanofi-Synthelabo S.A. France 2.18%
UBS AG Switzerland 2.07%
GlaxoSmithKline PLC United Kingdom 1.99%
Asahi Glass Co. Japan 1.97%
</Table>
GEOGRAPHICAL LOCATION VS. INDEX (AS OF 12/31/04)
<Table>
<Caption>
THE GUARDIAN BAILLIE GIFFORD
INTERNATINAL GROWTH FUND MSCI EAFE GROWTH INDEX
---------------------------- ----------------------
Continental Europe 42.35 45.11
Japan 22.94 22.35
UK 22.19 25.09
Asia Pacific 7.96 7.45
Emerging Markets 3.15 0.00
Cash 1.41 0.00
</Table>
AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS ENDED 12/31/04)
<Table>
<Caption>
INCEPTION 1 3 5 10 SINCE
DATE YR YRS YRS YRS INCEPTION
Class A shares (w/o sales charge) 2/16/93 16.34% 6.28% -6.61% 5.10% 6.52%
(w/sales charge) 2/16/93 11.10% 4.66% -7.47% 4.62% 6.11%
Class B shares (w/o sales charge) 5/1/96 15.02% 5.01% -7.71% -- 2.43%
(w/sales charge) 5/1/96 12.02% 4.40% -7.90% -- 2.43%
Class C shares (w/o sales charge) 8/7/00 15.19% 5.06% -- -- -5.33%
(w/sales charge) 8/7/00 14.19% 5.06% -- -- -5.33%
Class K shares (w/o sales charge) 5/15/01 16.19% 6.08% -- -- 0.25%
(w/sales charge) 5/15/01 15.19% 6.08% -- -- 0.25%
MSCI EAFE Growth Index 16.48% 9.14% -5.77% 3.41% 5.32%
Since Class A
shares inception
</Table>
- --------------------------------------------------------------------------------
ALL PERFORMANCE DATA QUOTED IS HISTORICAL AND THE RESULTS REPRESENT PAST
PERFORMANCE AND NEITHER GUARANTEE NOR PREDICT FUTURE INVESTMENT RESULTS. To
obtain performance data current to the most recent month (available within 7
business days of the most recent month end), please call us at (800) 221-3253 or
visit our website at www.guardianinvestor.com. Current performance may be higher
or lower than the performance quoted here. Investment return and principal value
will fluctuate so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
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.
- --------------------------------------------------------------------------------
29
/ / THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL GROWTH FUND ANNUAL REPORT
TO SHAREHOLDERS
- --------------------------------------------------------------------------------
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
To give you a comparison, this chart shows the performance of a hypothetical
$10,000 investment made in Class A shares of The Guardian Baillie Gifford
International Fund and the MSCI EAFE Growth Index. The starting point of $9,550
for Class A shares reflects the maximum sales charge of 4.5% that an investor
may pay when purchasing Class A shares of the Fund. The Index begins at $10,000.
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. Index returns do not include the fees
and expenses of the Fund, but do include the reinvestment of dividends.
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.
<Table>
<Caption>
THE GUARDIAN BAILLIE GIFFORD
INTERNATIONAL GROWTH FUND MSCI EAFE GROWTH INDEX
---------------------------- ----------------------
2/16/93 9550 10000
1993 12360.4 13227.2
1994 12292 12392.4
1995 13661.2 14397.5
1996 15619.1 14298.7
1997 17348.4 15958
1998 20749.6 18795
1999 28471.3 22886.8
2000 21691 18280.7
2001 16845.5 13111.1
2002 13518.9 11096.4
2003 17381.5 15768.6
2004 20222.1 18014.2
</Table>
FUND EXPENSES
By investing in the Fund, you incur two types of costs: (1) transaction costs,
including sales charges on purchase payments, reinvested dividends, or other
distributions; redemption fees and exchange fees; and (2) ongoing costs,
including, as applicable, management fees; distribution and/or service (12b-1)
fees; and other Fund expenses. These examples are intended to help you
understand your ongoing costs (in dollars) of investing in the Fund and to
compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested on July 1, 2004 and
held for six months ended December 31, 2004.
- --------------------------------------------------------------------------------
30
/ / THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL GROWTH FUND ANNUAL REPORT
TO SHAREHOLDERS
- --------------------------------------------------------------------------------
ACTUAL EXPENSES
The first table provides information about actual account values and actual
expenses. You may use the information in this table, together with the amount
you invested, to estimate the expenses that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the
applicable line under the heading entitled "Expenses Paid During the Period" to
estimate the expenses you paid on your account during this period.
<Table>
<Caption>
EXPENSES
BEGINNING ENDING PAID DURING
ACCOUNT ACCOUNT THE PERIOD
VALUE VALUE JULY 1, 2004 -
JULY 1, 2004 DECEMBER 31, 2004 DECEMBER 31, 2004(1)
Class A $1,000.00 $1,140.20 $10.44
Class B $1,000.00 $1,132.90 $16.51
Class C $1,000.00 $1,133.50 $15.82
Class K $1,000.00 $1,138.60 $10.97
</Table>
1 Expenses are equal to the Fund's annualized expense ratio of 1.94%, 3.08%,
2.95% and 2.04% for the Fund's Class A, B, C and K shares, respectively,
multiplied by the average account value over the period, multiplied by 184/366
(to reflect the Fund's most recent fiscal half-year).
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
This second table provides information about hypothetical account values and
hypothetical expenses based on the Fund's actual expense ratio and an assumed
rate of return of 5% per year before expenses, which is not the Fund's actual
return. The hypothetical account values and expenses may not be used to estimate
the actual ending account balance or expenses you paid for the period. You may
use this information to compare the ongoing costs of investing in the Fund and
other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads), redemption fees, or exchange fees. Therefore, the table is
useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if transactional
costs were included, your costs would have been higher.
<Table>
<Caption>
EXPENSES
BEGINNING ENDING PAID DURING
ACCOUNT ACCOUNT THE PERIOD
VALUE VALUE JULY 1, 2004 -
JULY 1, 2004 DECEMBER 31, 2004 DECEMBER 31, 2004(1)
Class A $1,000.00 $1,015.38 $ 9.83
Class B $1,000.00 $1,009.65 $15.56
Class C $1,000.00 $1,010.31 $14.91
Class K $1,000.00 $1,014.88 $10.33
</Table>
1 Expenses are equal to the Fund's annualized expense ratio of 1.94%, 3.08%,
2.95% and 2.04% for the Fund's Class A, B, C and K shares, respectively,
multiplied by the average account value over the period, multiplied by 184/366
(to reflect the Fund's most recent fiscal half-year).
- --------------------------------------------------------------------------------
31
/ / THE GUARDIAN BAILLIE GIFFORD EMERGING MARKETS FUND ANNUAL REPORT
TO SHAREHOLDERS
- --------------------------------------------------------------------------------
[PHOTO]
Edward H. Hocknell,
Portfolio Manager
OBJECTIVE:
Long-term capital appreciation
PORTFOLIO:
At least 80% in a diversified portfolio of common stocks and convertible
securities issued by companies in emerging markets
INCEPTION DATE:
May 1, 1997
NET ASSETS AT
DECEMBER 31, 2004:
$101,606,402
AN UPDATE FROM FUND MANAGEMENT
The Fund underperformed the MSCI EMF Index for the year ended December 31,
2004. The Fund rose 23.53%(1) compared to an increase of 25.95% in the MSCI EMF
Index. The absolute return in the emerging markets was positive as these
countries profited from continued strong demand from China and the resulting
surges in commodity prices. The strongest sectors in the Index were retailing
and food, principally attributable to Mexico. Central and South America were
strong as those economies profited from greater political stability, better
commodity prices and the resulting wealth effect. Central European countries
like Hungary, Czech Republic and Poland were particularly strong as the race to
join the European Union continues. At the heart of the growth in emerging
markets lies the rapid emergence of China as a global economic stimulator.
The main strength in relative performance came from stock selection. This
was strong in South Korea with ownership of Donkuk Steel (represents 1.02% of
the Fund's total net assets as of December 31, 2004) and Samsung Electronic. In
Taiwan, the Fund benefited from ownership of Hon Hai Precision, a large
technology company, as well as Asia Cement (represents 1.02% of the Fund's total
net assets as of December 31, 2004), which played the newfound strength in the
domestic housing market. Furthermore, in Russia, the Fund benefited from not
owning Yukos which was the worst performer in the Russian market. The greatest
detractor from performance was the currency effect from Brazilian and South
African stock holdings. Beyond these factors, the Fund was also helped by the
strength in materials and energy as China continues to stimulate demand.
We are a growth manager with a bottom-up approach to stock picking. We look
for companies that we believe have the potential to generate sustainable
earnings growth. In determining the potential of a company, we pay particular
attention to competitive advantage, management attitudes, financial strength and
the industry background that a company operates in. We regularly meet the
management of the companies within our investment universe and constantly
revisit the investment case for the companies within the portfolio to ensure
that our expectations are being met.
- --------------------------------------------------------------------------------
1 Total return is shown for Class A shares and does not take into account the
current maximum sales charge of 4.5%.
- --------------------------------------------------------------------------------
ABOUT INFORMATION IN THIS REPORT:
- It is important to consider the Fund's investment objectives, risks, fees
and expenses before investing. All funds involve some risk, including
possible loss of the principal amount invested. International investing has
special risks relating to changes in currency rates, foreign taxation,
differences in auditing and other financial standards, political uncertainty
and greater volatility. These risks are even greater when investing in
emerging markets.
- Please see the "About Your Annual Report" page for a description of the
Morgan Stanley Capital International (MSCI) Emerging Markets Free (EMF)
Index.
- --------------------------------------------------------------------------------
32
/ / THE GUARDIAN BAILLIE GIFFORD EMERGING MARKETS FUND ANNUAL REPORT
TO SHAREHOLDERS
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS (AS OF 12/31/04)
<Table>
<Caption>
PERCENTAGE OF
COMPANY COUNTRY TOTAL NET ASSETS
Petroleo Brasileiro S.A. Brazil 3.42%
Sasol Ltd. South Africa 3.02%
Standard Bank Group Ltd. South Africa 2.82%
America Movil S.A. de C.V. Mexico 2.74%
Hon Hai Precision Inds. Co. Ltd. Taiwan 2.53%
Itausa-Investimentos Itau S.A. Brazil 2.30%
Samsung Corp. South Korea 2.27%
Telecom. Norte Leste Participacoes Brazil 2.20%
CNOOC Ltd. China 2.03%
Turkiye Garanti Bankasi AS Turkey 2.01%
</Table>
GEOGRAPHICAL LOCATION VS. INDEX (AS OF 12/31/04)
<Table>
<Caption>
THE GUARDIAN BAILLIE GIFFORD
EMERGING MARKETS FUND MSCI EMF INDEX
---------------------------- --------------
Asia-Pacific 51.50 54.00
Latin America 23.10 19.30
South Africa 11.40 12.40
Europe 8.20 9.70
Middle East 2.90 4.60
Cash 2.90 0.00
</Table>
AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS ENDED 12/31/04)
<Table>
<Caption>
INCEPTION 1 3 5 10 SINCE
DATE YR YRS YRS YRS INCEPTION
Class A shares (w/o sales charge) 5/1/97 23.53% 21.90% 6.99% -- 5.95%
(w/ sales charge) 5/1/97 17.97% 20.04% 6.01% -- 5.32%
Class B shares (w/o sales charge) 5/6/97 22.28% 20.57% 5.60% -- 4.08%
(w/ sales charge) 5/6/97 19.27% 20.11% 5.44% -- 4.08%
Class C shares (w/o sales charge) 8/7/00 22.30% 20.59% -- -- 8.20%
(w/ sales charge) 8/7/00 21.30% 20.59% -- -- 8.20%
Class K shares (w/o sales charge) 5/15/01 23.16% 21.55% -- -- 17.37%
(w/ sales charge) 5/15/01 22.16% 21.55% -- -- 17.37%
MSCI EMF Index 25.95% 22.77% 4.62% -- 3.14%
Since Class A
shares inception
</Table>
- --------------------------------------------------------------------------------
ALL PERFORMANCE DATA QUOTED IS HISTORICAL AND THE RESULTS REPRESENT PAST
PERFORMANCE AND NEITHER GUARANTEE NOR PREDICT FUTURE INVESTMENT RESULTS. To
obtain performance data current to the most recent month (available within 7
business days of the most recent month end), please call us at (800) 221-3253 or
visit our website at www.guardianinvestor.com. Current performance may be higher
or lower than the performance quoted here. Investment return and principal value
will fluctuate so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
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.
- --------------------------------------------------------------------------------
33
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TO SHAREHOLDERS
- --------------------------------------------------------------------------------
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
To give you a comparison, this chart shows the performance of a hypothetical
$10,000 investment made in Class A and Class B shares of The Guardian Baillie
Gifford Emerging Markets Fund and the MSCI EMF Index. The starting point of
$9,550 for Class A shares reflects the maximum sales charge of 4.5% that an
investor may have to pay when purchasing Class A shares of the Fund. The Index
and Class B shares begin at $10,000. This performance does not reflect the
deduction of taxes that a shareholder may pay on distributions or redemption of
shares. Returns represent past performance and are not indicative of future
results. Index returns do not include the fees and expenses of the Fund, but do
include the reinvestment of dividends.
PERFORMANCE FOR CLASS C AND CLASS K SHARES, WHICH WERE FIRST OFFERED ON AUGUST
7, 2000 AND MAY 15, 2001, RESPECTIVELY, WILL VARY DUE TO DIFFERENCES IN SALES
LOAD AND OTHER EXPENSES CHARGED TO EACH SHARE CLASS.
<Table>
<Caption>
THE GUARDIAN BAILLIE THE GUARDIAN BAILLIE
GIFFORD EMERGING MARKETS GIFFORD EMERGING MARKETS
FUND, CLASS A SHARES FUND, CLASS B SHARES MSCI EMF INDEX
------------------------ ------------------------ --------------
5/1/97 9550 10000 10000
1997 8804.75 9029.13 8136.75
1998 6253.04 6252.69 6074.92
1999 10625.6 10340.2 10109.2
2000 8087.75 7738.18 7014.75
2001 8224.08 7747.89 6848.3
2002 7854.81 7330.4 6437.45
2003 12013.3 11107.3 10060.3
2004 14837.8 13581.1 12671.2
</Table>
FUND EXPENSES
By investing in the Fund, you incur two types of costs: (1) transaction costs,
including sales charges on purchase payments, reinvested dividends, or other
distributions; redemption fees and exchange fees; and (2) ongoing costs,
including, as applicable, management fees; distribution and/or service (12b-1)
fees; and other Fund expenses. These examples are intended to help you
understand your ongoing costs (in dollars) of investing in the Fund and to
compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested on July 1, 2004 and
held for six months ended December 31, 2004.
- --------------------------------------------------------------------------------
34
/ / THE GUARDIAN BAILLIE GIFFORD EMERGING MARKETS FUND ANNUAL REPORT
TO SHAREHOLDERS
- --------------------------------------------------------------------------------
ACTUAL EXPENSES
The first table provides information about actual account values and actual
expenses. You may use the information in this table, together with the amount
you invested, to estimate the expenses that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the
applicable line under the heading entitled "Expenses Paid During the Period" to
estimate the expenses you paid on your account during this period.
<Table>
<Caption>
EXPENSES
BEGINNING ENDING PAID DURING
ACCOUNT ACCOUNT THE PERIOD
VALUE VALUE JULY 1, 2004 -
JULY 1, 2004 DECEMBER 31, 2004 DECEMBER 31, 2004(1)
Class A $1,000.00 $1,256.70 $10.66
Class B $1,000.00 $1,250.00 $16.40
Class C $1,000.00 $1,250.30 $16.12
Class K $1,000.00 $1,255.10 $12.41
</Table>
1 Expenses are equal to the Fund's annualized expense ratio of 1.88%, 2.90%,
2.85% and 2.19% for the Fund's Class A, B, C and K shares, respectively,
multiplied by the average account value over the period, multiplied by 184/366
(to reflect the Fund's most recent fiscal half-year).
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
This second table provides information about hypothetical account values and
hypothetical expenses based on the Fund's actual expense ratio and an assumed
rate of return of 5% per year before expenses, which is not the Fund's actual
return. The hypothetical account values and expenses may not be used to estimate
the actual ending account balance or expenses you paid for the period. You may
use this information to compare the ongoing costs of investing in the Fund and
other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads), redemption fees, or exchange fees. Therefore, the table is
useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if transactional
costs were included, your costs would have been higher.
<Table>
<Caption>
EXPENSES
BEGINNING ENDING PAID DURING
ACCOUNT ACCOUNT THE PERIOD
VALUE VALUE JULY 1, 2004 -
JULY 1, 2004 DECEMBER 31, 2004 DECEMBER 31, 2004(1)
Class A $1,000.00 $1,015.69 9.53%
Class B $1,000.00 $1,010.56 14.66%
Class C $1,000.00 $1,010.81 14.41%
Class K $1,000.00 $1,014.13 11.09%
</Table>
1 Expenses are equal to the Fund's annualized expense ratio of 1.88%, 2.90%,
2.85% and 2.19% for the Fund's Class A, B, C and K shares, respectively,
multiplied by the average account value over the period, multiplied by 184/366
(to reflect the Fund's most recent fiscal half-year).
- --------------------------------------------------------------------------------
35
/ / THE GUARDIAN INVESTMENT QUALITY BOND FUND ANNUAL REPORT
TO SHAREHOLDERS
- --------------------------------------------------------------------------------
[PHOTO]
Howard W. Chin,
Co-Portfolio Manager
[PHOTO]
Robert Crimmins,
Co-Portfolio Manager
OBJECTIVE:
High level of current income and capital appreciation without undue risk to
principal
PORTFOLIO:
At least 80% in different kinds of investment grade bonds, such as corporate
bonds, mortgage-backed and asset-backed securities, and obligations of the
U.S. government and its agencies
INCEPTION DATE:
February 16, 1993
NET ASSETS AT
DECEMBER 31, 2004:
$144,242,689
AN UPDATE FROM FUND MANAGEMENT
The Fund had a total return of 4.10%(1) for the year ended December 31,
2004, outperforming the average fund in the Lipper Intermediate Investment Grade
peer group, which returned 3.85% for the same period. (The peer group consisted
of 460 other mutual funds that invest in primarily investment grade debt with
average maturities of 5-10 years.) Additionally, the Fund's benchmark, the
Lehman Aggregate Bond Index, which measures the taxable fixed income market,
returned 4.34% in 2004.
MARKET OVERVIEW
Interest rates were quite volatile in 2004. Investors spent much time
trying to determine when the Federal Reserve would likely start raising interest
rates, but these efforts were clouded by very volatile data from the labor
markets. As we came into 2004, the domestic economy was on solid footing,
growing in excess of 5.5% in the second half of 2003, but payroll growth was
consistently weak, growing by only 30,000 jobs per month during that same time
and raising concerns about the sustainability of the economic recovery.
Investors grew increasingly concerned about the prospect of a "jobless recovery"
and their expectations for interest rates rose and fell with each release of the
employment number.
The increase in crude oil prices and the prospect of greater inflationary
pressures also added to the uncertainty in interest rates. Starting the year
below $35/barrel, investors became fairly alarmed when oil hit a high of more
than $55/barrel. Those concerns eased as prices seemed to peak; oil closed out
the year below $44/barrel.
Treasury yields fell in the first quarter of 2004 in the wake of continued
weak employment data, but reversed course in early April with the release of a
payroll report that exceeded expectations by nearly 200,000 jobs. However, this
selloff proved to be short lived as the job market softened once again during
the summer and triggered yet another decline in Treasury yields, most notably in
the longer maturities. For the year overall, 10-year yields wound up essentially
unchanged, dropping by just .03% to finish the year at 4.22%. In contrast,
2-year Treasury yields rose by 1.24% during the year to finish at 3.07% with a
resulting flattening of the yield curve between these two maturities by 1.15%.
Not coincidentally, the very front end of the yield curve (the federal
funds rate) also rose by 1.25% during the year, as the Federal Reserve began to
tighten monetary policy in June amidst concerns that the current policy was too
accommodative and potentially inflationary. In all, there were five rate
increases and the federal funds rate closed the year at 2.25%. Although these
moves were clearly telegraphed to the market beforehand, the Fed's statements
after each meeting caused substantial market volatility in 2004 as the market
tried to interpret
- --------------------------------------------------------------------------------
1 Total return is shown for Class A shares and does not take into account the
current maximum sales charge of 4.5%.
- --------------------------------------------------------------------------------
ABOUT INFORMATION IN THIS REPORT:
- It is important to consider the Fund's investment objectives, risks, fees
and expenses before investing. All funds involve some risk, including
possible loss of the principal amount invested. Investing in bond funds
exposes you to the general risk of investing in the debt markets. Duration
is a measure of bond price sensitivity to a given change in interest rates.
Generally, the higher a bond's duration, the greater its price sensitivity
to a given change in interest rates. Bond funds are subject to interest rate
risk. When interest rates rise, bond prices generally fall, and when
interest rates fall, bond prices generally rise. Currently, interest rates
are at historically low levels. Please keep in mind that in this kind of
environment, the risk that bond prices may fall when interest rates rise is
potentially greater.
- Please see the "About Your Annual Report" page for a description of the
Lehman Aggregate Bond Index and the Lehman Treasury Index.
- Lipper, Inc. is an independent mutual fund monitoring and rating service.
Its database of performance information is based on historical returns,
which assume the reinvestment of dividends and distributions and the
deduction of all fund expenses. Lipper return figures do not reflect the
deduction of any sales charges that an investor may pay when purchasing or
redeeming shares of the Fund.
- --------------------------------------------------------------------------------
36
/ / THE GUARDIAN INVESTMENT QUALITY BOND FUND ANNUAL REPORT
TO SHAREHOLDERS
- --------------------------------------------------------------------------------
the Fed's intentions and the differences in nuance as the wording in each
statement was subtly changed. For example, the Fed's language transitioned from
2003's theme of maintaining an accommodative monetary policy for "a considerable
period" to one of "patience" in raising rates in 2004. This policy was then
further fine-tuned, with the Fed saying rates would be increased at a "measured
pace."
Despite the volatility in yields, all sectors of the bond market turned
very solid performances in 2004 and posted positive returns for the fifth
consecutive year. Treasuries returned 3.54% as measured by the Lehman Treasury
Index; more notably, though, every investment grade sector within the Lehman
Aggregate Bond Index repeated its 2003 showing by outperforming Treasuries once
again in 2004. As in 2003, the corporate bond sector was the star performer
within the Lehman Aggregate Bond Index, returning 5.24% on a nominal basis and
outperforming Treasuries by the widest margin at 1.59%. Many of 2003's positive
factors (solid economic growth, good credit fundamentals, lower corporate debt
issuance, lower volatility and strong demand from both domestic and overseas
investors) continued in 2004 and enabled the sector to put in another strong
performance. Furthering the comparison to 2003, lower-rated credits outperformed
higher-rated credits again as triple-B rated bonds returned 2.19% over
comparable duration Treasuries while double-A and triple-A rated securities
returned .68% and .67%, respectively.
Mortgage-backed securities (MBS) posted a welcome recovery from 2003's
lukewarm performance as the sector posted the second-best record for 2004 within
the Lehman Aggregate Bond Index on both a nominal (4.70%) and excess return
(1.42%) basis. In addition to enjoying strong investor demand and declining
issuance, MBS benefited greatly from the sharp drop in hedging needs and
activity by some of the major MBS investors to levels not seen since 2002. The
other portions of the structured finance sector fared well, too. Asset-backed
securities (ABS) returned 3.00% on a nominal basis and while this performance
seems lackluster relative to the sectors discussed above, the difference is
caused by duration differences among them. In fact, ABS returned 1.42% on an
excess return basis, tying the MBS sector for second-best performance within the
Lehman Aggregate Bond Index in 2004. Finally, commercial mortgage-backed
securities (CMBS) returned 4.10% on a nominal basis and bested comparable
Treasuries by 1.18%(2).
STRATEGY OVERVIEW
We viewed the investment landscape coming into 2004 very positively. We
believed many of the fundamental factors prevalent in 2003, most notably an
improving economy, reduced debt issuance and investor demand for incremental
income in a steep yield curve environment, were likely to continue. As a result,
we were generally overweighted in corporate bonds and structured finance
securities (MBS, ABS and CMBS) at the expense of Treasuries for much of the
year. This strategy served the Fund well as each sector outperformed Treasuries
by a substantial margin in 2004.
Our strategy in corporate bonds involved an overweight in the lower-rated
investment grade credit sector and an overweight in a limited number of issuers
in the crossover sector (high yield issuers expected to be upgraded to
investment grade) since we believed those market segments would fare best in an
improving economic environment. That turned out to be exactly the case. We
should also note that the Fund slowly reduced its exposure to the corporate
sector overall late in the year as valuations became increasingly less
attractive. We finished the year at a slight underweight. However, the Fund
participated in the lion's share of the corporate sector's performance in 2004
and finished the year by outperforming its credit index benchmark.
Our overweighted exposures in MBS, ABS and CMBS all served to add
incremental return to the Fund as the latter two sectors went through the year
without significant volatility or headline risk. Furthermore, MBS performed well
despite heightened scrutiny of the housing agencies' accounting practices and
concerns over their reduced investment in the MBS market. As a result, each
sector outperformed comparable Treasuries nearly each and every month of 2004.
Further, the Fund was aided by its overweight in those MBS coupons that enjoyed
the greatest demand, and home equity loan ABS, which was the one of the two best
performing segments of the ABS market.
In summary, the Fund was well served by its diversified portfolio and its
overweighted exposures to the spread sectors of the bond market (corporates and
structured finance securities), which uniformly beat Treasuries on a comparable
duration basis. Further, we added incremental value by the opportunistic
reallocation among these sectors as relative value changed during the year.
- --------------------------------------------------------------------------------
2 The respective indices are: the Lehman Mortgage-Backed Securities (MBS) Index,
the Lehman Asset-Backed Securities (ABS) Index, and the Lehman Commercial
Mortgage-Backed Securities (CMBS) Index.
- --------------------------------------------------------------------------------
37
/ / THE GUARDIAN INVESTMENT QUALITY BOND FUND ANNUAL REPORT
TO SHAREHOLDERS
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS (AS OF 12/31/04)
<Table>
<Caption>
MATURITY PERCENTAGE OF
COMPANY COUPON DATE TOTAL NET ASSETS
FNMA (30 yr. TBA) 5.000% N/A 8.27%
FHLMC (30 yr. TBA) 5.500% N/A 4.37%
FHLMC 5.500% 9/1/2034 4.10%
FHLMC 2.875% 5/15/2007 3.43%
U.S. Treasury Bonds 6.000% 2/15/2026 3.26%
FNMA 5.000% 6/1/2018 2.59%
U.S. Treasury Notes 4.250% 11/15/2014 2.51%
FNMA 3.250% 1/15/2008 2.48%
FHLMC 5.500% 10/1/2034 2.10%
FNMA (30 yr. TBA) 5.500% N/A 1.90%
</Table>
SECTOR ALLOCATION (AS OF 12/31/04 AND 6/30/04)
<Table>
<Caption>
THE GUARDIAN INVESTMENT QUALITY THE GUARDIAN INVESTMENT QUALITY
BOND FUND 12/31/2004 BOND FUND 6/30/2004
------------------------------- -------------------------------
Mortgage Backed Securities 36.95 37.06
Corporate Notes/Bonds 22.83 26.14
Treasury Notes/Bonds 8.18 13.77
Government Agencies 8.22 2.7
CMBS 8.81 3.86
Short-Term 2.99 4.9
Asset Backed Securities 4.42 4.76
CMOs 7.6 6.81
</Table>
AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS ENDED 12/31/04)
<Table>
<Caption>
INCEPTION 1 3 5 10 SINCE
DATE YR YRS YRS YRS INCEPTION
Class A shares (w/o sales charge) 2/16/93 4.10% 5.93% 7.22% 6.99% 5.91%
(w/ sales charge) 2/16/93 -0.58% 4.32% 6.24% 6.50% 5.50%
Class B shares (w/o sales charge) 8/7/00 3.22% 5.11% -- -- 6.29%
(w/ sales charge) 8/7/00 0.22% 4.50% -- -- 6.10%
Class C shares (w/o sales charge) 8/7/00 3.22% 5.11% -- -- 6.29%
(w/ sales charge) 8/7/00 2.22% 5.11% -- -- 6.29%
Class K shares (w/o sales charge) 5/15/01 3.69% 5.51% -- -- 6.01%
(w/ sales charge) 5/15/01 2.69% 5.51% -- -- 6.01%
Lehman Aggregate Bond Index 4.34% 6.19% 7.71% 7.72% 6.81%
Since Class A
shares inception
</Table>
- --------------------------------------------------------------------------------
ALL PERFORMANCE DATA QUOTED IS HISTORICAL AND THE RESULTS REPRESENT PAST
PERFORMANCE AND NEITHER GUARANTEE NOR PREDICT FUTURE INVESTMENT RESULTS. To
obtain performance data current to the most recent month (available within 7
business days of the most recent month end), please call us at (800) 221-3253 or
visit our website at www.guardianinvestor.com. Current performance may be higher
or lower than the performance quoted here. Investment return and principal value
will fluctuate so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
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 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.
- --------------------------------------------------------------------------------
38
/ / THE GUARDIAN INVESTMENT QUALITY BOND FUND ANNUAL REPORT
TO SHAREHOLDERS
- --------------------------------------------------------------------------------
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
To give you a comparison, this chart shows the performance of a hypothetical
$10,000 investment made in Class A shares of The Guardian Investment Quality
Bond Fund and the Lehman Aggregate Bond Index. The starting point of $9,550 for
Class A shares reflects the maximum sales charge of 4.5% that an investor may
pay when purchasing Class A shares of the Fund. The Index begins at $10,000.
This performance does not reflect the deduction of taxes that a shareholder may
pay on distributions or redemption of shares. Returns represent past performance
and are not indicative of future results. Index returns do not include the fees
and expenses of the Fund, but do include the reinvestment of dividends.
PERFORMANCE FOR CLASS B AND C SHARES, WHICH WERE FIRST OFFERED ON AUGUST 7, 2000
AND FOR CLASS K SHARES, WHICH WERE FIRST OFFERED ON MAY 15, 2001, WILL VARY DUE
TO DIFFERENCES IN SALES LOAD AND OTHER EXPENSES CHARGED TO EACH SHARE CLASS.
<Table>
<Caption>
THE GUARDIAN INVESTMENT QUALITY
BOND FUND LEHMAN AGGREGATE BOND INDEX
------------------------------- ---------------------------
2/16/93 9550 9550
1993 10066 10720
1994 9613 10407
1995 11213 12330
1996 11520 12777
1997 12496 14011
1998 13481 15228
1999 13347 15103
2000 14659 16859
2001 15908 18282
2002 17379 20158
2003 18170 21028
2004 18924 21940
</Table>
FUND EXPENSES
By investing in the Fund, you incur two types of costs: (1) transaction costs,
including sales charges on purchase payments, reinvested dividends, or other
distributions; redemption fees and exchange fees; and (2) ongoing costs,
including, as applicable, management fees; distribution and/or service (12b-1)
fees; and other Fund expenses. These examples are intended to help you
understand your ongoing costs (in dollars) of investing in the Fund and to
compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested on July 1, 2004 and
held for six months ended December 31, 2004.
- --------------------------------------------------------------------------------
39
/ / THE GUARDIAN INVESTMENT QUALITY BOND FUND ANNUAL REPORT
TO SHAREHOLDERS
- --------------------------------------------------------------------------------
ACTUAL EXPENSES
The first table provides information about actual account values and actual
expenses. You may use the information in this table, together with the amount
you invested, to estimate the expenses that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the
applicable line under the heading entitled "Expenses Paid During the Period" to
estimate the expenses you paid on your account during this period.
<Table>
<Caption>
EXPENSES
BEGINNING ENDING PAID DURING
ACCOUNT ACCOUNT THE PERIOD
VALUE VALUE JULY 1, 2004 -
JULY 1, 2004 DECEMBER 31, 2004 DECEMBER 31, 2004(1)
Class A $1,000.00 $1,040.90 $4.36
Class B $1,000.00 $1,036.00 $8.19
Class C $1,000.00 $1,036.00 $8.19
Class K $1,000.00 $1,038.80 $6.41
</Table>
1 Expenses are equal to the Fund's annualized expense ratio of 0.85%, 1.60%,
1.60% and 1.25% for the Fund's Class A, B, C and K shares, respectively,
multiplied by the average account value over the period, multiplied by 184/366
(to reflect the Fund's most recent fiscal half-year).
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
This second table provides information about hypothetical account values and
hypothetical expenses based on the Fund's actual expense ratio and an assumed
rate of return of 5% per year before expenses, which is not the Fund's actual
return. The hypothetical account values and expenses may not be used to estimate
the actual ending account balance or expenses you paid for the period. You may
use this information to compare the ongoing costs of investing in the Fund and
other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads), redemption fees, or exchange fees. Therefore, the table is
useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if transactional
costs were included, your costs would have been higher.
<Table>
<Caption>
EXPENSES
BEGINNING ENDING PAID DURING
ACCOUNT ACCOUNT THE PERIOD
VALUE VALUE JULY 1, 2004 -
JULY 1, 2004 DECEMBER 31, 2004 DECEMBER 31, 2004(1)
Class A $1,000.00 $1,020.86 $4.32
Class B $1,000.00 $1,017.09 $8.11
Class C $1,000.00 $1,017.09 $8.11
Class K $1,000.00 $1,018.85 $6.34
</Table>
1 Expenses are equal to the Fund's annualized expense ratio of 0.85%, 1.60%,
1.60% and 1.25% for the Fund's Class A, B, C and K shares, respectively,
multiplied by the average account value over the period, multiplied by 184/366
(to reflect the Fund's most recent fiscal half-year).
- --------------------------------------------------------------------------------
40
/ / THE GUARDIAN LOW DURATION BOND FUND ANNUAL REPORT
TO SHAREHOLDERS
- --------------------------------------------------------------------------------
[PHOTO]
Howard W. Chin,
Co-Portfolio Manager
[PHOTO]
Robert Crimmins,
Co-Portfolio Manager
OBJECTIVE:
Seeks a high level of current income, consistent with preservation of
capital
PORTFOLIO:
At least 80% in different kinds of investment grade bonds, such as corporate
bonds, mortgage-backed and asset-backed securities, and obligations of the
U.S. government and its agencies
INCEPTION DATE:
July 30, 2003
NET ASSETS AT
DECEMBER 31, 2004:
$33,716,348
AN UPDATE FROM FUND MANAGEMENT
The Fund had a total return of 1.36%(1) for the year ended December 31,
2004, outperforming the Fund's benchmark, the Lehman U.S. Government 1-3 Year
Bond Index, which returned 1.07% during the same period.
MARKET OVERVIEW
Interest rates were quite volatile in 2004. Investors spent much time
trying to determine when the Federal Reserve would likely start raising interest
rates, but these efforts were clouded by very volatile data from the labor
markets. As we came into 2004, the domestic economy was on solid footing,
growing in excess of 5.5% in the second half of 2003, but payroll growth was
consistently weak, growing by only 30,000 jobs per month during that same time
and raising concerns about the sustainability of the economic recovery.
Investors grew increasingly concerned about the prospect of a "jobless recovery"
and their expectations for interest rates rose and fell with each release of the
employment number.
The increase in crude oil prices and the prospect of greater inflationary
pressures also added to the uncertainty in interest rates. Starting the year
below $35/barrel, investors became fairly alarmed when oil hit a high of more
than $55/barrel. Those concerns eased as prices seemed to peak; oil closed out
the year below $44/barrel.
Treasury yields fell in the first quarter of 2004 in the wake of continued
weak employment data, but reversed course in early April with the release of a
payroll report that exceeded expectations by nearly 200,000 jobs. However, this
selloff proved to be short lived as the job market softened once again during
the summer and triggered yet another decline in Treasury yields, most notably in
the longer maturities. For the year overall, 10-year yields wound up essentially
unchanged, dropping by just .03% to finish the year at 4.22%. In contrast,
2-year Treasury yields rose by 1.24% during the year to finish at 3.07% with a
resulting flattening of the yield curve between these two maturities by 1.15%.
Not coincidentally, the very front end of the yield curve (the federal
funds rate) also rose by 1.25% during the year, as the Federal Reserve began to
tighten monetary policy in June amidst concerns that the current policy was too
accommodative and potentially inflationary. In all, there were five rate
increases and the federal funds rate closed the year at 2.25%. Although these
moves were clearly telegraphed to the market beforehand, the Fed's statements
after each meeting caused substantial market volatility in 2004 as the market
tried to interpret the Fed's intentions and the differences in nuance as the
wording in each statement was subtly changed. For example, the Fed's language
transitioned from 2003's theme of maintaining an accommodative monetary policy
for "a considerable period" to one of "patience" in raising rates in 2004. This
policy was then further fine-tuned, with the Fed saying rates would be increased
at a "measured pace."
- --------------------------------------------------------------------------------
1 Total return is shown for Class A shares and does not take into account the
current maximum sales charge of 3.0%.
- --------------------------------------------------------------------------------
ABOUT INFORMATION IN THIS REPORT:
- It is important to consider the Fund's investment objectives, risks, fees
and expenses before investing. All funds involve some risk, including
possible loss of the principal amount invested. Investing in bond funds
exposes you to the general risk of investing in the debt markets. Duration
is a measure of bond price sensitivity to a given change in interest rates.
Generally, the higher a bond's duration, the greater its price sensitivity
to a given change in interest rates. Bond funds are subject to interest rate
risk. When interest rates rise, bond prices generally fall, and when
interest rates fall, bond prices generally rise. Currently, interest rates
are at historically low levels. Please keep in mind that in this kind of
environment, the risk that bond prices may fall when interest rates rise is
potentially greater.
- Low duration bond funds may not be a suitable alternative to money market
funds because, unlike money market funds, low duration bond funds do not
seek to maintain a stable net asset value and, as a result, are a riskier
asset class.
- Please see the "About Your Annual Report" page for a description of the
Lehman U.S. Government 1-3 Year Bond Index and the Lehman Treasury Index.
- --------------------------------------------------------------------------------
41
/ / THE GUARDIAN LOW DURATION BOND FUND ANNUAL REPORT
TO SHAREHOLDERS
- --------------------------------------------------------------------------------
Despite the volatility in yields, all sectors of the bond market turned
very solid performances in 2004 and posted positive returns for the fifth
consecutive year. Treasuries returned 3.54% as measured by the Lehman Treasury
Index; more notably, though, every investment grade sector within the Lehman
Aggregate Bond Index repeated its 2003 showing by outperforming Treasuries once
again in 2004. As in 2003, the corporate bond sector was the star performer
within the Lehman Aggregate Bond Index, returning 5.24% on a nominal basis and
outperforming Treasuries by the widest margin at 1.59%. Many of 2003's positive
factors (solid economic growth, good credit fundamentals, lower corporate debt
issuance, lower volatility and strong demand from both domestic and overseas
investors) continued in 2004 and enabled the sector to put in another strong
performance. Furthering the comparison to 2003, lower-rated credits outperformed
higher-rated credits again as triple-B rated bonds returned 2.19% over
comparable duration Treasuries while double-A and triple-A rated securities
returned .68% and .67%, respectively.
Mortgage-backed securities (MBS) posted a welcome recovery from 2003's
lukewarm performance as the sector posted the second-best record for 2004 within
the Lehman Aggregate Bond Index on both a nominal (4.70%) and excess return
(1.42%) basis. In addition to enjoying strong investor demand and declining
issuance, MBS benefited greatly from the sharp drop in hedging needs and
activity by some of the major MBS investors to levels not seen since 2002. The
other portions of the structured finance sector fared well, too. Asset-backed
securities (ABS) returned 3.00% on a nominal basis and while this performance
seems lackluster relative to the sectors discussed above, the difference is
caused by duration differences among them. In fact, ABS returned 1.42% on an
excess return basis, tying the MBS sector for second-best performance within the
Lehman Aggregate Bond Index in 2004. Finally, commercial mortgage-backed
securities (CMBS) returned 4.10% on a nominal basis and bested comparable
Treasuries by 1.18%(2).
STRATEGY OVERVIEW
We viewed the investment landscape coming into 2004 very positively. We
believed many of the fundamental factors prevalent in 2003, most notably an
improving economy, reduced debt issuance and investor demand for incremental
income in a steep yield curve environment, were likely to continue. As a result,
we were generally overweighted in corporate bonds and structured finance
securities (ABS and CMBS) at the expense of Treasuries for much of the year.
This strategy served the Fund well as each sector outperformed Treasuries by a
substantial margin in 2004.
The Fund's strategy of investing in short-maturity corporate bonds helped
it to outperform its benchmark. The favorable fundamental and technical factors
mentioned above in addition to the lack of headline default risk supported firm
corporate bond valuations even as the sector outperformed comparable duration
Treasuries.
Structured finance bonds also benefited from the lack of adverse news in
2004. The Fund had a significant exposure in ABS, the second best performing
sector within investment grade bonds in 2004, but more notably, we had
significant holdings in home equity loan securities, which was one of the two
best performing segments of the ABS sector last year. The Fund was also helped
by its holdings in short maturity collateralized mortgage obligations (CMOs),
which performed well along with the mortgage-backed securities (MBS) sector.
In summary, the Fund was well served by its diversified portfolio and its
overweighted exposures to the spread sectors of the bond market (corporate and
structured finance securities), which uniformly beat Treasuries on a comparable
duration basis. Further, we added incremental value by the opportunistic
reallocation among these sectors as relative value changed during the year.
- --------------------------------------------------------------------------------
2 The respective indices are: the Lehman Mortgage-Backed Securities (MBS) Index,
the Lehman Asset-Backed Securities (ABS) Index, and the Lehman Commercial
Mortgage-Backed Securities (CMBS) Index.
- --------------------------------------------------------------------------------
42
/ / THE GUARDIAN LOW DURATION BOND FUND ANNUAL REPORT
TO SHAREHOLDERS
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS (AS OF 12/31/04)
<Table>
<Caption>
MATURITY PERCENTAGE OF
COMPANY COUPON DATE TOTAL NET ASSETS
U.S. Treasury Notes 3.375% 12/15/2008 18.37%
U.S. Treasury Notes 2.750% 8/15/2007 3.40%
U.S. Treasury Notes 2.625% 3/15/2009 2.98%
Residential Asset Mtg. Prods., Inc. 2.140% 2/25/2030 1.77%
Cox Comm., Inc. 7.750% 8/15/2006 1.58%
Avalon Bay Communities, Inc. 6.800% 7/15/2006 1.58%
Sprint Capital Corp. 6.000% 1/15/2007 1.55%
MBNA America Bank NA 6.500% 6/20/2006 1.55%
British Telecom. PLC 7.875% 12/15/2005 1.55%
Northrop Grumman Corp. 7.000% 3/1/2006 1.54%
</Table>
SECTOR ALLOCATION (AS OF 12/31/04 AND 6/30/04)
<Table>
<Caption>
THE GUARDIAN LOW DURATION BOND THE GUARDIAN LOW DURATION BOND
FUND 12/31/04 FUND 6/30/04
------------------------------ ------------------------------
Corporate Notes/Bonds 53.39 67.25
Treasury Notes/Bonds 24.72 15.91
Government Agencies 1.52 0
CMOs 6.3 6.56
Asset Backed Securities 9.44 7.19
Short-Term 2.3 0.87
CMBS 2.33 2.22
</Table>
AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS ENDED 12/31/04)
<Table>
<Caption>
INCEPTION 1 3 5 10 SINCE
DATE YR YRS YRS YRS INCEPTION
Class A Shares (w/o sales charge) 7/30/03 1.36% -- -- -- -0.70%
(w/ sales charge) 7/30/03 -1.68% -- -- -- -0.70%
Class B Shares (w/o sales charge) 7/30/03 0.61% -- -- -- 0.90%
(w/ sales charge) 7/30/03 -2.39% -- -- -- -1.72%
Class C Shares (w/o sales charge) 7/30/03 0.61% -- -- -- 0.90%
(w/ sales charge) 7/30/03 -0.39% -- -- -- 0.90%
Class K Shares (w/o sales charge) 7/30/03 0.96% -- -- -- 1.25%
(w/ sales charge) 7/30/03 -0.04% -- -- -- 0.79%
Lehman U.S. Government 1-3 Year Bond Index 1.07% -- -- -- 1.43%
Since Class A
shares inception
</Table>
- --------------------------------------------------------------------------------
ALL PERFORMANCE DATA QUOTED IS HISTORICAL AND THE RESULTS REPRESENT PAST
PERFORMANCE AND NEITHER GUARANTEE NOR PREDICT FUTURE INVESTMENT RESULTS. To
obtain performance data current to the most recent month (available within 7
business days of the most recent month end), please call us at (800) 221-3253 or
visit our website at www.guardianinvestor.com. Current performance may be higher
or lower than the performance quoted here. Investment return and principal value
will fluctuate so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
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 contractowner 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 3.0%, 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 operating expenses for the Fund. Without this assumption of expenses,
returns would have been lower.
- --------------------------------------------------------------------------------
43
/ / THE GUARDIAN LOW DURATION BOND FUND ANNUAL REPORT
TO SHAREHOLDERS
- --------------------------------------------------------------------------------
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
To give you a comparison, this chart shows you the performance of a hypothetical
$10,000 investment made in Class A, Class B, Class C and Class K shares of the
Fund and in the Lehman U.S. Government 1-3 Year Bond Index. The starting point
of $9,700 For Class A shares reflects the maximum sales charge of 3.0% that an
investor may have to pay when purchasing Class A shares of the Fund. For Class B
shares, the contingent deferred sales charge of 3% was imposed at the end of the
period. The initial investment amount in the S&P 500 Index, Class B, Class C and
Class K shares is $10,000. This performance does not reflect the deduction of
taxes that a shareholder may pay on distributions or redemption of shares.
Returns represent past performance and are not indicative of future results.
Index returns do not include the fees and expenses of the Fund, but do include
the reinvestment of dividends.
<Table>
<Caption>
THE GUARDIAN LOW THE GUARDIAN LOW THE GUARDIAN LOW THE GUARDIAN LOW
DURATION BOND DURATION BOND DURATION BOND DURATION BOND LEHMAN US
FUND, CLASS A FUND, CLASS B FUND, CLASS C FUND, CLASS K GOVERNMENT 1-3
SHARES SHARES SHARES SHARES YEAR BOND INDEX
---------------- ---------------- ---------------- ---------------- ---------------
7/30/03 10000 10000 10000 100000 10000
2003 9642.61 10067 10067 10122..35 10056.4
2004 9928.21 9824.15 10128 10219.4 10163.8
</Table>
FUND EXPENSES
By investing in the Fund, you incur two types of costs: (1) transaction costs,
including sales charges on purchase payments, reinvested dividends, or other
distributions; redemption fees and exchange fees; and (2) ongoing costs,
including, as applicable, management fees; distribution and/or service (12b-1)
fees; and other Fund expenses. These examples are intended to help you
understand your ongoing costs (in dollars) of investing in the Fund and to
compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested on July 1, 2004 and
held for six months ended December 31, 2004.
- --------------------------------------------------------------------------------
44
/ / THE GUARDIAN LOW DURATION BOND FUND ANNUAL REPORT
TO SHAREHOLDERS
- --------------------------------------------------------------------------------
ACTUAL EXPENSES
The first table provides information about actual account values and actual
expenses. You may use the information in this table, together with the amount
you invested, to estimate the expenses that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the
applicable line under the heading entitled "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.
<Table>
<Caption>
EXPENSES
BEGINNING ENDING PAID DURING
ACCOUNT ACCOUNT THE PERIOD
VALUE VALUE JULY 1, 2004 -
JULY 1, 2004 DECEMBER 31, 2004 DECEMBER 31, 2004(1)
Class A $1,000.00 $1,011.50 $4.04
Class B $1,000.00 $1,007.70 $7.82
Class C $1,000.00 $1,007.70 $7.82
Class K $1,000.00 $1,009.40 $6.06
</Table>
1 Expenses are equal to the Fund's annualized expense ratio of 0.80%, 1.55%,
1.55% and 1.20% for the Fund's Class A, B, C and K shares, respectively,
multiplied by the average account value over the period, multiplied by 184/366
(to reflect the Fund's most recent fiscal half-year). Since inception, the
investment adviser for the Fund has assumed certain operating expenses for the
Fund. Without this assumption of expenses, returns would have been lower.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
This second table provides information about hypothetical account values and
hypothetical expenses based on the Fund's actual expense ratio and an assumed
rate of return of 5% per year before expenses, which is not the Fund's actual
return. The hypothetical account values and expenses may not be used to estimate
the actual ending account balance or expenses you paid for the period. You may
use this information to compare the ongoing costs of investing in the Fund and
other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads), redemption fees, or exchange fees. Therefore, the table is
useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if transactional
costs were included, your costs would have been higher.
<Table>
<Caption>
EXPENSES
BEGINNING ENDING PAID DURING
ACCOUNT ACCOUNT THE PERIOD
VALUE VALUE JULY 1, 2004 -
JULY 1, 2004 DECEMBER 31, 2004 DECEMBER 31, 2004(1)
Class A $1,000.00 $1,021.11 $4.06
Class B $1,000.00 $1,017.34 $7.86
Class C $1,000.00 $1,017.34 $7.86
Class K $1,000.00 $1,019.10 $6.09
</Table>
1 Expenses are equal to the Fund's annualized expense ratio of 0.80%, 1.55%,
1.55% and 1.20% for the Fund's Class A, B, C and K shares, respectively,
multiplied by the average account value over the period, multiplied by 184/366
(to reflect the Fund's most recent fiscal half-year). Since inception, the
investment adviser for the Fund has assumed certain operating expenses for the
Fund. Without this assumption of expenses, returns would have been lower.
- --------------------------------------------------------------------------------
45
/ / THE GUARDIAN HIGH YIELD BOND FUND ANNUAL REPORT
TO SHAREHOLDERS
- --------------------------------------------------------------------------------
[PHOTO]
Peter J. Liebst,
Portfolio Manager
OBJECTIVE:
Seeks current income. Capital appreciation is a secondary objective.
PORTFOLIO:
At least 80% is invested in corporate bonds and other debt securities that,
at the time of purchase, are rated below investment grade or are unrated.
INCEPTION DATE:
September 1, 1998
NET ASSETS AT
DECEMBER 31, 2004:
$88,107,186
AN UPDATE FROM FUND MANAGEMENT
The Guardian High Yield Bond Fund posted a 9.15%(1) return for the year
2004. The Fund underperformed the overall high yield market by 1.98% as the
Fund's benchmark, the Lehman Corporate High Yield Index, posted an 11.13% return
for the year.
The U.S. high yield market began 2004 in its strongest condition since July
of 1998. According to the Lehman Corporate High Yield Index, the average market
yield on December 31, 2003 was 7.40% (Yield to Worst), which equated to an
overall risk premium, or spread, over comparable U.S. Treasuries, of 4.25%. The
market reflected not only the resurgence of growth in the U.S. economy, but an
improvement in corporate earnings and financial condition. These trends were
evidenced in the Moody's U.S. speculative-grade default rate that had dropped to
5.4% by January of 2004 from its peak of 11.6% in January of 2002 and was
projected to continue to improve throughout the year. The strength of these
fundamentals combined with a search for yield by investors navigating a fixed
income market with interest rates hovering around 20-year lows set the stage for
another year of strong demand for the high yield market.
These fundamentals did not disappoint investors in 2004. Basic industries
such as chemicals and steel saw demand and profits rapidly rise from trough
levels, and sectors such as electrics and pipelines which were recovering from
over-leveraged balance sheets were able to take advantage of the receptive
capital markets and low interest rate environment to make notable improvements
to their capital structures. Additionally, 2004 saw resurgence in mergers and
acquisitions, often to the benefit of high yield bondholders due to covenant
protection. By the end of the year, the Moody's speculative-grade default rate
had dropped to the low level of 2.9%. These positive trends provided support for
investors throughout 2004, which resulted in a continued reduction of the high
yield market's risk premium to end the year at 3.19%, again a level not seen
since mid-1998 and approaching the high yield market's record highs.
The Guardian High Yield Bond Fund entered 2004 adhering to its long-term
investment philosophy, which emphasizes portfolio diversification with
individual security selection based on fundamental creditworthiness and relative
value. This investment discipline results in a portfolio which significantly
underweights the lower quality and distressed segments of the high yield market,
and tends to concentrate in core mid-quality issuers. The Fund stayed true to
this approach throughout the year, which allowed it to perform well through
October of 2004 despite trailing the Lehman Corporate High Yield Index by 0.64%.
Believing that with an average risk premium of 3.99% the market was not
commanding an appropriate level of return for the corresponding risk, the Fund
took steps throughout the fourth quarter to raise the credit quality of the
portfolio where possible. The rationale for this action was that when the market
corrected to a more appropriate risk return profile, the higher quality credits
would outperform. In retrospect the opposite occurred with the post election
equity rally spilling over into the high yield market, which ultimately rewarded
investors for more aggressive
- --------------------------------------------------------------------------------
1 Total return is shown for Class A shares and does not take into account the
current maximum sales charge of 4.5%.
