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, 2003
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ITEM 1. REPORTS TO STOCKHOLDERS.
The Annual Report to Stockholders follows.
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GUARDIAN(R)
The Park Avenue Portfolio(R)
Annual Report
to Shareholders
December 31, 2003
The Guardian Park Avenue Fund(R)
The Guardian UBS Large Cap Value Fund(SM)
The Guardian Park Avenue Small Cap Fund(SM)
The Guardian UBS Small Cap Value Fund(SM)
The Guardian Asset Allocation Fund(SM)
The Guardian S&P 500 Index Fund(SM)
The Guardian Baillie Gifford International Fund(SM)
The Guardian Baillie Gifford Emerging Markets Fund(SM)
The Guardian Investment Quality Bond Fund(SM)
The Guardian Low Duration Bond Fund(SM)
The Guardian High Yield Bond Fund(SM)
The Guardian Tax-Exempt Fund(SM)
The Guardian Cash Management Fund(SM)
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THE PARK AVENUE PORTFOLIO
Table of Contents
Portfolio Schedule
Manager of
Interview Investments
Letter to Shareholders
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The Guardian Park Avenue Fund 2 29
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The Guardian UBS Large Cap Value Fund 6 31
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The Guardian Park Avenue Small Cap Fund 8 33
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The Guardian UBS Small Cap Value Fund 10 35
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The Guardian Asset Allocation Fund 12 37
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The Guardian S&P 500 Index Fund 14 40
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The Guardian Baillie Gifford International Fund 16 46
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The Guardian Baillie Gifford Emerging Markets Fund 18 48
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The Guardian Investment Quality Bond Fund 20 50
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The Guardian Low Duration Bond Fund 22 54
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The Guardian High Yield Bond Fund 24 56
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The Guardian Tax-Exempt Fund 26 61
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The Guardian Cash Management Fund 28 63
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Financial Statements 66
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Notes to Financial Statements 74
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Financial Highlights 94
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Dear Shareholder
[PHOTO]
Thomas G. Sorell, C.F.A.
Thomas G. Sorell, C.F.A.
Chief Investment Officer
Past performance is no indication of future performance. The commentary
reflects the outlook and views of Thomas G. Sorell, Chief Investment Officer of
Guardian Investor Services LLC and President of The Park Avenue Portfolio as of
December 31, 2003, and is subject to change.
"The End of a Bear Market"
The year 2003 will be remembered as the end of a three-year bear market in U.S.
equities. At its lowest point, in October 2002, the market was down 47.4% from
its March 2000 peak - the worst performance since the Great Depression. During
the 2003 rebound, small cap stocks outperformed large cap stocks as the Russell
2000 Index/1/ returned 47.3%, the S&P 500 Index/2 /gained 28.7% and the Dow
Jones Industrial Average/3/ returned 28.3%.
These returns, while welcome and substantial by recent and long-term
historical averages, pale in comparison to the market move of more speculative
investments during 2003. Stocks with high betas, no earnings, no dividends and
poor earnings quality outperformed more conservative higher quality equities.
Many of the best performing stocks in 2003 were companies from which investors
fled during 2002 due to concerns about solvency, accounting practices or
regulatory investigations.
The variance in returns during 2003 between high- and low-quality stocks is
evident when comparing stocks with high S&P Quality Ratings of A+ with the
returns of more speculative C and D rated stocks (S&P common stock Quality
Ratings reflect the long-term growth and stability of a company's earnings and
dividends during the trailing ten years and are unrelated to S&P debt ratings).
A+ rated stocks rose 26% last year while the more speculative C and D rated
stocks gained 81%. This 55% difference in performance was the second largest in
the 18-year history of the stock quality indices as maintained by Merrill
Lynch - surpassed only by the 73% spread observed in 1999./4/
Despite the cut in the dividend tax rate, investors shunned dividend-paying
stocks in 2003. The 100 companies in the S&P 500 that pay no dividends
outperformed the 100 highest yielding stocks by 35%. Risk taking was clearly
back in vogue in 2003 while conservatism was out of favor.
These same trends were evident in the fixed income market, where lower rated
securities generated the most attractive returns. In spite of significant
interest rate volatility, U.S. Treasury rates ended 2003 only slightly higher
than at the beginning of the year. The ten-year rate rose less than 0.50% to
41/4% and still generated a positive, albeit small, 1.3% total return.
The broad taxable investment grade market returned 4.1%, while the more
speculative high yield and emerging market debt sectors were the best
performing fixed income asset classes, with exceptional returns of 28.9% and
28.8%, respectively.
While not generating double-digit returns, investment grade corporate bonds
provided very strong returns as corporate yield spreads narrowed significantly
in the wake of improving economic conditions and higher corporate
profitability. Yield spreads tightened by 0.80%, more than offsetting the small
increase in Treasury rates. In fact, the corporate sector posted a
record-setting performance in 2003 relative to Treasuries: corporate bonds
returned 7.7%, outperforming similar duration Treasuries by 5.2% and eclipsing
the previous record by nearly 2.50%. Corporate bonds also outperformed the
broad fixed income market by over 3.5%.
Economic Recovery
Investors remained risk averse as 2003 began, shaken from a series of
corporate accounting scandals and concerned about the potential economic and
geopolitical impact of an imminent war with Iraq. Business confidence remained
weak as corporations continued to cut payrolls and capital spending while
drawing down inventories. As the U.S. prepared to invade Iraq during the first
quarter of 2003, the S&P 500 Index traded down to 800 on March 11th. This would
mark the 2003 low in stocks, and the beginning of a recovery in consumer and
business confidence that, along with a tremendous amount of fiscal and monetary
stimulus, would support stronger economic growth and a recovery in corporate
profitability.
Although the Federal Reserve Board (Fed) expected economic conditions to
improve as uncertainty regarding Iraq subsided, it became increasingly
concerned that there was a greater likelihood of a continued decline in
inflation. The fixed income markets immediately noted the Fed's deflationary
concerns, and the possibility that the Fed might utilize unconventional tools
(like purchasing Treasury debt) to drive interest rates lower in order to
stimulate economic growth and prevent deflation.
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/1/ The Russell 2000 Index is an unmanaged index that is generally considered
to be representative of small capitalization issues in the U.S. stock market.
This index is not available for direct investment.
/2/ The S&P 500 Index is an unmanaged index of 500 primarily large-cap U.S.
stocks that is generally considered to be representative of U.S. stock market
activity. This index is not available for direct investment.
/3/ The Dow Jones Industrial Average (DJIA) is an unmanaged index of 30
industrial stocks listed on the New York Stock Exchange that is generally
considered to be representative of U.S. stock market activity. This index is
not available for direct investment.
/4/ Bernstein, Richard, and Kirschner, Lisa. "Merrill Lynch Quantitative
Strategy Update - Low Quality Dominated 2003 Quality Performance." Merrill
Lynch Global Securities Research & Economics Group Quantitative Strategy
Department January 6, 2004.
Mr. Sorell's Shareholder Letter is not part of this shareholder report for
legal purposes.
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By June, U.S. interest rates had declined to 45-year lows when the ten-year
Treasury yield fell to 3.11%.
As the second quarter came to a close, the Fed's policy making Federal Open
Market Committee (FOMC) cut the Fed funds rate by 0.25%, lowering the target
rate to 1%, where it would remain for the rest of the year.
The Fed's strategy of keeping the economy afloat by supporting personal
consumption as it awaited a recovery in business confidence, spending and
hiring was about to prove successful. The decline in interest rates resulted in
historically attractive mortgage rates that stimulated a surge in home
purchases. Mortgage refinancing provided additional income, which in turn
sustained high levels of personal consumption.
While the Fed provided tremendous monetary stimulus, the Bush administration
was not about to rely solely on monetary policy to achieve and sustain economic
recovery. In May, President Bush received Congressional approval for a $350
billion economic stimulus package that represented the second tax cut of his
term: one that reduced individual taxes retroactively to the first of the year,
and cut the top tax rate on dividends and capital gains to 15%.
The combination of aggressive monetary and fiscal policy stimulus
increasingly benefited U.S. economic growth as the year progressed. Gross
Domestic Product (GDP)/5/ growth gradually improved from 2.0% in the first
quarter to 3.1% in the second quarter. GDP then surged to 8.2% in the third
quarter, the fastest quarterly pace in two decades. By the third quarter,
economic growth was becoming more balanced - benefiting from a revival in
business investment and no longer dependent simply on personal consumption.
Business investment in equipment and software grew by 17.6% during the third
quarter of 2003, the largest increase in more than 5 years and a significant
increase over the second quarter's 8.0% rate.
Businesses' willingness to begin reinvesting after a two-year hiatus was not
only driven by continued strength in consumption, but also by improving
corporate profitability. While revenue growth was modest, earnings were rising
due to continued cost cutting, enhancements in productivity and a weaker
dollar. Although some improvement was to be expected in 2003 relative to 2002's
poor results, the increase in S&P 500 operating profits proved to be
impressive. According to First Call,/6/ S&P 500 operating earnings per share
increased 12% during the first quarter 2003 on a year-over-year basis, 9% in
the second quarter, and by almost 18% during the third quarter. Earnings are
forecast to rise 21% during the forth quarter, and 14% for the full year 2003.
On a reported basis (as opposed to operating basis), the growth is expected to
be about 60-65% for the full year 2003. This would represent the strongest peak
to trough increase in earnings growth in the post-war period./7/
By year-end 2003, evidence of broader and more sustainable economic growth
alleviated deflationary fears. This trend convinced most fixed income investors
that the Fed was likely to begin raising interest rates sometime in 2004 (even
though it had indicated a willingness to leave monetary policy accommodative
for "a considerable period" despite low inflation and excess capacity).
GDP growth, which was not expected to remain at the elevated rate recorded in
the third quarter, was 4.0% in the final quarter of 2003. For the full year,
GDP gained 4.3% on a fourth quarter to fourth quarter basis, and 3.1% on a
year-over-year basis. Clearly, a tremendous amount of monetary and fiscal
policy stimulus had achieved the desired objective of reinvigorating economic
growth.
2004 Economic Outlook
As evidenced in 2003, the economy is becoming less dependent on continued
growth in consumer spending as the corporate sector begins its long-awaited
recovery from the 2001 "profits recession." As the effect of tax cuts and the
initial benefit of low interest rates dissipate, we expect personal consumption
expenditures (PCE) to moderate from the torrid 6.9% growth rate in the third
quarter of 2003. The current consensus forecast for PCE calls for a 2004 growth
of 3.7% on a year over year basis, up from 3.1% during 2003 and the best since
the year 2000 rate of 4.7%. This expectation is dependent in large part on
continued improvement in labor market conditions, which is currently evidenced
by declining jobless claims, a small albeit disappointing increase in non-farm
payroll growth, and a lower unemployment rate, which fell in December to 5.7%,
well below its June 2003 peak of 6.3%.
While personal consumption is expected to remain sufficiently strong to
support moderate economic growth, it is critical that the corporate sector
continues to rebound and make a larger contribution to GDP growth in order to
ensure the sustainability and longevity of the recovery. The consumer has been
on an auto and housing spending binge, supported by low interest rates and tax
cuts, but as pent-up demand dissipates these sectors of the economy are less
likely to contribute as strongly to GDP growth.
The improvement in corporate profitability, along with the consumer's
continued resiliency, has resulted in improved business confidence and
management's willingness
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/5/ Gross Domestic Product (GDP) measures the value of goods and services
produced in an economy. Real GDP is the gross domestic product adjusted for
changes in price level. Real GDP growth is generally used as the basis to
assess economic performance.
/6/ Thompson Financial's First Call is a global research network used by money
managers and brokers for real-time, commingled equity and fixed income research
and data, corporate news, shareholdings data, sell-side workflow tools and
internal research distribution.
/7/ Bernstein, Richard, "Merrill Lynch U.S. Strategy Update - Text to Monthly
Conference Call." Merrill Lynch Global Securities Research & Economics Group
Quantitative Strategy Department December 8, 2003.
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to begin rebuilding depleted inventories, increase capital spending and to
slowly begin hiring employees. Business confidence as measured by the Institute
for Supply Management (ISM)/8/ survey has improved from a low of 46.2% at the
beginning of 2003 to 63.4% in December. This increased confidence is evident in
an improvement in the manufacturing sector as industrial production increased
at a 6.2% annual rate in the fourth quarter, and toward the end of 2003 the ISM
production Index rose to its highest level in 20 years. Industrial production
is forecast to increase 5.0% on a year over year basis in 2004, the largest
increase since 1999. Non-residential fixed investment grew by 12.8%
(annualized) during the third quarter of 2003 and 6.9% in the fourth quarter.
These increases came after nine consecutive quarters of shrinkage. Business
spending on capital projects is likely to continue growing during 2004 due to
rising profit margins, which are an inducement to invest. Thanks to rising
labor productivity and low real wage growth, aggregate U.S. profit margins have
risen to their highest level in postwar history. Also supporting the business
recovery is the weaker dollar, which increases U.S. corporate competitiveness
and is likely to boost exports as the global economy continues to improve in
2004. These factors, along with forecasts of real nonresidential fixed
investment of 9.8% in 2004, result in a consensus 2004 GDP growth forecast of
4.6% on a year over year basis, which would represent the largest increase in
19 years.
While the above forecasts would represent a significant recovery in U.S.
economic growth in 2004, a reasonable expectation in our view, it is subject to
several significant risks.
The principal risks to these forecasts are deterioration in the
consumer/household sector's ability to continue spending due to weaker than
expected employment growth; further depreciation in the dollar, which could
fuel inflation and force the Fed to aggressively tighten monetary policy; and
the continued threat that terrorism may disrupt economic growth.
The fundamental concern regarding the household sector has been the low
savings rate and high debt levels, which, while manageable in a low interest
rate environment, may prove to be disastrous should interest rates rise
significantly in 2004. During the last decade, consumer debt has grown from 85%
to 115% of annual income. A rise in interest rates could also adversely affect
housing values, which have been a source of funding and liquidity for consumers
as they have cashed out equity in their homes to sustain spending.
Global labor outsourcing and growth in labor productivity have led to a
shortfall in income growth. So far, this is a worrisome factor in the economic
recovery. Fully 24 months into the current expansion (2001 third quarter
through third quarter 2003), private wage and salary disbursements are up only
2.1% over the entire period, little more than the consumer price inflation. The
9.2% growth in disposable personal income over this two-year period was mostly
due to tax cuts and a rise in government payments either as wages or social
benefits. The 11% growth in personal consumption expenditure over this period
outstrips income growth. This was also accompanied by a build-up in debt,
mostly through mortgages and not due to consumer credit. Personal savings as a
percentage of disposable income was 2.3% at the end of the third quarter of
2003, lower than the 2.8% recorded at the beginning of this recovery. The
household debt service ratio and financial obligations ratio remain at elevated
levels. Clearly, an improving labor market is critical to sustaining consumer
spending - even at what we expect will be lower levels than recorded in third
quarter 2003.
A continued decline in the dollar, which fell 8.5% on a trade-weighted basis
in 2003 - down 16.8% against the euro and 9.8% against the yen - poses the most
significant upside risk to U.S. interest rates. Both the real economy and U.S.
financial markets would likely suffer from rising rates.
The principal concern regarding the dollar is the growing U.S. trade and
budget deficits and U.S. dependence on foreign investment to fund these gaps.
The current account deficit surpassed 5% of GDP in 2003, representing the
largest imbalance since the 1980's when it was 31/2% of GDP. During that
period, from peak to trough, the dollar declined 15.3% on a trade-weighted
basis./9/
In addition to structural imbalances weakening the dollar, U.S. interest
rates and equity valuations may appear to provide less attractive returns to
foreign investors in 2004 than alternative investments in other global markets.
Finally, 2004 is a Presidential election year, and debate and rhetoric
concerning trade policy, tariffs and protectionism have the potential to
further weaken the dollar.
Both the potential inflationary effect of a weaker dollar and the difficulty
associated with attracting capital to fund the current account deficit can
cause upside pressure on U.S. interest rates.
While these risks to economic growth are significant, the consumer has proved
resilient for many years. At the same time, the Fed, along with others, believe
that the U.S. is likely to experience a gradual and orderly decline in the
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/8/ The Institute for Supply Management (ISM) Index is a national manufacturing
index based on a survey of purchasing executives at roughly 300 industrial
companies.
/9/ Current account is the sum of net exports [i.e., exports in excess of
imports] of goods and services, income on foreign assets, and net transfer
payments.
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dollar, which will not prove disruptive to economic growth or the financial
markets.
So, what should we expect of U.S. financial markets in 2004?
Financial Market Outlook
The most significant change in financial markets in 2004 is likely to be an
increase in U.S. interest rates, the result of rising inflation expectations
and the Federal Reserve's decision to tighten monetary policy.
While the Blue Chip Consensus/10/ forecast for inflation currently
anticipates little changes in 2004 and a small increase in 2005, the markets
are likely to begin discounting higher inflation as economic conditions
improve. As the economy recovers, we expect a gradual decline in the output gap
as the unemployment rate declines and capacity utilization increases. We
believe this decline in excess capacity will eventually raise unit labor costs
and, along with already rising commodity prices and inflationary pressures from
a weaker dollar, push interest rates higher. The Fed is likely to gradually
begin tightening monetary policy sometime in the second half of the year, most
likely in small 0.25% increments. As the Fed tightens monetary policy, we
expect the Treasury yield curve to flatten as short rates rise faster than long
rates. If in fact the Fed is correct in anticipating a gradual and orderly
decline in the dollar, pressure on interest rates should be modest. The degree
to which this interest rate increase is modest will be determined primarily by
how rapidly the output gap is narrowed and the degree to which the dollar
declines. If, however, the dollar collapses and foreign investors reduce their
willingness to fund the U.S. current account deficit, our markets will have to
depreciate more significantly to attract foreign capital.
As interest rates rise, fixed income securities are likely to experience a
decline in principal value, the degree of which will vary by maturity and
duration. Whether fixed income securities are able to generate positive returns
in 2004 will be determined by whether a particular security generates enough
interest income to offset the anticipated decline in principal value in a
rising rate environment. Shorter fixed income securities are less likely to be
adversely affected in this environment than longer fixed income investments.
Our outlook for the equity market is cautiously optimistic. U.S. corporations
are now in better financial health than a year ago because earnings and cash
flow generation have been strong and companies have taken advantage of low
interest rates to reduce their debt burdens. Changes in accounting rules
triggered by the accounting scandals of 2002 caused many companies to take
large write-offs reflecting the overstatement of earnings and goodwill from
prior years. This has improved the quality of reported earnings, an encouraging
development for investors.
The S&P 500 Index price return of 26.4% during 2003 was due in equal parts to
earnings growth and P/E ratio expansion. At 18.5, its current forward operating
P/E ratio is above the long-run average of 14.4. However, this can be justified
by the current low inflation. Equity valuations are helped by a low inflation
and low interest rate environment through their effect on the discount rate
used in discounted cash flow models. During the last 50 years, S&P 500 P/E
ratios have been greater when inflation was low than when inflation was high,
and currently inflation is lower than the long-run average.
Based on the Fed model, which compares the earnings yield of stocks to the
10-year Treasury bond yields, stocks are now less attractively priced than they
were last year. Following the notable rise in stocks during 2003, and given
current bond yields and inflation levels, stocks now seem fairly priced. If the
P/E ratio remains unchanged, then stocks can be expected to grow at the same
rate as earnings during 2004. The First Call analyst consensus calls for a 12%
growth in S&P 500 earnings per share during 2004. If, however, valuations
regress toward their long-run average due to an increase in interest rates or
inflation, then stocks will be flat to down for the year. In any case, it does
not seem likely that the stellar returns of 2003 will be repeated. In the
post-war era, generally the second year of a bull market has not been as strong
as the first year.
Since 2004 is a presidential election year, it adds its own interesting
dynamics to the economy. In the post-war era, on average, stocks have gained 9%
in the President's 4th year in office versus 17% in the 3rd year. Some see this
as evidence of priming the pump with fiscal policy. Although not predictive,
the 4th year of a President's term has been positive for stocks almost 80% of
the time.
What should the intelligent investor do given these forecasts?
Investment Strategy
As always, we believe that the best way to manage market volatility and
uncertainty is to remain committed to your long-term investment objectives and
to construct a well-diversified portfolio that is properly aligned with your
financial goals, time horizon and tolerance for risk.
Portfolio diversification is the foundation of sound asset allocation. For
example, while it might be tempting to reduce allocations to fixed income,
given expectations of rising rates, to do so within the context of a long-term
asset allocation plan may prove to be imprudent. Focus on the long-term and
diversify.
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/10/ The Blue Chip Economic Consensus forecast is a forecast of economic
variables published monthly based on the surveys of 55 leading economists and
financial analysts.
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Therefore, we believe that the best strategy by which to navigate the
volatility and uncertainty of the markets is to consult your financial advisor
and construct an appropriately well-diversified portfolio that will not only
seek to meet your long-term financial objectives, but can survive short-term
periods of volatility exhibited by any single asset class.
In conclusion, we thank you for your business, confidence and trust to manage
your investments and look forward to continued long-term success and prosperity
in the years ahead.
/s/ Thomas G. Sorell
Thomas G. Sorell, CFA
President, The Park Avenue Portfolio
Chief Investment Officer,
Guardian Investor Services LLC
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About Your Annual Report
In the interest of assisting you in understanding the information presented
in this report and evaluating your investment, we have highlighted certain
definitions and information included in this annual report.
Total Returns
Total return figures shown in the report are historical and assume the
reinvestment of dividends and distributions and the deduction of all Fund
expenses. Please refer to the Financial Statements and accompanying Notes to
Financial Statements sections of this report for specific information about the
fees and expenses borne by the Funds. The return figures shown do not reflect
the deduction of taxes that a shareholder may pay on distributions or
redemption of shares. Total return figures for Class A shares do not take into
account the current maximum sales charge of 4.5%, except where noted. Total
return figures for Class B, Class C and Class K shares do not take into account
the contingent deferred sales charge applicable to such shares (maximum of 3%
for Class B shares and 1% for Class C and Class K shares), except where noted.
Returns represent past performance and are not indicative of future results.
Investment return and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than the original cost.
Index Returns
Index returns are provided for comparative purposes. Please note that the
indices are unmanaged and not available for direct investment and their returns
do not reflect the fees and expenses that have been deducted from the Funds. In
addition, the return figures for the indices do not reflect sales charges that
an investor may pay when purchasing or redeeming shares of the Funds.
A Few Words About Risk
It is important to carefully consider the Funds' investment objectives,
risks, fees and expenses before investing. All funds involve some risk,
including possible loss of the principal amount invested. There are some
additional risks to consider when investing in certain funds within The Park
Avenue Portfolio family of mutual funds:
. Small-cap investing entails special risks, as small-cap stocks have tended
to be more volatile and to drop more in down markets than large-cap stocks.
This may happen because small companies may be limited in terms of product
lines, financial resources and management.
. International investing has special risks related to changes in currency
rates, foreign taxation, differences in auditing and other financial
standards, political uncertainty and greater volatility. These risks are
even greater when investing in emerging markets.
. Investing in bond funds exposes you to the general risk of investing in the
debt markets. Bond funds are subject to interest rate risk. When interest
rates rise, bond prices generally fall, and when interest rates fall, bond
prices generally rise. Currently, interest rates are at historically low
levels. Please keep in mind that in this kind of environment, the risk that
bond prices may fall when interest rates rise is potentially greater.
. Investing in high yield bonds involves special risks because investments in
lower rated and unrated debt securities are subject to greater loss of
principal and interest than higher rated securities.
. Low duration bond funds are not an alternative to money market funds since
they, unlike money market funds, do not seek to maintain a stable net asset
value and, as a result, are a riskier asset class.
Updated Performance Information
This annual report contains performance information for the year ending
December 31, 2003. To obtain performance data current to the most recent month
(available within 7 business days of the most recent month end), please call
us at 1-800-221-3253 or visit our website at www.guardianinvestor.com. Current
performance may be lower or higher than the performance quoted in this report.
You should consider the Funds' investment objectives, risks, fees and
expenses carefully before investing. For further information, please consult
the prospectus. The prospectus should be read carefully before you invest or
send money, and can be obtained from your investment professional or by calling
1-800-221-3253.
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The Guardian Park Avenue Fund
[PHOTO]
Goldman
Richard Goldman
Portfolio Manager
Objective:Long-term growth of capital
Portfolio:At least 80% common stocks and securities convertible into common
stocks
Inception:June 1, 1972
Net Assets at December 31, 2003: $1,312,508,366
Q: What are your observations about the stock market in 2003?
A: Starting in March, the stock market experienced a dramatic reversal from the
declines of the prior three years, resulting in double digit annual returns for
most indices as shown in the table below.
2003 Stock Market Returns
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Large Cap Stocks S&P 500 Index/1/ 28.68%
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Small Cap Stocks Russell 2000 Index/2/ 47.25%
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Technology NASDAQ Composite
Index/3/ 50.77%
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More Speculative Internet Stocks/4/ 103.04%
Companies Biotech Stocks/5/ 60.06%
Broadly speaking, smaller companies and technology companies led the market.
Looking deeper, there was dramatic out-performance by lower quality companies
(those with no earnings, companies under regulatory investigation, or highly
leveraged companies), very cyclical companies, and stocks trading at high P/E
ratios. These were the stocks that were beaten down the most in the downturn. I
believe this speculative environment was due to investors' belief that the
economy and earnings were poised for a lasting recovery.
Comparison of Companies' Fundamental Strength
The Guardian Park Avenue Fund vs. S&P 500 Index
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% Long- Return
Earnings Revenue Term on
5 year 5 year Debt/ Equity
Growth Growth Total 5 year
Rate/6/ Rate/7/ Capital/8/ Average/9/
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The Guardian Park
Avenue Fund 10% 8% 27% 20%
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S&P 500 Index 6% 6% 34% 16%
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Notes: Source: Baseline. Median values and debt calculations are as
of 12/31/03 and exclude financial companies.
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"Our style of investing in superior companies faced a difficult challenge in
2003, as enthusiasm for more speculative stocks was high. Even so, the Fund
achieved modestly lower daily volatility than the benchmark during the year."
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/1/ The S&P 500 Index is an unmanaged index of 500 primarily large cap U.S.
stocks that is generally considered to be representative of U.S. stock market
activity. This index is not available for direct investment, and its returns do
not reflect the fees and expenses that have been deducted from the Fund.
Likewise, return figures for the Index do not reflect any sales charges that an
investor may pay when purchasing or redeeming shares of the Fund.
/2/ The Russell 2000 Index is an unmanaged index that is generally considered
to be representative of small capitalization issues in the U.S. stock market.
This index is not available for direct investment, and its returns do not
reflect the fees and expenses that have been deducted from the Fund. Likewise,
return figures for the Index do not reflect any sales charges that an investor
may pay when purchasing or redeeming shares of the Fund.
/3/ The NASDAQ Composite Index is an unmanaged, broad-based
capitalization-weighted index of all NASDAQ National Market stocks. This index
is not available for direct investment, and its returns do not reflect the fees
and expenses that have been deducted from the Fund. Likewise, return figures
for the Index do not reflect any sales charges that an investor may pay when
purchasing or redeeming shares of the Fund.
/4/ As measured by Merrill Lynch Internet HOLDRS/SM/ (Holding Company
Depositary Receipts/SM/), which is generally indicative of Internet stock
performance. Merrill Lynch Internet HOLDRS/SM/ invests in common stock of a
group of specified companies in the Internet industry.
/5/ As measured by Merrill Lynch Biotech HOLDRS/SM/ (Holding Company Depositary
Receipts/SM/), which is generally indicative of Biotechnology stock
performance. Merrill Lynch Biotech HOLDRS/SM/ invests in common stock of a
group of specified companies in the Biotechnology industry.
/6/ Earnings 5-Year Growth Rate: The median earnings growth rate for the
companies in the Fund and the S&P 500 Index for the past five years. A higher
number indicates a greater rate of earnings growth.
/7/ Revenue 5-year Growth Rate: The median revenue growth rate for the
companies in the Fund and the S&P 500 Index for the past five years. A higher
number indicates a greater rate of revenue growth.
/8/ % Long Term Debt / Total Capital: The median long-term debt as a proportion
of capital for the companies in the Fund and the S&P 500 Index as of 12/31/03.
A lower number indicates a company's greater ability to pay off outstanding
debt.
/9/ Return on Equity 5-Year Average: The median return on equity of the last
five fiscal years for the companies in the Fund and the S&P 500 Index. Return
on Equity is an indicator of profitability and a higher number indicates
greater profitability.
- --------------------------------------------------------------------------------
2
- --------------------------------------------------------------------------------
The Guardian Park Avenue Fund
Q: What is The Guardian Park Avenue Fund's current investment profile?
A: The Fund seeks to invest in superior companies with strong financials, as
shown in the year-end snapshot below. Our experience and studies of historical
results show that investing in companies with strong balance sheets, positive
cash flows, high profitability, and consistent earnings - while out of favor in
1999 and 2002 - has the potential to deliver attractive returns over longer
investment horizons. We believe this remains true today.
Looking at the Fund's exposure to various sectors, while our investment
process does not permit significant sector deviations, our focus on stock
selection can lead to modest over- and under-weightings of sectors versus the
S&P 500 Index. The snapshot below of the weightings relative to the S&P 500
Index at year end shows that the Fund is overweight in the energy sector and
underweight in the cyclical consumer sector.
The Guardian Park Avenue Fund Sector
Weighting Comparison
as of 12/31/03
- ---------------------------------------------------------------------------
% of %
% of S&P 500 Over/
Fund Index Under
- ---------------------------------------------------------------------------
Energy 9.29 5.80 3.49
- ---------------------------------------------------------------------------
Health Care 14.55 13.32 1.24
- ---------------------------------------------------------------------------
Cash 0.95 0.00 0.95
- ---------------------------------------------------------------------------
Utilities 3.41 2.84 0.57
- ---------------------------------------------------------------------------
Consumer Staples 11.45 10.99 0.46
- ---------------------------------------------------------------------------
Industrials 11.10 10.90 0.20
- ---------------------------------------------------------------------------
Financials 20.51 20.66 -0.15
- ---------------------------------------------------------------------------
Information Technology 17.32 17.71 -0.39
- ---------------------------------------------------------------------------
Materials 1.78 3.04 -1.26
- ---------------------------------------------------------------------------
Telecommunication Services 1.46 3.45 -2.00
- ---------------------------------------------------------------------------
Consumer Discretionary 8.18 11.30 -3.11
- ---------------------------------------------------------------------------
Q: How did the Fund perform in 2003?
A: The Fund's 2003 total return of 20.95%/10 /was impressive in absolute terms,
but did not succeed in delivering higher returns and lower risk than our S&P
500 Index benchmark. Our style of investing in superior companies faced a
difficult challenge in 2003, as enthusiasm for more speculative stocks was
high. Even so, the Fund achieved modestly lower daily volatility than the
benchmark during the year.
While I'm clearly disappointed that the Fund did not beat its benchmark
during the year, I remain committed to investing in superior companies even if
their near-term relative returns have lagged those of lower quality companies.
In fact, we believe that, while the speculative market rally has driven some
sectors to bubble-era valuations, many higher quality companies are currently
attractively valued. Investor interest in these companies has taken a back seat
to riskier companies in recent months, but we believe at the end of the day
that you get what you pay for.
Q: Are there any other factors that investors should be aware of regarding the
Fund?
A: We believe the Fund is an attractive investment for investors seeking an
actively managed portfolio of large- cap companies. Our focus on what we
believe to be the highest quality companies in the U.S. may also appeal to
investors who are wary of the market given the corporate scandals that have
occurred in recent years. We remain committed to utilizing our disciplined
investment approach, which calls for not chasing the latest fad or hottest
performing sector, but rather constructing a highly diversified portfolio that
has the potential to perform well in a variety of market cycles.
The Fund did not generate taxable gains in 2003, despite its favorable
return. In general, we seek to hold stocks for over two years, which causes the
Fund to have less turnover than the average actively managed equity fund. In
addition, the Fund has tax loss carry forwards of $634,179,788 to offset
capital gains. This is approximately 48% of the Fund, and, on average, they
have over 5 years before they expire.
- --------------------------------------------------------------------------------
/10/ Total return figures are historical and assume the reinvestment of
dividends and distributions and the deduction of all Fund expenses. Total
return represents return for Class A shares and does not take into account the
current maximum sales charge of 4.5%. Returns represent past performance and
are not indicative of future results. Investment return and principal value
will fluctuate so that an investor's shares, when redeemed, may be worth more
or less than the original cost. Current performance may be lower or higher than
the data quoted.
- --------------------------------------------------------------------------------
3
- --------------------------------------------------------------------------------
The Guardian Park Avenue Fund
Top Ten Holdings as of December 31, 2003
(holdings are subject to change)
Company Percentage of Total Net Assets
- ---------------------------------------------------------------
1. Pfizer, Inc. 5.48%
- ---------------------------------------------------------------
2. General Electric Co. 3.31%
- ---------------------------------------------------------------
3. Deere & Co. 3.27%
- ---------------------------------------------------------------
4. Microsoft Corp. 3.08%
- ---------------------------------------------------------------
5. American Int'l. Group, Inc. 2.99%
- ---------------------------------------------------------------
6. Lehman Brothers Hldgs., Inc. 2.44%
- ---------------------------------------------------------------
7. AmerisourceBergen Corp. 2.36%
- ---------------------------------------------------------------
8. Viacom, Inc. 2.35%
- ---------------------------------------------------------------
9. Procter & Gamble Co. 2.29%
- ---------------------------------------------------------------
10. Exxon Mobil Corp. 2.28%
Average Annual Returns/1/ for Periods Ended December 31, 2003
Inception
Date 1 Year 3 Years 5 Years 10 Years Since Inception
- -----------------------------------------------------------------------------------------------
Class A Shares (without sales charge) 6/1/72 20.95% -9.45% -4.68% 7.98% 13.27%
- -----------------------------------------------------------------------------------------------
Class A Shares (with sales charge) 6/1/72 15.51% -10.83% -5.55% 7.48% 13.10%
- -----------------------------------------------------------------------------------------------
Class B Shares (without sales charge) 5/1/96 19.72% -10.32% -5.56% -- 4.63%
- -----------------------------------------------------------------------------------------------
Class B Shares (with sales charge) 5/1/96 16.72% -10.92% -5.75% -- 4.63%
- -----------------------------------------------------------------------------------------------
Class C Shares (without sales charge) 8/7/00 19.45% -10.52% -- -- -15.67%
- -----------------------------------------------------------------------------------------------
Class C shares (with sales charge) 8/7/00 18.45% -10.52% -- -- -15.67%
- -----------------------------------------------------------------------------------------------
Class K Shares (without sales charge) 5/15/01 20.58% -- -- -- -6.84%
- -----------------------------------------------------------------------------------------------
Class K Shares (with sales charge) 5/15/01 19.58% -- -- -- -6.84%
/1/Total return figures are historical and assume the reinvestment of dividends
and distributions and the deduction of all Fund expenses. The return figures
shown do not reflect the deduction of taxes that a shareholder may pay on
distributions or redemption of shares. Total return figures for Class A
shares do not take into account the current maximum sales charge of 4.5%,
except where noted. Total return figures for Class B, Class C and Class K
shares do not take into account the contingent deferred sales charge
applicable to such shares (maximum 3% for Class B shares and 1% for Class C
and Class K shares), except where noted. Returns represent past performance
and are not indicative of future results. Investment return and principal
value will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than the original cost. Prior to August 25, 1988, Class A
shares of the Fund were offered at a higher sales charge, so that actual
returns would have been somewhat lower. Current performance may be lower or
higher than the data quoted.