- --------------------------------------------------------------------------------
ABOUT INFORMATION IN THIS REPORT:
- It is important to consider the Fund's investment objectives, risks, fees
and expenses before investing. All funds involve some risk, including
possible loss of the principal amount invested. Investing in bond funds
exposes you to the general risk of investing in the debt markets. Duration
is a measure of bond price sensitivity to a given change in interest rates.
Generally, the higher a bond's duration, the greater its price sensitivity
to a given change in interest rates. Bond funds are subject to interest rate
risk. When interest rates rise, bond prices generally fall, and when
interest rates fall, bond prices generally rise. Currently, interest rates
are at historically low levels. Please keep in mind that in this kind of
environment, the risk that bond prices may fall when interest rates rise is
potentially greater. Investing in high yield bonds involves special risks
because investments in lower rated and unrated debt securities are subject
to greater loss of principal and interest than higher rated securities.
- Please see the "About Your Annual Report" page for a description of the
Lehman Corporate High Yield Index.
- --------------------------------------------------------------------------------
46
/ / THE GUARDIAN HIGH YIELD BOND FUND ANNUAL REPORT
TO SHAREHOLDERS
- --------------------------------------------------------------------------------
risk taking during the final two months of the year. November and December saw
the lowest quality segments of the high yield market rally, significantly
outperforming the rest of the high yield market and causing the Guardian High
Yield Bond Fund to underperform relative to its peers.
TOP TEN HOLDINGS (AS OF 12/31/04)
<Table>
<Caption>
MATURITY PERCENTAGE OF
COMPANY COUPON DATE TOTAL NET ASSETS
Targeted Return Index Secs. Tr. 7.940% 8/1/2015 2.96%
Nextel Comm., Inc. 7.375% 8/1/2015 2.46%
Sierra Pacific Resources 8.625% 3/15/2014 2.05%
Allegheny Energy Supply 7.800% 3/15/2011 1.84%
Teco Energy, Inc. 7.000% 5/1/2012 1.61%
Mission Energy Hldg. 13.500% 7/15/2008 1.55%
Charter Comm. Hldgs. II 10.250% 9/15/2010 1.53%
Federative Republic of Brazil 9.250% 10/22/2010 1.48%
UtiliCorp Canada Fin. 7.750% 6/15/2011 1.41%
CSC Hldgs., Inc. 7.875% 2/15/2018 1.37%
</Table>
BOND QUALITY (AS OF 12/31/04 AND 6/30/04)
<Table>
<Caption>
THE GUARDIAN HIGH YIELD BOND THE GUARDIAN HIGH YIELD BOND
FUND 12/31/2004 FUND 6/30/2004
---------------------------- ----------------------------
Short Term 4.11 6.42
BBB 3.47 0.00
BB 30.15 17.80
B 57.06 64.94
CCC 5.21 10.84
</Table>
- --------------------------------------------------------------------------------
47
/ / THE GUARDIAN HIGH YIELD BOND FUND ANNUAL REPORT
TO SHAREHOLDERS
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS ENDED 12/31/04)
<Table>
<Caption>
INCEPTION 1 3 5 10 SINCE
DATE YR YRS YRS YRS INCEPTION
Class A shares (w/o sales charge) 9/1/98 9.15% 9.80% 4.94% -- 5.36%
(w/ sales charge) 9/1/98 4.24% 8.13% 3.98% -- 4.60%
Class B shares (w/o sales charge) 9/1/98 8.20% 8.98% 4.11% -- 4.41%
(w/ sales charge) 9/1/98 5.20% 8.42% 3.94% -- 4.41%
Class C shares (w/o sales charge) 8/7/00 8.20% 8.98% -- -- 4.95%
(w/ sales charge) 8/7/00 7.20% 8.98% -- -- 4.95%
Class K shares (w/o sales charge) 5/15/01 8.72% 9.36% -- -- 7.49%
(w/ sales charge) 5/15/01 7.72% 9.36% -- -- 7.49%
Lehman Corporate High Yield
Bond Index 11.13% 12.22% 6.97% -- 6.34%
Since Class A
shares inception
</Table>
ALL PERFORMANCE DATA QUOTED IS HISTORICAL AND THE RESULTS REPRESENT PAST
PERFORMANCE AND NEITHER GUARANTEE NOR PREDICT FUTURE INVESTMENT RESULTS. To
obtain performance data current to the most recent month (available within 7
business days of the most recent month end), please call us at (800) 221-3253 or
visit our website at www.guardianinvestor.com. Current performance may be higher
or lower than the performance quoted here. Investment return and principal value
will fluctuate so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
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.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
To give you a comparison, the chart below shows the performance of a
hypothetical $10,000 investment made in Class A and Class B shares of The
Guardian High Yield Bond Fund and the Lehman Corporate High Yield Index. The
starting point of $9,550 for Class A shares reflects the maximum sales charge of
4.5% that an investor may pay when purchasing Class A shares of the Fund. The
Index and Class B shares begin at $10,000. This performance does not reflect the
deduction of taxes that a shareholder may pay on distributions or redemption of
shares. Returns represent past performance and are not indicative of future
results. Index returns do not include the fees and expenses of the Fund, but do
include the reinvestment of dividends.
PERFORMANCE FOR CLASS C AND CLASS K SHARES, WHICH WERE FIRST OFFERED ON AUGUST
7, 2000 AND MAY 15, 2001, RESPECTIVELY, WILL VARY DUE TO DIFFERENCES IN SALES
LOAD AND OTHER EXPENSES CHARGED TO EACH SHARE CLASS.
<Table>
<Caption>
THE GUARDIAN HIGH YIELD THE GUARDIAN HIGH YIELD LEHMAN CORPORATE HIGH
BOND FUND, CLASS A SHARES BOND FUND, CLASS B SHARES YIELD INDEX
------------------------- ------------------------- ---------------------
9/1/98 9550.00 10000.00 10000.00
1998 10447.30 10941.80 10258.90
1999 10385.70 10748.10 10504.30
2000 9707.94 9949.56 9888.90
2001 9986.33 10144.80 10411.00
2002 10086.00 10180.70 10264.50
2003 12114.40 12142.80 13238.00
2004 13221.20 13140.70 14711.20
</Table>
- --------------------------------------------------------------------------------
48
/ / THE GUARDIAN HIGH YIELD BOND FUND ANNUAL REPORT
TO SHAREHOLDERS
- --------------------------------------------------------------------------------
FUND EXPENSES
By investing in the Fund, you incur two types of costs: (1) transaction costs,
including sales charges on purchase payments, reinvested dividends, or other
distributions; redemption fees and exchange fees; and (2) ongoing costs,
including, as applicable, management fees; distribution and/or service (12b-1)
fees; and other Fund expenses. These examples are intended to help you
understand your ongoing costs (in dollars) of investing in the Fund and to
compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested on July 1, 2004 and
held for six months ended December 31, 2004.
ACTUAL EXPENSES
The first table provides information about actual account values and actual
expenses. You may use the information in this table, together with the amount
you invested, to estimate the expenses that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the
applicable line under the heading entitled "Expenses Paid During the Period" to
estimate the expenses you paid on your account during this period.
<Table>
<Caption>
EXPENSES
BEGINNING ENDING PAID DURING
ACCOUNT ACCOUNT THE PERIOD
VALUE VALUE JULY 1, 2004 -
JULY 1, 2004 DECEMBER 31, 2004 DECEMBER 31, 2004(1)
Class A $1,000.00 $1,078.20 $4.44
Class B $1,000.00 $1,072.80 $8.34
Class C $1,000.00 $1,072.80 $8.34
Class K $1,000.00 $1,074.60 $6.52
</Table>
1 Expenses are equal to the Fund's annualized expense ratio of 0.85%, 1.60%,
1.60% and 1.25% for the Fund's Class A, B, C and K shares, respectively,
multiplied by the average account value over the period, multiplied by 184/366
(to reflect the Fund's most recent fiscal half-year). 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.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
This second table provides information about hypothetical account values and
hypothetical expenses based on the Fund's actual expense ratio and an assumed
rate of return of 5% per year before expenses, which is not the Fund's actual
return. The hypothetical account values and expenses may not be used to estimate
the actual ending account balance or expenses you paid for the period. You may
use this information to compare the ongoing costs of investing in the Fund and
other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
- --------------------------------------------------------------------------------
49
/ / THE GUARDIAN HIGH YIELD BOND FUND ANNUAL REPORT
TO SHAREHOLDERS
- --------------------------------------------------------------------------------
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads), redemption fees, or exchange fees. Therefore, the table is
useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if transactional
costs were included, your costs would have been higher.
<Table>
<Caption>
EXPENSES
BEGINNING ENDING PAID DURING
ACCOUNT ACCOUNT THE PERIOD
VALUE VALUE JULY 1, 2004 -
JULY 1, 2004 DECEMBER 31, 2004 DECEMBER 31, 2004(1)
Class A $1,000.00 $1,020.86 $4.32
Class B $1,000.00 $1,017.09 $8.11
Class C $1,000.00 $1,017.09 $8.11
Class K $1,000.00 $1,018.85 $6.34
</Table>
1 Expenses are equal to the Fund's annualized expense ratio of 0.85%, 1.60%,
1.60% and 1.25% for the Fund's Class A, B, C and K shares, respectively,
multiplied by the average account value over the period, multiplied by 184/366
(to reflect the Fund's most recent fiscal half-year).
- --------------------------------------------------------------------------------
50
/ / THE GUARDIAN TAX-EXEMPT FUND ANNUAL REPORT
TO SHAREHOLDERS
- --------------------------------------------------------------------------------
[PHOTO]
Alexander M. Grant, Jr.,
Portfolio Manager
OBJECTIVE:
Seeks to maximize current income exempt from federal income taxes,
consistent with the preservation of capital
PORTFOLIO:
At least 80% in investment grade municipal debt obligations
INCEPTION DATE:
February 16, 1993
NET ASSETS AT
DECEMBER 31, 2004:
$92,822,116
AN UPDATE FROM FUND MANAGEMENT
The Guardian Tax-Exempt Fund produced a total return of 4.38%(1) for 2004.
The Lehman Brothers Municipal Bond Index, which does not include expenses,
produced a total return of 4.48% for the same period. The latter reflects the
different investment parameters of that Index which includes all bonds and
maturities. Even so, and without expenses factored in, it exceeded the Fund by
only 0.10%.
We believe that peer group comparisons from Lipper and Morningstar may also
be useful. The Lipper General Municipal Average return for the year was 3.70%,
ranking the Fund 78th out of 297 for the one-year period ended December 31,
2004, placing it in Lipper's 27th percentile. The Lipper peer group invests
primarily in municipal debt issues rated in the top four credit ratings. In
Morningstar's universe of municipal national long funds, the average return for
the year ended December 31, 2004 was 3.76%. This universe currently consists of
281 national funds with an average duration of more than seven years, or an
average maturity of more that 12 years. The Guardian Tax-Exempt Fund exceeded it
by 0.62%.
For the three-year period ended December 31, 2004, Lipper ranked the Fund
31st out of 269 funds and in the 12th percentile. For the five year period ended
December 31, 2004, the Fund ranked 21st out of 234 funds and in the 9th
percentile. For the ten-year period Lipper ranked the Fund 32nd out of 139 funds
and in the 23rd percentile.
As of December 31, 2004, the Fund's 30-day yield was 3.61% which compares
to a 5.55% taxable equivalent yield for a person in the highest federal income
tax bracket (35%) in 2004.
In 2004, new issuance was $358.55 billion, down slightly from the all-time
high of $383.71 billion in 2003, but almost exactly like 2002 with $358.58
billion. Even though the Federal Reserve raised interest rates five times,
long-term interest rates remained low.
The market easily absorbed this volume. Wealthy individuals and businesses
continued to be attracted to this asset class as a way to preserve capital,
diversify risk, and generate tax-exempt income. Looking at 2004 in terms of
total return performance, investors who followed a strategy of diversification
and moderation by issuer, insurance, industry, sector and state again were
rewarded.
Our strategy was to buy some undervalued lower quality bonds in the short
end of the curve while staying with higher quality in the long end. Continuous
sensitivity to coupon and structure along with supply and demand factors also
allowed the Fund to capture above average returns while maintaining an overall
portfolio credit quality of AA (as noted by Standard and Poor's).
- --------------------------------------------------------------------------------
1 Total return is shown for Class A shares and does not take into account the
current maximum sales charge of 4.5%.
- --------------------------------------------------------------------------------
ABOUT INFORMATION IN THIS REPORT:
- It is important to consider the Fund's investment objectives, risks, fees
and expenses before investing. All funds involve some risk, including
possible loss of the principal amount invested. Investing in bond funds
exposes you to the general risk of investing in the debt markets. Duration
is a measure of bond price sensitivity to a given change in interest rates.
Generally, the higher a bond's duration, the greater its price sensitivity
to a given change in interest rates. Bond funds are subject to interest rate
risk. When interest rates rise, bond prices generally fall, and when
interest rates fall, bond prices generally rise. Currently, interest rates
are at historically low levels. Please keep in mind that in this kind of
environment, the risk that bond prices may fall when interest rates rise is
potentially greater.
- Please see the "About Your Annual Report" page for a description of the
Lehman Brothers Municipal Bond Index.
- Lipper, Inc. is an independent mutual fund monitoring and rating service.
Its database of performance information is based on historical returns,
which assume the reinvestment of dividends and distributions and the
deduction of all fund expenses. Lipper return figures do not reflect the
deduction of any sales charges that an investor may pay when purchasing or
redeeming shares of the Fund.
- (R)2004 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.
- --------------------------------------------------------------------------------
51
/ / THE GUARDIAN TAX-EXEMPT FUND ANNUAL REPORT
TO SHAREHOLDERS
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS (AS OF 12/31/04)
<Table>
<Caption>
PERCENTAGE OF
COMPANY COUPON MATURITY DATE TOTAL NET ASSETS
California St. Econ. G.O. Ser. B 5.000% 7/1/2023 3.49%
Fairfax Cnty., VA Ref. Pub. Impt. Ser. A 4.250% 6/1/2008 3.44%
Puerto Rico Pub. Bldgs. Auth. Rev. Ref.
Gov't. Facs. Ser. K 4.500% 7/1/2022 2.69%
St. Johns Cnty., FL Sales Tax Rev. 5.250% 10/1/2027 2.60%
Puerto Rico Pub. Fin. Corp. Comwlth.
Approp. Ser. A 5.750% 8/1/2027 2.40%
Puerto Rico Pub. Bldgs. Auth. Rev. Ref.
Gov't. Facs. Ser. J 5.000% 7/1/2036 2.38%
Badger Tobacco Asset Securitization
Corp. Wisconsin 5.750% 6/1/2011 2.34%
California St. Pub. Wks. Brd. Dept. of
Mental Hlth. 5.500% 6/1/2023 2.33%
Tobacco Settlement Auth. WA Rev. 6.250% 6/1/2011 2.32%
Minnesota St. Muni. Power Agy. Electric 5.250% 10/1/2024 2.31%
</Table>
SECTOR ALLOCATION (AS OF 12/31/04 AND 6/30/04)
<Table>
<Caption>
THE GUARDIAN TAX-EXEMPT FUND THE GUARDIAN TAX-EXEMPT FUND
12/31/04 6/30/04
---------------------------- ----------------------------
Short-Term 0.16 4.84
State General Obligation Bonds 3.52 10.08
Local General Obligation Bonds 13.59 7.43
Revenue Bonds 47.82 32.27
Insured Bonds 33.67 45.38
Prerefunded 1.24 0
</Table>
AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS ENDED 12/31/04)
<Table>
<Caption>
INCEPTION 1 3 5 10 SINCE
DATE YR YRS YRS YRS INCEPTION
Class A shares (w/o sales charge) 2/16/93 4.38% 6.61% 7.35% 6.56% 5.31%
(w/ sales charge) 2/16/93 -0.32% 4.99% 6.37% 6.07% 4.90%
Class C shares (w/o sales charge) 8/7/00 3.60% 5.81% -- -- 5.99%
(w/ sales charge) 8/7/00 2.60% 5.81% -- -- 5.99%
Lehman Brothers Municipal Bond Index 4.48% 6.44% 7.20% 7.06% 6.27%
Since Class A
shares inception
</Table>
- --------------------------------------------------------------------------------
ALL PERFORMANCE DATA QUOTED IS HISTORICAL AND THE RESULTS REPRESENT PAST
PERFORMANCE AND NEITHER GUARANTEE NOR PREDICT FUTURE INVESTMENT RESULTS. To
obtain performance data current to the most recent month (available within 7
business days of the most recent month end), please call us at (800) 221-3253 or
visit our website at www.guardianinvestor.com. Current performance may be higher
or lower than the performance quoted here. Investment return and principal value
will fluctuate so that an investor's shares, when redeemed, may be worth more or
less than the original cost.
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 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.
- --------------------------------------------------------------------------------
52
/ / THE GUARDIAN TAX-EXEMPT FUND ANNUAL REPORT
TO SHAREHOLDERS
- --------------------------------------------------------------------------------
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
To give you a comparison, this chart shows the performance of a hypothetical
$10,000 investment made in Class A shares of The Guardian Tax-Exempt Fund and
the Lehman Municipal Bond Index. The starting point of $9,550 for Class A shares
reflects the maximum sales charge of 4.5% that an investor may pay when
purchasing Class A shares of the Fund. The Index begins at $10,000. This
performance does not reflect the deduction of taxes that a shareholder may pay
on distributions or redemption of shares. Returns represent past performance and
are not indicative of future results. Index returns do not include the fees and
expenses of the Fund, but do include the reinvestment of dividends.
PERFORMANCE FOR CLASS C SHARES, WHICH WERE FIRST OFFERED ON AUGUST 7, 2000, WILL
VARY DUE TO DIFFERENCES IN SALES LOAD AND OTHER EXPENSES CHARGED TO SUCH SHARE
CLASS.
<Table>
<Caption>
THE GUARDIAN TAX-EXEMPT FUND,
CLASS A SHARES LEHMAN MUNICIPAL BOND INDEX
----------------------------- ---------------------------
2/16/93 9550 9550
1993 10235.1 10974.5
1994 9319.36 10407
1995 10676.8 12223.6
1996 11060.9 12764.9
1997 12027.9 13938.4
1998 12769.9 14841.4
1999 12341.7 14536.2
2000 13865.9 16225.9
2001 14527.6 17067.3
2002 16003.9 18706.3
2003 16859.4 19700.5
2004 17610.2 20583.1
</Table>
FUND EXPENSES
By investing in the Fund, you incur two types of costs: (1) transaction costs,
including sales charges on purchase payments, reinvested dividends, or other
distributions; redemption fees and exchange fees; and (2) ongoing costs,
including, as applicable, management fees; distribution and/or service (12b-1)
fees; and other Fund expenses. These examples are intended to help you
understand your ongoing costs (in dollars) of investing in the Fund and to
compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested on July 1, 2004 and
held for six months ended December 31, 2004.
- --------------------------------------------------------------------------------
53
/ / THE GUARDIAN TAX-EXEMPT FUND ANNUAL REPORT
TO SHAREHOLDERS
- --------------------------------------------------------------------------------
ACTUAL EXPENSES
The first table provides information about actual account values and actual
expenses. You may use the information in this table, together with the amount
you invested, to estimate the expenses that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the
applicable line under the heading entitled "Expenses Paid During the Period" to
estimate the expenses you paid on your account during this period.
<Table>
<Caption>
BEGINNING ENDING EXPENSES PAID
ACCOUNT ACCOUNT DURING THE PERIOD
VALUE VALUE JULY 1, 2004 -
JULY 1, 2004 DECEMBER 31, 2004 DECEMBER 31, 2004(1)
Class A $1,000.00 $1,058.00 $4.40
Class C $1,000.00 $1,054.60 $8.26
</Table>
1 Expenses are equal to the Fund's annualized expense ratio of 0.85%, and 1.60%
for the Fund's Class A, and C shares, respectively, multiplied by the average
account value over the period, multiplied by 184/366 (to reflect the Fund's
most recent fiscal half-year).
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
This second table provides information about hypothetical account values and
hypothetical expenses based on the Fund's actual expense ratio and an assumed
rate of return of 5% per year before expenses, which is not the Fund's actual
return. The hypothetical account values and expenses may not be used to estimate
the actual ending account balance or expenses you paid for the period. You may
use this information to compare the ongoing costs of investing in the Fund and
other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads), redemption fees, or exchange fees. Therefore, the table is
useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if transactional
costs were included, your costs would have been higher.
<Table>
<Caption>
BEGINNING ENDING EXPENSES PAID
ACCOUNT ACCOUNT DURING THE PERIOD
VALUE VALUE JULY 1, 2004 -
JULY 1, 2004 DECEMBER 31, 2004 DECEMBER 31, 2004(1)
Class A $1,000.00 $1,020.86 $4.32
Class C $1,000.00 $1,017.09 $8.11
</Table>
1 Expenses are equal to the Fund's annualized expense ratio of 0.85%, and 1.60%
for the Fund's Class A, and C shares, respectively, multiplied by the average
account value over the period, multiplied by 184/366 (to reflect the Fund's
most recent fiscal half-year).
- --------------------------------------------------------------------------------
54
/ / THE GUARDIAN CASH MANAGEMENT FUND ANNUAL REPORT
TO SHAREHOLDERS
- --------------------------------------------------------------------------------
[PHOTO]
Alexander M. Grant, Jr.,
Portfolio Manager
OBJECTIVE:
Seeks as high a level of current income as is consistent with liquidity and
preservation of capital
PORTFOLIO:
Short-term money market investments
INCEPTION DATE:
November 3, 1982
NET ASSETS AT
DECEMBER 31, 2004:
$469,302,594
PORTFOLIO STATISTICS (AS OF 12/31/04)
<Table>
AVERAGE MATURITY (DAYS): 26.84
YIELDS:
Effective 7 day Yield With subsidy 1.42%
Without subsidy 1.38%
Current 7 day Yield With subsidy 1.41%
Without subsidy 1.37%
</Table>
Annualized historical yields for the 7-day periods ended December 31, 2004.
Effective yield assumes reinvested income. Yields will vary. The yield figures
cited represent yield for Class A shares.
SECTOR ALLOCATION (AS OF 12/31/04)
<Table>
<Caption>
COMMERCIAL PAPER TAXABLE MUNICIPALS REPURCHASE AGREEMENTS
- ---------------- ------------------ ---------------------
78.86 19.41 1.73
</Table>
AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS ENDED 12/31/04)
<Table>
<Caption>
INCEPTION 1 3 5 10 SINCE
DATE YR YRS YRS YRS INCEPTION
Class A shares (w/o sales charge) 9/13/82 0.57% 0.63% 2.15% 3.45% 5.03%
Class B shares (w/o sales charge) 5/1/96 0.57% 0.33% 1.75% -- 2.94%
(w/ sales charge) 5/1/96 -2.43% -0.34% 1.56% -- 2.94%
Class C shares (w/o sales charge) 8/7/00 0.57% 0.33% -- -- 1.25%
(w/ sales charge) 8/7/00 -0.43% 0.33% -- -- 1.25%
Class K shares (w/o sales charge) 5/15/01 0.47% 0.40% -- -- 0.68%
(w/ sales charge) 5/15/01 0.47% 0.40% -- -- 0.68%
Lehman Brothers 3 Month Treasury-Bill
Index 1.30% 1.41% 2.96% 4.19% 5.58%
Since Class A
shares inception
</Table>
- --------------------------------------------------------------------------------
- ALL PERFORMANCE DATA QUOTED IS HISTORICAL AND THE RESULTS REPRESENT PAST
PERFORMANCE AND NEITHER GUARANTEE NOR PREDICT FUTURE INVESTMENT RESULTS. To
obtain performance data current to the most recent month (available within 7
business days of the most recent month end), please call us at (800)
221-3253 or visit our website at www.guardianinvestor.com. Current
performance may be higher or lower than the performance quoted here.
Investment return and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than the original cost.
- 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 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 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.
- Shares of The Guardian Cash Management Fund are not issued or guaranteed by
the Federal Deposit Insurance Corporation (FDIC), the National Credit Union
Association (NCUA), the Federal Reserve Board or any other agency. Although
the Fund seeks to preserve the value of an investment at $1.00 per share, it
is possible to lose money by investing in the Fund.
ABOUT INFORMATION IN THIS REPORT:
- It is important to consider the Fund's investment objectives, risks, fees
and expenses before investing. All funds involve some risk, including
possible loss of the principal amount invested.
- Please see the "About Your Annual Report" page for a description of the
Lehman Brothers 3-Month Treasury Bill Index.
- --------------------------------------------------------------------------------
55
/ / THE GUARDIAN CASH MANAGEMENT FUND ANNUAL REPORT
TO SHAREHOLDERS
- --------------------------------------------------------------------------------
FUND EXPENSES
By investing in the Fund, you incur two types of costs: (1) transaction costs,
including sales charges on purchase payments, reinvested dividends, or other
distributions; redemption fees and exchange fees; and (2) ongoing costs,
including, as applicable, management fees; distribution and/or service (12b-1)
fees; and other Fund expenses. These examples are intended to help you
understand your ongoing costs (in dollars) of investing in the Fund and to
compare these costs with the ongoing costs of investing in other mutual funds.
The examples are based on an investment of $1,000 invested on July 1, 2004 and
held for six months ended December 31, 2004.
ACTUAL EXPENSES
The first table provides information about actual account values and actual
expenses. You may use the information in this table, together with the amount
you invested, to estimate the expenses that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the
applicable line under the heading entitled "Expenses Paid During the Period" to
estimate the expenses you paid on your account during this period.
<Table>
<Caption>
BEGINNING EXPENSES PAID
ACCOUNT ENDING ACCOUNT DURING THE PERIOD
VALUE VALUE JULY 1, 2004 -
JULY 1, 2004 DECEMBER 31, 2004 DECEMBER 31, 2004(1)
Class A $1,000.00 $1,004.40 $4.28
Class B $1,000.00 $1,004.40 $4.28
Class C $1,000.00 $1,004.40 $4.28
Class K $1,000.00 $1,003.90 $4.79
</Table>
1 Expenses are equal to the Fund's annualized expense ratio of 0.85%, 0.85%,
0.85% and 0.95% for the Fund's Class A, B, C and K shares, respectively,
multiplied by the average account value over the period, multiplied by 184/366
(to reflect the Fund's most recent fiscal half-year).
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
This second table provides information about hypothetical account values and
hypothetical expenses based on the Fund's actual expense ratio and an assumed
rate of return of 5% per year before expenses, which is not the Fund's actual
return. The hypothetical account values and expenses may not be used to estimate
the actual ending account balance or expenses you paid for the period. You may
use this information to compare the ongoing costs of investing in the Fund and
other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of the other funds.
- --------------------------------------------------------------------------------
56
/ / THE GUARDIAN CASH MANAGEMENT FUND ANNUAL REPORT
TO SHAREHOLDERS
- --------------------------------------------------------------------------------
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads), redemption fees, or exchange fees. Therefore, the table is
useful in comparing ongoing costs only, and will not help you determine the
relative total costs of owning different funds. In addition, if transactional
costs were included, your costs would have been higher.
<Table>
<Caption>
BEGINNING ENDING EXPENSES PAID
ACCOUNT ACCOUNT DURING THE PERIOD
VALUE VALUE JULY 1, 2004 -
JULY 1, 2004 DECEMBER 31, 2004 DECEMBER 31, 2004(1)
Class A $1,000.00 $1,020.86 $4.32
Class B $1,000.00 $1,020.86 $4.32
Class C $1,000.00 $1,020.86 $4.32
Class K $1,000.00 $1,020.36 $4.82
</Table>
1 Expenses are equal to the Fund's annualized expense ratio of 0.85%, 0.85%,
0.85% and 0.95% for the Fund's Class A, B, C and K shares, respectively,
multiplied by the average account value over the period, multiplied by 184/366
(to reflect the Fund's most recent fiscal half-year).
- --------------------------------------------------------------------------------
57
/ / The Guardian Park Avenue Fund
SCHEDULE OF INVESTMENTS
December 31, 2004
<Table>
<Caption>
COMMON STOCKS -- 99.7%
Shares Value
- --------------------------------------------------------------------------------
AEROSPACE AND DEFENSE -- 0.8%
82,300 United Technologies Corp. $ 8,505,705
- --------------------------------------------------------------------------------
AIR FREIGHT AND LOGISTICS -- 1.0%
132,100 United Parcel Svc., Inc. 11,289,266
- --------------------------------------------------------------------------------
BEVERAGES -- 1.9%
231,700 Coca-Cola Co. 9,645,671
219,800 PepsiCo., Inc. 11,473,560
---------------
21,119,231
- --------------------------------------------------------------------------------
BIOTECHNOLOGY -- 1.4%
251,200 Amgen, Inc.* 16,114,480
- --------------------------------------------------------------------------------
CAPITAL MARKETS -- 4.2%
52,000 Goldman Sachs Group, Inc. 5,410,080
240,600 Lehman Brothers Hldgs., Inc. 21,047,688
345,900 Merrill Lynch & Co., Inc. 20,674,443
---------------
47,132,211
- --------------------------------------------------------------------------------
COMMERCIAL BANKS -- 4.5%
546,900 Bank of America Corp. 25,698,831
82,900 M & T Bank Corp. 8,939,936
261,800 Wells Fargo & Co. 16,270,870
---------------
50,909,637
- --------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 3.4%
1,006,000 Cisco Systems, Inc.* 19,415,800
714,900 Motorola, Inc. 12,296,280
154,200 QUALCOMM, Inc. 6,538,080
---------------
38,250,160
- --------------------------------------------------------------------------------
COMPUTERS AND PERIPHERALS -- 2.7%
300,300 Dell, Inc.* 12,654,642
174,300 Int'l. Business Machines 17,182,494
---------------
29,837,136
- --------------------------------------------------------------------------------
CONTAINERS AND PACKAGING -- 0.6%
277,200 Pactiv Corp.* 7,010,388
- --------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES -- 2.6%
618,166 Citigroup, Inc. 29,783,238
- --------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 2.5%
429,100 SBC Comm., Inc. 11,057,907
413,600 Verizon Comm. 16,754,936
---------------
27,812,843
- --------------------------------------------------------------------------------
ELECTRIC UTILITIES -- 0.5%
80,700 FPL Group, Inc. 6,032,325
- --------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT AND INSTRUMENTS -- 1.1%
189,400 CDW Corp. 12,566,690
- --------------------------------------------------------------------------------
ENERGY EQUIPMENT AND SERVICES -- 0.7%
147,000 Noble Corp.* 7,311,780
- --------------------------------------------------------------------------------
FOOD AND STAPLES RETAILING -- 2.3%
118,000 Costco Wholesale Corp. 5,712,380
376,700 Wal-Mart Stores, Inc. 19,897,294
---------------
25,609,674
- --------------------------------------------------------------------------------
FOOD PRODUCTS -- 2.6%
151,200 Bunge Ltd. 8,619,912
355,300 Dean Foods Co.* 11,707,135
245,800 McCormick & Co., Inc. 9,487,880
---------------
29,814,927
- --------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
GAS UTILITIES -- 0.5%
269,300 NiSource, Inc. $ 6,134,654
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT AND SUPPLIES -- 4.3%
264,000 Boston Scientific Corp.* 9,385,200
123,200 C.R. Bard, Inc. 7,882,336
117,900 Guidant Corp. 8,500,590
279,290 Hospira, Inc.* 9,356,215
278,100 Medtronic, Inc. 13,813,227
---------------
48,937,568
- --------------------------------------------------------------------------------
HOTELS, RESTAURANTS AND LEISURE -- 5.6%
429,700 Carnival Corp. 24,763,611
554,700 Hilton Hotels Corp. 12,613,878
578,000 Int'l. Game Technology 19,871,640
112,700 Las Vegas Sands Corp.* 5,409,600
---------------
62,658,729
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 3.7%
296,200 Colgate-Palmolive Co. 15,153,592
483,900 Procter & Gamble Co. 26,653,212
---------------
41,806,804
- --------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES -- 4.7%
203,500 3M Co. 16,701,245
979,400 General Electric Co. 35,748,100
---------------
52,449,345
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY SERVICES -- 1.0%
268,900 First Data Corp. 11,439,006
- --------------------------------------------------------------------------------
INSURANCE -- 5.2%
218,200 Ambac Financial Group, Inc. 17,920,766
257,000 American Int'l. Group, Inc. 16,877,190
514,900 Fidelity National Financial, Inc. 23,515,483
---------------
58,313,439
- --------------------------------------------------------------------------------
INTERNET AND CATALOG RETAIL -- 0.5%
48,300 eBay, Inc.* 5,616,324
- --------------------------------------------------------------------------------
MACHINERY -- 2.0%
107,400 Caterpillar, Inc. 10,472,574
155,300 Deere & Co. 11,554,320
---------------
22,026,894
- --------------------------------------------------------------------------------
MEDIA -- 5.5%
164,000 Clear Channel Comm., Inc.* 5,492,360
362,800 Comcast Corp. -- Class A* 12,073,984
102,000 Gannett Co., Inc. 8,333,400
172,900 Knight-Ridder, Inc. 11,573,926
681,100 Viacom, Inc. 24,785,229
---------------
62,258,899
- --------------------------------------------------------------------------------
METALS AND MINING -- 2.2%
251,500 Alcoa, Inc. 7,902,130
172,000 Phelps Dodge Corp. 17,014,240
---------------
24,916,370
- --------------------------------------------------------------------------------
MULTILINE RETAIL -- 1.1%
388,200 Family Dollar Stores, Inc. 12,123,486
- --------------------------------------------------------------------------------
MULTI-UTILITIES AND UNREGULATED POWER -- 1.1%
187,700 Dominion Resources, Inc. 12,714,798
- --------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
See notes to financial statements.
58
/ / The Guardian Park Avenue Fund
SCHEDULE OF INVESTMENTS (CONTINUED)
December 31, 2004***
<Table>
<Caption>
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
OIL AND GAS -- 6.8%
363,800 ChevronTexaco Corp. $ 19,103,138
239,000 Devon Energy Corp. 9,301,880
590,100 Exxon Mobil Corp. 30,248,526
120,900 Newfield Exploration Co.* 7,139,145
183,200 Occidental Petroleum Corp. 10,691,552
---------------
76,484,241
- --------------------------------------------------------------------------------
PHARMACEUTICALS -- 7.9%
227,300 Abbott Laboratories 10,603,545
112,300 Eli Lilly & Co. 6,373,025
325,540 Johnson & Johnson 20,645,747
218,200 Merck & Co., Inc. 7,012,948
779,740 Pfizer, Inc. 20,967,208
553,100 Wyeth 23,556,529
---------------
89,159,002
- --------------------------------------------------------------------------------
SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT -- 3.0%
845,000 Intel Corp. 19,764,550
553,900 Texas Instruments, Inc. 13,637,018
---------------
33,401,568
- --------------------------------------------------------------------------------
SOFTWARE -- 5.4%
1,241,500 Microsoft Corp. 33,160,465
927,300 Oracle Corp.* 12,722,556
572,500 Siebel Systems, Inc.* 6,011,250
334,400 Symantec Corp.* 8,614,144
---------------
60,508,415
- --------------------------------------------------------------------------------
SPECIALTY RETAIL -- 4.4%
479,500 Bed, Bath & Beyond, Inc.* 19,098,485
199,700 Best Buy Co., Inc. 11,866,174
533,500 PETsMART, Inc. 18,955,255
---------------
49,919,914
- --------------------------------------------------------------------------------
THRIFTS AND MORTGAGE FINANCE -- 0.7%
116,900 Federal National Mortgage Assn. 8,324,449
- --------------------------------------------------------------------------------
TOBACCO -- 1.3%
238,800 Altria Group, Inc. 14,590,680
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $954,394,987) 1,122,884,276
- --------------------------------------------------------------------------------
<Caption>
REPURCHASE AGREEMENT -- 0.4%
Principal
Amount Value
- --------------------------------------------------------------------------------
$ 5,024,000 State Street Bank and Trust Co.
repurchase agreement,
dated 12/31/2004, maturity
value $5,024,888 at
2.12%, due 1/3/2005 (1)
(COST $5,024,000) $ 5,024,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.1%
(COST $959,418,987) 1,127,908,276
LIABILITIES IN EXCESS OF CASH, RECEIVABLES AND
OTHER ASSETS -- (0.1)% (1,352,386)
- --------------------------------------------------------------------------------
NET ASSETS -- 100% $ 1,126,555,890
- --------------------------------------------------------------------------------
</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.
59
/ / The Guardian UBS Large Cap Value Fund
SCHEDULE OF INVESTMENTS
December 31, 2004
<Table>
<Caption>
COMMON STOCKS -- 96.3%
Shares Value
- -----------------------------------------------------------------------------
AEROSPACE AND DEFENSE -- 2.4%
24,800 Lockheed Martin Corp. $ 1,377,640
18,000 Northrop Grumman Corp. 978,480
------------
2,356,120
- -----------------------------------------------------------------------------
AUTO COMPONENTS -- 1.4%
21,800 Johnson Controls, Inc. 1,382,992
- -----------------------------------------------------------------------------
BIOTECHNOLOGY -- 0.9%
18,600 Cephalon, Inc.* 946,368
- -----------------------------------------------------------------------------
BUILDING PRODUCTS -- 2.1%
56,700 Masco Corp. 2,071,251
- -----------------------------------------------------------------------------
CAPITAL MARKETS -- 7.8%
73,400 Mellon Financial Corp. 2,283,474
74,600 Morgan Stanley 4,141,792
26,400 Northern Trust Corp. 1,282,512
------------
7,707,778
- -----------------------------------------------------------------------------
COMMERCIAL BANKS -- 7.9%
39,856 Bank of America Corp. 1,872,833
33,100 PNC Financial Svcs. Group 1,901,264
65,000 Wells Fargo & Co. 4,039,750
------------
7,813,847
- -----------------------------------------------------------------------------
COMMERCIAL SERVICES AND SUPPLIES -- 0.6%
20,300 Equifax, Inc. 570,430
- -----------------------------------------------------------------------------
COMPUTERS AND PERIPHERALS -- 1.2%
54,700 Hewlett Packard Co. 1,147,059
- -----------------------------------------------------------------------------
CONSTRUCTION MATERIALS -- 1.9%
35,500 Martin Marietta Materials, Inc. 1,904,930
- -----------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES -- 8.9%
100,900 Citigroup, Inc. 4,861,362
100,500 J.P. Morgan Chase & Co. 3,920,505
------------
8,781,867
- -----------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 1.9%
72,600 SBC Comm., Inc. 1,870,902
- -----------------------------------------------------------------------------
ELECTRIC UTILITIES -- 6.6%
54,900 American Electric Power, Inc. 1,885,266
43,400 Exelon Corp. 1,912,638
47,000 FirstEnergy Corp. 1,856,970
44,000 Pepco Hldgs., Inc. 938,080
------------
6,592,954
- -----------------------------------------------------------------------------
FOOD AND STAPLES RETAILING -- 4.6%
60,400 Albertson's, Inc. 1,442,352
38,300 Costco Wholesale Corp. 1,854,103
73,700 Kroger Co.* 1,292,698
------------
4,589,153
- -----------------------------------------------------------------------------
HEALTH CARE PROVIDERS AND SERVICES -- 3.1%
4,400 Medco Health Solutions, Inc.* 183,040
5,400 Quest Diagnostics, Inc. 515,970
27,400 UnitedHealth Group 2,412,022
------------
3,111,032
- -----------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 1.1%
16,700 Kimberly-Clark Corp. 1,099,027
- -----------------------------------------------------------------------------
</Table>
<Table>
<Caption>
- -----------------------------------------------------------------------------
Shares Value
- -----------------------------------------------------------------------------
INSURANCE -- 4.2%
26,400 AFLAC, Inc. $ 1,051,776
30,700 Allstate Corp. 1,587,804
22,400 Hartford Financial Svcs. Group, Inc. 1,552,544
------------
4,192,124
- -----------------------------------------------------------------------------
INTERNET AND CATALOG RETAIL -- 0.9%
31,500 IAC/InterActiveCorp* 870,030
- -----------------------------------------------------------------------------
MACHINERY -- 2.4%
26,100 Illinois Tool Works, Inc. 2,418,948
- -----------------------------------------------------------------------------
MEDIA -- 8.6%
22,900 Omnicom Group, Inc. 1,930,928
125,000 Time Warner, Inc.* 2,430,000
21,600 Tribune Co. 910,224
30,000 Univision Comm., Inc.* 878,100
64,500 Viacom, Inc. 2,347,155
------------
8,496,407
- -----------------------------------------------------------------------------
MULTI-UTILITIES AND UNREGULATED POWER -- 1.8%
45,900 CMS Energy Corp.* 479,655
35,000 Sempra Energy 1,283,800
------------
1,763,455
- -----------------------------------------------------------------------------
OIL AND GAS -- 7.8%
103,600 Exxon Mobil Corp. 5,310,536
63,900 Marathon Oil Corp. 2,403,279
------------
7,713,815
- -----------------------------------------------------------------------------
PHARMACEUTICALS -- 6.2%
40,500 Bristol-Myers Squibb Corp. 1,037,610
31,000 Johnson & Johnson 1,966,020
39,900 Pfizer, Inc. 1,072,911
49,700 Wyeth 2,116,723
------------
6,193,264
- -----------------------------------------------------------------------------
ROAD AND RAIL -- 4.6%
46,400 Burlington Northern Santa Fe 2,195,184
59,800 CSX Corp. 2,396,784
------------
4,591,968
- -----------------------------------------------------------------------------
SOFTWARE -- 0.9%
64,500 Oracle Corp.* 884,940
- -----------------------------------------------------------------------------
THRIFTS AND MORTGAGE FINANCE -- 3.2%
43,100 Federal Home Loan Mortgage Corp. 3,176,470
- -----------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES -- 3.3%
108,900 Nextel Comm., Inc.* 3,267,000
- -----------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $71,981,016) 95,514,131
- -----------------------------------------------------------------------------
<Caption>
EXCHANGE-TRADED FUND -- 2.3%
18,500 S&P Depositary Receipts
Trust Series I
exp. 12/31/2099
(COST $2,081,354) $ 2,236,095
- -----------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
See notes to financial statements.
60
/ / The Guardian UBS Large Cap Value Fund
SCHEDULE OF INVESTMENTS (CONTINUED)
December 31, 2004
<Table>
<Caption>
REPURCHASE AGREEMENT -- 1.5%
Principal
Amount Value
- -----------------------------------------------------------------------------
$ 1,502,000 State Street Bank and Trust Co.
repurchase agreement,
dated 12/31/2004, maturity
value $1,502,265 at
2.12%, due 1/3/2005 (1)
(COST $1,502,000) $ 1,502,000
- -----------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.1%
(COST $75,564,370) 99,252,226
LIABILITIES IN EXCESS OF CASH, RECEIVABLES AND
OTHER ASSETS -- (0.1)% (80,620)
- -----------------------------------------------------------------------------
NET ASSETS -- 100% $ 99,171,606
- -----------------------------------------------------------------------------
</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.
61
/ / The Guardian Park Avenue Small Cap Fund
SCHEDULE OF INVESTMENTS
December 31, 2004
<Table>
<Caption>
COMMON STOCKS -- 99.1%
Shares Value
- -------------------------------------------------------------------------------
AEROSPACE AND DEFENSE -- 3.0%
74,100 Aviall, Inc.* $ 1,702,077
72,900 EDO Corp. 2,314,575
86,200 Esterline Technologies Corp.* 2,814,430
-------------
6,831,082
- -------------------------------------------------------------------------------
AIR FREIGHT AND LOGISTICS -- 1.7%
23,100 Hub Group, Inc.* 1,206,282
39,800 UTi Worldwide, Inc. 2,707,196
-------------
3,913,478
- -------------------------------------------------------------------------------
AIRLINES -- 1.4%
155,500 Skywest, Inc. 3,119,330
- -------------------------------------------------------------------------------
AUTO COMPONENTS -- 0.8%
58,500 American Axle & Mfg. Hldgs., Inc. 1,793,610
- -------------------------------------------------------------------------------
BIOTECHNOLOGY -- 4.4%
269,300 Cell Therapeutics, Inc.* 2,192,102
146,300 Immunicon Corp.* 1,021,174
130,800 Keryx Biopharmaceuticals, Inc.* 1,513,356
119,500 Nabi Biopharmaceuticals* 1,750,675
167,300 Protein Design Labs., Inc.* 3,456,418
-------------
9,933,725
- -------------------------------------------------------------------------------
CAPITAL MARKETS -- 3.2%
25,600 Affiliated Managers Group, Inc.* 1,734,144
113,100 Piper Jaffray Cos., Inc.* 5,423,145
-------------
7,157,289
- -------------------------------------------------------------------------------
CHEMICALS -- 2.3%
26,900 Georgia Gulf Corp. 1,339,620
70,900 Lubrizol Corp. 2,613,374
38,800 Westlake Chemical Corp. 1,295,920
-------------
5,248,914
- -------------------------------------------------------------------------------
COMMERCIAL BANKS -- 3.3%
84,000 Boston Private Financial Hldgs., Inc. 2,366,280
55,600 East West Bancorp, Inc. 2,332,976
31,200 Placer Sierra Bancshares 887,328
33,600 Westamerica Bancorporation 1,959,216
-------------
7,545,800
- -------------------------------------------------------------------------------
COMMERCIAL SERVICES AND SUPPLIES -- 4.6%
34,300 Bright Horizons Family Solutions, Inc.* 2,221,268
133,700 Educate, Inc.* 1,770,188
139,100 Knoll, Inc.* 2,434,250
39,000 Resources Connection, Inc.* 2,118,090
40,900 Stericycle, Inc.* 1,879,355
-------------
10,423,151
- -------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 2.7%
352,300 Arris Group, Inc.* 2,480,192
147,200 Foundry Networks, Inc.* 1,937,152
172,100 Symmetricom, Inc.* 1,671,091
-------------
6,088,435
- -------------------------------------------------------------------------------
COMPUTERS AND PERIPHERALS -- 1.6%
250,500 Iomega Corp.* 1,387,770
72,300 Synaptics, Inc.* 2,210,934
-------------
3,598,704
- -------------------------------------------------------------------------------
CONTAINERS AND PACKAGING -- 0.6%
58,100 Packaging Corp. of America 1,368,255
- -------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES -- 2.2%
119,600 Encore Capital Group, Inc.* 2,844,088
52,900 Financial Federal Corp.* 2,073,680
-------------
4,917,768
- -------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
- -------------------------------------------------------------------------------
Shares Value
- -------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 1.1%
112,900 Iowa Telecom. Svcs., Inc. $ 2,435,253
- -------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT AND INSTRUMENTS -- 3.7%
269,400 Aeroflex, Inc.* 3,265,128
92,000 Benchmark Electronics, Inc.* 3,137,200
149,000 Plexus Corp.* 1,938,490
-------------
8,340,818
- -------------------------------------------------------------------------------
ENERGY EQUIPMENT AND SERVICES -- 1.5%
287,900 Key Energy Svcs., Inc.* 3,397,220
- -------------------------------------------------------------------------------
FOOD AND STAPLES RETAILING -- 0.8%
67,100 Performance Food Group Co.* 1,805,661
- -------------------------------------------------------------------------------
GAS UTILITIES -- 0.8%
43,900 UGI Corp. 1,795,949
- -------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT AND SUPPLIES -- 6.7%
108,300 American Medical Systems Hldgs., Inc.* 4,528,023
126,600 Conceptus, Inc.* 1,027,359
94,900 DJ Orthopedics, Inc.* 2,032,758
231,850 Immucor, Inc.* 5,450,793
52,500 Varian, Inc.* 2,153,025
-------------
15,191,958
- -------------------------------------------------------------------------------
HOTELS, RESTAURANTS AND LEISURE -- 2.1%
37,700 Penn National Gaming, Inc.* 2,282,735
45,500 Red Robin Gourmet Burgers, Inc.* 2,432,885
-------------
4,715,620
- -------------------------------------------------------------------------------
HOUSEHOLD DURABLES -- 1.0%
50,600 Jarden Corp.* 2,198,064
- -------------------------------------------------------------------------------
INFORMATION TECHNOLOGY SERVICES -- 1.0%
153,300 Keane, Inc.* 2,253,510
- -------------------------------------------------------------------------------
INSURANCE -- 3.5%
159,300 Direct General Corp. 5,113,530
71,800 ProAssurance Corp.* 2,808,098
-------------
7,921,628
- -------------------------------------------------------------------------------
INTERNET AND CATALOG RETAIL -- 0.9%
105,000 Insight Enterprises, Inc.* 2,154,600
- -------------------------------------------------------------------------------
INTERNET SOFTWARE AND SERVICES -- 0.9%
230,400 S1 Corp.* 2,087,424
- -------------------------------------------------------------------------------
MACHINERY -- 3.0%
115,500 Trinity Inds., Inc. 3,936,240
87,500 Watts Water Technologies, Inc. 2,821,000
-------------
6,757,240
- -------------------------------------------------------------------------------
MEDIA -- 5.5%
221,600 Cumulus Media, Inc.* 3,341,728
97,400 Entercom Comm. Corp.* 3,495,686
174,200 Gray Television, Inc. 2,700,100
109,500 Westwood One, Inc.* 2,948,835
-------------
12,486,349
- -------------------------------------------------------------------------------
METALS AND MINING -- 2.6%
228,100 Century Aluminum Co.* 5,989,906
- -------------------------------------------------------------------------------
MULTILINE RETAIL -- 0.8%
119,200 99 Cents Only Stores* 1,926,272
- -------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
See notes to financial statements.
62
/ / The Guardian Park Avenue Small Cap Fund
SCHEDULE OF INVESTMENTS (CONTINUED)
December 31, 2004
<Table>
<Caption>
- -------------------------------------------------------------------------------
Shares Value
- -------------------------------------------------------------------------------
MULTI-UTILITIES AND UNREGULATED POWER -- 0.8%
31,400 Energen Corp. $ 1,851,030
- -------------------------------------------------------------------------------
OIL AND GAS -- 4.6%
83,000 Bill Barrett Corp.* 2,655,170
85,200 Energy Partners Ltd.* 1,727,004
71,400 Forest Oil Corp.* 2,264,808
171,500 Magnum Hunter Resources, Inc.* 2,212,350
65,300 Plains Exploration & Production Co.* 1,697,800
-------------
10,557,132
- -------------------------------------------------------------------------------
PAPER AND FOREST PRODUCTS -- 0.6%
30,500 Bowater, Inc. 1,341,085
- -------------------------------------------------------------------------------
PHARMACEUTICALS -- 3.7%
188,800 Discovery Laboratories, Inc.* 1,497,184
29,800 Medicis Pharmaceutical Corp. 1,046,278
231,400 Pain Therapeutics, Inc.* 1,668,394
232,550 Salix Pharmaceuticals Ltd.* 4,090,555
-------------
8,302,411
- -------------------------------------------------------------------------------
REAL ESTATE -- 3.6%
26,100 Alexandria Real Estate Equities 1,942,362
36,700 Federal Realty Investment Trust 1,895,555
79,900 Reckson Assocs. Realty Corp. 2,621,519
67,800 Tanger Factory Outlet Centers, Inc. 1,793,988
-------------
8,253,424
- -------------------------------------------------------------------------------
SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT -- 5.3%
159,800 Mattson Technology, Inc.* 1,799,348
191,100 Netlogic Microsystems, Inc.* 1,909,089
330,300 Micro Devices, Inc.* 2,259,252
126,800 Sigmatel, Inc.* 4,505,204
45,300 Varian Semiconductor Equipment Assoc., Inc.* 1,669,305
-------------
12,142,198
- -------------------------------------------------------------------------------
SOFTWARE -- 6.2%
198,200 Borland Software Corp.* 2,314,976
45,000 FactSet Research Systems, Inc. 2,629,800
310,400 Informatica Corp.* 2,520,448
109,400 Internet Security Systems, Inc.* 2,543,550
296,500 Parametric Technology Corp.* 1,746,385
110,600 RSA Security, Inc.* 2,218,636
-------------
13,973,795
- -------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
- -------------------------------------------------------------------------------
Shares Value
- -------------------------------------------------------------------------------
SPECIALTY RETAIL -- 4.4%
106,100 Cost Plus, Inc.* $ 3,408,993
92,100 Finish Line, Inc. 1,685,430
136,700 New York & Co., Inc.* 2,258,284
102,000 The Sports Authority, Inc.* 2,626,500
-------------
9,979,207
- -------------------------------------------------------------------------------
THRIFTS AND MORTGAGE FINANCE -- 2.2%
49,000 Commercial Capital Bancorp, Inc. 1,135,820
82,700 Flagstar Bancorp, Inc. 1,869,020
129,800 NewAlliance Bancshares, Inc. 1,985,940
-------------
4,990,780
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $187,845,383) 224,788,075
- -------------------------------------------------------------------------------
<Caption>
REPURCHASE AGREEMENT -- 0.9%
Principal
Amount Value
- -------------------------------------------------------------------------------
$ 2,037,000 State Street Bank and Trust Co.
repurchase agreement,
dated 12/31/2004, maturity
value $2,037,360 at
2.12%, due 1/3/2005 (1)
(COST $2,037,000) $ 2,037,000
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0%
(COST $189,882,383) 226,825,075
LIABILITIES IN EXCESS OF CASH, RECEIVABLES AND
OTHER ASSETS -- (0.0)% (35,586)
- -------------------------------------------------------------------------------
NET ASSETS -- 100% $ 226,789,489
- -------------------------------------------------------------------------------
</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.
63
/ / The Guardian UBS Small Cap Value Fund
SCHEDULE OF INVESTMENTS
December 31, 2004
<Table>
<Caption>
COMMON STOCKS -- 92.8%
Shares Value
- -------------------------------------------------------------------------------
AEROSPACE AND DEFENSE -- 2.7%
25,400 Esterline Technologies Corp.* $ 829,310
12,000 Triumph Group, Inc.* 474,000
-------------
1,303,310
- -------------------------------------------------------------------------------
AIRLINES -- 3.2%
33,200 AMR Corp.* 363,540
50,300 Mesa Air Group, Inc.* 399,382
55,800 Pinnacle Airlines Corp.* 777,852
-------------
1,540,774
- -------------------------------------------------------------------------------
AUTO COMPONENTS -- 1.4%
22,700 American Axle & Mfg. Hldgs., Inc. 695,982
- -------------------------------------------------------------------------------
BIOTECHNOLOGY -- 1.5%
23,000 Alkermes, Inc.* 324,070
16,500 Ligand Pharmaceuticals, Inc.* 192,060
11,500 Vicuron Pharmaceuticals, Inc.* 200,215
-------------
716,345
- -------------------------------------------------------------------------------
BUILDING PRODUCTS -- 0.4%
14,500 Apogee Enterprises, Inc. 194,445
- -------------------------------------------------------------------------------
CAPITAL MARKETS -- 2.4%
48,800 Apollo Investment Corp. 736,880
10,900 National Financial Partners Corp. 422,920
-------------
1,159,800
- -------------------------------------------------------------------------------
CHEMICALS -- 0.8%
10,200 Lubrizol Corp. 375,972
- -------------------------------------------------------------------------------
COMMERCIAL BANKS -- 8.8%
22,600 Boston Private Financial Hldgs., Inc. 636,642
37,100 Colonial BancGroup, Inc. 787,633
15,600 Cullen/Frost Bankers, Inc. 758,160
9,200 First BanCorp. 584,292
16,100 South Financial Group, Inc. 523,733
22,200 Trustmark Corp. 689,754
9,400 Vineyard National Bancorp Co. 308,884
-------------
4,289,098
- -------------------------------------------------------------------------------
COMMERCIAL SERVICES AND SUPPLIES -- 5.0%
23,200 Jackson Hewitt Tax Svc., Inc. 585,800
7,300 John H. Harland Co. 263,530
25,600 McGrath Rentcorp 1,116,416
14,900 Mobile Mini, Inc.* 492,296
-------------
2,458,042
- -------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 1.9%
15,000 Harris Corp. 926,850
- -------------------------------------------------------------------------------
COMPUTERS AND PERIPHERALS -- 0.3%
46,500 Quantum Corp.* 121,830
- -------------------------------------------------------------------------------
ELECTRIC UTILITIES -- 1.5%
8,100 Allete, Inc. 297,675
15,400 Hawaiian Electric Inds., Inc. 448,910
-------------
746,585
- -------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 3.0%
33,900 Regal-Beloit Corp. 969,540
26,600 Ultralife Batteries, Inc.* 517,370
-------------
1,486,910
- -------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT AND INSTRUMENTS -- 3.0%
32,000 Methode Electronics, Inc. 411,200
36,000 Newport Corp.* 507,600
25,300 Park Electrochemical Corp. 548,504
-------------
1,467,304
- -------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
- -------------------------------------------------------------------------------
Shares Value
- -------------------------------------------------------------------------------
ENERGY EQUIPMENT AND SERVICES -- 2.5%
21,200 Oceaneering Int'l., Inc.* $ 791,184
13,700 Offshore Logistics, Inc.* 444,839
-------------
1,236,023
- -------------------------------------------------------------------------------
FOOD PRODUCTS -- 1.3%
30,400 Hain Celestial Group, Inc.* 628,368
- -------------------------------------------------------------------------------
GAS UTILITIES -- 1.3%
18,500 AGL Resources, Inc. 614,940
- -------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT AND SUPPLIES -- 3.1%
52,200 Candela Corp.* 592,992
12,500 Haemonetics Corp.* 452,625
14,400 Mentor Corp. 485,856
-------------
1,531,473
- -------------------------------------------------------------------------------
HEALTH CARE PROVIDERS AND SERVICES -- 4.6%
11,400 LifePoint Hospitals, Inc.* 396,948
13,200 Molina Healthcare, Inc.* 612,216
9,000 RehabCare Group, Inc.* 251,910
27,000 Renal Care Group, Inc.* 971,730
-------------
2,232,804
- -------------------------------------------------------------------------------
HOTELS, RESTAURANTS AND LEISURE -- 1.4%
16,900 CBRL Group, Inc. 707,265
- -------------------------------------------------------------------------------
HOUSEHOLD DURABLES -- 4.5%
28,200 Department 56, Inc.* 469,530
25,900 Furniture Brands Int'l., Inc. 648,795
12,300 Libbey, Inc. 273,183
400 Meritage Homes Corp.* 45,080
13,200 Ryland Group, Inc. 759,528
-------------
2,196,116
- -------------------------------------------------------------------------------
INFORMATION TECHNOLOGY SERVICES -- 1.0%
54,700 SM&A* 466,646
- -------------------------------------------------------------------------------
INSURANCE -- 3.3%
18,400 AmerUs Group Co. 833,520
9,100 Donegal Group, Inc. 208,663
12,500 Selective Insurance Group, Inc. 553,000
-------------
1,595,183
- -------------------------------------------------------------------------------
INTERNET SOFTWARE AND SERVICES -- 1.0%
143,000 Tumbleweed Comm. Corp.* 477,620
- -------------------------------------------------------------------------------
MACHINERY -- 3.9%
22,200 Gardner Denver, Inc.* 805,638
8,400 Harsco Corp. 468,216
16,200 Nordson Corp. 649,134
-------------
1,922,988
- -------------------------------------------------------------------------------
MEDIA -- 3.6%
12,000 ADVO, Inc. 427,800
40,600 Radio One, Inc.* 654,472
21,900 Saga Comm., Inc.* 369,015
35,300 Sinclair Broadcast Group, Inc. 325,113
-------------
1,776,400
- -------------------------------------------------------------------------------
METALS AND MINING -- 2.0%
13,900 Quanex Corp. 953,123
- -------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
See notes to financial statements.
64
/ / The Guardian UBS Small Cap Value Fund
SCHEDULE OF INVESTMENTS (CONTINUED)
December 31, 2004
December 31, 2004
<Table>
<Caption>
- -------------------------------------------------------------------------------
Shares Value
- -------------------------------------------------------------------------------
MULTI-UTILITIES AND UNREGULATED POWER -- 2.9%
23,600 Equitable Resources, Inc. $ 1,431,576
- -------------------------------------------------------------------------------
OIL AND GAS -- 1.0%
7,200 Cimarex Energy Co.* 272,880
14,900 NGP Capital Resources Co.* 229,013
-------------
501,893
- -------------------------------------------------------------------------------
PERSONAL PRODUCTS -- 1.3%
24,800 Nu Skin Enterprises, Inc. 629,424
- -------------------------------------------------------------------------------
REAL ESTATE -- 5.4%
20,507 Government Pptys. Trust, Inc. 202,199
14,700 Parkway Pptys., Inc. 746,025
23,900 Saxon Capital, Inc. 573,361
8,000 SL Green Realty Corp. 484,400
22,700 Thornburg Mortgage, Inc. 657,392
-------------
2,663,377
- -------------------------------------------------------------------------------
ROAD AND RAIL -- 2.5%
13,050 Genesee & Wyoming, Inc.* 367,096
14,700 Werner Enterprises, Inc. 332,808
9,800 Yellow Roadway Corp.* 545,958
-------------
1,245,862
- -------------------------------------------------------------------------------
SOFTWARE -- 1.4%
29,500 Mentor Graphics Corp.* 451,055
9,200 Reynolds & Reynolds Co. 243,892
-------------
694,947
- -------------------------------------------------------------------------------
SPECIALTY RETAIL -- 4.0%
16,100 Linens 'n Things, Inc.* 399,280
43,500 Party City Corp.* 562,455
17,300 Rent-A-Center, Inc.* 458,450
7,400 Sharper Image Corp.* 139,490
15,800 The Sports Authority, Inc.* 406,850
-------------
1,966,525
- -------------------------------------------------------------------------------
TEXTILES, APPAREL AND LUXURY GOODS -- 0.8%
11,100 Kellwood Co. 382,950
- -------------------------------------------------------------------------------
THRIFTS AND MORTGAGE FINANCE -- 4.1%
13,500 Accredited Home Lenders Hldg. Co.* 670,680
10,500 Independence Community Bank Corp. 447,090
11,300 IndyMac Bancorp, Inc. 389,285
52,900 Ocwen Financial Corp.* 505,724
-------------
2,012,779
- -------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $34,491,886) 45,351,529
- -------------------------------------------------------------------------------
EXCHANGE-TRADED FUND -- 2.8%
7,100 iShares Russell 2000
Value Index Fund
(COST $1,271,211) $ 1,370,016
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 4.5%
Principal
Amount Value
- -------------------------------------------------------------------------------
$ 2,212,000 State Street Bank and Trust Co.
repurchase agreement,
dated 12/31/2004, maturity
value $2,212,391 at
2.12%, due 1/3/2005 (1)
(COST $2,212,000) $ 2,212,000
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.1%
(COST $37,975,097) 48,933,545
LIABILITIES IN EXCESS OF CASH, RECEIVABLES AND
OTHER ASSETS -- (0.1)% (48,321)
- -------------------------------------------------------------------------------
NET ASSETS -- 100% $ 48,885,224
- -------------------------------------------------------------------------------
</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.
65
/ / The Guardian Asset Allocation Fund
SCHEDULE OF INVESTMENTS
December 31, 2004
<Table>
<Caption>
COMMON STOCKS -- 15.2%
Shares Value
- ------------------------------------------------------------
AEROSPACE AND DEFENSE -- 0.3%
3,044 Boeing Co. $ 157,588
2,736 Honeywell Int'l., Inc. 96,882
1,046 Lockheed Martin Corp. 58,105
1,212 Northrop Grumman Corp. 65,884
1,924 Raytheon Co. 74,709
318 United Technologies Corp. 32,865
-------------
486,033
- ------------------------------------------------------------
AIR FREIGHT AND LOGISTICS -- 0.1%
2,119 United Parcel Svc., Inc. 181,090
- ------------------------------------------------------------
AIRLINES -- 0.0%
2,503 Southwest Airlines Co. 40,749
- ------------------------------------------------------------
AUTOMOBILES -- 0.2%
5,835 Ford Motor Co. 85,425
2,438 General Motors Corp. 97,666
1,219 Harley-Davidson, Inc. 74,054
-------------
257,145
- ------------------------------------------------------------
BEVERAGES -- 0.4%
2,438 Anheuser-Busch Cos., Inc. 123,680
4,595 Coca-Cola Co. 191,290
3,197 Coca-Cola Enterprises, Inc. 66,658
2,867 PepsiCo., Inc. 149,657
2,305 The Pepsi Bottling Group, Inc. 62,327
-------------
593,612
- ------------------------------------------------------------
BIOTECHNOLOGY -- 0.2%
2,242 Amgen, Inc.* 143,824
917 Biogen Idec, Inc.* 61,081
1,035 Chiron Corp.* 34,497
1,726 MedImmune, Inc.* 46,792
-------------
286,194
- ------------------------------------------------------------
BUILDING PRODUCTS -- 0.1%
2,608 Masco Corp. 95,270
- ------------------------------------------------------------
CAPITAL MARKETS -- 0.4%
2,547 Bank of New York, Inc. 85,121
8,048 Charles Schwab Corp. 96,254
1,000 Goldman Sachs Group, Inc. 104,040
980 Lehman Brothers Hldgs., Inc. 85,730
2,356 Mellon Financial Corp. 73,295
410 Merrill Lynch & Co., Inc. 24,506
3,352 Morgan Stanley 186,103
57 State Street Corp. 2,800
-------------
657,849
- ------------------------------------------------------------
CHEMICALS -- 0.2%
567 Dow Chemical Co. 28,072
3,035 E.I. Du Pont de Nemours & Co. 148,867
1,085 Monsanto Co. 60,272
1,174 PPG Inds., Inc. 80,020
1,770 Rohm & Haas Co. 78,287
-------------
395,518
- ------------------------------------------------------------
COMMERCIAL BANKS -- 1.0%
14,194 Bank of America Corp. 666,976
1,872 BB&T Corp. 78,718
2,217 Fifth Third Bancorp 104,820
1,410 KeyCorp 47,799
3,312 U.S. Bancorp 103,732
4,992 Wachovia Corp. 262,579
3,950 Wells Fargo & Co. 245,492
-------------
1,510,116
- ------------------------------------------------------------
</Table>
<Table>
<Caption>
- ------------------------------------------------------------
Shares Value
- ------------------------------------------------------------
COMMERCIAL SERVICES AND SUPPLIES -- 0.2%
5,396 Cendant Corp. $ 126,159
1,807 Cintas Corp. 79,255
1,630 Pitney Bowes, Inc. 75,436
2,779 Waste Management, Inc. 83,203
-------------
364,053
- ------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 0.4%
15,125 Cisco Systems, Inc.* 291,913
6,482 Corning, Inc.* 76,293
6,075 Motorola, Inc. 104,490
4,768 QUALCOMM, Inc. 202,163
-------------
674,859
- ------------------------------------------------------------
COMPUTERS AND PERIPHERALS -- 0.6%
4,776 Dell, Inc.* 201,261
5,386 EMC Corp.* 80,090
8,215 Hewlett Packard Co. 172,268
4,066 Int'l. Business Machines 400,826
12,916 Sun Microsystems, Inc.* 69,488
-------------
923,933
- ------------------------------------------------------------
CONSUMER FINANCE -- 0.2%
1,972 American Express Co. 111,162
146 Capital One Financial Corp. 12,295
4,750 MBNA Corp. 133,902
2,265 SLM Corp. 120,928
-------------
378,287
- ------------------------------------------------------------
DISTRIBUTORS -- 0.1%
2,967 Genuine Parts Co. 130,726
- ------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES -- 0.5%
11,373 Citigroup, Inc. 547,951
5,066 J.P. Morgan Chase & Co. 197,625
-------------
745,576
- ------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.4%
1,564 ALLTEL Corp. 91,901
1,989 AT & T Corp. 37,910
5,078 BellSouth Corp. 141,118
5,290 SBC Comm., Inc. 136,323
1,710 Sprint Corp. 42,494
4,971 Verizon Comm. 201,375
-------------
651,121
- ------------------------------------------------------------
ELECTRIC UTILITIES -- 0.3%
1,705 Entergy Corp. 115,241
1,050 Exelon Corp. 46,273
1,214 FPL Group, Inc. 90,746
1,395 Progress Energy, Inc. 63,110
2,650 Southern Co. 88,828
1,292 TXU Corp. 83,412
-------------
487,610
- ------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 0.1%
424 Cooper Inds. Ltd. 28,785
1,106 Emerson Electric Co. 77,531
-------------
106,316
- ------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
See notes to financial statements.
66
/ / The Guardian Asset Allocation Fund
SCHEDULE OF INVESTMENTS (CONTINUED)
December 31, 2004
<Table>
<Caption>
- ------------------------------------------------------------
Shares Value
- ------------------------------------------------------------
ELECTRONIC EQUIPMENT AND INSTRUMENTS -- 0.1%
2,990 Agilent Technologies, Inc.* $ 72,059
4,723 Solectron Corp.* 25,174
-------------
97,233
- ------------------------------------------------------------
ENERGY EQUIPMENT AND SERVICES -- 0.1%
2,205 Baker Hughes, Inc. 94,087
1,681 Schlumberger Ltd. 112,543
-------------
206,630
- ------------------------------------------------------------
FOOD AND STAPLES RETAILING -- 0.5%
840 Albertson's, Inc. 20,059
2,620 CVS Corp. 118,084
2,409 Kroger Co.* 42,254
1,099 Safeway, Inc.* 21,694
10,695 Wal-Mart Stores, Inc. 564,910
-------------
767,001
- ------------------------------------------------------------
FOOD PRODUCTS -- 0.4%
2,194 Archer-Daniels-Midland Co. 48,948
2,621 Campbell Soup Co. 78,342
2,662 ConAgra Foods, Inc. 78,396
928 General Mills, Inc. 46,131
2,424 H.J. Heinz Co. 94,512
1,334 Hershey Foods Corp. 74,090
2,012 Kellogg Co. 89,856
1,269 W.M. Wrigley Jr. Co. 87,802
-------------
598,077
- ------------------------------------------------------------
HEALTH CARE EQUIPMENT AND SUPPLIES -- 0.5%
2,128 Baxter Int'l., Inc. 73,501
2,122 Becton Dickinson & Co., Inc. 120,530
2,932 Boston Scientific Corp.* 104,233
272 C.R. Bard, Inc. 17,402
2,016 Guidant Corp. 145,354
1,756 Medtronic, Inc. 87,220
2,884 St. Jude Medical, Inc.* 120,926
1,188 Stryker Corp. 57,321
884 Zimmer Hldgs., Inc.* 70,826
-------------
797,313
- ------------------------------------------------------------
HEALTH CARE PROVIDERS AND SERVICES -- 0.2%
998 AmerisourceBergen Corp. 58,562
746 Cigna Corp. 60,851
306 HCA, Inc. 12,228
3,629 Health Management Assoc., Inc. 82,451
1,178 McKesson Corp. 37,060
1,512 Tenet Healthcare Corp.* 16,602
929 WellPoint, Inc.* 106,835
-------------
374,589
- ------------------------------------------------------------
HOTELS, RESTAURANTS AND LEISURE -- 0.3%
2,190 Carnival Corp. 126,210
2,751 McDonald's Corp. 88,197
2,943 Starbucks Corp.* 183,525
-------------
397,932
- ------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 0.3%
614 Clorox Co. 36,183
1,955 Kimberly-Clark Corp. 128,658
5,120 Procter & Gamble Co. 282,010
-------------
446,851
- ------------------------------------------------------------
INDUSTRIAL CONGLOMERATES -- 0.8%
2,236 3M Co. 183,509
23,903 General Electric Co. 872,459
6,224 Tyco Int'l. Ltd. 222,446
-------------
1,278,414
- ------------------------------------------------------------
</Table>
<Table>
<Caption>
- ------------------------------------------------------------
Shares Value
- ------------------------------------------------------------
INFORMATION TECHNOLOGY SERVICES -- 0.3%
2,142 Automatic Data Processing, Inc. $ 94,998
2,525 Electronic Data Systems Corp. 58,327
4,416 First Data Corp. 187,857
957 Paychex, Inc. 32,615
1,608 Sabre Hldgs. Corp. 35,633
-------------
409,430
- ------------------------------------------------------------
INSURANCE -- 0.6%
2,353 AFLAC, Inc. 93,743
2,008 Allstate Corp. 103,854
5,515 American Int'l. Group, Inc. 362,170
1,281 Chubb Corp. 98,509
186 Loews Corp. 13,076
2,164 Marsh & McLennan Cos., Inc. 71,196
2,884 MetLife, Inc. 116,831
1,253 Progressive Corp. 106,304
687 St. Paul Travelers Cos., Inc. 25,467
-------------
991,150
- ------------------------------------------------------------
INTERNET SOFTWARE AND SERVICES -- 0.0%
1,884 Yahoo! Inc.* 70,989
- ------------------------------------------------------------
LEISURE EQUIPMENT AND PRODUCTS -- 0.1%
1,149 Eastman Kodak Co. 37,055
3,448 Mattel, Inc. 67,202
-------------
104,257
- ------------------------------------------------------------
MACHINERY -- 0.2%
1,626 Caterpillar, Inc. 158,551
1,491 Deere & Co. 110,930
2,138 Dover Corp. 89,668
-------------
359,149
- ------------------------------------------------------------
MEDIA -- 0.5%
2,046 Clear Channel Comm., Inc. 68,520
3,217 Comcast Corp. -- Class A* 107,062
629 Gannett Co., Inc. 51,389
1,395 New York Times Co. 56,916
11,612 Time Warner, Inc.* 225,737
77 Tribune Co. 3,245
4,849 Viacom, Inc. 176,455
5,567 Walt Disney Co. 154,763
-------------
844,087
- ------------------------------------------------------------
METALS AND MINING -- 0.0%
2,364 Alcoa, Inc. 74,277
- ------------------------------------------------------------
MULTILINE RETAIL -- 0.1%
1,602 Kohl's Corp.* 78,771
481 Target Corp. 24,978
-------------
103,749
- ------------------------------------------------------------
MULTI-UTILITIES AND UNREGULATED POWER -- 0.2%
3,468 AES Corp.* 47,408
4,604 Duke Energy Corp. 116,619
1,682 Public Svc. Enterprise Group,
Inc. 87,077
-------------
251,104
- ------------------------------------------------------------
OIL AND GAS -- 0.9%
1,406 Anadarko Petroleum Corp. 91,123
294 Burlington Resources, Inc. 12,789
</Table>
- --------------------------------------------------------------------------------
See notes to financial statements.
67
/ / The Guardian Asset Allocation Fund
SCHEDULE OF INVESTMENTS (CONTINUED)
December 31, 2004
<Table>
<Caption>
- ------------------------------------------------------------
Shares Value
- ------------------------------------------------------------
5,774 ChevronTexaco Corp. $ 303,193
1,233 ConocoPhillips 107,061
3,136 El Paso Corp. 32,614
14,298 Exxon Mobil Corp. 732,915
2,571 Unocal Corp. 111,170
3,916 Williams Cos., Inc. 63,792
-------------
1,454,657
- ------------------------------------------------------------
PAPER AND FOREST PRODUCTS -- 0.1%
2,952 Georgia-Pacific Corp. 110,641
- ------------------------------------------------------------
PERSONAL PRODUCTS -- 0.1%
2,752 Avon Products, Inc. 106,502
2,784 Gillette Co. 124,668
-------------
231,170
- ------------------------------------------------------------
PHARMACEUTICALS -- 1.0%
1,116 Allergan, Inc. 90,474
6,462 Bristol-Myers Squibb Corp. 165,556
3,549 Eli Lilly & Co. 201,406
1,774 Forest Laboratories, Inc.* 79,582
6,872 Johnson & Johnson 435,822
1,779 King Pharmaceuticals, Inc.* 22,060
17,915 Pfizer, Inc. 481,734
3,875 Schering-Plough Corp. 80,910
-------------
1,557,544
- ------------------------------------------------------------
REAL ESTATE -- 0.1%
2,383 Plum Creek Timber Co., Inc. 91,603
1,972 Simon Ppty. Group, Inc. 127,529
-------------
219,132
- ------------------------------------------------------------
ROAD AND RAIL -- 0.1%
2,352 Burlington Northern Santa Fe 111,273
1,674 Union Pacific Corp. 112,577
-------------
223,850
- ------------------------------------------------------------
SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT -- 0.5%
2,923 Altera Corp.* 60,506
754 Analog Devices, Inc. 27,838
4,648 Applied Materials, Inc.* 79,481
1,688 Broadcom Corp.* 54,488
670 Freescale Semiconductor, Inc.* 12,301
13,630 Intel Corp. 318,806
1,448 KLA-Tencor Corp.* 67,448
549 Linear Technology Corp. 21,279
794 Maxim Integrated Products, Inc. 33,657
3,302 Micron Technology, Inc.* 40,780
1,503 Texas Instruments, Inc. 37,004
2,346 Xilinx, Inc. 69,559
-------------
823,147
- ------------------------------------------------------------
</Table>
<Table>
<Caption>
- ------------------------------------------------------------
Shares Value
- ------------------------------------------------------------
SOFTWARE -- 0.6%
1,802 Adobe Systems, Inc. $ 113,058
3,590 Computer Associates Int'l.,
Inc. 111,505
23,245 Microsoft Corp. 620,874
2,830 Siebel Systems, Inc.* 29,715
2,739 VERITAS Software Corp.* 78,198
-------------
953,350
- ------------------------------------------------------------
SPECIALTY RETAIL -- 0.4%
1,416 Bed, Bath & Beyond, Inc.* 56,399
1,930 Best Buy Co., Inc. 114,680
3,143 Home Depot, Inc. 134,332
2,415 Lowe's Cos., Inc. 139,080
432 Staples, Inc. 14,563
5,047 The Gap, Inc. 106,593
-------------
565,647
- ------------------------------------------------------------
TEXTILES, APPAREL AND LUXURY GOODS -- 0.1%
1,255 NIKE, Inc. 113,816
- ------------------------------------------------------------
THRIFTS AND MORTGAGE FINANCE -- 0.2%
1,850 Federal National Mortgage Assn. 131,738
4,145 Washington Mutual, Inc. 175,251
-------------
306,989
- ------------------------------------------------------------
TOBACCO -- 0.2%
5,316 Altria Group, Inc. 324,807
509 UST, Inc. 24,488
-------------
349,295
- ------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $24,009,224) 24,047,527
- ------------------------------------------------------------
<Caption>
MUTUAL FUND -- 80.0%
EQUITY -- 80.0%
15,277,311 The Guardian S&P 500 Index
Fund, Class A (1)+
(COST $132,417,998) $ 126,801,679
- ------------------------------------------------------------
<Caption>
U.S. GOVERNMENT SECURITY -- 1.2%
Principal
Amount Value
- ------------------------------------------------------------
$ 1,900,000 U.S. Treasury Bill
1.81%, due 1/20/2005 (2)
(COST $1,898,185) $ 1,898,185
- ------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
See notes to financial statements.
68
/ / The Guardian Asset Allocation Fund
SCHEDULE OF INVESTMENTS (CONTINUED)
December 31, 2004
December 31, 2004
<Table>
<Caption>
REPURCHASE AGREEMENT -- 3.7%
Principal
Amount Value
- ------------------------------------------------------------
$ 5,890,000 State Street Bank and Trust Co.
repurchase agreement,
dated 12/31/2004, maturity
value $5,891,041 at
2.12%, due 1/3/2005 (3)
(COST $5,890,000) $ 5,890,000
- ------------------------------------------------------------
TOTAL INVESTMENTS -- 100.1%
(COST $164,215,407) 158,637,391
LIABILITIES IN EXCESS OF CASH, RECEIVABLES
AND OTHER ASSETS -- (0.1)% (200,192)
- ------------------------------------------------------------
NET ASSETS -- 100% $ 158,437,199
- ------------------------------------------------------------
</Table>
* Non-income producing security.
+ The Guardian S&P 500 Index Fund financials are included herein.
(1) Majority-owned subsidiary.
(2) The U.S. Treasury Bill is segregated as collateral to cover margin
requirements on open futures contracts.
(3) The repurchase agreement is fully collateralized by 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 Appreciation
- ---------------------------------------------------
20 S&P 500 Index 3/2005 $ 132,339
- ---------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
See notes to financial statements.
69
/ / The Guardian S&P 500 Index Fund
SCHEDULE OF INVESTMENTS
December 31, 2004
<Table>
<Caption>
COMMON STOCKS -- 96.9%
Shares Value
- ------------------------------------------------------------------------------
AEROSPACE AND DEFENSE -- 2.0%
12,788 Boeing Co. $ 662,035
3,125 General Dynamics Corp. 326,875
2,343 Goodrich Corp. 76,476
13,224 Honeywell Int'l., Inc. 468,262
1,600 L-3 Comm. Hldgs., Inc. 117,184
6,804 Lockheed Martin Corp. 377,962
5,740 Northrop Grumman Corp. 312,026
6,629 Raytheon Co. 257,404
2,645 Rockwell Collins, Inc. 104,319
7,755 United Technologies Corp. 801,479
-------------
3,504,022
- ------------------------------------------------------------------------------
AIR FREIGHT AND LOGISTICS -- 1.1%
4,550 FedEx Corp. 448,129
810 Ryder Systems, Inc. 38,694
17,015 United Parcel Svc., Inc. 1,454,102
-------------
1,940,925
- ------------------------------------------------------------------------------
AIRLINES -- 0.1%
1,785 Delta Airlines, Inc.* 13,352
12,232 Southwest Airlines Co. 199,137
-------------
212,489
- ------------------------------------------------------------------------------
AUTO COMPONENTS -- 0.2%
945 Cooper Tire & Rubber Co. 20,365
2,085 Dana Corp. 36,133
8,041 Delphi Corp. 72,530
4,365 Goodyear Tire & Rubber Co.* 63,991
2,858 Johnson Controls, Inc. 181,311
1,852 Visteon Corp. 18,094
-------------
392,424
- ------------------------------------------------------------------------------
AUTOMOBILES -- 0.6%
28,159 Ford Motor Co. 412,248
8,879 General Motors Corp. 355,693
4,838 Harley-Davidson, Inc. 293,908
-------------
1,061,849
- ------------------------------------------------------------------------------
BEVERAGES -- 2.2%
525 Adolph Coors Co. 39,727
11,891 Anheuser-Busch Cos., Inc. 603,231
1,990 Brown-Forman Corp. 96,873
37,132 Coca-Cola Co. 1,545,805
7,664 Coca-Cola Enterprises, Inc. 159,794
25,965 PepsiCo., Inc. 1,355,373
4,359 The Pepsi Bottling Group, Inc. 117,867
-------------
3,918,670
- ------------------------------------------------------------------------------
BIOTECHNOLOGY -- 1.3%
19,558 Amgen, Inc.* 1,254,646
3,019 Applera Corp.-Applied Biosystems Group 63,127
5,022 Biogen Idec, Inc.* 334,515
2,723 Chiron Corp.* 90,758
3,379 Genzyme Corp.* 196,218
6,600 Gilead Sciences, Inc.* 230,934
3,661 MedImmune, Inc.* 99,250
-------------
2,269,448
- ------------------------------------------------------------------------------
BUILDING PRODUCTS -- 0.2%
3,186 American Standard Cos., Inc.* 131,645
7,483 Masco Corp. 273,354
-------------
404,999
- ------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
- ------------------------------------------------------------------------------
Shares Value
- ------------------------------------------------------------------------------
CAPITAL MARKETS -- 2.8%
11,877 Bank of New York, Inc. $ 396,929
1,537 Bear Stearns Cos., Inc. 157,250
19,889 Charles Schwab Corp. 237,872
5,500 E*TRADE Financial Corp.* 82,225
1,600 Federated Investors, Inc. 48,640
3,801 Franklin Resources, Inc. 264,740
7,166 Goldman Sachs Group, Inc. 745,551
3,184 Janus Capital Group, Inc. 53,523
4,199 Lehman Brothers Hldgs., Inc. 367,328
6,309 Mellon Financial Corp. 196,273
15,654 Merrill Lynch & Co., Inc. 935,640
16,508 Morgan Stanley 916,524
3,195 Northern Trust Corp. 155,213
5,114 State Street Corp. 251,200
1,728 T. Rowe Price Group, Inc. 107,482
-------------
4,916,390
- ------------------------------------------------------------------------------
CHEMICALS -- 1.6%
3,281 Air Products & Chemicals, Inc. 190,199
14,085 Dow Chemical Co. 697,348
15,009 E.I. Du Pont de Nemours & Co. 736,191
1,083 Eastman Chemical Co. 62,522
4,653 Ecolab, Inc. 163,460
1,823 Engelhard Corp. 55,911
685 Great Lakes Chemical Corp. 19,516
1,497 Hercules, Inc.* 22,230
1,377 Int'l. Flavors & Fragrances, Inc. 58,991
3,976 Monsanto Co. 220,867
2,774 PPG Inds., Inc. 189,076
5,132 Praxair, Inc. 226,578
3,834 Rohm & Haas Co. 169,578
1,093 Sigma-Aldrich 66,083
-------------
2,878,550
- ------------------------------------------------------------------------------
COMMERCIAL BANKS -- 5.7%
5,373 AmSouth Bancorporation 139,161
62,976 Bank of America Corp. 2,959,242
8,563 BB&T Corp. 360,074
2,548 Comerica, Inc. 155,479
8,646 Fifth Third Bancorp 408,783
1,845 First Horizon Nat'l. Corp. 79,538
3,600 Huntington Bancshares, Inc. 89,208
6,165 KeyCorp 208,994
1,800 M & T Bank Corp. 194,112
3,714 Marshall & Ilsley Corp. 164,159
9,265 National City Corp. 347,901
3,607 North Fork Bancorporation, Inc. 104,062
4,177 PNC Financial Svcs. Group 239,927
7,283 Regions Financial Corp. 259,202
4,276 SunTrust Banks, Inc. 315,911
4,926 Synovus Financial Corp. 140,785
30,104 U.S. Bancorp 942,857
24,514 Wachovia Corp. 1,289,436
25,987 Wells Fargo & Co. 1,615,092
1,438 Zions Bancorporation 97,827
-------------
10,111,750
- ------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
See notes to financial statements.
70
/ / The Guardian S&P 500 Index Fund
SCHEDULE OF INVESTMENTS (CONTINUED)
December 31, 2004
<Table>
<Caption>
- ------------------------------------------------------------------------------
Shares Value
- ------------------------------------------------------------------------------
COMMERCIAL SERVICES AND SUPPLIES -- 1.0%
4,995 Allied Waste Inds., Inc.* $ 46,354
2,845 Apollo Group, Inc.* 229,620
1,581 Avery Dennison Corp. 94,813
15,262 Cendant Corp. 356,826
2,425 Cintas Corp. 106,360
997 Deluxe Corp. 37,218
2,052 Equifax, Inc. 57,661
2,604 H & R Block, Inc. 127,596
1,707 Monster Worldwide, Inc.* 57,423
3,634 Pitney Bowes, Inc. 168,181
4,423 R.R. Donnelley & Sons Co. 156,088
2,547 Robert Half Int'l., Inc. 74,958
8,974 Waste Management, Inc. 268,682
-------------
1,781,780
- ------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT -- 2.6%
11,132 ADC Telecomm., Inc.* 29,834
2,400 Andrew Corp.* 32,712
6,102 Avaya, Inc.* 104,954
7,613 CIENA Corp.* 25,427
103,242 Cisco Systems, Inc.* 1,992,571
2,380 Comverse Technology, Inc.* 58,191
20,197 Corning, Inc.* 237,719
18,734 JDS Uniphase Corp.* 59,387
67,556 Lucent Technologies, Inc.* 254,010
35,440 Motorola, Inc. 609,568
25,104 QUALCOMM, Inc. 1,064,410
2,311 Scientific Atlanta, Inc. 76,286
5,897 Tellabs, Inc.* 50,655
-------------
4,595,724
- ------------------------------------------------------------------------------
COMPUTERS AND PERIPHERALS -- 3.9%
6,053 Apple Computer, Inc.* 389,813
38,726 Dell, Inc.* 1,631,914
36,868 EMC Corp.* 548,227
4,621 Gateway, Inc.* 27,772
46,798 Hewlett Packard Co. 981,354
26,281 Int'l. Business Machines 2,590,781
1,823 Lexmark Int'l. Group, Inc.* 154,955
1,379 NCR Corp.* 95,468
5,702 Network Appliance, Inc.* 189,421
1,349 QLogic Corp.* 49,549
46,932 Sun Microsystems, Inc.* 252,494
-------------
6,911,748
- ------------------------------------------------------------------------------
CONSTRUCTION AND ENGINEERING -- 0.0%
1,050 Fluor Corp. 57,235
- ------------------------------------------------------------------------------
CONSTRUCTION MATERIALS -- 0.0%
1,439 Vulcan Materials Co. 78,584
- ------------------------------------------------------------------------------
CONSUMER FINANCE -- 1.3%
19,651 American Express Co. 1,107,727
3,450 Capital One Financial Corp. 290,525
19,217 MBNA Corp. 541,727
4,111 Providian Financial Corp.* 67,708
7,101 SLM Corp. 379,122
-------------
2,386,809
- ------------------------------------------------------------------------------
CONTAINERS AND PACKAGING -- 0.2%
1,626 Ball Corp. 71,511
1,504 Bemis Co., Inc. 43,751
2,261 Pactiv Corp.* 57,181
2,781 Sealed Air Corp.* 148,144
697 Temple-Inland, Inc. 47,675
-------------
368,262
- ------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
- ------------------------------------------------------------------------------
Shares Value
- ------------------------------------------------------------------------------
DISTRIBUTORS -- 0.1%
2,486 Genuine Parts Co. $ 109,533
- ------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES -- 3.6%
3,200 CIT Group, Inc. 146,624
78,862 Citigroup, Inc. 3,799,571
54,353 J.P. Morgan Chase & Co. 2,120,311
2,359 Moody's Corp. 204,879
5,116 Principal Financial Group, Inc. 209,449
-------------
6,480,834
- ------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 2.9%
4,514 ALLTEL Corp. 265,243
12,198 AT & T Corp. 232,494
28,012 BellSouth Corp. 778,454
1,992 CenturyTel, Inc. 70,656
6,319 Citizens Comm. Co. 87,139
30,623 Qwest Comm. Int'l., Inc.* 135,966
50,060 SBC Comm., Inc. 1,290,046
21,364 Sprint Corp. 530,895
41,885 Verizon Comm. 1,696,761
-------------
5,087,654
- ------------------------------------------------------------------------------
ELECTRIC UTILITIES -- 2.0%
1,753 Allegheny Energy, Inc.* 34,552
2,471 Ameren Corp. 123,896
6,284 American Electric Power, Inc. 215,793
4,248 CenterPoint Energy, Inc. 48,002
2,886 CiNergy Corp. 120,144
3,075 Consolidated Edison, Inc. 134,531
2,578 DTE Energy Co. 111,189
4,648 Edison Int'l. 148,875
3,618 Entergy Corp. 244,541
9,904 Exelon Corp. 436,469
5,049 FirstEnergy Corp. 199,486
2,907 FPL Group, Inc. 217,298
6,344 PG&E Corp.* 211,128
1,212 Pinnacle West Capital Corp. 53,825
2,692 PPL Corp. 143,430
4,069 Progress Energy, Inc. 184,082
12,246 Southern Co. 410,486
2,624 TECO Energy, Inc. 40,252
4,437 TXU Corp. 286,453
6,601 Xcel Energy, Inc. 120,138
-------------
3,484,570
- ------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 0.4%
2,786 American Power Conversion Corp. 59,620
1,359 Cooper Inds. Ltd. 92,263
6,564 Emerson Electric Co. 460,136
1,094 Power-One, Inc.* 9,759
2,645 Rockwell Automation, Inc. 131,060
-------------
752,838
- ------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT AND INSTRUMENTS -- 0.3%
7,382 Agilent Technologies, Inc.* 177,906
2,726 Jabil Circuit, Inc.* 69,731
2,802 Molex, Inc. 84,060
7,816 Sanmina-SCI Corp.* 66,201
12,349 Solectron Corp.* 65,820
</Table>
- --------------------------------------------------------------------------------
See notes to financial statements.
71
/ / The Guardian S&P 500 Index Fund
SCHEDULE OF INVESTMENTS (CONTINUED)
December 31, 2004
<Table>
<Caption>
- ------------------------------------------------------------------------------
Shares Value
- ------------------------------------------------------------------------------
3,132 Symbol Technologies, Inc. $ 54,184
1,336 Tektronix, Inc. 40,361
-------------
558,263
- ------------------------------------------------------------------------------
ENERGY EQUIPMENT AND SERVICES -- 0.9%
2,317 B.J. Svcs. Co. 107,833
5,564 Baker Hughes, Inc. 237,416
6,355 Halliburton Co. 249,370
2,092 Nabors Inds., Inc.* 107,299
2,008 Noble Corp.* 99,878
1,317 Rowan Cos., Inc.* 34,110
9,003 Schlumberger Ltd. 602,751
5,572 Transocean, Inc.* 236,197
-------------
1,674,854
- ------------------------------------------------------------------------------
FOOD AND STAPLES RETAILING -- 3.2%
5,902 Albertson's, Inc. 140,940
7,059 Costco Wholesale Corp. 341,726
6,301 CVS Corp. 283,986
11,800 Kroger Co.* 206,972
7,230 Safeway, Inc.* 142,720
1,885 Supervalu, Inc. 65,070
9,731 Sysco Corp. 371,432
66,196 Wal-Mart Stores, Inc. 3,496,473
15,872 Walgreen Co. 609,009
2,010 Winn-Dixie Stores, Inc. 9,146
-------------
5,667,474
- ------------------------------------------------------------------------------
FOOD PRODUCTS -- 1.3%
9,568 Archer-Daniels-Midland Co. 213,462
6,069 Campbell Soup Co. 181,402
8,628 ConAgra Foods, Inc. 254,094
5,846 General Mills, Inc. 290,605
5,823 H.J. Heinz Co. 227,039
3,920 Hershey Foods Corp. 217,717
6,444 Kellogg Co. 287,789
1,968 McCormick & Co., Inc. 75,965
12,269 Sara Lee Corp. 296,173
3,730 W.M. Wrigley Jr. Co. 258,079
-------------
2,302,325
- ------------------------------------------------------------------------------
GAS UTILITIES -- 0.2%
4,116 KeySpan Corp. 162,376
674 NICOR, Inc. 24,898
4,276 NiSource, Inc. 97,407
527 Peoples Energy Corp. 23,162
-------------
307,843
- ------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT AND SUPPLIES -- 2.1%
755 Bausch & Lomb, Inc. 48,667
9,370 Baxter Int'l., Inc. 323,640
3,689 Becton Dickinson & Co., Inc. 209,535
3,846 Biomet, Inc. 166,878
12,482 Boston Scientific Corp.* 443,735
1,442 C.R. Bard, Inc. 92,259
1,700 Fisher Scientific Int'l., Inc.* 106,046
4,822 Guidant Corp. 347,666
2,380 Hospira, Inc.* 79,730
18,280 Medtronic, Inc. 907,968
653 Millipore Corp.* 32,526
2,010 PerkinElmer, Inc. 45,205
5,634 St. Jude Medical, Inc.* 236,234
</Table>
<Table>
<Caption>
- ------------------------------------------------------------------------------
Shares Value
- ------------------------------------------------------------------------------
6,194 Stryker Corp. $ 298,860
2,568 Thermo Electron Corp.* 77,528
2,045 Waters Corp.* 95,685
3,813 Zimmer Hldgs., Inc.* 305,498
-------------
3,817,660
- ------------------------------------------------------------------------------
HEALTH CARE PROVIDERS AND SERVICES -- 2.2%
2,336 Aetna, Inc. 291,416
1,854 AmerisourceBergen Corp. 108,793
6,958 Cardinal Health, Inc. 404,608
6,800 Caremark Rx, Inc.* 268,124
2,221 Cigna Corp. 181,167
1,165 Express Scripts, Inc.* 89,053
7,462 HCA, Inc. 298,181
3,671 Health Management Assoc., Inc. 83,405
2,389 Humana, Inc.* 70,929
3,317 IMS Health, Inc. 76,987
2,100 Laboratory Corp. of America Hldgs.* 104,622
1,456 Manor Care, Inc. 51,586
4,085 McKesson Corp. 128,514
4,011 Medco Health Solutions, Inc.* 166,858
1,738 Quest Diagnostics, Inc. 166,066
6,941 Tenet Healthcare Corp.* 76,212
9,720 UnitedHealth Group 855,652
4,484 WellPoint, Inc.* 515,660
-------------
3,937,833
- ------------------------------------------------------------------------------
HOTELS, RESTAURANTS AND LEISURE -- 1.5%
9,614 Carnival Corp. 554,055
2,575 Darden Restaurants, Inc. 71,431
1,649 Harrah's Entertainment, Inc. 110,302
5,226 Hilton Hotels Corp. 118,839
5,356 Int'l. Game Technology 184,139
3,443 Marriott Int'l., Inc. 216,840
20,021 McDonald's Corp. 641,873
6,148 Starbucks Corp.* 383,389
3,141 Starwood Hotels & Resorts Worldwide, Inc. 183,435
1,623 Wendy's Int'l., Inc. 63,719
4,234 Yum! Brands, Inc. 199,760
-------------
2,727,782
- ------------------------------------------------------------------------------
HOUSEHOLD DURABLES -- 0.5%
1,127 Black & Decker Corp. 99,548
2,084 Centex Corp. 124,165
2,219 Fortune Brands, Inc. 171,262
618 KB Home 64,519
2,782 Leggett & Platt, Inc. 79,092
1,066 Maytag Corp. 22,493
3,827 Newell Rubbermaid, Inc. 92,575
2,046 Pulte Homes, Inc. 130,535
811 Snap-On, Inc. 27,866
1,228 Stanley Works 60,160
933 Whirlpool Corp. 64,573
-------------
936,788
- ------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 1.8%
3,390 Clorox Co. 199,773
8,248 Colgate-Palmolive Co. 421,968
7,704 Kimberly-Clark Corp. 507,000
39,416 Procter & Gamble Co. 2,171,033
-------------
3,299,774
- ------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
See notes to financial statements.
72
/ / The Guardian S&P 500 Index Fund
SCHEDULE OF INVESTMENTS (CONTINUED)
December 31, 2004
<Table>
<Caption>
- ------------------------------------------------------------------------------
Shares Value
- ------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES -- 4.5%
11,794 3M Co. $ 967,934
160,251 General Electric Co. 5,849,161
2,056 Textron, Inc. 151,733
31,210 Tyco Int'l. Ltd. 1,115,445
-------------
8,084,273
- ------------------------------------------------------------------------------
INFORMATION TECHNOLOGY SERVICES -- 1.1%
2,100 Affiliated Computer Svcs., Inc.* 126,399
9,179 Automatic Data Processing, Inc. 407,089
2,951 Computer Sciences Corp.* 166,348
2,482 Convergys Corp.* 37,205
7,704 Electronic Data Systems Corp. 177,962
14,105 First Data Corp. 600,027
2,689 Fiserv, Inc.* 108,071
6,010 Paychex, Inc. 204,821
1,910 Sabre Hldgs. Corp. 42,325
3,991 SunGard Data Systems, Inc.* 113,065
4,516 Unisys Corp.* 45,973
-------------
2,029,285
- ------------------------------------------------------------------------------
INSURANCE -- 4.1%
4,286 ACE Ltd. 183,226
7,659 AFLAC, Inc. 305,135
10,558 Allstate Corp. 546,060
1,504 Ambac Financial Group, Inc. 123,524
40,006 American Int'l. Group, Inc. 2,627,194
4,649 Aon Corp. 110,925
2,889 Chubb Corp. 222,164
2,424 Cincinnati Financial Corp. 107,286
4,261 Hartford Financial Svcs. Group, Inc. 295,330
2,226 Jefferson-Pilot Corp. 115,663
2,766 Lincoln Nat'l. Corp. 129,117
2,851 Loews Corp. 200,425
7,934 Marsh & McLennan Cos., Inc. 261,029
2,115 MBIA, Inc. 133,837
11,297 MetLife, Inc. 457,641
3,436 Progressive Corp. 291,510
8,227 Prudential Financial, Inc. 452,156
1,823 SAFECO Corp. 95,234
10,367 St. Paul Travelers Cos., Inc. 384,305
1,831 Torchmark Corp. 104,623
4,975 UnumProvident Corp. 89,252
2,213 XL Capital Ltd. 171,839
-------------
7,407,475
- ------------------------------------------------------------------------------
INTERNET AND CATALOG RETAIL -- 0.7%
10,156 eBay, Inc.* 1,180,940
- ------------------------------------------------------------------------------
INTERNET SOFTWARE AND SERVICES -- 0.4%
20,122 Yahoo! Inc.* 758,197
- ------------------------------------------------------------------------------
LEISURE EQUIPMENT AND PRODUCTS -- 0.2%
1,223 Brunswick Corp. 60,539
4,324 Eastman Kodak Co. 139,449
2,426 Hasbro, Inc. 47,016
6,117 Mattel, Inc. 119,220
-------------
366,224
- ------------------------------------------------------------------------------
MACHINERY -- 1.5%
5,238 Caterpillar, Inc. 510,757
841 Crane Co. 24,255
571 Cummins, Inc. 47,844
4,676 Danaher Corp. 268,449
3,730 Deere & Co. 277,512
2,911 Dover Corp. 122,087
2,354 Eaton Corp. 170,336
</Table>
<Table>
<Caption>
- ------------------------------------------------------------------------------
Shares Value
- ------------------------------------------------------------------------------
4,671 Illinois Tool Works, Inc. $ 432,908
2,653 Ingersoll-Rand Co. 213,036
1,256 ITT Inds., Inc. 106,069
1,366 Navistar Int'l. Corp.* 60,077
2,467 PACCAR, Inc. 198,544
1,735 Pall Corp. 50,228
1,682 Parker-Hannifin Corp. 127,395
-------------
2,609,497
- ------------------------------------------------------------------------------
MEDIA -- 3.8%
9,260 Clear Channel Comm., Inc. 310,117
34,494 Comcast Corp. -- Class A* 1,147,960
1,237 Dow Jones & Co., Inc. 53,265
4,065 Gannett Co., Inc. 332,111
5,651 Interpublic Group Cos., Inc.* 75,723
1,337 Knight-Ridder, Inc. 89,499
2,816 McGraw-Hill Cos., Inc. 257,777
690 Meredith Corp. 37,398
2,319 New York Times Co. 94,615
32,000 News Corp. 597,120
2,999 Omnicom Group, Inc. 252,876
69,818 Time Warner, Inc.* 1,357,262
5,202 Tribune Co. 219,212
4,887 Univision Comm., Inc.* 143,042
26,391 Viacom, Inc. 960,369
31,096 Walt Disney Co. 864,469
-------------
6,792,815
- ------------------------------------------------------------------------------
METALS AND MINING -- 0.7%
13,096 Alcoa, Inc. 411,476
2,832 Allegheny Technologies, Inc. 61,370
3,526 Freeport-McMoran Copper & Gold, Inc. 134,799
6,419 Newmont Mining Corp. 285,068
2,256 Nucor Corp. 118,079
1,425 Phelps Dodge Corp. 140,961
1,892 United States Steel Corp. 96,965
1,195 Worthington Inds., Inc. 23,398
-------------
1,272,116
- ------------------------------------------------------------------------------
MULTILINE RETAIL -- 1.1%
1,561 Big Lots, Inc.* 18,935
1,201 Dillards, Inc. 32,271
4,737 Dollar General Corp. 98,387
2,900 Family Dollar Stores, Inc. 90,567
2,840 Federated Department Stores, Inc. 164,124
4,629 J.C. Penney Co., Inc. 191,641
5,280 Kohl's Corp.* 259,617
4,265 May Department Stores Co. 125,391
2,637 Nordstrom, Inc. 123,227
2,894 SearsRoebuck & Co. 147,681
13,845 Target Corp. 718,971
-------------
1,970,812
- ------------------------------------------------------------------------------
MULTI-UTILITIES AND UNREGULATED POWER -- 0.7%
10,232 AES Corp.* 139,871
4,708 Calpine Corp.* 18,550
1,896 CMS Energy Corp.* 19,813
2,335 Constellation Energy Group, Inc. 102,063
4,770 Dominion Resources, Inc. 323,120
13,778 Duke Energy Corp. 348,997
4,647 Dynegy, Inc.* 21,469
3,650 Public Svc. Enterprise Group, Inc. 188,961
3,727 Sempra Energy 136,706
-------------
1,299,550
- ------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
See notes to financial statements.