- --------------------------------------------------------------------------------
4
- --------------------------------------------------------------------------------
The Guardian Park Avenue Fund
Growth of a Hypothetical $10,000 Investment
[CHART]
Guardian
Park Avenue
Fund (Class A) S&P 500 Index Cost of Living
-------------- ------------- --------------
06/01/72 $ 10,000 $ 10,000 $10,000
June-72 9,343 9,791 10,024
July-72 9,412 9,837 10,064
August-72 9,689 10,199 10,080
September-72 9,470 10,173 10,121
October-72 9,551 10,292 10,153
November-72 10,117 10,784 10,177
December-72 9,905 10,935 10,210
January-73 9,531 10,773 10,241
February-73 9,157 10,394 10,313
March-73 8,940 10,404 10,409
April-73 8,498 10,005 10,481
May-73 8,096 9,841 10,545
June-73 7,746 9,802 10,617
July-73 8,302 10,200 10,641
August-73 8,044 9,852 10,834
September-73 9,089 10,271 10,866
October-73 9,173 10,284 10,954
November-73 8,078 9,143 11,034
December-73 8,341 9,320 11,106
January-74 8,836 9,254 11,202
February-74 8,936 9,248 11,347
March-74 8,882 9,061 11,491
April-74 8,719 8,735 11,539
May-74 8,210 8,471 11,683
June-74 8,080 8,376 11,779
July-74 7,961 7,754 11,876
August-74 7,333 7,085 12,020
September-74 6,803 6,276 12,164
October-74 7,449 7,329 12,284
November-74 7,271 6,970 12,380
December-74 7,003 6,861 12,476
January-75 8,375 7,734 12,525
February-75 8,721 8,226 12,621
March-75 9,038 8,434 12,669
April-75 9,231 8,864 12,717
May-75 9,685 9,284 12,789
June-75 10,184 9,724 12,885
July-75 9,809 9,098 13,029
August-75 9,719 8,939 13,053
September-75 9,505 8,663 13,126
October-75 10,092 9,228 13,198
November-75 10,291 9,487 13,294
December-75 10,291 9,410 13,342
January-76 11,653 10,556 13,366
February-76 12,040 10,468 13,414
March-76 12,291 10,819 13,438
April-76 12,267 10,733 13,486
May-76 12,159 10,613 13,582
June-76 12,901 11,077 13,654
July-76 12,997 11,022 13,727
August-76 13,033 11,000 13,799
September-76 13,543 11,281 13,847
October-76 13,125 11,067 13,919
November-76 13,653 11,017 13,943
December-76 14,697 11,628 13,991
January-77 14,366 11,078 14,063
February-77 14,259 10,877 14,207
March-77 14,547 10,763 14,303
April-77 14,809 10,805 14,424
May-77 14,691 10,591 14,496
June-77 15,516 11,108 14,592
July-77 15,228 10,969 14,664
August-77 14,992 10,780 14,712
September-77 15,139 10,795 14,760
October-77 14,710 10,370 14,808
November-77 15,795 10,692 14,880
December-77 15,862 10,766 14,929
January-78 15,233 10,149 15,025
February-78 15,306 9,944 15,121
March-78 16,152 10,235 15,241
April-78 17,435 11,156 15,361
May-78 18,139 11,256 15,505
June-78 17,914 11,101 15,674
July-78 19,084 11,748 15,794
August-78 20,056 12,100 15,866
September-78 19,554 12,061 15,986
October-78 17,009 11,007 16,130
November-78 17,685 11,239 16,203
December-78 18,159 11,454 16,275
January-79 19,008 11,961 16,419
February-79 18,653 11,578 16,611
March-79 19,926 12,262 16,780
April-79 20,003 12,336 16,972
May-79 19,911 12,067 17,188
June-79 20,417 12,583 17,381
July-79 20,939 12,749 17,573
August-79 22,258 13,479 17,741
September-79 22,430 13,535 17,933
October-79 21,418 12,664 18,078
November-79 22,319 13,260 18,246
December-79 23,442 13,539 18,438
January-80 25,291 14,380 18,703
February-80 24,817 14,377 18,967
March-80 22,398 12,987 19,256
April-80 22,994 13,584 19,472
May-80 24,041 14,277 19,664
June-80 24,582 14,721 19,881
July-80 25,882 15,744 19,881
August-80 26,459 15,901 20,025
September-80 27,126 16,363 20,193
October-80 27,517 16,692 20,385
November-80 29,005 18,461 20,554
December-80 28,484 17,907 20,746
January-81 28,447 17,157 20,914
February-81 29,321 17,453 21,131
March-81 30,487 18,146 21,275
April-81 30,774 17,791 21,419
May-81 30,876 17,833 21,587
June-81 30,487 17,725 21,780
July-81 30,180 17,754 22,020
August-81 29,076 16,729 22,188
September-81 27,979 15,910 22,405
October-81 29,543 16,768 22,453
November-81 30,629 17,454 22,525
December-81 30,130 17,009 22,597
January-82 29,369 16,789 22,669
February-82 28,413 15,855 22,741
March-82 28,182 15,773 22,717
April-82 29,502 16,484 22,813
May-82 28,761 15,921 23,030
June-82 28,159 15,681 23,318
July-82 27,441 15,403 23,438
August-82 30,868 17,261 23,487
September-82 32,008 17,473 23,535
October-82 36,087 19,484 23,607
November-82 37,661 20,268 23,559
December-82 37,780 20,656 23,463
January-83 38,949 21,425 23,511
February-83 40,212 21,915 23,535
March-83 42,078 22,719 23,535
April-83 45,213 24,507 23,703
May-83 46,557 24,292 23,847
June-83 49,493 25,227 23,919
July-83 48,299 24,482 24,015
August-83 47,154 24,846 24,088
September-83 48,413 25,184 24,208
October-83 47,300 24,891 24,280
November-83 48,261 25,413 24,328
December-83 48,590 25,280 24,352
January-84 48,059 25,138 24,496
February-84 46,277 24,257 24,616
March-84 46,541 24,674 24,665
April-84 47,364 24,903 24,785
May-84 45,307 23,525 24,857
June-84 47,716 24,027 24,929
July-84 46,894 23,728 25,025
August-84 52,594 26,337 25,121
September-84 52,934 26,343 25,241
October-84 53,477 26,441 25,314
November-84 53,296 26,142 25,314
December-84 54,742 26,822 25,314
January-85 60,225 28,912 25,362
February-85 62,203 29,263 25,482
March-85 61,393 29,281 25,578
April-85 60,617 29,252 25,698
May-85 63,282 30,931 25,794
June-85 64,868 31,409 25,866
July-85 65,036 31,364 25,915
August-85 64,261 31,096 25,963
September-85 60,333 30,130 26,035
October-85 63,149 31,520 26,131
November-85 68,574 33,673 26,203
December-85 72,798 35,289 26,275
January-86 74,618 35,484 26,347
February-86 81,036 38,124 26,275
March-86 87,037 40,237 26,155
April-86 87,878 39,781 26,107
May-86 91,968 41,888 26,179
June-86 93,344 42,589 26,323
July-86 86,655 40,206 26,323
August-86 89,254 43,177 26,371
September-86 82,359 39,624 26,492
October-86 86,071 41,911 26,516
November-86 87,965 42,927 26,540
December-86 86,179 41,837 26,564
January-87 96,526 47,470 26,732
February-87 104,479 49,339 26,828
March-87 106,660 50,754 26,948
April-87 102,508 50,297 27,092
May-87 101,711 50,723 27,189
June-87 104,389 53,265 27,285
July-87 108,786 55,960 27,357
August-87 113,352 58,039 27,501
September-87 111,745 56,769 27,645
October-87 84,813 44,544 27,718
November-87 80,966 40,882 27,742
December-87 88,729 43,972 27,742
January-88 90,301 45,882 27,814
February-88 97,445 47,928 27,886
March-88 100,112 46,472 28,006
April-88 102,112 47,048 28,150
May-88 100,826 47,335 28,246
June-88 107,073 49,508 28,367
July-88 106,199 49,383 28,487
August-88 102,852 47,625 28,607
September-88 105,617 49,649 28,799
October-88 106,296 51,086 28,895
November-88 104,065 50,272 28,919
December-88 107,166 51,154 28,968
January-89 113,972 54,945 29,112
February-89 115,281 53,512 29,232
March-89 117,165 54,772 29,400
April-89 121,511 57,675 29,593
May-89 124,180 59,856 29,761
June-89 124,001 59,543 29,833
July-89 129,424 64,972 29,905
August-89 136,178 66,144 29,953
September-89 135,220 65,881 30,049
October-89 129,531 64,397 30,194
November-89 130,966 65,633 30,266
December-89 132,707 67,204 30,314
January-90 124,901 62,757 30,626
February-90 127,605 63,471 30,771
March-90 130,863 65,181 30,939
April-90 125,761 63,615 30,987
May-90 133,752 69,636 31,059
June-90 131,696 69,207 31,227
July-90 128,760 69,037 31,347
August-90 116,453 62,734 31,636
September-90 111,080 59,733 31,900
October-90 106,207 59,530 32,093
November-90 112,204 63,283 32,165
December-90 116,342 65,041 32,165
January-91 123,478 67,942 32,357
February-91 133,163 72,697 32,405
March-91 138,132 74,501 32,453
April-91 137,623 74,727 32,501
May-91 141,828 77,807 32,598
June-91 136,539 74,298 32,694
July-91 143,602 77,837 32,742
August-91 148,065 79,568 32,838
September-91 148,906 78,256 32,982
October-91 153,757 79,387 33,030
November-91 146,901 76,116 33,126
December-91 157,248 84,769 33,150
January-92 160,926 83,288 33,199
February-92 164,109 84,291 33,319
March-92 161,704 82,671 33,487
April-92 161,846 85,185 33,535
May-92 164,817 85,478 33,583
June-92 159,102 84,210 33,703
July-92 165,737 87,744 33,775
August-92 161,456 85,855 33,872
September-92 166,665 86,846 33,968
October-92 170,874 87,243 34,088
November-92 181,647 90,091 34,136
December-92 189,447 91,214 34,112
January-93 198,103 92,072 34,280
February-93 200,211 93,252 34,400
March-93 207,813 95,203 34,521
April-93 204,727 93,006 34,617
May-93 209,995 95,338 34,665
June-93 215,173 95,626 34,713
July-93 216,554 95,337 34,713
August-93 229,743 98,834 34,809
September-93 233,807 98,074 34,881
October-93 230,433 100,199 35,026
November-93 223,302 99,132 35,050
December-93 227,863 100,349 35,050
January-94 233,673 103,841 35,146
February-94 230,967 100,956 35,266
March-94 221,336 96,584 35,386
April-94 223,087 97,932 35,434
May-94 224,440 99,377 35,458
June-94 218,710 96,957 35,578
July-94 224,483 100,245 35,675
August-94 230,995 104,243 35,819
September-94 227,169 101,682 35,915
October-94 230,507 104,047 35,939
November-94 219,437 100,187 35,987
December-94 224,591 101,655 35,987
January-95 223,923 104,366 36,131
February-95 236,284 108,365 36,276
March-95 244,970 111,557 36,396
April-95 252,236 114,924 36,516
May-95 260,422 119,336 36,588
June-95 270,695 122,113 36,660
July-95 285,914 126,247 36,660
August-95 288,517 126,461 36,756
September-95 297,918 131,765 36,828
October-95 293,134 131,368 36,949
November-95 300,605 137,009 36,925
December-95 301,580 139,649 36,901
January-96 311,257 144,470 37,117
February-96 315,340 145,736 37,237
March-96 317,205 147,152 37,429
April-96 321,732 149,400 37,574
May-96 331,587 153,079 37,646
June-96 333,904 153,694 37,670
July-96 320,164 146,943 37,742
August-96 327,265 149,982 37,814
September-96 347,459 158,357 37,934
October-96 360,646 162,781 38,054
November-96 385,636 174,990 38,127
December-96 381,454 171,525 38,127
January-97 405,502 182,333 38,247
February-97 403,590 183,703 38,367
March-97 385,277 176,190 38,463
April-97 406,106 186,775 38,511
May-97 431,563 197,992 38,487
June-97 451,626 206,864 38,535
July-97 489,655 223,323 38,583
August-97 473,664 210,810 38,655
September-97 501,853 222,282 38,752
October-97 489,040 214,921 38,848
November-97 504,313 224,793 38,824
December-97 514,394 228,623 38,776
January-98 507,367 231,206 38,848
February-98 542,612 247,830 38,920
March-98 569,603 260,544 38,992
April-98 578,526 263,280 39,064
May-98 569,157 258,672 39,136
June-98 585,343 269,200 39,184
July-98 571,995 266,266 39,232
August-98 484,154 227,844 39,281
September-98 510,621 242,654 39,329
October-98 545,073 262,284 39,425
November-98 576,330 278,179 39,425
December-98 623,955 294,369 39,401
January-99 645,844 306,673 39,497
February-99 618,182 297,136 39,545
March-99 638,147 309,021 39,665
April-99 642,236 320,980 39,954
May-99 631,291 313,405 39,954
June-99 674,605 330,799 39,954
July-99 656,616 320,478 40,073
August-99 656,616 318,876 40,170
September-99 649,839 310,139 40,362
October-99 686,557 329,764 40,435
November-99 719,210 336,468 40,459
December-99 812,676 356,272 40,459
January-00 783,954 338,372 40,556
February-00 882,974 331,967 40,796
March-00 896,241 364,443 41,130
April-00 826,626 353,479 41,155
May-00 754,276 346,226 41,180
June-00 836,063 354,761 41,418
July-00 809,172 349,220 41,515
August-00 916,797 370,911 41,491
September-00 829,564 351,327 41,707
October-00 755,218 349,851 41,779
November-00 635,839 322,283 41,851
December-00 661,350 323,862 41,923
January-01 666,328 335,359 42,187
February-01 564,669 304,808 42,356
March-01 525,803 285,514 42,453
April-01 574,945 307,698 42,623
May-01 574,140 309,760 42,815
June-01 565,373 302,233 42,995
July-01 553,082 299,271 42,874
August-01 517,827 280,536 42,874
September-01 475,780 257,897 42,681
October-01 488,879 262,815 42,536
November-01 511,358 282,975 42,464
December-01 517,504 285,456 42,358
January-02 510,226 281,291 42,430
February-02 504,243 275,865 42,527
March-02 522,355 286,241 42,672
April-02 493,408 268,895 42,887
May-02 484,836 266,905 42,887
June-02 450,557 247,902 42,930
July-02 420,228 228,575 42,977
August-02 424,607 230,075 43,012
September-02 382,762 205,070 43,083
October-02 414,227 223,117 43,154
November-02 431,419 236,236 43,154
December-02 405,955 222,359 43,059
January-03 394,764 216,533 43,250
February-03 388,601 213,285 43,583
March-03 388,601 215,356 43,847
April-03 417,633 233,095 43,752
May-03 437,257 245,376 43,680
June-03 440,085 248,505 43,728
July-03 449,716 252,888 43,776
August-03 454,123 257,819 43,942
September-03 449,879 255,081 44,050
October-03 472,643 269,519 44,002
November-03 474,959 271,891 43,883
December-03 496,427 286,165 43,800
Performance for Class B, Class C, and Class K shares, which were first offered
on May 1, 1996, August 7, 2000, and May 15, 2001, respectively, will vary due
to differences in sales load and other expenses charged to each share class.
A hypothetical $10,000 investment in Class A shares made at the inception of
The Guardian Park Avenue Fund on June 1, 1972 has a starting point of $9,550,
which reflects the current maximum sales charge for Class A shares of 4.5%.
This investment would have grown to $496,427 on December 31, 2003. We compare
our performance to that of the S&P 500 Index, an unmanaged index that is
generally considered the performance benchmark of the U.S. stock market. While
you cannot invest directly in the S&P 500 Index, a similar hypothetical
investment would now be worth $286,165. The Cost of Living, as measured by the
Consumer Price Index, is generally representative of the level of U.S.
inflation and is provided to lend a more complete understanding of the
investment's real worth. This performance does not reflect the deduction of
taxes that a shareholder may pay on distributions or redemption of shares.
Returns represent past performance and are not indicative of future results.
- --------------------------------------------------------------------------------
5
- --------------------------------------------------------------------------------
The Guardian UBS Large Cap Value Fund
The Guardian UBS Large Cap Value Fund is managed by a team of investment
professionals from the Fund's sub-advisor, UBS Global Asset Management
(Americas) Inc., with many years of experience in large cap value investment
management.
Objective:Seeks to maximize total return, consisting of capital appreciation
and current income
Portfolio:At least 80% in equity securities issued by companies with a large
market capitalization at the time of purchase
Inception:February 3, 2003
Net assets at December 31, 2003: $84,827,055
Q: How did the Fund perform during 2003?
A: Since its inception on February 3, 2003 through December 31, 2003, The
Guardian UBS Large Cap Value Fund had a total return of 31.48,/1/ versus a
return of 32.52% for its benchmark, the Russell 1000 Value Index./2/
Q: What factors affected the Fund's performance?
A: Industry allocation and stock selection contributed most strongly to
year-to-date performance, with overweightings in medical services and
construction being the largest contributors by industry. The Fund's exposure to
larger cap stocks detracted from its performance, as smaller, beaten-up stocks
were the strongest performers in 2003.
The strengthening economy and early 2003 successes in Iraq drove the U.S.
equity market, as did strong earnings growth and investor perception of higher
earnings quality. The U.S. economy also performed impressively, with a
surprisingly strong 8.2% third quarter annualized growth in U.S. real GDP,/3/
and consensus expectations of 4.6% for 2004. Thanks to further tax cuts and
anticipated continued fiscal stimuli, consumption is likely to remain an
important contributor to economic growth in 2004. A continued strong economic
recovery, however, now appears to be priced into the market, and our view is
that the market as a whole is within a modest range of fair valuation. There
remain some underlying concerns about the growing deficit, but investors'
caution on that score has abated.
Q: What is your strategy going forward?
A: We are finding attractive opportunities in the banking and financial
sectors. We also continue to see opportunities in healthcare, and believe we
are well positioned in light of the effects of the new Medicare bill. We
currently have exposure to the generic drug segment at reasonable valuations.
We are also maintaining branded-drug exposure with unique, non-geriatric
product concentrations (vaccines, anti-infectives, antidepressants). While we
take advantage of those opportunities, we are avoiding new, broadly utilized,
big-technology biologics, and large-dollar, commodity geriatric markets
(cholesterol, hypertension, anti-inflammatory drug makers), which we believe
will face a secular headwind.
- --------------------------------------------------------------------------------
"We are finding attractive opportunities in the banking and financial sectors.
We also continue to see opportunities in health care, and believe we are well
positioned in light of the effects of the new Medicare bill."
- --------------------------------------------------------------------------------
In contrast to the attractive health care and financial sectors, we continue
to underweight computer hardware-- specifically the semiconductors market.
While this area has seen an improvement in the underlying fundamentals, the
price appreciation has far surpassed the improving fundamentals. Our
underweight in this area is driven by the fact that the market is currently
pricing in expected growth rates well above what these companies have
historically been able to achieve. We do not believe these expectations will be
met.
- --------------------------------------------------------------------------------
/1/ Total return figures are historical and assume the reinvestment of
dividends and distributions and the deduction of all Fund expenses. Total
return represents return for Class A shares and does not take into account the
current maximum sales charge of 4.5%. Returns represent past performance and
are not indicative of future results. Investment return and principal value
will fluctuate so that an investor's shares, when redeemed, may be worth more
or less than the original cost. Current performance may be lower or higher than
the data quoted.
/2/ The Russell 1000 Value Index measures the performance of those Russell 1000
companies with lower price-to-book ratios and lower forecasted growth values.
The Russell 1000 Index measures the performance of the 1,000 largest companies
in the Russell 3000 Index. The Russell 1000 Index represents approximately 92%
of the total market capitalization of the Russell 3000 Index. The Russell 1000
Value Index and the Russell 1000 Index are unmanaged indices, they are not
available for direct investment, and their returns do not reflect the fees and
expenses that have been deducted from the Fund's returns. Likewise, return
figures for the indices do not reflect any sales charges that an investor may
pay when purchasing or redeeming shares of the Fund.
/3/ Gross Domestic Product (GDP) measures the value of goods and services
produced in an economy. Real GDP is the gross domestic product adjusted for
changes in price level. Real GDP growth is generally used as the basis to
assess economic performance.
- --------------------------------------------------------------------------------
6
- --------------------------------------------------------------------------------
The Guardian UBS Large Cap Value Fund
Sector Weightings Held by the Fund as of December 31, 2003
[CHART]
Energy 8.71%
Health Care 11.54%
Consumer Staples 2.55%
Utilities 7.91%
Industrials 10.50%
Financials 33.62%
Materials 6.51%
Information Technology 3.59%
Telecommunication Services 8.21%
Consumer Discretionary 6.86%
Top Ten Holdings as of December 31, 2003
(holdings are subject to change)
Company Percentage of Total Net Assets
- ------------------------------------------
1. Citigroup, Inc. 5.77%
- ------------------------------------------
2. Exxon Mobil Corp. 5.01%
- ------------------------------------------
3. Nextel Comm., Inc. 4.61%
- ------------------------------------------
4. Wells Fargo & Co. 4.30%
- ------------------------------------------
5. Morgan Stanley 4.16%
- ------------------------------------------
6. J.P. Morgan Chase & Co. 3.84%
- ------------------------------------------
7. UnitedHealth Group 3.20%
- ------------------------------------------
8. ConocoPhillips 3.00%
- ------------------------------------------
9. Federal Home Loan Mortgage Corp. 2.96%
- ------------------------------------------
10. Illinois Tool Works, Inc. 2.83%
Total Returns/1/ for Period Ending December 31, 2003
Inception Since
Date Inception
- ---------------------------------------------------------
Class A Shares (without sales charge) 2/3/03 31.48%
- ---------------------------------------------------------
Class A Shares (with sales charge) 2/3/03 25.56%
- ---------------------------------------------------------
Class B Shares (without sales charge) 2/3/03 30.65%
- ---------------------------------------------------------
Class B Shares (with sales charge) 2/3/03 27.65%
- ---------------------------------------------------------
Class C Shares (without sales charge) 2/3/03 30.65%
- ---------------------------------------------------------
Class C Shares (with sales charge) 2/3/03 29.65%
- ---------------------------------------------------------
Class K Shares (without sales charge) 2/3/03 31.22%
- ---------------------------------------------------------
Class K Shares (with sales charge) 2/3/03 30.22%
- ---------------------------------------------------------
/1/Total return figures are historical and assume the reinvestment of dividends
and distributions and the deduction of all Fund expenses. The return figures
shown do not reflect the deduction of taxes that a shareholder may pay on
distributions or redemption of shares. Total return represents return for
Class A shares and does not take into account the current maximum sales
charge of 4.5%, except where noted. Total return figures for Class B, Class
C and Class K shares do not take into account the current maximum sales
charge of 4.5%, except where noted. Returns represent past performance and
are not indicative of future results. Investment return and principal value
will fluctuate so that an investor's shares, when redeemed, may be worth
more or less than the original cost. Current performance may be lower or
higher than the data quoted.
- --------------------------------------------------------------------------------
7
- --------------------------------------------------------------------------------
The Guardian Park Avenue Small Cap Fund
[PHOTO]
Matthew Ziehl
Matthew Ziehl, C.F.A.
Portfolio Manager
Objective:Long-term growth of capital
Portfolio:At least 85% in a diversified portfolio of common stocks issued by
companies with a small market capitalization at the time of initial
purchase
Inception:May 1, 1997
Net Assets at December 31, 2003: $201,022,946
Q: How did the Fund perform during 2003?
A: U.S. stocks rallied strongly in 2003, with small caps leading the way. The
Russell 2000 Index/1/ returned an eye-popping 47.25%, setting a new
calendar-year record return for the 25-year history of this benchmark, versus a
"mere" 28.68% for the S&P 500 Index./2/ The Guardian Park Avenue Small Cap Fund
participated in the rally, but performance trailed the benchmark by 4.02% with
a 43.23%/3/ total return.
Most of the underperformance came during the second quarter, as the stock
market reversed early-year declines and experienced a sharp rally after the
invasion of Iraq commenced in March. Highly speculative companies led this
rally, as we discussed in our June 30th semiannual report letter to you. The
Russell 2000's strongest performers during the first half of 2003 were
companies that we consider to be of low fundamental quality, such as those with
negative earnings, stocks priced below $5 per share, and stocks with under $500
million market cap in the Russell 2000. This environment made it challenging
for the Fund to keep pace during the run-up, because we tend to avoid such
companies. Instead, we seek to invest in companies with high fundamental
quality--those we determine are demonstrably superior to their competitors in
terms of financial strength, profitability and management skill.
The stock market continued to rally strongly in the second half of 2003, and
small cap stocks again led the charge. But the second-half rally was more
broadly based, and encompassed higher quality companies as well as the more
speculative fare. This environment was more favorable to our investment style,
as reflected by stronger relative performance; The Guardian Park Avenue Small
Cap Fund returned 25.33% versus 24.92% for the Russell 2000 Index during the
second half of 2003.
For the full year 2003, relative performance was driven primarily by stock
selection rather than by sector allocations. This is consistent with our
investment discipline that emphasizes selecting individual stocks rather than
placing large "bets" on one market sector versus another. The Fund generated
strong returns within the technology, consumer, and basic materials sectors,
but these benefits were more than offset by underperformance in industrial,
healthcare and telecom stocks. Performance did benefit somewhat from the Fund
being overweight versus the index in technology stocks during 2003, as
technology was the small cap market's strongest major sector.
Q: What was your investment strategy?
A: Throughout 2003 we remained true to our investment philosophy and process of
maintaining a diversified, high-quality portfolio. As bottom-up stock pickers,
the Fund's overweights and underweights to its benchmark (the Russell 2000
Index) were a function of the individual stocks in the Fund's portfolio. Having
said that, for much of the year the Fund held an overweight in technology
stocks because we identified a number of firms with solid fundamentals that we
believed were poised to benefit from the improving economic environment. We
recently neutralized our technology weighting by trimming or selling out of
certain technology stocks that had performed well, but that appeared to have
gotten expensive in terms of their valuations versus current- and near-term
sales and earnings.
- --------------------------------------------------------------------------------
". . . the second-half rally was more broadly based, and encompassed higher
quality companies as well as the more speculative fare. This environment was
more favorable to our investment style, as reflected by stronger relative
performance . . ."
- --------------------------------------------------------------------------------
Late in the year, we added to our exposure in the energy sector, as we
believe investors have not priced in the likelihood that oil and natural gas
prices will remain high for an extended period of time due to strengthening
global demands for energy (including the secular growth of China as an
industrial power) and ongoing supply constraints-- especially with regard to
the U.S. natural gas supply.
Q: What is your outlook for the future?
A: Despite their considerable outperformance in 2003, we believe small cap
stocks can continue to outperform their larger-cap counterparts during 2004,
albeit less significantly. We expect the economic recovery to continue.
Although stock market performance is impossible to predict, historically, an
improving economy has favored smaller companies because their earnings tended
to rebound more quickly than those of larger companies as
- --------------------------------------------------------------------------------
/1/ The Russell 2000 Index is an unmanaged index that is generally considered
to be representative of small capitalization issues in the U.S. stock market.
The Russell 2000 Index is not available for direct investment, and its returns
do not reflect the fees and expenses that have been deducted from the Fund's
returns. Likewise, return figures for the Russell 2000 Index do not reflect any
sales charges that an investor may pay when purchasing or redeeming shares of
the Fund.
/2/ The S&P 500 Index is an unmanaged index of 500 primarily large cap U.S.
stocks that is generally considered to be representative of U.S. stock market
activity. The S&P 500 Index is not available for direct investment, and its
returns do not reflect the fees and expenses that have been deducted from the
Fund's returns. Likewise, return figures for the S&P 500 Index do not reflect
any sales charges that an investor may pay when purchasing or redeeming shares
of the Fund.
/3/ Total return figures are historical and assume the reinvestment of
dividends and distributions and the deduction of all Fund expenses. Total
return represents return for Class A shares and does not take into account the
current maximum sales charge of 4.5%. Returns represent past performance and
are not indicative of future results. Investment return and principal value
will fluctuate so that an investor's shares, when redeemed, may be worth more
or less than the original cost. Current performance may be lower or higher than
the data quoted.
- --------------------------------------------------------------------------------
8
- --------------------------------------------------------------------------------
The Guardian Park Avenue Small Cap Fund
Gross Domestic Product/4/ (GDP) accelerates. In addition, from a valuation
standpoint, small caps remain attractive relative to larger-cap companies. As
always, we'll emphasize high quality companies that have strong financial
characteristics and market share positions. We believe our investment approach
will be rewarded when the market is once again fundamentally driven, not
speculatively driven.
In early 2004 we are adding to positions in the consumer cyclical sector,
mainly in retail stocks. We had trimmed our retail positions during the third
quarter after these stocks ran up strongly and valuations became quite
stretched, as the market anticipated a very strong holiday selling season. We
viewed these stocks as vulnerable to price declines if their high sales
expectations were not met. Holiday sales turned out to be solid but not
spectacular, and this group lagged the market as the year drew to a close. In
early 2004 we are selectively increasing our exposure to retailers at more
reasonable valuations.
Growth of a Hypothetical $10,000 Investment
[CHART]
Guardian Guardian
Park Avenue Park Avenue
Small Cap Small Cap
Fund Fund Russell 2000
(Class A) (Class B) Index
---------- ---------- ----------
5/1/97 $10,000 $10,000 $10,000
May-97 10,461 10,510 11,113
June-97 11,043 11,086 11,589
July-97 11,851 11,879 12,128
August-97 12,095 12,115 12,405
September-97 13,400 13,371 13,313
October-97 12,940 12,937 12,729
November-97 12,865 12,861 12,646
December-97 13,068 13,047 12,868
January-98 13,068 13,037 12,665
February-98 13,912 13,877 13,601
March-98 14,615 14,574 14,162
April-98 14,710 14,659 14,240
May-98 13,960 13,905 13,473
June-98 13,950 13,877 13,501
July-98 12,793 12,713 12,409
August-98 10,040 9,963 9,999
September-98 10,451 10,376 10,782
October-98 10,623 10,540 11,221
November-98 11,388 11,290 11,809
December-98 12,239 12,126 12,540
January-99 11,923 11,799 12,706
February-99 10,737 10,617 11,677
March-99 10,776 10,655 11,860
April-99 11,292 11,155 12,922
May-99 11,455 11,309 13,111
June-99 12,047 11,886 13,704
July-99 11,943 11,771 13,329
August-99 11,685 11,511 12,835
September-99 11,838 11,655 12,838
October-99 12,679 12,463 12,891
November-99 14,334 14,069 13,660
December-99 16,732 16,406 15,207
January-00 16,560 16,223 14,963
February-00 20,475 20,570 17,433
March-00 19,125 18,723 16,284
April-00 17,450 17,069 15,304
May-00 16,100 15,742 14,412
June-00 18,666 18,223 15,668
July-00 18,312 17,877 15,164
August-00 20,858 20,348 16,321
September-00 19,853 19,348 15,842
October-00 18,139 17,665 15,811
November-00 14,789 14,396 13,156
December-00 16,339 15,895 12,247
January-01 16,184 15,730 12,885
February-01 14,630 14,217 12,039
March-01 13,926 13,529 11,450
April-01 14,930 14,489 12,346
May-01 15,499 15,022 12,650
June-01 15,624 15,139 13,097
July-01 15,451 14,954 12,388
August-01 14,814 14,324 11,988
September-01 13,221 12,782 10,374
October-01 13,743 13,277 10,982
November-01 14,457 13,946 11,832
December-01 15,190 14,644 12,564
January-02 15,248 14,683 12,433
February-02 15,229 14,663 12,092
March-02 16,097 15,488 13,064
April-02 16,174 15,546 13,183
May-02 15,644 15,022 12,598
June-02 14,901 14,305 11,973
July-02 13,057 12,520 10,165
August-02 13,097 12,549 10,139
September-02 12,257 11,735 9,411
October-02 12,681 12,132 9,713
November-02 13,395 12,801 10,579
December-02 12,835 12,258 9,990
January-03 12,401 11,841 9,714
February-03 12,005 11,444 9,420
March-03 12,140 11,560 9,541
April-03 13,183 12,549 10,446
May-03 14,244 13,548 11,567
June-03 14,669 13,946 11,776
July-03 15,470 14,692 12,513
August-03 16,242 15,410 13,087
September-03 15,991 15,158 12,845
October-03 17,508 16,458 13,924
November-03 18,083 16,991 14,418
December-03 18,529 16,879 14,711
To give you a comparison, the chart above shows the performance of a
hypothetical $10,000 investment made in Class A and Class B shares of The
Guardian Park Avenue Small Cap Fund and the Russell 2000 Index. The starting
point of $9,550 for Class A shares reflects the maximum sales charge of 4.5%
that an investor may have to pay when purchasing Class A shares of the Fund.
For Class B shares, the contingent deferred sales charge of 1% was imposed at
the end of the period. The Index and Class B shares begin at $10,000. This
performance does not reflect the deduction of taxes that a shareholder may pay
on distributions or redemption of shares. Returns represent past performance
and are not indicative of future results.
Performance for Class C and Class K shares, which were first offered on August
7, 2000 and May 15, 2001, respectively, will vary due to differences in sales
load and other expenses charged to each share class.
Average Annual Returns/1/ for Periods Ended December 31, 2003
Inception
Date 1 Year 3 Years 5 Years Since Inception
- --------------------------------------------------------------------------------------
Class A Shares (without sales charge) 5/1/97 43.23% 4.01% 8.45% 10.16%
- --------------------------------------------------------------------------------------
Class A Shares (with sales charge) 5/1/97 36.78% 2.43% 7.46% 9.40%
- --------------------------------------------------------------------------------------
Class B Shares (without sales charge) 5/6/97 41.85% 3.04% 7.47% 8.67%
- --------------------------------------------------------------------------------------
Class B Shares (with sales charge) 5/6/97 38.85% 2.41% 7.32% 8.67%
- --------------------------------------------------------------------------------------
Class C Shares (without sales charge) 8/7/00 41.62% 2.85% -- -2.17%
- --------------------------------------------------------------------------------------
Class C shares (with sales charge) 8/7/00 40.62% 2.85% -- -2.17%
- --------------------------------------------------------------------------------------
Class K Shares (without sales charge) 5/15/01 42.89% -- -- 6.46%
- --------------------------------------------------------------------------------------
Class K Shares (with sales charge) 5/15/01 41.89% -- -- 6.46%
/1/Total return figures are historical and assume the reinvestment of dividends
and distributions and the deduction of all Fund expenses. The return figures
shown do not reflect the deduction of taxes that a shareholder may pay on
distributions or redemption of shares. Total return figures for Class A
shares do not take into account the current maximum sales charge of 4.5%,
except where noted. Total return figures for Class B, Class C and Class K
shares do not take into account the contingent deferred sales charge
applicable to such shares (maximum of 3% for Class B shares and 1% for Class
C and Class K shares), except where noted. Returns represent past
performance and are not indicative of future results. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than the original cost. Current performance may be
lower or higher than data quoted.