73
/ / The Guardian S&P 500 Index Fund
SCHEDULE OF INVESTMENTS (CONTINUED)
December 31, 2004
<Table>
<Caption>
- ------------------------------------------------------------------------------
Shares Value
- ------------------------------------------------------------------------------
OFFICE ELECTRONICS -- 0.1%
11,648 Xerox Corp.* $ 198,132
- ------------------------------------------------------------------------------
OIL AND GAS -- 6.0%
1,272 Amerada Hess Corp. 104,787
4,276 Anadarko Petroleum Corp. 277,127
4,912 Apache Corp. 248,400
966 Ashland, Inc. 56,395
6,212 Burlington Resources, Inc. 270,222
32,488 ChevronTexaco Corp. 1,705,945
10,367 ConocoPhillips 900,167
6,942 Devon Energy Corp. 270,183
10,252 El Paso Corp. 106,621
1,669 EOG Resources, Inc. 119,100
100,880 Exxon Mobil Corp. 5,171,109
2,450 Kerr-McGee Corp. 141,585
2,048 Kinder Morgan, Inc. 149,770
4,449 Marathon Oil Corp. 167,327
5,890 Occidental Petroleum Corp. 343,740
1,169 Sunoco, Inc. 95,519
3,975 Unocal Corp. 171,879
4,300 Valero Energy Corp. 195,220
7,802 Williams Cos., Inc. 127,095
-------------
10,622,191
- ------------------------------------------------------------------------------
PAPER AND FOREST PRODUCTS -- 0.5%
3,965 Georgia-Pacific Corp. 148,608
7,547 Int'l. Paper Co. 316,974
1,413 Louisiana-Pacific Corp. 37,784
2,831 MeadWestvaco Corp. 95,943
3,511 Weyerhaeuser Co. 236,009
-------------
835,318
- ------------------------------------------------------------------------------
PERSONAL PRODUCTS -- 0.6%
1,201 Alberto-Culver Co. 58,332
6,846 Avon Products, Inc. 264,940
15,165 Gillette Co. 679,089
-------------
1,002,361
- ------------------------------------------------------------------------------
PHARMACEUTICALS -- 6.6%
23,802 Abbott Laboratories 1,110,364
1,885 Allergan, Inc. 152,817
29,523 Bristol-Myers Squibb Corp. 756,379
17,027 Eli Lilly & Co. 966,282
5,593 Forest Laboratories, Inc.* 250,902
45,393 Johnson & Johnson 2,878,824
3,608 King Pharmaceuticals, Inc.* 44,739
33,762 Merck & Co., Inc. 1,085,111
4,100 Mylan Laboratories, Inc. 72,488
117,992 Pfizer, Inc. 3,172,805
22,681 Schering-Plough Corp. 473,579
1,463 Watson Pharmaceuticals, Inc.* 48,001
20,017 Wyeth 852,524
-------------
11,864,815
- ------------------------------------------------------------------------------
REAL ESTATE -- 0.5%
1,513 Apartment Investment & Management Co. 58,311
6,439 Equity Office Pptys. Trust 187,503
4,460 Equity Residential 161,363
2,659 Plum Creek Timber Co., Inc. 102,212
2,678 ProLogis 116,038
3,160 Simon Ppty. Group, Inc. 204,357
-------------
829,784
- ------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
- ------------------------------------------------------------------------------
Shares Value
- ------------------------------------------------------------------------------
ROAD AND RAIL -- 0.5%
5,663 Burlington Northern Santa Fe $ 267,917
3,037 CSX Corp. 121,723
5,523 Norfolk Southern Corp. 199,877
3,900 Union Pacific Corp. 262,275
-------------
851,792
- ------------------------------------------------------------------------------
SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT -- 3.0%
6,069 Advanced Micro Devices, Inc.* 133,639
5,686 Altera Corp.* 117,700
5,668 Analog Devices, Inc. 209,263
25,199 Applied Materials, Inc.* 430,903
4,283 Applied Micro Circuits Corp.* 18,031
5,795 Broadcom Corp.* 187,063
3,913 Freescale Semiconductor, Inc.* 71,843
99,614 Intel Corp. 2,329,971
3,041 KLA-Tencor Corp.* 141,650
4,550 Linear Technology Corp. 176,358
5,783 LSI Logic Corp.* 31,691
4,899 Maxim Integrated Products, Inc. 207,669
8,530 Micron Technology, Inc.* 105,345
6,136 National Semiconductor Corp. 110,141
2,577 Novellus Systems, Inc.* 71,873
3,946 NVIDIA Corp.* 92,968
3,235 PMC-Sierra, Inc.* 36,394
2,493 Teradyne, Inc.* 42,555
26,280 Texas Instruments, Inc. 647,014
5,339 Xilinx, Inc. 158,301
-------------
5,320,372
- ------------------------------------------------------------------------------
SOFTWARE -- 4.2%
3,464 Adobe Systems, Inc. 217,331
4,222 Autodesk, Inc. 160,225
3,499 BMC Software, Inc.* 65,081
2,659 Citrix Systems, Inc.* 65,225
9,148 Computer Associates Int'l., Inc. 284,137
5,272 Compuware Corp.* 34,110
4,446 Electronic Arts, Inc.* 274,229
3,242 Intuit, Inc.* 142,680
1,159 Mercury Interactive Corp.* 52,793
165,976 Microsoft Corp. 4,433,219
6,727 Novell, Inc.* 45,407
80,487 Oracle Corp.* 1,104,282
3,803 Parametric Technology Corp.* 22,400
5,561 PeopleSoft, Inc.* 147,255
6,843 Siebel Systems, Inc.* 71,852
10,000 Symantec Corp.* 257,600
6,433 VERITAS Software Corp.* 183,662
-------------
7,561,488
- ------------------------------------------------------------------------------
SPECIALTY RETAIL -- 2.4%
4,489 AutoNation, Inc.* 86,234
1,333 AutoZone, Inc.* 121,716
4,634 Bed, Bath & Beyond, Inc.* 184,572
4,823 Best Buy Co., Inc. 286,583
2,929 Circuit City Stores, Inc. 45,810
34,767 Home Depot, Inc. 1,485,942
8,155 Limited Brands 187,728
12,053 Lowe's Cos., Inc. 694,132
4,230 Office Depot, Inc.* 73,433
1,654 OfficeMax, Inc. 51,902
2,665 RadioShack Corp. 87,625
2,265 Sherwin-Williams Co. 101,087
7,453 Staples, Inc. 251,241
13,490 The Gap, Inc. 284,909
</Table>
- --------------------------------------------------------------------------------
See notes to financial statements.
74
/ / The Guardian S&P 500 Index Fund
SCHEDULE OF INVESTMENTS (CONTINUED)
December 31, 2004
December 31, 2004
<Table>
<Caption>
- ------------------------------------------------------------------------------
Shares Value
- ------------------------------------------------------------------------------
2,083 Tiffany & Co. $ 66,593
7,969 TJX Cos., Inc. 200,261
2,834 Toys R Us, Inc.* 58,012
-------------
4,267,780
- ------------------------------------------------------------------------------
TEXTILES, APPAREL AND LUXURY GOODS -- 0.4%
2,800 Coach, Inc.* 157,920
2,039 Jones Apparel Group, Inc. 74,566
1,864 Liz Claiborne, Inc. 78,680
4,106 NIKE, Inc. 372,373
649 Reebok Int'l. Ltd. 28,556
1,473 V.F. Corp. 81,575
-------------
793,670
- ------------------------------------------------------------------------------
THRIFTS AND MORTGAGE FINANCE -- 1.8%
8,654 Countrywide Financial Corp. 320,285
10,495 Federal Home Loan Mortgage Corp. 773,481
14,854 Federal National Mortgage Assn. 1,057,753
4,552 Golden West Financial Corp. 279,584
1,532 MGIC Investment Corp. 105,570
5,100 Sovereign Bancorp, Inc. 115,005
13,818 Washington Mutual, Inc. 584,225
-------------
3,235,903
- ------------------------------------------------------------------------------
TOBACCO -- 1.3%
32,351 Altria Group, Inc. 1,976,646
2,145 Reynolds American, Inc. 168,597
2,362 UST, Inc. 113,636
-------------
2,258,879
- ------------------------------------------------------------------------------
TRADING COMPANIES AND DISTRIBUTORS -- 0.1%
2,244 W.W. Grainger, Inc. 149,495
- ------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION SERVICES -- 0.3%
16,542 Nextel Comm., Inc.* 496,260
- ------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $163,182,864) 172,997,107
- ------------------------------------------------------------------------------
<Caption>
U.S. GOVERNMENT SECURITIES -- 0.2%
Principal
Amount Value
- ------------------------------------------------------------------------------
U.S. Treasury Bills
$ 20,000 1.942% due 2/3/2005 (1) $ 19,964
20,000 2.045% due 2/17/2005 (1) 19,947
20,000 2.075% due 2/17/2005 (1) 19,946
100,000 2.1775% due 3/3/2005 (1) 99,631
190,000 2.207% due 3/17/2005 (1) 189,126
- ------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT SECURITIES
(COST $348,614) 348,614
- ------------------------------------------------------------------------------
<Caption>
REPURCHASE AGREEMENT -- 2.8%
Principal
Amount Value
- ------------------------------------------------------------------------------
$ 4,979,000 State Street Bank and Trust Co.
repurchase agreement,
dated 12/31/2004, maturity
value $4,979,880 at
2.12%, due 1/3/2005 (2)
(COST $4,979,000) $ 4,979,000
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 99.9%
(COST $168,510,478) 178,324,721
CASH, RECEIVABLES AND OTHER ASSETS
LESS LIABILITIES -- 0.1% 228,083
- ------------------------------------------------------------------------------
NET ASSETS -- 100% $ 178,552,804
- ------------------------------------------------------------------------------
</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 Appreciation
- ---------------------------------------------------
16 S&P 500 Index 3/2005 $ 105,871
- ---------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
See notes to financial statements.
75
/ / The Guardian Baillie Gifford International Growth Fund
SCHEDULE OF INVESTMENTS
December 31, 2004
<Table>
<Caption>
COMMON STOCKS -- 95.5%
Shares Value
- ---------------------------------------------------------------
AUSTRALIA -- 4.1%
BEVERAGES -- 0.4%
53,400 Fosters Group Ltd. $ 241,212
COMMERCIAL BANKS -- 0.4%
13,354 Australia and NZ Banking Group
Ltd. 214,509
CONSTRUCTION AND ENGINEERING -- 0.4%
20,000 Leighton Hldgs. Ltd. 192,385
CONTAINERS AND PACKAGING -- 0.3%
32,066 Amcor Ltd. 183,870
FOOD AND STAPLES RETAILING -- 0.4%
20,506 Woolworths Ltd. 240,126
MEDIA -- 0.2%
33,000 John Fairfax Hldgs. Ltd. 117,140
METALS AND MINING -- 1.1%
53,406 BHP Billiton Ltd. 639,136
OIL AND GAS -- 0.4%
15,200 Woodside Petroleum Ltd. 238,351
REAL ESTATE -- 0.5%
19,000 Westfield Group* 243,539
-------------
2,310,268
- ---------------------------------------------------------------
DENMARK -- 2.3%
COMMERCIAL BANKS -- 2.3%
42,840 Danske Bank AS 1,307,738
- ---------------------------------------------------------------
FINLAND -- 1.6%
COMMUNICATIONS EQUIPMENT -- 1.6%
55,920 Nokia OYJ 879,621
- ---------------------------------------------------------------
FRANCE -- 12.1%
BEVERAGES -- 1.7%
6,320 Pernod-Ricard S.A. 964,192
HEALTH CARE EQUIPMENT AND SUPPLIES -- 2.4%
17,790 Essilor Int'l. S.A. 1,388,346
MEDIA -- 1.2%
20,852 Vivendi Universal S.A.* 663,061
OIL AND GAS -- 2.9%
7,490 Total S.A. 1,629,372
PERSONAL PRODUCTS -- 1.7%
13,091 L'Oreal S.A. 989,734
PHARMACEUTICALS -- 2.2%
15,565 Sanofi-Synthelabo S.A. 1,238,936
-------------
6,873,641
- ---------------------------------------------------------------
GERMANY -- 5.4%
HEALTH CARE PROVIDERS AND SERVICES -- 0.9%
6,150 Celesio AG 498,184
MACHINERY -- 0.7%
11,178 MAN AG 428,831
MULTI-UTILITIES AND UNREGULATED POWER -- 0.9%
9,760 RWE AG 537,733
SOFTWARE -- 1.8%
5,628 SAP AG 1,001,087
TEXTILES, APPAREL AND LUXURY GOODS -- 1.1%
3,770 Adidas-Salomon AG 606,035
-------------
3,071,870
- ---------------------------------------------------------------
HONG KONG -- 2.9%
COMMERCIAL BANKS -- 0.9%
169,500 BOC Hong Kong Hldgs. Ltd. 323,831
13,000 Hang Seng Bank Ltd. 180,630
-------------
504,461
DISTRIBUTORS -- 0.2%
78,000 Li & Fung Ltd. 131,458
DIVERSIFIED FINANCIAL SERVICES -- 0.3%
50,000 Hong Kong Exchanges & Clearing
Ltd. 134,122
</Table>
<Table>
<Caption>
- ---------------------------------------------------------------
Shares Value
- ---------------------------------------------------------------
REAL ESTATE -- 1.5%
59,000 Cheung Kong Hldgs. Ltd. $ 590,167
28,000 Sun Hung Kai Properties Ltd. 280,079
-------------
870,246
-------------
1,640,287
- ---------------------------------------------------------------
IRELAND -- 3.1%
COMMERCIAL BANKS -- 1.4%
39,230 Allied Irish Banks PLC 815,172
CONSTRUCTION MATERIALS -- 1.7%
35,380 CRH PLC 943,510
-------------
1,758,682
- ---------------------------------------------------------------
ITALY -- 4.4%
INSURANCE -- 2.8%
20,630 Assicurazioni Generali SPA* 697,333
40,860 Riunione Adriatica di Sicurta SPA* 920,395
-------------
1,617,728
OIL AND GAS -- 1.6%
35,990 ENI SPA 897,416
-------------
2,515,144
- ---------------------------------------------------------------
JAPAN -- 22.5%
AUTO COMPONENTS -- 1.1%
33,000 Bridgestone Corp. 655,310
AUTOMOBILES -- 1.6%
21,900 Toyota Motor Corp. 888,961
BUILDING PRODUCTS -- 2.0%
102,000 Asahi Glass Co. 1,121,970
COMMERCIAL BANKS -- 1.1%
104 UFJ Hldgs., Inc.* 628,677
DIVERSIFIED FINANCIAL SERVICES -- 1.2%
9,700 Promise Co. 691,171
DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.5%
67 Nippon Tele. & Tel. Corp. 300,010
ELECTRONIC EQUIPMENT AND INSTRUMENTS -- 2.7%
26,000 Alps Electric Co. Ltd. 386,469
2,800 Keyence Corp. 625,796
38,500 Konica Corp. 509,686
-------------
1,521,951
HOUSEHOLD PRODUCTS -- 1.0%
22,000 Kao Corp. 561,083
INSURANCE -- 1.1%
70,000 Mitsui Sumitomo Insurance Co. 606,444
MACHINERY -- 1.0%
20,000 Daikin Inds. Ltd. 576,268
MARINE -- 0.9%
89,000 Mitsui O.S.K. Lines Ltd. 532,804
MULTILINE RETAIL -- 0.7%
40,000 Takashimaya Co. Ltd. 383,919
OFFICE ELECTRONICS -- 1.7%
29,000 Brother Inds. Ltd. 245,877
13,000 Canon, Inc. 699,796
-------------
945,673
REAL ESTATE -- 0.6%
27,000 Sumitomo Realty & Dev't. Co. Ltd. 351,134
ROAD AND RAIL -- 1.1%
120,000 Tokyu Corp. 647,133
SPECIALTY RETAIL -- 0.9%
11,900 Yamada Denki Co., Ltd. 508,527
</Table>
- --------------------------------------------------------------------------------
See notes to financial statements.
76
/ / The Guardian Baillie Gifford International Growth Fund
SCHEDULE OF INVESTMENTS (CONTINUED)
December 31, 2004
<Table>
<Caption>
- ---------------------------------------------------------------
Shares Value
- ---------------------------------------------------------------
TOBACCO -- 1.9%
96 Japan Tobacco, Inc. $ 1,093,352
TRADING COMPANIES AND DISTRIBUTORS -- 1.4%
86,000 Mitsui & Co. Ltd. 769,337
-------------
12,783,724
- ---------------------------------------------------------------
NETHERLANDS -- 0.6%
HOUSEHOLD DURABLES -- 0.6%
13,650 Philips Electronics (KON) 360,506
- ---------------------------------------------------------------
NEW ZEALAND -- 0.4%
DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.4%
53,400 Telecom. Corp. of New Zealand 236,012
- ---------------------------------------------------------------
PEOPLE'S REPUBLIC OF CHINA -- 0.8%
OIL AND GAS -- 0.8%
807,500 CNOOC Ltd 433,732
- ---------------------------------------------------------------
RUSSIA -- 0.6%
OIL AND GAS -- 0.6%
2,840 LUKOIL ADR 347,900
- ---------------------------------------------------------------
SINGAPORE -- 0.6%
ELECTRONIC EQUIPMENT AND INSTRUMENTS -- 0.3%
19,000 Venture Corp. Ltd. 185,065
MEDIA -- 0.3%
56,000 Singapore Press Hldgs. Ltd. 157,804
-------------
342,869
- ---------------------------------------------------------------
SOUTH AFRICA -- 0.7%
METALS AND MINING -- 0.3%
5,200 Anglo American Platinum Corp. 190,513
OIL AND GAS -- 0.4%
10,156 Sasol Ltd 217,500
-------------
408,013
- ---------------------------------------------------------------
SPAIN -- 2.7%
COMMERCIAL BANKS -- 1.4%
12,130 Banco Popular Espanol S.A. 796,389
TOBACCO -- 1.3%
16,720 Altadis S.A. 762,761
-------------
1,559,150
- ---------------------------------------------------------------
SWEDEN -- 5.1%
COMMERCIAL BANKS -- 1.3%
28,440 Svenska Handelsbanken AB 737,594
COMMUNICATIONS EQUIPMENT -- 1.0%
182,870 LM Ericsson* 581,192
MACHINERY -- 2.8%
24,860 Atlas Copco AB 1,034,203
14,040 Sandvik AB 564,084
-------------
1,598,287
-------------
2,917,073
- ---------------------------------------------------------------
SWITZERLAND -- 3.4%
COMMERCIAL BANKS -- 2.1%
14,100 UBS AG 1,178,295
ELECTRICAL EQUIPMENT -- 1.3%
134,300 ABB Ltd.* 747,419
-------------
1,925,714
- ---------------------------------------------------------------
UNITED KINGDOM -- 22.2%
COMMERCIAL BANKS -- 5.3%
69,800 Barclays PLC 783,635
55,000 HSBC Hldgs. 926,217
25,664 Royal Bank of Scotland 861,429
23,000 Standard Chartered PLC 426,765
-------------
2,998,046
</Table>
<Table>
<Caption>
- ---------------------------------------------------------------
Shares Value
- ---------------------------------------------------------------
HOTELS, RESTAURANTS AND LEISURE -- 2.0%
8,600 Carnival PLC $ 523,617
112,000 Hilton Group PLC 610,466
-------------
1,134,083
METALS AND MINING -- 0.8%
40,000 BHP Billiton PLC 467,850
MULTILINE RETAIL -- 0.7%
13,000 Next PLC 410,950
OIL AND GAS -- 3.3%
58,000 BG Group PLC 393,362
155,000 BP PLC 1,508,539
-------------
1,901,901
PHARMACEUTICALS -- 2.0%
48,302 GlaxoSmithKline PLC 1,130,830
SOFTWARE -- 0.3%
41,000 Sage Group 158,867
TOBACCO -- 3.6%
29,000 British American Tobacco PLC 498,647
56,000 Imperial Tobacco 1,530,993
-------------
2,029,640
WIRELESS TELECOMMUNICATION SERVICES -- 4.2%
210,000 mmO2* 493,858
707,650 Vodafone Group 1,914,997
-------------
2,408,855
-------------
12,641,022
- ---------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $37,439,223) 54,312,966
- ---------------------------------------------------------------
<Caption>
PREFERRED STOCKS -- 2.6%
BRAZIL -- 1.0%
OIL AND GAS -- 1.0%
16,500 Petroleo Brasileiro S.A. ADR $ 597,465
- ---------------------------------------------------------------
GERMANY -- 1.6%
AUTOMOBILES -- 1.6%
1,440 Porsche AG 915,210
- ---------------------------------------------------------------
TOTAL PREFERRED STOCKS
(COST $884,143) 1,512,675
- ---------------------------------------------------------------
<Caption>
CONVERTIBLE BOND -- 0.5%
Principal
Amount Value
- ---------------------------------------------------------------
JAPAN -- 0.5%
COMMERCIAL BANKS -- 0.5%
Y 12,000,000 SMFG Finance
2.25% due 7/11/2005
(COST $95,661) $ 278,363
- ---------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
See notes to financial statements.
77
/ / The Guardian Baillie Gifford International Growth Fund
SCHEDULE OF INVESTMENTS (CONTINUED)
December 31, 2004
<Table>
<Caption>
REPURCHASE AGREEMENT -- 1.4%
Principal
Amount Value
- ---------------------------------------------------------------
$ 801,000 State Street Bank and Trust Co.
repurchase agreement,
dated 12/31/2004, maturity
value $801,060 at
0.90%, due 1/3/2005 (1)
(COST $801,000) $ 801,000
- ---------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0%
(COST $39,220,027) 56,905,004
LIABILITIES IN EXCESS OF CASH, RECEIVABLES AND
OTHER ASSETS -- 0.0% (13,571)
- ---------------------------------------------------------------
NET ASSETS -- 100% $ 56,891,433
- ---------------------------------------------------------------
</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.
GLOSSARY OF TERMS:
ADR -- American Depositary Receipt.
Y -- Japanese Yen.
- --------------------------------------------------------------------------------
See notes to financial statements.
78
/ / The Guardian Baillie Gifford Emerging Markets Fund
SCHEDULE OF INVESTMENTS
December 31, 2004
<Table>
<Caption>
COMMON STOCKS -- 91.5%
Shares Value
- ------------------------------------------------------------
ARGENTINA -- 0.0%
DISTRIBUTORS -- 0.0%
11,480 Imp. Y Exp. Patagonia $ 56,000
- ------------------------------------------------------------
BRAZIL -- 6.0%
DIVERSIFIED TELECOMMUNICATION SERVICES -- 2.2%
132,600 Telecom. Norte Leste
Participacoes ADR 2,236,962
METALS AND MINING -- 1.8%
37,300 Comp. Siderurgica Nacional S.A.
ADR 713,176
36,900 Comp. Vale Do Rio Doce ADR 1,070,469
-------------
1,783,645
OIL AND GAS -- 1.3%
33,000 Petroleo Brasileiro S.A. ADR 1,312,740
PAPER AND FOREST PRODUCTS -- 0.7%
44,500 Votorantim Celulose e Papel S.A.
ADR 720,900
-------------
6,054,247
- ------------------------------------------------------------
CHILE -- 0.5%
COMMERCIAL BANKS -- 0.5%
15,000 Banco Santander Chile ADR 507,900
- ------------------------------------------------------------
EGYPT -- 0.9%
WIRELESS TELECOMMUNICATION SERVICES -- 0.9%
44,792 Orascom Telecom Hldg. SAE GDR* 946,007
- ------------------------------------------------------------
HONG KONG -- 0.9%
INDUSTRIAL CONGLOMERATES -- 0.5%
170,000 Citic Pacific Ltd. 480,072
INTERNET SOFTWARE AND SERVICES -- 0.4%
2,150,000 Tom.Com Ltd.* 395,546
-------------
875,618
- ------------------------------------------------------------
INDIA -- 4.7%
CHEMICALS -- 1.3%
52,500 Reliance Inds. Ltd. GDR 1,345,050
COMMERCIAL BANKS -- 1.1%
25,500 HDFC Bank Ltd. ADR 1,156,680
METALS AND MINING -- 2.3%
40,000 Hindalco Inds. Ltd. GDR+ 1,317,200
133,000 Vedanta Resources PLC 1,005,854
-------------
2,323,054
-------------
4,824,784
- ------------------------------------------------------------
INDONESIA -- 3.5%
COMMERCIAL BANKS -- 0.3%
899,500 PT Bank Rakyat Indonesia 278,595
DIVERSIFIED TELECOMMUNICATION SERVICES -- 2.2%
1,240,000 PT Indonesian Satellite Corp.
Tbk (Indosat) 768,112
2,800,000 PT Telekomunikasi Indonesia 1,455,427
-------------
2,223,539
METALS AND MINING -- 1.0%
12,335,000 PT Bumi Resources Tbk* 1,063,076
-------------
3,565,210
- ------------------------------------------------------------
ISRAEL -- 2.0%
CHEMICALS -- 0.9%
176,100 Makhteshim-Agan Inds. Ltd. 946,537
COMMERCIAL BANKS -- 1.1%
315,000 Bank Hapoalim Ltd. 1,062,396
-------------
2,008,933
- ------------------------------------------------------------
MALAYSIA -- 6.5%
DIVERSIFIED TELECOMMUNICATION SERVICES -- 1.4%
475,000 Telekom Malaysia Berhad 1,450,000
</Table>
<Table>
<Caption>
- ------------------------------------------------------------
Shares Value
- ------------------------------------------------------------
FOOD PRODUCTS -- 1.5%
365,000 IOI Corp. Berhad $ 912,500
235,000 IOI Oleochemical Inds. Berhad 593,684
-------------
1,506,184
HOTELS, RESTAURANTS AND LEISURE -- 0.9%
244,000 Tanjong PLC 905,368
MEDIA -- 0.9%
700,000 Astro All Asia Networks PLC* 994,737
REAL ESTATE -- 0.6%
530,000 SP Setia Berhad 602,526
TOBACCO -- 0.6%
50,000 British American Tobacco
Malaysia Berhad 601,974
TRANSPORTATION INFRASTRUCTURE -- 0.6%
800,000 PLUS Expressways Berhad 589,474
-------------
6,650,263
- ------------------------------------------------------------
MEXICO -- 9.7%
COMMERCIAL BANKS -- 0.6%
98,200 Grupo Fin. Banorte S.A. de C.V. 617,820
CONSTRUCTION AND ENGINEERING -- 0.4%
150,000 Consorcio Ara S.A. de C.V.* 450,350
CONSTRUCTION MATERIALS -- 1.7%
48,700 Cemex S.A. de C.V. ADR 1,773,654
DIVERSIFIED TELECOMMUNICATION SERVICES -- 1.8%
271,000 Grupo Carso Global Telecom.* 482,107
34,600 Telefonos de Mexico S.A. ADR 1,325,872
-------------
1,807,979
METALS AND MINING -- 0.6%
112,000 Grupo Mexico S.A. de C.V.* 564,617
MULTILINE RETAIL -- 0.9%
253,474 Wal-Mart de Mexico S.A. de C.V. 870,053
TRANSPORTATION INFRASTRUCTURE -- 0.4%
14,400 Grupo Aeroportuario del Sureste
S.A. de C.V. ADR 393,840
WIRELESS TELECOMMUNICATION SERVICES -- 3.3%
53,200 America Movil S.A. de C.V. ADR 2,785,020
191,000 America Telecom S.A. de C.V.* 547,940
-------------
3,332,960
-------------
9,811,273
- ------------------------------------------------------------
PANAMA -- 0.5%
COMMERCIAL BANKS -- 0.5%
25,000 Banco Latinoamericano de
Exportaciones S.A 498,500
- ------------------------------------------------------------
PEOPLE'S REPUBLIC OF CHINA -- 4.0%
OIL AND GAS -- 3.2%
3,840,000 CNOOC Ltd. 2,062,577
2,320,000 PetroChina Co. Ltd. 1,238,679
-------------
3,301,256
TRANSPORTATION INFRASTRUCTURE -- 0.8%
1,136,000 Zhejiang Expressway Co. Ltd. 781,906
-------------
4,083,162
- ------------------------------------------------------------
POLAND -- 1.7%
COMMERCIAL BANKS -- 1.1%
25,000 Bank Pekao S.A. 1,150,000
MEDIA -- 0.6%
30,000 Agora S.A.* 568,000
-------------
1,718,000
- ------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
See notes to financial statements.
79
/ / The Guardian Baillie Gifford Emerging Markets Fund
SCHEDULE OF INVESTMENTS (CONTINUED)
December 31, 2004
<Table>
<Caption>
- ------------------------------------------------------------
Shares Value
- ------------------------------------------------------------
RUSSIA -- 3.7%
METALS AND MINING -- 0.6%
64,000 Peter Hambro Mining PLC* $ 619,202
OIL AND GAS -- 2.0%
12,300 LUKOIL ADR 1,506,750
13,452 OAO Gazprom ADR 477,546
-------------
1,984,296
WIRELESS TELECOMMUNICATION SERVICES -- 1.1%
4,100 Mobile Telesystems ADR 567,891
15,300 VimpelCom ADR* 552,942
-------------
1,120,833
-------------
3,724,331
- ------------------------------------------------------------
SOUTH AFRICA -- 11.4%
COMMERCIAL BANKS -- 2.8%
246,000 Standard Bank Group Ltd. 2,864,920
DIVERSIFIED TELECOMMUNICATION SERVICES -- 1.6%
95,000 Telkom Group Ltd. 1,647,788
INDUSTRIAL CONGLOMERATES -- 1.1%
28,000 Barloworld Ltd. 526,797
29,000 Imperial Hldgs. Ltd.* 533,805
-------------
1,060,602
METALS AND MINING -- 1.8%
30,435 Anglo American Platinum Corp. 1,115,052
43,000 Lonmin PLC* 755,438
-------------
1,870,490
MULTILINE RETAIL -- 0.2%
3,143 Edgars Consolidated Stores Ltd. 168,137
OIL AND GAS -- 3.0%
143,100 Sasol Ltd. 3,064,619
PAPER AND FOREST PRODUCTS -- 0.9%
61,000 Sappi Ltd. 896,106
-------------
11,572,662
- ------------------------------------------------------------
SOUTH KOREA -- 12.1%
CHEMICALS -- 0.6%
40,800 Cheil Inds., Inc. 628,632
COMMERCIAL SERVICES AND SUPPLIES -- 1.2%
33,000 S1 Corp. 1,163,543
INDUSTRIAL CONGLOMERATES -- 1.5%
117,630 Hanwha Corp. 1,562,415
INSURANCE -- 1.2%
41,000 Oriental Fire & Marine Insurance
Co. Ltd. 687,162
7,100 Samsung Fire & Marine Ins. Co.
Ltd. 558,974
-------------
1,246,136
MARINE -- 1.1%
175,000 Samsung Heavy Inds. Co. Ltd. 1,092,060
MEDIA -- 0.5%
3,500 Cheil Comms., Inc. 508,839
METALS AND MINING -- 1.0%
60,350 Dongkuk Steel Mill Co. Ltd. 1,040,618
OIL AND GAS -- 0.6%
28,000 GS Hldgs. Corp.* 605,873
PHARMACEUTICALS -- 1.2%
14,797 Yuhan Corp. 1,243,566
TRADING COMPANIES AND DISTRIBUTORS -- 2.3%
186,200 Samsung Corp. 2,311,312
TRANSPORTATION INFRASTRUCTURE -- 0.9%
58,230 Daewoo Shipbuilding & Marine
Engineering Co. Ltd.* 866,250
-------------
12,269,244
- ------------------------------------------------------------
</Table>
<Table>
<Caption>
- ------------------------------------------------------------
Shares Value
- ------------------------------------------------------------
TAIWAN -- 13.4%
BUILDING PRODUCTS -- 1.0%
1,573,200 Taiwan Cement Corp. $ 1,034,284
CHEMICALS -- 1.3%
1,215,000 Taiwan Fertilizer Co. Ltd. 1,326,219
CONSTRUCTION AND ENGINEERING -- 0.5%
843,767 CTCI Corp. 536,146
DIVERSIFIED FINANCIAL SERVICES -- 1.1%
1,882,570 SinoPac Hldgs. 1,107,394
ELECTRICAL EQUIPMENT -- 0.5%
400,000 Phoenixtec Power Co. Ltd. 481,913
ELECTRONIC EQUIPMENT AND INSTRUMENTS -- 4.9%
823,000 AU Optronics Corp. 1,188,289
556,599 Hon Hai Precision Inds. Co. Ltd. 2,573,767
785,000 Synnex Technology Int'l. Corp. 1,158,115
-------------
4,920,171
MACHINERY -- 0.6%
1,071,000 Yungtay Engineering Co. Ltd. 646,845
MARINE -- 0.5%
900,000 Far Eastern Silo Shipping* 469,959
MULTILINE RETAIL -- 1.0%
1,830,000 Far Eastern Dept. Stores Ltd. 1,047,688
PAPER AND FOREST PRODUCTS -- 0.5%
1,010,000 Chung Hwa Pulp Corp. 530,576
WIRELESS TELECOMMUNICATION SERVICES -- 1.5%
1,386,800 Taiwan Cellular Corp. 1,548,644
-------------
13,649,839
- ------------------------------------------------------------
THAILAND -- 6.4%
COMMERCIAL BANKS -- 1.8%
700,000 Bangkok Bank Public Co. Ltd. 1,873,874
DIVERSIFIED FINANCIAL SERVICES -- 0.7%
1,150,000 TISCO Finance Pub. Co. Ltd. 719,305
METALS AND MINING -- 0.6%
148,900 Banpu Pub. Co. Ltd. 582,569
OIL AND GAS -- 1.4%
187,000 PTT Exploration & Production
Pub. Co. Ltd. 1,395,882
WIRELESS TELECOMMUNICATION SERVICES -- 1.9%
720,000 Advanced Info Service Pub. Co.
Ltd. 1,983,011
-------------
6,554,641
- ------------------------------------------------------------
TURKEY -- 2.8%
COMMERCIAL BANKS -- 2.0%
647,357,664 Turkiye Garanti Bankasi AS 2,045,045
INDUSTRIAL CONGLOMERATES -- 0.8%
128,677,377 Koc Hldg. A.S 839,719
-------------
2,884,764
- ------------------------------------------------------------
VENEZUELA -- 0.8%
DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.8%
35,000 Comp. Anonima Nacional Tel.
de Venezuela ADR 783,650
- ------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $68,754,015) 93,039,028
- ------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
See notes to financial statements.
80
/ / The Guardian Baillie Gifford Emerging Markets Fund
SCHEDULE OF INVESTMENTS (CONTINUED)
December 31, 2004
<Table>
<Caption>
PREFERRED STOCKS -- 5.8%
Shares Value
- ------------------------------------------------------------
BRAZIL -- 5.8%
CHEMICALS -- 0.4%
8,900 Braskem S.A. ADR* $ 453,544
COMMERCIAL BANKS -- 2.3%
1,351,577 Itausa-Investimentos Itau S.A. 2,340,834
FOOD PRODUCTS -- 0.0%
4,700,000 Comp. Lorenz S.A.* 0
INDUSTRIAL CONGLOMERATES -- 0.5%
14,103 Bradespar S.A. 464,613
METALS AND MINING -- 0.5%
19,000 Comp. Vale Do Rio Doce 458,904
OIL AND GAS -- 2.1%
59,600 Petroleo Brasileiro S.A. ADR 2,158,116
- ------------------------------------------------------------
TOTAL PREFERRED STOCKS
(COST $2,933,896) 5,876,011
- ------------------------------------------------------------
<Caption>
REPURCHASE AGREEMENT -- 2.7%
Principal
Amount Value
- ------------------------------------------------------------
$ 2,742,000 State Street Bank and Trust Co.
repurchase agreement,
dated 12/31/2004, maturity
value $2,742,206 at
0.90%, due 1/3/2005 (1)
(COST $2,742,000) $ 2,742,000
- ------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0%
(COST $74,429,911) 101,657,039
LIABILITIES IN EXCESS OF CASH, RECEIVABLES
AND OTHER ASSETS -- 0.0% (50,637)
- ------------------------------------------------------------
NET ASSETS -- 100% $ 101,606,402
- ------------------------------------------------------------
</Table>
* Non-income producing security.
+ Rule 144A restricted security and can only be sold to qualified
institutional buyers.
(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.
81
/ / The Guardian Investment Quality Bond Fund
SCHEDULE OF INVESTMENTS
December 31, 2004
<Table>
<Caption>
ASSET BACKED SECURITIES -- 4.4%
Principal
Amount Value
- -------------------------------------------------------------------------------
$ 1,280,000 Aesop Funding II LLC
2003-2A A3
3.61% due 6/20/2009+ $ 1,273,390
1,200,000 Ameriquest Mtg. Secs., Inc.
2003-5 A6
4.541% due 4/25/2033 1,210,124
105,627 Amresco
1997-1 MIF
7.42% due 3/25/2027 105,391
310,000 Residential Asset Mtg. Prods., Inc.
2003-RZ3 A3
2.14% due 2/25/2030 307,873
1,600,000 Residential Funding Mtg. Secs.
2003-HS3 AI2
3.15% due 7/25/2018 1,580,407
1,900,000 Vanderbilt Acquisition Loan Tr.
2002-1 A3
5.70% due 9/7/2023 1,956,111
- -------------------------------------------------------------------------------
TOTAL ASSET BACKED SECURITIES
(COST $6,429,984) 6,433,296
- -------------------------------------------------------------------------------
<Caption>
COLLATERALIZED MORTGAGE OBLIGATIONS -- 7.7%
$ 1,450,000 Countrywide Home Loans
2002-19 1A1
6.25% due 11/25/2032 $ 1,490,640
FHLMC
H006 A2
1,308,733 2.837% due 2/15/2010 1,294,203
2430 GD
300,747 6.50% due 11/15/2030 302,525
2744 VC
1,131,704 5.50% due 4/15/2011 1,176,547
2500 TD
405,000 5.50% due 2/15/2016 414,509
2744 PC
1,500,000 5.50% due 1/15/2031 1,568,806
2367 ME
1,200,000 6.50% due 10/15/2031 1,267,648
1,098,967 FNMA
2001-51 PH
6.00% due 8/25/2030 1,121,261
918,000 Mastr Asset Securitization Trust
2003-10 3A7
5.50% due 11/25/2033 921,385
1,500,000 Wells Fargo Mtg.-Backed Secs. Tr.
2003-11 1A3
4.75% due 10/25/2018 1,501,868
- -------------------------------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(COST $11,239,019) 11,059,392
- -------------------------------------------------------------------------------
<Caption>
COMMERCIAL MORTGAGE BACKED SECURITIES -- 8.9%
Banc of America Comm'l. Mtg., Inc.
2004-5 AAB
$ 1,123,000 4.673% due 11/10/2041 $ 1,130,112
2004-5 AJ
1,123,000 4.992% due 11/10/2041 1,134,717
</Table>
<Table>
<Caption>
- -------------------------------------------------------------------------------
Principal
Amount Value
- -------------------------------------------------------------------------------
$ 764,718 First Union National Bank Comm'l.
Mtg. Tr.
2000-C2 A1
6.94% due 10/15/2032 $ 810,480
915,844 GMAC Comm'l. Mtg. Sec., Inc.
1997-C1 A3
6.869% due 7/15/2029 968,912
1,940,000 J.P. Morgan Chase & Co.
2004-CB9 A3
5.1498% due 6/12/2041 2,016,411
LB-UBS Comm'l. Mtg. Tr.
2004-C8 A6
1,500,000 4.799% due 12/15/2029 1,499,394
2004-C4 A3
1,500,000 4.98687% due 6/15/2029 1,560,664
1,550,000 Merrill Lynch Mtg. Tr.
2004-BPC1 A3
4.467% due 10/12/2041 1,546,303
1,165,000 Midland Realty Acceptance Corp.
1996-C1 C
7.881% due 8/25/2028 (2) 1,226,996
889,251 Mortgage Capital Funding, Inc.
1997-MC1 A3
7.288% due 7/20/2027 919,428
- -------------------------------------------------------------------------------
TOTAL COMMERCIAL MORTGAGE BACKED SECURITIES
(COST $12,927,604) 12,813,417
- -------------------------------------------------------------------------------
<Caption>
CORPORATE BONDS -- 23.0%
AEROSPACE AND DEFENSE -- 0.2%
$ 100,000 Northrop Grumman Corp.
7.125% due 2/15/2011 $ 114,761
150,000 TRW, Inc.
7.75% due 6/1/2029 188,712
-------------
303,473
- -------------------------------------------------------------------------------
AUTOMOTIVE -- 1.6%
DaimlerChrysler NA Hldg.
500,000 4.05% due 6/4/2008 498,968
150,000 6.50% due 11/15/2013 162,692
120,000 Ford Motor Co.
7.45% due 7/16/2031 120,689
Ford Motor Credit Co.
250,000 6.50% due 1/25/2007 259,962
250,000 7.00% due 10/1/2013 265,033
200,000 7.375% due 10/28/2009 215,733
General Motors Acceptance Corp.
250,000 6.125% due 9/15/2006 256,296
150,000 6.75% due 12/1/2014 150,205
395,000 6.875% due 9/15/2011 404,793
-------------
2,334,371
- -------------------------------------------------------------------------------
CHEMICALS -- 0.5%
250,000 Lubrizol Corp.
5.50% due 10/1/2014 251,473
400,000 Potash Corp.
4.875% due 3/1/2013 402,061
-------------
653,534
- -------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
See notes to financial statements.
82
/ / The Guardian Investment Quality Bond Fund
SCHEDULE OF INVESTMENTS (CONTINUED)
December 31, 2004
<Table>
<Caption>
- -------------------------------------------------------------------------------
Principal
Amount Value
- -------------------------------------------------------------------------------
CONSUMER PRODUCTS -- 0.2%
$ 250,000 Procter & Gamble Co.
5.50% due 2/1/2034 $ 254,744
- -------------------------------------------------------------------------------
ENERGY -- 0.9%
250,000 Pioneer Natural Resources Co.
7.20% due 1/15/2028 286,491
549,600 RAS Laffan Liquefied Natural Gas
3.437% due 9/15/2009+ 539,685
350,000 Western Oil Sands, Inc.
8.375% due 5/1/2012 409,063
-------------
1,235,239
- -------------------------------------------------------------------------------
ENERGY-REFINING -- 0.6%
500,000 Tosco Corp.
8.125% due 2/15/2030 667,397
200,000 Valero Logistics
6.05% due 3/15/2013 211,205
-------------
878,602
- -------------------------------------------------------------------------------
ENTERTAINMENT -- 0.4%
500,000 Time Warner, Inc.
7.57% due 2/1/2024 588,177
- -------------------------------------------------------------------------------
ENVIRONMENTAL -- 0.6%
800,000 Waste Management, Inc.
7.375% due 8/1/2010 917,002
- -------------------------------------------------------------------------------
FINANCE COMPANIES -- 1.4%
400,000 Capital One Bank
5.75% due 9/15/2010 424,323
500,000 CIT Group, Inc.
2.53% due 5/18/2007 (2) 500,002
200,000 General Electric Capital Corp.
6.75% due 3/15/2032 234,090
400,000 Household Finance Corp.
6.375% due 11/27/2012 441,953
375,000 MBNA America Bank Nat'l.
7.125% due 11/15/2012 426,564
-------------
2,026,932
- -------------------------------------------------------------------------------
FINANCIAL -- 1.0%
200,000 Credit Suisse First Boston
6.50% due 1/15/2012 222,596
550,000 Goldman Sachs Group, Inc.
5.70% due 9/1/2012 583,010
200,000 Lehman Brothers Hldgs., Inc.
6.625% due 1/18/2012 223,638
400,000 Morgan Stanley
6.60% due 4/1/2012 446,127
-------------
1,475,371
- -------------------------------------------------------------------------------
FINANCIAL-BANKS -- 2.9%
550,000 Bank of America Corp.
4.875% due 9/15/2012 561,691
300,000 Bank One Corp.
5.25% due 1/30/2013 308,093
600,000 Citigroup, Inc.
5.00% due 9/15/2014+ 602,894
300,000 City Nat'l. Corp.
5.125% due 2/15/2013 303,005
200,000 HSBC USA, Inc.
4.625% due 4/1/2014 196,124
450,000 J.P. Morgan Chase & Co.
5.75% due 1/2/2013 476,851
</Table>
<Table>
<Caption>
- -------------------------------------------------------------------------------
Principal
Amount Value
- -------------------------------------------------------------------------------
$ 200,000 Regions Financial Corp.
6.375% due 5/15/2012 $ 220,492
250,000 Sovereign Bank
5.125% due 3/15/2013 250,279
400,000 Wachovia Corp.
5.25% due 8/1/2014 409,962
300,000 Wells Fargo Bank NA
6.45% due 2/1/2011 333,619
500,000 Zions Bancorp
6.00% due 9/15/2015 533,002
-------------
4,196,012
- -------------------------------------------------------------------------------
FOOD AND BEVERAGE -- 0.6%
750,000 Kellogg Co.
2.875% due 6/1/2008 728,461
200,000 Kraft Foods, Inc.
5.25% due 10/1/2013 205,770
-------------
934,231
- -------------------------------------------------------------------------------
HOME CONSTRUCTION -- 0.9%
500,000 D.R. Horton, Inc.
5.875% due 7/1/2013 510,625
500,000 Lennar Corp.
9.95% due 5/1/2010 535,850
300,000 Ryland Group, Inc.
5.375% due 6/1/2008 312,000
-------------
1,358,475
- -------------------------------------------------------------------------------
INDUSTRIAL-OTHER -- 1.2%
1,700,000 Aramark Svcs., Inc.
7.10% due 12/1/2006 1,802,066
- -------------------------------------------------------------------------------
MEDIA-CABLE -- 0.9%
300,000 AT & T Broadband Corp.
9.455% due 11/15/2022 414,916
800,000 Comcast Cable Comm., Inc.
6.875% due 6/15/2009 888,756
-------------
1,303,672
- -------------------------------------------------------------------------------
MEDIA-NONCABLE -- 1.0%
150,000 News America Hldgs.
8.00% due 10/17/2016 182,921
1,150,000 Scholastic Corp.
5.75% due 1/15/2007 1,191,999
-------------
1,374,920
- -------------------------------------------------------------------------------
MERCHANDISING-SUPERMARKETS -- 0.8%
400,000 Delhaize America, Inc.
7.375% due 4/15/2006 419,991
325,000 Kroger Co.
4.95% due 1/15/2015 322,444
400,000 Safeway, Inc.
6.15% due 3/1/2006 412,585
-------------
1,155,020
- -------------------------------------------------------------------------------
METALS AND MINING -- 0.2%
250,000 Glencore Funding LLC
6.00% due 4/15/2014+ 241,870
- -------------------------------------------------------------------------------
NATURAL GAS-PIPELINES -- 0.9%
500,000 Buckeye Partners
5.30% due 10/15/2014 506,426
500,000 Enterprise Prods. Operating LP
6.65% due 10/15/2034+ 517,135
</Table>
- --------------------------------------------------------------------------------
See notes to financial statements.
83
/ / The Guardian Investment Quality Bond Fund
SCHEDULE OF INVESTMENTS (CONTINUED)
December 31, 2004
<Table>
<Caption>
- -------------------------------------------------------------------------------
Principal
Amount Value
- -------------------------------------------------------------------------------
$ 250,000 Kinder Morgan Energy Partners
5.00% due 12/15/2013 $ 249,814
-------------
1,273,375
- -------------------------------------------------------------------------------
PAPER AND FOREST PRODUCTS -- 0.1%
150,000 Weyerhaeuser Co.
6.00% due 8/1/2006 155,877
- -------------------------------------------------------------------------------
RAILROADS -- 0.5%
150,000 CSX Corp.
4.875% due 11/1/2009 152,989
450,000 Norfolk Southern Corp.
6.75% due 2/15/2011 507,139
-------------
660,128
- -------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST -- 0.8%
100,000 EOP Operating LP
7.00% due 7/15/2011 112,774
500,000 Istar Financial, Inc.
6.00% due 12/15/2010 527,414
200,000 Liberty Ppty. LP
7.25% due 3/15/2011 226,319
100,000 Regency Centers LP
6.75% due 1/15/2012 111,579
125,000 Simon Ppty. Group LP
4.90% due 1/30/2014 123,141
-------------
1,101,227
- -------------------------------------------------------------------------------
RETAILERS -- 0.4%
250,000 CVS Corp.
4.875% due 9/15/2014 250,078
300,000 Staples, Inc.
7.375% due 10/1/2012 349,078
-------------
599,156
- -------------------------------------------------------------------------------
TECHNOLOGY -- 0.5%
200,000 IBM Corp.
5.875% due 11/29/2032 211,509
500,000 Jabil Circuit, Inc.
5.875% due 7/15/2010 526,311
-------------
737,820
- -------------------------------------------------------------------------------
UTILITIES-ELECTRIC AND WATER -- 1.3%
250,000 FirstEnergy Corp.
6.45% due 11/15/2011 271,617
300,000 Potomac Edison Co.
5.35% due 11/15/2014+ 302,335
300,000 Progress Energy, Inc.
7.00% due 10/30/2031 332,242
500,000 Public Service Co. of New Mexico
4.40% due 9/15/2008 504,180
200,000 Public Service Electric Gas Co.
5.125% due 9/1/2012 206,868
200,000 TXU Corp.
6.50% due 11/15/2024+ 200,334
-------------
1,817,576
- -------------------------------------------------------------------------------
WIRELESS COMMUNICATIONS -- 0.7%
250,000 AT & T Wireless Svcs., Inc.
8.125% due 5/1/2012 302,211
690,000 Verizon Wireless Capital LLC
5.375% due 12/15/2006 714,705
-------------
1,016,916
- -------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
- -------------------------------------------------------------------------------
Principal
Amount Value
- -------------------------------------------------------------------------------
WIRELINE COMMUNICATIONS -- 1.6%
$ 250,000 Deutsche Telekom Int'l. Finance BV
8.75% due 6/15/2030 (2) $ 330,115
France Telecom S.A.
325,000 8.50% due 3/1/2011 (2) 387,693
150,000 9.25% due 3/1/2031 (2) 203,339
600,000 Sprint Capital Corp.
8.375% due 3/15/2012 730,885
200,000 Telecom Italia Capital
5.25% due 11/15/2013+ 202,147
400,000 Verizon Global Funding Corp.
7.75% due 12/1/2030 497,330
-------------
2,351,509
- -------------------------------------------------------------------------------
YANKEE -- 0.3%
350,000 Pemex Project Funding Master Tr.
7.875% due 2/1/2009 (2) 393,225
- -------------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(COST $31,664,665) 33,140,520
- -------------------------------------------------------------------------------
<Caption>
MORTGAGE PASS-THROUGH SECURITIES -- 37.3%
FHLMC
$ 6,200,000 5.50%, (30 yr. TBA) $ 6,296,875
10,828,877 5.50%, 2034 11,007,903
2,437,603 6.00%, 8/1/2034 2,520,013
13,172 7.00%, 8/1/2008 13,838
FNMA
12,025,000 5.00%, (30 yr. TBA) 11,927,297
2,700,000 5.50%, (30 yr. TBA) 2,740,500
1,825,000 6.00%, (30 yr. TBA) 1,886,594
1,100,000 6.50%, (30 yr. TBA) 1,153,282
3,676,806 5.00%, 6/1/2018 3,739,172
2,375,865 5.00%, 10/1/2019 2,415,433
475,521 5.50%, 12/1/2014 492,795
278,172 5.50%, 8/1/2019 287,673
648,969 6.00%, 10/1/2013 681,486
445,611 6.00%, 4/1/2016 467,236
960,002 6.00%, 1/1/2034 993,111
1,059,891 6.50%, 12/1/2017 1,124,122
1,836,670 6.50%, 2032 1,927,805
6,833 7.00%, 2/1/2009 7,173
46,767 7.00%, 2012 49,584
170,998 7.00%, 9/1/2014 181,294
3,003 7.00%, 8/1/2023 3,202
1,926 7.00%, 12/1/2027 2,046
51,913 7.00%, 12/1/2028 55,109
585,838 7.00%, 2032 621,036
235 7.50%, 5/1/2027 252
122,018 7.50%, 12/1/2029 130,783
496,427 7.50%, 2/1/2031 532,343
227,313 8.00%, 2030 246,477
GNMA
1,074,896 6.00%, 2033 1,114,750
949,546 6.50%, 2032 1,000,445
122,290 8.00%, 2030 132,765
- -------------------------------------------------------------------------------
TOTAL MORTGAGE PASS-THROUGH SECURITIES
(COST $53,253,046) 53,752,394
- -------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
See notes to financial statements.
84
/ / The Guardian Investment Quality Bond Fund
SCHEDULE OF INVESTMENTS (CONTINUED)
December 31, 2004
<Table>
<Caption>
SOVEREIGN DEBT SECURITIES -- 0.9%
Principal
Amount Value
- -------------------------------------------------------------------------------
$ 200,000 Pemex Project Funding Master Tr.
3.79% due 6/15/2010+(2) $ 205,200
475,000 Republic of South Africa
6.50% due 6/2/2014 520,125
500,000 United Mexican States
8.00% due 9/24/2022 576,750
- -------------------------------------------------------------------------------
TOTAL SOVEREIGN DEBT SECURITIES
(COST $1,182,944) 1,302,075
- -------------------------------------------------------------------------------
<Caption>
U.S. GOVERNMENT SECURITIES -- 15.2%
U.S. GOVERNMENT AGENCY SECURITIES -- 7.0%
FHLMC
$ 5,000,000 2.875%, 5/15/2007 $ 4,948,990
335,000 4.50%, 1/15/2014 334,866
FNMA
3,600,000 3.25%, 1/15/2008 3,572,327
1,290,000 4.625%, 10/15/2014 1,290,969
-------------
10,147,152
- -------------------------------------------------------------------------------
U.S. TREASURY BONDS AND NOTES -- 8.2%
U.S. Treasury Bonds
812,000 5.375%, 2/15/2031 878,038
4,110,000 6.00%, 2/15/2026 4,708,038
U.S. Treasury Notes
245,000 2.50%, 9/30/2006 242,885
200,000 3.375%, 10/15/2009 198,031
315,000 3.50%, 11/15/2006 317,658
4,799,000 4.25%, 2014 4,811,095
570,000 4.375%, 5/15/2007 585,831
-------------
11,741,576
- -------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT SECURITIES
(COST $21,502,105) 21,888,728
- -------------------------------------------------------------------------------
<Caption>
COMMERCIAL PAPER -- 16.6%
AUTOMOTIVE -- 3.4%
$ 5,000,000 Toyota Motor Credit Corp.
2.26% due 1/13/2005 (1) $ 4,996,233
- -------------------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES -- 0.2%
300,000 Citigroup Global Markets Hldgs., Inc.