- --------------------------------------------------------------------------------
/4/ Gross Domestic Product (GDP) measures the value of goods and services
produced in an economy. Real GDP is the gross domestic product adjusted for
changes in price level. Real GDP growth is generally used as the basis to
assess economic performance.
- --------------------------------------------------------------------------------
9
- --------------------------------------------------------------------------------
The Guardian UBS Small Cap Value Fund
The Guardian UBS Small Cap Value Fund is managed by a team of investment
professionals from the Fund's sub-advisor, UBS Global Asset Management
(Americas) Inc., with many years of experience in small cap value investment
management.
Objective:Seeks to maximize total return, consisting of capital appreciation
and current income
Portfolio:At least 80% in equity securities issued by companies with a small
market capitalization at the time of initial purchase
Inception:February 3, 2003
Net Assets at December 31, 2003: $38,732,859
Q: How did the Fund perform during 2003?
A: Since its inception on February 3, 2003 through December 31, 2003, The
Guardian UBS Small Cap Value Fund had a total return of 35.76%/1/ versus a
return of 50.85% for its benchmark, the Russell 2000 Value Index./2/
Q: What factors affected the Fund's performance?
A: After a weak first quarter performance, the U.S. equity markets rallied
strongly, reflecting a successful war effort in Iraq and an above average
rebound for the U.S. economy. In particular, investors were attracted to the
most volatile sectors of the market, including technology and
biotechnology/health care stocks. Low price stocks and those with negative
earnings were strong performers in the small cap market. The Fund
underperformed its benchmark since its inception due largely to the Fund's
conservative position in terms of volatility, while investors were showing an
increasing appetite for risk. Fund performance was also affected by negative
stock selection due to the disappointing earnings reports of several portfolio
holdings. The Fund's industry selection benefited from overweights in medical
services, leisure and medical devices.
- --------------------------------------------------------------------------------
"We continue to favor companies with high earnings yields (low P/E ratios),
strong balance sheets, low earnings variation, strong free cash flow generation
and attractive growth prospects."
- --------------------------------------------------------------------------------
Q: What is your strategy going forward?
A: We continue to favor companies with high earnings yields (low P/E ratios),
strong balance sheets, low earnings variation, strong free cash flow generation
and attractive growth prospects. We will continue to value companies based on
traditional fundamental analysis, a strategy that has served us well over the
long term. We are evaluating attractive expected return companies in the higher
volatility segment of the market on an opportunistic basis. At the end of the
reporting period, the Fund's largest sector overweights were in medical
services, consumer durables and medical devices, while the largest underweights
were in industrial parts and heavy machinery.
- --------------------------------------------------------------------------------
/1/ Total return figures are historical and assume the reinvestment of
dividends and distributions and the deduction of all Fund expenses. Total
return represents return for Class A shares and does not take into account the
current maximum sales charge of 4.5%. Returns represent past performance and
are not indicative of future results. Investment return and principal value
will fluctuate so that an investor's shares, when redeemed, may be worth more
or less than the original cost. Current performance may be lower or higher than
the data quoted.
/2/ The Russell 2000 Value Index measures the performance of those Russell 2000
companies with lower price-to-book ratios and lower forecasted growth values.
The Russell 2000 Index measures the performance of the 2,000 smallest companies
in the Russell 3000 Index. The Russell 2000 Index represents approximately 8%
of the total market capitalization of the Russell 3000 Index. The Russell 2000
Index and the Russell 2000 Value Index are unmanaged indices, they are not
available for direct investment, and their returns do not reflect the fees and
expenses that have been deducted from the Fund's returns. Likewise, return
figures for the Indices do not reflect any sales charges that an investor may
pay when purchasing or redeeming shares of the Fund.
- --------------------------------------------------------------------------------
10
- --------------------------------------------------------------------------------
The Guardian UBS Small Cap Value Fund
Sector Weightings Held by the Fund as of December 31, 2003
[CHART]
Energy 5.79%
Health Care 8.73%
Consumer Staples 2.24%
Industrials 13.16%
Utilities 3.09%
Financials 30.36%
Materials 6.32%
Information Technology 13.08%
Consumer Discretionary 17.23%
Top Ten Holdings as of December 31, 2003
(holdings are subject to change)
Company Percentage of Total Net Assets.....
- -----------------------------------------------------------------
1. Equitable Resources, Inc. 2.67%
- -----------------------------------------------------------------
2. AmerUs Group Co. 2.46%
- -----------------------------------------------------------------
3. City National Corp. 2.41%
- -----------------------------------------------------------------
4. IndyMac Bancorp, Inc. 2.28%
- -----------------------------------------------------------------
5. Cullen/Frost Bankers, Inc. 2.12%
- -----------------------------------------------------------------
6. Colonial BancGroup, Inc. 2.05%
- -----------------------------------------------------------------
7. ALLETE, Inc. 1.98%
- -----------------------------------------------------------------
8. Reynolds & Reynolds Co. 1.97%
- -----------------------------------------------------------------
9. Park Electrochemical Corp. 1.94%
- -----------------------------------------------------------------
10. Renal Care Group, Inc. 1.91%
Total Returns/1/ for Period Ending December
31, 2003
Inception Since
Date Inception
- -----------------------------------------------------------------
Class A Shares (without sales charge) 2/3/03 35.76%
- -----------------------------------------------------------------
Class A Shares (with sales charge) 2/3/03 29.65%
- -----------------------------------------------------------------
Class B Shares (without sales charge) 2/3/03 34.76%
- -----------------------------------------------------------------
Class B Shares (with sales charge) 2/3/03 31.76%
- -----------------------------------------------------------------
Class C Shares (without sales charge) 2/3/03 34.76%
- -----------------------------------------------------------------
Class C Shares (with sales charge) 2/3/03 33.76%
- -----------------------------------------------------------------
Class K Shares (without sales charge) 2/3/03 35.46%
- -----------------------------------------------------------------
Class K Shares (with sales charge) 2/3/03 34.46%
/1/Total return figures are historical and assume the reinvestment of dividends
and distributions and the deduction of all Fund expenses. The return figures
shown do not reflect the deduction of taxes that a shareholder may pay on
distributions or redemption of shares. Total return figures for Class A
shares do not take into account the current maximum sales charge of 4.5%,
except where noted. Total return figures for Class B, Class C and Class K
shares do not take into account the contingent deferred sales charge
applicable to such shares (maximum of 3% for Class B shares and 1% for Class
C and Class K shares), except where noted. Returns represent past
performance and are not indicative of future results. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than the original cost. Current performance may be
lower or higher than the data quoted.
- --------------------------------------------------------------------------------
11
- --------------------------------------------------------------------------------
The Guardian Asset Allocation Fund
[PHOTO]
Jonathan C. Jankus, C.F.A.
Jonathan C. Jankus, C.F.A.
Portfolio Manager
Objective:Long-term total investment return consistent with moderate investment
risk
Portfolio:Generally purchases shares of The Guardian S&P 500 Index, The
Guardian Park Avenue, The Guardian Investment Quality Bond and/or The
Guardian Cash Management Funds. Also invests in individual securities
and uses futures to manage allocations among the equity, debt and
money market asset classes
Inception:February 16, 1993
Net Assets at December 31, 2003: $167,566,045
Q: How did the Fund perform this year?
A: For the year ending December 31, 2003, the Fund's return was 27.87%,/1/
placing it above the average 21.20% return of 310 funds with similar objectives
and policies in the Lipper/2/ universe. The Fund also outperformed the median
return of 19.74% produced by Morningstar's/3/ universe of 850 asset allocation
funds. During this period, the Fund's return also significantly surpassed the
18.48% return experienced by its passive composite benchmark, a model portfolio
with 60% of its value in the S&P 500 Index/4/ and 40% in the Lehman Aggregate
Bond Index,/5/ rebalanced monthly without expenses or trading costs. Since its
inception on February 16, 1993 through December 31, 2003, the Fund's annualized
return of 8.81% places it behind the annualized return of 9.79% experienced by
its passive composite benchmark.
Q: What factors affected Fund performance?
A: Stock market returns were positive for the first year since 1999. Indeed,
the market's returns for 2000, 2001 and 2002 were so poor that the cumulative
return including dividends on the S&P 500 Index for the five-year period ending
December 31, 2003 has actually been negative. In addition to a weak economy,
the market had to deal with shocking levels of corporate malfeasance, the
continuing threat of terrorist attacks and a Mid-East war.
The Fund's performance was positively impacted by a correctly aggressive
stance on the market. After the declines of 2000, 2001 and the first half of
2002, our models viewed the market as being extremely "cheap" relative to
fixed-income alternatives. In addition, the turnaround in the economy led to a
pronounced rebound in corporate profitability. Even in the face of increasing
federal deficits and a rapidly expanding economy, bond yields and short-term
interest rates continued to stay very low.
- --------------------------------------------------------------------------------
"The Fund's performance was positively impacted by a correctly aggressive
stance on the market."
- --------------------------------------------------------------------------------
Q: What are your expectations for the coming year?
A: Our investing will, of course, continue to be guided by our quantitative
model, whose ideal mix would have us invested fully 100% in stocks, 0% in bonds
and 0% in cash. This is the most aggressive position that the Fund can hold.
Most signs indicate continuing economic growth that hopefully will continue
to feed a rebound in corporate profits. A risk on the horizon is the extent to
which interest rates will rise in the near term, especially given such
exogenous factors as a weak dollar and expensive oil. Politically, especially
during an election year, fiscal or monetary tightening seem unlikely at least
until employment statistics begin to share the apparent strength of the overall
economy.
- --------------------------------------------------------------------------------
/1/ Total return figures are historical and assume the reinvestment of
dividends and distributions and the deduction of all Fund expenses. Total
return figures for Class A shares do not take into account the current maximum
sales charge of 4.5%. Returns represent past performance and are not indicative
of future results. Investment return and principal value will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than the
original cost. Current performance may be lower or higher than the data quoted.
/2/ Lipper Analytical Services, Inc. is an independent mutual fund monitoring
and rating service. Its database of performance information is based on
historical returns, which assume the reinvestment of dividends and
distributions and the deduction of all fund expenses. Lipper return figures do
not reflect the deduction of any sales charges that an investor may pay when
purchasing or redeeming shares of the Fund.
/3 (R)/2003 Morningstar, Inc. All Rights Reserved. The information contained
herein: (1) is proprietary to Morningstar; (2) may not be copied or
distributed; and (3) is not warranted to be accurate, complete or timely.
Morningstar is not responsible for any damages or losses arising from any use
of this information and has not granted its consent to be considered or deemed
an "expert" under the Securities Act of 1933. Returns represent past
performance and are no guarantee of future results. Morningstar's database of
performance information is based on historical total returns, which assumes the
reinvestment of dividends and distributions, and the deduction of all fund
expenses.
/4/ The S&P 500 Index is an unmanaged index of 500 primarily large cap U.S.
stocks that is generally considered to be representative of U.S. stock market
activity. The S&P 500 Index is not available for direct investment, and its
returns do not reflect the fees and expenses that have been deducted from the
Fund's returns. Likewise, return figures for the S&P 500 Index do not reflect
any sales charges that an investor may pay when purchasing or redeeming shares
of the Fund.
/5/ The Lehman Aggregate Bond Index is an unmanaged index that is generally
considered to be representative of U.S. bond market activity. The Lehman
Aggregate Bond Index is not available for direct investment, and its returns do
not reflect the fees and expenses that have been deducted from the Fund's
returns. Likewise, return figures for the Lehman Aggregate Bond Index do not
reflect any sales charges that an investor may pay when purchasing or redeeming
shares of the Fund.
- --------------------------------------------------------------------------------
12
- --------------------------------------------------------------------------------
The Guardian Asset Allocation Fund
Growth of a Hypothetical $10,000 Investment
[CHART]
Guardian Asset Lehman
Allocation Fund S&P 500 Aggregate
(Class A) Index Bond Index
--------------- ------- ----------
2/16/1993 $10,000 $10,000 $10,000
2/26/1993 9,680 9,988 10,129
3/31/1993 9,862 10,196 10,171
4/30/1993 9,804 9,961 10,242
5/31/1993 9,900 10,211 10,255
6/30/1993 10,186 10,241 10,441
7/30/1993 10,186 10,211 10,500
8/31/1993 10,760 10,585 10,684
9/30/1993 10,922 10,504 10,713
10/29/1993 10,884 10,732 10,753
11/30/1993 10,597 10,618 10,662
12/31/1993 10,718 10,749 10,720
1/31/1994 11,128 11,123 10,865
2/28/1994 10,864 10,814 10,676
3/31/1994 10,513 10,345 10,413
4/29/1994 10,435 10,490 10,329
5/31/1994 10,366 10,645 10,328
6/30/1994 10,191 10,386 10,305
7/29/1994 10,365 10,738 10,510
8/31/1994 10,679 11,166 10,523
9/30/1994 10,466 10,892 10,368
10/31/1994 10,668 11,145 10,359
11/30/1994 10,294 10,732 10,336
12/30/1994 10,490 10,888 10,407
1/31/1995 10,428 11,179 10,613
2/28/1995 11,023 11,607 10,865
3/31/1995 11,300 11,950 10,932
4/28/1995 11,371 12,311 11,085
5/31/1995 11,730 12,783 11,514
6/30/1995 11,997 13,081 11,598
7/31/1995 12,550 13,525 11,572
8/31/1995 12,560 13,548 11,712
9/29/1995 12,881 14,115 11,826
10/31/1995 12,767 14,073 11,980
11/30/1995 13,057 14,677 12,159
12/29/1995 13,061 14,960 12,330
1/31/1996 13,361 15,476 12,412
2/29/1996 13,351 15,612 12,196
3/29/1996 13,436 15,764 12,111
4/30/1996 13,522 16,005 12,043
5/31/1996 13,769 16,399 12,019
6/28/1996 13,934 16,464 12,180
7/31/1996 13,455 15,741 12,213
8/30/1996 13,615 16,067 12,193
9/30/1996 14,276 16,964 12,405
10/31/1996 14,788 17,437 12,680
11/29/1996 15,734 18,745 12,897
12/31/1996 15,510 18,374 12,777
1/31/1997 16,348 19,531 12,816
2/28/1997 16,312 19,678 12,848
3/31/1997 15,761 18,873 12,706
4/30/1997 16,432 20,007 12,896
5/30/1997 17,162 21,208 13,018
6/30/1997 17,722 22,158 13,173
7/31/1997 18,851 23,922 13,528
8/29/1997 18,323 22,582 13,412
9/30/1997 18,949 23,810 13,610
10/31/1997 18,826 23,022 13,808
11/28/1997 19,047 24,079 13,871
12/31/1997 19,300 24,488 14,011
1/30/1998 19,190 24,765 14,191
2/27/1998 20,001 26,546 14,180
3/31/1998 20,646 27,907 14,229
4/30/1998 20,825 28,201 14,303
5/29/1998 20,715 27,707 14,439
6/30/1998 21,084 28,835 14,561
7/31/1998 20,833 28,520 14,592
8/31/1998 18,949 24,405 14,830
9/30/1998 19,842 25,991 15,177
10/30/1998 20,972 28,094 15,097
11/30/1998 21,852 29,796 15,182
12/31/1998 23,046 31,531 15,228
1/29/1999 23,608 32,849 15,337
2/26/1999 22,843 31,827 15,069
3/31/1999 23,374 33,100 15,153
4/30/1999 23,623 34,381 15,201
5/31/1999 23,342 33,570 15,067
6/30/1999 23,972 35,433 15,019
7/31/1999 23,680 34,327 14,956
8/31/1999 23,745 34,156 14,948
9/30/1999 23,729 33,218 15,121
10/31/1999 24,200 35,320 15,177
11/30/1999 24,671 36,038 15,176
12/31/1999 26,039 38,159 15,103
1/31/2000 26,074 36,242 15,054
2/29/2000 27,978 35,556 15,236
3/31/2000 27,749 39,034 15,436
4/30/2000 26,867 37,860 15,392
5/31/2000 25,862 37,083 15,385
6/30/2000 27,238 37,997 15,705
7/31/2000 27,146 37,403 15,848
8/31/2000 28,312 39,727 16,077
9/30/2000 27,609 37,629 16,178
10/31/2000 26,998 37,471 16,285
11/30/2000 25,722 34,518 16,552
12/31/2000 26,300 34,688 16,859
1/31/2001 26,765 35,919 17,134
2/28/2001 24,459 32,647 17,284
3/31/2001 23,144 30,580 17,370
4/30/2001 24,742 32,956 17,298
5/31/2001 24,863 33,177 17,403
6/30/2001 24,349 32,371 17,468
7/31/2001 24,218 32,054 17,859
8/31/2001 22,955 30,047 18,064
9/30/2001 21,496 27,623 18,274
10/31/2001 21,866 28,150 18,656
11/30/2001 23,282 30,309 18,399
12/31/2001 23,609 30,576 18,282
1/31/2002 23,325 30,130 18,430
2/28/2002 22,955 29,549 18,609
3/31/2002 23,652 30,660 18,299
4/30/2002 22,389 28,802 18,654
5/31/2002 22,236 28,589 18,813
6/30/2002 20,865 26,553 18,975
7/31/2002 19,157 24,483 19,204
8/31/2002 19,446 24,644 19,529
9/30/2002 17,273 21,966 19,845
10/31/2002 18,803 23,899 19,754
11/30/2002 19,911 25,306 19,749
12/31/2002 18,736 23,819 20,157
1/31/2003 18,248 23,195 20,174
2/28/2003 17,960 22,847 20,453
3/31/2003 18,137 23,069 20,438
4/30/2003 19,623 24,969 20,607
5/31/2003 20,621 26,285 20,991
6/30/2003 20,892 26,620 20,990
7/31/2003 21,253 27,089 20,285
8/31/2003 21,659 27,618 20,419
9/30/2003 21,613 27,324 20,960
10/31/2003 22,820 28,870 20,764
11/30/2003 23,025 29,124 20,814
12/31/2003 24,208 30,652 21,026
To give you a comparison, the chart above shows the performance of a
hypothetical $10,000 investment made in Class A shares of each The Guardian
Asset Allocation Fund, the S&P 500 Index and the Lehman Aggregate Bond Index.
The starting point of $9,550 for Class A shares reflects the maximum sales
charge of 4.5% that an investor may pay when purchasing Class A shares of the
Fund. Each Index begins at $10,000. This performance does not reflect the
deduction of taxes that a shareholder may pay on distributions or redemption of
shares. Returns represent past performance and are not indicative of future
results.
Performance for Class B, Class C and Class K shares, which were first offered
on May 1, 1996, August 7, 2000, and May 15, 2001, respectively, will vary due
to differences in sales load and other expenses charged to each share class.
Portfolio Composition by Asset Class as of December 31, 2003
[CHART]
Cash
0.59%
Common Stocks
99.41%
Average Annual Returns/1/ for Periods Ended December 31, 2003
Inception
Date 1 Year 3 Years 5 Years 10 Years Since Inception
- -----------------------------------------------------------------------------------------------
Class A Shares (without sales charge) 2/16/93 27.87% -3.06% 0.78% 8.38% 8.81%
- -----------------------------------------------------------------------------------------------
Class A Shares (with sales charge) 2/16/93 22.12% -4.54% -0.14% 7.88% 8.35%
- -----------------------------------------------------------------------------------------------
Class B Shares (without sales charge) 5/1/96 26.65% -3.91% -0.06% -- 6.63%
- -----------------------------------------------------------------------------------------------
Class B Shares (with sales charge) 5/1/96 23.65% -4.55% -0.26% -- 6.63%
- -----------------------------------------------------------------------------------------------
Class C Shares (without sales charge) 8/7/00 26.39% -4.31% -- -- -5.02%
- -----------------------------------------------------------------------------------------------
Class C shares (with sales charge) 8/7/00 25.39% -4.31% -- -- -5.02%
- -----------------------------------------------------------------------------------------------
Class K Shares (without sales charge) 5/15/01 27.20% -- -- -- -2.57%
- -----------------------------------------------------------------------------------------------
Class K Shares (with sales charge) 5/15/01 26.20% -- -- -- -2.57%
/1/Total return figures are historical and assume the reinvestment of dividends
and distributions and the deduction of all Fund expenses. The return figures
shown do not reflect the deduction of taxes that a shareholder may pay on
distributions or redemption of shares. Total return figures for Class A
shares do not take into account the current maximum sales charge of 4.5%,
except where noted. Total return figures for Class B, Class C and Class K
shares do not take into account the contingent deferred sales charge
applicable to such shares (maximum of 3% for Class B shares and 1% for Class
C and Class K shares), except where noted. Returns represent past
performance and are not indicative of future results. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than the original cost. Current performance may be
lower or higher than the data quoted.
- --------------------------------------------------------------------------------
13
- --------------------------------------------------------------------------------
The Guardian S&P 500 Index Fund
[PHOTO]
Jonathan C. Jankus, C.F.A.
Jonathan C. Jankus, C.F.A.
Portfolio Manager
Objective:Seeks to track the investment performance of the Standard & Poor's
500 Composite Stock Price Index ("the S&P 500 Index")
Portfolio:Common stocks of companies included in the S&P 500 Index, which
emphasizes securities issued by large U.S. companies
Inception:August 7, 2000
Net Assets at December 31, 2003: $157,686,909
Q: How did the Fund perform this year?
A: For the year ending December 31, 2003, the Fund's return was 27.78%./1/ The
Fund's objective is to match the returns of the S&P 500 Index,/2 /a theoretical
portfolio of 500 blue-chip stocks, which returned 28.68% over the same period.
The portfolio index is theoretical in the sense that it is computed as though
it was purchased and subsequently rebalanced without any trading costs or Fund
expenses. For the period starting at the Fund's inception on August 7, 2000 and
ending December 31, 2003, the Fund's annualized return was -6.97% compared to a
total annualized return of -6.63% for the S&P 500 Index.
Q: What factors affected Fund performance?
A: Stock market returns were positive for the first year since 1999. Indeed,
the market's returns for 2000, 2001 and 2002 were so poor that the cumulative
return including dividends on the S&P 500 has actually been negative for the
five-year period ending December 31, 2003. In addition to a weak economy, the
market had to deal with shocking levels of corporate malfeasance, the
continuing threat of terrorist attacks and a Mid-East war.
The stock market rebound has been a product of the turnaround in the economy
in general and corporate profits in particular. In spite of this strength,
interest rates and bond yields remained low.
Q: What are your expectations for the coming year?
A: We will continue to manage the portfolio so as to be substantially invested
in stocks, attempt to match the S&P 500 Index and keep trading costs to a
minimum. If history is any indication, this has proven to be a difficult
strategy to surpass. Of course, past performance is no indication of future
performance.
- --------------------------------------------------------------------------------
"We will continue to manage the portfolio so as to be substantially invested in
stocks, attempt to match the S&P 500 Index and keep trading costs to a minimum.
If history is any indication, this has proven to be a difficult strategy to
surpass."
- --------------------------------------------------------------------------------
Most signs indicate continuing economic growth that will hopefully continue
to feed a rebound in corporate profits. A risk on the horizon is the extent to
which interest rates will rise in the near term, especially given such
exogenous factors as a weak dollar and expensive oil. Politically, especially
during an election year, fiscal or monetary tightening seem unlikely at least
until employment statistics begin to share the apparent strength of the overall
economy.
- --------------------------------------------------------------------------------
/1/ Total return figures are historical and assume the reinvestment of
dividends and distributions and the deduction of all Fund expenses. Total
return represents return for Class A shares and does not take into account the
current maximum sales charge of 4.5%. Since inception, the investment adviser
for the Fund has assumed certain ordinary operating expenses for the Fund.
Without this assumption of expenses, returns would have been lower. Returns
represent past performance and are not indicative of future results. Investment
return and principal value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than the original cost. Current performance
may be lower or higher than the data quoted.
/2/ "S&P," "S&P 500(R)," "Standard & Poor's 500," and "500" are trademarks of
The McGraw-Hill Companies, Inc. and have been licensed for use by Guardian
Investor Services LLC. The Fund is not sponsored, endorsed, sold or promoted by
Standard & Poor's and Standard & Poor's makes no representation regarding the
advisability of investing in the Fund. The S&P 500 Index is an unmanaged index
of 500 primarily large cap U.S. stocks that is generally considered to be
representative of U.S. stock market activity. The S&P 500 Index is not
available for direct investment, and its returns do not reflect the fees and
expenses that have been deducted from the Fund's returns. Likewise, return
figures for the Index do not reflect any sales charges that an investor may pay
when purchasing or redeeming shares of the Fund.
- --------------------------------------------------------------------------------
14
- --------------------------------------------------------------------------------
The Guardian S&P 500 Index Fund
Growth of a Hypothetical $10,000 Investment
[CHART]
The Guardian The Guardian The Guardian
S&P 500 S&P 500 S&P 500
Index Fund Index Fund Index Fund
(Class A) (Class B) (Class C) S&P 500 Index
-------------- -------------- -------------- -------------
8/7/2000 $10,000 $10,000 $10,000 $10,000
Aug 31, 2000 9,797 10,247 10,247 10,270
Sep 30, 2000 9,297 9,723 9,723 9,728
Oct 31, 2000 9,268 9,684 9,684 9,687
Nov 30, 2000 8,551 8,923 8,923 8,923
Dec 31, 2000 8,590 8,947 8,947 8,967
Jan 31, 2001 8,884 9,254 9,254 9,285
Feb 28, 2001 8,079 8,413 8,413 8,440
Mar 31, 2001 7,568 7,879 7,879 7,905
Apr 30, 2001 8,145 8,472 8,472 8,520
May 31, 2001 8,202 8,522 8,522 8,577
Jun 30, 2001 7,995 8,304 8,304 8,368
Jul 31, 2001 7,919 8,215 8,215 8,286
Aug 31, 2001 7,426 7,701 7,701 7,767
Sep 30, 2001 6,827 7,079 7,079 7,140
Oct 31, 2001 6,951 7,197 7,197 7,277
Nov 30, 2001 7,473 7,741 7,741 7,835
Dec 31, 2001 7,538 7,795 7,796 7,904
Jan 31, 2002 7,424 7,676 7,677 7,788
Feb 28, 2002 7,280 7,518 7,519 7,638
Mar 31, 2002 7,548 7,795 7,796 7,926
Apr 30, 2002 7,090 7,320 7,311 7,445
May 31, 2002 7,032 7,251 7,252 7,390
Jun 30, 2002 6,534 6,731 6,731 6,864
Jul 31, 2002 6,026 6,206 6,207 6,329
Aug 31, 2002 6,065 6,246 6,236 6,370
Sep 30, 2002 5,394 5,553 5,553 5,678
Oct 31, 2002 5,873 6,038 6,038 6,178
Nov 30, 2002 6,208 6,385 6,385 6,541
Dec 31, 2002 5,853 5,985 5,986 6,157
Jan 31, 2003 5,689 5,826 5,817 5,996
Feb 28, 2003 5,601 5,727 5,728 5,906
Mar 31, 2003 5,660 5,777 5,778 5,963
Apr 30, 2003 6,115 6,243 6,256 6,455
May 31, 2003 6,435 6,571 6,575 6,795
Jun 30, 2003 6,515 6,644 6,648 6,880
Jul 31, 2003 6,632 6,753 6,757 7,002
Aug 31, 2003 6,749 6,872 6,887 7,138
Sep 30, 2003 6,680 6,872 6,877 7,062
Oct 31, 2003 7,050 7,171 7,176 7,462
Nov 30, 2003 7,109 7,231 7,236 7,528
Dec 31, 2003 7,480 7,381 7,531 7,923
To give you a comparison, the chart above shows the performance of a
hypothetical $10,000 investment made in Class A, Class B and Class C shares of
The Guardian S&P 500 Index Fund and the S&P 500 Index Fund. The starting point
of $9,550 for Class A shares reflects the maximum sales charge of 4.5% that an
investor may have to pay when purchasing Class A shares of the Fund. For Class
B shares, the contingent deferred sales charge of 2% was imposed at the end of
the period. The S&P 500 Index, Class B and Class C shares begin at $10,000.
This performance does not reflect the deduction of taxes that a shareholder may
pay on distributions or redemption of shares. Returns represent past
performance and are not indicative of future results.
Performance for Class K shares, which were first offered on May 15, 2001, will
vary due to differences in sales load and other expenses charged to such share
class.
Sector Weightings for The Guardian
S&P 500 Index Fund as of Sector Weightings of the S&P 500 Index as
December 31, 2003 of December 31, 2003
[CHART] [CHART]
Financials Financials
20.63% 20.66%
Information Technology Information Technology
17.69% 17.71%
Health Care Health Care
13.30% 13.32%
Consumer Discretionary Consumer Discretionary
11.25% 11.30%
Consumer Staples Consumer Staples
11.00% 10.99%
Industrials Industrials
10.80% 10.90%
Energy Energy
5.78% 5.80%
Telecommunication Telecommunication
Services 3.41% Services 3.45%
Materials Materials
3.03% 3.04%
Utilities Utilities
2.84% 2.84%
Cash
0.27%
Average Annual Returns/1/ for Periods Ended December 31, 2003
Inception
Date 1 Year 3 Years Since Inception
- ------------------------------------------------------------------------------
Class A Shares (without sales charge) 8/7/00 27.78% -4.51% -6.97%
- ------------------------------------------------------------------------------
Class A Shares (with sales charge) 8/7/00 22.03% -5.96% -8.22%
- ------------------------------------------------------------------------------
Class B Shares (without sales charge) 8/7/00 26.94% -5.30% -7.77%
- ------------------------------------------------------------------------------
Class B Shares (with sales charge) 8/7/00 23.94% -5.94% -8.32%
- ------------------------------------------------------------------------------
Class C Shares (without sales charge) 8/7/00 26.77% -5.34% -7.80%
- ------------------------------------------------------------------------------
Class C shares (with sales charge) 8/7/00 25.77% -5.34% -7.80%
- ------------------------------------------------------------------------------
Class K Shares (without sales charge) 5/15/01 27.31% -- -4.76%
- ------------------------------------------------------------------------------
Class K Shares (with sales charge) 5/15/01 26.31% -- -4.76%
/1/Total return figures are historical and assume the reinvestment of dividends
and distributions and the deduction of all Fund expenses. The return figures
shown do not reflect the deduction of taxes that a shareholder may pay on
distributions or redemption of shares. Total return figures for Class A
shares do not take into account the current maximum sales charge of 4.5%,
except where noted. Total return figures for Class B, Class C and Class K
shares do not take into account the contingent deferred sales charge
applicable to such shares (maximum of 3% for Class B shares and 1% for Class
C and Class K shares), except where noted. Since inception, the investment
adviser for the Fund has assumed certain ordinary operating expenses for the
Fund. Without this assumption of expenses, returns would have been lower.
Returns represent past performance and are not indicative of future results.
Investment return and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than the original cost.
Current performance may be lower or higher than the data quoted.
- --------------------------------------------------------------------------------
15
- --------------------------------------------------------------------------------
The Guardian Baillie Gifford International Fund
[PHOTO]
Menzies
R. Robin Menzies
Portfolio Manager
Objective:Long-term growth of capital
Portfolio:At least 80% in a diversified portfolio of common stocks and
convertible securities of companies domiciled outside the United
States
Inception:February 16, 1993
Net Assets at December 31, 2003: $51,186,313
Q: How did the Fund perform?
A: During 2003, the world's markets began to recover from the declines that
began in 2000. The Fund returned 28.57%/1 /during 2003, compared to the Morgan
Stanley Capital International (MSCI) Europe, Australasia and Far East (EAFE)
Growth Index,/2/ which rose 32.5% during the same period. As was the case in
2002, international returns benefited from the weakness of the dollar relative
to the world's other major currencies. This was particularly evident in
Continental Europe; the local currency return of the MSCI Europe ex-UK Growth
Index/3/ was 16.2%, compared with a dollar-denominated return of 37.8%. Of the
countries in the EAFE Growth Index, Germany performed best, rising by over 68%.
Finland did least well, returning 11.5%.
Q: What factors affected the Fund's performance?
A: Although it achieved a strong positive return, the Fund underperformed the
MSCI EAFE Growth Index. The main investment management reason for this was our
choice of stocks in Continental Europe and in Japan. While we believe that the
Fund's holdings in these regions are good quality companies that will grow
their earnings faster than their peers over the longer term, the markets often
neglected such stocks, preferring lower quality companies in many cases. On the
positive side, the Fund benefited from its allocation to emerging markets: its
investments in this area rose by 52% during the year. We have favored oil and
gas companies in the emerging markets over their counterparts in the developed
world; this is reflected also in the strong stock selection achieved in the
energy industry. The Fund's relative performance was also helped by stock
selection in the telecommunication services, and food, beverages, and tobacco
industries, and by having no exposure to the utilities industry.
Q: What is your outlook for the future?
A: The task of an outlook is to try to estimate what will come next. The most
convincing answer to that question in economic terms seems to be "more of the
same." Productivity growth is high, and there is plenty of spare capacity in
most areas (with commodities being the most obvious exception). The speed and
vigor of the American recovery has thus far worked wonders for corporate
profits in the U.S., and there is evidence of the long-awaited recovery in
capital expenditure, which we believe should build up in 2004. For much of the
world, we believe, the most important issue is what the dollar does next. On
balance, in our view the dollar is likely to remain fairly weak, and this will
be a painful experience for manufacturers in the euro and yen areas.
- --------------------------------------------------------------------------------
". . . the Fund benefited from its allocation to emerging markets: its
investments in this area rose by 52% during the year."
- --------------------------------------------------------------------------------
We expect that the pressure on Europe and Japan to stimulate demand at home
will become irresistible. The United Kingdom has managed to steer a remarkably
stable middle course, but stability may become an unfashionable virtue if
current conditions persist. The emerging markets, which, in general, have
depreciated with the dollar, find themselves in a happier position. They are
more competitive compared to their old rivals in Europe and Japan, and their
main customers (America and other emerging markets, especially China) are
booming. Stock markets in general do not look particularly cheap to us at the
moment, but the rate of profit increases in some may make such statements
outdated fairly quickly. With the significant caveat that the dollar does not
fall too sharply, we believe the background to equity investment looks quite
good.
- --------------------------------------------------------------------------------
/1/ Total return figures are historical and assume the reinvestment of
dividends and distributions and the deduction of all Fund expenses. Total
return represents return for Class A shares and does not take into account the
current maximum sales charge of 4.5%. A redemption fee of 2% applies to
redemptions of shares purchased after August 22, 2003 and held for less than 60
days. This fee does not apply to omnibus accounts. Returns represent past
performance and are not indicative of future results. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than the original cost. Current performance may be lower
or higher than data quoted.
/2/ The Morgan Stanley Capital International (MSCI) Europe, Australasia and Far
East (EAFE) Growth Index is an unmanaged index that is generally considered to
be representative of international growth stock market activity. The MSCI EAFE
Growth Index is not available for direct investment, and its returns do not
reflect the fees and expenses that have been deducted from the Fund. Likewise,
these return figures for the index do not reflect any sales charges that an
investor may pay when purchasing or redeeming shares of the fund.
/3/ The MSCI Europe ex-UK Growth Index is generally considered to be
representative of the European growth stock market excluding the United
Kingdom. The returns for these indexes do not reflect the fees and expenses
that have been deducted from the Fund. Likewise, these return figures for the
index do not reflect any sales charges that an investor may pay when purchasing
or redeeming shares of the fund.
- --------------------------------------------------------------------------------
16
- --------------------------------------------------------------------------------
The Guardian Baillie Gifford International Fund
Growth of a Hypothetical $10,000 Investment
[CHART]
Guardian Baillie Gifford
International Fund MSCI EAFE
(Class A) Growth Index
------------------------ ------------
02/16/1993 $10,000 $10,000
28-Feb-93 9,670 10,274
31-Mar-93 9,837 11,005
30-Apr-93 10,358 11,897
31-May-93 10,609 12,249
30-Jun-93 10,395 12,140
30-Jul-93 10,674 12,497
31-Aug-93 11,371 13,138
30-Sep-93 11,409 12,819
29-Oct-93 11,901 13,226
30-Nov-93 11,343 11,931
31-Dec-93 12,360 12,637
31-Jan-94 12,866 13,589
28-Feb-94 12,651 13,489
31-Mar-94 12,248 12,827
29-Apr-94 12,604 13,359
31-May-94 12,501 13,206
30-Jun-94 12,388 13,333
29-Jul-94 12,736 13,452
31-Aug-94 13,064 13,760
30-Sep-94 12,557 13,303
31-Oct-94 12,942 13,678
30-Nov-94 12,304 13,066
30-Dec-94 12,292 13,237
31-Jan-95 11,574 12,731
28-Feb-95 11,593 12,729
31-Mar-95 12,027 13,533
28-Apr-95 12,339 14,135
31-May-95 12,368 13,975
30-Jun-95 12,368 13,688
31-Jul-95 13,047 14,564
31-Aug-95 12,933 13,954
29-Sep-95 13,162 14,276
31-Oct-95 12,952 13,893
30-Nov-95 13,142 14,278
29-Dec-95 13,661 14,779
31-Jan-96 13,873 14,791
29-Feb-96 13,993 14,845
29-Mar-96 14,446 15,204
30-Apr-96 14,879 15,575
31-May-96 14,759 15,253
28-Jun-96 14,940 15,309
31-Jul-96 14,457 14,817
30-Aug-96 14,658 14,834
30-Sep-96 15,020 15,243
31-Oct-96 14,809 15,120
29-Nov-96 15,554 15,606
31-Dec-96 15,619 15,326
31-Jan-97 15,270 14,690
28-Feb-97 15,445 14,920
31-Mar-97 15,609 15,011
30-Apr-97 15,855 15,164
30-May-97 16,892 16,058
30-Jun-97 17,768 16,995
31-Jul-97 18,724 17,404
29-Aug-97 17,325 16,065
30-Sep-97 18,631 17,130
31-Oct-97 17,140 15,511
28-Nov-97 17,048 15,481
31-Dec-97 17,348 15,683
30-Jan-98 17,758 16,394
27-Feb-98 19,021 17,485
31-Mar-98 19,981 17,725
30-Apr-98 20,358 17,905
29-May-98 20,488 17,783
30-Jun-98 20,607 18,031
31-Jul-98 21,077 18,116
31-Aug-98 18,246 16,173
30-Sep-98 17,568 15,721
30-Oct-98 18,771 17,319
30-Nov-98 19,645 18,160
31-Dec-98 20,750 19,206
29-Jan-99 20,648 19,309
26-Feb-99 20,231 18,685
31-Mar-99 20,580 18,941
30-Apr-99 21,257 19,138
31-May-99 20,287 18,310
30-Jun-99 21,412 19,022
31-Jul-99 22,060 19,391
31-Aug-99 22,549 19,503
30-Sep-99 22,481 19,816
31-Oct-99 23,560 20,880
30-Nov-99 25,572 22,413
31-Dec-99 28,471 24,911
31-Jan-00 26,667 23,513
29-Feb-00 28,703 24,819
31-Mar-00 28,459 25,288
30-Apr-00 26,485 23,620
31-May-00 25,107 22,159
30-Jun-00 25,705 22,953
31-Jul-00 24,720 21,518
31-Aug-00 24,990 21,749
30-Sep-00 23,530 20,312
31-Oct-00 22,548 19,375
30-Nov-00 21,210 18,484
31-Dec-00 21,691 18,834
31-Jan-01 21,524 18,781
28-Feb-01 19,747 16,876
31-Mar-01 18,501 15,716
30-Apr-01 20,020 16,801
31-May-01 19,382 16,131
30-Jun-01 18,790 15,351
31-Jul-01 18,106 14,979
31-Aug-01 17,590 14,297
30-Sep-01 15,934 12,947
31-Oct-01 16,283 13,462
30-Nov-01 16,557 14,155
31-Dec-01 16,845 14,237
31-Jan-02 15,888 13,470
28-Feb-02 15,934 13,652
31-Mar-02 16,769 14,178
30-Apr-02 16,769 14,260
31-May-02 16,875 14,302
30-Jun-02 16,237 13,936
31-Jul-02 14,536 12,451
31-Aug-02 14,338 12,357
30-Sep-02 12,940 11,284
31-Oct-02 13,395 11,923
30-Nov-02 13,866 12,275
31-Dec-02 13,516 11,993
31-Jan-03 13,000 11,400
28-Feb-03 12,802 11,155
31-Mar-03 12,635 11,046
30-Apr-03 13,820 12,015
31-May-03 14,564 12,647
30-Jun-03 14,626 12,871
31-Jul-03 14,702 13,042
31-Aug-03 14,824 13,281
30-Sep-03 15,265 13,733
31-Oct-03 16,106 14,524
30-Nov-03 16,442 14,866
31-Dec-03 17,498 15,889
To give you a comparison, the chart at left shows the performance of a
hypothetical $10,000 investment made in Class A shares of The Guardian Baillie
Gifford International Fund and the MSCI EAFE Growth Index. The starting point
of $9,550 for Class A shares reflects the maximum sales charge of 4.5% that an
investor may pay when purchasing Class A shares of the Fund. The Index begins
at $10,000. The Fund's performance was previously compared to the MSCI EAFE
Index. This index was replaced by the MSCI EAFE Growth Index, which is more
comparable to the Fund's investments. Total returns for the MSCI EAFE Index for
the 1-, 5- and 10-year periods ended December 31, 2003 were 39.17%, 0.26% and
4.78%, respectively. This performance does not reflect the deduction of taxes
that a shareholder may pay on distributions or redemption of shares. Returns
represent past performance and are not indicative of future results.
Performance for Class B, Class C and Class K shares, which were first offered
on May 1, 1996, August 7, 2000 and May 15, 2001, respectively, will vary due to
differences in sales load and other expenses charged to each share class.
Portfolio Composition by Geographical Location as of December 31, 2003
[CHART]
Emerging Markets 4.6%
Japan 22.6%
Cash 0.9%
Continental Europe 40.6%
Asia Pacific 6.6%
UK 24.7%
Average Annual Returns/1/ for Periods Ended December 31, 2003
Inception Since
Date 1 Year 3 Years 5 Years 10 Years Inception
- -----------------------------------------------------------------------------------------
Class A Shares (without sales charge) 2/16/93 28.57% -7.12% -3.48% 3.47% 5.66%
- -----------------------------------------------------------------------------------------
Class A Shares (with sales charge) 2/16/93 22.78% -8.53% -4.36% 2.99% 5.21%
- -----------------------------------------------------------------------------------------
Class B Shares (without sales charge) 5/1/96 27.13% -8.27% -4.54% -- 0.90%
- -----------------------------------------------------------------------------------------
Class B Shares (with sales charge) 5/1/96 24.13% -8.89% -4.73% -- 0.90%
- -----------------------------------------------------------------------------------------
Class C Shares (without sales charge) 8/7/00 27.06% -8.24% -- -- -10.65%
- -----------------------------------------------------------------------------------------
Class C shares (with sales charge) 8/7/00 26.06% -8.24% -- -- -10.65%
- -----------------------------------------------------------------------------------------
Class K Shares (without sales charge) 5/15/01 28.31% -- -- -- -5.22%
- -----------------------------------------------------------------------------------------
Class K Shares (with sales charge) 5/15/01 27.31% -- -- -- -5.22%
/1/Total return figures are historical and assume the reinvestment of dividends
and distributions and the deduction of all Fund expenses. The return figures
shown do not reflect the deduction of taxes that a shareholder may pay on
distributions or redemption of shares. Total return figures for Class A
shares do not take into account the current maximum sales charge of 4.5%,
except where noted. Total return figures for Class B, Class C and Class K
shares do not take into account the contingent deferred sales charge
applicable to such shares (maximum of 3% for Class B shares and 1% for Class
C and Class K shares), except where noted. Returns represent past
performance and are not indicative of future results. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than the original cost. Current performance may be
lower or higher than the data quoted.
- --------------------------------------------------------------------------------
17
- --------------------------------------------------------------------------------
The Guardian Baillie Gifford Emerging Markets Fund
[PHOTO]
Edward H. Hocknell
Edward H. Hocknell
Portfolio Manager
Objective:Long-term capital appreciation
Portfolio:At least 80% in a portfolio of common stocks and convertible
securities issued by companies in emerging markets
Inception:May 1, 1997
Net Assets at December 31, 2003: $74,292,852
Q: How did the Fund perform?
A: The Fund returned 53.53%/1/ in 2003, compared to a 56.28% return for the
Morgan Stanley Capital International (MSCI) Emerging Markets Free (EMF)
Index/2/ during the same period. For the third consecutive year, returns from
emerging markets have significantly exceeded those from their developed peers.
As in 2002, the fourth quarter ended the year on a positive note: the MSCI EMF
Index closed up 17.8%. However, regional, and particularly country, returns
were characteristically volatile. Monetary easing continues to be the impetus
behind the Brazilian market, and the Yukos debacle weighed heavily on the
Russian market. Of the major countries, Taiwan was the most disappointing,
barely in positive ground.
Q: What factors affected the Fund's performance?
A: Despite an underweight position in India, good stock selection meant that
this market was a main positive contributor to performance. The Indian market
performed strongly during the year, up over 78% and the Fund's holdings,
especially in materials and banks, have outperformed. The Chinese and Russian
markets also performed well, and an overweight in these countries, combined
with good stock selection, helped the Fund's performance. High commodity prices
ensured that materials stocks largely performed well, whether in aluminum, oil,
nickel, gold or steel. South African holdings failed to benefit from these
prices as much as elsewhere due to the strong rand, the main factor which led
to South Africa underperforming as a whole. In terms of industries, the stocks
in the materials and capital goods industries were the key contributors to
performance, and given the improved global growth outlook and demand from China
in particular, we see the pricing outlook for companies in these industries
remaining strong.
Q: What is your outlook for the future?
A: We maintain a favorable view of emerging markets as we enter 2004. However,
after three years of good relative (to its developed peers) performance, it is
difficult to envisage another year of significantly higher returns. The
developed economies are beginning to show tangible signs of recovery, and the
interest rate cycle is set to reverse in an upward direction. That said, we
remain enthusiastic on a stock-by-stock basis, and we do not think that
attractive growth prospects throughout the regions are fully reflected in
current share prices. We continue to believe that we can find "emerging"
companies that are striving to match their developed peers, in terms of both
business acumen and shareholder awareness. Typically, the medium term rewards
will not come without some setbacks along the way.
- --------------------------------------------------------------------------------
"High commodity prices ensured that materials stocks largely performed well,
whether in aluminum, oil, nickel, gold or steel . . . stocks in the materials
and capital goods industries were the key contributors to performance, and
given the improved global growth outlook and demand from China in particular,
we see the pricing outlook for companies in these industries remaining strong."
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
/1/ Total return figures are historical and assume the reinvestment of
dividends and distributions and the deduction of all Fund expenses. Total
return represents return for Class A shares and does not take into account the
current maximum sales charge of 4.5%. A redemption fee of 2% applies to
redemptions of shares purchased after August 22, 2003 and held for less than 60
days. This fee does not apply to omnibus accounts. Returns represent past
performance and are not indicative of future results. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than the original cost. Current performance may be lower
or higher than data quoted.
/2/ The Morgan Stanley Capital International (MSCI) Emerging Markets Free (EMF)
Index is an unmanaged index that is generally considered to be representative
of the stock market activity of emerging markets. The MSCI EMF Index is a
market capitalization weighted index composed of companies representative of
the market structure of 22 emerging market countries in Europe, Latin America
and the Pacific Basin. The MSCI EMF Index excludes closed markets and those
shares in otherwise free markets that may not be purchased by foreigners. The
MSCI EMF Index is not available for direct investment, and the returns do not
reflect the fees and expenses that have been deducted from the Fund's returns.
Likewise, total return figures for the Index do not reflect any sales charges
that an investor may pay when purchasing or redeeming shares of the Fund.
- --------------------------------------------------------------------------------
18
- --------------------------------------------------------------------------------
The Guardian Baillie Gifford Emerging Markets Fund
Growth of a Hypothetical $10,000 Investment
[CHART]
Guardian Baillie Gifford Guardian Baillie Gifford
Emerging Markets MSCI Emerging Markets
Fund(Class A) EMF Index Fund(Class B)
------------------------ ----------- ------------------------
5/1/97 $10,000 $10,000 $10,000.00
May-97 9,980 10,286 $10,349.51
June-97 10,419 10,837 $10,796.12
July-97 10,915 10,998 $11,291.26
August-97 10,129 9,599 $10,466.02
September-97 10,428 9,865 $10,776.70
October-97 8,670 8,246 $8,941.75
November-97 8,418 7,945 $8,679.61
December-97 8,805 8,137 $9,029.13
January-98 7,885 7,499 $8,077.67
February-98 8,635 8,281 $8,834.95
March-98 8,832 8,641 $9,000.00
April-98 8,794 8,547 $8,941.75
May-98 7,527 7,375 $7,650.49
June-98 6,995 6,602 $7,097.38
July-98 7,286 6,811 $7,378.95
August-98 5,408 4,842 $5,475.96
September-98 5,446 5,149 $5,485.66
October-98 5,821 5,691 $6,009.96
November-98 6,272 6,164 $6,291.52
December-98 6,253 6,075 $6,252.69
January-99 5,944 5,977 $5,932.28
February-99 5,840 6,035 $5,815.77
March-99 6,572 6,830 $6,524.54
April-99 7,126 7,675 $7,058.54
May-99 6,985 7,631 $6,912.91
June-99 7,812 8,497 $7,699.35
July-99 7,671 8,266 $7,544.00
August-99 7,775 8,341 $7,631.38
September-99 7,455 8,059 $7,301.27
October-99 7,812 8,231 $7,631.38
November-99 9,080 8,969 $8,854.74
December-99 10,626 10,109 $10,340.23
January-00 10,845 10,169 $10,534.42
February-00 12,058 10,304 $11,699.51
March-00 11,972 10,354 $11,592.71
April-00 10,683 9,373 $10,330.53
May-00 10,015 8,985 $9,660.59
June-00 10,597 9,302 $10,214.02
July-00 10,025 8,823 $9,641.18
August-00 10,326 8,867 $9,922.74
September-00 9,382 8,092 $9,010.08
October-00 8,652 7,506 $8,301.31
November-00 7,951 6,849 $7,621.68
December-00 8,088 7,015 $7,738.18
January-01 9,032 7,981 $8,641.13
February-01 8,438 7,356 $8,068.30
March-01 7,650 6,633 $7,272.15
April-01 8,146 6,961 $7,738.18
May-01 8,555 7,044 $8,126.55
June-01 8,448 6,900 $8,010.04
July-01 7,728 6,464 $7,320.69
August-01 7,475 6,400 $7,077.96
September-01 6,433 5,409 $6,087.63
October-01 6,784 5,745 $6,417.74
November-01 7,455 6,345 $7,039.13
December-01 8,224 6,848 $7,747.89
January-02 8,662 7,080 $8,165.39
February-02 9,110 7,197 $8,573.17
March-02 9,713 7,630 $9,136.30
April-02 9,567 7,679 $8,990.66
May-02 9,441 7,557 $8,864.44
June-02 8,789 6,991 $8,243.06
July-02 8,234 6,459 $7,718.77
August-02 8,263 6,558 $7,738.18
September-02 7,377 5,850 $6,903.20
October-02 7,738 6,230 $7,223.60
November-02 8,186 6,659 $7,641.09
December-02 7,855 6,437 $7,330.40
January-03 7,845 6,409 $7,301.27
February-03 7,621 6,236 $7,097.38
March-03 7,319 6,060 $6,806.11
April-03 7,566 6,599 $7,310.98
May-03 8,682 7,073 $8,058.59
June-03 8,964 7,476 $8,311.02
July-03 9,393 7,944 $8,699.39
August-03 9,977 8,478 $9,233.39
September-03 10,016 8,540 $9,252.81
October-03 10,927 9,266 $10,126.63
November-03 11,102 9,380 $10,272.27
31-Dec-03 12,013 10,060 $10,799.09
To give you a comparison, the chart at left shows the performance of a
hypothetical $10,000 investment made in Class A and Class B shares of The
Guardian Baillie Gifford Emerging Markets Fund and the MSCI EMF Index. The
starting point of $9,550 for Class A shares reflects the maximum sales charge
of 4.5% that an investor may have to pay when purchasing Class A shares of the
Fund. For Class B shares the contingent deferred sales charge of 1% was imposed
at the end of the period. The Index and Class B shares begin at $10,000. This
performance does not reflect the deduction of taxes that a shareholder may pay
on distributions or redemption of shares. Returns represent past performance
and are not indicative of future results.
Performance for Class C and Class K shares, which were first offered on August
7, 2000 and May 15, 2001, respectively, will vary due to differences in sales
load and other expenses charged to each share class.
Portfolio Composition by Geographical Location as of December 31, 2003
[CHART]
Asia 56.08%
Europe/Middle East 19.78%
Latin America 20.34%
Cash 3.80%
Average Annual Returns/1/ for Periods Ended December 31, 2003
Inception
Date 1 Year 3 Years 5 Years Since Inception
- --------------------------------------------------------------------------------------
Class A Shares (without sales charge) 5/1/97 53.53% 14.24% 14.03% 3.53%
- --------------------------------------------------------------------------------------
Class A Shares (with sales charge) 5/1/97 46.62% 12.50% 12.98% 2.82%
- --------------------------------------------------------------------------------------
Class B Shares (without sales charge) 5/6/97 51.52% 12.80% 12.18% 1.59%
- --------------------------------------------------------------------------------------
Class B Shares (with sales charge) 5/6/97 48.52% 12.27% 12.05% 1.59%
- --------------------------------------------------------------------------------------
Class C Shares (without sales charge) 8/7/00 51.72% 12.85% -- 4.37%
- --------------------------------------------------------------------------------------
Class C shares (with sales charge) 8/7/00 50.72% 12.85% -- 4.37%
- --------------------------------------------------------------------------------------
Class K Shares (without sales charge) 5/15/01 52.95% 15.23%
- --------------------------------------------------------------------------------------
Class K Shares (with sales charge) 5/15/01 51.95% 15.23%
/1/Total return figures are historical and assume the reinvestment of dividends
and distributions and the deduction of all Fund expenses. The return figures
shown do not reflect the deduction of taxes that a shareholder may pay on
distributions or redemption of shares. Total return figures for Class A
shares do not take into account the current maximum sales charge of 4.5%,
except where noted. Total return figures for Class B, Class C and Class K
shares do not take into account the contingent deferred sales charge
applicable to such shares (maximum of 3% for Class B shares and 1% for Class
C and Class K shares), except where noted. Returns represent past
performance and are not indicative of future results. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than the original cost. Current performance may be
lower or higher than the data quoted.
- --------------------------------------------------------------------------------
19
- --------------------------------------------------------------------------------
The Guardian Investment Quality Bond Fund
[PHOTO]
Howard Chin
Howard W. Chin
Portfolio Manager
Net Assets at December 31, 2003: $182,935,542
Q: How did the Fund perform in 2003?
A: The Fund had a total return of 4.53%/1/ for the year ended
December 31, 2003, outperforming its benchmark, the Lehman
Aggregate Bond Index,/2/ which measures the taxable fixed
income market and returned 4.10% in 2003. Additionally, the
average fund in the Lipper Intermediate Investment Grade/3/
peer group returned 4.55% for the same period (the peer group
consists of 426 other mutual funds that invest in primarily
investment grade debt with average maturities of 5-10 years).
Q: What factors affected the Fund's performance?
A: After a disappointing 2002, and an anemic start in 2003, the long-awaited
economic recovery finally gained some substantial ground in the second half of
2003, although not without some fits and starts along the way. Despite very low
interest rates, the economy grew at only a 2.5% rate during the first half of
2003, but much of that was attributed to geopolitical concerns and the
uncertainty surrounding the war in Iraq. With the war's successful conclusion,
signs of a stronger economy unfolded as the year went on. Fueled by a very
accommodative monetary policy and stimulative tax and fiscal policies, economic
growth surged in the third quarter to 8.2%. Blue Chip Consensus/4/ expectations
are for a more moderate 4.3% growth rate in the fourth quarter, and 4.6% for
2004.
The Federal Reserve Board (Fed) remained an integral factor in the fixed
income markets in 2003 as it cut the Fed Funds rate by another 0.25% in June to
reach 1.0%, the lowest rate in over forty years. And after observing a
sustained period of low inflation, the Fed also raised the possibility of
unwelcome deflation and put the market on notice that they would take steps to
prevent it, leading to a rally that resulted in the lowest interest rates in
over forty years with the 10-year Treasury bottoming out at a 3.11% yield in
June. Since then, however, the Fed has stated that the risk of deflation has
subsided and is now roughly equal to that of inflation. On the other hand, the
Fed reiterated its expectation of maintaining an accommodative stance on
monetary policy for a considerable period. The 2- and 10-year Treasuries
finished the year at 1.84% and 4.26% respectively, 0.25% and 0.44% higher than
when the year started.
Even though yields were higher for the year, the Treasury sector as measured
by the Lehman Treasury Index/2/ posted a positive return of 2.24% in 2003 as
coupon income more than offset the price declines. Furthermore, most portions
of the fixed income market performed even better. The star performer within the
Lehman Aggregate Bond Index was the investment grade corporate bond sector,
which returned 7.70% in 2003 and, more impressively, outperformed comparable
Treasuries by 5.27%, eclipsing the previous record by 2.50%. This spectacular
performance was based on sharply better underlying fundamentals, where all the
stars were aligned in the same positive direction. Most notably, we saw a much
better economy and greater profitability among American businesses resulting
from their earlier cost-cutting efforts. Accordingly, investors were much more
comfortable taking on credit risk and increased their demand for corporate
bonds just as the net supply for 2003 was shrinking compared to year-earlier
levels. Lower-rated investment grade corporates fared the best in this
environment, and led the recovery among corporates as the poorest performing
sectors in 2002 recovered the most in 2003.
In contrast, mortgage-backed securities (MBS) fared less well in 2003.
Although the sector posted a positive return of 3.07%, it outperformed
comparable Treasuries by only 0.11%, the weakest showing among the structured
product sectors of the Lehman Aggregate Index. MBS underperformed by 1.53% in
July - the poorest one-month showing in the history of the Lehman MBS index -
when Treasury yields increased sharply. The other portions of the structured
products market did much better. Asset- backed securities (ABS) returned 4.01%
on a nominal basis and bested Treasuries by 1.81%. Commercial mortgage-backed
securities (CMBS), benefiting from many of the same positive fundamentals as
corporate bonds, performed even better, returning 4.66% and 2.01%
respectively./5/
- --------------------------------------------------------------------------------
". . . corporates were far and away the best performing asset class in 2003,
and our overweights served the Fund very well."
- --------------------------------------------------------------------------------
Q: What was your investment strategy during the period?
A: Coming into 2003, we believed spread assets were very attractive and well
positioned to take advantage of the expected economic recovery. Corporate bonds
were especially attractive as the previous year's underperformance left them
fundamentally undervalued. As a result, we adopted overweighted exposures in
both corporate bonds and structured products (MBS, ABS and CMBS). Although the
economic recovery was initially less robust and took longer to fully emerge
than originally expected, corporates, ABS and CMBS still performed very well.
As discussed above, corporates were far and away the best performing asset
class in 2003, and our overweights served the Fund very well. Furthermore, many
of the specific subsectors in which we chose to strongly overweight performed
even better than the average corporate sector in the Lehman Credit Index, which
outperformed Treasuries by 5.27%. Of particular note, the media-cable sector
(10.96% of excess returns relative to Treasuries) and the wirelines sector
(7.64%) made outsized contributions to the Fund's performance. In addition, our
decision to overweight the automotive sector in the fourth quarter proved to be
very timely as, after several volatile quarters, the sector recovered and
outperformed Treasuries by 4.76% in the last quarter alone.
Our asset allocation strategy within structured products also helped the Fund
to outperform. We were overweighted in all three subsectors for much of the
year, but we were much more strongly overweighted in CMBS and ABS relative to
MBS, and, as noted above, these two sectors posted significantly greater excess
returns. In fact, we were overweighted in MBS during the first half of the year
when the sector outperformed, and in July subsequently eliminated our
overweight in MBS, thus avoiding most of the sector's historic underperformance.
- --------------------------------------------------------------------------------
/1/ Total return figures are historical and assume the reinvestment of
dividends and distributions and the deduction of all Fund expenses. Total
return represents return for Class A shares and does not take into account the
current maximum sales charge of 4.5%. Since June 1, 1994, the investment
adviser for the Fund has assumed certain ordinary operating expenses for the
Fund. Without this assumption of expenses, returns would have been lower.
Returns represent past performance and are not indicative of future results.
Investment return and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than the original cost.
Current performance may be lower or higher than the data quoted.
/2/ The Lehman Aggregate Bond Index, the Lehman Credit Index and the Lehman
Treasury Index are unmanaged indices that are generally considered to be
representative of U.S. bond market activity, the U.S. investment grade
corporate bond market activity, and U.S. treasury market activity,
respectively. The Indices are not available for direct investment, and their
returns do not reflect the fees and expenses that have been deducted from the
Fund. Likewise, return figures for the Indices do not reflect any sales charges
that an investor may have to pay when purchasing or redeeming shares of the
Fund.
/3/ Lipper, Inc. is an independent mutual fund monitoring and rating service.
Its database of performance information is based on historical returns, which
assume the reinvestment of dividends and distributions and the deduction of all
fund expenses. Lipper return figures do not reflect the deduction of any sales
charges that an investor may pay when purchasing or redeeming shares of the
Fund.
/4/ The Blue Chip Economic Consensus is a forecast of economic variables
published monthly based on the surveys of 55 leading economists and financial
analysts.
/5/ The respective indices are: the Lehman Mortgage-Backed Securities (MBS)
Index, the Lehman Asset-Backed Securities (ABS) Index, and the Lehman
Commercial Mortgage-Backed Securities (CMBS) Index.
- --------------------------------------------------------------------------------
20
- --------------------------------------------------------------------------------
The Guardian Investment Quality Bond Fund
Q: What is your outlook for 2004?
A: We remain optimistic for both the economic recovery and the prospects for
the spread sectors in 2004. Corporate profitability has improved, and demand
has increased such that businesses are now more comfortable in making greater
commitments in capital investment and hiring. This was not the case just a year
earlier. Capital expenditures are clearly on the upswing. We have also seen
some positive job creation in the recent months, and while the hiring activity
is not yet at levels indicative of a robust expansion, historically labor
growth has been a lagging indicator of economic health. The trend is
encouraging, and we remain watchful for additional supporting signs that the
economic recovery has gained ground and is solidly on the road to
sustainability.
The impact of the growing economy on interest rates is less clear. The Fed has
stated that it intends to be patient with its current accommodative monetary
policy, so rates are likely to stay low for a while. In the longer term, rates
are likely to increase as the economy heats up and the prospect of inflation
grows, but we believe that inflation is still at the very low end of the Fed's
desired range with no signs of upward inflation pressure on the horizon. More
importantly, we think there is enough surplus capacity in the economy
(manufacturing capacity and labor supply) such that it can grow steadily
without creating any inflationary pressures on either front. As a result, a
near-term rate rise seems unlikely, and depending on the rate at which the
excess capacity is consumed, the Fed may not need to raise rates until 2005.
That said, the market has priced in a .25% increase by the Fed by the middle of
2004.
Whether this turns out to be the case is still uncertain, but until the market
believes the Fed is poised to act, the yield curve is likely to remain very
steep. With a continuing steep yield curve as the backdrop, investors will have
plenty of incentive to extend maturities beyond the yield curve and earn
incremental yield. We believe corporate bonds and structured product securities
will be favored in this environment, and an improving economy further bolsters
our outlook for these sectors. We will retain our overweighted exposures in
spread assets, and although these sectors are unlikely to perform as
spectacularly as they did in 2003, we still believe they have the potential to
put in a very solid showing and to outperform Treasuries.
Growth of a Hypothetical $10,000 Investment
[CHART]
Guardian Investment Lehman Aggregate
Quality Bond Fund Bond Index
------------------- ----------------
02/16/93 $10,000 $10,000
February-93 9,572 10,129
March-93 9,647 10,171
April-93 9,678 10,242
May-93 9,628 10,255
June-93 9,859 10,441
July-93 9,877 10,500
August-93 10,109 10,684
September-93 10,142 10,713
October-93 10,134 10,753
November-93 10,012 10,662
December-93 10,066 10,720
January-94 10,252 10,864
February-94 10,045 10,676
March-94 9,772 10,412
April-94 9,660 10,329
May-94 9,617 10,328
June-94 9,592 10,305
July-94 9,715 10,510
August-94 9,747 10,523
September-94 9,624 10,368
October-94 9,616 10,359
November-94 9,564 10,336
December-94 9,613 10,407
January-95 9,769 10,613
February-95 10,030 10,865
March-95 10,073 10,932
April-95 10,186 11,085
May-95 10,535 11,514
June-95 10,597 11,598
July-95 10,552 11,572
August-95 10,671 11,712
September-95 10,754 11,826
October-95 10,898 11,980
November-95 11,072 12,159
December-95 11,213 12,330
January-96 11,274 12,412
February-96 11,028 12,196
March-96 10,940 12,111
April-96 10,870 12,043
May-96 10,854 12,018
June-96 10,989 12,180
July-96 11,009 12,213
August-96 10,993 12,193
September-96 11,190 12,405
October-96 11,434 12,680
November-96 11,654 12,897
December-96 11,520 12,777
January-97 11,573 12,816
February-97 11,610 12,848
March-97 11,478 12,706
April-97 11,624 12,896
May-97 11,721 13,018
June-97 11,881 13,173
July-97 12,200 13,528
August-97 12,084 13,412
September-97 12,246 13,610
October-97 12,356 13,808
November-97 12,384 13,871
December-97 12,496 14,011
January-98 12,666 14,191
February-98 12,656 14,180
March-98 12,703 14,229
April-98 12,761 14,303
May-98 12,871 14,439
June-98 12,980 14,561
July-98 13,001 14,592
August-98 13,203 14,830
September-98 13,443 15,177
October-98 13,419 15,097
November-98 13,446 15,182
December-98 13,481 15,228
January-99 13,578 15,337
February-99 13,346 15,069
March-99 13,430 15,152
April-99 13,473 15,200
May-99 13,339 15,067
June-99 13,287 15,019
July-99 13,226 14,955
August-99 13,222 14,948
September-99 13,386 15,121
October-99 13,380 15,177
November-99 13,379 15,176
December-99 13,347 15,103
January-00 13,298 15,053
February-00 13,466 15,235
March-00 13,568 15,436
April-00 13,494 15,392
May-00 13,524 15,385
June-00 13,818 15,705
July-00 13,908 15,847
August-00 14,103 16,077
September-00 14,182 16,178
October-00 14,216 16,285
November-00 14,354 16,552
December-00 14,659 16,859
January-01 14,961 17,134
February-01 15,073 17,284
March-01 15,139 17,370
April-01 15,082 17,298
May-01 15,165 17,403
June-01 15,183 17,468
July-01 15,547 17,859
August-01 15,724 18,063
September-01 15,916 18,274
October-01 16,230 18,656
November-01 16,033 18,399
December-01 15,908 18,282
January-02 16,053 18,430
February-02 16,214 18,609
March-02 15,935 18,299
April-02 16,212 18,654
May-02 16,361 18,813
June-02 16,459 18,976
July-02 16,604 19,205
August-02 16,896 19,530
September-02 17,170 19,846
October-02 17,088 19,756
November-02 17,038 19,750
December-02 17,379 20,158
January-03 17,382 20,175
February-03 17,631 20,455
March-03 17,645 20,439
April-03 17,829 20,609
May-03 18,137 20,992
June-03 18,137 20,991
July-03 17,497 20,286
August-03 17,614 20,420
September-03 18,075 20,961
October-03 17,936 20,766
November-03 17,990 20,816
December-03 18,170 21,028
To give you a comparison, the chart above shows the performance of a
hypothetical $10,000 investment made in Class A shares of The Guardian
Investment Quality Bond Fund and the Lehman Aggregate Bond Index. The starting
point of $9,550 for Class A shares reflects the maximum sales charge of 4.5%
that an investor may pay when purchasing Class A shares of the Fund. The Index
begins at $10,000. This performance does not reflect the deduction of taxes
that a shareholder may pay on distributions or redemption of shares. Returns
represent past performance and are not indicative of future results.
Performance for Class B and C shares, which were first offered on August 7,
2000 and for Class K shares, which were first offered on May 15, 2001, will
vary due to differences in sales load and other expenses charged to each share
class.