2.30% due 1/13/2005 (1) 299,770
- -------------------------------------------------------------------------------
FINANCIAL-BANKS -- 6.2%
4,000,000 State Street Boston Corp.
2.26% due 1/13/2005 (1) 3,996,987
5,000,000 UBS Finance, Inc.
2.265% due 1/13/2005 (1) 4,996,225
-------------
8,993,212
- -------------------------------------------------------------------------------
</Table>
<Table>
- -------------------------------------------------------------------------------
Principal Value
Amount
- -------------------------------------------------------------------------------
<Caption>
FOOD AND BEVERAGE -- 3.5%
$ 5,000,000 Nestle Capital Corp.
2.20% due 1/13/2005 (1) $ 4,996,334
- -------------------------------------------------------------------------------
UTILITIES-ELECTRIC AND WATER -- 3.3%
4,750,000 National Rural Utilities Coop. Fin.
2.29% due 1/13/2005 (1) 4,746,374
- -------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER
(COST $24,031,923) 24,031,923
- -------------------------------------------------------------------------------
<Caption>
REPURCHASE AGREEMENT -- 3.0%
$ 4,327,000 State Street Bank and Trust Co.
repurchase agreement,
dated 12/31/2004, maturity
value $4,327,764 at
2.12%, due 1/3/2005 (1)(3)
(COST $4,327,000) $ 4,327,000
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 117.0%
(COST $166,558,290) 168,748,745
PAYABLES FOR MORTGAGE PASS-THROUGHS
DELAYED DELIVERY SECURITIES (1) -- (16.6)% (24,059,296)
LIABILITIES IN EXCESS OF CASH, RECEIVABLES
AND OTHER ASSETS -- (0.4)% (446,760)
- -------------------------------------------------------------------------------
NET ASSETS -- 100% $ 144,242,689
- -------------------------------------------------------------------------------
</Table>
+ Securities exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to certain qualified buyers. At December 31, 2004,
the aggregate market value of these securities amounted to $4,084,990
representing 2.8% of net assets.
(1) Securities are segregated to cover forward mortgage purchases.
(2) Floating rate note. The rate shown is the rate in effect at December 31,
2004.
(3) 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.
85
/ / The Guardian Low Duration Bond Fund
SCHEDULE OF INVESTMENTS
December 31, 2004
<Table>
<Caption>
ASSET BACKED SECURITIES -- 9.5%
Principal
Amount Value
- ----------------------------------------------------------------------
$ 350,000 Capital Auto Receivables Asset
Tr.
2004-2 A3
3.58% due 1/15/2009 $ 349,825
500,000 Chase Manhattan Auto Owner Tr.
2003-A A4
2.06% due 12/15/2009 487,468
290,000 Countrywide Asset-Backed
Certificates
2004-AB2 A2
2.69% due 5/25/2036 (1) 290,000
240,970 Navistar Financial Corp. Owner
Tr.
2004-A A3
2.01% due 8/15/2008 237,089
290,000 New Century Home Equity Loan
Tr.
2004-4 A4
2.687% due 2/25/2035 (1) 289,991
400,000 PP&L Transition Bond Co. LLC
1999-1 A7
7.05% due 6/25/2009 425,577
Residential Asset Mtg. Prods.,
Inc.
2003-RZ3 A3
600,000 2.14% due 2/25/2030 595,883
2002-RS5 AI4
224,965 4.428% due 9/25/2030 225,082
300,000 Residential Funding Mtg. Secs.
2003-HS3 AI2
3.15% due 7/25/2018 296,326
- ----------------------------------------------------------------------
TOTAL ASSET BACKED SECURITIES
(COST $3,207,157) 3,197,241
- ----------------------------------------------------------------------
<Caption>
COLLATERALIZED MORTGAGE OBLIGATIONS -- 6.3%
FHLMC
2430 GD
$ 76,690 6.50% due 11/15/2030 $ 77,144
2744 VC
277,741 5.50% due 4/15/2011 288,747
2500 TD
420,000 5.50% due 2/15/2016 429,861
1650 J
495,000 6.50% due 6/15/2023 511,118
FNMA
2002-55 PC
360,000 5.50% due 4/25/2026 364,137
2001-51 PH
213,921 6.00% due 8/25/2030 218,261
155,748 GNMA
2002-93 NV
4.75% due 2/20/2032 155,998
90,669 Prudential Home Mtg. Secs.
1993-60 A3
6.75% due 12/25/2023 90,505
- ----------------------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS
(COST $2,164,604) 2,135,771
- ----------------------------------------------------------------------
<Caption>
COMMERCIAL MORTGAGE BACKED SECURITIES -- 2.3%
Principal
Amount Value
- ----------------------------------------------------------------------
$ 299,285 GMAC Comm'l. Mtg. Sec., Inc.
1997-C1 A3
6.869% due 7/15/2029 $ 316,627
128,576 LB UBS Comm'l. Mtg. Tr.
2001-C3 A1
6.058% due 6/15/2020 135,763
225,000 Midland Realty Acceptance Corp.
1996-C1 C
7.881% due 8/25/2028 (1) 236,973
99,528 Morgan Stanley Capital I
1999-WF1 A1
5.91% due 11/15/2031 102,236
- ----------------------------------------------------------------------
TOTAL COMMERCIAL MORTGAGE
BACKED SECURITIES
(COST $816,725) 791,599
- ----------------------------------------------------------------------
<Caption>
CORPORATE BONDS -- 52.9%
- ----------------------------------------------------------------------
AEROSPACE AND DEFENSE -- 1.5%
$ 500,000 Northrop Grumman Corp.
7.00% due 3/1/2006 $ 520,837
- ----------------------------------------------------------------------
AUTOMOTIVE -- 6.0%
500,000 Daimler Chrysler NA Hldg.
4.75% due 1/15/2008 510,676
500,000 Delphi Corp.
6.55% due 6/15/2006 514,582
500,000 Ford Motor Credit Co.
7.50% due 3/15/2005 504,271
500,000 General Motors Acceptance Corp.
5.25% due 5/16/2005 504,644
-------------
2,034,173
- ----------------------------------------------------------------------
ENERGY -- 3.5%
500,000 Anadarko Petroleum Corp.
6.50% due 5/15/2005 505,937
175,000 ConocoPhillips
3.625% due 10/15/2007 175,101
500,000 Repsol Int'l. Fin. BV
7.45% due 7/15/2005 511,629
-------------
1,192,667
- ----------------------------------------------------------------------
ENTERTAINMENT -- 1.3%
400,000 AOL Time Warner, Inc.
6.15% due 5/1/2007 423,182
- ----------------------------------------------------------------------
FINANCE COMPANIES -- 6.9%
500,000 American General Fin. Corp.
5.875% due 12/15/2005 512,342
500,000 Capital One Bank
6.875% due 2/1/2006 518,690
500,000 General Electric Capital Corp.
3.50% due 8/15/2007 498,989
250,000 Household Fin. Corp.
6.50% due 1/24/2006 258,442
500,000 MBNA America Bank NA
6.50% due 6/20/2006 521,792
-------------
2,310,255
- ----------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
See notes to financial statements.
86
/ / The Guardian Low Duration Bond Fund
SCHEDULE OF INVESTMENTS (CONTINUED)
December 31, 2004
<Table>
<Caption>
- ----------------------------------------------------------------------
Principal
Amount Value
- ----------------------------------------------------------------------
FINANCIAL -- 2.3%
$ 500,000 Bear Stearns Cos., Inc.
3.00% due 3/30/2006 $ 498,967
250,000 Lehman Brothers Hldgs., Inc.
6.25% due 5/15/2006 260,184
-------------
759,151
- ----------------------------------------------------------------------
FINANCIAL-BANKS -- 0.7%
250,000 KeyCorp
4.625% due 5/16/2005 251,703
- ----------------------------------------------------------------------
FOOD AND BEVERAGE -- 3.0%
500,000 Kellogg Co.
6.00% due 4/1/2006 515,511
500,000 Kraft Foods, Inc.
4.625% due 11/1/2006 510,309
-------------
1,025,820
- ----------------------------------------------------------------------
HOME CONSTRUCTION -- 0.8%
250,000 Lennar Corp.
9.95% due 5/1/2010 267,925
- ----------------------------------------------------------------------
LODGING -- 0.8%
250,000 Marriott Int'l., Inc.
6.875% due 11/15/2005 257,922
- ----------------------------------------------------------------------
MEDIA-CABLE -- 1.6%
500,000 Cox Comm., Inc.
7.75% due 8/15/2006 531,842
- ----------------------------------------------------------------------
NATURAL GAS-PIPELINES -- 3.0%
500,000 Duke Energy Field Svcs.
7.50% due 8/16/2005 513,210
500,000 Enterprise Prods. Operating L P
4.00% due 10/15/2007+ 498,780
-------------
1,011,990
- ----------------------------------------------------------------------
PAPER AND FOREST PRODUCTS -- 0.8%
250,000 Abitibi-Consolidated, Inc.
8.30% due 8/1/2005 255,625
- ----------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST -- 6.7%
505,000 Avalon Bay Communities, Inc.
6.80% due 7/15/2006 531,314
500,000 EOP Operating LP
6.625% due 2/15/2005 502,251
500,000 ERP Operating LP
6.63% due 4/13/2005 505,084
300,000 Gables Realty LP
6.80% due 3/15/2005 301,950
400,000 Simon Ppty. Group LP
6.875% due 10/27/2005 411,364
-------------
2,251,963
- ----------------------------------------------------------------------
SERVICES -- 0.8%
250,000 Cendant Corp.
6.875% due 8/15/2006 263,016
- ----------------------------------------------------------------------
UTILITIES-ELECTRIC AND WATER -- 5.6%
175,000 Dominion Resources, Inc.
4.125% due 2/15/2008 176,203
500,000 National Rural Utilities Coop.
Fin.
3.00% due 2/15/2006 498,993
250,000 Niagara Mohawk Power Corp.
6.625% due 7/1/2005 254,574
500,000 Nisource Fin. Corp.
7.625% due 11/15/2005 518,214
</Table>
<Table>
<Caption>
- ----------------------------------------------------------------------
Principal
Amount Value
- ----------------------------------------------------------------------
$ 425,000 PSEG Power LLC
6.875% due 4/15/2006 $ 443,045
-------------
1,891,029
- ----------------------------------------------------------------------
WIRELESS COMMUNICATIONS -- 1.5%
498,000 AT & T Wireless Svcs., Inc.
6.875% due 4/18/2005 503,811
- ----------------------------------------------------------------------
WIRELINE COMMUNICATIONS -- 6.1%
500,000 British Telecom. PLC
7.875% due 12/15/2005 521,495
500,000 Deutsche Telekom Int'l. Fin. BV
8.25% due 6/15/2005 511,652
500,000 Sprint Capital Corp.
6.00% due 1/15/2007 523,298
500,000 Telefonica Europe BV
7.35% due 9/15/2005 514,795
-------------
2,071,240
- ----------------------------------------------------------------------
TOTAL CORPORATE BONDS
(COST $17,921,788) 17,824,151
- ----------------------------------------------------------------------
<Caption>
SOVEREIGN DEBT SECURITY -- 1.5%
$ 500,000 Petroleos Mexicanos
6.50% due 2/1/2005
(COST $501,560) $ 501,600
- ----------------------------------------------------------------------
<Caption>
U.S. GOVERNMENT SECURITIES -- 24.8%
U.S. TREASURY NOTES -- 24.8%
U.S. Treasury Notes
$ 1,040,000 2.625%, 3/15/2009 $ 1,004,940
1,160,000 2.75%, 8/15/2007 1,147,267
6,215,000 3.375%, 12/15/2008 6,195,336
- ----------------------------------------------------------------------
TOTAL U.S. GOVERNMENT
SECURITIES
(COST $8,388,589) 8,347,543
- ----------------------------------------------------------------------
<Caption>
REPURCHASE AGREEMENT -- 2.3%
$ 780,000 State Street Bank and Trust Co.
repurchase agreement,
dated 12/31/2004, maturity
value $780,138 at
2.12%, due 1/3/2005 (2)
(COST $780,000) $ 780,000
- ----------------------------------------------------------------------
TOTAL INVESTMENTS -- 99.6%
(COST $33,780,423) 33,577,905
CASH, RECEIVABLES AND OTHER ASSETS
LESS LIABILITIES -- 0.4% 138,443
- ----------------------------------------------------------------------
NET ASSETS -- 100% $ 33,716,348
- ----------------------------------------------------------------------
</Table>
+ Securities exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to certain qualified buyers. At December 31, 2004,
the aggregate market value of these securities amounted to $498,780
representing 1.5% of net assets.
(1) Floating rate note. The rate shown is the rate in effect at December 31,
2004.
(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.
87
/ / The Guardian High Yield Bond Fund
SCHEDULE OF INVESTMENTS
December 31, 2004
<Table>
<Caption>
CORPORATE BONDS -- 88.3%
Rating
Principal Moody's/
Amount S&P* Value
- -----------------------------------------------------------------------------
AEROSPACE AND DEFENSE -- 1.8%
Comm. & Power Inds., Inc.
$ 671,000 Sr. Sub. Nt.
8.00% due 2/1/2012 B3/B- $ 711,260
Sequa Corp.
800,000 Sr. Nt.
8.875% due 4/1/2008 B1/BB- 876,000
------------
1,587,260
- -----------------------------------------------------------------------------
AUTOMOTIVE -- 4.1%
Affinia Group, Inc.
435,000 Sr. Sub. Nt.+
9.00% due 11/30/2014 Caa1/B 453,488
General Motors Acceptance
Corp.
875,000 Global Note
6.75% due 12/1/2014 Baa1/BBB- 876,196
Keystone Automotive
Operations
522,000 Sr. Sub. Nt.
9.75% due 11/1/2013 B3/B- 558,540
Stanadyne Corp.
292,000 Sr. Sub. Nt.+
10.00% due 8/15/2014 Caa1/B- 315,360
Tenneco Automotive, Inc.
320,000 Sr. Sub. Nt.+
8.625% due 11/15/2014 B3/B- 332,800
298,000 Sr. Sec. Nt. Ser. B
10.25% due 7/15/2013 B2/B- 351,640
TRW Automotive, Inc.
248,000 Sr. Nt.
9.375% due 2/15/2013 Ba3/BB- 287,680
United Components, Inc.
400,000 Sr. Sub. Nt.
9.375% due 6/15/2013 B3/B 434,000
------------
3,609,704
- -----------------------------------------------------------------------------
BANKING -- 0.5%
Western Financial Bank
350,000 Sub. Cap. Debt.
9.625% due 5/15/2012 B1/BB- 399,000
- -----------------------------------------------------------------------------
BUILDING MATERIALS -- 1.1%
Norcraft Cos. Fin
343,000 Sr. Sub. Nt.
9.00% due 11/1/2011 B3/B- 370,440
Ply Gem Inds., Inc.
556,000 Sr. Sub. Nt.+
9.00% due 2/15/2012 B3/B- 564,340
------------
934,780
- -----------------------------------------------------------------------------
CHEMICALS -- 5.4%
BCP Caylux Hldgs. Luxembourg
SCA
745,000 Sr. Sub. Nt.+
9.625% due 6/15/2014 B3/B- 839,987
Equistar Chemicals LP
670,000 Sr. Nt.
10.125% due 9/1/2008 B2/B+ 772,175
Huntsman Advanced Materials
373,000 Sr. Sec. Nt.+
11.00% due 7/15/2010 B2/B 443,870
Huntsman Int'l. LLC
224,000 Sr. Nt.
9.875% due 3/1/2009 B3/B- 245,840
Huntsman LLC
373,000 Sr. Nt.+
11.50% due 7/15/2012 B3/CCC+ 441,073
</Table>
<Table>
<Caption>
- -----------------------------------------------------------------------------
Rating
Principal Moody's/
Amount S&P* Value
- -----------------------------------------------------------------------------
IMC Global, Inc.
$ 29,000 Sr. Nt. Ser. B
10.875% due 6/1/2008 B1/BB $ 34,800
Koppers, Inc.
584,000 Sec. Nt.
9.875% due 10/15/2013 B2/B 665,760
Lyondell Chemical Co.
372,000 Sr. Sub. Nt.
10.875% due 5/1/2009 B3/B- 393,390
Millennium America, Inc.
513,070 Sr. Nt.
9.25% due 6/15/2008 B1/B+ 583,617
Nalco Co.
298,000 Sr. Sub. Nt.
8.875% due 11/15/2013 Caa1/B- 327,055
------------
4,747,567
- -----------------------------------------------------------------------------
CONSTRUCTION MACHINERY -- 2.1%
Joy Global, Inc.
140,000 Sr. Sub. Nt.
8.75% due 3/15/2012 B1/B+ 156,800
NMHG Hldg. Co.
140,000 Sr. Nt.
10.00% due 5/15/2009 B3/B+ 154,700
Terex Corp.
285,000 Sr. Sub. Nt.
9.25% due 7/15/2011 B3/B 319,912
285,000 Sr. Sub. Nt.
10.375% due 4/1/2011 B3/B 319,200
United Rentals NA, Inc.
960,000 Sr. Sub. Nt.
7.75% due 11/15/2013 B2/B+ 940,800
------------
1,891,412
- -----------------------------------------------------------------------------
CONSUMER PRODUCTS -- 3.3%
Bombardier Recreational
Products
286,000 Sr. Sub. Nt.
8.375% due 12/15/2013 B3/B- 305,305
Elizabeth Arden, Inc.
410,000 Sr. Sub. Nt.
7.75% due 1/15/2014 B2/B- 434,600
Jafra Cosmetics
828,000 Sr. Sub. Nt.
10.75% due 5/15/2011 B3/B- 935,640
Rayovac Corp.
745,000 Sr. Sub. Nt.
8.50% due 10/1/2013 B3/B- 826,950
Riddell Bell Hldgs., Inc.
360,000 Sr. Sub. Nt.+
8.375% due 10/1/2012 B3/B- 372,600
------------
2,875,095
- -----------------------------------------------------------------------------
ELECTRIC -- 11.7%
Allegheny Energy Supply
1,490,000 Nt.
7.80% due 3/15/2011 B3/B- 1,624,100
CMS Energy Corp.
400,000 Sr. Nt.
8.50% due 4/15/2011 B1/B+ 454,500
</Table>
- --------------------------------------------------------------------------------
See notes to financial statements.
88
/ / The Guardian High Yield Bond Fund
SCHEDULE OF INVESTMENTS (CONTINUED)
December 31, 2004
<Table>
<Caption>
- -----------------------------------------------------------------------------
Rating
Principal Moody's/
Amount S&P* Value
- -----------------------------------------------------------------------------
Dynegy Hldgs., Inc.
$ 400,000 Sr. Sec. Nt.+
10.125% due 7/15/2013 B3/B- $ 458,000
Edison Mission Energy
365,000 Sr. Nt.
9.875% due 4/15/2011 B1/B 432,525
745,000 Sr. Nt.
10.00% due 8/15/2008 B1/B 854,888
Mission Energy Hldg.
1,095,000 Sr. Sec. Nt.
13.50% due 7/15/2008 B3/CCC 1,366,012
NRG Energy, Inc.
596,000 Sec. Nt.+
8.00% due 12/15/2013 B1/B 649,640
Sierra Pacific Resources
1,600,000 Sr. Nt.
8.625% due 3/15/2014 B2/B- 1,808,000
Teco Energy, Inc.
1,295,000 Nt.
7.00% due 5/1/2012 Ba2/BB 1,414,787
UtiliCorp Canada Fin.
1,200,000 Sr. Nt.
7.75% due 6/15/2011 B2/B- 1,246,500
------------
10,308,952
- -----------------------------------------------------------------------------
ENERGY -- 3.0%
Chesapeake Energy Corp.
318,000 Sr. Nt.+
6.375% due 6/15/2015 Ba3/BB- 326,745
Dresser, Inc.
447,000 Sr. Nt.
9.375% due 4/15/2011 B2/B 489,465
Forest Oil Corp.
365,000 Sr. Nt.
7.75% due 5/1/2014 Ba3/BB- 396,937
Newpark Resources, Inc.
700,000 Sr. Sub. Nt. Ser. B
8.625% due 12/15/2007 B2/B 710,500
Pride Int'l., Inc.
219,000 Sr. Nt.
7.375% due 7/15/2014 Ba2/BB- 239,258
Stone Energy Corp.
159,000 Sr. Sub. Nt.+
6.75% due 12/15/2014 B2/B+ 158,603
Western Oil Sands, Inc.
298,000 Sr. Sec. Nt.
8.375% due 5/1/2012 Ba2/BB+ 348,287
------------
2,669,795
- -----------------------------------------------------------------------------
ENTERTAINMENT -- 1.1%
Intrawest Corp.
720,000 Sr. Nt.
7.50% due 10/15/2013 B1/B+ 765,900
Six Flags, Inc.
160,000 Sr. Nt.
9.625% due 6/1/2014 Caa1/CCC 160,800
------------
926,700
- -----------------------------------------------------------------------------
ENVIRONMENTAL -- 0.4%
Allied Waste NA, Inc.
335,000 Sr. Nt.
7.875% due 4/15/2013 B2/BB- 343,375
- -----------------------------------------------------------------------------
</Table>
<Table>
<Caption>
- -----------------------------------------------------------------------------
Rating
Principal Moody's/
Amount S&P* Value
- -----------------------------------------------------------------------------
FOOD AND BEVERAGE -- 5.8%
American Seafood Group LLC
$ 560,000 Sr. Sub. Nt.
10.125% due 4/15/2010 B3/B- $ 602,000
ASG Con. LLC/Finance, Inc.
1,240,000 Sr. Disc. Nt.+(1)
0/11.50% due 11/1/2011 Caa1/B- 790,500
Del Monte Corp.
635,000 Sr. Sub. Nt.
9.25% due 5/15/2011 B2/B 695,325
Merisant Co.
960,000 Sr. Sub. Nt.+
9.50% due 7/15/2013 B3/B- 854,400
Michael Foods, Inc.
373,000 Sr. Sub. Nt.
8.00% due 11/15/2013 B3/B- 393,515
Premium Standard Farms, Inc.
969,000 Sr. Nt.
9.25% due 6/15/2011 B1/BB 1,036,830
Seminis Vegetable Seeds,
Inc.
670,000 Sr. Sub. Nt.
10.25% due 10/1/2013 B3/B- 753,750
------------
5,126,320
- -----------------------------------------------------------------------------
GAMING -- 0.4%
Sun Int'l. Hotels Ltd.
285,000 Sr. Sub. Nt.
8.875% due 8/15/2011 B2/B 311,363
- -----------------------------------------------------------------------------
HEALTH CARE -- 3.6%
Alliance Imaging, Inc.
636,000 Sr. Sub. Nt.+
7.25% due 12/15/2012 B3/B- 647,130
Bio-Rad Laboratories, Inc.
358,000 Sr. Sub. Nt.+
6.125% due 12/15/2014 Ba3/BB- 360,685
Fisher Scientific Int'l.,
Inc.
365,000 Sr. Sub. Nt.+
6.75% due 8/15/2014 Ba3/BB+ 391,462
382,000 Sr. Sub. Nt.
8.125% due 5/1/2012 Ba3/BB+ 424,020
Fresenius Medical Care
570,000 Capital Tr.
7.875% due 6/15/2011 Ba2/BB- 635,550
Medical Device Mfg., Inc.
366,000 Sr. Sub. Nt.+
10.00% due 7/15/2012 Caa1/B- 394,365
National Nephrology Assocs.,
Inc.
288,000 Sr. Sub. Nt.+
9.00% due 11/1/2011 B1/B 333,360
------------
3,186,572
- -----------------------------------------------------------------------------
HOME CONSTRUCTION -- 1.6%
D.R. Horton, Inc.
800,000 Sr. Nt.
5.625% due 9/15/2014 Ba1/BB+ 798,000
Meritage Corp.
286,000 Sr. Nt.
9.75% due 6/1/2011 Ba3/BB- 316,030
</Table>
- --------------------------------------------------------------------------------
See notes to financial statements.
89
/ / The Guardian High Yield Bond Fund
SCHEDULE OF INVESTMENTS (CONTINUED)
December 31, 2004
<Table>
<Caption>
- -----------------------------------------------------------------------------
Rating
Principal Moody's/
Amount S&P* Value
- -----------------------------------------------------------------------------
WCI Communities, Inc.
$ 280,000 Sr. Sub. Nt.
9.125% due 5/1/2012 Ba3/B+ $ 310,800
------------
1,424,830
- -----------------------------------------------------------------------------
INDUSTRIAL-OTHER -- 1.7%
Da Lite Screen Co., Inc.
224,000 Sr. Nt.+
9.50% due 5/15/2011 B2/B- 246,400
General Cable Corp.
575,000 Sr. Nt.
9.50% due 11/15/2010 B2/B 649,750
PerkinElmer, Inc.
560,000 Sr. Sub. Nt.
8.875% due 1/15/2013 Ba3/BB- 638,400
------------
1,534,550
- -----------------------------------------------------------------------------
LODGING -- 0.8%
Host Marriott LP
398,000 Sr. Nt. Ser. J
7.125% due 11/1/2013 Ba3/B+ 425,363
John Q. Hammons Hotels LP
280,000 1st Mtg. Nt. Ser. B
8.875% due 5/15/2012 B2/B 316,400
------------
741,763
- -----------------------------------------------------------------------------
MEDIA-CABLE -- 5.0%
Charter Comm. Hldgs. II
1,272,000 Sr. Nt.
10.25% due 9/15/2010 Caa1/CCC- 1,348,320
Charter Comm. Operating LLC
372,000 Sr. Nt.+
8.00% due 4/30/2012 B2/B- 386,880
CSC Hldgs., Inc.
730,000 Debt.
7.625% due 7/15/2018 B1/BB- 771,975
1,120,000 Debt.
7.875% due 2/15/2018 B1/BB- 1,209,600
Insight Comm., Inc.
298,000 Sr. Disc. Nt. (1)
0/12.25% due 2/15/2011 Caa2/B- 289,805
Insight Midwest LP
373,000 Sr. Nt.
10.50% due 11/1/2010 B2/B+ 408,435
------------
4,415,015
- -----------------------------------------------------------------------------
MEDIA-NONCABLE -- 4.0%
American Media Operations,
Inc.
570,000 Sr. Sub. Nt. Ser. B
10.25% due 5/1/2009 B3/B- 600,637
Dex Media East LLC
351,000 Sr. Sub. Nt.
12.125% due 11/15/2012 B2/B 427,781
DirecTV Hldgs. Finance
278,000 Sr. Nt.
8.375% due 3/15/2013 B1/BB- 311,708
EchoStar DBS Corp.
365,000 Sr. Nt.
6.375% due 10/1/2011 Ba3/BB- 373,212
400,000 Sr. Nt.+
6.625% due 10/1/2014 Ba3/BB- 405,000
</Table>
<Table>
<Caption>
- -----------------------------------------------------------------------------
Rating
Principal Moody's/
Amount S&P* Value
- -----------------------------------------------------------------------------
Houghton Mifflin Co.
$ 800,000 Sr. Sub. Nt.
9.875% due 2/1/2013 Caa1/B- $ 876,000
R.H. Donnelley Fin. Corp. I
465,000 Sr. Sub. Nt.+
10.875% due 12/15/2012 B2/B+ 552,188
------------
3,546,526
- -----------------------------------------------------------------------------
METALS AND MINING -- 3.7%
AK Steel Corp.
880,000 Sr. Nt.
7.75% due 6/15/2012 B3/B+ 906,400
671,000 Sr. Nt.
7.875% due 2/15/2009 B3/B+ 683,581
Century Aluminum Co.
398,000 Sr. Nt.+
7.50% due 8/15/2014 B1/BB- 423,870
Luscar Coal Ltd.
286,000 Sr. Nt.
9.75% due 10/15/2011 Ba3/BB 324,610
Oregon Steel Mills, Inc.
480,000 1st Mtg. Nt.
10.00% due 7/15/2009 B2/B 534,000
Peabody Energy Corp.
365,000 Sr. Nt.
6.875% due 3/15/2013 Ba3/BB- 395,113
------------
3,267,574
- -----------------------------------------------------------------------------
NATURAL GAS-PIPELINES -- 3.9%
El Paso Natural Gas
670,000 Sr. Nt.
7.625% due 8/1/2010 B1/B- 733,650
Northwest Pipeline Corp.
208,000 Sr. Nt.
8.125% due 3/1/2010 Ba2/B+ 230,100
Southern Natural Gas Co.
623,000 Nt.
7.35% due 2/15/2031 B1/B- 646,363
Transcontinental Gas
Pipeline Corp.
180,000 Nt. Ser. B
7.00% due 8/15/2011 Ba2/B+ 197,325
Williams Cos., Inc.
875,000 Sr. Nt.
7.75% due 6/15/2031 B1/B+ 916,562
600,000 Nt.
8.125% due 3/15/2012 B1/B+ 693,000
------------
3,417,000
- -----------------------------------------------------------------------------
NONCAPTIVE CONSUMER -- 0.7%
Dollar Financial Group, Inc.
559,000 Sr. Nt.
9.75% due 11/15/2011 B3/B 606,515
- -----------------------------------------------------------------------------
NON SOVEREIGN -- 1.2%
Gazprom OAO
900,000 Nt.+
9.625% due 3/1/2013 NA/BB- 1,062,000
- -----------------------------------------------------------------------------
PACKAGING -- 1.3%
Crown European Hldgs. S.A.
355,000 Sec. Nt.
9.50% due 3/1/2011 B1/B+ 404,700
</Table>
- --------------------------------------------------------------------------------
See notes to financial statements.
90
/ / The Guardian High Yield Bond Fund
SCHEDULE OF INVESTMENTS (CONTINUED)
December 31, 2004
<Table>
<Caption>
- -----------------------------------------------------------------------------
Rating
Principal Moody's/
Amount S&P* Value
- -----------------------------------------------------------------------------
Owens-Brockway Glass
Container
$ 398,000 Sr. Nt.+
6.75% due 12/1/2014 B2/B $ 401,980
Silgan Hldgs., Inc.
298,000 Sr. Sub. Nt.
6.75% due 11/15/2013 B1/B+ 309,920
------------
1,116,600
- -----------------------------------------------------------------------------
PAPER AND FOREST PRODUCTS -- 3.8%
Graphic Packaging Int'l.,
Inc.
522,000 Sr. Sub. Nt.
9.50% due 8/15/2013 B3/B- 593,775
Millar Western Forest
298,000 Sr. Nt.
7.75% due 11/15/2013 B2/B+ 318,860
Packaging Corp. of America
1,000,000 Sr. Nt.
4.375% due 8/1/2008 Ba1/BBB 1,004,556
Stone Container Corp.
745,000 Sr. Nt.
8.375% due 7/1/2012 B2/B 812,050
Stone Container Fin. Canada
219,000 Sr. Nt.
7.375% due 7/15/2014 B2/B 233,235
Tembec Inds., Inc.
348,000 Sr. Nt.
8.625% due 6/30/2009 Ba3/B 349,740
------------
3,312,216
- -----------------------------------------------------------------------------
RETAILERS -- 2.4%
J.C. Penney Co., Inc.
596,000 Nt.
8.00% due 3/1/2010 Ba2/BB+ 680,930
720,000 Nt.
9.00% due 8/1/2012 Ba2/BB+ 887,400
Petco Animal Supplies, Inc.
285,000 Sr. Sub. Nt.
10.75% due 11/1/2011 B2/B+ 333,450
Rent-A-Center
239,000 Sr. Sub. Nt. Ser. B
7.50% due 5/1/2010 B1/BB- 247,664
------------
2,149,444
- -----------------------------------------------------------------------------
TECHNOLOGY -- 2.1%
AMI Semiconductor, Inc.
361,000 Sr. Sub. Nt.
10.75% due 2/1/2013 B3/B 424,175
Flextronics Int'l. Ltd.
159,000 Sr. Sub. Nt.+
6.25% due 11/15/2014 Ba2/BB- 157,410
Iron Mountain, Inc.
700,000 Sr. Sub. Nt.
8.625% due 4/1/2013 Caa1/B 743,750
Magnachip Semiconductor
318,000 Sr. Nt.+
6.875% due 12/15/2011 Ba3/B+ 327,540
159,000 Sr. Sub. Nt.+
8.00% due 12/15/2014 B2/B- 165,758
------------
1,818,633
- -----------------------------------------------------------------------------
</Table>
<Table>
<Caption>
- -----------------------------------------------------------------------------
Rating
Principal Moody's/
Amount S&P* Value
- -----------------------------------------------------------------------------
TEXTILE -- 2.2%
Oxford Inds., Inc.
$ 300,000 Sr. Nt.
8.875% due 6/1/2011 B2/B $ 322,125
Russell Corp.
350,000 Sr. Nt.
9.25% due 5/1/2010 B1/BB- 375,375
St. John Knits Int'l., Inc.
750,000 Sr. Sub. Nt.
12.50% due 7/1/2009 B3/B- 799,687
William Carter Co.
422,000 Sr. Sub. Nt. Ser. B
10.875% due 8/15/2011 B3/B+ 472,640
------------
1,969,827
- -----------------------------------------------------------------------------
TRANSPORTATION -- 0.6%
Omi Corp.
220,000 Sr. Nt.
7.625% due 12/1/2013 B1/B+ 235,400
Teekay Shipping Corp.
280,000 Sr. Nt.
8.875% due 7/15/2011 Ba2/BB- 324,800
------------
560,200
- -----------------------------------------------------------------------------
WIRELESS COMMUNICATIONS -- 5.4%
Centennial Cell Comm. Corp.
700,000 Sr. Nt.
10.125% due 6/15/2013 Caa1/CCC 785,750
Inmarsat Fin. PLC
477,000 Sr. Nt.
7.625% due 6/30/2012 B2/B- 496,080
Nextel Comm., Inc.
1,970,000 Sr. Nt.
7.375% due 8/1/2015 Ba3/BB 2,167,000
Nextel Partners, Inc.
350,000 Sr. Nt.
8.125% due 7/1/2011 B3/B- 388,500
Rogers Wireless, Inc.
580,000 Sr. Sub. Nt.+
8.00% due 12/15/2012 B2/B+ 613,350
Ubiquitel Operating Co.
298,000 Sr. Nt.
9.875% due 3/1/2011 Caa1/CCC 334,505
------------
4,785,185
- -----------------------------------------------------------------------------
WIRELINE COMMUNICATIONS -- 3.6%
AT & T Corp.
398,000 Sr. Nt. (3)
9.05% due 11/15/2011 Ba1/BB+ 458,197
Citizens Comm. Co.
238,000 Sr. Nt.
6.25% due 1/15/2013 Ba3/BB+ 239,785
MCI, Inc.
397,000 Sr. Nt. (3)
7.688% due 5/1/2009 B2/B+ 410,895
</Table>
- --------------------------------------------------------------------------------
See notes to financial statements.
91
/ / The Guardian High Yield Bond Fund
SCHEDULE OF INVESTMENTS (CONTINUED)
December 31, 2004
<Table>
<Caption>
- -----------------------------------------------------------------------------
Rating
Principal Moody's/
Amount S&P* Value
- -----------------------------------------------------------------------------
Qwest Corp.
$ 397,000 Debt.
7.20% due 11/10/2026 Ba3/BB- $ 381,120
1,085,000 Sr. Nt.+
7.875% due 9/1/2011 Ba3/BB- 1,177,225
U.S. West Comm.
480,000 Debt.
8.875% due 6/1/2031 Ba3/BB- 501,600
------------
3,168,822
- -----------------------------------------------------------------------------
TOTAL CORPORATE BONDS
(COST $72,992,871) 77,814,595
- -----------------------------------------------------------------------------
<Caption>
SOVEREIGN DEBT SECURITIES -- 2.8%
Federative Republic of
Brazil
$ 1,163,000 Nt.
9.25% due 10/22/2010 B1/BB- $ 1,300,234
Pemex Project Funding Master
Tr
1,000,000 Nt. (3)
7.875% due 2/1/2009 Baa1/BBB- 1,123,500
- -----------------------------------------------------------------------------
TOTAL SOVEREIGN DEBT SECURITIES
(COST $2,320,791) 2,423,734
- -----------------------------------------------------------------------------
<Caption>
INDEXED SECURITIES -- 3.0%
Targeted Return Index
$ 2,383,722 Secs. Tr.
Ser. HY-2004-1+(3)
7.94% due 8/1/2015 B1/BB-
(COST $2,539,791) $ 2,607,220
- -----------------------------------------------------------------------------
<Caption>
WARRANT -- 0.0%
Shares Value
- -----------------------------------------------------------------------------
XM Satellite Radio, Inc.
330 exp. 3/15/2010
(COST $66,660) $ 28,050
- -----------------------------------------------------------------------------
<Caption>
REPURCHASE AGREEMENT -- 4.1%
Principal
Amount Value
- -----------------------------------------------------------------------------
$ 3,629,000 State Street Bank and Trust
Co.
repurchase agreement,
dated 12/31/2004, maturity
value $3,629,641 at
2.12% due 1/3/2005 (2)
(COST $3,629,000) $ 3,629,000
- -----------------------------------------------------------------------------
TOTAL INVESTMENTS -- 98.2%
(COST $81,549,113) 86,502,599
CASH, RECEIVABLES AND OTHER ASSETS
LESS LIABILITIES -- 1.8% 1,604,587
- -----------------------------------------------------------------------------
NET ASSETS -- 100% $ 88,107,186
- -----------------------------------------------------------------------------
</Table>
* Unaudited.
+ Securities exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to certain qualified buyers. At December 31, 2004,
the aggregate market value of these securities amounted to $17,655,227
representing 20.0% of net assets.
(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.
(3) Floating rate note. The rate shown is the rate in effect at December 31,
2004.
- --------------------------------------------------------------------------------
See notes to financial statements.
92
/ / The Guardian Tax-Exempt Fund
SCHEDULE OF INVESTMENTS
December 31, 2004
<Table>
<Caption>
MUNICIPAL BONDS -- 98.6%
Rating
Principal Moody's/
Amount S&P* Value
- -------------------------------------------------------------------------
ALABAMA -- 1.1%
$ 1,000,000 Alabama 21st Century
Auth. Tobacco
Settlement Rev.,
5.25% due 12/1/2009 Baa1/A- $ 1,054,230
- -------------------------------------------------------------------------
ALASKA -- 1.5%
1,300,000 Northern Tobacco
Securitization Corp.,
5.80% due 6/1/2012 Baa3/BBB 1,349,283
- -------------------------------------------------------------------------
ARIZONA -- 6.4%
1,500,000 Arizona Tourism &
Sports Auth.,
5.00% due 7/1/2024 Aaa/NR 1,577,280
1,500,000 Mesa, AZ Street & Hwy.
Rev.,
5.125% due 7/1/2023 Aaa/AAA 1,619,850
1,500,000 Phoenix, AZ Civic
Impt. Corp. Wtr. Sys.
Rev.,
5.50% due 7/1/2020 Aaa/AAA 1,664,835
1,000,000 Phoenix, AZ G.O. Ser.
B,
5.375% due 7/1/2020 Aa1/AA+ 1,110,760
-------------
5,972,725
- -------------------------------------------------------------------------
ARKANSAS -- 1.2%
1,000,000 Arkansas St. G.O. Fed.
Hwy. Grant Ser. A,
5.50% due 8/1/2011 Aa2/AA 1,111,780
- -------------------------------------------------------------------------
CALIFORNIA -- 9.5%
3,000,000 California St. Econ.
G.O. Ser. B,
5.00% due 7/1/2023 (1) Aa3/AA- 3,243,870
2,000,000 California St. G.O.,
5.25% due 11/1/2027 A3/A 2,096,220
2,000,000 California St. Pub.
Wks. Brd.
Dept. of Mental Hlth.,
5.50% due 6/1/2023 Baa1/A- 2,164,660
1,250,000 Metropolitan Wtr.
Dist. South California
Wtrwks. Rev. Ser. B-1,
5.00% due 10/1/2029 Aaa/AAA 1,293,750
-------------
8,798,500
- -------------------------------------------------------------------------
COLORADO -- 2.2%
500,000 Colorado Housing &
Fin. Auth. Rev.,
2.00% due 10/1/2030
(1) Aaa/AAA 500,000
1,500,000 Mesa Cnty., CO Valley
Sch. Dist. Ser. A,
5.00% due 12/1/2024 Aaa/NR 1,583,910
-------------
2,083,910
- -------------------------------------------------------------------------
DISTRICT OF COLUMBIA -- 0.5%
300,000 District Columbia G.O.
Ser. A,
2.00% due 6/1/2015 (1) Aaa/AAA 300,000
155,000 District Columbia
Tobacco Settlement
Financing Corp. Rev.,
5.375% due 5/15/2010 Baa3/BBB 159,676
-------------
459,676
- -------------------------------------------------------------------------
</Table>
<Table>
<Caption>
- -------------------------------------------------------------------------
Rating
Principal Moody's/
Amount S&P* Value
- -------------------------------------------------------------------------
FLORIDA -- 5.5%
$ 1,500,000 Florida St. Brd. of
Ed. Lottery Rev. Ser.
C,
5.25% due 7/1/2016 Aaa/AAA $ 1,652,715
1,000,000 Lakes By The Bay
South Community,
6.25% due 5/1/2034 NR/NR 1,038,420
2,255,000 St. Johns Cnty., FL
Sales Tax Rev.,
5.25% due 10/1/2027 Aaa/AAA 2,410,866
-------------
5,102,001
- -------------------------------------------------------------------------
GEORGIA -- 3.2%
1,000,000 Fulton Cnty., GA Dev.
Auth. Rev. Georgia
Tech. Foundation Ser.
A,
5.125% due 11/1/2021 Aa1/AA+ 1,075,180
350,000 Gainesville, GA Wtr. &
Swg. Rev.,
5.25% due 11/15/2018 Aaa/AAA 381,927
1,500,000 Municipal Electric
Auth. Georgia,
2.00% due 1/1/2026 (1) Aaa/AAA 1,500,000
-------------
2,957,107
- -------------------------------------------------------------------------
IDAHO -- 2.0%
1,625,000 Boise City, ID Urban
Renewal Agy. Lease,
6.00% due 8/15/2023 Aaa/AAA 1,843,075
- -------------------------------------------------------------------------
ILLINOIS -- 1.2%
1,000,000 Chicago, IL Brd. of
Ed. Ser. A,
5.25% due 12/1/2018 Aaa/AAA 1,097,460
- -------------------------------------------------------------------------
IOWA -- 1.8%
1,615,000 Tobacco Settlement
Auth. IA Rev. Ser. B,
5.50% due 6/1/2011 Baa3/BBB 1,669,442
- -------------------------------------------------------------------------
KANSAS -- 2.6%
1,300,000 Kansas St. Dev. Fin.
Auth. Lease,
5.125% due 4/1/2022 Aaa/AAA 1,403,610
1,000,000 Wyandotte Cnty.,
Kansas City, KS Impt.
Ser. B,
5.00% due 9/1/2028 Aaa/AAA 1,033,210
-------------
2,436,820
- -------------------------------------------------------------------------
MARYLAND -- 2.9%
1,000,000 Prince Georges Cnty.,
MD
Industrial Dev. Auth.
Ref.,
5.00% due 6/30/2019 Aaa/AAA 1,080,320
1,600,000 Washington Sub. San
Dist. MD Ser. A,
2.00% due 6/1/2023 (1) Aaa/AAA 1,600,000
-------------
2,680,320
- -------------------------------------------------------------------------
MASSACHUSETTS -- 5.1%
2,000,000 Massachusetts Bay
Trans. Auth. Rev. Ser.
A,
5.00% due 7/1/2027 Aa1/AAA 2,078,100
</Table>
- --------------------------------------------------------------------------------
See notes to financial statements.
93
/ / The Guardian Tax-Exempt Fund
SCHEDULE OF INVESTMENTS (CONTINUED)
December 31, 2004
<Table>
<Caption>
- -------------------------------------------------------------------------
Rating
Principal Moody's/
Amount S&P* Value
- -------------------------------------------------------------------------
$ 1,500,000 Massachusetts St.
Special Obligation
Rev.,
5.25% due 1/1/2028 Aaa/AAA $ 1,590,375
1,000,000 Massachusetts St. Wtr.
Resources Auth. Rev.
Ser. A,
5.00% due 8/1/2029 Aaa/AAA 1,032,220
-------------
4,700,695
- -------------------------------------------------------------------------
MICHIGAN -- 1.9%
1,650,000 Michigan St. Hospital
Fin. Auth. Rev.,
5.50% due 11/1/2014 A2/A 1,806,668
- -------------------------------------------------------------------------
MINNESOTA -- 4.0%
2,000,000 Minnesota St. Muni.
Power Agy. Electric,
5.25% due 10/1/2024 A3/NR 2,144,820
1,500,000 St. Paul, MN Port
Auth. Lease Rev.,
5.125% due 12/1/2027 Aa2/AA+ 1,582,740
-------------
3,727,560
- -------------------------------------------------------------------------
NEW HAMPSHIRE -- 0.8%
700,000 New Hampshire Higher
Ed.
& Hlth. Facs. Auth.
Rev.,
2.00% due 1/1/2028 (1) Aaa/AAA 700,000
- -------------------------------------------------------------------------
NEW JERSEY -- 2.5%
Tobacco Settlement
Financing Corp.,
1,000,000 5.50% due 6/1/2011 Baa3/BBB 1,036,490
1,235,000 5.50% due 6/1/2012 Baa3/BBB 1,273,532
-------------
2,310,022
- -------------------------------------------------------------------------
NEW MEXICO -- 1.2%
1,000,000 New Mexico St. Hwy.
Comm.
Tax Rev. Preref.,
6.00% due 6/15/2010
(2) Aa2/AA+ 1,138,220
- -------------------------------------------------------------------------
NEW YORK -- 5.1%
1,255,000 New York City
Industrial Dev. Agy.,
5.25% due 3/1/2018 Aaa/AAA 1,378,756
1,615,000 New York City
Transport Fin.,
5.00% due 8/1/2007 Aa2/AA+ 1,721,606
1,500,000 New York St. Urban
Dev. Corp.,
5.25% due 1/1/2021 NR/AA- 1,631,880
-------------
4,732,242
- -------------------------------------------------------------------------
NORTH DAKOTA -- 1.2%
1,000,000 North Dakota St. Wtr.
Comm. Rev.,
5.75% due 8/1/2020 Aaa/AAA 1,122,660
- -------------------------------------------------------------------------
OHIO -- 1.3%
1,050,000 Univ. of Cincinnati,
OH General Rcpts. Ser.
A,
5.50% due 6/1/2011 Aaa/AAA 1,191,435
- -------------------------------------------------------------------------
PENNSYLVANIA -- 1.2%
1,000,000 Delaware River Port
Auth. PA & NJ,
6.00% due 1/1/2017 Aaa/AAA 1,136,550
- -------------------------------------------------------------------------
</Table>
<Table>
<Caption>
- -------------------------------------------------------------------------
Rating
Principal Moody's/
Amount S&P* Value
- -------------------------------------------------------------------------
PUERTO RICO -- 12.7%
$ 2,000,000 Puerto Rico Comwlth.,
5.00% due 7/1/2029 Baa1/A- $ 2,040,900
1,000,000 Puerto Rico Muni. Fin.
Agency Ser. A,
5.25% due 8/1/2021 Aaa/AAA 1,105,000
1,500,000 Puerto Rico Pub.
Bldgs. Auth. Rev.
Gov't. Facs. Ser. I,
5.50% due 7/1/2020 Baa1/A- 1,673,700
2,000,000 Puerto Rico Pub.
Bldgs. Auth. Rev. Ref.
Gov't. Facs. Ser. J,
5.00% due 7/1/2036 Aaa/AAA 2,207,220
2,400,000 Puerto Rico Pub.
Bldgs. Auth. Rev. Ref.
Gov't. Facs. Ser. K,
4.50% due 7/1/2022 Baa1/A- 2,501,544
2,000,000 Puerto Rico Pub. Fin.
Corp. Comwlth. Approp.
Ser. A,
5.75% due 8/1/2027 (1) Baa2/BBB+ 2,231,940
-------------
11,760,304
- -------------------------------------------------------------------------
SOUTH CAROLINA -- 5.2%
350,000 Charleston Cnty., SC
Sch. Dist. Ref. Ser.
B,
5.00% due 2/1/2016 Aa1/AA+ 375,823
1,250,000 Charleston, SC Wtrwks.
& Swr. Rev.,
5.25% due 1/1/2018 Aa3/AA- 1,357,637
1,000,000 Mount Pleasant, SC
Wtr.
& Swr. Rev. Ref. &
Impt.,
5.25% due 12/1/2019 Aaa/AAA 1,103,930
2,000,000 Tobacco Settlement
Rev. Management,
6.00% due 5/15/2022 Baa3/BBB 1,978,580
-------------
4,815,970
- -------------------------------------------------------------------------
TENNESSEE -- 0.8%
700,000 Knox Cnty., TN
Pub. Impt. G.O.,
5.375% due 5/1/2020 Aa2/AA 774,221
- -------------------------------------------------------------------------
VIRGINIA -- 5.1%
3,000,000 Fairfax Cnty., VA Ref.
Pub. Impt. Ser. A,
4.25% due 6/1/2008 Aaa/AAA 3,188,490
1,430,000 Newport News, VA Gen.
Impt. Ser. D,
5.00% due 12/1/2022 Aa2/AA 1,520,676
-------------
4,709,166
- -------------------------------------------------------------------------
WASHINGTON -- 3.8%
1,250,000 Snohomish Cnty., WA
G.O.,
5.375% due 12/1/2019 Aaa/AAA 1,375,725
2,000,000 Tobacco Settlement
Auth. WA Rev.,
6.25% due 6/1/2011 Baa3/BBB 2,149,060
-------------
3,524,785
- -------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
See notes to financial statements.
94
/ / The Guardian Tax-Exempt Fund
SCHEDULE OF INVESTMENTS (CONTINUED)
December 31, 2004
<Table>
<Caption>
- -------------------------------------------------------------------------
Rating
Principal Moody's/
Amount S&P* Value
- -------------------------------------------------------------------------
WISCONSIN -- 5.1%
Badger Tobacco Asset
Securitization Corp.,
$ 1,500,000 5.50% due 6/1/2010 Baa3/BBB $ 1,554,450
2,070,000 5.75% due 6/1/2011 Baa3/BBB 2,167,952
1,005,000 6.00% due 6/1/2017 Baa3/BBB 1,006,126
-------------
4,728,528
- -------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS
(COST $87,894,748) 91,495,355
- -------------------------------------------------------------------------
TOTAL INVESTMENTS -- 98.6%
(COST $87,894,748) 91,495,355
CASH, RECEIVABLES AND OTHER ASSETS
LESS LIABILITIES -- 1.4% 1,326,761
- -------------------------------------------------------------------------
NET ASSETS -- 100% $ 92,822,116
- -------------------------------------------------------------------------
</Table>
* Unaudited.
(1) Variable rate demand notes.
(2) Pre-refunded.
GLOSSARY:
G.O. -- General Obligation.
- --------------------------------------------------------------------------------
See notes to financial statements.
95
/ / The Guardian Cash Management Fund
SCHEDULE OF INVESTMENTS
December 31, 2004
<Table>
<Caption>
CORPORATE BONDS -- 1.8%
Principal Maturity
Amount Date Value
- -------------------------------------------------------------------
CAPITAL MARKETS -- 1.1%
$ 5,000,000 Goldman Sachs Group,
Inc.
7.50% 1/28/2005 $ 5,022,469
- -------------------------------------------------------------------
FINANCIAL-BANKS -- 0.7%
3,335,000 First Union Corp.
7.05% 8/1/2005 3,415,098
- -------------------------------------------------------------------
TOTAL CORPORATE BONDS
(COST $8,437,567) 8,437,567
- -------------------------------------------------------------------
<Caption>
U.S. GOVERNMENT SECURITIES -- 4.5%
U.S. GOVERNMENT AGENCY SECURITIES -- 4.5%
$ 6,000,000 FHLB
1.44% 3/8/2005 $ 6,000,000
FNMA
10,000,000 1.65% 5/16/2005 10,000,000
5,000,000 2.32% 9/30/2005 5,000,000
- -------------------------------------------------------------------
TOTAL U.S. GOVERNMENT SECURITIES
(COST $21,000,000) 21,000,000
- -------------------------------------------------------------------
<Caption>
COMMERCIAL PAPER -- 72.6%
ASSET BACKED -- 2.1%
$ 5,000,000 Sheffield Receivables
Corp.
2.34% 2/1/2005 $ 4,989,925
5,000,000 Surrey Funding Corp.
2.11% 1/3/2005 4,999,414
- -------------------------------------------------------------------
TOTAL ASSET BACKED 9,989,339
- -------------------------------------------------------------------
FINANCIAL -- 31.1%
AUTOMOTIVE -- 4.3%
$ 10,000,000 BMW US Capital LLC
2.28% 1/20/2005 $ 9,987,967
10,000,000 Toyota Motor Credit
Corp.
2.27% 1/28/2005 9,982,975
-------------
19,970,942
- -------------------------------------------------------------------
CAPITAL MARKETS -- 2.1%
10,000,000 Morgan Stanley Dean
Witter & Co.