Average Annual Returns/1/ for Periods Ended December 31, 2003
Inception
Date 1 Year 3 Years 5 Years 10 Years Since Inception
- -----------------------------------------------------------------------------------------------
Class A Shares (without sales charge) 2/16/93 4.53% 7.42% 6.14% 6.07% 6.08%
- -----------------------------------------------------------------------------------------------
Class A Shares (with sales charge) 2/16/93 -0.17% 5.78% 5.17% 5.58% 5.63%
- -----------------------------------------------------------------------------------------------
Class B Shares (without sales charge) 8/7/00 3.75% 6.66% -- -- 7.20%
- -----------------------------------------------------------------------------------------------
Class B Shares (with sales charge) 8/7/00 0.75% 6.07% -- -- 6.70%
- -----------------------------------------------------------------------------------------------
Class C Shares (without sales charge) 8/7/00 3.75% 6.66% -- -- 7.20%
- -----------------------------------------------------------------------------------------------
Class C shares (with sales charge) 8/7/00 2.75% 6.66% -- -- 7.20%
- -----------------------------------------------------------------------------------------------
Class K Shares (without sales charge) 5/15/01 4.11% -- -- -- 6.91%
- -----------------------------------------------------------------------------------------------
Class K Shares (with sales charge) 5/15/01 3.11% -- -- -- 6.91%
/1/Total return figures are historical and assume the reinvestment of dividends
and distributions and the deduction of all Fund expenses. The return figures
shown do not reflect the deduction of taxes that a shareholder may pay on
distributions or redemption of shares. Total return figures for Class A
shares do not take into account the current maximum sales charge of 4.5%,
except where noted. Total return figures for Class B, Class C and Class K
shares do not take into account the contingent deferred sales charge
applicable to such shares (maximum of 3% for Class B shares and 1% for Class
C and Class K shares), except where noted. Since June 1, 1994, the
investment adviser for the Fund has assumed certain ordinary operating
expenses for the Fund. Without this assumption of expenses, returns would
have been lower. Returns represent past performance and are not indicative
of future results. Investment return and principal value will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than the
original cost. Current performance may be lower or higher than the data
quoted.
- --------------------------------------------------------------------------------
21
- --------------------------------------------------------------------------------
The Guardian Low Duration Bond Fund
[PHOTO]
Howard Chin
Howard W. Chin
Portfolio Manager
Objective:Seeks a high level of current income, consistent with preservation of
capital
Portfolio:At least 80% in investment grade corporate and government bonds, and
asset- and mortgage-backed securities
Inception:July 30, 2003
Net assets at December 31, 2003: $31,375,457
Q: How did the Fund perform in 2003?
A: The Fund was created on July 30, 2003 and had a total return of 0.99%/1/ for
the year ended December 31, 2003, closely matching our benchmark, the Lehman
U.S. Government 1-3 Year Bond Index,/2/ which returned 0.95% over the same time
period.
Q: What factors affected the Fund's performance?
A: After a disappointing 2002, and an anemic start to 2003, the long-awaited
economic recovery finally gained some substantial ground in the second half of
2003, although not without some fits and starts along the way. Despite very low
interest rates, the economy grew at only a 2.5% rate during the first half of
2003, but much of that was attributed to geopolitical concerns and the
uncertainty surrounding the war in Iraq. Fueled by a very accommodative
monetary policy and stimulative tax and fiscal policies, economic growth surged
in the third quarter to 8.2%. Blue Chip Consensus/3/ expectations are for a
more moderate 4.3% growth rate in the fourth quarter, and 4.6% for 2004.
The Federal Reserve Board (Fed) remained an integral factor in the fixed
income markets in 2003 as it cut the Fed Funds rate by another 0.25% in June to
reach 1.0%, the lowest rate in over forty years. And after a sustained period
of low inflation, the Fed raised the possibility of unwelcome deflation and put
the market on notice that they would take steps to prevent it, leading to a
rally that resulted in the lowest interest rates in over forty years with the
2- and 10-year Treasury notes bottoming out at yields of 1.07% and 3.11%,
respectively, in June. Since then, however, the Fed has stated that the risk of
deflation has subsided and is now roughly equal to that of inflation. On the
other hand, the Fed further reiterated its expectation of maintaining an
accommodative stance on monetary policy for a considerable period. The 2- and
10-year Treasuries finished the year at 1.84% and 4.26% respectively, 0.25% and
0.44% higher than when the year started.
Even though yields were higher for the year, the Treasury sector as measured
by the Lehman Treasury Index/4/ posted a positive return of 2.24% in 2003 as
coupon income more than offset the price declines. Furthermore, most portions
of the fixed income market performed even better. The star performer within the
Lehman Aggregate Bond Index/4/ was the investment grade corporate bond sector,
which returned 7.70% in 2003 and more impressively, outperformed comparable
Treasuries by 5.27%, eclipsing the previous record by 2.50%. This spectacular
performance was based on sharply better underlying fundamentals where all the
stars were aligned in the same positive direction. Most notably, we saw a much
better economy and greater profitability among American businesses, which
resulted from their earlier cost cutting efforts. Accordingly, investors were
much more comfortable taking on credit risk and increased their demand for
corporate bonds just as the net supply was shrinking in 2003 compared to
year-earlier levels. Lower-rated investment grade corporates fared the best
under this environment, and led the recovery among corporates as the poorest
performing sectors in 2002 recovered the most in 2003.
- --------------------------------------------------------------------------------
"Corporates were far and away the best performing asset class in 2003, and our
decision to overweight corporates in lieu of Treasuries served the Fund very
well."
- --------------------------------------------------------------------------------
In contrast, mortgage-backed securities (MBS) fared less well in 2003.
Although the sector posted a positive return of 3.07%, they outperformed
comparable Treasuries by only 0.11%, the weakest showing among the structured
product sectors of the Lehman Aggregate Bond Index. MBS underperformed by 1.53%
in July when Treasury yields increased sharply, and performed just well enough
in the rest of the year to overcome July's dramatic weakening. The other
portions of the structured products market did much better. Asset-backed
securities (ABS) returned 4.01% on a nominal basis and bested Treasuries by
1.81%. Commercial mortgage-backed securities (CMBS), benefiting from many of
the same positive fundamentals as corporate bonds, were even better, returning
4.66% and 2.01% respectively./5/
- --------------------------------------------------------------------------------
/1 /Total return figures are historical and assume the reinvestment of
dividends and distributions and the deduction of all Fund expenses. Total
return represents return for Class A shares and does not take into account the
current maximum sales charge of 4.5%. Returns represent past performance and
are not indicative of future results. Investment return and principal value
will fluctuate so that an investor's shares, when redeemed, may be worth more
or less than the original cost. Current performance may be lower or higher than
the data quoted.
/2 /The Lehman U.S. Government 1-3 Year Bond Index is an unmanaged index that
is generally considered to be representative of U.S. short duration bond market
activity. The index is not available for direct investment, and its returns do
not reflect the fees and expenses that have been deducted from the Fund.
Likewise, return figures for the Index do not reflect any sales charges that an
investor may have to pay when purchasing or redeeming shares in the Fund.
/3 /The Blue Chip Economic Consensus is a forecast of economic variables
published monthly based on the surveys of 55 leading economists and financial
analysts.
/4 /The Lehman Aggregate Bond Index and the Lehman Treasury Index are unmanaged
indices that are generally considered to be representative of U.S. bond market
activity and U.S. treasury market activity, respectively. The indices are not
available for direct investment, and their returns do not reflect the fees and
expenses that have been deducted from the Fund. Likewise, return figures for
the indices do not reflect any sales charges that an investor may have to pay
when purchasing of redeeming shares of the Fund.
/5/ The respective indices are: the Lehman Mortgage-Backed Securities (MBS)
Index, the Lehman Asset-Backed Securities (ABS) Index, and the Lehman
Commercial Mortgage-Backed Securities (CMBS) Index.
- --------------------------------------------------------------------------------
22
- --------------------------------------------------------------------------------
The Guardian Low Duration Bond Fund
Q: What was your investment strategy during the period?
A: Coming into 2003, we believed spread assets were very attractive and well
positioned to take advantage of the expected economic recovery. Corporate bonds
were especially attractive as the previous year's underperformance left them
fundamentally undervalued. Corporates, in addition to looking attractive
relative to other spread products, also provided the portfolio with a very
stable duration. These factors were still in place when the Fund became
effective in July 2003. As a result, we decided to purchase an initial
portfolio of diversified corporate bonds with a small weighting in CMBS,
collateralized mortgage obligations (CMO) and ABS for further diversification
and incremental yield versus Treasuries.
As it turns out, each decision proved to be beneficial as each sector
outperformed comparable Treasuries. Corporates were far and away the best
performing asset class in 2003, and our decision to overweight corporates in
lieu of Treasuries served the Fund very well. In addition, our decision to buy
selected structured product securities resulted in a further positive impact on
the Fund's performance.
Q: What is your outlook for 2004?
A: We remain optimistic for both the economic recovery and the prospects for
the spread sectors in 2004. Corporate profitability has improved, and demand
has increased such that businesses are now more comfortable in making greater
commitments in capital investment and hiring. This was not the case just a year
earlier. Capital expenditures are clearly on the upswing. We have also seen
some positive job creation in the recent months, and while the hiring activity
is not yet at levels indicative of a robust expansion, historically labor
growth has been a lagging indicator of economic health. The trend is
encouraging, and we remain watchful for additional supporting signs that the
economic recovery has gained ground and is solidly on the road to
sustainability.
The impact of the growing economy on interest rates is less clear. The Fed
has stated that it intends to be patient with its current accommodative
monetary policy, so rates are likely to stay low for a while. In the longer
term, we believe that rates are likely to increase as the economy heats up and
the prospect of inflation grows, but inflation is still at the very low end of
the Fed's desired range with no signs of upward inflation pressure on the
horizon. More importantly, we believe there is enough surplus capacity in the
economy (manufacturing capacity and labor supply) such that it can grow
steadily without creating any inflationary pressures on either front. As a
result, a near-term rate rise seems unlikely, and depending on the rate at
which the excess capacity is consumed, the Fed may not need to raise rates
until 2005.
We are still positive on the spread sectors, and believe outperformance
during the first part of 2004 will be captured by rolling down the steep
Treasury curve and by earning the spread sectors' additional yield spread over
Treasuries. In our view, a recovering economy and increasing corporate
profitability will provide even greater support for the investment grade
market. While we are very positive on corporates, we will also continue to
assess their value relative to Treasuries, MBS and other sector segments of the
structured products market.
Total Returns/1/ for Period Ending December 31, 2003
Inception
Date Since Inception
- ---------------------------------------------------------------
Class A Shares (without sales charge) 7/30/03 0.99%
- ---------------------------------------------------------------
Class A Shares (with sales charge) 7/30/03 -3.55%
- ---------------------------------------------------------------
Class B Shares (without sales charge) 7/30/03 0.67%
- ---------------------------------------------------------------
Class B Shares (with sales charge) 7/30/03 -2.33%
- ---------------------------------------------------------------
Class C Shares (without sales charge) 7/30/03 0.67%
- ---------------------------------------------------------------
Class C Shares (with sales charge) 7/30/03 -0.33%
- ---------------------------------------------------------------
Class K Shares (without sales charge) 7/30/03 0.82%
- ---------------------------------------------------------------
Class K Shares (with sales charge) 7/30/03 -0.18%
/1/Total return figures are historical and assume the reinvestment of dividends
and distributions and the deduction of all Fund expenses. The return figures
shown do not reflect the deduction of taxes that a shareholder may pay on
distributions or redemption of shares. Total return figures for Class A
shares do not take into account the current maximum sales charge of 4.5%,
except where noted. Total return figures for Class B, Class C and Class K
shares do not take into account the contingent deferred sales charge
applicable to such shares (maximum of 3% for Class B shares and 1% for Class
C and Class K shares), except where noted. Since inception, the investment
adviser for the Fund has assumed certain ordinary operating expenses for the
Fund. Without this assumption of expenses, returns would have been lower.
Returns represent past performance and are not indicative of future results.
Investment return and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than the original cost.
Current performance may be lower or higher than the data quoted.
- --------------------------------------------------------------------------------
23
- --------------------------------------------------------------------------------
The Guardian High Yield Bond Fund
[PHOTO]
Peter J. Liebst
Peter J. Liebst
Portfolio Manager
Objective:Seeks current income. Capital appreciation is a secondary objective.
Portfolio:At least 80% is invested in corporate bonds and other debt securities
that, at the time of purchase, are rated below investment grade or
are unrated
Inception:September 1, 1998
Net Assets at December 31, 2003: $71,503,871
Q: How did the Fund perform during 2003?
A: The Guardian High Yield Bond Fund posted a 20.11%/1/ return for calendar
year 2003. The Fund underperformed the overall high yield market by 8.86% as
the Fund's benchmark, the Lehman Corporate High Yield Index,/2/ posted a 28.97%
return for the year 2003.
Q: What factor's affected the Fund's performance?
A: The high yield market entered 2003 in a highly distressed state. According
to the Lehman Corporate High Yield Index, the average market yield on December
31, 2002 was 12.08%, which represented a near historically high-risk premium of
9.10% over comparable U.S. Treasuries. The market was acutely concerned over
the impending war in Iraq, the economy did not appear to be responding to the
substantial stimulus introduced by the Federal Reserve Board (Fed), and the
capital structures of entire industries such as utilities, airlines and
communications were being challenged. But from the start of 2003 to its close,
the market appeared to overlook each obstacle and generally focused on the
optimistic outlook that the economy and corporate fortunes were on the verge of
rising from the ashes. This viewpoint was supported by a continued mortgage
refinancing boom, federal tax cut stimulus from Washington, D.C. and
accommodative capital markets, which ultimately rewarded the market for its
leap of faith with a 28.97% return, the second largest one-year return in the
history of the high yield market.
Returns were positive in 2003 for all sectors of the market, but substantial
outperformance was evident in certain areas. Specifically, the general theme
for the year was that the more distressed segments of the market saw the
greatest returns. Sectors such as media-cable, telecommunications, airlines and
electric utilities, which were the worst performing areas of 2002, posted some
of 2003's highest returns. Indeed, with returns ranging from 35% to 62%, the
rebound of these sectors, which accounted for 22% of the market at the
beginning of the year, were integral to the overall 2003 performance in the
high yield market. Segmenting the market by credit quality, the year's returns
were inversely related, with lower quality generating higher returns. The
lowest quality components of the market, which fall into the "C" and "D"
ratings categories by the major U.S. rating agencies, Moody's and Standard and
Poor's, produced the highest returns, averaging 86.29%, while more core high
yield categories rated "B" and "BB" produced average returns of 26% and 19%
respectively. These returns were actually below the average for the overall
market.
- --------------------------------------------------------------------------------
"Emphasizing credit fundamentals, which include appropriate capital structures,
adequate cash flow generation and earnings outlook, the Fund inherently
minimizes its exposure to the most speculative segment of the market."
- --------------------------------------------------------------------------------
While The Guardian High Yield Bond Fund captured a large portion of the high
yield markets 2003 rally, it under-performed the overall market due to its
limited exposure to distressed securities. Throughout the year, the Fund
actively managed diversification, and adhered to its credit-based fundamental
investment selection process. Emphasizing credit fundamentals, which include
appropriate capital structures, adequate cash flow generation and earnings
outlook, the Fund inherently minimizes its exposure to the most speculative
segment of the market. Specifically, at the beginning of 2003, only 4.15% of
the Fund's holdings were yielding what is typically deemed to be a "distressed
yield" (typically a yield of 10% or more in excess of a comparable maturity
Treasury), while according to the Lehman Corporate High Yield Index, over 22.5%
of the overall market fell into this classification.
We strongly believe that consistent observance of credit fundamentals, and
the selection of securities possessing sustainable financial structures, is the
most prudent way to approach investing in the high yield market and is in the
best interest of the Fund's shareholders.
- --------------------------------------------------------------------------------
/1/ Total return figures are historical and assume the reinvestment of
dividends and distributions and the deduction of all Fund expenses. Total
return represents return for Class A shares and does not take into account the
current maximum sales charge of 4.5%. A redemption fee of 2% applies to
redemptions of shares purchased after August 22, 2003 and held for less than 60
days. This fee does not apply to omnibus accounts. Since inception, the
investment adviser for the Fund has assumed certain ordinary operating expenses
for the Fund. Without this assumption of expenses, returns would have been
lower. Returns represent past performance and are not indicative of future
results. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than the original
cost. Current performance may be lower or higher than the data quoted.
/2/ The Lehman Corporate High Yield Index is an unmanaged index that is
generally considered to be representative of U.S. corporate high yield bond
market activity. The Index is not available for direct investment, and its
returns do not reflect the fees and expenses that have been deducted from the
Fund's returns. Likewise, return figures for the Index do not reflect any sales
charges that an investor may have to pay when purchasing or redeeming shares of
the Fund.
- --------------------------------------------------------------------------------
24
- --------------------------------------------------------------------------------
The Guardian High Yield Bond Fund
Q: What was your investment strategy during the year and what is your outlook
for the future?
A: The Fund's overall strategy was to maximize the total return of a
diversified fixed-income portfolio principally composed of below investment
grade securities. Specifically, we sought to identify attractive asset
allocation weightings based on analysis of industry fundamentals, issuer
creditworthiness and risk/return profile, and relative value. Throughout 2003,
stable or improving credit quality of larger, more liquid issues was emphasized
with a focus on the identification of fundamental total return opportunities.
Entering 2004 with a 4.25% 10-year Treasury, we believe high yield will
continue to be an asset class in demand as fixed income investors search for
yield. With an average yield of 7.4% and much of the distressed yields now
removed from the high yield market, we would expect returns to become less
influenced by the recovery of distressed securities as experienced in 2003, and
transition to a more evenly distributed contribution across risk categories.
Growth of a Hypothetical Credit Quality as of
$10,000 Investment December 31, 2003
[CHART] [CHART]
B 70.85%
Lehman Corporate BB 19.77%
Historical Guardian BBB 0.98%
High Yield Guardian CCC 6.32%
High Yield High Short Term 2.08%
Yield
Performance Bond Fund
(Class A) Bond Fund
(Class B) Bond Index
-------------
---------------------
---------------------
-----------------
09/01/1998
$10,000
$10,000
$10,000
30-Sep-98
9,856
10,364
10,045
30-Oct-98
9,863
10,368
9,839
30-Nov-98
10,395
10,901
10,248
31-Dec-98
10,447
10,942
10,259
29-Jan-99
10,479
10,973
10,411
26-Feb-99
10,422
10,887
10,350
31-Mar-99
10,527
10,987
10,449
30-Apr-99
10,699
11,167
10,651
31-May-99
10,468
10,909
10,507
30-Jun-99
10,401
10,816
10,485
31-Jul-99
10,351
10,780
10,527
31-Aug-99
10,311
10,713
10,410
30-Sep-99
10,146
10,532
10,335
31-Oct-99
10,069
10,442
10,267
30-Nov-99
10,292
10,657
10,387
31-Dec-99
10,386
10,748
10,504
31-Jan-00
10,250
10,595
10,459
29-Feb-00
10,332
10,672
10,479
31-Mar-00
10,089
10,410
10,257
30-Apr-00
10,234
10,563
10,275
31-May-00
10,107
10,422
10,170
30-Jun-00
10,305
10,615
10,377
31-Jul-00
10,336
10,623
10,456
31-Aug-00
10,477
10,762
10,528
30-Sep-00
10,370
10,644
10,436
31-Oct-00
10,015
10,268
10,102
30-Nov-00
9,337
9,562
9,701
31-Dec-00
9,708
9,950
9,889
31-Jan-01
10,525
10,770
10,630
28-Feb-01
10,544
10,783
10,771
31-Mar-01
10,165
10,400
10,518
30-Apr-01
10,002
10,227
10,387
31-May-01
10,068
10,288
10,574
30-Jun-01
9,803
9,997
10,277
31-Jul-01
9,881
10,083
10,428
31-Aug-01
10,006
10,192
10,551
30-Sep-01
9,444
9,623
9,842
31-Oct-01
9,813
9,995
10,086
30-Nov-01
10,128
10,310
10,454
31-Dec-01
9,986
10,145
10,411
31-Jan-02
10,027
10,194
10,483
28-Feb-02
9,967
10,126
10,337
31-Mar-02
10,160
10,316
10,586
30-Apr-02
10,284
10,422
10,751
31-May-02
10,238
11,111
10,695
30-Jun-02
9,888
10,021
9,907
31-Jul-02
9,654
9,776
9,474
31-Aug-02
9,840
9,959
9,744
30-Sep-02
9,659
9,769
9,616
31-Oct-02
9,623
9,712
9,533
30-Nov-02
10,047
10,149
10,123
31-Dec-02
10,086
10,181
10,264
31-Jan-03
10,214
10,304
10,606
28-Feb-03
10,358
10,429
10,737
31-Mar-03
10,594
10,661
11,046
30-Apr-03
11,000
11,065
11,701
31-May-03
11,037
11,111
11,821
30-Jun-03
11,279
11,332
12,161
31-Jul-03
11,098
11,157
12,028
31-Aug-03
11,248
11,302
12,166
30-Sep-03
11,446
11,494
12,499
31-Oct-03
11,695
11,736
12,751
30-Nov-03
11,832
11,850
12,945
31-Dec-03
12,114
11,787
13,240
To give you a comparison, the chart above shows the performance of a
hypothetical $10,000 investment made in Class A and Class B shares of The
Guardian High Yield Bond Fund and the Lehman Brothers Corporate High Yield
Index. The starting point of $9,550 for Class A shares reflects the maximum
sales charge of 4.5% that an investor may pay when purchasing Class A shares of
the Fund. For Class B shares, the contingent deferred sales charge of 1% was
imposed at the end of the period. The Index and Class B shares begin at
$10,000. This performance does not reflect the deduction of taxes that a
shareholder may pay on distributions or redemption of shares. Returns represent
past performance and are not indicative of future results.
Performance for Class C and Class K shares, which were first offered on August
7, 2000 and May 15, 2001, respectively, will vary due to differences in sales
load and other expenses charged to each share class.
Average Annual Returns/1/ for Periods Ended December 31, 2003
Inception
Date 1 Year 3 Years 5 Years Since Inception
- --------------------------------------------------------------------------------------
Class A Shares (without sales charge) 9/1/98 20.11% 7.65% 2.99% 4.66%
- --------------------------------------------------------------------------------------
Class A Shares (with sales charge) 9/1/98 14.71% 6.01% 2.05% 3.76%
- --------------------------------------------------------------------------------------
Class B Shares (without sales charge) 9/1/98 19.22% 6.85% 2.11% 3.72%
- --------------------------------------------------------------------------------------
Class B Shares (with sales charge) 9/1/98 16.22% 6.26% 1.93% 3.56%
- --------------------------------------------------------------------------------------
Class C Shares (without sales charge) 8/7/00 19.22% 6.89% -- 4.01%
- --------------------------------------------------------------------------------------
Class C shares (with sales charge) 8/7/00 18.22% 6.89% -- 4.01%
- --------------------------------------------------------------------------------------
Class K Shares (without sales charge) 5/15/01 19.63% -- -- 7.02%
- --------------------------------------------------------------------------------------
Class K Shares (with sales charge) 5/15/01 18.63% -- -- 7.02%
/1/Total return figures are historical and assume the reinvestment of dividends
and distributions and the deduction of all Fund expenses. The return figures
shown do not reflect the deduction of taxes that a shareholder may pay on
distributions or redemption of shares. Total return figures for Class A
shares do not take into account the current maximum sales charge of 4.5%,
except where noted. Total return figures for Class B, Class C and Class K
shares do not take into account the contingent deferred sales charge
applicable to such shares (maximum 3% for Class B shares and 1% for Class C
and Class K shares), except where noted. Since inception, the investment
adviser for the Fund has assumed certain ordinary operating expenses for the
Fund. Without this assumption of expenses, returns would have been lower.
Returns represent past performance and are not indicative of future results.
Investment return and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than the original cost.
Current performance may be lower or higher than the data quoted.
- --------------------------------------------------------------------------------
25
- --------------------------------------------------------------------------------
The Guardian Tax-Exempt Fund
[PHOTO]
Alexander M. Grant, Jr.
Alexander M. Grant, Jr.
Portfolio Manager
Objective:Seeks to maximize current income exempt from federal income taxes,
consistent with the preservation of capital
Portfolio:At least 80% in investment grade municipal debt obligations
Inception:February 16, 1993
Net Assets at December 31, 2003: $90,577,818
Q: How did the Guardian Tax-Exempt Fund perform in 2003?
A: The Guardian Tax-Exempt Fund produced a total return of 5.34%/1/ for 2003.
The Lehman Municipal Bond Index/2/ produced a total return of 5.31% for the
same period. The latter reflects the different investment parameters of that
Index, which includes all bonds and maturities. Even so, the Fund exceeded it
by 0.03%.
Somewhat more meaningful peer group comparisons are from Lipper/3/ and
Morningstar./4/ The Lipper General Municipal Average return for the year was
4.75%, ranking the Fund 72nd out of 296 for the one-year period ended December
31, 2003, placing it in Lipper's 25th percentile. The Lipper peer group invests
primarily in municipal debt issues rated in the top four credit ratings. The
Morningstar universe of municipal national long funds currently consists of 269
national funds with an average duration of more than seven years, or an average
maturity of more than 12 years. The average return for this Morningstar group
for the year ended December 31, 2003 was 4.87%. The Guardian Tax-Exempt Fund
outperformed this Morningstar group by 0.47%.
For the three-year period ended December 31, 2003, Lipper ranks the Fund 22nd
out of 257 funds and in the 9th percentile. For the five-year period ended
December 31, 2003, the Fund ranks 8th out of 219 funds and in the 4th
percentile. For the 10-year period ended December 31, 2003, the Fund ranked
50th out of 116 funds and in the 43rd percentile.
As of December 31, 2003, the Fund's 30-day yield was 3.42%, which compares to
a 5.26% taxable equivalent yield for a person in the highest federal income tax
bracket in 2003.
Q: What strategies did you use to manage the Fund?
A: Benefiting from historically low interest rates, municipal issuers continued
to issue bonds at record levels. For all of 2003, new issue volume was $383.24
billion, a new high. Investors poured money into municipal bonds, allowing the
market to absorb this volume. Wealthy individuals and businesses continued to
be attracted to this asset class as a way to preserve capital, diversify risk
and generate tax-exempt income.
Looking at 2003 in terms of total return performance, a strategy of
diversification and moderation by issuer, insurance, industry, sector and state
proved to be best. In 2003, the performance hazards due to overly concentrating
investments in one credit sector, industry or state were evident in tobacco
securitization bonds, airlines, and State of California bonds. In 1999, the
bonds to avoid were health care related; in 2000, it was high yield and
non-investment grade bonds; in 2001 the underperformers were California utility
bonds and airlines; and in 2002, airlines dropped over 20% during the course of
the year. At year-end 2003, ongoing litigation against tobacco companies, weak
profit margins for airlines and continued budgetary stress for California state
government drove extreme volatility and poor performance for those investors
with heavy concentrations in these sectors.
- --------------------------------------------------------------------------------
"Our strategy continued to be to buy good quality, attractively structured
national market names and stay away from "hot" deals or lower investment
quality bonds."
- --------------------------------------------------------------------------------
Our strategy continued to be to buy good quality, attractively structured
national market names and stay away from "hot" deals or lower investment
quality bonds. On the sell side, we sold selectively retail and institutional
blocks when the bids were right in terms of the spread relative to our
benchmarks.
- --------------------------------------------------------------------------------
/1/ Total return figures are historical and assume the reinvestment of
dividends and distributions and the deduction of all Fund expenses. Total
return represents return for Class A shares and does not take into account the
current maximum sales charge of 4.5%. Since June 1, 1994, the investment
adviser for the Fund has assumed certain ordinary operating expenses for the
Fund. Without this assumption of expenses, returns would have been lower.
Returns represent past performance and are not indicative of future results.
Investment return and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than the original cost.
Current performance may be lower or higher than the data quoted.
/2/ The Lehman Municipal Bond Index is an unmanaged index that is generally
considered to be representative of U.S. municipal bond activity. The Lehman
Municipal Bond Index is not available for direct investment, and its return
does not reflect the expenses that have been deducted from the Fund. Likewise,
return figures for the Lehman Municipal Bond Index do not reflect any sales
charges that an investor may pay when purchasing or redeeming shares of the
Fund.
/3/ Lipper, Inc. is an independent mutual fund monitoring and rating service.
Its database performance information is based on historical total returns,
which assume the reinvestment of dividends and distributions and the deduction
of all fund expenses. Lipper returns do not reflect the deduction of sales
charges that an investor may pay when purchasing or redeeming shares of the
Fund.
/4 (R)/2003 Morningstar, Inc. All Rights Reserved. The information contained
herein: (1) is proprietary to Morningstar; (2) may not be copied or
distributed; and (3) is not warranted to be accurate, complete or timely.
Morningstar is not responsible for any damages or losses arising from any use
of this information and has not granted its consent to be considered or deemed
an "expert" under the Securities Act of 1933. Returns represent past
performance and are no guarantee of future results. Morningstar's database of
performance information is based on historical total returns, which assumes the
reinvestment of dividends and distributions, and the deduction of all fund
expenses.
- --------------------------------------------------------------------------------
26
- --------------------------------------------------------------------------------
The Guardian Tax-Exempt Fund
Q: What is your outlook for the future?
A: According to Lehman Brothers 2004 Municipal Market Outlook,/5/ new issue
volume in 2004 is expected to be substantially lower and down as much as 25%.
Variables determining the decline will be absolute yields and the level of
fiscal recovery of state budgets. Even with a 25% decline over 2003, issuance
would still be higher than the average issuance over the past five years ($212
billion). We expect this volume to be easily absorbed by investors with
investment capital made available by coupon and redemption payments, as well as
by crossovers and arbitrageurs (who usually buy taxable bonds) brought in by
the attractive ratios to taxable bonds.
Insurance companies continue to be some of the largest sources of funding for
the tax-exempt market. Increasing profitability continued to fuel their demand
for tax-exempt income. As an example, over the first three quarters of 2003,
net income at the largest property and casualty insurers increased to $21.1
billion, a 400%-plus increase over a similar period in 2002. Also, the strength
of the economic recovery, inflationary pressures and tax law changes in both
Washington, D.C. and individual states will continue to be variables to
monitor. They are critical influences on interest rates, new issuance volume
and credit quality and investor demand.
Growth of a Hypothetical $10,000 Investment Portfolio Composition by Sector Allocation
as of December 31, 2003
[CHART] [CHART]
Guardian Tax Exempt Lehman Municipal Insured Bonds 52.07%
Fund (Class A) Bond Index Revenue Bonds 27.10%
------------------- ---------------- State General Obligation Bonds 4.72%
16-Feb-93 $10,000 $10,000 Local General Obligation Bonds 14.31%
26-Feb-93 9,689 10,245 Short-Term 1.80%
31-Mar-93 9,482 10,137
30-Apr-93 9,577 10,239
31-May-93 9,644 10,296
30-Jun-93 9,836 10,468
30-Jul-93 9,774 10,482
31-Aug-93 10,059 10,700
30-Sep-93 10,237 10,822
29-Oct-93 10,142 10,843
30-Nov-93 10,010 10,748
31-Dec-93 10,235 10,974
31-Jan-94 10,365 11,100
28-Feb-94 9,964 10,812
31-Mar-94 9,416 10,372
29-Apr-94 9,388 10,460
31-May-94 9,530 10,551
30-Jun-94 9,389 10,486
29-Jul-94 9,562 10,678
31-Aug-94 9,571 10,715
30-Sep-94 9,405 10,558
31-Oct-94 9,249 10,371
30-Nov-94 9,089 10,183
30-Dec-94 9,319 10,407
31-Jan-95 9,600 10,705
28-Feb-95 9,827 11,016
31-Mar-95 9,903 11,143
28-Apr-95 9,901 11,156
31-May-95 10,188 11,512
30-Jun-95 9,992 11,411
31-Jul-95 10,129 11,519
31-Aug-95 10,220 11,665
29-Sep-95 10,276 11,739
31-Oct-95 10,405 11,910
30-Nov-95 10,572 12,107
29-Dec-95 10,677 12,224
31-Jan-96 10,782 12,316
29-Feb-96 10,665 12,233
29-Mar-96 10,491 12,077
30-Apr-96 10,475 12,042
31-May-96 10,460 12,038
28-Jun-96 10,539 12,169
31-Jul-96 10,666 12,279
30-Aug-96 10,637 12,276
30-Sep-96 10,779 12,448
31-Oct-96 10,910 12,588
29-Nov-96 11,109 12,819
31-Dec-96 11,061 12,765
31-Jan-97 11,042 12,789
28-Feb-97 11,130 12,907
31-Mar-97 10,994 12,734
30-Apr-97 11,077 12,841
30-May-97 11,241 13,034
30-Jun-97 11,377 13,173
31-Jul-97 11,679 13,538
29-Aug-97 11,547 13,411
30-Sep-97 11,689 13,570
31-Oct-97 11,762 13,658
28-Nov-97 11,843 13,738
31-Dec-97 12,028 13,938
30-Jan-98 12,108 14,082
27-Feb-98 12,070 14,086
31-Mar-98 12,115 14,099
30-Apr-98 12,035 14,035
29-May-98 12,285 14,257
30-Jun-98 12,309 14,314
31-Jul-98 12,330 14,349
31-Aug-98 12,537 14,571
30-Sep-98 12,720 14,753
30-Oct-98 12,640 14,752
30-Nov-98 12,731 14,804
31-Dec-98 12,770 14,841
29-Jan-99 12,884 15,018
26-Feb-99 12,882 14,952
31-Mar-99 12,843 14,973
30-Apr-99 12,867 15,010
31-May-99 12,708 14,923
30-Jun-99 12,537 14,709
31-Jul-99 12,571 14,762
31-Aug-99 12,453 14,644
30-Sep-99 12,435 14,650
31-Oct-99 12,251 14,491
30-Nov-99 12,424 14,645
31-Dec-99 12,342 14,536
31-Jan-00 12,285 14,473
29-Feb-00 12,450 14,641
31-Mar-00 12,761 14,961
30-Apr-00 12,662 14,873
31-May-00 12,576 14,795
30-Jun-00 12,933 15,187
31-Jul-00 13,103 15,399
31-Aug-00 13,314 15,636
30-Sep-00 13,227 15,555
31-Oct-00 13,370 15,724
30-Nov-00 13,488 15,843
31-Dec-00 13,866 16,226
31-Jan-01 13,943 16,396
28-Feb-01 13,964 16,448
31-Mar-01 14,109 16,595
30-Apr-01 13,919 16,415
31-May-01 14,063 16,592
30-Jun-01 14,182 16,703
31-Jul-01 14,412 16,950
31-Aug-01 14,671 17,230
30-Sep-01 14,579 17,172
31-Oct-01 14,797 17,376
30-Nov-01 14,661 17,230
31-Dec-01 14,528 17,067
31-Jan-02 14,763 17,363
28-Feb-02 14,956 17,573
31-Mar-02 14,657 17,228
30-Apr-02 14,937 17,564
31-May-02 15,028 17,671
30-Jun-02 15,209 17,859
31-Jul-02 15,419 18,088
31-Aug-02 15,630 18,306
30-Sep-02 16,094 18,707
31-Oct-02 15,700 18,396
30-Nov-02 15,616 18,320
31-Dec-02 16,004 18,706
31-Jan-03 15,932 18,659
28-Feb-03 16,180 18,920
31-Mar-03 16,229 18,931
30-Apr-03 16,371 19,056
31-May-03 16,838 19,502
30-Jun-03 16,711 19,419
31-Jul-03 16,014 18,740
31-Aug-03 16,106 18,879
30-Sep-03 16,637 19,434
31-Oct-03 16,509 19,337
30-Nov-03 16,712 19,538
31-Dec-03 16,859 19,700
To give you a comparison, the chart above shows the performance of a
hypothetical $10,000 investment made in Class A shares of The Guardian
Tax-Exempt Fund and the Lehman Municipal Bond Index. The starting point of
$9,550 for Class A shares reflects the maximum sales charge of 4.5% that an
investor may pay when purchasing Class A shares of the Fund. The Index begins
at $10,000. This performance does not reflect the deduction of taxes that a
shareholder may pay on distributions or redemption of shares. Returns represent
past performance and are not indicative of future results.
Performance for Class C shares, which were first offered on August 7, 2000,
will vary due to differences in sales load and other expenses charged to such
share class.
Average Annual Returns/1/ for Periods Ended December 31, 2003
Inception
Date 1 Year 3 Years 5 Years 10 Years Since Inception
- -----------------------------------------------------------------------------------------------
Class A Shares (without sales charge) 2/16/93 5.34% 6.74% 5.72% 5.12% 5.40%
- -----------------------------------------------------------------------------------------------
Class A Shares (with sales charge) 2/16/93 0.60% 5.11% 4.75% 4.64% 4.95%
- -----------------------------------------------------------------------------------------------
Class C Shares (without sales charge) 8/7/00 4.54% 5.94% -- -- 6.71%
- -----------------------------------------------------------------------------------------------
Class C shares (with sales charge) 8/7/00 3.54% 5.94% -- -- 6.71%
/1/Total return figures are historical and assume the reinvestment of dividends
and distributions and the deduction of all Fund expenses. The return figures
shown do not reflect the deduction of taxes that a shareholder may pay on
redemption of shares. Total return figures for Class A shares do not take
into account the current maximum sales charge of 4.5%, except where noted.
Total return figures for Class C shares do not take into account the
contingent deferred sales charges applicable to such shares (maximum of 1%)
except where noted. Since June 1, 1994, the investment adviser for the Fund
has assumed certain ordinary operating expenses for the Fund. Without this
assumption of expenses, returns would have been lower. Returns represent
past performance and are not a guarantee of future results. Investment
return and principal value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than the original cost. Current
performance may be lower or higher than the data quoted.
- --------------------------------------------------------------------------------
/5/ DeGroot, Peter, Lehman Brothers 2004 Municipal Market Outlook, p. 14,
January 2004.
- --------------------------------------------------------------------------------
27
- --------------------------------------------------------------------------------
The Guardian Cash Management Fund
[PHOTO]
Alexander M. Grant, Jr.
Alexander M. Grant, Jr.
Portfolio Manager
Objective:Seeks as high a level of current income as is consistent with
liquidity and preservation of capital
Portfolio:Short-term money market instruments
Inception:November 3, 1982
Net Assets at December 31, 2003: $560,587,544
Q: How did the Fund perform for the year ended December 31, 2003?
A: As of December 31, 2003 the effective 7-day net annualized yield for the
Guardian Cash Management Fund was 0.52%,/1/ adjusted up from 0.28% to account
for a one-time interest income correction. The Fund produced a total net
annualized return of 0.37%, unaffected by the minor income correction mentioned
earlier, for the year ended December 31, 2003. In contrast, the effective 7-day
annualized yield of Tier One money market funds as measured by iMoneyNet, Inc.
was 0.39%; total return for the same category was 0.49%. iMoneyNet, Inc. is a
research firm that tracks money market funds.
Q: What was your investment strategy during the year?
A: The Fund is a place for our investors to put their money while they decide
their preferred long-term investment vehicle, be it stocks or bonds. Also, some
of our investors prefer the relative stability of the money markets. To best
accommodate all our investors, we will continue to try to provide a strong
7-day yield, while offering safety and liquidity. Our investment strategy was
to create a diversified portfolio of money market instruments that presents
minimal credit risks according to our criteria. As always, we only purchased
securities from issuers that had received ratings in the two highest credit
quality categories established by nationally recognized statistical ratings
organizations like Moody's Investors Service Inc. and Standard & Poor's
Corporation for the Fund's portfolio. Most of the portfolio (65.31%) was
invested in commercial paper and short maturity corporate bonds; the balance
was invested in repurchase agreements (8.00%) and floating rate taxable
municipal bonds (26.69%).
Q: What factors affected the Fund's performance?
A: Money market funds are directly affected by the actions of the Federal
Reserve Board (Fed). With the Fed's policy-making Federal Open Markets
Committee (FOMC) rate cuts of Fed Funds totaling 4.75% in 2001, an additional
0.50% in 2002, and an additional 0.25% in the second quarter of 2003, the money
markets remain tight with issuers encouraged to alter their rate offerings in
response to stock market expectations and monetary policy. The Fed Funds target
is the rate at which banks can borrow from each other overnight. While the
Federal Reserve Board does not set this rate, it can establish a target rate,
and, through open market operations, the Fed can move member banks in the
direction of that target rate. The Discount Rate is the rate at which banks can
borrow directly from the Federal Reserve. Another factor affecting performance
was the portfolio's average maturity of 49 days as of December 31, 2003. The
average Tier One money market fund as measured by iMoneyNet, Inc. had an
average maturity of 51 days.
- --------------------------------------------------------------------------------
"Our investment strategy was to create a diversified portfolio of money market
instruments that presents minimal credit risks according to our criteria."
- --------------------------------------------------------------------------------
Q: What is your outlook for the future?
A: Uncertainty with the direction of the stock market contributes to large
daily inflows and outflows of money in the Fund. As the stock market rallies,
our investors typically transfer cash to equity funds. During those times when
the stock market stalls, we see cash inflows. However, with money market yields
at all time lows, investors have been seeking alternative investment vehicles
for "parking" money between stock market fluctuations, such as ultra-short bond
funds. They have begun giving up the "risk-free" component of money market
funds for the slight return pick-up of these alternate vehicles. However, as
the FOMC tightens money supply and raises rates, cash inflows may increase into
money market funds.
AN INVESTMENT IN THE FUND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. ALTHOUGH THE FUND SEEKS
TO PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO
LOSE MONEY BY INVESTING IN THE FUND.
- --------------------------------------------------------------------------------
/1/ Yields are annualized historical figures. Effective yield assumes
reinvested income. Yields will vary as interest rates change. Past performance
is not indicative of future results.
/2/ Total return figures are historical and assume the reinvestment of
dividends and distributions and the deduction of all Fund expenses. Since June
1, 1994, the investment adviser for the Fund has assumed certain ordinary
operating expenses of the Fund. Without these expense assumptions, the returns
would have been lower. The total return and yield figures cited represent total
return and yield for Class A shares. Returns represent past performance and are
not indicative of future results. Investment return and principal value will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than the original cost. Current performance may be lower or higher than
the data quoted.
- --------------------------------------------------------------------------------
28
Schedule of Investments
December 31, 2003
.. The Guardian Park Avenue Fund
Common Stocks -- 99.2%
Shares Value
---------------------------------------------------------
Aerospace and Defense -- 2.2%
279,100 Lockheed Martin Corp. $ 14,345,740
158,400 United Technologies Corp. 15,011,568
---------------
29,357,308
---------------------------------------------------------
Air Freight and Logistics -- 1.3%
223,700 United Parcel Svcs., Inc. 16,676,835
---------------------------------------------------------
Beverages -- 3.7%
170,400 Anheuser-Busch Cos., Inc. 8,976,672
359,800 Coca-Cola Co. 18,259,850
469,500 PepsiCo., Inc. 21,888,090
---------------
49,124,612
---------------------------------------------------------
Biotechnology -- 1.2%
252,900 Amgen, Inc.* 15,629,220
---------------------------------------------------------
Capital Markets -- 9.2%
232,800 Goldman Sachs Group, Inc. 22,984,344
414,500 Lehman Brothers Hldgs., Inc. 32,007,690
430,000 Mellon Financial Corp. 13,807,300
497,900 Merrill Lynch & Co., Inc. 29,201,835
442,600 State Street Corp. 23,050,608
---------------
121,051,777
---------------------------------------------------------
Chemicals -- 0.5%
150,100 E.I. Du Pont de Nemours & Co. 6,888,089
---------------------------------------------------------
Commercial Banks -- 4.7%
145,900 Bank of America Corp. 11,734,737
154,500 M & T Bank Corp. 15,187,350
227,600 North Fork Bancorporation, Inc. 9,210,972
429,400 Wells Fargo & Co. 25,287,366
---------------
61,420,425
---------------------------------------------------------
Communications Equipment -- 2.0%
1,084,600 Cisco Systems, Inc.* 26,344,934
---------------------------------------------------------
Computers and Peripherals -- 3.6%
270,500 Dell, Inc.* 9,186,180
1,283,900 Hewlett Packard Co. 29,491,183
356,100 Storage Technology Corp.* 9,169,575
---------------
47,846,938
---------------------------------------------------------
Diversified Financial Services -- 1.6%
426,066 Citigroup, Inc. 20,681,244
---------------------------------------------------------
Diversified Telecommunication Services -- 1.5%
545,600 Verizon Comm. 19,139,648
---------------------------------------------------------
Electric Utilities -- 2.3%
244,200 Consolidated Edison, Inc. 10,503,042
302,500 FPL Group, Inc. 19,789,550
---------------
30,292,592
---------------------------------------------------------
Electronic Equipment and Instruments -- 0.8%
351,500 Jabil Circuit, Inc.* 9,947,450
---------------------------------------------------------
Energy Equipment and Services -- 3.5%
648,100 Nabors Industries, Inc.* 26,896,150
526,800 Noble Corp.* 18,848,904
---------------
45,745,054
---------------------------------------------------------
Food and Staples Retailing -- 2.0%
209,900 Costco Wholesale Corp.* 7,804,082
339,200 Wal-Mart Stores, Inc. 17,994,560
---------------
25,798,642
---------------------------------------------------------
Food Products -- 0.6%
105,600 Hershey Foods Corp. 8,130,144
---------------------------------------------------------
----------------------------------------------------------
Shares Value
----------------------------------------------------------
Gas Utilities -- 1.1%
659,600 NiSource, Inc. $ 14,471,624
----------------------------------------------------------
Health Care Equipment and Supplies -- 3.1%
438,600 Boston Scientific Corp. 16,122,936
135,800 C.R. Bard, Inc. 11,033,750
280,000 Medtronic, Inc. 13,610,800
---------------
40,767,486
----------------------------------------------------------
Health Care Providers and Services -- 2.4%
552,600 AmerisourceBergen Corp. 31,028,490
----------------------------------------------------------
Hotels, Restaurants and Leisure -- 1.1%
353,100 Carnival Corp. 14,028,663
----------------------------------------------------------
Household Products -- 4.0%
440,100 Colgate-Palmolive Co. 22,027,005
300,700 Procter & Gamble Co. 30,033,916
---------------
52,060,921
----------------------------------------------------------
Industrial Conglomerates -- 3.3%
1,402,500 General Electric Co. 43,449,450
----------------------------------------------------------
Information Technology Services -- 1.5%
187,100 Affiliated Computer Svcs., Inc.* 10,189,466
246,400 Fiserv, Inc.* 9,735,264
---------------
19,924,730
----------------------------------------------------------
Insurance -- 5.1%
104,100 Ambac Financial Group, Inc. 7,223,499
592,200 American Int'l. Group, Inc. 39,251,016
292,100 Chubb Corp. 19,892,010
---------------
66,366,525
----------------------------------------------------------
Leisure Equipment and Products -- 1.4%
988,300 Mattel, Inc. 19,044,541
----------------------------------------------------------
Machinery -- 4.3%
660,200 Deere & Co. 42,946,010
181,300 ITT Industries, Inc. 13,454,273
---------------
56,400,283
----------------------------------------------------------
Media -- 4.9%
553,200 EchoStar Comm. Corp.* 18,808,800
176,200 Lamar Advertising Co.* 6,575,784
183,400 New York Times Co. 8,764,686
695,000 Viacom, Inc. 30,844,100
---------------
64,993,370
----------------------------------------------------------
Metals and Mining -- 1.3%
433,000 Alcoa, Inc. 16,454,000
----------------------------------------------------------
Oil and Gas -- 5.8%
221,700 ChevronTexaco Corp. 19,152,663
308,300 EOG Resources, Inc. 14,234,211
730,100 Exxon Mobil Corp. 29,934,100
307,700 Occidental Petroleum Corp. 12,997,248
---------------
76,318,222
----------------------------------------------------------
Personal Products -- 0.4%
84,000 Avon Products, Inc. 5,669,160
----------------------------------------------------------
Pharmaceuticals -- 7.9%
228,900 Abbott Laboratories 10,666,740
411,940 Johnson & Johnson 21,280,820
2,034,540 Pfizer, Inc. 71,880,298
---------------
103,827,858
----------------------------------------------------------
- --------------------------------------------------------------------------------
See notes to financial statements.
29
The Guardian Park Avenue Fund
Schedule of Investments (Continued)
------------------------------------------------------
Shares Value
------------------------------------------------------
Semiconductors and Semiconductor Equipment -- 3.3%
182,500 Analog Devices, Inc. $ 8,331,125
352,400 Applied Materials, Inc.* 7,911,380
830,400 Intel Corp. 26,738,880
--------------
42,981,385
-----------------------------------------------------
Software -- 6.2%
229,800 Adobe Systems, Inc. 9,031,140
879,000 BEA Systems, Inc.* 10,811,700
1,466,100 Microsoft Corp. 40,376,394
1,568,200 Oracle Corp. * 20,700,240
--------------
80,919,474
-----------------------------------------------------
Specialty Retail -- 0.7%
309,200 RadioShack Corp. 9,486,256
-----------------------------------------------------
Tobacco -- 0.7%
176,700 Altria Group, Inc. 9,616,014
-----------------------------------------------------
Total Common Stocks
(Cost $1,138,874,853) 1,301,883,364
-----------------------------------------------------
Total Investments -- 99.2%
(Cost $1,138,874,853) 1,301,883,364
Cash, Receivables and Other Assets Less
Liabilities -- 0.8% 10,625,002
-----------------------------------------------------
Net Assets -- 100% $1,312,508,366
-----------------------------------------------------
* Non-income producing security.
- --------------------------------------------------------------------------------
See notes to financial statements.
30
.. The Guardian UBS Large Cap Value Fund
Common Stocks -- 96.0%
Shares Value
----------------------------------------------------------
Aerospace and Defense -- 1.8%
21,400 Boeing Co. $ 901,796
6,900 United Technologies Corp. 653,913
-----------
1,555,709
---------------------------------------------------------
Airlines -- 0.4%
32,100 Delta Airlines, Inc. 379,101
---------------------------------------------------------
Auto Components -- 1.2%
8,800 Johnson Controls, Inc. 1,021,856
---------------------------------------------------------
Biotechnology -- 1.1%
18,600 Cephalon, Inc.* 900,426
---------------------------------------------------------
Building Products -- 2.0%
63,600 Masco Corp. 1,743,276
---------------------------------------------------------
Capital Markets -- 10.1%
88,700 J.P. Morgan Chase & Co. 3,257,951
55,800 Mellon Financial Corp. 1,791,738
61,000 Morgan Stanley 3,530,070
-----------
8,579,759
---------------------------------------------------------
Commercial Banks -- 8.0%
9,100 Bank of America Corp. 731,913
19,500 FleetBoston Financial Corp. 851,175
28,300 PNC Financial Svcs. Group 1,548,859
61,900 Wells Fargo & Co. 3,645,291
-----------
6,777,238
---------------------------------------------------------
Computers and Peripherals -- 0.9%
33,100 Hewlett Packard Co. 760,307
---------------------------------------------------------
Construction Materials -- 2.0%
35,500 Martin Marietta Materials, Inc. 1,667,435
---------------------------------------------------------
Diversified Financial Services -- 5.8%
100,900 Citigroup, Inc. 4,897,686
---------------------------------------------------------
Diversified Telecommunication Services -- 3.7%
44,100 BellSouth Corp. 1,248,030
72,600 SBC Comm., Inc. 1,892,682
-----------
3,140,712
---------------------------------------------------------
Electric Utilities -- 6.3%
15,500 American Electric Power, Inc. 472,905
45,900 CMS Energy Corp.* 391,068
21,700 Exelon Corp. 1,440,012
47,000 FirstEnergy Corp. 1,654,400
19,400 Progress Energy, Inc. 878,044
21,500 TXU Corp. 509,980
-----------
5,346,409
---------------------------------------------------------
Food and Staples Retailing -- 1.9%
32,300 Albertson's, Inc. 731,595
24,100 Costco Wholesale Corp.* 896,038
-----------
1,627,633
---------------------------------------------------------
Gas Utilities -- 1.2%
35,000 Sempra Energy 1,052,100
---------------------------------------------------------
Health Care Equipment and Supplies -- 0.6%
17,500 Baxter Int'l., Inc. 534,100
---------------------------------------------------------
Health Care Providers and Services -- 4.5%
9,300 Anthem, Inc.* 697,500
5,400 Quest Diagnostics, Inc.* 394,794
46,600 UnitedHealth Group 2,711,188
-----------
3,803,482
---------------------------------------------------------
-----------------------------------------------------------
Shares Value
-----------------------------------------------------------
Household Durables -- 0.3%
11,200 Newell Rubbermaid, Inc. $ 255,024
-----------------------------------------------------------
Household Products -- 1.2%
16,700 Kimberly-Clark Corp. 986,803
-----------------------------------------------------------
Information Technology Services -- 1.5%
30,300 First Data Corp. 1,245,027
-----------------------------------------------------------
Insurance -- 4.3%
19,000 AFLAC, Inc. 687,420
24,400 American Int'l. Group, Inc. 1,617,232
22,400 Hartford Financial Svcs. Group, Inc. 1,322,272
-----------
3,626,924
-----------------------------------------------------------
Machinery -- 4.2%
28,600 Illinois Tool Works, Inc. 2,399,826
24,800 Pentair, Inc. 1,133,360
-----------
3,533,186
-----------------------------------------------------------
Media -- 4.9%
10,000 Gannett Co., Inc. 891,600
9,700 McGraw-Hill Cos., Inc. 678,224
94,300 Time Warner, Inc.* 1,696,457
20,300 Viacom, Inc. 900,914
-----------
4,167,195
-----------------------------------------------------------
Oil and Gas -- 8.8%
13,600 Anadarko Petroleum Corp. 693,736
38,800 ConocoPhillips 2,544,116
103,600 Exxon Mobil Corp. 4,247,600
-----------
7,485,452
-----------------------------------------------------------
Paper and Forest Products -- 1.0%
30,000 MeadWestvaco Corp. 892,500
-----------------------------------------------------------
Pharmaceuticals -- 5.2%
69,100 Bristol-Myers Squibb Corp. 1,976,260
6,000 Johnson & Johnson 309,960
49,700 Wyeth 2,109,765
-----------
4,395,985
-----------------------------------------------------------
Road and Rail -- 3.9%
46,400 Burlington Northern Santa Fe 1,501,040
75,200 Norfolk Southern Corp. 1,778,480
-----------
3,279,520
-----------------------------------------------------------
Thrifts and Mortgage Finance -- 4.6%
43,100 Federal Home Loan Mortgage Corp. 2,513,592
38,550 GreenPoint Financial Corp. 1,361,586
-----------
3,875,178
-----------------------------------------------------------
Wireless Telecommunication Services -- 4.6%
139,500 Nextel Comm., Inc.* 3,914,370
-----------------------------------------------------------
Total Common Stocks
(Cost $62,941,376) 81,444,393
-----------------------------------------------------------
Exchange-Traded Fund -- 1.5%
11,000 S&P Depositary Receipts
Trust Series 1
exp. 12/31/2099
(Cost $1,157,650) $ 1,224,080
-----------------------------------------------------------
- --------------------------------------------------------------------------------
See notes to financial statements.
31
The Guardian UBS Large Cap Value Fund
Schedule of Investments (Continued)
Repurchase Agreement -- 2.8%
Principal
Amount Value
-----------------------------------------------------------
$ 2,408,000 State Street Bank and Trust Co.
repurchase agreement,
dated 12/31/2003, maturity
value $1,408,123 at
0.92%, due 1/2/2004 (1)
(Cost $2,408,000) $ 2,408,000
----------------------------------------------------------
Total Investments -- 100.3%
(Cost $66,507,026) 85,076,473
Liabilities in Excess of Cash, Receivables and
Other Assets -- (0.3)% (249,418)
----------------------------------------------------------
Net Assets -- 100% $84,827,055
----------------------------------------------------------
* Non-income producing security.
(1)The repurchase agreement is fully collateralized by U.S. Government and/or
agency obligations based on market prices at the date of the portfolio.
- --------------------------------------------------------------------------------
See notes to financial statements.
32
.. The Guardian Park Avenue Small Cap Fund
Common Stocks -- 99.1%
Shares Value
--------------------------------------------------------------
Aerospace and Defense -- 2.3%
187,600 EDO Corp. $ 4,624,340
--------------------------------------------------------------
Airlines -- 1.8%
198,100 Skywest, Inc. 3,589,572
--------------------------------------------------------------
Auto Components -- 2.5%
126,000 American Axle & Mfg. Hldgs., Inc.* 5,092,920
--------------------------------------------------------------
Beverages -- 0.7%
47,400 Cott Corp.* 1,327,674
--------------------------------------------------------------
Biotechnology -- 6.5%
41,200 Angiotech Pharmaceuticals, Inc.* 1,895,200
38,900 Charles River Laboratories Int'l.* 1,335,437
121,700 Exact Sciences Corp.* 1,231,604
74,400 ILEX Oncology, Inc.* 1,581,000
76,000 NPS Pharmaceuticals, Inc.* 2,336,240
128,800 Protein Design Labs., Inc.* 2,305,520
249,300 Repligen Corp.* 1,089,441
179,800 XOMA Ltd.* 1,186,680
------------
12,961,122
--------------------------------------------------------------
Capital Markets -- 2.3%
120,600 Investors Financial Svcs. Corp. 4,632,246
--------------------------------------------------------------
Chemicals -- 0.6%
40,200 Cabot Corp. 1,279,968
--------------------------------------------------------------
Commercial Banks -- 6.0%
161,800 Boston Private Financial Hldgs., Inc.* 4,019,112
30,200 Community Bank System, Inc. 1,479,800
28,600 East West Bancorp, Inc. 1,535,248
55,500 Southwest Bancorp. of Texas, Inc. 2,156,175
37,700 UCBH Hldgs., Inc. 1,469,169
30,750 Wintrust Financial Corp. 1,386,825
------------
12,046,329
--------------------------------------------------------------
Commercial Services and Supplies -- 1.8%
43,800 Banta Corp. 1,773,900
135,000 Labor Ready, Inc.* 1,768,500
------------
3,542,400
--------------------------------------------------------------
Communications Equipment -- 0.8%
209,500 Symmetricom, Inc.* 1,525,160
--------------------------------------------------------------
Computers and Peripherals -- 0.9%
120,800 Synaptics, Inc.* 1,809,584
--------------------------------------------------------------
Construction and Engineering -- 0.9%
38,100 Jacobs Engineering Group, Inc.* 1,829,181
--------------------------------------------------------------
Diversified Financial Services -- 2.1%
140,600 Financial Federal Corp.* 4,295,330
--------------------------------------------------------------
Diversified Telecommunication Services -- 1.6%
39,300 Comwlth. Tel. Enterprises, Inc.* 1,483,575
156,300 TALK America Hldgs., Inc.* 1,800,576
------------
3,284,151
--------------------------------------------------------------
Electronic Equipment and Instruments -- 2.7%
55,500 Benchmark Electronics, Inc.* 1,931,955
71,200 Merix Corp.* 1,746,536
43,000 Varian, Inc.* 1,794,390
------------
5,472,881
--------------------------------------------------------------
Energy Equipment and Services -- 4.1%
386,000 Grant Prideco, Inc.* 5,025,720
316,700 Key Energy Svcs., Inc.* 3,265,177
------------
8,290,897
--------------------------------------------------------------
--------------------------------------------------------------
Shares Value
--------------------------------------------------------------
Food and Staples Retailing -- 1.1%
63,100 United Natural Foods, Inc.* $ 2,265,921
--------------------------------------------------------------
Food Products -- 1.3%
61,100 American Italian Pasta Co.* 2,560,090
--------------------------------------------------------------
Gas Utilities -- 0.7%
51,500 AGL Resources, Inc. 1,498,650
--------------------------------------------------------------
Health Care Equipment and Supplies -- 4.3%
93,700 ALARIS Medical Systems, Inc.* 1,425,177
150,000 American Medical Systems Hldgs., Inc.* 3,270,000
83,600 Immucor, Inc.* 1,704,604
42,100 Sola Int'l., Inc.* 791,480
75,300 Synovis Life Technologies, Inc. 1,531,602
------------
8,722,863
--------------------------------------------------------------
Hotels, Restaurants and Leisure -- 2.6%
130,600 Penn National Gaming, Inc.* 3,014,248
76,500 Ruby Tuesday, Inc. 2,179,485
------------
5,193,733
--------------------------------------------------------------
Information Technology Services -- 2.1%
40,400 CACI Int'l., Inc.* 1,964,248
147,500 Keane, Inc.* 2,159,400
------------
4,123,648
--------------------------------------------------------------
Insurance -- 2.7%
75,500 Direct General Corp. 2,499,050
25,500 Montpelier Re Hldgs. Ltd. 935,850
59,000 ProAssurance Corp.* 1,896,850
------------
5,331,750
--------------------------------------------------------------
Internet Software and Services -- 2.2%
114,400 Netegrity, Inc.* 1,179,464
85,100 PEC Solutions, Inc.* 1,442,445
217,300 S1 Corp.* 1,749,265
------------
4,371,174
--------------------------------------------------------------
Machinery -- 3.6%
139,800 AGCO Corp.* 2,815,572
70,000 CLARCOR, Inc. 3,087,000
33,100 IDEX Corp. 1,376,629
------------
7,279,201
--------------------------------------------------------------
Media -- 1.9%
165,800 Gray Television, Inc. 2,506,896
21,200 Media General, Inc. 1,380,120
------------
3,887,016
--------------------------------------------------------------
Metals and Mining -- 1.7%
158,000 Hecla Mining Co.* 1,309,820
96,200 Massey Energy Co. 2,000,960
------------
3,310,780
--------------------------------------------------------------
Multi-Utilities and Unregulated Power -- 1.9%
171,700 ONEOK, Inc. 3,791,136
--------------------------------------------------------------
Oil and Gas -- 4.9%
203,500 Energy Partners Ltd.* 2,828,650
152,200 Magnum Hunter Resources, Inc.* 1,447,422
263,800 Range Resources Corp.* 2,492,910
40,700 Western Gas Resources, Inc. 1,923,075
66,500 Whiting Petroleum Corp.* 1,223,600
------------
9,915,657
--------------------------------------------------------------
Paper and Forest Products -- 0.8%
94,700 Louisiana-Pacific Corp.* 1,693,236
--------------------------------------------------------------
- --------------------------------------------------------------------------------
See notes to financial statements.
33
The Guardian Park Avenue Small Cap Fund
Schedule of Investments (Continued)
---------------------------------------------------------------
Shares Value
---------------------------------------------------------------
Pharmaceuticals -- 4.8%
89,400 Atrix Laboratories, Inc.* $ 2,149,176
25,500 Medicis Pharmaceutical Corp. 1,818,150
190,200 Pain Therapeutics, Inc.* 1,321,890
75,400 Salix Pharmaceuticals Ltd.* 1,709,318
41,700 Taro Pharmaceutical Inds. Ltd.* 2,689,650
------------
9,688,184
--------------------------------------------------------------
Real Estate -- 1.8%
61,400 Arden Realty, Inc. 1,862,876
41,600 Home Pptys. NY, Inc. 1,680,224
------------
3,543,100
--------------------------------------------------------------
Road and Rail -- 2.1%
48,100 Arkansas Best Corp. 1,509,859
138,625 Werner Enterprises, Inc. 2,701,801
------------
4,211,660
--------------------------------------------------------------
Semiconductors and Semiconductor Equipment -- 5.1%
87,100 Credence Systems Corp.* 1,146,236
117,100 Entegris, Inc.* 1,504,735
83,200 Micrel, Inc.* 1,296,256
168,100 Pericom Semiconductor Corp.* 1,791,946
65,900 Sigmatel, Inc.* 1,626,412
145,200 Silicon Storage Technology, Inc.* 1,597,200
31,200 Varian Semiconductor Equipment
Assoc., Inc.* 1,363,128
------------
10,325,913
--------------------------------------------------------------
Software -- 6.1%
204,100 Borland Software Corp.* 1,985,893
128,900 Bottomline Technologies, Inc.* 1,160,100
72,100 FactSet Research Systems, Inc. 2,754,941
263,300 Lawson Software, Inc.* 2,166,959
59,200 Manhattan Assoc., Inc.* 1,636,288
80,900 RSA Security, Inc.* 1,148,780
113,600 Verisity Ltd.* 1,448,400
------------
12,301,361
--------------------------------------------------------------
Specialty Retail -- 2.9%
43,300 Cost Plus, Inc.* 1,775,300
55,900 Group 1 Automotive, Inc.* 2,023,021
108,800 Movie Gallery, Inc.* 2,032,384
------------
5,830,705
--------------------------------------------------------------
Thrifts and Mortgage Finance -- 5.2%
67,800 BankUnited Financial Corp.* 1,748,562
166,800 Federal Agricultural Mortgage Corp.* 5,330,928
178,398 W Hldg. Co., Inc. 3,319,987
------------
10,399,477
--------------------------------------------------------------
Water Utilities -- 0.7%
60,625 Philadelphia Subn. Corp. 1,339,813
--------------------------------------------------------------
Wireless Telecommunication Services -- 1.0%
112,600 Western Wireless Corp.* 2,067,336
--------------------------------------------------------------
Total Common Stocks
(Cost $155,682,958) 199,256,159
--------------------------------------------------------------
Repurchase Agreement -- 1.6%
------------------------------------------------------------
Principal
Amount Value
------------------------------------------------------------
$ 3,200,000 State Street Bank and Trust Co.
repurchase agreement,
dated 12/31/2003, maturity
value $3,200,164 at
0.92%, due 1/2/2004 (1)
(Cost $3,200,000) $ 3,200,000
-----------------------------------------------------------
Total Investments -- 100.7%
(Cost $158,882,958) 202,456,159
Liabilities in Excess of Cash, Receivables and
Other Assets -- (0.7)% (1,433,213)
-----------------------------------------------------------
Net Assets -- 100% $201,022,946
-----------------------------------------------------------
* Non-income producing security.
(1)The repurchase agreement is fully collateralized by U.S. Government and/or
agency obligations based on market prices at the date of the portfolio.
- --------------------------------------------------------------------------------
See notes to financial statements.
34
.. The Guardian UBS Small Cap Value Fund
Common Stocks -- 96.3%
---------------------------------------------------------
Shares Value
---------------------------------------------------------
Aerospace and Defense -- 2.5%
22,300 Esterline Technologies Corp.* $ 594,741
10,800 Triumph Group, Inc.* 393,120
------------
987,861
--------------------------------------------------------
Airlines -- 1.1%
20,300 Mesa Air Group, Inc.* 254,156
13,300 Pinnacle Airlines Corp.* 184,737
------------
438,893
--------------------------------------------------------
Auto Components -- 1.4%
12,500 Superior Industries Int'l., Inc. 544,000
--------------------------------------------------------
Building Products -- 0.4%
14,500 Apogee Enterprises, Inc. 164,575
--------------------------------------------------------
Capital Markets -- 1.4%
16,100 Allied Capital Corp. 448,868
3,600 National Financial Partners Corp. 99,180
------------
548,048
--------------------------------------------------------
Chemicals -- 2.2%
13,700 A. Schulman, Inc. 292,084
17,300 Lubrizol Corp. 562,596
------------
854,680
--------------------------------------------------------
Commercial Banks -- 11.7%
15,000 City National Corp. 931,800
45,800 Colonial BancGroup, Inc. 793,256
20,200 Cullen/Frost Bankers, Inc. 819,514
19,360 F. N. B. Corp. 686,312
6,300 First BanCorp. 249,165
12,600 Greater Bay Bancorp 358,848
23,500 Trustmark Corp. 687,845
------------
4,526,740
--------------------------------------------------------
Commercial Services and Supplies -- 5.1%
17,100 John H. Harland Co. 466,830
25,600 McGrath Rentcorp 697,600
12,200 Mobile Mini, Inc.* 240,584
18,700 New England Business Svc., Inc. 551,650
------------
1,956,664
--------------------------------------------------------
Communications Equipment -- 1.5%
15,000 Harris Corp. 569,250
--------------------------------------------------------
Computers and Peripherals -- 1.0%
130,500 Quantum Corp.* 407,160
--------------------------------------------------------
Construction and Engineering -- 0.7%
6,500 EMCOR Group, Inc.* 285,350
--------------------------------------------------------
Electric Utilities -- 1.5%
12,000 Hawaiian Electric Industries, Inc. 568,440
--------------------------------------------------------
Electrical Equipment -- 1.6%
28,800 Regal-Beloit Corp. 633,600
--------------------------------------------------------
Electronic Equipment and Instruments -- 3.8%
26,300 Methode Electronics, Inc. 321,649
23,400 Newport Corp.* 386,802
28,300 Park Electrochemical Corp. 749,667
------------
1,458,118
--------------------------------------------------------
Energy Equipment and Services -- 3.2%
19,400 Oceaneering Int'l., Inc.* 543,200
29,000 Offshore Logistics, Inc.* 711,080
------------
1,254,280
--------------------------------------------------------
--------------------------------------------------------------
Shares Value
--------------------------------------------------------------
Food Products -- 1.6%
11,500 Lancaster Colony Corp. $ 519,340
5,800 Sensient Technologies Corp. 114,666
------------
634,006
--------------------------------------------------------------
Gas Utilities -- 1.1%
15,100 AGL Resources, Inc. 439,410
--------------------------------------------------------------
Health Care Equipment and Supplies -- 3.8%
12,500 Haemonetics Corp.* 298,625
3,600 ICU Medical, Inc.* 123,408
18,000 Mentor Corp. 433,080
15,800 Ocular Sciences, Inc.* 453,618
31,100 Theragenics Corp.* 170,117
------------
1,478,848
--------------------------------------------------------------
Health Care Providers and Services -- 4.2%
5,900 Apria Healthcare Group, Inc.* 167,973
5,700 Coventry Health Care, Inc.* 367,593
9,000 RehabCare Group, Inc.* 191,340
18,000 Renal Care Group, Inc.* 741,600
28,300 Stewart Enterprises, Inc.* 160,744
------------
1,629,250
--------------------------------------------------------------
Hotels, Restaurants and Leisure -- 2.0%
2,700 Bally Total Fitness Hldg. Corp.* 18,900
15,700 CBRL Group, Inc. 600,682
17,100 Dover Downs Gaming & Entertainment, Inc. 161,766
------------
781,348
--------------------------------------------------------------
Household Durables -- 4.7%
38,000 Department 56, Inc.* 497,800
24,600 Furniture Brands Int'l., Inc. 721,518
8,900 Libbey, Inc. 253,472
10,800 Stanley Furniture Co., Inc. 340,200
------------
1,812,990
--------------------------------------------------------------
Industrial Conglomerates -- 2.0%
25,000 ALLETE, Inc. 765,000
--------------------------------------------------------------
Information Technology Services -- 1.6%
28,900 American Management Systems, Inc.* 435,523
49,700 Computer Task Group, Inc.* 193,333
------------
628,856
--------------------------------------------------------------
Insurance -- 4.8%
27,200 AmerUs Group Co. 951,184
9,100 Donegal Group, Inc. 200,382
9,750 Fidelity National Financial, Inc. 378,105
9,900 Selective Insurance Group, Inc. 320,364
------------
1,850,035
--------------------------------------------------------------
Machinery -- 2.0%
18,100 Federal Signal Corp. 317,112
10,200 Harsco Corp. 446,964
------------
764,076
--------------------------------------------------------------
Media -- 1.9%
23,600 Radio One, Inc.* 455,480
16,100 Saga Comm., Inc.* 298,333
------------
753,813
--------------------------------------------------------------
Metals and Mining -- 1.7%
13,900 Quanex Corp. 640,790
--------------------------------------------------------------
Multi-Utilities and Unregulated Power -- 2.7%
24,100 Equitable Resources, Inc. 1,034,372
--------------------------------------------------------------
- --------------------------------------------------------------------------------
See notes to financial statements.