2.32% 1/18/2005 9,989,044
- -------------------------------------------------------------------
DIVERSIFIED FINANCIAL SERVICES -- 4.3%
10,000,000 Citigroup Global Markets
Hldgs., Inc.
2.24% 1/20/2005 9,988,178
10,000,000 Credit Suisse First
Boston
2.31% 1/13/2005 9,992,300
-------------
19,980,478
- -------------------------------------------------------------------
FINANCE COMPANIES -- 2.1%
5,066,000 Barton Capital Corp.
2.27% 1/10/2005 5,063,125
5,000,000 Private Export Funding
Corp.
2.53% 5/23/2005 4,950,103
-------------
10,013,228
- -------------------------------------------------------------------
</Table>
<Table>
<Caption>
- -------------------------------------------------------------------
Principal Maturity
Amount Date Value
- -------------------------------------------------------------------
FINANCIAL-BANKS -- 16.2%
$ 5,000,000 Abbey National NA LLC
2.28% 1/10/2005 $ 4,997,150
9,100,000 ABN Amro NA
2.25% 1/10/2005 9,094,881
5,000,000 Bank of America Corp.
2.37% 3/7/2005 4,978,604
12,000,000 Deutsche Bank Financial
2.26% 1/3/2005 11,998,493
5,000,000 Dexia Delaware LLC
2.30% 1/18/2005 4,994,570
10,000,000 Dresdner Bank AG
2.42% 2/28/2005 9,961,011
10,000,000 HVB Finance
2.28% 1/10/2005 9,994,300
10,000,000 Societe Generale NA
2.28% 2/1/2005 9,980,367
10,000,000 UBS Finance, Inc.
2.305% 1/28/2005 9,982,713
-------------
75,982,089
- -------------------------------------------------------------------
FINANCIAL-OTHER -- 2.1%
10,000,000 Govco, Inc.
2.17% 1/3/2005 9,998,794
- -------------------------------------------------------------------
TOTAL FINANCIAL 145,934,575
- -------------------------------------------------------------------
INDUSTRIAL -- 39.4%
AGRICULTURAL -- 1.1%
$ 5,150,000 Cargill, Inc.
2.25% 1/6/2005 $ 5,148,391
- -------------------------------------------------------------------
BEVERAGE -- 3.7%
10,000,000 Coca-Cola Co.
2.25% 1/27/2005 9,983,750
7,640,000 PepsiCo., Inc.
2.21% 1/5/2005 7,638,124
-------------
17,621,874
- -------------------------------------------------------------------
COMMERCIAL SERVICES AND SUPPLIES -- 3.2%
15,000,000 Pitney Bowes Inc.
2.23% 1/6/2005 14,995,354
- -------------------------------------------------------------------
CONGLOMERATES -- 1.6%
7,380,000 General Electric Capital
Corp.
2.17% 1/11/2005 7,375,551
- -------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES -- 2.1%
SBC Int'l., Inc.
5,000,000 2.20% 1/10/2005 4,997,250
5,000,000 2.35% 3/7/2005 4,978,785
-------------
9,976,035
- -------------------------------------------------------------------
ELECTRONICS AND INSTRUMENTS -- 1.1%
5,000,000 Sharp Electronics
2.31% 1/24/2005 4,992,621
- -------------------------------------------------------------------
FOOD AND STAPLES RETAILING -- 1.1%
5,000,000 Wal-Mart Stores, Inc.
2.23% 1/26/2005 4,992,257
- -------------------------------------------------------------------
FOOD PRODUCTS -- 2.1%
5,000,000 McCormick & Co., Inc.
2.30% 2/22/2005 4,983,389
5,000,000 Nestle Capital Corp.
2.13% 1/12/2005 4,996,746
-------------
9,980,135
- -------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
See notes to financial statements.
96
/ / The Guardian Cash Management Fund
SCHEDULE OF INVESTMENTS (CONTINUED)
December 31, 2004
<Table>
<Caption>
- -------------------------------------------------------------------
Principal Maturity
Amount Date Value
- -------------------------------------------------------------------
HEALTH CARE EQUIPMENT AND SUPPLIES -- 2.1%
$ 10,000,000 Medtronic, Inc.
2.25% 1/5/2005 $ 9,997,500
- -------------------------------------------------------------------
HOUSEHOLD DURABLES -- 1.1%
5,000,000 Fortune Brands, Inc.
2.03% 1/3/2005 4,999,436
- -------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 2.1%
10,000,000 Procter & Gamble Co.
2.135% 1/13/2005 9,992,883
- -------------------------------------------------------------------
MEDIA -- 4.3%
10,000,000 Gannett Co., Inc.
2.26% 1/3/2005 9,998,744
10,000,000 Knight-Ridder, Inc.
2.18% 1/10/2005 9,994,550
-------------
19,993,294
- -------------------------------------------------------------------
OIL AND GAS SERVICES -- 4.2%
Koch Inds.
5,000,000 2.25% 1/7/2005 4,998,125
5,000,000 2.28% 1/18/2005 4,994,616
10,000,000 Motiva Enterprises
2.27% 1/12/2005 9,993,064
-------------
19,985,805
- -------------------------------------------------------------------
PHARMACEUTICALS -- 4.2%
5,000,000 Alcon Fin.
2.34% 3/1/2005 4,980,825
5,000,000 Eli Lilly & Co.
2.28% 2/1/2005 4,990,184
10,000,000 Pfizer, Inc.
2.14% 1/14/2005 9,992,272
-------------
19,963,281
- -------------------------------------------------------------------
TRANSPORT SERVICES -- 1.1%
5,000,000 Netjets, Inc.
2.19% 1/21/2005 4,993,917
- -------------------------------------------------------------------
UTILITIES-ELECTRIC AND WATER -- 4.3%
10,000,000 National Rural Utilities
Coop. Fin.
2.27% 1/10/2005 9,994,325
10,000,000 Southern Co.
2.22% 1/13/2005 9,992,600
-------------
19,986,925
- -------------------------------------------------------------------
TOTAL INDUSTRIAL 184,995,259
- -------------------------------------------------------------------
TOTAL COMMERCIAL PAPER
(COST $340,919,173) 340,919,173
- -------------------------------------------------------------------
<Caption>
TAXABLE MUNICIPAL SECURITIES -- 19.5%
Principal Reset
Amount Date* Value
- -------------------------------------------------------------------
CALIFORNIA -- 4.6%
$ 13,590,000 California Housing Fin.
Agency
2.42% 1/5/2005 $ 13,590,000
8,100,000 Sacramento Cnty., CA
2.41% 1/5/2005 8,100,000
-------------
21,690,000
- -------------------------------------------------------------------
</Table>
<Table>
<Caption>
- -------------------------------------------------------------------
Principal Reset
Amount Date* Value
- -------------------------------------------------------------------
COLORADO -- 2.9%
Colorado Housing & Fin.
Auth
$ 7,390,000 2.42% 1/5/2005 $ 7,390,000
6,000,000 2.42% 1/5/2005 6,000,000
-------------
13,390,000
- -------------------------------------------------------------------
CONNECTICUT -- 1.7%
8,000,000 Connecticut St. Housing
& Fin. Auth.
2.42% 1/6/2005 8,000,000
- -------------------------------------------------------------------
MICHIGAN -- 0.9%
4,000,000 Michigan St. Housing
Dev. Auth.
2.42% 1/5/2005 4,000,000
- -------------------------------------------------------------------
NEW YORK-3.6%
17,040,000 New York City Trans.
2.42% 1/5/2005 17,040,000
- -------------------------------------------------------------------
UTAH -- 4.6%
Utah Housing Corp.
Single Family
3,630,000 2.42% 1/5/2005 3,630,000
3,835,000 2.42% 1/5/2005 3,835,000
1,400,000 2.42% 1/5/2005 1,400,000
5,610,000 2.42% 1/5/2005 5,610,000
Utah St. Housing Fin.
Agency
2,780,000 2.42% 1/5/2005 2,780,000
4,415,000 2.42% 1/5/2005 4,415,000
-------------
21,670,000
- -------------------------------------------------------------------
WASHINGTON -- 1.2%
5,595,000 Seattle, WA
2.40% 8/31/2005 5,595,000
- -------------------------------------------------------------------
TOTAL TAXABLE MUNICIPAL SECURITIES
(COST $91,385,000) 91,385,000
- -------------------------------------------------------------------
<Caption>
REPURCHASE AGREEMENT -- 1.7%
Principal
Amount Value
- -------------------------------------------------------------------
$ 8,139,000 State Street Bank and Trust Co.
repurchase agreement,
dated 12/31/2004, maturity
value $8,140,438 at
2.12% due 1/3/2005 (1)
(COST $8,139,000) $ 8,139,000
- -------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.1% (COST
$469,880,740) 469,880,740
LIABILITIES IN EXCESS OF CASH,
RECEIVABLES AND
OTHER ASSETS -- (0.1)%
(578,146)
- -------------------------------------------------------------------
NET ASSETS -- 100% $ 469,302,594
- -------------------------------------------------------------------
</Table>
* Floating rate note. The rate shown is the rate in effect at December 31,
2004.
(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.
97
/ / The Park Avenue Portfolio
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 2004
- ------------------------------------------------------------
<Table>
<Caption>
THE GUARDIAN THE GUARDIAN THE GUARDIAN THE GUARDIAN THE GUARDIAN
PARK AVENUE UBS LARGE PARK AVENUE UBS SMALL ASSET
FUND CAP VALUE SMALL CAP CAP VALUE ALLOCATION
FUND FUND FUND FUND
--------------------------------------------------------------------------
ASSETS
Investments, at identified cost (includes
majority-owned subsidiary of $132,417,998 for
GAAF).......................................... $ 959,418,987 $75,564,370 $189,882,383 $37,975,097 $164,215,407
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Investments, at market -- Note 1 (includes
majority-owned subsidiary of $126,801,679 for
GAAF).......................................... 1,127,908,276 99,252,226 226,825,075 48,933,545 158,637,391
Cash............................................. 589 931 16,854 970 44
Foreign Currency (cost $18,088 GBGIF and $11,474
GBGEMF, respectively).......................... -- -- -- -- --
Dividends receivable............................. 933,806 87,539 142,635 49,882 29,105
Receivable for fund shares sold.................. 216,620 6,416 242,225 7,692 60,288
Interest receivable.............................. 296 88 120 130 347
Receivable for securities sold................... 255 216,359 -- 361,640 --
Dividend reclaim receivable...................... -- -- -- -- --
Principal paydowns receivable.................... -- -- -- -- --
Other assets..................................... 29,615 2,131 4,937 997 3,940
--------------------------------------------------------------------------
TOTAL ASSETS................................. 1,129,089,457 99,565,690 227,231,846 49,354,856 158,731,115
--------------------------------------------------------------------------
LIABILITIES
Payable for fund shares redeemed................. 1,492,677 -- 143,539 18,350 171,790
Accrued expenses................................. 278,682 92,451 69,457 76,716 70,225
Payable for securities purchased................. -- 210,032 14,279 330,353 --
Distributions payable............................ -- -- 1,009 -- --
Payable for variation margin -- Note 1........... -- -- -- -- 5,000
Accrued foreign capital gains tax................ -- -- -- -- --
Payable for forward mortgage securities
purchased -- Note 7............................ -- -- -- -- --
Due to GIS....................................... 762,208 91,601 214,073 44,213 46,901
--------------------------------------------------------------------------
TOTAL LIABILITIES............................ 2,533,567 394,084 442,357 469,632 293,916
--------------------------------------------------------------------------
NET ASSETS................................... $1,126,555,890 $99,171,606 $226,789,489 $48,885,224 $158,437,199
--------------------------------------------------------------------------
--------------------------------------------------------------------------
COMPONENTS OF NET ASSETS
Shares of beneficial interest, at par............ $ 361,051 $ 74,714 $ 118,439 $ 37,465 $ 138,733
Additional paid-in capital....................... 1,646,565,232 74,251,079 178,204,303 37,465,298 215,320,910
Undistributed/(distribution in excess) of net
investment income.............................. 1,652,167 26,487 -- -- 320,666
Accumulated net realized gain/(loss) on
investments and foreign currency related
transactions................................... (690,511,849) 1,131,470 11,524,055 424,013 (51,897,433)
Net unrealized appreciation/(depreciation) of
investment and foreign currency related
transactions................................... 168,489,289 23,687,856 36,942,692 10,958,448 (5,445,677)
--------------------------------------------------------------------------
NET ASSETS................................... $1,126,555,890 $99,171,606 $226,789,489 $48,885,224 $158,437,199
--------------------------------------------------------------------------
--------------------------------------------------------------------------
NET ASSETS
Class A.......................................... $ 980,871,999 $26,676,316 $181,067,508 $14,331,751 $111,486,212
Class B.......................................... $ 130,371,598 $24,646,063 $23,574,118 $11,651,564 $ 29,226,407
Class C.......................................... $ 6,551,322 $23,506,993 $ 9,756,792 $11,094,535 $ 8,431,373
Class K.......................................... $ 8,760,971 $24,342,234 $12,391,071 $11,807,374 $ 9,293,207
SHARES OF BENEFICIAL INTEREST OUTSTANDING -- $0.01 PAR VALUE
Class A.......................................... 31,266,008 2,005,735 9,331,205 1,088,537 9,757,412
Class B.......................................... 4,337,340 1,860,913 1,314,140 900,365 2,563,504
Class C.......................................... 221,158 1,774,792 548,055 857,350 738,703
Class K.......................................... 280,569 1,829,978 650,483 900,287 813,699
NET ASSET VALUE PER SHARE
Class A.......................................... $31.37 $13.30 $19.40 $13.17 $11.43
Class B.......................................... $30.06 $13.24 $17.94 $12.94 $11.40
Class C.......................................... $29.62 $13.24 $17.80 $12.94 $11.41
Class K.......................................... $31.23 $13.30 $19.05 $13.12 $11.42
MAXIMUM OFFERING PRICE PER SHARE
Class A (Net Asset Value X 104.71%)*............. $32.85 $13.93 $20.31 $13.79 $11.97
Class A (Net Asset Value X 103.09%)*............. -- -- -- -- --
</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.
98
<Table>
<Caption>
THE GUARDIAN THE GUARDIAN THE GUARDIAN THE GUARDIAN THE GUARDIAN THE GUARDIAN THE GUARDIAN THE GUARDIAN
S&P 500 BAILLIE GIFFORD BAILLIE GIFFORD INVESTMENT LOW DURATION HIGH YIELD TAX-EXEMPT CASH
INDEX INTERNATIONAL EMERGING QUALITY BOND FUND BOND FUND MANAGEMENT
FUND GROWTH FUND MARKETS FUND BOND FUND FUND FUND
- ----------------------------------------------------------------------------------------------------------------------------
$168,510,478 $ 39,220,027 $ 74,429,911 $166,558,290 $33,780,423 $81,549,113 $87,894,748 $469,880,740
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
178,324,721 56,905,004 101,657,039 168,748,745 33,577,905 86,502,599 91,495,355 469,880,740
88,200 986 380 45,179 41,773 70,298 215,230 51,014
-- 19,272 11,711 -- -- -- -- --
225,830 80,340 194,673 -- -- -- -- --
106,037 24,706 27,945 44,303 8,417 14,897 475 359,305
293 1,999 69 1,010,846 343,405 1,647,790 1,232,193 776,044
-- -- -- -- -- 89,175 -- --
-- 13,099 -- -- -- -- -- --
-- -- -- 55,723 -- -- -- --
3,987 1,248 2,011 4,061 796 1,821 2,201 12,448
- ----------------------------------------------------------------------------------------------------------------------------
178,749,068 57,046,654 101,893,828 169,908,857 33,972,296 88,326,580 92,945,454 471,079,551
- ----------------------------------------------------------------------------------------------------------------------------
35,694 63,734 122,381 223,772 13,819 9,612 9,350 1,324,484
63,579 68,829 81,092 68,936 38,340 44,809 42,912 136,154
-- -- -- 1,108,004 169,821 85,675 -- --
-- -- -- 92,820 856 -- 5,697 1,751
4,000 -- -- -- -- -- -- --
-- -- 43,584 -- -- -- -- --
-- -- -- 24,059,296 -- -- -- --
92,991 22,658 40,369 113,340 33,112 79,298 65,379 314,568
- ----------------------------------------------------------------------------------------------------------------------------
196,264 155,221 287,426 25,666,168 255,948 219,394 123,338 1,776,957
- ----------------------------------------------------------------------------------------------------------------------------
$178,552,804 $ 56,891,433 $101,606,402 $144,242,689 $33,716,348 $88,107,186 $92,822,116 $469,302,594
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
$ 215,304 $ 43,990 $ 71,026 $ 144,014 $ 33,957 $ 116,268 $ 91,088 $ 4,693,026
264,793,484 79,671,244 71,535,517 141,307,528 33,947,432 100,748,815 88,982,306 464,609,568
26,546 (39,426) (147,983) -- -- -- -- --
(96,402,644) (40,472,993) 2,961,721 600,692 (62,523) (17,711,383) 148,115 --
9,920,114 17,688,618 27,186,121 2,190,455 (202,518) 4,953,486 3,600,607 --
- ----------------------------------------------------------------------------------------------------------------------------
$178,552,804 $ 56,891,433 $101,606,402 $144,242,689 $33,716,348 $88,107,186 $92,822,116 $469,302,594
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
$145,072,255 $ 35,105,532 $ 61,974,614 $105,131,457 $ 9,487,369 $57,249,699 $82,118,397 $442,109,390
$ 13,393,808 $ 6,306,941 $ 12,138,471 $16,685,445 $ 8,694,531 $10,013,095 -- $ 8,143,828
$ 9,842,434 $ 6,687,105 $ 12,291,359 $11,421,772 $ 7,816,856 $10,110,096 $10,703,719 $ 8,625,588
$ 10,244,307 $ 8,791,855 $ 15,201,958 $11,004,015 $ 7,717,592 $10,734,296 -- $ 10,423,788
17,487,971 2,647,109 4,225,060 10,496,709 955,562 7,553,962 8,058,449 442,109,390
1,617,631 524,527 906,467 1,666,462 875,651 1,321,910 -- 8,143,828
1,189,754 554,325 915,042 1,140,724 787,266 1,334,985 1,050,391 8,625,588
1,235,051 673,008 1,056,072 1,097,522 777,270 1,415,932 -- 10,423,788
$8.30 $13.26 $14.67 $10.02 $9.93 $7.58 $10.19 $1.00
$8.28 $12.02 $13.39 $10.01 $9.93 $7.57 -- $1.00
$8.27 $12.06 $13.43 $10.01 $9.93 $7.57 $10.19 $1.00
$8.29 $13.06 $14.39 $10.03 $9.93 $7.58 -- $1.00
$8.69 $13.88 $15.36 $10.49 -- $7.94 $10.67 N/A**
-- -- -- -- $10.24 -- -- --
</Table>
- --------------------------------------------------------------------------------
99
/ / The Park Avenue Portfolio
STATEMENTS OF OPERATIONS
Year Ended December 31, 2004
- ------------------------------------------------------------
<Table>
<Caption>
THE GUARDIAN THE GUARDIAN THE GUARDIAN THE GUARDIAN
THE GUARDIAN UBS LARGE PARK AVENUE UBS SMALL ASSET
PARK AVENUE CAP VALUE SMALL CAP CAP VALUE ALLOCATION
FUND FUND FUND FUND FUND
------------------------------------------------------------------------
INVESTMENT INCOME
Dividends (includes $1,735,502 from a
majority-owned subsidiary and $451,709 from a
non-controlled affiliate for GAAF)............. $21,790,546 $ 1,853,505 $ 1,055,443 $ 687,576 $ 2,663,759
Interest......................................... 163,857 25,300 60,397 14,508 91,824
Less: Foreign tax withheld....................... -- -- (2,944) (566) (110)
------------------------------------------------------------------------
Total Income................................. 21,954,403 1,878,805 1,112,896 701,518 2,755,473
------------------------------------------------------------------------
EXPENSES:
Investment advisory fees -- Note 2............... 5,985,047 735,581 1,536,174 416,755 1,042,750
Administrative fees -- Class A -- Note 2......... 2,099,001 58,033 408,758 28,517 283,586
Administrative fees -- Class B -- Note 2......... 365,873 55,418 55,921 25,627 76,983
Administrative fees -- Class C -- Note 2......... 16,241 53,596 21,207 24,622 19,834
Administrative fees -- Class K -- Note 2......... 19,153 54,514 26,172 25,423 20,655
12b-1 fees -- Class B -- Note 3.................. 1,097,618 166,255 167,762 76,881 230,948
12b-1 fees -- Class C -- Note 3.................. 48,724 160,787 63,620 73,867 59,502
12b-1 fees -- Class K -- Note 3.................. 30,644 87,223 41,876 40,677 33,048
Transfer agent fees -- Class A................... 1,371,087 32,565 152,808 32,562 151,051
Transfer agent fees -- Class B................... 424,291 30,761 57,638 30,012 61,711
Transfer agent fees -- Class C................... 33,262 29,119 30,688 29,199 30,949
Transfer agent fees -- Class K................... -- 403 -- 384 --
Custodian fees................................... 205,079 91,333 119,119 83,392 103,561
Printing expense................................. 97,512 8,811 14,544 7,030 12,803
Trustees' fees -- Note 2......................... 92,731 6,257 14,148 2,744 11,876
Registration fees................................ 70,399 55,581 65,826 54,580 62,636
Legal fees....................................... 43,001 2,193 5,163 1,121 5,201
Insurance expense................................ 29,189 2,727 4,298 1,593 4,297
Audit fees....................................... 27,800 27,800 22,850 22,850 22,850
Loan commitment fees -- Note 9................... 20,451 1,513 3,305 610 2,845
Other............................................ 2,380 454 457 454 663
------------------------------------------------------------------------
Total Expenses before Reimbursement and
Custody credits........................... 12,079,483 1,660,924 2,812,334 978,900 2,237,749
Less: Expenses assumed by investment
adviser -- Note 2.............................. -- -- -- -- (1,222,178)
Custody credits -- Note 1................... -- -- -- -- --
------------------------------------------------------------------------
Expenses Net of Reimbursement and Custody
credits................................... 12,079,483 1,660,924 2,812,334 978,900 1,015,571
------------------------------------------------------------------------
NET INVESTMENT INCOME/(LOSS)....................... 9,874,920 217,881 (1,699,438) (277,382) 1,739,902
------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS
AND FOREIGN CURRENCIES -- NOTE 4
Net realized gain/(loss) on investments -- Note
1.............................................. 43,914,493 5,880,973 36,997,666 4,594,611 162,820
Net realized gain on futures contracts........... -- -- -- -- 1,190,157
Net realized gain on sales of affiliated
underlying funds............................... -- -- -- -- 653,915
Net realized gains received from affiliated
underlying funds............................... -- -- -- -- 46,786
Realized foreign capital gains tax............... -- -- -- -- --
Net realized gain/(loss) on foreign currency
related transactions -- Note 1................. -- -- -- -- --
Net change in unrealized
appreciation/(depreciation) on
investments -- Note 4.......................... 5,480,778 5,118,409 (6,630,509) 2,797,353 10,920,822
Unrealized foreign capital gains tax............. -- -- -- -- --
Net change in unrealized appreciation of futures
contracts -- Note 1............................ -- -- -- -- (440,080)
Net change in unrealized appreciation from
translation of other assets and liabilities
denominated in foreign currencies -- Note 1.... -- -- -- -- --
------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN/LOSS ON
INVESTMENTS AND FOREIGN CURRENCIES............... 49,395,271 10,999,382 30,367,157 7,391,964 12,534,420
------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS....... $59,270,191 $11,217,263 $28,667,719 $7,114,582 $14,274,322
------------------------------------------------------------------------
------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
See notes to financial statements.
100
<Table>
<Caption>
THE GUARDIAN THE GUARDIAN THE GUARDIAN THE GUARDIAN THE GUARDIAN THE GUARDIAN
S&P 500 BAILLIE GIFFORD BAILLIE GIFFORD INVESTMENT THE GUARDIAN HIGH YIELD THE GUARDIAN CASH
INDEX INTERNATIONAL EMERGING QUALITY LOW DURATION BOND TAX-EXEMPT MANAGEMENT
FUND GROWTH FUND MARKETS FUND BOND FUND BOND FUND FUND FUND FUND
- ---------------------------------------------------------------------------------------------------------------------------
$ 3,284,534 $1,146,461 $ 2,193,163 -- -- -- -- --
61,488 19,368 11,988 $7,472,304 $1,000,283 $6,028,495 $3,925,289 $7,074,387
(115) (97,250) (257,324) -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
3,345,907 1,068,579 1,947,827 7,472,304 1,000,283 6,028,495 3,925,289 7,074,387
- ---------------------------------------------------------------------------------------------------------------------------
412,407 412,825 843,923 813,622 147,263 459,868 451,623 2,517,297
336,569 80,268 127,763 309,423 22,896 117,907 199,662 1,186,614
31,119 15,817 25,444 43,439 20,498 24,810 -- 25,443
23,131 14,457 25,947 28,189 19,329 23,925 26,150 21,850
21,588 18,465 31,826 25,759 19,090 24,970 -- 24,741
93,356 47,452 76,333 130,318 61,492 74,429 -- 76,330
69,392 43,371 77,840 84,568 57,987 71,776 78,449 65,551
34,541 29,545 50,922 41,215 30,545 39,953 -- 39,586
46,574 95,013 48,757 81,442 28,700 35,171 36,484 356,738
37,720 43,337 36,449 38,583 26,564 32,759 -- 27,132
31,258 32,248 32,691 30,627 26,441 29,759 29,716 7,184
1,592 259 -- 805 52 353 -- 3,550
147,861 192,715 341,437 132,516 72,096 102,459 73,402 149,824
12,508 6,748 8,780 13,520 6,153 8,105 7,042 31,166
11,370 3,876 5,074 13,351 2,315 5,158 6,606 40,555
85,839 68,149 65,470 66,635 49,697 61,552 32,134 66,193
4,000 2,200 1,698 7,765 1,000 2,230 2,000 23,000
3,867 2,060 1,875 5,949 1,220 2,238 2,944 15,532
22,850 28,000 28,000 22,850 24,500 27,850 22,850 22,000
2,678 815 1,275 2,798 530 1,200 1,479 --
465 1,674 688 667 484 584 1,328 1,632
- ---------------------------------------------------------------------------------------------------------------------------
1,430,685 1,139,294 1,832,192 1,894,041 618,852 1,147,056 971,869 4,701,918
(359,085) -- -- (254,572) (206,999) (309,290) (106,114) (411,660)
-- -- -- -- -- -- (18,675) --
- ---------------------------------------------------------------------------------------------------------------------------
1,071,600 1,139,294 1,832,192 1,639,469 411,853 837,766 847,080 4,290,258
- ---------------------------------------------------------------------------------------------------------------------------
2,274,307 (70,715) 115,635 5,832,835 588,430 5,190,729 3,078,209 2,784,129
- ---------------------------------------------------------------------------------------------------------------------------
133,803 1,175,675 10,314,740 1,606,034 (28,179) 1,382,997 1,899,375 --
353,309 -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- (58,390) -- -- -- -- --
-- 38,768 (108,359) -- -- -- -- --
13,573,899 6,738,595 7,468,520 (1,524,310) (294,183) 242,109 (1,173,809) --
-- -- 58,908 -- -- -- -- --
79,054 -- -- -- -- -- -- --
-- (2,184) 1,900 -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
14,140,065 7,950,854 17,677,319 81,724 (322,362) 1,625,106 725,566 --
- ---------------------------------------------------------------------------------------------------------------------------
$16,414,372 $7,880,139 $17,792,954 $5,914,559 $ 266,068 $6,815,835 $3,803,775 $2,784,129
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
101
/ / The Park Avenue Portfolio
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
THE GUARDIAN THE GUARDIAN THE GUARDIAN
PARK AVENUE FUND UBS LARGE CAP VALUE FUND PARK AVENUE SMALL CAP FUND
------------------------------- ----------------------------------- ---------------------------
PERIOD FROM
YEAR ENDED FEBRUARY 3, 2003+ TO
YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, YEAR ENDED DECEMBER 31,
2004 2003 2004 2003 2004 2003
---------------------------------------------------------------------------------------------------
INCREASE/(DECREASE) IN NET
ASSETS
FROM OPERATIONS:
Net investment
income/(loss)......... $ 9,874,920 $ 7,520,558 $ 217,881 $ 251,856 $ (1,699,438) $ (1,352,534)
Net realized gain/(loss)
on investments and
foreign currency
related
transactions.......... 43,914,493 (76,280,304) 5,880,973 4,603,444 36,997,666 16,253,102
Net change in unrealized
appreciation/
(depreciation) of
investments and
foreign currency
related
transactions.......... 5,480,778 310,795,254 5,118,409 18,569,447 (6,630,509) 44,032,029
---------------------------------------------------------------------------------------------------
NET INCREASE IN NET
ASSETS RESULTING FROM
OPERATIONS............ 59,270,191 242,035,508 11,217,263 23,424,747 28,667,719 58,932,597
---------------------------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
TO SHAREHOLDERS FROM:
Net investment income
Class A............... (12,988,844) (7,367,278) (130,775) (130,506) -- --
Class B............... -- -- -- (25,664) -- --
Class C............... -- -- -- (25,489) -- --
Class K............... (97,044) (20,780) (61,348) (69,468) -- --
Net realized gain on
investments and
foreign currency
related transactions
Class A............... -- -- (2,047,005) (412,361) (20,434,106) --
Class B............... -- -- (1,934,103) (408,262) (2,882,448) --
Class C............... -- -- (1,856,823) (397,214) (1,179,600) --
Class K............... -- -- (1,898,407) (398,772) (1,406,422) --
---------------------------------------------------------------------------------------------------
TOTAL DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS........ (13,085,888) (7,388,058) (7,928,461) (1,867,736) (25,902,576) --
---------------------------------------------------------------------------------------------------
FROM CAPITAL SHARE
TRANSACTIONS:
Net increase/(decrease)
in net assets from
capital share
transactions -- Note
8..................... (232,136,779) (221,597,031) 11,055,749 63,270,044 23,001,400 526,138
Redemption fees......... -- -- -- -- -- --
---------------------------------------------------------------------------------------------------
(232,136,779) (221,597,031) 11,055,749 63,270,044 23,001,400 526,138
---------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN
NET ASSETS.............. (185,952,476) 13,050,419 14,344,551 84,827,055 25,766,543 59,458,735
NET ASSETS:
Beginning of period......... 1,312,508,366 1,299,457,947 84,827,055 -- 201,022,946 141,564,211
---------------------------------------------------------------------------------------------------
End of period*.............. $1,126,555,890 $1,312,508,366 $99,171,606 $84,827,055 $226,789,489 $201,022,946
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
* Includes
undistributed/(distributions
in excess) of net
investment income of...... $ 1,652,167 $ 4,863,135 $ 26,487 $ 729 $ -- $ --
+ Commencement of
operations.
</Table>
- --------------------------------------------------------------------------------
See notes to financial statements.
102
<Table>
<Caption>
THE GUARDIAN
THE GUARDIAN THE GUARDIAN THE GUARDIAN BAILLIE GIFFORD
UBS SMALL CAP VALUE FUND ASSET ALLOCATION FUND S&P 500 INDEX FUND INTERNATIONAL GROWTH FUND
- ----------------------------------- --------------------------- --------------------------- --------------------------
PERIOD FROM
YEAR ENDED FEBRUARY 3, 2003+ TO
DECEMBER 31, DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
2004 2003 2004 2003 2004 2003 2004 2003
- ----------------------------------------------------------------------------------------------------------------------------
$ (277,382) $ (172,665) $ 1,739,902 $ 1,589,028 $ 2,274,307 $ 1,531,499 $ (70,715) $ 112,017
4,594,611 4,660,235 2,053,678 2,070,307 487,112 (317,473) 1,214,443 (4,580,776)
2,797,353 8,161,095 10,480,742 33,756,586 13,652,953 32,458,190 6,736,411 18,741,326
- ----------------------------------------------------------------------------------------------------------------------------
7,114,582 12,648,665 14,274,322 37,415,921 16,414,372 33,672,216 7,880,139 14,272,567
- ----------------------------------------------------------------------------------------------------------------------------
-- -- (2,400,470) (1,836,307) (1,978,008) (1,405,045) (89,371) (63,805)
-- -- (271,768) (225,527) (89,432) (50,103) -- --
-- -- (48,522) (29,885) (66,023) (36,942) -- --
-- -- (141,931) (81,064) (94,839) (55,604) -- --
(1,668,270) (651,609) -- -- -- -- -- --
(1,424,466) (632,339) -- -- -- -- -- --
(1,360,553) (613,490) -- -- -- -- -- --
(1,415,192) (614,867) -- -- -- -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
(5,868,481) (2,512,305) (2,862,691) (2,172,783) (2,228,302) (1,547,694) (89,371) (63,805)
- ----------------------------------------------------------------------------------------------------------------------------
8,906,264 28,596,499 (20,540,477) (19,929,631) 6,679,825 5,064,300 (2,103,573) (26,483,377)
-- -- -- -- -- -- 17,925 127,145
- ----------------------------------------------------------------------------------------------------------------------------
8,906,264 28,596,499 (20,540,477) (19,929,631) 6,679,825 5,064,300 (2,085,648) (26,356,232)
- ----------------------------------------------------------------------------------------------------------------------------
10,152,365 38,732,859 (9,128,846) 15,313,507 20,865,895 37,188,822 5,705,120 (12,147,470)
38,732,859 -- 167,566,045 152,252,538 157,686,909 120,498,087 51,186,313 63,333,783
- ----------------------------------------------------------------------------------------------------------------------------
$48,885,224 $38,732,859 $158,437,199 $167,566,045 $178,552,804 $157,686,909 $56,891,433 $ 51,186,313
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
$ -- $ -- $ 320,666 $ 1,448,759 $ 26,546 $ 10,951 $ (39,426) $ 81,893
</Table>
- --------------------------------------------------------------------------------
103
/ / The Park Avenue Portfolio
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<Table>
<Caption>
THE GUARDIAN
BAILLIE GIFFORD THE GUARDIAN THE GUARDIAN
EMERGING MARKETS FUND INVESTMENT QUALITY BOND FUND LOW DURATION BOND FUND
-------------------------- ----------------------------- --------------------------------
PERIOD FROM
YEAR ENDED JULY 30, 2003+ TO
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31,
2004 2003 2004 2003 2004 2003
---------------------------------------------------------------------------------------------
INCREASE/(DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income......... $ 115,635 $ 135,000 $ 5,832,835 $ 6,938,090 $ 588,430 $ 179,570
Net realized gain/(loss) on
investments and foreign
currency related
transactions................ 10,147,991 2,248,314 1,606,034 5,743,920 (28,179) (14,521)
Net change in unrealized
appreciation/ (depreciation)
of investments and foreign
currency related
transactions................ 7,529,328 22,845,347 (1,524,310) (3,814,085) (294,183) 91,665
---------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS... 17,792,954 25,228,661 5,914,559 8,867,925 266,068 256,714
---------------------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income
Class A..................... (116,609) -- (4,631,841) (5,833,151) (206,517) (62,296)
Class B..................... -- -- (519,948) (526,000) (123,667) (35,675)
Class C..................... -- -- (337,129) (292,345) (116,473) (35,327)
Class K..................... (11,893) -- (343,917) (286,594) (141,773) (46,272)
Net realized gain on
investments and foreign
currency related
transactions
Class A..................... (2,415,890) -- (1,090,742) (4,189,420) -- --
Class B..................... (515,212) -- (164,526) (528,307) -- --
Class C..................... (519,613) -- (109,717) (318,457) -- --
Class K..................... (601,842) -- (103,230) (278,194) -- --
---------------------------------------------------------------------------------------------
TOTAL DIVIDENDS AND
DISTRIBUTIONS TO
SHAREHOLDERS.............. (4,181,059) -- (7,301,050) (12,252,468) (588,430) (179,570)
---------------------------------------------------------------------------------------------
FROM CAPITAL SHARE TRANSACTIONS:
Net increase/(decrease) in net
assets from capital share
transactions -- Note 8...... 13,696,283 1,751,043 (37,306,362) (23,611,845) 2,663,253 31,298,313
Redemption fees............... 5,372 -- -- -- -- --
---------------------------------------------------------------------------------------------
13,701,655 1,751,043 (37,306,362) (23,611,845) 2,663,253 31,298,313
---------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET
ASSETS........................ 27,313,550 26,979,704 (38,692,853) (26,996,388) 2,340,891 31,375,457
NET ASSETS:
Beginning of period............... 74,292,852 47,313,148 182,935,542 209,931,930 31,375,457 --
---------------------------------------------------------------------------------------------
End of period*.................... $101,606,402 $74,292,852 $144,242,689 $182,935,542 $33,716,348 $31,375,457
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
* Includes
undistributed/(distributions in
excess) of net investment income
of.............................. $ 147,983 $ (4,769) $ -- $ -- $ -- $ --
+ Commencement of operations.
</Table>
- --------------------------------------------------------------------------------
See notes to financial statements.
104
<Table>
<Caption>
THE GUARDIAN THE GUARDIAN THE GUARDIAN
HIGH YIELD BOND FUND TAX-EXEMPT FUND CASH MANAGEMENT FUND
- ------------------------- -------------------------- ----------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
2004 2003 2004 2003 2004 2003
- -------------------------------------------------------------------------------------
$ 5,190,729 $ 4,839,189 $ 3,078,209 $ 3,146,743 $ 2,784,129 $ 2,386,552
1,382,997 2,660,574 1,899,375 3,094,286 -- --
242,109 4,375,476 (1,173,809) (1,854,464) -- --
- -------------------------------------------------------------------------------------
6,815,835 11,875,239 3,803,775 4,386,565 2,784,129 2,386,552
- -------------------------------------------------------------------------------------
(3,299,787) (3,002,350) (2,791,145) (2,868,086) (2,633,636) (2,318,884)
(625,306) (628,715) -- -- (53,655) (33,161)
(602,260) (581,123) (287,064) (278,657) (49,517) (19,118)
(663,376) (627,001) -- -- (47,321) (15,389)
-- -- (1,571,408) (2,827,113) -- --
-- -- -- -- -- --
-- -- (204,912) (372,638) -- --
-- -- -- -- -- --
- -------------------------------------------------------------------------------------
(5,190,729) (4,839,189) (4,854,529) (6,346,494) (2,784,129) (2,386,552)
- -------------------------------------------------------------------------------------
14,976,472 6,584,315 3,295,052 (31,055,047) (91,284,950) (133,887,227)
1,737 -- -- -- -- --
- -------------------------------------------------------------------------------------
14,978,209 6,584,315 3,295,052 (31,055,047) (91,284,950) (133,887,227)
- -------------------------------------------------------------------------------------
16,603,315 13,620,365 2,244,298 (33,014,976) (91,284,950) (133,887,227)
71,503,871 57,883,506 90,577,818 123,592,794 560,587,544 694,474,771
- -------------------------------------------------------------------------------------
$88,107,186 $71,503,871 $92,822,116 $ 90,577,818 $469,302,594 $ 560,587,544
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
$ -- $ -- $ -- $ -- $ -- $ --
</Table>
- --------------------------------------------------------------------------------
105
/ / The Guardian Investment Quality Bond Fund
STATEMENT OF CASH FLOWS
Year Ended December 31, 2004
- ------------------------------------------------------------
<Table>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net increase in net assets resulting from operations...... $ 5,914,559
Adjustments to reconcile net increase in net assets
resulting from operations to net cash provided by
operating activities:
Purchases of long-term securities................. (368,605,923)
Proceeds from sales of long-term securities....... 398,575,830
Proceeds from mortgage securities' paydown........ 16,660,585
Loss on proceeds from mortgage securities'
paydown............................................ 452,830
Premium amortization/discount accretion, net...... 320,363
Purchases of short-term investments, net.......... (16,178,946)
Decrease in receivables........................... 548,133
Decrease in other assets.......................... 268
Increase in accrued expenses...................... 5,784
Decrease in distributions payable................. (87,551)
Decrease in due to GIS............................ (37,690)
Net realized gain on investments.................. (1,606,034)
Net change in unrealized appreciation of
investments........................................ 1,524,310
-------------
Net cash provided by operating activities....... 37,486,518
-------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Fund shares sold.................... 12,645,037
Payments for Fund shares redeemed................. (57,337,375)
Cash distributions paid........................... (719,057)
Proceeds from the financing of dollar roll
transactions, net.................................. 7,873,765
-------------
Net cash used in financing activities........... (37,537,630)
-------------
DECREASE IN CASH.......................................... (51,112)
CASH
Beginning of year......................................... 96,291
-------------
End of year............................................... $ 45,179
=============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Non-cash financing activities not included above:
Reinvestment of distributions........................ $ 6,581,993
=============
</Table>
- --------------------------------------------------------------------------------
See notes to financial statements.
106
/ / The Park Avenue Portfolio
NOTES TO FINANCIAL STATEMENTS
December 31, 2004
/ / 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 Growth Fund
/ / The Guardian Baillie Gifford Emerging Markets Fund
/ / The Guardian Investment Quality Bond Fund
/ / The Guardian Low Duration Bond Fund
/ / The Guardian High Yield Bond Fund
/ / The Guardian Tax-Exempt Fund
/ / The Guardian Cash Management Fund
NOTE 1. ORGANIZATION AND ACCOUNTING POLICIES
The Park Avenue Portfolio (the Portfolio) is a diversified open-end
management investment company registered under the Investment Company Act of
1940, as amended (the 1940 Act), which is organized as a business trust under
the laws of the Commonwealth of Massachusetts. The Portfolio consists of
thirteen series, namely: The Guardian Park Avenue Fund (GPAF); The Guardian UBS
Large Cap Value Fund (GULCVF); The Guardian Park Avenue Small Cap Fund (GPASCF);
The Guardian UBS Small Cap Value Fund (GUSCVF); The Guardian Asset Allocation
Fund (GAAF); The Guardian S&P 500 Index Fund (GSP500F); The Guardian Baillie
Gifford International Growth Fund (GBGIF) (formerly Guardian Baillie Gifford
International Fund); The Guardian Baillie Gifford Emerging Markets Fund
(GBGEMF); The Guardian Investment Quality Bond Fund (GIQBF); The Guardian Low
Duration Bond Fund (GLDBF); The Guardian High Yield Bond Fund (GHYBF); The
Guardian Tax-Exempt Fund (GTEF); and The Guardian Cash Management Fund (GCMF).
The series are collectively referred to herein as the "Funds".
On July 30, 2003, GLDBF commenced operations. GLDBF sold 750,000 shares for
each of Class A, Class B, Class C and Class K shares to Guardian Life Insurance
Company of America (Guardian Life) for $7,500,000 each.
The Funds offer up to five classes of shares: Class A, Class B, Class C,
Class K and the Institutional Class. Each of the Funds offers Class A shares.
Class A shares are sold with an initial sales load of up to 4.50% (up to 3.00%
for GLDBF and 0.00% for GCMF) and an administrative fee of up to .25% on an
annual basis of the Funds' average daily net assets. A redemption fee of 2% is
imposed on purchases of Class A shares of GBGIF, GBGEMF and GHYBF if redeemed
within 60 days of purchase, except for shares held in omnibus accounts. 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 each Fund's 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 each Fund's 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 each Fund's Class K
average daily net assets, and a CDSL of up to 1% imposed on certain redemptions.
Institutional Class shares are offered by GPAF, GPASCF, GAAF, GSP500F, GBGIF,
GBGEMF, GIQBF and GHYBF. As of December 31, 2004, none of the Funds had issued
Institutional Class shares. Institutional Class shares are offered at net asset
value, without an initial or a CDSL. 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
income, gains (losses) and expenses during the reporting period. Actual results
could differ from those estimates.
Significant accounting policies of the Funds are as follows:
- --------------------------------------------------------------------------------
107
/ / The Park Avenue Portfolio
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 2004
Investments
Securities listed on domestic or foreign securities exchanges are valued at
the last sale price on such exchanges, or if no sale occurred, at the mean of
the bid and asked prices. Securities that are traded on the NASDAQ National
Securities Market are valued at the NASDAQ Official Closing Price. In GAAF,
investments in the underlying Funds are valued at the closing net asset value of
each underlying Fund on the day of valuation.
Pursuant to valuation procedures approved by the Board of Trustees, certain
debt securities may be valued each business day by an independent pricing
service (Service). Debt securities for which quoted bid prices are readily
available and representative of the bid side of the market, in the judgment of
the Service, are valued at the bid price, except for GTEF. In GTEF, debt
securities are valued at the mean between the bid and asked prices obtained by
the Service. Other debt securities that are valued by the Service are carried at
fair value as determined by the Service, based on methods which include
consideration of: yields or prices of securities of comparable quality, coupon,
maturity and type; indications as to values from dealers; and general market
conditions.
Futures contracts are valued at the settlement prices established by the
boards of trade or exchanges on which they are traded.
Other securities, including securities for which market quotations are not
readily available (such as certain mortgage backed securities, restricted
securities and foreign securities subject to "significant event") are valued at
fair value as determined in good faith by or under the direction of the Funds'
Board of Trustees. A "significant event" is an event that will affect the value
of a portfolio security that occurs after the close of trading in the security's
primary trading market or exchange but before the Funds' NAV is calculated.
Investing outside of the U.S. may involve certain considerations and risks
not typically associated with domestic investments, including the possibility of
political and economic unrest and different levels of governmental supervision
and regulation of foreign securities markets.
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.
Investment transactions are recorded on the date of purchase or sale.
Security gains or losses are determined on an identified cost basis. Interest
income, including amortization/accretion of premium/ discount, is accrued daily.
Dividend income is recorded on the ex-dividend date.
All income, expenses (other than class-specific expenses) and realized and
unrealized gains or losses are allocated daily to each class of shares based
upon the relative value of shares of each class. Class-specific expenses, which
include any items that are specifically attributed to a particular class, are
charged directly to such class. For the year ended December 31, 2004,
distribution, administrative and transfer agent fees were the only
class-specific expenses.
Foreign Currency Translation
GPAF, GULCVF, GPASCF, GUSCVF, GAAF, GBGIF, GBGEMF and GHYBF are permitted
to buy international securities that are not U.S. dollar denominated. Their
books and records are maintained in U.S. dollars as follows:
(1) The foreign currency market value of investment securities and other
assets and liabilities stated in foreign currencies are translated into U.S.
dollars at the current rate of exchange.
(2) Security purchases and sales, income and expenses are translated at the
rate of exchange prevailing on the respective dates of such transactions.
The resulting gains and losses are included in the Statement of Operations
as follows:
Gains and losses attributable to foreign currency exchange rates on sales
of securities are recorded for financial statement purposes as net realized
gains and losses on investments. Realized foreign exchange gains and losses,
which result from changes in foreign exchange rates between the date on which a
Fund earns dividends and interest or pays foreign withholding taxes or other
expenses and the date on which U.S. dollar equivalent amounts are actually
received or paid, are included in net realized gains or losses on foreign
currency related transactions. Realized foreign exchange gains and losses which
result from changes in foreign exchange rates between the trade and settlement
dates on security and currency transactions are also included in net realized
gains or losses on foreign currency related transactions. Net currency gains and
losses from valuing other assets and liabilities denominated in foreign currency
at the period end exchange rate are reflected in net change in unrealized
appreciation or depreciation from translation of other assets and liabilities
denominated in foreign currencies.
- --------------------------------------------------------------------------------
108
/ / The Park Avenue Portfolio
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 2004
Forward Foreign Currency Contracts
GPAF, GULCVF, GPASCF, GUSCVF, GAAF, GBGIF, GBGEMF and GHYBF may enter into
forward foreign currency contracts in connection with planned purchases or sales
of securities, or to hedge against changes in currency exchange rates affecting
the values of its investments that are denominated in a particular currency. A
forward foreign currency contract is a commitment to purchase or sell a foreign
currency at a future date at a negotiated forward exchange rate. Risks may arise
from the potential inability of a counterparty to meet the terms of a contract
and from unanticipated movements in the value of a foreign currency relative to
the U.S. dollar. Fluctuations in the value of forward foreign currency contracts
are recorded for book purposes as unrealized gains or losses from translation of
other assets and liabilities denominated in foreign currencies by the Funds.
When forward contracts are closed, the Funds 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 Funds to deliver an amount of
foreign currency in excess of the value of the Funds' portfolio securities or
other assets denominated in that currency.
Futures Contracts
GULCVF, GUSCVF, GAAF, GSP500F, GBGIF, GBGEMF, GIQBF, GLDBF, GHYBF and GTEF
may enter into financial futures contracts for the delayed delivery of
securities, currency or contracts based on financial indices at a fixed price on
a future date. In entering into such contracts, the Funds are required to
deposit either in cash or securities an amount equal to a certain percentage of
the contract amount. Subsequent payments are made or received by the Funds each
day, depending on the daily fluctuations in the value of the underlying
security, and are recorded for financial statement purposes as variation margins
by the Funds. The daily changes in the variation margin are recognized as
unrealized gains or losses by the Funds. The Funds' investments in financial
futures contracts are designed to hedge against anticipated future changes in
interest or exchange rates or securities prices. In addition, GAAF may enter
into financial futures contracts for non-hedging purposes. Should interest or
exchange rates or securities prices or prices of futures contracts move
unexpectedly, the Funds may not achieve the anticipated benefits of the
financial futures contracts and may realize a loss.
Dividend Distributions
Dividends from net investment income are declared and accrued daily and are
paid monthly for GIQBF, GLDBF, GHYBF and GTEF, and declared and paid
semi-annually for GPAF, GULCVF, GPASCF, GUSCVF, GAAF, GSP500F, GBGIF and GBGEMF.
Net realized short-term and long-term capital gains for these Funds will be
distributed at least annually. Dividends from GCMF's net investment income,
which includes any net realized capital gains or losses, are declared and
accrued daily and paid monthly on the last business day of each month.
All dividends and distributions are recorded on the ex-dividend date. Such
distributions are determined in conformity with federal income tax regulations.
Differences between the recognition of income on an income tax basis and
recognition of income based on GAAP may cause temporary overdistributions of net
realized gains and net investment income.
The tax character of distributions paid to shareholders during the years
ended December 31, 2004 and 2003 were as follows:
<Table>
<Caption>
-----------------------------------------------------
2004
-----------------------------------------------------
TAX ORDINARY LONG-TERM
EXEMPT INCOME CAPITAL GAIN TOTAL
---------- ----------- ------------ -----------
GPAF $ -- $13,085,888 $ -- $13,085,888
GULCVF -- 4,297,882 3,630,580 7,928,462
GPASCF -- 2,521,505 23,381,071 25,902,576
GUSCVF -- 2,314,532 3,553,949 5,868,481
GAAF -- 2,862,691 -- 2,862,691
GSP500F -- 2,228,302 -- 2,228,302
GBGIF -- 89,371 -- 89,371
GBGEMF -- 128,502 4,052,557 4,181,059
GIQBF -- 5,932,497 1,368,554 7,301,051
GLDBF -- 588,430 -- 588,430
GHYBF -- 5,190,729 -- 5,190,729
GTEF 3,078,209 27,210 1,749,110 4,854,529
GCMF -- 2,784,129 -- 2,784,129
</Table>
<Table>
<Caption>
-----------------------------------------------------
2003
-----------------------------------------------------
GPAF $ -- $ 7,388,058 $ -- $ 7,388,058
GULCVF -- 1,867,736 -- 1,867,736
GUSCVF -- 2,512,305 -- 2,512,305
GAAF -- 2,172,784 -- 2,172,784
GSP500F -- 1,547,694 -- 1,547,694
GBGIF -- 63,805 -- 63,805
GIQBF -- 9,989,588 2,262,880 12,252,468
GLDBF -- 179,570 -- 179,570
GHYBF -- 4,839,189 -- 4,839,189
GTEF 3,146,743 1,003,278 2,196,473 6,346,494
GCMF -- 2,386,552 -- 2,386,552
</Table>
- --------------------------------------------------------------------------------
109
/ / The Park Avenue Portfolio
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 2004
For the year ended December 31, 2004, the components of distributable
earnings on a tax basis were as follows:
<Table>
<Caption>
LONG-TERM GAIN/
UNDISTRIBUTED (POST-OCTOBER LOSS)/ UNREALIZED
ORDINARY (CAPITAL LOSS APPRECIATION
INCOME CARRYFORWARD) (DEPRECIATION)
------------- -------------------- --------------
GPAF $1,652,166 $(679,399,208) $157,376,648
GULCVF 118,535 1,064,147 23,663,130
GPASCF -- 12,368,020 36,098,727
GUSCVF -- 436,458 10,946,003
GAAF 320,666 (51,766,138) (5,576,972)
GSP500F 26,547 (96,003,982) 9,521,452
GBGIF 144,037 (39,757,915) 16,790,077
GBGEMF -- 2,936,939 27,062,920
GIQBF 584,205 46,040 2,160,901
GLDBF -- (44,283) (220,758)
GHYBF -- (17,677,424) 4,919,527
GTEF 18,275 129,843 3,600,607
GCMF 5,821 (5,700) --
</Table>
Taxes
Each Fund has qualified and intends to remain qualified to be taxed as a
"regulated investment company" under the provisions of the U.S. Internal Revenue
Code (Code), and as such will not be subject to federal income tax on taxable
income (including any realized capital gains) which is distributed in accordance
with the provisions of the Code. Therefore, no federal income tax provision is
required.