35
The Guardian UBS Small Cap Value Fund
Schedule of Investments (Continued)
-------------------------------------------------------
Shares Value
-------------------------------------------------------
Oil and Gas -- 2.1%
22,700 Cimarex Energy Co.* $ 605,863
4,900 Stone Energy Corp.* 208,005
-----------
813,868
-------------------------------------------------------
Personal Products -- 0.9%
18,800 Chattem, Inc.* 336,520
-------------------------------------------------------
Real Estate -- 7.5%
8,000 EastGroup Pptys., Inc. 259,040
43,700 Equity Inns, Inc. 395,485
31,900 Innkeepers USA Trust 267,003
13,000 Kilroy Realty Corp. 425,750
14,700 Parkway Pptys., Inc. 611,520
8,000 SL Green Realty Corp. 328,400
22,700 Thornburg Mortgage, Inc. 617,440
-----------
2,904,638
-------------------------------------------------------
Road and Rail -- 2.8%
21,000 Genesee & Wyoming, Inc.* 661,500
11,600 Yellow Roadway Corp.* 419,572
-----------
1,081,072
-------------------------------------------------------
Semiconductors and Semiconductor Equipment -- 0.8%
7,900 Dupont Photomasks, Inc.* 190,706
7,000 Integrated Silicon Solution, Inc.* 109,690
-----------
300,396
-------------------------------------------------------
Software -- 2.0%
26,200 Reynolds & Reynolds Co. 761,110
-------------------------------------------------------
Specialty Retail -- 3.4%
16,100 Linens 'n Things, Inc.* 484,288
5,800 Michaels Stores, Inc. 256,360
16,700 Party City Corp.* 211,923
11,700 Rent-A-Center, Inc.* 349,596
-----------
1,302,167
-------------------------------------------------------
Textiles, Apparel and Luxury Goods -- 0.3%
6,300 OshKosh B'Gosh, Inc. 135,198
-------------------------------------------------------
Thrifts and Mortgage Finance -- 3.3%
10,500 Independence Community Bank Corp. 377,685
29,700 IndyMac Bancorp, Inc. 884,763
-----------
1,262,448
-------------------------------------------------------
Total Common Stocks
(Cost $29,309,763) 37,307,870
-------------------------------------------------------
Exchange-Traded Fund -- 1.3%
3,100 iShares Russell 2000
Value Index Fund
(Cost $334,252) $ 497,240
-------------------------------------------------------
Repurchase Agreement -- 2.6%
-----------------------------------------------------------
Principal
Amount Value
-----------------------------------------------------------
$ 990,000 State Street Bank and Trust Co.
repurchase agreement,
dated 12/31/2003, maturity
value $990,051 at
0.92%, due 1/2/2004 (1)
(Cost $990,000) $ 990,000
----------------------------------------------------------
Total Investments -- 100.2%
(Cost $30,634,015) 38,795,110
Liabilities in Excess of Cash, Receivables and
Other Assets -- (0.2)% (62,251)
----------------------------------------------------------
Net Assets -- 100% $38,732,859
----------------------------------------------------------
* Non-income producing security.
(1)The repurchase agreement is fully collateralized by U.S. Government and/or
agency obligations based on market prices at the date of the portfolio.
- --------------------------------------------------------------------------------
See notes to financial statements.
36
.. The Guardian Asset Allocation Fund
Common Stocks -- 13.5%
Shares Value
------------------------------------------------------
Aerospace and Defense -- 0.2%
3,044 Boeing Co. $ 128,274
2,736 Honeywell Int'l., Inc. 91,465
1,046 Lockheed Martin Corp. 53,764
606 Northrop Grumman Corp. 57,934
1,924 Raytheon Co. 57,797
318 United Technologies Corp. 30,137
------------
419,371
------------------------------------------------------
Air Freight and Logistics -- 0.1%
2,119 United Parcel Svcs., Inc. 157,971
------------------------------------------------------
Airlines -- 0.0%
2,503 Southwest Airlines Co. 40,398
------------------------------------------------------
Automobiles -- 0.2%
5,835 Ford Motor Co. 93,360
2,438 General Motors Corp. 130,189
1,219 Harley-Davidson, Inc. 57,939
------------
281,488
------------------------------------------------------
Beverages -- 0.4%
2,438 Anheuser-Busch Cos., Inc. 128,434
4,595 Coca-Cola Co. 233,196
3,197 Coca-Cola Enterprises, Inc. 69,918
2,867 PepsiCo., Inc. 133,660
2,305 The Pepsi Bottling Group, Inc. 55,735
------------
620,943
------------------------------------------------------
Biotechnology -- 0.2%
2,242 Amgen, Inc.* 138,556
917 Biogen Idec, Inc.* 33,727
1,035 Chiron Corp.* 58,985
1,726 MedImmune, Inc.* 43,840
------------
275,108
------------------------------------------------------
Building Products -- 0.0%
2,608 Masco Corp. 71,485
------------------------------------------------------
Capital Markets -- 0.5%
2,547 Bank of New York, Inc. 84,357
8,048 Charles Schwab Corp. 95,288
1,000 Goldman Sachs Group, Inc. 98,730
5,066 J.P. Morgan Chase & Co. 186,074
980 Lehman Brothers Hldgs., Inc. 75,676
2,356 Mellon Financial Corp. 75,651
410 Merrill Lynch & Co., Inc. 24,046
3,352 Morgan Stanley 193,980
57 State Street Corp. 2,969
------------
836,771
------------------------------------------------------
Chemicals -- 0.2%
567 Dow Chemical Co. 23,570
3,035 E.I. Du Pont de Nemours & Co. 139,276
1,085 Monsanto Co. 31,226
1,174 PPG Industries, Inc. 75,160
1,770 Rohm & Haas Co. 75,597
------------
344,829
------------------------------------------------------
Commercial Banks -- 0.8%
4,591 Bank of America Corp. 369,254
1,872 BB&T Corp. 72,334
2,217 Fifth Third Bancorp 131,025
4,514 FleetBoston Financial Corp. 197,036
1,410 KeyCorp 41,341
3,312 U.S. Bancorp 98,631
4,992 Wachovia Corp. 232,577
3,950 Wells Fargo & Co. 232,616
------------
1,374,814
------------------------------------------------------
-----------------------------------------------------------
Shares Value
-----------------------------------------------------------
Commercial Services and Supplies -- 0.2%
5,396 Cendant Corp.* $ 120,169
1,807 Cintas Corp. 90,585
1,630 Pitney Bowes, Inc. 66,211
2,779 Waste Management, Inc. 82,258
------------
359,223
----------------------------------------------------------
Communications Equipment -- 0.4%
15,125 Cisco Systems, Inc.* 367,386
6,482 Corning, Inc.* 67,608
6,075 Motorola, Inc. 85,475
2,384 QUALCOMM, Inc. 128,569
------------
649,038
----------------------------------------------------------
Computers and Peripherals -- 0.5%
4,776 Dell, Inc.* 162,193
5,386 EMC Corp.* 69,587
8,215 Hewlett Packard Co. 188,698
4,066 Int'l. Business Machines 376,837
12,916 Sun Microsystems, Inc.* 57,993
------------
855,308
----------------------------------------------------------
Consumer Finance -- 0.2%
1,972 American Express Co. 95,110
146 Capital One Financial Corp. 8,948
4,750 MBNA Corp. 118,038
2,265 SLM Corp. 85,345
------------
307,441
----------------------------------------------------------
Distributors -- 0.1%
2,967 Genuine Parts Co. 98,504
----------------------------------------------------------
Diversified Financial Services -- 0.3%
11,373 Citigroup, Inc. 552,045
----------------------------------------------------------
Diversified Telecommunication Services -- 0.4%
1,564 ALLTEL Corp. 72,851
1,989 AT & T Corp. 40,377
5,078 BellSouth Corp. 143,707
5,290 SBC Comm., Inc. 137,910
1,710 Sprint Corp. (FON Group) 28,078
4,971 Verizon Comm. 174,383
------------
597,306
----------------------------------------------------------
Electric Utilities -- 0.2%
1,705 Entergy Corp. 97,407
525 Exelon Corp. 34,839
1,214 FPL Group, Inc. 79,420
1,395 Progress Energy, Inc. 63,138
2,650 Southern Co. 80,162
1,292 TXU Corp. 30,646
------------
385,612
----------------------------------------------------------
Electrical Equipment -- 0.1%
424 Cooper Industries Ltd. 24,562
1,106 Emerson Electric Co. 71,614
------------
96,176
----------------------------------------------------------
Electronic Equipment and Instruments -- 0.1%
2,990 Agilent Technologies, Inc.* 87,428
4,723 Solectron Corp.* 27,913
------------
115,341
----------------------------------------------------------
Energy Equipment and Services -- 0.1%
2,205 Baker Hughes, Inc. 70,913
1,681 Schlumberger Ltd. 91,984
------------
162,897
----------------------------------------------------------
- --------------------------------------------------------------------------------
See notes to financial statements.
37
The Guardian Asset Allocation Fund
Schedule of Investments (Continued)
-----------------------------------------------------------
Shares Value
-----------------------------------------------------------
Food and Staples Retailing -- 0.4%
840 Albertson's, Inc. $ 19,026
2,620 CVS Corp. 94,634
2,409 Kroger Co.* 44,591
1,099 Safeway, Inc.* 24,079
10,695 Wal-Mart Stores, Inc. 567,370
------------
749,700
-----------------------------------------------------------
Food Products -- 0.3%
2,194 Archer-Daniels-Midland Co. 33,393
2,621 Campbell Soup Co. 70,243
2,662 ConAgra Foods, Inc. 70,250
928 General Mills, Inc. 42,038
2,424 H.J. Heinz Co. 88,306
667 Hershey Foods Corp. 51,352
2,012 Kellogg Co. 76,617
1,269 W.M. Wrigley Jr. Co. 71,331
------------
503,530
-----------------------------------------------------------
Health Care Equipment and Supplies -- 0.4%
2,128 Baxter Int'l., Inc. 64,947
2,122 Becton Dickinson & Co., Inc. 87,299
2,932 Boston Scientific Corp. 107,780
136 C.R. Bard, Inc. 11,050
2,016 Guidant Corp. 121,363
1,756 Medtronic, Inc. 85,359
1,442 St. Jude Medical, Inc.* 88,467
594 Stryker Corp. 50,496
884 Zimmer Hldgs., Inc.* 62,234
------------
678,995
-----------------------------------------------------------
Health Care Providers and Services -- 0.2%
998 AmerisourceBergen Corp. 56,038
746 Cigna Corp. 42,895
306 HCA, Inc. 13,146
3,629 Health Management Associates, Inc. 87,096
1,178 McKesson Corp. 37,884
1,512 Tenet Healthcare Corp.* 24,267
929 Wellpoint Health Networks, Inc.* 90,104
------------
351,430
-----------------------------------------------------------
Hotels, Restaurants and Leisure -- 0.1%
2,190 Carnival Corp. 87,009
2,751 McDonald's Corp. 68,307
2,943 Starbucks Corp.* 97,296
------------
252,612
-----------------------------------------------------------
Household Products -- 0.2%
614 Clorox Co. 29,816
1,955 Kimberly-Clark Corp. 115,521
2,560 Procter & Gamble Co. 255,693
------------
401,030
-----------------------------------------------------------
Industrial Conglomerates -- 0.7%
2,236 3M Co. 190,127
23,903 General Electric Co. 740,515
6,224 Tyco Int'l. Ltd. 164,936
------------
1,095,578
-----------------------------------------------------------
Information Technology Services -- 0.2%
2,142 Automatic Data Processing, Inc. 84,845
3,414 Concord EFS, Inc.* 50,664
2,525 Electronic Data Systems Corp. 61,963
3,170 First Data Corp. 130,255
957 Paychex, Inc. 35,600
1,608 Sabre Hldgs. Corp. 34,717
------------
398,044
-----------------------------------------------------------
-----------------------------------------------------------
Shares Value
-----------------------------------------------------------
Insurance -- 0.6%
2,353 AFLAC, Inc. $ 85,132
2,008 Allstate Corp. 86,384
5,515 American Int'l. Group, Inc. 365,534
1,281 Chubb Corp. 87,236
1,104 John Hancock Financial Svcs., Inc. 41,400
186 Loews Corp. 9,198
2,164 Marsh & McLennan Cos., Inc. 103,634
2,884 MetLife, Inc. 97,104
1,253 Progressive Corp. 104,738
1,586 Travelers Ppty. Casualty Corp. 26,915
------------
1,007,275
-----------------------------------------------------------
Internet Software and Services -- 0.0%
942 Yahoo! Inc.* 42,550
-----------------------------------------------------------
Leisure Equipment and Products -- 0.1%
1,149 Eastman Kodak Co. 29,495
3,448 Mattel, Inc. 66,443
------------
95,938
-----------------------------------------------------------
Machinery -- 0.2%
1,626 Caterpillar, Inc. 134,991
1,491 Deere & Co. 96,990
2,138 Dover Corp. 84,985
------------
316,966
-----------------------------------------------------------
Media -- 0.5%
2,046 Clear Channel Comm., Inc. 95,814
3,217 Comcast Corp. - Class A* 105,743
216 Comcast Corp. - Class A Special* 6,756
629 Gannett Co., Inc. 56,082
1,395 New York Times Co. 66,667
11,612 Time Warner, Inc.* 208,900
77 Tribune Co. 3,973
4,849 Viacom, Inc. 215,199
5,567 Walt Disney Co. 129,878
------------
889,012
-----------------------------------------------------------
Metals and Mining -- 0.1%
2,364 Alcoa, Inc. 89,832
-----------------------------------------------------------
Multiline Retail -- 0.1%
1,602 Kohl's Corp.* 71,994
481 Target Corp. 18,470
------------
90,464
-----------------------------------------------------------
Multi-Utilities and Unregulated Power -- 0.2%
3,468 AES Corp.* 32,738
4,604 Duke Energy Corp. 94,152
3,136 El Paso Corp. 25,684
1,682 Public Svc. Enterprise Group, Inc. 73,671
3,916 Williams Cos., Inc. 38,455
------------
264,700
-----------------------------------------------------------
Oil and Gas -- 0.6%
1,406 Anadarko Petroleum Corp. 71,720
147 Burlington Resources, Inc. 8,141
2,887 ChevronTexaco Corp. 249,408
1,233 ConocoPhillips 80,848
14,298 Exxon Mobil Corp. 586,218
2,571 Unocal Corp. 94,690
------------
1,091,025
-----------------------------------------------------------
Paper and Forest Products -- 0.1%
2,952 Georgia-Pacific Corp. 90,538
-----------------------------------------------------------
- --------------------------------------------------------------------------------
See notes to financial statements.
38
The Guardian Asset Allocation Fund
Schedule of Investments (Continued)
---------------------------------------------------------
Shares Value
---------------------------------------------------------
Personal Products -- 0.1%
1,376 Avon Products, Inc. $ 92,866
2,784 Gillette Co. 102,257
------------
195,123
---------------------------------------------------------
Pharmaceuticals -- 1.0%
1,116 Allergan, Inc. 85,720
6,462 Bristol-Myers Squibb Corp. 184,813
3,549 Eli Lilly & Co. 249,601
1,774 Forest Laboratories, Inc.* 109,633
6,872 Johnson & Johnson 355,008
1,779 King Pharmaceuticals, Inc.* 27,148
17,915 Pfizer, Inc. 632,937
3,875 Schering-Plough Corp. 67,386
------------
1,712,246
---------------------------------------------------------
Real Estate -- 0.1%
2,383 Plum Creek Timber Co., Inc. 72,562
1,972 Simon Ppty. Group, Inc. 91,383
------------
163,945
---------------------------------------------------------
Road and Rail -- 0.1%
2,352 Burlington Northern Santa Fe 76,087
1,674 Union Pacific Corp. 116,310
------------
192,397
---------------------------------------------------------
Semiconductors and Semiconductor Equipment -- 0.6%
2,923 Altera Corp.* 66,352
754 Analog Devices, Inc. 34,420
4,648 Applied Materials, Inc.* 104,348
1,688 Broadcom Corp.* 57,544
13,630 Intel Corp. 438,886
1,448 KLA-Tencor Corp.* 84,954
549 Linear Technology Corp. 23,097
794 Maxim Integrated Products, Inc. 39,541
3,302 Micron Technology, Inc.* 44,478
1,503 Texas Instruments, Inc. 44,158
2,346 Xilinx, Inc.* 90,884
------------
1,028,662
---------------------------------------------------------
Software -- 0.6%
1,802 Adobe Systems, Inc. 70,819
3,590 Computer Associates Int'l., Inc. 98,151
23,245 Microsoft Corp. 640,167
2,830 Siebel Systems, Inc.* 39,252
2,739 VERITAS Software Corp.* 101,781
------------
950,170
---------------------------------------------------------
Specialty Retail -- 0.3%
1,416 Bed, Bath & Beyond, Inc.* 61,383
1,930 Best Buy Co., Inc.* 100,823
3,143 Home Depot, Inc. 111,545
2,415 Lowe's Cos., Inc. 133,767
432 Staples, Inc.* 11,794
5,047 The Gap, Inc. 117,141
------------
536,453
---------------------------------------------------------
Textiles, Apparel and Luxury Goods -- 0.0%
1,255 NIKE, Inc. 85,917
---------------------------------------------------------
Thrifts and Mortgage Finance -- 0.2%
1,850 Federal National Mortgage Assn. 138,861
4,145 Washington Mutual, Inc. 166,297
------------
305,158
---------------------------------------------------------
Tobacco -- 0.2%
5,316 Altria Group, Inc. 289,297
509 UST, Inc. 18,166
------------
307,463
---------------------------------------------------------
---------------------------------------------------------------
Shares Value
---------------------------------------------------------------
Wireless Telecommunication Services -- 0.1%
12,777 AT & T Wireless Svcs., Inc.* $ 102,088
---------------------------------------------------------------
Total Common Stocks
(Cost $24,129,149) 22,590,910
---------------------------------------------------------------
Mutual Funds -- 82.7%
Equity -- 69.5%
15,277,311 The Guardian S&P 500 Index Fund,
Class A (1)+ $116,565,880
---------------------------------------------------------------
Fixed Income -- 13.2%
2,190,079 The Guardian Investment Quality Bond
Fund, Class A (2) 22,097,901
---------------------------------------------------------------
Total Mutual Funds
(Cost $153,624,380) 138,663,781
---------------------------------------------------------------
U.S. Government -- 1.3%
---------------------------------------------------------------
Principal
Amount Value
---------------------------------------------------------------
U.S. Treasury Bill
$ 2,000,000 0.84%, 1/29/2004 (3) $ 1,998,693
200,000 0.88%, 1/8/2004 (3) 199,966
---------------------------------------------------------------
Total U.S. Government
(Cost $2,198,659) 2,198,659
---------------------------------------------------------------
Repurchase Agreement -- 2.6%
$ 4,355,000 State Street Bank and Trust Co.
repurchase agreement,
dated 12/31/2003, maturity
value $4,355,223 at
0.92%, due 1/2/2004 (4)
(Cost $4,355,000) $ 4,355,000
---------------------------------------------------------------
Total Investments -- 100.1%
(Cost $184,307,188) 167,808,350
Liabilities in Excess of Cash, Receivables and
Other Assets -- (0.1)% (242,305)
---------------------------------------------------------------
Net Assets -- 100% $167,566,045
---------------------------------------------------------------
* Non-income producing security.
+ The Guardian S&P 500 Index Fund financials are included herein.
(1)Majority-owned subsidiary.
(2)Affiliated issuer.
(3)The U.S. Treasury Bill is segregated as collateral to cover margin
requirements on open futures contracts.
(4)The repurchase agreement is fully collateralized by U.S. Government and/or
agency obligations based on market prices at the date of the portfolio.
Purchased (P)/Sold (S) Futures Contracts
Unrealized
Appreciation/
Contracts Type Description Expiration (Depreciation)
--------------------------------------------------------------
198 S U.S. Treasury Notes,
5 Year 3/2004 $ (98,027)
100 P S&P 500 Index 3/2004 670,446
------------
$ 572,419
--------------------------------------------------------------
- --------------------------------------------------------------------------------
See notes to financial statements.
39
.. The Guardian S&P 500 Index Fund
Common Stocks -- 99.0%
Shares Value
---------------------------------------------------------
Aerospace and Defense -- 1.8%
12,788 Boeing Co. $ 538,886
3,125 General Dynamics Corp. 282,469
1,476 Goodrich Corp. 43,823
13,224 Honeywell Int'l., Inc. 442,078
6,804 Lockheed Martin Corp. 349,726
2,870 Northrop Grumman Corp. 274,372
6,629 Raytheon Co. 199,135
2,645 Rockwell Collins, Inc. 79,429
7,055 United Technologies Corp. 668,602
-------------
2,878,520
---------------------------------------------------------
Air Freight and Logistics -- 1.0%
4,550 FedEx Corp. 307,125
810 Ryder Systems, Inc. 27,662
17,015 United Parcel Svcs., Inc. 1,268,468
-------------
1,603,255
---------------------------------------------------------
Airlines -- 0.1%
1,785 Delta Airlines, Inc. 21,081
12,232 Southwest Airlines Co. 197,424
-------------
218,505
---------------------------------------------------------
Auto Components -- 0.2%
945 Cooper Tire & Rubber Co. 20,204
2,085 Dana Corp. 38,260
8,041 Delphi Corp. 82,099
1,786 Goodyear Tire & Rubber Co.* 14,038
1,429 Johnson Controls, Inc. 165,935
1,852 Visteon Corp. 19,279
-------------
339,815
---------------------------------------------------------
Automobiles -- 0.7%
28,159 Ford Motor Co. 450,544
8,879 General Motors Corp. 474,139
4,838 Harley-Davidson, Inc. 229,950
-------------
1,154,633
---------------------------------------------------------
Beverages -- 2.6%
525 Adolph Coors Co. 29,452
11,891 Anheuser-Busch Cos., Inc. 626,418
995 Brown-Forman Corp. 92,983
37,132 Coca-Cola Co. 1,884,449
7,664 Coca-Cola Enterprises, Inc. 167,612
25,965 PepsiCo., Inc. 1,210,488
4,359 The Pepsi Bottling Group, Inc. 105,401
-------------
4,116,803
---------------------------------------------------------
Biotechnology -- 1.2%
19,558 Amgen, Inc.* 1,208,685
5,022 Biogen Idec, Inc.* 184,709
2,723 Chiron Corp.* 155,184
3,379 Genzyme Corp.* 166,720
3,661 MedImmune, Inc.* 92,989
-------------
1,808,287
---------------------------------------------------------
Building Products -- 0.2%
1,062 American Standard Cos., Inc.* 106,943
7,483 Masco Corp. 205,109
-------------
312,052
---------------------------------------------------------
Capital Markets -- 3.6%
11,877 Bank of New York, Inc. 393,366
1,537 Bear Stearns Cos., Inc. 122,883
19,889 Charles Schwab Corp. 235,486
1,600 Federated Investors, Inc. 46,976
3,801 Franklin Resources, Inc. 197,880
7,166 Goldman Sachs Group, Inc. 707,499
------------------------------------------------------------
Shares Value
------------------------------------------------------------
30,880 J.P. Morgan Chase & Co. $ 1,134,222
3,184 Janus Capital Group, Inc. 52,250
4,199 Lehman Brothers Hldgs., Inc. 324,247
6,309 Mellon Financial Corp. 202,582
14,254 Merrill Lynch & Co., Inc. 835,997
16,508 Morgan Stanley 955,318
3,195 Northern Trust Corp. 148,312
5,114 State Street Corp. 266,337
1,728 T. Rowe Price Group, Inc. 81,925
-------------
5,705,280
------------------------------------------------------------
Chemicals -- 1.6%
3,281 Air Products & Chemicals, Inc. 173,335
14,085 Dow Chemical Co. 585,514
15,009 E.I. Du Pont de Nemours & Co. 688,763
1,083 Eastman Chemical Co. 42,811
4,653 Ecolab, Inc. 127,353
1,823 Engelhard Corp. 54,599
685 Great Lakes Chemical Corp. 18,625
1,497 Hercules, Inc.* 18,263
1,377 Int'l. Flavors & Fragrances, Inc. 48,085
3,976 Monsanto Co. 114,429
2,774 PPG Industries, Inc. 177,592
5,132 Praxair, Inc. 196,042
3,134 Rohm & Haas Co. 133,853
1,093 Sigma-Aldrich 62,498
-------------
2,441,762
------------------------------------------------------------
Commercial Banks -- 6.3%
5,373 AmSouth Bancorporation 131,639
22,464 Bank of America Corp. 1,806,780
17,177 Bank One Corp. 783,099
8,563 BB&T Corp. 330,874
3,302 Charter One Financial, Inc. 114,084
2,548 Comerica, Inc. 142,841
8,646 Fifth Third Bancorp 510,979
1,845 First Tennessee Nat'l. Corp. 81,365
16,251 FleetBoston Financial Corp. 709,356
3,600 Huntington Bancshares, Inc. 81,000
6,165 KeyCorp 180,758
3,714 Marshall & Ilsley Corp. 142,060
9,265 National City Corp. 314,454
2,405 North Fork Bancorporation, Inc. 97,330
4,177 PNC Financial Svcs. Group 228,607
3,484 Regions Financial Corp. 129,605
4,873 SouthTrust Corp. 159,493
4,276 SunTrust Banks, Inc. 305,734
4,926 Synovus Financial Corp.* 142,460
29,004 U.S. Bancorp 863,739
2,982 Union Planters Corp. 93,903
20,178 Wachovia Corp. 940,093
25,187 Wells Fargo & Co. 1,483,262
1,438 Zions Bancorporation 88,193
-------------
9,861,708
------------------------------------------------------------
Commercial Services and Supplies -- 1.0%
2,838 Allied Waste Industries, Inc.* 39,391
2,845 Apollo Group, Inc.* 193,460
1,581 Avery Dennison Corp. 88,568
15,262 Cendant Corp.* 339,885
2,425 Cintas Corp. 121,565
997 Deluxe Corp. 41,206
2,052 Equifax, Inc. 50,274
2,604 H & R Block, Inc. 144,184
1,707 Monster Worldwide, Inc.* 37,486
3,634 Pitney Bowes, Inc. 147,613
1,723 R.R. Donnelley & Sons Co. 51,948
- --------------------------------------------------------------------------------
See notes to financial statements.
40
The Guardian S&P 500 Index Fund
Schedule of Investments (Continued)
------------------------------------------------------------
Shares Value
------------------------------------------------------------
2,547 Robert Half Int'l., Inc.* $ 59,447
8,974 Waste Management, Inc. 265,630
-------------
1,580,657
----------------------------------------------------------
Communications Equipment -- 2.9%
11,132 ADC Telecomm., Inc.* 33,062
2,400 Andrew Corp.* 27,624
6,102 Avaya, Inc.* 78,960
7,613 CIENA Corp.* 50,550
106,642 Cisco Systems, Inc.* 2,590,334
2,380 Comverse Technology, Inc.* 41,864
19,376 Corning, Inc.* 202,092
18,734 JDS Uniphase Corp.* 68,379
67,556 Lucent Technologies, Inc.* 191,859
35,440 Motorola, Inc. 498,641
1,349 QLogic Corp.* 69,609
12,102 QUALCOMM, Inc. 652,661
2,311 Scientific Atlanta, Inc. 63,090
5,897 Tellabs, Inc.* 49,712
-------------
4,618,437
----------------------------------------------------------
Computers and Peripherals -- 3.8%
6,053 Apple Computer, Inc.* 129,353
38,726 Dell, Inc.* 1,315,135
32,506 EMC Corp.* 419,977
4,621 Gateway, Inc.* 21,257
46,798 Hewlett Packard Co. 1,074,950
26,281 Int'l. Business Machines 2,435,723
1,823 Lexmark Int'l. Group, Inc.* 143,361
1,379 NCR Corp.* 53,505
5,702 Network Appliance, Inc.* 117,062
46,932 Sun Microsystems, Inc.* 210,725
-------------
5,921,048
----------------------------------------------------------
Construction and Engineering -- 0.0%
1,050 Fluor Corp. 41,622
----------------------------------------------------------
Construction Materials -- 0.1%
1,439 Vulcan Materials Co. 68,453
----------------------------------------------------------
Consumer Finance -- 1.2%
19,651 American Express Co. 947,768
3,450 Capital One Financial Corp. 211,450
19,217 MBNA Corp. 477,542
4,111 Providian Financial Corp.* 47,852
7,101 SLM Corp. 267,566
-------------
1,952,178
----------------------------------------------------------
Containers and Packaging -- 0.2%
813 Ball Corp. 48,431
752 Bemis Co., Inc. 37,600
2,261 Pactiv Corp.* 54,038
1,181 Sealed Air Corp.* 63,939
697 Temple-Inland, Inc. 43,681
-------------
247,689
----------------------------------------------------------
Distributors -- 0.1%
2,486 Genuine Parts Co. 82,535
----------------------------------------------------------
Diversified Financial Services -- 2.6%
78,262 Citigroup, Inc. 3,798,838
2,359 Moody's Corp. 142,837
5,116 Principal Financial Group, Inc. 169,186
-------------
4,110,861
----------------------------------------------------------
Diversified Telecommunication Services -- 2.8%
4,514 ALLTEL Corp. 210,262
12,198 AT & T Corp. 247,620
28,012 BellSouth Corp. 792,740
1,992 CenturyTel, Inc. 64,979
----------------------------------------------------------
Shares Value
----------------------------------------------------------
3,719 Citizens Comm. Co.* $ 46,190
23,823 Qwest Comm. Int'l., Inc.* 102,915
50,060 SBC Comm., Inc. 1,305,064
14,091 Sprint Corp. (FON Group) 231,374
41,885 Verizon Comm. 1,469,326
-------------
4,470,470
----------------------------------------------------------
Electric Utilities -- 2.0%
1,753 Allegheny Energy, Inc.* 22,368
2,471 Ameren Corp. 113,666
6,284 American Electric Power, Inc. 191,725
4,248 CenterPoint Energy, Inc. 41,163
2,886 CiNergy Corp. 112,006
1,896 CMS Energy Corp.* 16,154
3,075 Consolidated Edison, Inc. 132,256
4,770 Dominion Resources, Inc. 304,469
2,578 DTE Energy Co. 101,573
4,648 Edison Int'l.* 101,931
3,618 Entergy Corp. 206,696
4,952 Exelon Corp. 328,615
5,049 FirstEnergy Corp. 177,725
2,907 FPL Group, Inc. 190,176
6,344 PG&E Corp.* 176,173
1,212 Pinnacle West Capital Corp. 48,504
2,692 PPL Corp. 117,775
3,469 Progress Energy, Inc. 157,007
11,246 Southern Co. 340,191
2,624 TECO Energy, Inc. 37,812
4,937 TXU Corp. 117,105
6,601 Xcel Energy, Inc. 112,085
-------------
3,147,175
----------------------------------------------------------
Electrical Equipment -- 0.5%
2,786 American Power Conversion Corp. 68,118
1,359 Cooper Industries Ltd. 78,727
6,564 Emerson Electric Co. 425,019
1,094 Power-One, Inc.* 11,848
2,645 Rockwell Automation, Inc. 94,162
767 Thomas & Betts Corp. 17,556
-------------
695,430
----------------------------------------------------------
Electronic Equipment and Instruments -- 0.5%
7,382 Agilent Technologies, Inc.* 215,850
2,726 Jabil Circuit, Inc.* 77,146
2,802 Molex, Inc. 97,762
2,010 PerkinElmer, Inc. 34,311
7,816 Sanmina-SCI Corp.* 98,560
12,349 Solectron Corp.* 72,982
3,132 Symbol Technologies, Inc. 52,899
1,336 Tektronix, Inc. 42,218
2,568 Thermo Electron Corp.* 64,713
2,045 Waters Corp.* 67,812
-------------
824,253
----------------------------------------------------------
Energy Equipment and Services -- 0.8%
2,317 B.J. Svcs. Co.* 83,181
4,764 Baker Hughes, Inc. 153,210
6,355 Halliburton Co. 165,230
2,092 Nabors Industries, Inc.* 86,818
2,008 Noble Corp.* 71,846
1,317 Rowan Cos., Inc.* 30,515
9,003 Schlumberger Ltd. 492,644
5,572 Transocean, Inc.* 133,784
-------------
1,217,228
----------------------------------------------------------
Food and Staples Retailing -- 3.5%
5,902 Albertson's, Inc. 133,680
7,059 Costco Wholesale Corp.* 262,454
- --------------------------------------------------------------------------------
See notes to financial statements.