Withholding taxes on foreign interest, dividends and capital gains in GBGIF
and GBGEMF have been provided for in accordance with the applicable country's
tax rules and rates.
For the year ended December 31, 2004, for federal income tax purposes, the
following Funds have post-October capital losses and capital losses carryforward
of:
<Table>
<Caption>
POST-OCTOBER CAPITAL LOSS EXPIRATION
CAPITAL LOSS CARRYFORWARD DATE
------------ ------------- ----------
GPAF $ -- $ 367,844,523 2009
-- 255,258,469 2010
-- 11,076,797 2011
-- 45,219,419 2012
--------- -------------
Total $ -- $ 679,399,208
========= =============
GAAF $ -- $ 37,312,633 2009
-- 14,453,505 2010
--------- -------------
Total $ -- $ 51,766,138
========= =============
GSP500F $ -- $ 95,848,928 2010
-- 155,054 2011
--------- -------------
Total $ -- $ 96,003,982
========= =============
</Table>
<Table>
<Caption>
POST-OCTOBER CAPITAL LOSS EXPIRATION
CAPITAL LOSS CARRYFORWARD DATE
------------ ------------- ----------
GBGIF $ -- $ 9,129,274 2009
-- 22,118,121 2010
-- 8,510,520 2011
--------- -------------
Total $ -- $ 39,757,915
========= =============
GBGEMF $ 24,782 $ -- --
========= =============
GLDBF $ 23,148 $ 2,657 2011
-- 18,478 2012
--------- -------------
$ 23,148 $ 21,135
========= =============
GHYBF $ -- $ 1,654,339 2007
-- 3,128,645 2008
-- 7,587,223 2009
-- 5,307,217 2010
--------- -------------
Total $ -- $ 17,677,424
========= =============
GCMF $ -- $ 195 2007
-- 5,073 2011
-- 432 2012
--------- -------------
Total $ -- $ 5,700
========= =============
</Table>
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
$18,675 under this arrangement. GTEF could have employed the uninvested assets
to produce income if GTEF has not entered into such arrangement.
Reclassification of Capital Accounts
The treatment for financial statement purposes of distributions made during
the year from net investment income and net realized gains may differ from their
ultimate treatment for federal income tax purposes. These differences primarily
are caused by differences in the timing of the recognition of certain components
of income or capital gains, and the recharacterization of foreign exchange gains
or losses to either ordinary income or realized capital gains for federal income
tax purposes. Where such differences are permanent in nature, they are
reclassified in the components of net assets based on their ultimate
characterization for federal income tax purposes. Any such reclassifications
will have no effect on net assets, results of operations, or net asset value per
share of the Funds.
During the year ended December 31, 2004, certain Funds reclassified amounts
to paid-in capital from undistrib-
- --------------------------------------------------------------------------------
110
/ / The Park Avenue Portfolio
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 2004
uted/(distributions in excess) of net investment income and accumulated net
realized gain/(loss) on investment and foreign currency related transactions.
Increases/(decreases) to the various capital accounts were as follows:
<Table>
<Caption>
ACCUMULATED
NET REALIZED
UNDISTRIBUTED/ GAIN/(LOSS) ON
(DISTRIBUTIONS INVESTMENTS
IN EXCESS) OF AND FOREIGN
PAID-IN NET INVESTMENT CURRENCY RELATED
CAPITAL INCOME TRANSACTIONS
-------- -------------- ----------------
GPASCF $(51,202) $1,699,438 $(1,648,236)
GUSCVF -- 277,382 (277,382)
GAAF -- (5,304) 5,304
GSP500F 3 (30,410) 30,407
GBGIF -- 38,767 (38,767)
GBGEMF (36,496) (130,347) 166,843
GLDBF 20,597 -- (20,597)
GTEF 2 -- (2)
</Table>
NOTE 2. INVESTMENT ADVISORY AGREEMENTS AND PAYMENTS TO OR FROM RELATED PARTIES
The Funds (except GBGIF and GBGEMF) have an investment advisory agreement
with Guardian Investor Services LLC (GIS), an indirect wholly-owned subsidiary
of Guardian Life. Fees for investment advisory are at an annual rate of .50% of
the average daily net assets of each Fund, except for GPASCF, GSP500F, GHYBF and
GLDBF, which pay GIS an annual rate of .75%, .25%, .60% and .45%, respectively,
of their average daily net assets.
GAAF is subject to a contractual annual advisory fee of .65% of its average
daily net assets. However, GIS has agreed to a waiver of .15% of GAAF's annual
advisory fee when GAAF is operated as a "fund of funds" so that GAAF's effective
advisory fee is .50% of its average daily net assets. There are no duplicative
advisory and administrative service fees charged to GAAF on assets invested in
other Guardian Funds. Under an SEC exemptive order, advisory and administrative
fees are paid at the underlying Fund level.
GULCVF pays investment advisory fees to GIS at an annual rate of .83% of
its average daily net assets. GUSCVF pays investment advisory fees to GIS at an
annual rate of 1.00% of its average daily net assets for the first $50 million
and an annual rate of .95% of its average daily net assets in excess of $50
million. GIS has entered into a sub-investment advisory agreement with UBS
Global Asset Management (Americas), Inc. (UBS Global AM). UBS Global AM is
responsible for the day-to-day management of GULCVF and GUSCVF. GIS continually
monitors and evaluates the 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 year ended December 31, 2004, 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%
GLDBF .80% 1.55% 1.55% 1.20%
GHYBF .85% 1.60% 1.60% 1.25%
GTEF .85% N/A 1.60% N/A
GCMF .85% 1.60% 1.60% 1.25%
</Table>
For the year ended December 31, 2004, 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
------- ------- ------- -------
Administrative
Fees .18% .25% .25% .16%
12b-1 Fees -- .20% .24% --
---- ----- ----- -----
.18% .45% .49% .16%
==== ===== ===== =====
</Table>
<Table>
<Caption>
- ---------------------------------------------------------
GIQBF
- ---------------------------------------------------------
CLASS A CLASS B CLASS C CLASS K
------- ------- ------- -------
Administrative
Fees .13% .25% .25% .06%
12b-1 Fees -- .03% .08% --
---- ---- ---- ----
.13% .28% .33% .06%
==== ==== ==== ====
</Table>
<Table>
<Caption>
- ---------------------------------------------------------
GLDBF
- ---------------------------------------------------------
CLASS A CLASS B CLASS C CLASS K
------- ------- ------- -------
Advisory Fees .39% .39% .39% .39%
Transfer Agent
Fees .30% .31% .34% --
---- ---- ---- ----
.69% .70% .73% .39%
==== ==== ==== ====
</Table>
- --------------------------------------------------------------------------------
111
/ / The Park Avenue Portfolio
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 2004
<Table>
<Caption>
- ---------------------------------------------------------
GHYBF
- ---------------------------------------------------------
CLASS A CLASS B CLASS C CLASS K
------- ------- ------- -------
Advisory Fees .28% .28% .28% .28%
Transfer Agent
Fees .06% .34% .31% --
---- ---- ---- ----
.34% .62% .59% .28%
==== ==== ==== ====
</Table>
<Table>
<Caption>
- ---------------------------------------------------------
GTEF
- ---------------------------------------------------------
CLASS A CLASS C
------- -------
Administrative Fees .09% .25%
12b-1 Fees -- .08%
---- ----
.09% .33%
==== ====
</Table>
<Table>
<Caption>
- ---------------------------------------------------------
GCMF
- ---------------------------------------------------------
CLASS A CLASS B CLASS C CLASS K
------- ------- ------- -------
Administrative
Fees .04% .25% .25% .25%
12b-1 Fees -- .74% .55% .05%
---- ---- ---- ----
.04% .99% .80% .30%
==== ==== ==== ====
</Table>
For the year ended December 31, 2004, GIS voluntarily assumed $359,085,
$254,572, $106,114 and $240,310 of the administrative fees and 12b-1 fees of
GSP500F, GIQBF, GTEF and GCMF, respectively. GIS voluntarily assumed $206,999
and $309,290 of the advisory fees and transfer agent fees of GLDBF and GHYBF,
respectively. In addition, GIS reimbursed the GCMF $171,350 in expenses in order
to maintain a minimum yield threshold. These arrangements can be terminated at
any time by GIS.
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 average daily net
assets. One half of these fees is payable by GBG to BG Overseas for its
services. Payment of the sub-investment management fee does not represent a
separate or additional expense to GBGIF or GBGEMF.
The Guardian Fund Complex pays trustees who are not "interested persons"
(as defined in the 1940 Act) fees consisting of a $5,000 per meeting fee and an
annual retainer of $30,500, allocated among all funds in the Guardian Fund
Complex based on relative average daily net assets. Board committee members also
receive a fee of $2,000 per committee meeting, which also is allocated among all
funds in the Guardian Fund Complex based on relative average daily net assets.
Additional compensation is paid to the Chairmen of the Nominating and Governance
Committee and the Audit Committee, respectively. GIS pays compensation to
certain trustees who are interested persons. Certain officers and trustees of
the Funds are affiliated with GIS.
GAAF received $2,187,211 in dividends from other Guardian mutual funds.
Park Avenue Securities LLC (PAS), a wholly-owned subsidiary of GIAC and an
affiliate of GIS distributes the Portfolio's shares as a retail broker-dealer.
For the year ended December 31, 2004, PAS received $542,131 for brokerage
commissions from the Portfolio.
Administrative Services Agreement
Pursuant to the Administrative Services Agreement adopted by the Funds on
behalf of the Class A, Class B, Class C and Class K shares, each of the Funds,
except GPAF, pays GIS an administrative service fee at an annual rate of .25% of
the Funds' average daily net assets. GPAF pays this fee to GIS at an annual rate
of up to .25% of the average daily net assets for which a "dealer of record" has
been designated. For the year ended December 31, 2004, GPAF Class A shares paid
an annualized rate of .20% of its average daily net assets pursuant to the
Administrative Services Agreement.
NOTE 3. UNDERWRITING AGREEMENT AND DISTRIBUTION PLAN
The Portfolio has entered into an Underwriting Agreement with GIS pursuant
to which GIS serves as the principal underwriter for shares of the Funds.
- --------------------------------------------------------------------------------
112
/ / The Park Avenue Portfolio
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 2004
For the year ended December 31, 2004, 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 $18,845 GBGEMF $ 709
GULCVF 3,259 GIQBF 3,662
GPASCF 3,008 GLDBF 2,201
GAAF 2,787 GHYBF 804
GSP500F 4,641 GTEF 2,365
GBGIF 600
</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 year ended December 31, 2004, GIS received
CDSL charges on Class B, Class C and Class K as follows:
<Table>
<Caption>
FUND CLASS B CLASS C CLASS K
---- -------- ------- -------
GPAF $162,654 $ 380 $154
GULCVF 1,354 -- 35
GPASCF 11,295 294 71
GUSCVF 1,391 -- 322
GAAF 35,123 22 35
GSP500F 9,107 1,897 56
GBGIF 5,744 3 41
GBGEMF 3,643 147 468
GIQBF 18,710 645 198
GLDBF 646 204 --
GHYBF 6,873 769 2
GTEF -- 1,103 --
GCMF 21,958 4,112 739
</Table>
NOTE 4. INVESTMENT TRANSACTIONS
Purchases and proceeds from sales of securities (excluding short-term
securities) for the year ended December 31, 2004 were as follows:
<Table>
<Caption>
- --------------------------------------------------------
GPAF GULCVF
- --------------------------------------------------------
Purchases $ 885,168,342 $ 31,785,081
Proceeds 1,113,562,477 27,702,710
- --------------------------------------------------------
GPASCF GUSCVF
- --------------------------------------------------------
Purchases $ 257,671,266 $ 23,385,454
Proceeds 262,506,507 21,860,979
- --------------------------------------------------------
</Table>
<Table>
<Caption>
- --------------------------------------------------------
GAAF GSP500F
- --------------------------------------------------------
Purchases $ 69,637 $ 4,644,784
Proceeds 22,212,684 1,425,060
- --------------------------------------------------------
GBGIF GBGEMF
- --------------------------------------------------------
Purchases $ 12,402,631 $ 66,738,332
Proceeds 15,041,502 57,515,860
- --------------------------------------------------------
GIQBF GLDBF
- --------------------------------------------------------
Purchases $ 369,646,191 $ 25,969,651
Proceeds 398,575,830 21,861,230
- --------------------------------------------------------
GHYBF GTEF
- --------------------------------------------------------
Purchases $ 81,066,916 $144,981,040
Proceeds 68,352,075 142,857,918
- --------------------------------------------------------
</Table>
The gross unrealized appreciation and depreciation of investments, on a tax
basis, excluding foreign currency and futures at December 31, 2004 were as
follows:
<Table>
GPAF GULCVF
------------ ------------
Appreciation $171,875,676 $ 23,868,493
(Depreciation) (14,499,028) (205,363)
------------ ------------
Net Unrealized
Appreciation $157,376,648 $ 23,663,130
============ ============
Cost of investments for
tax purposes $970,531,628 $ 75,589,096
============ ============
GPASCF GUSCVF
------------ ------------
Appreciation $ 39,482,688 $ 11,461,857
(Depreciation) (3,383,961) (515,854)
------------ ------------
Net Unrealized
Appreciation $ 36,098,727 $ 10,946,003
============ ============
Cost of investments for
tax purposes $190,726,348 $ 37,987,542
============ ============
GAAF GSP500F
------------ ------------
Appreciation $ 3,521,222 $ 36,643,482
(Depreciation) (9,098,194) (27,122,030)
------------ ------------
Net Unrealized
Appreciation/
(Depreciation) $ (5,576,972) $ 9,521,452
============ ============
Cost of investments for
tax purposes $164,214,363 $168,803,269
============ ============
GBGIF GBGEMF
------------ ------------
Appreciation $ 17,745,052 $ 28,223,767
(Depreciation) (958,616) (1,119,840)
------------ ------------
Net Unrealized
Appreciation $ 16,786,436 $ 27,103,927
============ ============
Cost of investments for
tax purposes $ 40,118,568 $ 74,553,112
============ ============
</Table>
- --------------------------------------------------------------------------------
113
/ / The Park Avenue Portfolio
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 2004
<Table>
GIQBF GLDBF
------------ ------------
Appreciation $ 2,678,532 $ 22,011
(Depreciation) (517,631) (242,769)
------------ ------------
Net Unrealized
Appreciation/
(Depreciation) $ 2,160,901 $ (220,758)
------------ ------------
Cost of investments for
tax purposes $166,587,844 $ 33,798,663
============ ============
GHYBF GTEF
------------ ------------
Appreciation $ 5,155,535 $ 3,626,755
(Depreciation) (236,008) (26,148)
------------ ------------
Net Unrealized
Appreciation $ 4,919,527 $ 3,600,607
============ ============
Cost of investments for
tax purposes $ 81,583,072 $ 87,894,748
============ ============
</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, GLDBF and GHYBF may enter into reverse repurchase agreements
with banks or third party broker-dealers to borrow short-term funds. Interest on
the value of reverse repurchase agreements issued and outstanding is based upon
competitive market rates at the time of issuance. At the time GAAF, GIQBF, GLDBF
and GHYBF enter into a reverse repurchase agreement, the Funds establish and
segregate cash, U.S. government securities or liquid, unencumbered securities
that are marked-to-market daily. The value of such segregated assets must be at
least equal to the value of the repurchase obligation (principal plus accrued
interest), as applicable. Reverse repurchase agreements involve the risk that
the buyer of the securities sold by GAAF, GIQBF, GLDBF and GHYBF may be unable
to deliver the securities when the Funds seek to repurchase them.
NOTE 7. DOLLAR ROLL TRANSACTIONS
GAAF, GIQBF, GLDBF and GHYBF may enter into dollar rolls (principally using
TBA's) in which GIQBF and GLDBF sell mortgage securities for delivery in the
current month and simultaneously contract to repurchase similar securities at an
agreed-upon price on a fixed date. The securities repurchased will bear the same
interest as those sold, but generally will be collateralized at the time of
delivery by different pools of mortgages with different prepayment histories
than those securities sold. During the period between the sale and repurchase,
the Fund will not be entitled to receive interest and principal payments on the
securities sold. Dollar roll transactions involve the risk that the buyer of the
securities sold by GAAF, GIQBF, GLDBF and GHYBF may be unable to deliver the
securities when the Funds seek to repurchase them.
- --------------------------------------------------------------------------------
114
/ / The Park Avenue Portfolio
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 2004
NOTE 8. SHARES OF BENEFICIAL INTEREST
There is an unlimited number of $0.01 par value shares of beneficial
interest authorized, divided into five classes, designated as Class A, Class B,
Class C, Class K and Institutional Class shares. As of December 31, 2004: (i)
GPAF, GPASCF, GAAF, GSP500F, GBGIF, GBGEMF, GIQBF and GHYBF offered all five
classes; (ii) GTEF offered Class A and Class C shares; and (iii) GULCVF, GUSCVF,
GLDBF and GCMF offered Class A, Class B, Class C and Class K shares. Through
December 31, 2004, no Institutional Class shares of the Funds were sold.
Transactions in shares of beneficial interest were as follows:
/ / THE GUARDIAN PARK AVENUE FUND
<Table>
<Caption>
Year Ended December 31, Year Ended December 31,
2004 2003 2004 2003
- ---------------------------------------------------------------------------------------------------------------------------------
Shares Amount
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS A
Shares sold 1,190,345 2,688,100 $ 35,901,738 $ 71,466,076
Shares issued in reinvestment of
dividends 410,983 259,185 12,593,649 7,135,022
Shares repurchased (8,021,112) (10,027,084) (241,079,852) (268,695,546)
- ---------------------------------------------------------------------------------------------------------------------------------
NET DECREASE (6,419,784) (7,079,799) $ (192,584,465) $ (190,094,448)
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS B
Shares sold 120,793 236,579 $ 3,485,291 $ 6,081,629
Shares repurchased (1,537,731) (1,463,661) (43,974,403) (37,424,241)
- ---------------------------------------------------------------------------------------------------------------------------------
NET DECREASE (1,416,938) (1,227,082) $ (40,489,112) $ (31,342,612)
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS C
Shares sold 10,462 15,063 $ 296,587 $ 370,651
Shares repurchased (22,706) (29,394) (635,942) (741,440)
- ---------------------------------------------------------------------------------------------------------------------------------
NET DECREASE (12,244) (14,331) $ (339,355) $ (370,789)
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS K
Shares sold 41,501 7,291 $ 1,245,335 $ 198,820
Shares issued in reinvestment of
dividends 3,162 756 97,044 20,780
Shares repurchased (2,258) (310) (66,226) (8,782)
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 42,405 7,737 $ 1,276,153 $ 210,818
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
/ / THE GUARDIAN UBS LARGE CAP VALUE FUND
<Table>
<Caption>
Period from Period from
Year Ended February 3, 2003+ to Year Ended February 3, 2003+ to
December 31, 2004 December 31, 2003 December 31, 2004 December 31, 2003
- ---------------------------------------------------------------------------------------------------------------------------------
Shares Amount
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS A
Shares sold 174,657 1,959,608 $ 2,262,682 $ 19,415,494
Shares issued in reinvestment of
dividends and distributions 166,765 42,951 2,170,261 542,073
Shares repurchased (28,215) (310,031) (362,577) (3,709,638)
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 313,207 1,692,528 $ 4,070,366 $ 16,247,929
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS B
Shares sold 81,632 1,946,976 $ 1,054,685 $ 19,255,790
Shares issued in reinvestment of
dividends and distributions 148,409 34,101 1,925,522 432,709
Shares repurchased (39,293) (310,912) (506,949) (3,705,050)
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 190,748 1,670,165 $ 2,473,258 $ 15,983,449
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS C
Shares sold 6,593 1,902,265 $ 84,107 $ 18,753,050
Shares issued in reinvestment of
dividends and distributions 143,136 33,316 1,856,821 422,703
Shares repurchased -- (310,518) -- (3,700,000)
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 149,729 1,625,063 $ 1,940,928 $ 15,475,753
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS K
Shares sold 51,807 1,905,775 $ 682,461 $ 18,794,718
Shares issued in reinvestment of
dividends and distributions 150,644 36,999 1,959,753 468,239
Shares repurchased (5,504) (309,743) (71,017) (3,700,044)
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 196,947 1,633,031 $ 2,571,197 $ 15,562,913
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
+ Commencement of operations.
- --------------------------------------------------------------------------------
115
/ / The Park Avenue Portfolio
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 2004
/ / THE GUARDIAN PARK AVENUE SMALL CAP FUND
<Table>
<Caption>
Year Ended December 31, Year Ended December 31,
2004 2003 2004 2003
- ---------------------------------------------------------------------------------------------------------------------------------
Shares Amount
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS A
Shares sold 1,343,980 1,813,369 $ 26,373,297 $ 28,850,596
Shares issued in reinvestment of
distributions 1,031,848 -- 20,020,556 --
Shares repurchased (1,447,680) (1,819,099) (27,991,349) (27,392,677)
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) 928,148 (5,730) $ 18,402,504 $ 1,457,919
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS B
Shares sold 140,829 125,391 $ 2,576,277 $ 1,962,819
Shares issued in reinvestment of
distributions 149,273 -- 2,681,069 --
Shares repurchased (257,947) (203,610) (4,675,874) (2,928,195)
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) 32,155 (78,219) $ 581,472 $ (965,376)
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS C
Shares sold 39,603 9,592 $ 688,850 $ 145,248
Shares issued in reinvestment of
distributions 65,829 -- 1,173,573 --
Shares repurchased (11,175) (18,489) (204,574) (322,464)
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) 94,257 (8,897) $ 1,657,849 $ (177,216)
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS K
Shares sold 52,945 13,855 $ 1,003,863 $ 218,871
Shares issued in reinvestment of
distributions 73,805 -- 1,406,418 --
Shares repurchased (2,648) (452) (50,706) (8,060)
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 124,102 13,403 $ 2,359,575 $ 210,811
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
/ / THE GUARDIAN UBS SMALL CAP VALUE FUND
<Table>
<Caption>
Period from Period from
Year Ended February 3, 2003+ to Year Ended February 3, 2003+ to
December 31, 2004 December 31, 2003 December 31, 2004 December 31, 2003
- ---------------------------------------------------------------------------------------------------------------------------------
Shares Amount
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS A
Shares sold 190,281 932,267 $ 2,526,654 $ 9,277,024
Shares issued in reinvestment of
distributions 123,870 50,375 1,605,478 648,829
Shares repurchased (18,561) (189,695) (239,521) (2,437,582)
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 295,590 792,947 $ 3,892,611 $ 7,488,271
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS B
Shares sold 35,115 921,249 $ 454,187 $ 9,123,598
Shares issued in reinvestment of
distributions 110,609 49,148 1,410,041 628,105
Shares repurchased (17,277) (198,479) (220,955) (2,529,505)
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 128,447 771,918 $ 1,643,273 $ 7,222,198
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS C
Shares sold 3,638 891,366 $ 46,138 $ 8,777,985
Shares issued in reinvestment of
distributions 106,734 48,004 1,360,553 613,488
Shares repurchased -- (192,392) -- (2,454,478)
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 110,372 746,978 $ 1,406,691 $ 6,936,995
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS K
Shares sold 52,642 890,722 $ 683,169 $ 8,771,733
Shares issued in reinvestment of
distributions 109,649 47,849 1,415,186 614,865
Shares repurchased (10,438) (190,137) (134,666) (2,437,563)
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 151,853 748,434 $ 1,963,689 $ 6,949,035
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
+ Commencement of operations.
- --------------------------------------------------------------------------------
116
/ / The Park Avenue Portfolio
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 2004
/ / THE GUARDIAN ASSET ALLOCATION FUND
<Table>
<Caption>
Year Ended December 31, Year Ended December 31,
2004 2003 2004 2003
- ---------------------------------------------------------------------------------------------------------------------------------
Shares Amount
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS A
Shares sold 790,317 1,015,158 $ 8,537,011 $ 9,497,451
Shares issued in reinvestment of
dividends 208,464 186,765 2,305,931 1,766,807
Shares repurchased (2,432,345) (3,099,656) (26,267,499) (28,129,262)
- ---------------------------------------------------------------------------------------------------------------------------------
NET DECREASE (1,433,564) (1,897,733) $ (15,424,557) $ (16,865,004)
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS B
Shares sold 102,043 249,644 $ 1,100,025 $ 2,356,152
Shares issued in reinvestment of
dividends 23,248 22,830 259,342 215,963
Shares repurchased (671,863) (619,271) (7,213,089) (5,507,970)
- ---------------------------------------------------------------------------------------------------------------------------------
NET DECREASE (546,572) (346,797) $ (5,853,722) $ (2,935,855)
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS C
Shares sold 20,244 10,197 $ 214,709 $ 95,189
Shares issued in reinvestment of
dividends 4,285 3,114 48,490 29,460
Shares repurchased (29,495) (40,895) (311,293) (367,270)
- ---------------------------------------------------------------------------------------------------------------------------------
NET DECREASE (4,966) (27,584) $ (48,094) $ (242,621)
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS K
Shares sold 65,378 20,906 $ 705,819 $ 191,338
Shares issued in reinvestment of
dividends 12,780 8,578 141,931 81,064
Shares repurchased (5,606) (15,129) (61,854) (158,553)
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 72,552 14,355 $ 785,896 $ 113,849
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
/ / THE GUARDIAN S&P 500 INDEX FUND
<Table>
<Caption>
Year Ended December 31, Year Ended December 31,
2004 2003 2004 2003
- ---------------------------------------------------------------------------------------------------------------------------------
Shares Amount
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS A
Shares sold 1,359,992 1,236,886 $ 10,600,735 $ 8,356,406
Shares issued in reinvestment of
dividends 27,719 16,294 226,075 119,186
Shares repurchased (841,650) (898,109) (6,529,210) (5,898,251)
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 546,061 355,071 $ 4,297,600 $ 2,577,341
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS B
Shares sold 226,852 335,881 $ 1,760,369 $ 2,276,274
Shares issued in reinvestment of
dividends 10,594 6,681 86,674 48,558
Shares repurchased (204,588) (162,230) (1,588,671) (1,045,467)
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 32,858 180,332 $ 258,372 $ 1,279,365
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS C
Shares sold 186,853 216,791 $ 1,437,277 $ 1,471,332
Shares issued in reinvestment of
dividends 7,898 5,016 64,524 36,385
Shares repurchased (160,903) (90,706) (1,237,474) (626,275)
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 33,848 131,101 $ 264,327 $ 881,442
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS K
Shares sold 242,188 42,861 $ 1,876,104 $ 288,767
Shares issued in reinvestment of
dividends 11,599 7,640 94,838 55,604
Shares repurchased (14,508) (2,533) (111,416) (18,219)
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 239,279 47,968 $ 1,859,526 $ 326,152
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
117
/ / The Park Avenue Portfolio
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 2004
/ / THE GUARDIAN BAILLIE GIFFORD INTERNATIONAL GROWTH FUND
<Table>
<Caption>
Year Ended December 31, Year Ended December 31,
2004 2003 2004 2003
- ---------------------------------------------------------------------------------------------------------------------------------
Shares Amount
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS A
Shares sold 662,514 10,537,973 $ 7,884,998 $ 97,112,928
Shares issued in reinvestment of
dividends 7,506 5,562 87,669 55,072
Shares repurchased (834,343) (13,119,742) (9,889,156) (123,103,708)
- ---------------------------------------------------------------------------------------------------------------------------------
NET DECREASE (164,323) (2,576,207) $ (1,916,489) $ (25,935,708)
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS B
Shares sold 28,247 37,373 $ 307,868 $ 344,699
Shares repurchased (129,102) (92,815) (1,401,616) (815,798)
- ---------------------------------------------------------------------------------------------------------------------------------
NET DECREASE (100,855) (55,442) $ (1,093,748) $ (471,099)
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS C
Shares sold 27,182 1,537 $ 308,977 $ 27,531
Shares repurchased (2,578) (3,434) (27,430) (28,063)
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) 24,604 (1,897) $ 281,547 $ (532)
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS K
Shares sold 53,942 3,672 $ 648,581 $ 51,596
Shares repurchased (2,052) (53) (23,464) (489)
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 51,890 3,619 $ 625,117 $ 51,107
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
/ / THE GUARDIAN BAILLIE GIFFORD EMERGING MARKETS FUND
<Table>
<Caption>
Year Ended December 31, Year Ended December 31,
2004 2003 2004 2003
- ---------------------------------------------------------------------------------------------------------------------------------
Shares Amount
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS A
Shares sold 1,405,868 2,873,147 $ 18,918,924 $ 26,734,981
Shares issued in reinvestment of
dividends and distributions 172,261 -- 2,480,952 --
Shares repurchased (869,934) (2,744,885) (11,026,232) (25,296,414)
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 708,195 128,262 $ 10,373,644 $ 1,438,567
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS B
Shares sold 91,087 150,218 $ 1,115,800 $ 1,342,915
Shares issued in reinvestment of
distributions 37,243 -- 494,590 --
Shares repurchased (42,565) (119,951) (506,264) (1,037,985)
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 85,765 30,267 $ 1,104,126 $ 304,930
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS C
Shares sold 54,177 44,398 $ 643,204 $ 373,501
Shares issued in reinvestment of
distributions 38,909 -- 518,275 --
Shares repurchased (9,827) (46,386) (121,577) (397,512)
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) 83,259 (1,988) $ 1,039,902 $ (24,011)
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS K
Shares sold 55,567 9,274 $ 719,161 $ 86,943
Shares issued in reinvestment of
dividends and distributions 43,129 -- 613,008 --
Shares repurchased (11,138) (4,707) (153,558) (55,386)
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 87,558 4,567 $ 1,178,611 $ 31,557
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
118
/ / The Park Avenue Portfolio
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 2004
/ / THE GUARDIAN INVESTMENT QUALITY BOND FUND
<Table>
<Caption>
Year Ended December 31, Year Ended December 31,
2004 2003 2004 2003
- ---------------------------------------------------------------------------------------------------------------------------------
Shares Amount
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS A
Shares sold 1,063,835 3,296,812 $ 10,712,545 $ 34,079,857
Shares issued in reinvestment of
dividends and distributions 502,991 802,794 5,039,162 8,219,350
Shares repurchased (5,293,237) (6,470,579) (53,080,160) (66,786,391)
- ---------------------------------------------------------------------------------------------------------------------------------
NET DECREASE (3,726,411) (2,370,973) $ (37,328,453) $ (24,487,184)
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS B
Shares sold 87,162 350,698 $ 881,154 $ 3,646,670
Shares issued in reinvestment of
dividends and distributions 65,499 98,401 655,658 1,005,080
Shares repurchased (307,375) (506,012) (3,078,041) (5,234,314)
- ---------------------------------------------------------------------------------------------------------------------------------
NET DECREASE (154,714) (56,913) $ (1,541,229) $ (582,564)
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS C
Shares sold 9,411 51,395 $ 95,145 $ 533,062
Shares issued in reinvestment of
dividends and distributions 43,962 58,874 440,050 600,919
Shares repurchased (23,399) (45,445) (234,564) (467,508)
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 29,974 64,824 $ 300,631 $ 666,473
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS K
Shares sold 92,817 26,977 $ 935,863 $ 279,706
Shares issued in reinvestment of
dividends and distributions 44,606 55,230 447,123 564,721
Shares repurchased (11,921) (5,155) (120,297) (52,997)
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 125,502 77,052 $ 1,262,689 $ 791,430
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
/ / THE GUARDIAN LOW DURATION BOND FUND
<Table>
<Caption>
Period from Period from
Year Ended July 30, 2003+ to Year Ended July 30, 2003+ to
December 31, 2004 December 31, 2003 December 31, 2004 December 31, 2003
- ---------------------------------------------------------------------------------------------------------------------------------
Shares Amount
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS A
Shares sold 217,235 844,512 $ 2,176,482 $ 8,444,850
Shares issued in reinvestment of
dividends 20,264 6,175 202,280 61,772
Shares repurchased (125,558) (7,066) (1,252,947) (70,762)
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 111,941 843,621 $ 1,125,815 $ 8,435,860
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS B
Shares sold 97,549 768,810 $ 974,331 $ 7,688,450
Shares issued in reinvestment of
dividends 12,212 3,565 121,895 35,669
Shares repurchased (6,485) -- (64,820) --
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 103,276 772,375 $ 1,031,406 $ 7,724,119
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS C
Shares sold 18,572 755,679 $ 185,410 $ 7,556,708
Shares issued in reinvestment of
dividends 11,618 3,529 115,977 35,314
Shares repurchased (2,131) (1) (21,257) (10)
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 28,059 759,207 $ 280,130 $ 7,592,012
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS K
Shares sold 8,500 750,005 $ 84,748 $ 7,500,050
Shares issued in reinvestment of
dividends 14,202 4,625 141,773 46,272
Shares repurchased (62) -- (619) --
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 22,640 754,630 $ 225,902 $ 7,546,322
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
+ Commencement of operations.
- --------------------------------------------------------------------------------
119
/ / The Park Avenue Portfolio
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 2004
/ / THE GUARDIAN HIGH YIELD BOND FUND
<Table>
<Caption>
Year Ended December 31, Year Ended December 31,
2004 2003 2004 2003
- ---------------------------------------------------------------------------------------------------------------------------------
Shares Amount
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS A
Shares sold 1,934,200 1,700,337 $ 14,283,811 $ 11,968,468
Shares issued in reinvestment of
dividends 439,968 413,138 3,265,041 2,932,687
Shares repurchased (536,446) (1,462,685) (3,988,418) (10,413,890)
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 1,837,722 650,790 $ 13,560,434 $ 4,487,265
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS B
Shares sold 38,772 112,748 $ 286,046 $ 794,370
Shares issued in reinvestment of
dividends 78,636 83,788 582,493 593,996
Shares repurchased (140,632) (97,832) (1,041,229) (688,181)
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) (23,224) 98,704 $ (172,690) $ 700,185
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS C
Shares sold 15,621 63,604 $ 115,550 $ 454,494
Shares issued in reinvestment of
dividends 81,203 81,823 601,376 580,074
Shares repurchased (13,136) (47,186) (96,779) (339,768)
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 83,688 98,241 $ 620,147 $ 694,800
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS K
Shares sold 47,295 10,354 $ 352,627 $ 75,093
Shares issued in reinvestment of
dividends 89,467 88,340 663,370 627,000
Shares repurchased (6,387) (4) (47,416) (28)
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 130,375 98,690 $ 968,581 $ 702,065
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
/ / THE GUARDIAN TAX-EXEMPT FUND
<Table>
<Caption>
Year Ended December 31, Year Ended December 31,
2004 2003 2004 2003
- ---------------------------------------------------------------------------------------------------------------------------------
Shares Amount
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS A
Shares sold 171,456 746,166 $ 1,759,539 $ 7,845,141
Shares issued in reinvestment of
dividends and distributions 417,665 531,383 4,260,609 5,543,478
Shares repurchased (292,175) (4,350,043) (2,999,696) (45,456,417)
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) 296,946 (3,072,494) $ 3,020,452 $ (32,067,798)
- ---------------------------------------------------------------------------------------------------------------------------------
CLASS C
Shares sold 10,161 49,048 $ 103,572 $ 518,954
Shares issued in reinvestment of
dividends and distributions 47,821 62,083 487,634 646,799
Shares repurchased (31,129) (14,571) (316,606) (153,002)
- ---------------------------------------------------------------------------------------------------------------------------------
NET INCREASE 26,853 96,560 $ 274,600 $ 1,012,751
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
- --------------------------------------------------------------------------------
120
/ / The Park Avenue Portfolio
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 2004
/ / THE GUARDIAN CASH MANAGEMENT FUND
<Table>
<Caption>
Year Ended December 31,
2004 2003
- ---------------------------------------------------------------------------------------------------------
Shares @ $1 per share
- ---------------------------------------------------------------------------------------------------------
CLASS A
Shares sold 176,701,322 234,972,577
Shares issued in reinvestment of dividends 2,621,389 2,306,769
Shares repurchased (266,534,396) (366,117,487)
- ---------------------------------------------------------------------------------------------------------
NET DECREASE (87,211,685) (128,838,141)
- ---------------------------------------------------------------------------------------------------------
CLASS B
Shares sold 2,629,517 5,150,561
Shares issued in reinvestment of dividends 50,094 30,959
Shares repurchased (7,034,259) (11,168,541)
- ---------------------------------------------------------------------------------------------------------
NET DECREASE (4,354,648) (5,987,021)
- ---------------------------------------------------------------------------------------------------------
CLASS C
Shares sold 572,903 436,733
Shares issued in reinvestment of dividends 49,455 19,006
Shares repurchased (1,082,301) (700,634)
- ---------------------------------------------------------------------------------------------------------
NET DECREASE (459,943) (244,895)
- ---------------------------------------------------------------------------------------------------------
CLASS K
Shares sold 8,049,743 3,114,743
Shares issued in reinvestment of dividends 46,831 15,352
Shares repurchased (7,355,248) (1,947,265)
- ---------------------------------------------------------------------------------------------------------
NET INCREASE 741,326 1,182,830
- ---------------------------------------------------------------------------------------------------------
</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 year ended December 31, 2004,
none of the Funds borrowed against this line of credit.
The Funds are obligated to pay State Street Bank and Trust Company and Bank
of Montreal a commitment fee computed at a rate of .08% per annum on the average
daily unused portion of the revolving credit.
NOTE 10. INVESTMENTS IN AFFILIATES(1)
A summary of GAAF transactions in affiliated securities during the year
ended December 31, 2004 is set forth below:
<Table>
<Caption>
BALANCE OF BALANCE OF DIVIDENDS
SHARES GROSS SHARES INCLUDED NET REALIZED
HELD PURCHASES GROSS HELD VALUE IN GAINS FROM
DECEMBER 31, AND SALES AND DECEMBER 31, DECEMBER 31, DIVIDEND UNDERLYING
NAME OF ISSUER 2003 ADDITIONS REDUCTIONS 2004 2004 INCOME FUNDS
-------------- ------------ --------- ---------- ------------ ------------ ---------- ------------
Non-Controlled Affiliates
- ------------------------------
The Guardian Investment
Quality Bond Fund, Class A 2,190,079 -- 2,190,079 -- -- $ 451,709 $46,786
Majority-Owned Subsidiary
- ------------------------------
The Guardian S&P 500 Index
Fund, Class A 15,277,311 -- -- 15,277,311 $126,801,679 1,735,502 --
<Caption>
NET REALIZED
GAIN
NAME OF ISSUER ON SALES
-------------- ------------
Non-Controlled Affiliates
- ------------------------------
The Guardian Investment
Quality Bond Fund, Class A $653,915
Majority-Owned Subsidiary
- ------------------------------
The Guardian S&P 500 Index
Fund, Class A --
</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.
- --------------------------------------------------------------------------------
121
/ / The Park Avenue Portfolio
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 2004
NOTE 11. MANAGEMENT INFORMATION (UNAUDITED)
The trustees and officers of the Portfolio are named below. Information
about their principal occupations and certain other affiliations during the past
five years is also provided. The business address of each trustee and officer is
7 Hanover Square, New York, New York 10004, unless otherwise noted. The
"Guardian Fund Complex" referred to in this biographical information is composed
of (1) the Portfolio, (2) The Guardian Variable Contract Funds, Inc. (a series
fund that issues its shares in seven series), (3) The Guardian Bond Fund, Inc.,
(4) The Guardian Cash Fund, Inc. and (5) GIAC Funds, Inc. (a series fund that
issues its shares in three series).
<Table>
<Caption>
NUMBER
OF FUNDS
IN THE
GUARDIAN
TERM OF FUND
OFFICE AND COMPLEX
POSITION LENGTH OF OVERSEEN
NAME, ADDRESS AND WITH TIME PRINCIPAL OCCUPATIONS BY
DATE OF BIRTH PORTFOLIO SERVED+ DURING PAST 5 YEARS TRUSTEE
- -----------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES*
Arthur V. Ferrara Trustee Since 1987 Retired. Director and former Chairman of the 25
(8/12/30) Board and Chief Executive Officer, The
Guardian Life Insurance Company of America.
Director (Trustee) of all of the mutual funds
within the Guardian Fund Complex.
Leo R. Futia Trustee Since 1982 Retired. Director and former Chairman of the 25
(8/27/19) Board and Chief Executive Officer, The
Guardian Life Insurance Company of America.
Director (Trustee) of all of the mutual funds
within the Guardian Fund Complex.
Dennis J. Manning Trustee Since 2003 President and Chief Executive Officer, The 25
81 Graenest Ridge Road Guardian Life Insurance Company of America
Wilton, Connecticut since 1/03; President and Chief Operating
06897 Officer, 1/02 to 12/02; Executive Vice
(1/26/47) President and Chief Operating Officer, 1/01 to
12/01; Executive Vice President, Individual
Markets and Group Pensions, 1/99 to 12/00.
Director (Trustee) of all of the mutual funds
within the Guardian Fund Complex.
DISINTERESTED TRUSTEES
Frank J. Fabozzi, Ph.D. Trustee Since 1992 Adjunct Professor of Finance, School of 25
(8/24/48) Management -- Yale University, 2/94 to
present; Editor, Journal of Portfolio
Management. Director (Trustee) of all of the
mutual funds within the Guardian Fund Complex.
Anne M. Goggin, Esq. Trustee Since 2004 Partner, Edwards and Angell, LLP, 4/04 to 25
(11/28/48) 8/04; Chief Counsel, Metropolitan Life
Insurance Company, 6/00 to 12/03; Senior Vice
President and General Counsel, New England
Life Insurance Company, 6/00 to 12/03;
Chairman, President and Chief Executive
Officer, MetLife Advisors LLC, 6/99 to 12/03;
Chairman of the Board, Metropolitan Series
Fund, 1/02 to 12/03; Chairman of the Board,
New England Zenith Fund, 6/99 to 12/03.
Director (Trustee) of all of the mutual funds
within the Guardian Fund Complex.
<Caption>
NAME, ADDRESS AND OTHER
DATE OF BIRTH DIRECTORSHIPS
- ------------------------- ----------------------------
INTERESTED TRUSTEES*
Arthur V. Ferrara Director of various mutual
(8/12/30) funds sponsored by Gabelli
Asset Management.
Leo R. Futia None.
(8/27/19)
Dennis J. Manning Director of The Guardian
81 Graenest Ridge Road Life Insurance Company of
Wilton, Connecticut America and The Guardian
06897 Insurance & Annuity Company,
(1/26/47) Inc. Manager, Guardian
Investor Services LLC and
Park Avenue Securities LLC.
Director of various Guardian
Life subsidiaries.
DISINTERESTED TRUSTEES
Frank J. Fabozzi, Ph.D. Director (Trustee) of
(8/24/48) various closed-end
investment companies
sponsored by BlackRock
Financial Management.
Director of BlackRock Funds
(47 funds).
Anne M. Goggin, Esq. None.
(11/28/48)
</Table>
* "Interested" Trustee means one who is an "interested person" under the
Investment Company Act of 1940 by virtue of a current or past position with
The Guardian Life Insurance Company of America, the indirect parent company of
Guardian Investor Services LLC, the investment adviser of certain Funds in the
Guardian Fund Complex.
+ There is no set term of office for Trustees and Officers. The table reflects
the year from which each person has served as Trustee and/or Officer.
- --------------------------------------------------------------------------------
122
/ / The Park Avenue Portfolio
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 2004
<Table>
<Caption>
NUMBER
OF FUNDS
IN THE
GUARDIAN
TERM OF FUND
OFFICE AND COMPLEX
POSITION LENGTH OF OVERSEEN
NAME, ADDRESS AND WITH TIME PRINCIPAL OCCUPATIONS BY
DATE OF BIRTH PORTFOLIO SERVED+ DURING PAST 5 YEARS TRUSTEE
- -----------------------------------------------------------------------------------------------------------
William W. Hewitt, Jr. Trustee Since 1989 Retired. Former Executive Vice President, 25
(7/28/28) Shearson Lehman Brothers, Inc. Director
(Trustee) of all of the mutual funds within
the Guardian Fund Complex.
Sidney I. Lirtzman, Ph.D. Trustee Since 1987 Emanuel Saxe Professor of Management 9/96 to 25
200 East 57th Street present, City University of New York -- Baruch
New York, New York College; Dean Emeritus of the Zicklin School
10022 of Business; Dean from 10/95 to 9/02; Interim
(11/9/30) President 9/99 to 9/00. President, Fairfield
Consulting Associates, Inc. Director (Trustee)
of all of the mutual funds within the Guardian
Fund Complex.
Carl W. Schafer Trustee Since 1996 President, Atlantic Foundation (a private 25
66 Witherspoon Street, charitable foundation). Director of Labor
#1100 Ready, Inc. (provider of temporary labor) and
Princeton, New Jersey Frontier Oil Corporation. Director (Trustee)
08542 of all of the mutual funds within the Guardian
(1/16/36) Fund Complex.
Robert G. Smith, Ph.D. Trustee Since 1982 Chairman and Chief Executive Officer, Smith 25
132 East 72nd Street, Affiliated Capital Corp. since 4/82. Director
Apt. #1 (Trustee) of all of the mutual funds within
New York, New York the Guardian Fund Complex.
10021
(3/9/32)
<Caption>
NAME, ADDRESS AND OTHER
DATE OF BIRTH DIRECTORSHIPS
- ------------------------- ----------------------------
William W. Hewitt, Jr. None.
(7/28/28)
Sidney I. Lirtzman, Ph.D. Director, since 6/01
200 East 57th Street Youthstream, Inc. Member,
New York, New York Advisory Board of Directors,
10022 New York City Independent
(11/9/30) Budget Office 5/98 to 5/01.
Carl W. Schafer Director (Trustee) of
66 Witherspoon Street, various mutual funds
#1100 sponsored by UBS Global
Princeton, New Jersey Asset Management Inc. (f/k/a
08542 Mitchell Hutchins Asset
(1/16/36) Management, Inc. and UBS
PaineWebber, Inc.), Harding
Loevner (4 funds) and Ell
Realty Securities Trust (2
funds).
Robert G. Smith, Ph.D. Governor appointments as
132 East 72nd Street, Director of New York Health
Apt. #1 Care Reform Act Charitable
New York, New York Organization and Nassau
10021 County Interim Finance
(3/9/32) Authority. Senior private
member of the New York State
Financial Control Board for
New York City. Senior
Director for the New York
State Comptroller's Invest-
ment Advisory Committee for
State Pension Funds (Common
Fund).
</Table>
<Table>
<Caption>
TERM OF NUMBER OF FUNDS
OFFICE AND IN THE
POSITION LENGTH OF GUARDIAN FUND
NAME, ADDRESS AND WITH TIME PRINCIPAL OCCUPATIONS COMPLEX FOR WHICH
DATE OF BIRTH PORTFOLIO SERVED+ DURING PAST 5 YEARS OFFICER SERVES
- -----------------------------------------------------------------------------------------------------------------------------------
OFFICERS
Joseph A. Caruso Senior Vice Since 1992 Director, The Guardian Life Insurance Company of 25
(6/13/52) President and America, since 1/05; Senior Vice President and Corporate
Secretary Secretary, The Guardian Life Insurance Company of
America since 1/01; Vice President and Corporate
Secretary prior thereto. Director, Senior Vice President
and Secretary, The Guardian Insurance & Annuity Company,
Inc. Manager, Senior Vice President and Corporate
Secretary, Guardian Investor Services LLC. Director,
Senior Vice President and Secretary, Park Avenue Life
Insurance Company; Manager, Park Avenue Securities LLC;
Senior Vice President and Secretary of Guardian Baillie
Gifford Limited, and all of the mutual funds within the
Guardian Fund Complex. Director and Officer of various
Guardian Life subsidiaries.
</Table>
+ There is no set term of office for Trustees and Officers. The table reflects
the year from which each person has served as Trustee and/or Officer.
- --------------------------------------------------------------------------------
123
/ / The Park Avenue Portfolio
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 2004
<Table>
<Caption>
TERM OF NUMBER OF FUNDS
OFFICE AND IN THE
POSITION LENGTH OF GUARDIAN FUND
NAME, ADDRESS AND WITH TIME PRINCIPAL OCCUPATIONS COMPLEX FOR WHICH
DATE OF BIRTH PORTFOLIO SERVED+ DURING PAST 5 YEARS OFFICER SERVES
- -----------------------------------------------------------------------------------------------------------------------------------
Howard W. Chin Managing Since 1997 Managing Director, The Guardian Life Insurance Company 15
(8/20/52) Director of America. Officer of various mutual funds within the
Guardian Fund Complex.
Robert J. Crimmins, Jr. Senior Since 2003 Senior Director, The Guardian Life Insurance Company of 15
(12/4/60) Director America since 3/01. Assistant Vice President, Fixed
Income Investments, prior thereto. Officer of various
mutual funds within the Guardian Fund Complex.
Richard A. Cumiskey Chief Since 2002 Second Vice President, Equity Administration and 25
(8/14/60) Compliance Oversight, The Guardian Life Insurance Company of
Officer America since 1/01; Assistant Vice President, Equity
Administration and Oversight prior thereto. Senior Vice
President and Chief Compliance Officer of The Guardian
Insurance & Annuity Company, Inc. and Guardian Investor
Services LLC since 4/04; Second Vice President and
Compliance Officer prior thereto. Chief Compliance
Officer of all of the mutual funds within the Guardian
Fund Complex.
Richard A. Goldman Managing Since 2001 Managing Director, The Guardian Life Insurance Company 23
(6/25/62) Director of America since 7/01. Director, Citigroup Asset
Management prior thereto. Officer of various mutual
funds within the Guardian Fund Complex.
Alexander M. Grant, Jr. Managing Since 1993 Managing Director, The Guardian Life Insurance Company 15
(2/22/49) Director of America. Officer of various mutual funds within the
Guardian Fund Complex.
Edward H. Hocknell Vice President Since 1997 Partner, Baillie Gifford & Co. Director, Baillie Gifford 16
c/o Baillie Gifford Overseas Limited. Officer of various mutual funds within
Overseas, the Guardian Fund Complex.
Limited
1 Greenside Row
Edinburgh, EH1 3AN,
Scotland
(11/14/60)
Jonathan C. Jankus Managing Since 1995 Managing Director, The Guardian Life Insurance Company 20
(5/19/47) Director of America. Officer of various mutual funds within the
Guardian Fund Complex.
Stewart M. Johnson Senior Since 2002 Senior Director, The Guardian Life Insurance Company of 15
(10/21/52) Director America since 1/02. Second Vice President from 12/00 to
1/02; Assistant Vice President prior thereto. Officer of
various mutual funds within the Guardian Fund Complex.
Peter J. Liebst Managing Since 1999 Managing Director, The Guardian Life Insurance Company 20
(4/7/56) Director of America. Officer of various mutual funds within the
Guardian Fund Complex.
R. Robin Menzies Vice President Since 1991 Partner, Baillie Gifford & Co. Director, Baillie Gifford 16
c/o Baillie Gifford Overseas Limited. Director, Guardian Baillie Gifford
Overseas, Limited. Trustee, Baillie Gifford Funds, Inc. (2 funds).
Limited Officer of various mutual funds within the Guardian Fund
1 Greenside Row Complex.
Edinburgh, EH1 3AN,
Scotland
(10/30/52)
Nydia Morrison Controller Since 2003 Director, Mutual Fund Reporting, The Guardian Life 25
(11/22/58) Insurance Company of America since 5/04; Manager prior
thereto. Officer of all of the mutual funds within the
Guardian Fund Complex.
</Table>
+ There is no set term of office for Trustees and Officers. The table reflects
the year from which each person has served as Trustee and/or Officer.
- --------------------------------------------------------------------------------
124
/ / The Park Avenue Portfolio
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 2004
<Table>
<Caption>
TERM OF NUMBER OF FUNDS
OFFICE AND IN THE
POSITION LENGTH OF GUARDIAN FUND
NAME, ADDRESS AND WITH TIME PRINCIPAL OCCUPATIONS COMPLEX FOR WHICH
DATE OF BIRTH PORTFOLIO SERVED+ DURING PAST 5 YEARS OFFICER SERVES
- -----------------------------------------------------------------------------------------------------------------------------------
Frank L. Pepe Vice President Since 1985 Vice President and Equity Controller, The Guardian Life 25
(3/26/42) and Treasurer Insurance Company of America. Senior Vice President and
Controller, The Guardian Insurance & Annuity Company,
Inc. since 4/04; Vice President and Controller prior
thereto. Senior Vice President and Controller, Guardian
Investor Services LLC. Vice President and Treasurer of
all of the mutual funds within the Guardian Fund
Complex.
Richard T. Potter, Jr. Vice President Since 1992 Vice President and Equity Counsel, The Guardian Life 25
(7/20/54) and Counsel Insurance Company of America. Senior Vice President and
Counsel, The Guardian Insurance & Annuity Company, Inc.
and Guardian Investor Services LLC since 4/04; Vice
President and Counsel prior thereto. Vice President and
Counsel of Park Avenue Securities LLC and all of the
mutual funds within the Guardian Fund Complex.
Robert A. Reale Managing Since 2001 Managing Director, The Guardian Life Insurance Company 25
(6/12/60) Director of America, The Guardian Insurance & Annuity Company,
Inc. and Guardian Investor Services LLC since 3/01;
Second Vice President 10/99 to 2/01. Assistant Vice
President, Metropolitan Life prior thereto. Officer of
all of the mutual funds within the Guardian Fund
Complex.
Thomas G. Sorell President Since 1997 Executive Vice President and Chief Investment Officer, 25
(3/3/55) The Guardian Life Insurance Company of America since
1/03; Senior Managing Director, Fixed Income Securities
since 3/00; Vice President, Fixed Income Securities
prior thereto. Managing Director, Investments: Park
Avenue Life Insurance Company. President of all of the
mutual funds within the Guardian Fund Complex.
Donald P. Sullivan, Jr. Vice President Since 1995 Vice President, Equity Administration, The Guardian Life 25
(12/24/54) Insurance Company of America. Vice President, The
Guardian Insurance & Annuity Company, Inc. and Guardian
Investor Services LLC. Officer of all of the mutual
funds within the Guardian Fund Complex.
Gregory L. Tuorto Director Since 2004 Director, The Guardian Life Insurance Company of America 16
(5/28/71) since 6/02; prior thereto, Senior Managing Analyst,
Dreyfus Corporation from 4/02 to 6/02; Analyst and
Assistant Portfolio Manager, Tocqueville Asset
Management, prior thereto. Officer of various mutual
funds within the Guardian Fund Complex.
Matthew P. Ziehl Managing Since 2002 Managing Director, The Guardian Life Insurance Company 16
(4/29/67) Director of America since 1/02; prior thereto, Team Leader,
Salomon Brothers Asset Management, Inc. from 1/01 to
12/01; Co-Portfolio Manager, prior thereto. Officer of
various mutual funds within the Guardian Fund Complex.
</Table>
The Statement of Additional Information includes additional information
about fund trustees and is available upon request, without charge, by calling
1-800-221-3253 or by writing to Guardian Investor Services LLC at 7 Hanover
Square, New York, New York 10004.
+ There is no set term of office for Trustees and Officers. The table reflects
the year from which each person has served as Trustee and/or Officer.
- --------------------------------------------------------------------------------
125
/ / The Park Avenue Portfolio
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:
Year ended 12/31/2004...................... $30.08 $ 0.34 $ 1.35 $ 1.69 $(0.40)
Year ended 12/31/2003...................... 25.03 0.23 5.00 5.23 (0.18)
Year ended 12/31/2002...................... 32.00 0.17 (7.06) (6.89) (0.08)
Year ended 12/31/2001...................... 41.18 0.12 (9.06) (8.94) (0.03)
Year ended 12/31/2000...................... 59.42 (0.09) (10.57) (10.66) (0.00)+
CLASS B:
Year ended 12/31/2004...................... 28.72 (0.20) 1.54 1.34 --
Year ended 12/31/2003...................... 23.99 (0.16) 4.89 4.73 --
Year ended 12/31/2002...................... 30.88 (0.20) (6.69) (6.89) --
Year ended 12/31/2001...................... 40.08 (0.23) (8.76) (8.99) --
Year ended 12/31/2000...................... 58.57 (0.43) (10.48) (10.91) --
CLASS C:
Year ended 12/31/2004...................... 28.37 (0.09) 1.34 1.25 --
Year ended 12/31/2003...................... 23.75 (0.16) 4.78 4.62 --
Year ended 12/31/2002...................... 30.64 (0.19) (6.70) (6.89) --
Year ended 12/31/2001...................... 39.85 (0.25) (8.75) (9.00) --
Period from 8/7/2000++ to 12/31/2000....... 58.01 (0.11) (12.59) (12.70) --
CLASS K:
Year ended 12/31/2004...................... 30.00 0.20 1.39 1.59 (0.36)
Year ended 12/31/2003...................... 24.96 0.11 5.02 5.13 (0.09)
Year ended 12/31/2002...................... 31.93 0.05 (7.02) (6.97) --
Period from 5/15/2001++ to 12/31/2001...... 35.55 0.00+ (3.41) (3.41) --
THE GUARDIAN UBS LARGE CAP VALUE FUND
CLASS A:
Year ended 12/31/2004...................... 12.82 0.08 1.59 1.67 (0.07)
Period from 2/3/2003++ to 12/31/2003....... 10.00 0.08 3.06 3.14 (0.07)
CLASS B:
Year ended 12/31/2004...................... 12.80 (0.01) 1.57 1.56 --
Period from 2/3/2003++ to 12/31/2003....... 10.00 0.00+ 3.06 3.06 (0.01)
CLASS C:
Year ended 12/31/2004...................... 12.80 (0.01) 1.57 1.56 --
Period from 2/3/2003++ to 12/31/2003....... 10.00 0.00+ 3.06 3.06 (0.01)
CLASS K:
Year ended 12/31/2004...................... 12.83 0.05 1.58 1.63 (0.04)
Period from 2/3/2003++ to 12/31/2003....... 10.00 0.05 3.07 3.12 (0.04)
THE GUARDIAN PARK AVENUE SMALL CAP FUND
CLASS A:
Year ended 12/31/2004...................... 19.05 (0.12) 2.90 2.78 --
Year ended 12/31/2003...................... 13.30 (0.10) 5.85 5.75 --
Year ended 12/31/2002...................... 15.74 (0.07) (2.37) (2.44) --
Year ended 12/31/2001...................... 16.93 (0.06) (1.13) (1.19) --
Year ended 12/31/2000...................... 17.48 (0.05) (0.37) (0.42) --
CLASS B:
Year ended 12/31/2004...................... 17.93 (0.27) 2.71 2.44 --
Year ended 12/31/2003...................... 12.64 (0.24) 5.53 5.29 --
Year ended 12/31/2002...................... 15.10 (0.20) (2.26) (2.46) --
Year ended 12/31/2001...................... 16.39 (0.20) (1.09) (1.29) --
Year ended 12/31/2000...................... 17.06 (0.20) (0.34) (0.54) --
CLASS C:
Year ended 12/31/2004...................... 17.83 (0.26) 2.66 2.40 --
Year ended 12/31/2003...................... 12.59 (0.27) 5.51 5.24 --
Year ended 12/31/2002...................... 15.07 (0.22) (2.26) (2.48) --
Year ended 12/31/2001...................... 16.39 (0.21) (1.11) (1.32) --
Period from 8/7/2000++ to 12/31/2000....... 19.37 (0.08) (2.77) (2.85) --
CLASS K:
Year ended 12/31/2004...................... 18.79 (0.16) 2.85 2.69 --
Year ended 12/31/2003...................... 13.15 (0.14) 5.78 5.64 --
Year ended 12/31/2002...................... 15.62 (0.11) (2.36) (2.47) --
Period from 5/15/2001++ to 12/31/2001...... 15.71 (0.07) (0.02) (0.09) --
</Table>
+ Rounds to less than $0.01.
++ Commencement of operations.
- --------------------------------------------------------------------------------
126
<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
- --------------------------------------------------------------------------------------------------------
-- $31.37 5.64% $ 980,872 0.88% 0.95% 75%
-- 30.08 20.95 1,133,468 0.89 0.72 74
-- 25.03 (21.56) 1,120,351 0.87 0.51 60
$(0.21) 32.00 (21.75) 1,779,818 0.83 0.31 143
(7.58) 41.18 (18.62) 2,589,059 0.79 (0.16) 108
-- 30.06 4.67 130,372 1.84 (0.02) 75
-- 28.72 19.72 165,274 1.84 (0.24) 74
-- 23.99 (22.31) 167,471 1.83 (0.44) 60
(0.21) 30.88 (22.46) 274,761 1.75 (0.61) 143
(7.58) 40.08 (19.34) 431,206 1.67 (1.03) 108
-- 29.62 4.41 6,551 2.06 (0.21) 75
-- 28.37 19.45 6,622 2.12 (0.52) 74
-- 23.75 (22.49) 5,884 2.07 (0.67) 60
(0.21) 30.64 (22.62) 7,594 1.96 (0.81) 143
(5.46) 39.85 (21.79)(a) 8,222 2.18(b) (1.29)(b) 108
-- 31.23 5.34 8,761 1.20 0.69 75
-- 30.00 20.58 7,145 1.20 0.41 74
-- 24.96 (21.83) 5,752 1.21 0.19 60
(0.21) 31.93 (9.63)(a) 7,229 1.22(b) 0.02(b) 143
(1.12) 13.30 13.43 26,676 1.44 0.68 32
(0.25) 12.82 31.48(a) 21,705 1.59(b) 0.78(b) 45
(1.12) 13.24 12.52 24,646 2.19 (0.07) 32
(0.25) 12.80 30.65(a) 21,378 2.33(b) 0.03(b) 45
(1.12) 13.24 12.52 23,507 2.19 (0.07) 32
(0.25) 12.80 30.65(a) 20,801 2.33(b) 0.04(b) 45
(1.12) 13.30 13.05 24,342 1.70 0.42 32
(0.25) 12.83 31.22(a) 20,944 1.88(b) 0.49(b) 45
(2.43) 19.40 14.74 181,068 1.21 (0.67) 127
-- 19.05 43.23 160,049 1.27 (0.67) 105
-- 13.30 (15.50) 111,803 1.25 (0.45) 108
-- 15.74 (7.03) 139,774 1.28 (0.37) 131
(0.13) 16.93 (2.35) 150,022 1.25 (0.31) 125
(2.43) 17.94 13.76 23,574 2.13 (1.59) 127
-- 17.93 41.85 22,989 2.21 (1.61) 105
-- 12.64 (16.29) 17,189 2.19 (1.40) 108
-- 15.10 (7.87) 20,876 2.18 (1.27) 131
(0.13) 16.39 (3.11) 24,977 2.12 (1.18) 125
(2.43) 17.80 13.62 9,757 2.23 (1.69) 127
-- 17.83 41.62 8,092 2.39 (1.79) 105
-- 12.59 (16.46) 5,824 2.40 (1.60) 108
-- 15.07 (8.05) 6,752 2.34 (1.43) 131
(0.13) 16.39 (14.67)(a) 7,033 2.22(b) (1.12)(b) 125
(2.43) 19.05 14.47 12,391 1.52 (0.97) 127
-- 18.79 42.89 9,893 1.55 (0.96) 105
-- 13.15 (15.81) 6,748 1.55 (0.75) 108
-- 15.62 (0.57)(a) 7,959 1.61(b) (0.77)(b) 131
</Table>
* Excludes the effect of sales load.
(a) Not annualized.
(b) Annualized.
- --------------------------------------------------------------------------------
127
/ / The Park Avenue Portfolio
FINANCIAL HIGHLIGHTS (CONTINUED)
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:
Year ended 12/31/2004...................... $12.71 $(0.03) $ 2.25 $ 2.22 --
Period from 2/3/2003+ to 12/31/2003........ 10.00 (0.01) 3.60 3.59 --
CLASS B:
Year ended 12/31/2004...................... 12.61 (0.12) 2.21 2.09 --
Period from 2/3/2003+ to 12/31/2003........ 10.00 (0.09) 3.58 3.49 --
CLASS C:
Year ended 12/31/2004...................... 12.61 (0.12) 2.21 2.09 --
Period from 2/3/2003+ to 12/31/2003........ 10.00 (0.10) 3.59 3.49 --
CLASS K:
Year ended 12/31/2004...................... 12.68 (0.04) 2.24 2.20 --
Period from 2/3/2003+ to 12/31/2003........ 10.00 (0.03) 3.59 3.56 --
THE GUARDIAN ASSET ALLOCATION FUND
CLASS A:
Year ended 12/31/2004...................... 10.63 0.16 0.88 1.04 $(0.24)
Year ended 12/31/2003...................... 8.45 0.14 2.20 2.34 (0.16)
Year ended 12/31/2002...................... 10.84 0.17 (2.38) (2.21) (0.18)
Year ended 12/31/2001...................... 13.00 0.30 (1.61) (1.31) (0.18)
Year ended 12/31/2000...................... 14.77 0.45 (0.29) 0.16 (0.44)
CLASS B:
Year ended 12/31/2004...................... 10.57 0.06 0.87 0.93 (0.10)
Year ended 12/31/2003...................... 8.41 0.05 2.18 2.23 (0.07)
Year ended 12/31/2002...................... 10.77 0.09 (2.37) (2.28) (0.08)
Year ended 12/31/2001...................... 12.95 0.19 (1.59) (1.40) (0.11)
Year ended 12/31/2000...................... 14.72 0.32 (0.27) 0.05 (0.33)
CLASS C:
Year ended 12/31/2004...................... 10.56 0.04 0.88 0.92 (0.07)
Year ended 12/31/2003...................... 8.39 0.02 2.19 2.21 (0.04)
Year ended 12/31/2002...................... 10.77 0.05 (2.38) (2.33) (0.05)
Year ended 12/31/2001...................... 12.94 0.17 (1.64) (1.47) (0.03)
Period from 8/7/2000+ to 12/31/2000........ 14.72 0.15 (0.78) (0.63) (0.23)
CLASS K:
Year ended 12/31/2004...................... 10.60 0.11 0.89 1.00 (0.18)
Year ended 12/31/2003...................... 8.43 0.09 2.19 2.28 (0.11)
Year ended 12/31/2002...................... 10.82 0.13 (2.39) (2.26) (0.13)
Period from 5/15/2001+ to 12/31/2001....... 12.06 0.11 (0.68) (0.57) --
THE GUARDIAN S&P 500 INDEX FUND
CLASS A:
Year ended 12/31/2004...................... 7.63 0.12 0.66 0.78 (0.11)
Year ended 12/31/2003...................... 6.04 0.08 1.59 1.67 (0.08)
Year ended 12/31/2002...................... 7.90 0.10 (1.86) (1.76) (0.10)
Year ended 12/31/2001...................... 9.07 0.06 (1.17) (1.11) (0.06)
Period from 7/25/2000+ to 12/31/2000....... 10.06 0.03 (0.99) (0.96) (0.03)
CLASS B:
Year ended 12/31/2004...................... 7.62 0.06 0.66 0.72 (0.06)
Year ended 12/31/2003...................... 6.03 0.03 1.59 1.62 (0.03)
Year ended 12/31/2002...................... 7.88 0.02 (1.85) (1.83) (0.02)
Year ended 12/31/2001...................... 9.05 0.01 (1.18) (1.17) (0.00)++
Period from 7/25/2000+ to 12/31/2000....... 10.06 0.00++ (1.01) (1.01) --
CLASS C:
Year ended 12/31/2004...................... 7.61 0.06 0.66 0.72 (0.06)
Year ended 12/31/2003...................... 6.03 0.03 1.58 1.61 (0.03)
Year ended 12/31/2002...................... 7.88 0.02 (1.85) (1.83) (0.02)
Year ended 12/31/2001...................... 9.05 0.01 (1.17) (1.16) (0.01)
Period from 7/25/2000+ to 12/31/2000....... 10.06 0.00++ (1.01) (1.01) --
CLASS K:
Year ended 12/31/2004...................... 7.63 0.08 0.66 0.74 (0.08)
Year ended 12/31/2003...................... 6.04 0.06 1.59 1.65 (0.06)
Year ended 12/31/2002...................... 7.90 0.05 (1.86) (1.81) (0.05)
Period from 5/15/2001+ to 12/31/2001....... 8.59 0.02 (0.69) (0.67) (0.02)
</Table>
+ Commencement of operations.
++ Rounds to less than $0.01.
- --------------------------------------------------------------------------------
128
<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
- ------------------------------------------------------------------------------------------------------------------------------
$(1.76) $13.17 18.14% $ 14,332 1.95% -- -- (0.25)% 53%
(0.88) 12.71 35.76 (c) 10,081 2.17(d) -- -- (0.07)(d) 94
(1.76) 12.94 17.22 11,652 2.71 -- -- (1.04) 53
(0.88) 12.61 34.76 (c) 9,737 2.91(d) -- -- (0.81)(d) 94
(1.76) 12.94 17.22 11,095 2.72 -- -- (1.04) 53
(0.88) 12.61 34.76 (c) 9,422 2.91(d) -- -- (0.81)(d) 94
(1.76) 13.12 18.01 11,807 2.07 -- -- (0.39) 53
(0.88) 12.68 35.46 (c) 9,492 2.35(d) -- -- (0.25)(d) 94
-- 11.43 9.84 111,486 0.41 0.76% 0.86% 1.30 0
-- 10.63 27.87 118,988 0.43 0.77 0.92(e) 1.25 0
-- 8.45 (20.64) 110,593 0.42 0.73 0.89(e) 1.60 4
(0.67) 10.84 (10.23) 169,386 0.47 0.63 0.83(e) 2.44 51
(1.49) 13.00 1.00 227,228 0.46 0.60 0.96(e) 3.07 11
-- 11.40 8.83 29,226 1.23 0.76 1.68 0.46 0
-- 10.57 26.65 32,863 1.27 0.77 1.75(e) 0.43 0
-- 8.41 (21.31) 29,064 1.25 0.73 1.71(e) 0.78 4
(0.67) 10.77 (10.99) 44,813 1.28 0.63 1.64(e) 1.62 51
(1.49) 12.95 0.26 51,024 1.28 0.60 1.76(e) 2.29 11
-- 11.41 8.68 8,431 1.42 0.76 1.87 0.35 0
-- 10.56 26.39 7,857 1.51 0.77 2.00(e) 0.19 0
-- 8.39 (21.70) 6,470 1.50 0.73 1.97(e) 0.58 4
(0.67) 10.77 (11.48) 8,080 1.46 0.63 1.82(e) 1.43 51
(0.92) 12.94 (4.18)(c) 8,544 1.49(d) 0.55(d) 1.93(d)(e) 2.61(d) 11
-- 11.42 9.51 9,293 0.68 0.76 1.13 1.13 0
-- 10.60 27.20 7,859 0.68 0.77 1.17(e) 1.04 0
-- 8.43 (21.05) 6,126 0.70 0.73 1.16(e) 1.39 4
(0.67) 10.82 (4.85)(c) 7,619 0.75(d) 0.72(d) 1.16(d)(e) 1.57(d) 51
-- 8.30 10.30 145,072 0.53 0.18 -- 1.50 1
-- 7.63 27.78 129,228 0.53 0.25 -- 1.26 4
-- 6.04 (22.35) 100,129 0.53 0.13 -- 1.03 10
-- 7.90 (12.25) 276,645 0.53 0.10 -- 0.87 1
(0.00)(f) 9.07 (9.53)(c) 167,487 0.53(d) 0.21(d) -- 0.71(d) 4
-- 8.28 9.40 13,394 1.28 0.45 -- 0.75 1
-- 7.62 26.94 12,070 1.28 0.61 -- 0.51 4
-- 6.03 (23.22) 8,472 1.28 0.52 -- 0.33 10
-- 7.88 (12.87) 9,705 1.28 0.47 -- 0.09 1
(0.00)(f) 9.05 (10.00)(c) 7,677 1.28(d) 0.47(d) -- (0.04)(d) 4
-- 8.27 9.41 9,842 1.28 0.49 -- 0.74 1
-- 7.61 26.77 8,796 1.28 0.67 -- 0.51 4
-- 6.03 (23.21) 6,175 1.28 0.57 -- 0.33 10
-- 7.88 (12.87) 7,598 1.28 0.49 -- 0.09 1
(0.00)(f) 9.05 (10.00)(c) 7,296 1.28(d) 0.47(d) -- (0.04)(d) 4
-- 8.29 9.72 10,244 0.93 0.16 -- 1.13 1
-- 7.63 27.31 7,594 0.93 0.21 -- 0.86 4
-- 6.04 (23.00) 5,722 0.93 0.10 -- 0.68 10
-- 7.90 (7.76)(c) 7,383 0.93(d) 0.15(d) -- 0.47(d) 1
</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) Reflects adjustments made on prior years' expense waivers.
(f) Rounds to less than $0.01.
- --------------------------------------------------------------------------------
129
/ / The Park Avenue Portfolio
FINANCIAL HIGHLIGHTS (CONTINUED)
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 GROWTH
FUND
CLASS A:
Year ended 12/31/2004...................... $11.43 $ 0.03 $ 1.83 $ 1.86 $(0.03)
Year ended 12/31/2003...................... 8.90 0.18 2.33 2.51 (0.01)
Year ended 12/31/2002...................... 11.09 0.06 (2.25) (2.19) --
Year ended 12/31/2001...................... 14.28 0.01 (3.20) (3.19) --
Year ended 12/31/2000...................... 23.36 (0.06) (5.52) (5.58) --
CLASS B:
Year ended 12/31/2004...................... 10.45 (0.29) 1.86 1.57 --
Year ended 12/31/2003...................... 8.22 (0.16) 2.36 2.20 --
Year ended 12/31/2002...................... 10.38 (0.19) (1.97) (2.16) --
Year ended 12/31/2001...................... 13.54 (0.20) (2.96) (3.16) --
Year ended 12/31/2000...................... 22.61 (0.11) (5.46) (5.57) --
CLASS C:
Year ended 12/31/2004...................... 10.47 (0.08) 1.67 1.59 --
Year ended 12/31/2003...................... 8.24 (0.08) 2.28 2.20 --
Year ended 12/31/2002...................... 10.40 (0.09) (2.07) (2.16) --
Year ended 12/31/2001...................... 13.55 (0.12) (3.03) (3.15) --
Period from 8/7/2000+ to 12/31/2000........ 19.19 (0.09) (2.20) (2.29) --
CLASS K:
Year ended 12/31/2004...................... 11.24 0.00++ 1.82 1.82 --
Year ended 12/31/2003...................... 8.76 0.00++ 2.45 2.45 --
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:
Year ended 12/31/2004...................... 12.39 0.05 2.85 2.90 (0.03)
Year ended 12/31/2003...................... 8.07 0.05 4.27 4.32 --
Year ended 12/31/2002...................... 8.45 0.01 (0.39) (0.38) --
Year ended 12/31/2001...................... 8.31 0.01 0.13 0.14 --
Year ended 12/31/2000...................... 11.13 (0.55) (2.05) (2.60) (0.22)
CLASS B:
Year ended 12/31/2004...................... 11.44 (0.05) 2.59 2.54 --
Year ended 12/31/2003...................... 7.55 (0.04) 3.93 3.89 --
Year ended 12/31/2002...................... 7.98 (0.10) (0.33) (0.43) --
Year ended 12/31/2001...................... 7.97 (0.10) 0.11 0.01 --
Year ended 12/31/2000...................... 10.65 0.08 (2.76) (2.68) --
CLASS C:
Year ended 12/31/2004...................... 11.47 (0.06) 2.61 2.55 --
Year ended 12/31/2003...................... 7.56 (0.04) 3.95 3.91 --
Year ended 12/31/2002...................... 8.00 (0.09) (0.35) (0.44) --
Year ended 12/31/2001...................... 7.98 (0.09) 0.11 0.02 --
Period from 8/7/2000+ to 12/31/2000........ 9.92 (0.08) (1.86) (1.94) --
CLASS K:
Year ended 12/31/2004...................... 12.19 0.01 2.79 2.80 (0.01)
Year ended 12/31/2003...................... 7.97 0.03 4.19 4.22 --
Year ended 12/31/2002...................... 8.36 (0.03) (0.36) (0.39) --
Period from 5/15/2001+ to 12/31/2001....... 8.35 (0.06) 0.07 0.01 --
</Table>
+ Commencement of operations.
++ Rounds to less than $0.01.
- --------------------------------------------------------------------------------
130
<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 REDEMPTION TAX RETURN END OF TOTAL PERIOD TO AVERAGE TO AVERAGE TURNOVER
TRANSACTIONS FEES OF CAPITAL PERIOD RETURN* (000'S OMITTED) NET ASSETS NET ASSETS RATE
- -----------------------------------------------------------------------------------------------------------------------------------
-- $0.00(a) -- $13.26 16.34% $35,106 1.94% 0.13% 24%
-- 0.03 -- 11.43 28.57 32,126 1.93 0.50 44
-- -- -- 8.90 (19.75) 47,948 1.62 0.29 45
-- -- -- 11.09 (22.34) 80,856 1.53 0.06 63
$(3.26) -- $(0.24) 14.28 (23.81) 94,482 1.45 (0.29) 78
-- 0.00(a) -- 12.02 15.02 6,307 3.08 (0.98) 24
-- 0.03 -- 10.45 27.13 6,535 3.19 (1.00) 44
-- -- -- 8.22 (20.81) 5,598 2.87 (0.98) 45
-- -- -- 10.38 (23.34) 8,228 2.62 (1.05) 63
(3.26) -- (0.24) 13.54 (24.56) 12,747 2.43 (1.27) 78
-- 0.00(a) -- 12.06 15.19 6,687 2.95 (0.89) 24
-- 0.03 -- 10.47 27.06 5,546 3.10 (0.93) 44
-- -- -- 8.24 (20.77) 4,381 2.85 (0.99) 45
-- -- -- 10.40 (23.25) 5,530 2.60 (1.04) 63
(3.11) -- (0.24) 13.55 (11.72)(b) 7,208 2.51(c) (1.52)(c) 78
-- 0.00(a) -- 13.06 16.19 8,792 2.04 0.00(a) 24
-- 0.03 -- 11.24 28.31 6,979 2.13 0.04 44
-- -- -- 8.76 (19.93) 5,407 1.86 0.01 45
-- -- -- 10.94 (15.59)(b) 6,753 1.84(c) (0.60)(c) 63
(0.59) 0.00(a) -- 14.67 23.53 61,975 1.88 0.42 71
-- -- -- 12.39 53.53 43,561 2.10 0.57 74
-- -- -- 8.07 (4.50) 27,356 2.10 (0.04) 81
-- -- -- 8.45 1.68 19,777 2.39 (0.19) 101
-- -- -- 8.31 (23.88) 18,439 2.18 (0.86) 101
(0.59) 0.00(a) -- 13.39 22.28 12,138 2.90 (0.58) 71
-- -- -- 11.44 51.52 9,389 3.20 (0.54) 74
-- -- -- 7.55 (5.39) 5,965 3.21 (1.16) 81
-- -- -- 7.98 0.13 6,023 3.51 (1.28) 101
-- -- -- 7.97 (25.16) 6,105 3.79 (2.54) 101
(0.59) 0.00(a) -- 13.43 22.30 12,291 2.85 (0.55) 71
-- -- -- 11.47 51.72 9,540 3.17 (0.51) 74
-- -- -- 7.56 (5.50) 6,306 3.12 (1.08) 81
-- -- -- 8.00 0.25 6,486 3.34 (1.12) 101
-- -- -- 7.98 (19.56)(b) 6,466 3.49(c) (2.31)(c) 101
(0.59) 0.00(a) -- 14.39 23.16 15,202 2.19 0.12 71
-- -- -- 12.19 52.95 11,803 2.38 0.29 74
-- -- -- 7.97 (4.67) 7,685 2.36 (0.32) 81
-- -- -- 8.36 0.12(b) 8,020 2.63(c) (1.23)(c) 101
</Table>
* Excludes the effect of sales load.
(a) Rounds to less than $0.01.
(b) Not annualized.
(c) Annualized.
- --------------------------------------------------------------------------------
131
/ / The Park Avenue Portfolio
FINANCIAL HIGHLIGHTS (CONTINUED)
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:
Year ended 12/31/2004...................... $10.09 $0.38 $ 0.03 $ 0.41 $(0.38)
Year ended 12/31/2003...................... 10.28 0.35 0.11 0.46 (0.35)
Year ended 12/31/2002...................... 9.86 0.44 0.45 0.89 (0.44)
Year ended 12/31/2001...................... 9.61 0.50 0.30 0.80 (0.50)
Year ended 12/31/2000...................... 9.33 0.60 0.28 0.88 (0.60)
CLASS B:
Year ended 12/31/2004...................... 10.09 0.30 0.02 0.32 (0.30)
Year ended 12/31/2003...................... 10.28 0.27 0.11 0.38 (0.27)
Year ended 12/31/2002...................... 9.86 0.37 0.45 0.82 (0.37)
Year ended 12/31/2001...................... 9.60 0.43 0.31 0.74 (0.43)
Period from 8/7/2000+ to 12/31/2000........ 9.41 0.22 0.19 0.41 (0.22)
CLASS C:
Year ended 12/31/2004...................... 10.09 0.30 0.02 0.32 (0.30)
Year ended 12/31/2003...................... 10.28 0.27 0.11 0.38 (0.27)
Year ended 12/31/2002...................... 9.86 0.37 0.45 0.82 (0.37)
Year ended 12/31/2001...................... 9.60 0.43 0.31 0.74 (0.43)
Period from 8/7/2000+ to 12/31/2000........ 9.41 0.22 0.19 0.41 (0.22)
CLASS K:
Year ended 12/31/2004...................... 10.10 0.34 0.03 0.37 (0.34)
Year ended 12/31/2003...................... 10.29 0.31 0.11 0.42 (0.31)
Year ended 12/31/2002...................... 9.87 0.40 0.45 0.85 (0.40)
Period from 5/15/2001+ to 12/31/2001....... 9.68 0.28 0.24 0.52 (0.28)
THE GUARDIAN LOW DURATION BOND FUND
CLASS A:
Year ended 12/31/2004...................... 10.02 0.23 (0.09) 0.14 (0.23)
Period from 7/30/2003+ to 12/31/2003....... 10.00 0.08 0.02 0.10 (0.08)
CLASS B:
Year ended 12/31/2004...................... 10.02 0.15 (0.09) 0.06 (0.15)
Period from 7/30/2003+ to 12/31/2003....... 10.00 0.05 0.02 0.07 (0.05)
CLASS C:
Year ended 12/31/2004...................... 10.02 0.15 (0.09) 0.06 (0.15)
Period from 7/30/2003+ to 12/31/2003....... 10.00 0.05 0.02 0.07 (0.05)
CLASS K:
Year ended 12/31/2004...................... 10.02 0.19 (0.09) 0.10 (0.19)
Period from 7/30/2003+ to 12/31/2003....... 10.00 0.06 0.02 0.08 (0.06)
THE GUARDIAN HIGH YIELD BOND FUND
CLASS A:
Year ended 12/31/2004...................... 7.45 0.52 0.13 0.65 (0.52)
Year ended 12/31/2003...................... 6.69 0.54 0.76 1.30 (0.54)
Year ended 12/31/2002...................... 7.19 0.55 (0.50) 0.05 (0.55)
Year ended 12/31/2001...................... 7.66 0.69 (0.47) 0.22 (0.69)
Year ended 12/31/2000...................... 8.98 0.77 (1.32) (0.55) (0.77)
CLASS B:
Year ended 12/31/2004...................... 7.45 0.47 0.12 0.59 (0.47)
Year ended 12/31/2003...................... 6.69 0.48 0.76 1.24 (0.48)
Year ended 12/31/2002...................... 7.18 0.50 (0.49) 0.01 (0.50)
Year ended 12/31/2001...................... 7.66 0.64 (0.48) 0.16 (0.64)
Year ended 12/31/2000...................... 8.97 0.68 (1.31) (0.63) (0.68)
CLASS C:
Year ended 12/31/2004...................... 7.45 0.47 0.12 0.59 (0.47)
Year ended 12/31/2003...................... 6.69 0.48 0.76 1.24 (0.48)
Year ended 12/31/2002...................... 7.18 0.50 (0.49) 0.01 (0.50)
Year ended 12/31/2001...................... 7.65 0.64 (0.47) 0.17 (0.64)
Period from 8/7/2000+ to 12/31/2000........ 8.47 0.28 (0.82) (0.54) (0.28)
CLASS K:
Year ended 12/31/2004...................... 7.45 0.49 0.13 0.62 (0.49)
Year ended 12/31/2003...................... 6.69 0.51 0.76 1.27 (0.51)
Year ended 12/31/2002...................... 7.19 0.53 (0.50) 0.03 (0.53)
Period from 5/15/2001+ to 12/31/2001....... 7.68 0.39 (0.49) (0.10) (0.39)
</Table>
+ Commencement of operations.
- --------------------------------------------------------------------------------
132
<Table>
<Caption>
DISTRIBUTIONS
FROM RATIOS/SUPPLEMENTAL DATA
NET REALIZED -----------------------------------
GAIN ON
INVESTMENTS NET ASSET NET ASSETS, NET
AND FOREIGN VALUE, END OF EXPENSES
CURRENCY RELATED REDEMPTION END OF TOTAL PERIOD TO AVERAGE
TRANSACTIONS FEES PERIOD RETURN* (000'S OMITTED) NET ASSETS(A)(B)
- ------------------------------------------------------------------------------------------
$(0.10) -- $10.02 4.10% $105,131 0.85%
(0.30) -- 10.09 4.53 143,536 0.85
(0.03) -- 10.28 9.25 170,658 0.85
(0.05) -- 9.86 8.55 144,900 0.86
-- -- 9.61 9.81 124,805 0.85
(0.10) -- 10.01 3.22 16,685 1.60
(0.30) -- 10.09 3.75 18,374 1.60
(0.03) -- 10.28 8.43 19,308 1.60
(0.05) -- 9.86 7.86 13,036 1.61
-- -- 9.60 4.40 (c) 8,493 1.60(d)
(0.10) -- 10.01 3.22 11,422 1.60
(0.30) -- 10.09 3.75 11,206 1.60
(0.03) -- 10.28 8.44 10,753 1.60
(0.05) -- 9.86 7.85 9,090 1.61
-- -- 9.60 4.39 (c) 8,356 1.60(d)
(0.10) -- 10.03 3.69 11,004 1.25
(0.30) -- 10.10 4.11 9,820 1.25
(0.03) -- 10.29 8.81 9,213 1.25
(0.05) -- 9.87 5.43 (c) 8,436 1.26(d)
-- -- 9.93 1.36 9,487 0.80
-- -- 10.02 0.99 (c) 8,457 0.80(d)
-- -- 9.93 0.61 8,695 1.55
-- -- 10.02 0.67 (c) 7,743 1.55(d)
-- -- 9.93 0.61 7,817 1.55
-- -- 10.02 0.67 (c) 7,611 1.55(d)
-- -- 9.93 0.96 7,718 1.20
-- -- 10.02 0.82 (c) 7,565 1.20(d)
-- $0.00(e) 7.58 9.15 57,250 0.85
-- -- 7.45 20.11 42,589 0.85
-- -- 6.69 0.96 33,894 0.85
-- -- 7.19 2.87 33,797 0.85
-- -- 7.66 (6.53) 38,646 0.85
-- 0.00(e) 7.57 8.20 10,013 1.60
-- -- 7.45 19.22 10,018 1.60
-- -- 6.69 0.35 8,336 1.60
-- -- 7.18 1.96 8,182 1.60
-- -- 7.66 (7.32) 7,567 1.74
-- 0.00(e) 7.57 8.20 10,110 1.60
-- -- 7.45 19.22 9,316 1.60
-- -- 6.69 0.35 7,710 1.60
-- -- 7.18 2.09 7,657 1.60
-- -- 7.65 (6.42)(c) 7,491 1.60(d)
-- 0.00(e) 7.58 8.72 10,734 1.25
-- -- 7.45 19.63 9,581 1.25
-- -- 6.69 0.55 7,944 1.25
-- -- 7.19 (1.31)(c) 7,893 1.25(d)
<Caption>
RATIOS/SUPPLEMENTAL DATA
- --------------------------------------------------------
EXPENSES NET
(EXCLUDING INVESTMENT
INTEREST EXPENSE) EXPENSES INCOME PORTFOLIO
TO AVERAGE SUBSIDIZED TO AVERAGE TURNOVER
NET ASSETS(A) BY GIS NET ASSETS RATE
- --------------------------------------------------------
0.85% 0.13% 3.74% 233%
0.85 0.11 3.40 257
0.85 0.08 4.37 275
0.85 0.09 5.11 414
0.85 0.09 6.41 344
1.60 0.28 2.99 233
1.60 0.27 2.65 257
1.60 0.27 3.58 275
1.60 0.31 4.31 414
1.60(d) 0.34(d) 5.78(d) 344
1.60 0.33 2.99 233
1.60 0.35 2.66 257
1.60 0.36 3.64 275
1.60 0.36 4.36 414
1.60(d) 0.34(d) 5.78(d) 344
1.25 0.06 3.34 233
1.25 0.05 3.00 257
1.25 0.03 4.00 275
1.25(d) 0.08(d) 4.48(d) 414
-- 0.69 2.25 68
-- 1.20(d) 1.87(d) 97
-- 0.70 1.51 68
-- 1.20(d) 1.11(d) 97
-- 0.73 1.51 68
-- 1.21(d) 1.11(d) 97
-- 0.39 1.86 68
-- 0.97(d) 1.46(d) 97
-- 0.34 7.00 95
-- 0.42 7.59 153
-- 0.45 8.17 69
-- 0.47 9.21 141
-- 0.38 9.03 163
-- 0.62 6.30 95
-- 0.72 6.85 153
-- 0.77 7.42 69
-- 0.78 8.42 141
-- 0.77 8.37 163
-- 0.59 6.29 95
-- 0.71 6.85 153
-- 0.77 7.42 69
-- 0.71 8.43 141
-- 0.63(d) 8.74(d) 163
-- 0.28 6.64 95
-- 0.33 7.20 153
-- 0.35 7.77 69
-- 0.41(d) 8.36(d) 141
</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.
(e) Rounds to less than $0.01.
- --------------------------------------------------------------------------------
133
/ / The Park Avenue Portfolio
FINANCIAL HIGHLIGHTS (CONTINUED)
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 TAX-EXEMPT FUND
CLASS A:
Year ended 12/31/2004...................... $10.31 $ 0.36 $0.08 $0.44 $ (0.36)
Year ended 12/31/2003...................... 10.51 0.37 0.18 0.55 (0.37)
Year ended 12/31/2002...................... 10.09 0.40 0.61 1.01 (0.40)
Year ended 12/31/2001...................... 10.10 0.41 0.06 0.47 (0.41)
Year ended 12/31/2000...................... 9.40 0.43 0.70 1.13 (0.43)
CLASS C:
Year ended 12/31/2004...................... 10.31 0.28 0.08 0.36 (0.28)
Year ended 12/31/2003...................... 10.51 0.29 0.18 0.47 (0.29)
Year ended 12/31/2002...................... 10.09 0.32 0.61 0.93 (0.32)
Year ended 12/31/2001...................... 10.10 0.34 0.06 0.40 (0.34)
Period from 8/7/2000+ to 12/31/2000........ 9.77 0.14 0.33 0.47 (0.14)
THE GUARDIAN CASH MANAGEMENT FUND
CLASS A:
Year ended 12/31/2004...................... 1.000 0.006 -- -- (0.006)
Year ended 12/31/2003...................... 1.000 0.004 -- -- (0.004)
Year ended 12/31/2002...................... 1.000 0.009 -- -- (0.009)
Year ended 12/31/2001...................... 1.000 0.032 -- -- (0.032)
Year ended 12/31/2000...................... 1.000 0.056 -- -- (0.056)
CLASS B:
Year ended 12/31/2004...................... 1.000 0.006 -- -- (0.006)
Year ended 12/31/2003...................... 1.000 0.002 -- -- (0.002)
Year ended 12/31/2002...................... 1.000 0.002 -- -- (0.002)
Year ended 12/31/2001...................... 1.000 0.025 -- -- (0.025)
Year ended 12/31/2000...................... 1.000 0.052 -- -- (0.052)
CLASS C:
Year ended 12/31/2004...................... 1.000 0.006 -- -- (0.006)
Year ended 12/31/2003...................... 1.000 0.002 -- -- (0.002)
Year ended 12/31/2002...................... 1.000 0.002 -- -- (0.002)
Year ended 12/31/2001...................... 1.000 0.025 -- -- (0.025)
Period from 8/7/2000+ to 12/31/2000........ 1.000 0.020 -- -- (0.020)
CLASS K:
Year ended 12/31/2004...................... 1.000 0.005 -- -- (0.005)
Year ended 12/31/2003...................... 1.000 0.002 -- -- (0.002)
Year ended 12/31/2002...................... 1.000 0.005 -- -- (0.005)
Period from 5/15/2001+ to 12/31/2001....... 1.000 0.013 -- -- (0.013)
</Table>
+ Commencement of operations.
- --------------------------------------------------------------------------------
134
<Table>
<Caption>
DISTRIBUTIONS
FROM RATIOS/SUPPLEMENTAL DATA
NET REALIZED ----------------------------------------------------------------------
GAIN ON NET
INVESTMENTS NET ASSET NET ASSETS, NET INVESTMENT
AND FOREIGN VALUE, END OF EXPENSES EXPENSES INCOME PORTFOLIO
CURRENCY RELATED END OF TOTAL PERIOD TO AVERAGE SUBSIDIZED TO AVERAGE TURNOVER
TRANSACTIONS PERIOD RETURN* (000'S OMITTED) NET ASSETS(A) BY GIS NET ASSETS RATE
- ----------------------------------------------------------------------------------------------------------------
$(0.20) $10.19 4.38% $ 82,118 0.87%(c) 0.09% 3.49% 161%
(0.38) 10.31 5.34 80,025 0.89(c) 0.09 3.52 68
(0.19) 10.51 10.20 113,852 0.87(c) 0.06 3.85 99
(0.07) 10.09 4.78 107,676 0.91(c) 0.09 4.03 181
-- 10.10 12.29 97,185 0.88(c) 0.07 4.43 124
(0.20) 10.19 3.60 10,704 1.62(c) 0.33 2.74 161
(0.38) 10.31 4.54 10,553 1.64(c) 0.36 2.77 68
(0.19) 10.51 9.37 9,741 1.62(c) 0.37 3.11 99
(0.07) 10.09 3.99 8,783 1.66(c) 0.37 3.28 181
-- 10.10 4.87(b) 8,391 1.65(c)(d) 0.31(d) 3.62(d) 124
-- 1.000 0.57 442,109 0.85 0.04 0.55 --
-- 1.000 0.37 529,321 0.85 0.05 0.38 --
-- 1.000 0.95 658,159 0.85 0.02 0.94 --
-- 1.000 3.27 606,045 0.85 0.04 3.13 --
-- 1.000 5.69 462,183 0.85 0.07 5.57 --
-- 1.000 0.57 8,144 0.85 0.99 0.53 --
-- 1.000 0.21 12,498 1.03(e) 0.73(e) 0.21 --
-- 1.000 0.23 18,485 1.57(e) 0.16(e) 0.22 --
-- 1.000 2.48 15,685 1.60 0.12 2.37 --
-- 1.000 5.34 11,860 1.14 0.63 5.25 --
-- 1.000 0.57 8,626 0.85 0.80 0.57 --
-- 1.000 0.21 9,086 1.02(e) 0.63(e) 0.21 --
-- 1.000 0.22 9,330 1.57(e) 0.06(e) 0.22 --
-- 1.000 2.48 8,492 1.60 0.04 2.47 --
-- 1.000 2.03(b) 8,193 1.60(d) 0.13(d) 5.06(d) --
-- 1.000 0.47 10,424 0.95 0.30 0.48 --
-- 1.000 0.18 9,682 1.25 -- 0.18 --
-- 1.000 0.55 8,500 1.25 -- 0.54 --
-- 1.000 1.26(b) 8,125 1.25(d) 0.01(d) 1.99(d) --
</Table>
* Excludes the effect of sales load.
(a) After expenses subsidized by GIS.
(b) Not annualized.
(c) Before offset of custody credits. Including the custody credits in Class A,
the expense ratio is 0.85% for 2000, 2001, 2002, 2003 and 2004; in Class C
the expense ratio is 1.60% for 2000, 2001, 2002, 2003 and 2004.
(d) Annualized.
(e) Revised to reflect additional subsidies to maintain a minium yield
threshold.
- --------------------------------------------------------------------------------
135
/ / The Park Avenue Portfolio
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
BOARD OF TRUSTEES AND SHAREHOLDERS
THE PARK AVENUE PORTFOLIO
We have audited the accompanying statements of assets and liabilities of
The Park Avenue Portfolio (comprising, respectively, The Guardian Park Avenue
Fund, The Guardian UBS Large Cap Value Fund, The Guardian Park Avenue Small Cap
Fund, The Guardian UBS Small Cap Value Fund, The Guardian Asset Allocation Fund,
The Guardian S&P 500 Index Fund, The Guardian Baillie Gifford International
Growth 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) (the "Portfolio"), including the schedules of investments, as
of December 31, 2004, and the related statements of operations (and cash flows
for The Guardian Investment Quality Bond Fund) for the year then ended, the
statements of changes in net assets for each of the periods in the two years
then ended, and the financial highlights for each of the periods indicated
therein. These financial statements and financial highlights are the
responsibility of the Portfolios' management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
An audit includes consideration of internal control over financial reporting as
a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Fund's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of December 31, 2004, by correspondence with the custodian
and brokers, or by other appropriate auditing procedures where replies from
brokers were not received. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the respective Funds constituting The Park Avenue Portfolio at December
31, 2004, the results of their operations (and cash flows for The Guardian
Investment Quality Bond Fund) for the year then ended, the changes in their net
assets for each of the periods in the two years then ended, and the financial
highlights for each of the indicated periods, in conformity with U.S. generally
accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 11, 2005
- --------------------------------------------------------------------------------
136
(This page intentionally left blank)
137
(This page intentionally left blank)
138
- - TRUSTEES
Dennis J. Manning, CLU, ChFC
Frank J. Fabozzi, Ph.D.
Arthur V. Ferrara, CLU
Leo R. Futia, CLU
Anne M. Goggin, Esq.
William W. Hewitt, Jr.
Sidney I. Lirtzman, Ph.D.
Carl W. Schafer
Robert G. Smith, Ph.D.
- - OFFICERS
Thomas G. Sorell
Joseph A. Caruso
Howard W. Chin
Robert J. Crimmins, Jr.
Richard A. Cumiskey
Richard A. Goldman
Alexander M. Grant, Jr.
Edward H. Hocknell
Jonathan C. Jankus
Stewart M. Johnson
Peter J. Liebst
R. Robin Menzies
Nydia Morrison
Karen L. Olvany
Frank L. Pepe
Richard T. Potter, Jr.
Robert A. Reale
Donald P. Sullivan, Jr.
Gregory L. Tuorto
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
Boston Financial Data Services
Post Office Box 219611
Kansas City, Missouri 64121-9611
- - INDEPENDENT AUDITORS
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116
[GUARDIAN LOGO]
Guardian Investor Services LLC
7 Hanover Square
New York, New York 10004
- - PROXY VOTING POLICIES AND PROCEDURES:
A description of the policies and procedures that the Funds use to determine
how to vote proxies relating to portfolio securities, as well as information
regarding how each Fund voted proxies relating to portfolio securities during
the 12-month period ended June 30, 2004, is available without charge upon
request by logging on to www.guardianinvestor.com or the Securities and
Exchange Commission's ("SEC") website at www.sec.gov.
- - FORM N-Q:
The Park Avenue Portfolio files a complete schedule of portfolio holdings with
the SEC for the first and third quarters of each year on the Form N-Q. The
Portfolio's Form N-Q is available on the SEC's Internet site at www.sec.gov,
and can be reviewed and copied at the SEC's Public Reference Room in
Washington D.C. Information on the operation of the Public Reference Room may
be obtained by calling the SEC at 1-800-SEC-0330.
- - CODE OF ETHICS:
The Park Avenue Portfolio has adopted a code of ethics for its Principal
Executive Officer and Principal Financial Officers (the "Code"). The purpose
of the Code is to promote, among other things: honest and ethical conduct,
including the handling of conflicts of interest; full, fair, accurate, timely
and understandable disclosure in reports and documents filed with the SEC; and
compliance with applicable laws and regulations. A copy of the Code has been
filed with the SEC on Form N-CSR and can be obtained on the SEC's website at
www.sec.gov.
Copies of the above can also be obtained free of charge by calling
1-800-221-3253 or by writing Guardian Investor Services LLC at 7 Hanover Square,
New York, New York 10004.
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 submitted for the general information of the shareholders of The
Park Avenue Portfolio family of mutual funds. THIS REPORT IS NOT AUTHORIZED FOR
DISTRIBUTION TO THE PUBLIC UNLESS ACCOMPANIED OR PRECEDED BY A CURRENT
PROSPECTUS FOR THE FUNDS WHICH COMPRISE THE PARK AVENUE PORTFOLIO. THE
PROSPECTUS CONTAINS IMPORTANT INFORMATION, INCLUDING FEES AND EXPENSES. PLEASE
READ THE PROSPECTUS CAREFULLY BEFORE INVESTING OR SENDING MONEY. YOU SHOULD
CONSIDER THE INVESTMENT OBJECTIVES, RISKS, FEES AND CHARGES OF THE INVESTMENT
COMPANY CAREFULLY BEFORE INVESTING. FOR AN ADDITIONAL PROSPECTUS, WHICH CONTAINS
THIS AND OTHER INFORMATION, PLEASE CONTACT YOUR INVESTMENT PROFESSIONAL OR CALL
GUARDIAN INVESTOR SERVICES LLC AT 800-221-3253.
[GUARDIAN LOGO]
GUARDIAN INVESTOR SERVICES LLC
7 Hanover Square
New York, New York 10004
EB 011566 (12/04)
PRSRT STANDARD
U.S. POSTAGE PAID
BOWNE FULFILLMENT SOLUTIONS
EB 011566 ADP (12/04)
ITEM 2. CODE OF ETHICS.
The registrant has adopted a code of ethics, as defined in Item 2 of Form N-CSR,
applicable to its principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar
functions (the "Code"). A copy of the Code is filed as an exhibit to this Form
N-CSR. There were no substantive amendments made to the Code, nor were there any
waivers granted under the Code, during the period covered by this report.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT
The registrant's Board of Directors/Trustees has determined that Robert G. Smith
qualifies as an audit committee financial expert, as defined in Item 3 of Form
N-CSR. Dr. Smith serves as Chairman of the registrant's audit committee and is
considered "independent" for purposes of Item 3 of Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
a) - (d) Aggregate fees billed to the registrant for the last two fiscal years
for professional services rendered by the registrant's principal accountant were
as follows: 2004 - (a) Audit Fees $249,218; (c) Tax Fees $73,832; 2003 - (a)
Audit Fees $239,315; (c) Tax Fees $72,000.
Audit Fees include amounts related to the audit and report on the registrant's
annual financial statements. Tax fees include amounts related to tax compliance
services.
(e)(1) Pursuant to the Audit Committee charter, the Audit Committee of the Board
is responsible for pre- approving any engagement of the Registrant's accountant
to provide any non-prohibited services to the Registrant, including the fees and
other compensation to be paid to the accountant. The Chairman of the Audit
Committee may grant the pre-approval of services to the Registrant for
non-prohibited services. All such delegated pre-approvals shall be presented to
the Audit Committee no later than the next Audit Committee meeting.
The Audit Committee of the Board is responsible for pre-approving any engagement
of the Registrant's accountant, including the fees and other compensation to be
paid to the accountant, to provide any non- audit services to the Registrant's
investment adviser (or any entity controlling, controlled by, or under common
control with the adviser that provides ongoing services to the Registrant), if
the engagement relates directly to the operations and financial reporting of the
Registrant. The Chairman of the Audit Committee may pre-approve non-audit
services, which are not prohibited, to the adviser (or any entity controlling,
controlled by, or under common control with the adviser that provides ongoing
services to the Registrant). All such delegated pre-approvals shall be presented
to the Audit Committee no later than the next Audit Committee meeting.
(2) No services described in paragraph (b) - (d) of Item 4, were approved by
the Audit Committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of
Regulation S-X.
(f) Not Applicable.
(g) Not Applicable.
(h) Not Applicable.
ITEM 5. AUDIT COMMITTE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS
Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASES.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 11. CONTROLS AND PROCEDURES.
a) The registrant's certifying officers have evaluated the registrant's
disclosure controls and procedures within 90 days of this filing and have
concluded that the registrant's disclosure controls and procedures were
effective, as of that date, in ensuring that information required to be
disclosed by the registrant in this Form N-CSR was recorded, processed,
summarized, and reported timely.
(b) The registrant's certifying officers are aware of no changes in the
registrant's internal control over financial reporting that occurred during the
registrant's most recent fiscal half-year that has materially affected, or is
reasonably likely to materially affect, the registrant's internal control over
financial reporting.
ITEM 12. EXHIBITS.
(a)(1) The registrant's code of ethics pursuant to Item 2 of Form N-CSR is
attached.
(a)(2) Separate certifications by the registrant's certifying officers, pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002 and required by Rule 30a-2(a)
under the Investment Company Act of 1940, are attached.
(a)(3) Not applicable.
(b) A certification by the registrant's certifying officers, pursuant to Section
906 of the Sarbanes-Oxley Act of 2002 and required by Rule 30a-2(b) under the
Investment Company Act of 1940, is attached.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
The Park Avenue Portfolio
By: /s/ Thomas G. Sorell
----------------------------
Thomas G. Sorell
President of
The Park Avenue Portfolio
Date: March 4, 2005
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Thomas G. Sorell
----------------------------
Thomas G. Sorell
President of
The Park Avenue Portfolio
Date: March 4, 2005
By: /s/ Frank L. Pepe
----------------------------
Frank L. Pepe
Vice President and Treasurer of
The Park Avenue Portfolio
Date: March 4, 2005