41
The Guardian S&P 500 Index Fund
Schedule of Investments (Continued)
-------------------------------------------------------------
Shares Value
-------------------------------------------------------------
6,301 CVS Corp. $ 227,592
11,800 Kroger Co.* 218,418
7,230 Safeway, Inc.* 158,409
1,885 Supervalu, Inc. 53,892
9,731 Sysco Corp. 362,285
66,196 Wal-Mart Stores, Inc. 3,511,698
15,872 Walgreen Co. 577,423
2,010 Winn-Dixie Stores, Inc. 20,000
-------------
5,525,851
-------------------------------------------------------------
Food Products -- 1.2%
9,568 Archer-Daniels-Midland Co. 145,625
6,069 Campbell Soup Co. 162,649
8,628 ConAgra Foods, Inc. 227,693
5,846 General Mills, Inc. 264,824
5,023 H.J. Heinz Co. 182,988
1,960 Hershey Foods Corp. 150,900
6,444 Kellogg Co. 245,388
1,968 McCormick & Co., Inc. 59,237
12,269 Sara Lee Corp. 266,360
3,230 W.M. Wrigley Jr. Co. 181,558
-------------
1,887,222
-------------------------------------------------------------
Gas Utilities -- 0.3%
2,616 KeySpan Corp. 96,269
2,048 Kinder Morgan, Inc. 121,037
674 NICOR, Inc. 22,943
4,276 NiSource, Inc. 93,815
527 Peoples Energy Corp. 22,155
3,727 Sempra Energy 112,034
-------------
468,253
-------------------------------------------------------------
Health Care Equipment and Supplies -- 2.0%
3,019 Applera Corp.-Applied Biosystems
Group 62,524
755 Bausch & Lomb, Inc. 39,185
9,370 Baxter Int'l., Inc. 285,972
3,689 Becton Dickinson & Co., Inc. 151,765
3,846 Biomet, Inc. 140,033
12,482 Boston Scientific Corp. 458,838
721 C.R. Bard, Inc. 58,581
4,822 Guidant Corp. 290,284
18,280 Medtronic, Inc. 888,591
653 Millipore Corp.* 28,112
2,817 St. Jude Medical, Inc.* 172,823
3,097 Stryker Corp. 263,276
3,437 Zimmer Hldgs., Inc.* 241,965
-------------
3,081,949
-------------------------------------------------------------
Health Care Providers and Services -- 1.8%
2,336 Aetna, Inc. 157,867
1,854 AmerisourceBergen Corp. 104,102
2,046 Anthem, Inc.* 153,450
6,958 Cardinal Health, Inc. 425,551
2,221 Cigna Corp. 127,707
1,165 Express Scripts, Inc.* 77,391
7,462 HCA, Inc. 320,567
3,671 Health Management Associates, Inc. 88,104
2,389 Humana, Inc.* 54,589
3,317 IMS Health, Inc. 82,461
1,456 Manor Care, Inc. 50,334
4,085 McKesson Corp. 131,374
4,011 Medco Health Solutions, Inc.* 136,334
1,738 Quest Diagnostics, Inc.* 127,065
6,941 Tenet Healthcare Corp.* 111,403
9,220 UnitedHealth Group 536,419
2,138 Wellpoint Health Networks, Inc.* 207,365
-------------
2,892,083
-------------------------------------------------------------
---------------------------------------------------------------
Shares Value
---------------------------------------------------------------
Hotels, Restaurants and Leisure -- 1.2%
9,614 Carnival Corp. $ 381,964
2,575 Darden Restaurants, Inc. 54,178
1,649 Harrah's Entertainment, Inc. 82,071
5,226 Hilton Hotels Corp. 89,521
5,356 Int'l. Game Technology 191,209
3,443 Marriott Int'l., Inc. 159,067
18,921 McDonald's Corp. 469,808
6,148 Starbucks Corp.* 203,253
3,141 Starwood Hotels & Resorts
Worldwide, Inc. 112,982
1,623 Wendy's Int'l., Inc. 63,686
4,234 Yum! Brands, Inc.* 145,650
-------------
1,953,389
---------------------------------------------------------------
Household Durables -- 0.5%
800 American Greetings Corp.* 17,496
1,127 Black & Decker Corp. 55,584
1,042 Centex Corp. 112,171
2,219 Fortune Brands, Inc. 158,636
618 KB Home 44,817
2,782 Leggett & Platt, Inc. 60,175
1,066 Maytag Corp. 29,688
3,827 Newell Rubbermaid, Inc. 87,141
1,023 Pulte Homes, Inc. 95,773
811 Snap-On, Inc. 26,147
1,228 Stanley Works 46,504
786 Tupperware Corp. 13,629
933 Whirlpool Corp. 67,783
-------------
815,544
---------------------------------------------------------------
Household Products -- 1.9%
3,390 Clorox Co. 164,618
8,248 Colgate-Palmolive Co. 412,813
7,704 Kimberly-Clark Corp. 455,229
19,708 Procter & Gamble Co. 1,968,435
-------------
3,001,095
---------------------------------------------------------------
Industrial Conglomerates -- 4.2%
11,794 3M Co. 1,002,844
152,011 General Electric Co. 4,709,301
2,056 Textron, Inc. 117,315
30,110 Tyco Int'l. Ltd. 797,915
-------------
6,627,375
---------------------------------------------------------------
Information Technology Services -- 1.2%
9,179 Automatic Data Processing, Inc. 363,580
2,951 Computer Sciences Corp.* 130,523
7,400 Concord EFS, Inc.* 109,816
2,482 Convergys Corp.* 43,336
7,704 Electronic Data Systems Corp. 189,056
11,404 First Data Corp. 468,590
2,689 Fiserv, Inc.* 106,242
6,010 Paychex, Inc. 223,572
1,910 Sabre Hldgs. Corp. 41,237
3,991 SunGard Data Systems, Inc.* 110,591
4,516 Unisys Corp.* 67,063
-------------
1,853,606
---------------------------------------------------------------
Insurance -- 4.5%
4,286 ACE Ltd. 177,526
7,659 AFLAC, Inc. 277,103
10,558 Allstate Corp. 454,205
1,504 Ambac Financial Group, Inc. 104,363
39,606 American Int'l. Group, Inc. 2,625,086
4,649 Aon Corp. 111,297
2,889 Chubb Corp. 196,741
2,309 Cincinnati Financial Corp. 96,701
4,261 Hartford Financial Svcs. Group, Inc. 251,527
- --------------------------------------------------------------------------------
See notes to financial statements.
42
The Guardian S&P 500 Index Fund
Schedule of Investments (Continued)
---------------------------------------------------------------
Shares Value
---------------------------------------------------------------
2,226 Jefferson-Pilot Corp. $ 112,747
4,288 John Hancock Financial Svcs., Inc. 160,800
2,766 Lincoln Nat'l. Corp. 111,663
2,851 Loews Corp. 140,982
7,934 Marsh & McLennan Cos., Inc. 379,959
2,115 MBIA, Inc. 125,271
11,297 MetLife, Inc. 380,370
3,436 Progressive Corp. 287,215
8,227 Prudential Financial, Inc. 343,642
1,823 SAFECO Corp. 70,969
3,733 St. Paul Cos., Inc. 148,013
1,831 Torchmark Corp. 83,384
15,308 Travelers Ppty. Casualty Corp. 259,777
4,975 UnumProvident Corp. 78,456
2,213 XL Capital Ltd. 171,618
-------------
7,149,415
---------------------------------------------------------------
Internet and Catalog Retail -- 0.4%
9,856 eBay, Inc.* 636,599
---------------------------------------------------------------
Internet Software and Services -- 0.3%
10,061 Yahoo! Inc.* 454,455
---------------------------------------------------------------
Leisure Equipment and Products -- 0.2%
1,223 Brunswick Corp. 38,928
4,324 Eastman Kodak Co. 110,997
2,426 Hasbro, Inc. 51,625
6,117 Mattel, Inc. 117,875
-------------
319,425
---------------------------------------------------------------
Machinery -- 1.4%
5,238 Caterpillar, Inc. 434,859
841 Crane Co. 25,852
571 Cummins, Inc. 27,945
2,338 Danaher Corp. 214,512
3,730 Deere & Co. 242,637
2,911 Dover Corp. 115,712
1,177 Eaton Corp. 127,092
4,671 Illinois Tool Works, Inc. 391,944
2,653 Ingersoll-Rand Co. 180,086
1,256 ITT Industries, Inc. 93,208
832 Navistar Int'l. Corp.* 39,844
1,645 PACCAR, Inc. 140,022
1,735 Pall Corp. 46,550
1,682 Parker-Hannifin Corp. 100,079
-------------
2,180,342
---------------------------------------------------------------
Media -- 4.0%
9,260 Clear Channel Comm., Inc. 433,646
34,494 Comcast Corp. -- Class A* 1,133,818
1,237 Dow Jones & Co., Inc. 61,664
4,065 Gannett Co., Inc. 362,435
5,651 Interpublic Group Cos., Inc.* 88,155
1,337 Knight-Ridder, Inc. 103,444
2,816 McGraw-Hill Cos., Inc. 196,895
690 Meredith Corp. 33,679
2,319 New York Times Co. 110,825
2,999 Omnicom Group, Inc. 261,903
67,918 Time Warner, Inc.* 1,221,845
5,202 Tribune Co. 268,423
4,887 Univision Comm., Inc.* 193,965
26,391 Viacom, Inc. 1,171,232
31,096 Walt Disney Co. 725,470
-------------
6,367,399
---------------------------------------------------------------
Metals and Mining -- 0.8%
13,096 Alcoa, Inc. 497,648
1,132 Allegheny Technologies, Inc. 14,965
2,726 Freeport-McMoran Copper & Gold, Inc. 114,846
6,419 Newmont Mining Corp. 312,028
-------------------------------------------------------------
Shares Value
-------------------------------------------------------------
1,128 Nucor Corp. $ 63,168
1,425 Phelps Dodge Corp.* 108,428
1,892 United States Steel Corp. 66,258
1,195 Worthington Industries, Inc. 21,546
-------------
1,198,887
-------------------------------------------------------------
Multiline Retail -- 1.0%
1,561 Big Lots, Inc.* 22,182
1,201 Dillards, Inc. 19,768
4,737 Dollar General Corp. 99,430
2,900 Family Dollar Stores, Inc. 104,052
2,840 Federated Department Stores, Inc. 133,849
4,629 J.C. Penney Co., Inc. 121,650
5,280 Kohl's Corp.* 237,283
4,265 May Department Stores Co. 123,984
1,837 Nordstrom, Inc. 63,009
3,694 SearsRoebuck & Co. 168,040
13,845 Target Corp. 531,648
-------------
1,624,895
-------------------------------------------------------------
Multi-Utilities and Unregulated Power -- 0.5%
10,232 AES Corp.* 96,590
4,272 Calpine Corp.* 20,548
2,335 Constellation Energy Group, Inc. 91,439
13,778 Duke Energy Corp. 281,760
4,647 Dynegy, Inc.* 19,889
10,252 El Paso Corp. 83,964
3,650 Public Svc. Enterprise Group, Inc. 159,870
7,802 Williams Cos., Inc. 76,616
-------------
830,676
-------------------------------------------------------------
Office Electronics -- 0.1%
11,648 Xerox Corp.* 160,742
-------------------------------------------------------------
Oil and Gas -- 5.0%
1,272 Amerada Hess Corp. 67,632
3,676 Anadarko Petroleum Corp. 187,513
2,456 Apache Corp. 199,182
966 Ashland, Inc. 42,562
3,106 Burlington Resources, Inc. 172,010
16,244 ChevronTexaco Corp. 1,403,319
10,367 ConocoPhillips 679,764
3,471 Devon Energy Corp. 198,750
1,669 EOG Resources, Inc. 77,058
100,880 Exxon Mobil Corp. 4,136,080
1,350 Kerr-McGee Corp. 62,762
4,449 Marathon Oil Corp. 147,217
5,890 Occidental Petroleum Corp. 248,794
1,169 Sunoco, Inc. 59,794
3,975 Unocal Corp. 146,399
-------------
7,828,836
-------------------------------------------------------------
Paper and Forest Products -- 0.5%
3,965 Georgia-Pacific Corp. 121,607
7,547 Int'l. Paper Co. 325,351
1,413 Louisiana-Pacific Corp.* 25,264
2,831 MeadWestvaco Corp. 84,222
3,511 Weyerhaeuser Co. 224,704
-------------
781,148
-------------------------------------------------------------
Personal Products -- 0.5%
801 Alberto-Culver Co. 50,527
3,423 Avon Products, Inc. 231,018
15,165 Gillette Co. 557,011
-------------
838,556
-------------------------------------------------------------
Pharmaceuticals -- 8.3%
23,802 Abbott Laboratories 1,109,173
1,885 Allergan, Inc. 144,787
- --------------------------------------------------------------------------------
See notes to financial statements.
43
The Guardian S&P 500 Index Fund
Schedule of Investments (Continued)
-----------------------------------------------------------
Shares Value
-----------------------------------------------------------
29,523 Bristol-Myers Squibb Corp. $ 844,358
17,027 Eli Lilly & Co. 1,197,509
5,593 Forest Laboratories, Inc.* 345,647
44,593 Johnson & Johnson 2,303,674
3,608 King Pharmaceuticals, Inc.* 55,058
33,762 Merck & Co., Inc. 1,559,805
117,992 Pfizer, Inc. 4,168,657
22,681 Schering-Plough Corp. 394,423
1,463 Watson Pharmaceuticals, Inc.* 67,298
20,017 Wyeth 849,722
-------------
13,040,111
-----------------------------------------------------------
Real Estate -- 0.4%
1,513 Apartment Investment &
Management Co. 52,198
6,439 Equity Office Pptys. Trust 184,477
4,460 Equity Residential 131,615
2,659 Plum Creek Timber Co., Inc. 80,967
2,678 ProLogis 85,937
3,160 Simon Ppty. Group, Inc. 146,434
-------------
681,628
-----------------------------------------------------------
Road and Rail -- 0.4%
5,663 Burlington Northern Santa Fe 183,198
3,037 CSX Corp. 109,150
5,523 Norfolk Southern Corp. 130,619
3,900 Union Pacific Corp. 270,972
-------------
693,939
-----------------------------------------------------------
Semiconductors and Semiconductor Equipment -- 4.2%
6,069 Advanced Micro Devices, Inc.* 90,428
5,686 Altera Corp.* 129,072
5,668 Analog Devices, Inc. 258,744
25,199 Applied Materials, Inc.* 565,718
4,283 Applied Micro Circuits Corp.* 25,612
4,595 Broadcom Corp.* 156,644
98,714 Intel Corp. 3,178,591
3,041 KLA-Tencor Corp.* 178,415
4,550 Linear Technology Corp. 191,418
5,783 LSI Logic Corp.* 51,295
4,899 Maxim Integrated Products, Inc. 243,970
8,530 Micron Technology, Inc.* 114,899
3,068 National Semiconductor Corp.* 120,910
2,577 Novellus Systems, Inc.* 108,363
2,246 NVIDIA Corp.* 52,220
2,652 PMC-Sierra, Inc.* 53,438
2,493 Teradyne, Inc.* 63,447
26,280 Texas Instruments, Inc. 772,106
5,339 Xilinx, Inc.* 206,833
-------------
6,562,123
-----------------------------------------------------------
Software -- 4.6%
3,464 Adobe Systems, Inc. 136,135
1,611 Autodesk, Inc. 39,598
3,499 BMC Software, Inc.* 65,256
2,659 Citrix Systems, Inc.* 56,397
9,148 Computer Associates Int'l., Inc. 250,106
5,272 Compuware Corp.* 31,843
4,446 Electronic Arts, Inc.* 212,430
3,242 Intuit, Inc.* 171,534
1,159 Mercury Interactive Corp.* 56,374
163,576 Microsoft Corp. 4,504,883
6,727 Novell, Inc.* 70,768
80,487 Oracle Corp.* 1,062,429
3,803 Parametric Technology Corp.* 14,984
5,561 PeopleSoft, Inc.* 126,791
6,843 Siebel Systems, Inc.* 94,913
-------------------------------------------------------------
Shares Value
-------------------------------------------------------------
4,500 Symantec Corp.* $ 155,925
6,433 VERITAS Software Corp.* 239,050
-------------
7,289,416
-------------------------------------------------------------
Specialty Retail -- 2.4%
4,489 AutoNation, Inc.* 82,463
1,333 AutoZone, Inc.* 113,585
4,634 Bed, Bath & Beyond, Inc.* 200,884
4,823 Best Buy Co., Inc.* 251,953
811 Boise Cascade Corp. 26,649
2,929 Circuit City Stores, Inc. 29,671
34,767 Home Depot, Inc. 1,233,881
12,053 Lowe's Cos., Inc. 667,616
4,230 Office Depot, Inc.* 70,683
2,665 RadioShack Corp. 81,762
2,265 Sherwin-Williams Co. 78,686
7,453 Staples, Inc.* 203,467
13,490 The Gap, Inc. 313,103
8,155 The Limited, Inc. 147,035
2,083 Tiffany & Co. 94,152
7,969 TJX Cos., Inc. 175,716
2,834 Toys R Us, Inc.* 35,822
-------------
3,807,128
-------------------------------------------------------------
Textiles, Apparel and Luxury Goods -- 0.3%
2,039 Jones Apparel Group, Inc. 71,834
1,864 Liz Claiborne, Inc. 66,097
4,106 NIKE, Inc. 281,097
649 Reebok Int'l. Ltd. 25,519
1,473 V.F. Corp. 63,692
-------------
508,239
-------------------------------------------------------------
Thrifts and Mortgage Finance -- 1.8%
2,885 Countrywide Financial Corp. 218,853
10,495 Federal Home Loan Mortgage Corp. 612,068
14,854 Federal National Mortgage Assn. 1,114,941
2,276 Golden West Financial Corp. 234,861
1,532 MGIC Investment Corp. 87,232
13,818 Washington Mutual, Inc. 554,378
-------------
2,822,333
-------------------------------------------------------------
Tobacco -- 1.2%
30,851 Altria Group, Inc. 1,678,911
1,345 R.J. Reynolds Tobacco Hldgs., Inc. 78,212
2,362 UST, Inc. 84,300
-------------
1,841,423
-------------------------------------------------------------
Trading Companies and Distributors -- 0.0%
1,344 W.W. Grainger, Inc. 63,692
-------------------------------------------------------------
Wireless Telecommunication Services -- 0.6%
40,498 AT & T Wireless Svcs., Inc.* 323,579
16,542 Nextel Comm., Inc.* 464,169
14,547 Sprint Corp. (PCS Group)* 81,754
-------------
869,502
-------------------------------------------------------------
Total Common Stocks
(Cost $159,835,589) 156,075,932
-------------------------------------------------------------
U.S. Government -- 0.1%
-------------------------------------------------------------
Principal
Amount Value
-------------------------------------------------------------
$ 200,000 U.S. Treasury Bill
0.86% due 3/18/2004 (1)
(Cost $199,628) $ 199,628
-------------------------------------------------------------
- --------------------------------------------------------------------------------
See notes to financial statements.
44
The Guardian S&P 500 Index Fund
Schedule of Investments (Continued)
Repurchase Agreement -- 0.7%
--------------------------------------------------------
Principal
Amount Value
--------------------------------------------------------
$ 1,078,000 State Street Bank and Trust Co.
repurchase agreement,
dated 12/31/2003, maturity
value $1,078,055 at
0.92%, due 1/2/2004 (2)
(Cost $1,078,000) $ 1,078,000
--------------------------------------------------------
Total Investments -- 99.8%
(Cost $161,113,217) 157,353,560
Cash, Receivables and Other Assets
Less Liabilities -- 0.2% 333,349
--------------------------------------------------------
Net Assets -- 100% $157,686,909
--------------------------------------------------------
* Non-income producing security.
(1)The U.S. Treasury Bill is segregated as collateral to cover margin
requirements on open futures contracts.
(2)The repurchase agreement is fully collateralized by U.S. Government and/or
agency obligations based on market prices at the date of the portfolio.
Purchased Futures Contracts
Contracts Description Expiration Unrealized Appreciation
- -----------------------------------------------------------------------------------------------------------
4 S&P 500 Index 3/2004 $ 26,818
- -------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
See notes to financial statements.
45
.. The Guardian Baillie Gifford International Fund
Common Stocks -- 94.8%
Shares Value
----------------------------------------------------------------
Australia -- 3.2%
Beverages -- 0.3%
53,400 Fosters Group Ltd. $ 180,934
Commercial Banks -- 0.8%
13,354 Australia and NZ Banking Group Ltd. 177,770
9,732 National Australia Bank 219,465
Containers and Packaging -- 0.4%
32,066 Amcor Ltd. 199,430
Food and Staples Retailing -- 0.2%
11,306 Woolworths Ltd. 100,452
Media -- 0.3%
15,700 News Corp. Ltd. 141,738
Metals and Mining -- 0.9%
48,106 BHP Billiton Ltd. 441,539
Oil and Gas -- 0.3%
15,200 Woodside Petroleum Ltd. 169,384
------------
1,630,712
----------------------------------------------------------------
Brazil -- 0.5%
Diversified Telecommunication Services -- 0.5%
15,400 Telecom. Norte Leste Participacoes ADR 237,622
----------------------------------------------------------------
Denmark -- 1.0%
Commercial Banks -- 1.0%
21,990 Danske Bank AS 515,315
----------------------------------------------------------------
Finland -- 3.2%
Communications Equipment -- 3.2%
93,390 Nokia OYJ 1,613,211
----------------------------------------------------------------
France -- 9.5%
Beverages -- 1.4%
6,320 Pernod-Ricard S.A. 701,928
Diversified Telecommunication Services -- 0.9%
15,740 France Telecom S.A.* 449,385
Health Care Equipment and Supplies -- 1.5%
14,540 Essilor Int'l. S.A. 751,107
Media -- 1.4%
30,860 Vivendi Universal S.A.* 749,257
Personal Products -- 2.1%
13,091 L'Oreal S.A. 1,072,111
Pharmaceuticals -- 2.2%
15,120 Sanofi-Synthelabo S.A. 1,137,312
------------
4,861,100
----------------------------------------------------------------
Germany -- 6.4%
Automobiles -- 0.8%
9,210 Bayerische Motoren Werke AG* 426,452
Commercial Banks -- 1.9%
11,717 Deutsche Bank AG 969,919
Diversified Financial Services -- 1.1%
9,890 Deutsche Boerse AG 540,180
Software -- 1.8%
5,460 SAP AG 915,983
Textiles, Apparel and Luxury Goods -- 0.8%
3,770 Adidas-Salomon AG 428,926
------------
3,281,460
----------------------------------------------------------------
Hong Kong -- 2.8%
Commercial Banks -- 0.8%
123,500 BOC Hong Kong Hldgs. Ltd 232,246
13,000 Hang Seng Bank Ltd. 170,794
Computers and Peripherals -- 0.1%
116,000 Legend Group Ltd. 49,680
Distributors -- 0.2%
56,000 Li & Fung Ltd. 95,933
Real Estate -- 1.7%
59,000 Cheung Kong Hldgs. Ltd. 467,364
48,000 Sun Hung Kai Properties Ltd. 395,685
------------
1,411,702
----------------------------------------------------------------
--------------------------------------------------------------
Shares Value
--------------------------------------------------------------
Ireland -- 3.3%
Airlines -- 0.9%
53,280 Ryanair Hldgs. PLC* $ 442,388
Commercial Banks -- 1.1%
34,010 Allied Irish Banks PLC 544,207
Construction Materials -- 1.3%
33,360 CRH PLC 684,280
------------
1,670,875
--------------------------------------------------------------
Israel -- 0.5%
Pharmaceuticals -- 0.5%
4,200 Teva Pharmaceutical Inds. Ltd. ADR 238,182
--------------------------------------------------------------
Italy -- 2.2%
Insurance -- 0.9%
27,170 Riunione Adriatica di Sicurta SPA 462,144
Oil and Gas -- 1.3%
35,990 ENI SPA 678,370
------------
1,140,514
--------------------------------------------------------------
Japan -- 22.2%
Auto Components -- 0.9%
33,000 Bridgestone Corp. 443,861
Automobiles -- 1.4%
21,900 Toyota Motor Corp. 739,982
Building Products -- 1.6%
102,000 Asahi Glass Co. 837,821
Chemicals -- 0.7%
9,100 Shin-Etsu Chemical Co. Ltd. 372,035
Commercial Banks -- 1.0%
104 UFJ Hldgs., Inc.* 499,930
Diversified Financial Services -- 0.5%
6,200 Promise Co. 270,257
Diversified Telecommunication Services -- 0.6%
67 Nippon Tele. & Tel. Corp. 323,321
Electronic Equipment and Instruments -- 2.7%
26,000 Alps Electric Co. Ltd. 380,529
2,400 Keyence Corp. 506,053
7,100 Kyocera Corp. 473,179
Household Products -- 0.9%
22,000 Kao Corp. 447,659
Insurance -- 0.8%
52,000 Mitsui Sumitomo Insurance Co. 427,125
Leisure Equipment and Products -- 1.6%
62,000 Konica Corp. 833,920
Machinery -- 1.4%
31,000 Daikin Inds. Ltd. 716,153
Office Electronics -- 1.8%
32,000 Brother Inds. Ltd. 293,611
13,000 Canon, Inc. 605,498
Road and Rail -- 1.2%
120,000 Tokyu Corp. 616,045
Semiconductors and Semiconductor Equipment -- 0.9%
3,900 Rohm Co. Ltd. 457,218
Specialty Retail -- 0.8%
11,900 Yamada Denki Co., Ltd. 399,869
Tobacco -- 1.7%
118 Japan Tobacco, Inc. 864,610
Trading Companies and Distributors -- 1.1%
72,000 Mitsui & Co. Ltd. 579,979
Wireless Telecommunication Services -- 0.6%
128 NTT DoCoMo, Inc. 290,325
------------
11,378,980
--------------------------------------------------------------
Netherlands -- 3.5%
Household Durables - 0.8%
13,650 Philips Electronics (KON) 398,141
Insurance -- 1.4%
47,865 Aegon NV 707,407
- --------------------------------------------------------------------------------
See notes to financial statements.
46
The Guardian Baillie Gifford International Fund
Schedule of Investments (Continued)
--------------------------------------------------------------
Shares Value
--------------------------------------------------------------
Media -- 1.3%
20,950 Ver Ned Uitgevers $ 661,219
------------
1,766,767
--------------------------------------------------------------
New Zealand -- 0.2%
Diversified Telecommunication Services -- 0.2%
35,400 Telecom. Corp. of New Zealand 124,552
--------------------------------------------------------------
People's Republic of China -- 0.6%
Oil and Gas -- 0.6%
161,500 CNOOC Ltd. 317,228
--------------------------------------------------------------
Portugal -- 0.1%
Transportation Infrastructure -- 0.1%
7,742 Brisa-Auto Estradas de Portugal S.A. 51,699
--------------------------------------------------------------
Russia -- 0.7%
Oil and Gas -- 0.7%
3,740 LUKOIL ADR 348,194
--------------------------------------------------------------
Singapore -- 0.4%
Electronic Equipment and Instruments -- 0.4%
19,000 Venture Corp. Ltd. 223,753
--------------------------------------------------------------
South Africa -- 0.6%
Metals and Mining -- 0.6%
7,200 Anglo American Platinum Corp. 313,717
--------------------------------------------------------------
South Korea -- 0.5%
Semiconductors and Semiconductor Equipment -- 0.5%
1,400 Samsung Electronics Co. Ltd. GDR 263,200
--------------------------------------------------------------
Spain -- 1.9%
Commercial Banks -- 1.2%
9,830 Banco Popular Espanol S.A. 585,825
Tobacco -- 0.7%
13,140 Altadis S.A. 372,505
------------
958,330
--------------------------------------------------------------
Sweden -- 3.4%
Communications Equipment -- 1.0%
302,580 LM Ericsson* 542,665
Machinery -- 2.4%
24,860 Atlas Copco AB 810,487
10,600 SKF AB 409,688
------------
1,762,840
--------------------------------------------------------------
Switzerland -- 3.4%
Commercial Banks -- 1.3%
9,680 UBS AG 662,649
Commercial Services and Supplies -- 0.8%
6,310 Adecco S.A. 405,435
Electrical Equipment -- 1.3%
134,300 ABB Ltd.* 680,564
------------
1,748,648
--------------------------------------------------------------
United Kingdom -- 24.7%
Beverages -- 1.3%
52,000 Diageo PLC 682,247
Commercial Banks -- 5.1%
69,800 Barclays PLC 620,802
25,325 HBOS PLC 327,069
55,000 HSBC Hldgs. 862,001
27,764 Royal Bank of Scotland 815,760
Hotels, Restaurants and Leisure -- 1.1%
8,500 Carnival PLC 341,543
28,678 Compass Group 194,528
Insurance -- 0.8%
31,000 Aviva PLC 271,288
17,000 Prudential Corp. 143,308
Multiline Retail -- 0.5%
13,000 Next PLC 260,600
---------------------------------------------------------------
Shares Value
---------------------------------------------------------------
Oil and Gas -- 3.7%
58,000 BG Group PLC $ 296,881
155,000 BP PLC 1,253,374
48,000 Shell Transport & Trading 356,010
Pharmaceuticals -- 4.4%
10,000 Astrazeneca 478,394
76,902 GlaxoSmithKline PLC 1,757,107
Software -- 0.3%
41,000 Sage Group 128,626
Tobacco -- 3.2%
33,000 British American Tobacco PLC 453,582
61,000 Imperial Tobacco 1,197,769
Wireless Telecommunication Services -- 4.3%
195,000 mmO2* 268,026
778,650 Vodafone Group 1,925,053
------------
12,633,968
---------------------------------------------------------------
Total Common Stocks
(Cost $38,406,883) 48,492,569
---------------------------------------------------------------
Preferred Stocks -- 4.1%
Brazil -- 1.3%
Metals and Mining -- 0.5%
4,900 Comp. Vale Do Rio Doce ADR $ 252,399
Oil and Gas -- 0.8%
14,800 Petroleo Brasileiro S.A. ADR 394,568
------------
646,967
---------------------------------------------------------------
Germany -- 2.8%
Automobiles -- 2.8%
2,470 Porsche AG 1,464,295
---------------------------------------------------------------
Total Preferred Stocks
(Cost $1,379,679) 2,111,262
---------------------------------------------------------------
Convertible Bond -- 0.4%
---------------------------------------------------------------
Principal
Amount Value
---------------------------------------------------------------
Japan -- 0.4%
Commercial Banks -- 0.4%
(Yen) 12,000,000 SMFG Finance
2.25% due 7/11/2005
(Cost $81,182) $ 210,295
---------------------------------------------------------------
Repurchase Agreement -- 0.8%
$ 416,000 State Street Bank and Trust Co.
repurchase agreement,
dated 12/31/2003, maturity
value $416,008 at
0.35%, due 1/2/2004 (1)
(Cost $416,000) $ 416,000
---------------------------------------------------------------
Total Investments -- 100.1%
(Cost $40,283,744) 51,230,126
Liabilities in Excess of Cash, Receivables and
Other Assets -- (0.1)% (43,813)
---------------------------------------------------------------
Net Assets -- 100% $ 51,186,313
---------------------------------------------------------------
* Non-income producing security.
(1)The repurchase agreement is fully collateralized by U.S. Government and/or
agency obligations based on market prices at the date of the portfolio.
Glossary of Terms:
ADR -- American Depositary Receipt.
GDR -- Global Depositary Receipt.
- --------------------------------------------------------------------------------
See notes to financial statements.
47
.. The Guardian Baillie Gifford Emerging Markets Fund
Common Stocks -- 91.9%
Shares Value
---------------------------------------------------------------
Argentina -- 0.1%
Distributors -- 0.1%
11,480 Imp. Y Exp. Patagonia* $ 44,824
---------------------------------------------------------------
Brazil -- 7.9%
Beverages -- 1.3%
37,000 Comp. de Bebidas das Americas ADR 943,870
Commercial Banks -- 0.5%
15,500 Unibanco GDR 386,725
Diversified Telecommunication Services -- 1.6%
79,500 Telecom. Norte Leste Participacoes ADR 1,226,685
Metals and Mining -- 2.5%
20,600 Comp. Siderurgica Nacional S.A. ADR 1,104,160
12,300 Comp. Vale Do Rio Doce ADR 719,550
Oil and Gas -- 1.3%
33,000 Petroleo Brasileiro S.A. ADR 964,920
Paper and Forest Products -- 0.7%
17,800 Votorantim Celulose e Papel S.A. ADR 558,030
------------
5,903,940
---------------------------------------------------------------
Chile -- 0.9%
Commercial Banks -- 0.1%
1,256 Banco Santander Chile ADR 29,868
Metals and Mining -- 0.8%
32,940 Antofagasta Hldgs. 620,335
------------
650,203
---------------------------------------------------------------
Croatia -- 0.4%
Pharmaceuticals -- 0.4%
20,215 Pliva d.d. GDR 329,504
---------------------------------------------------------------
Hong Kong -- 1.9%
Industrial Conglomerates -- 1.2%
385,000 Shanghai Industrial Hldgs. Ltd. 875,254
Internet Software and Services -- 0.7%
1,600,000 Tom.Com Ltd.* 499,758
------------
1,375,012
---------------------------------------------------------------
Hungary -- 0.6%
Pharmaceuticals -- 0.6%
4,000 Richter Gedeon VEG 470,740
---------------------------------------------------------------
India -- 5.4%
Commercial Banks -- 2.2%
60,200 ICICI Bank Ltd. ADR 1,034,236
18,500 State Bank of India GDR 617,530
Metals and Mining -- 3.2%
40,000 Hindalco Inds. Ltd. GDR+ 1,241,200
170,000 Vedanta Resources PLC* 1,116,728
------------
4,009,694
---------------------------------------------------------------
Indonesia -- 2.0%
Diversified Telecommunication Services -- 1.1%
985,000 Telekomunikasi Indonesia 789,403
Metals and Mining -- 0.9%
11,200,000 PT Bumi Resources Tbk 664,886
------------
1,454,289
---------------------------------------------------------------
Israel -- 3.5%
Commercial Banks -- 0.7%
215,000 Bank Hapoalim Ltd. 528,568
Information Technology Services -- 0.1%
3,100 Radware Ltd.* 84,475
Internet Software and Services -- 0.9%
37,400 Check Point Software Technologies Ltd.* 629,068
-------------------------------------------------------------
Shares Value
-------------------------------------------------------------
Pharmaceuticals -- 1.8%
11,300 Taro Pharmaceutical Inds. Ltd.* $ 728,850
11,200 Teva Pharmaceutical Inds. Ltd. ADR 635,152
------------
2,606,113
-------------------------------------------------------------
Malaysia -- 2.7%
Automobiles -- 0.6%
215,000 Perusahaan Otomobil Nasional Berhad 478,092
Food Products -- 1.0%
338,000 IOI Oleochemical Inds. Berhad 738,263
Hotels, Restaurants and Leisure -- 1.1%
186,000 Genting Berhad 812,527
------------
2,028,882
-------------------------------------------------------------
Mexico -- 6.7%
Commercial Banks -- 1.5%
98,200 Grupo Fin. Banorte S.A. de C.V. 340,821
874,200 Grupo Fin. BBVA Bancomer S.A. de C.V.* 746,847
Construction and Engineering -- 0.5%
150,000 Consorcio Ara S.A. de C.V.* 372,430
Diversified Telecommunication Services -- 0.5%
271,000 Grupo Carso Global Telecom.* 379,598
Media -- 0.9%
76,000 TV Azteca S.A. de C.V. ADR 691,600
Multiline Retail -- 0.8%
212,670 Wal-Mart de Mexico S.A. de C.V. 568,722
Transportation Infrastructure -- 0.4%
14,400 Grupo Aeroportuario del Sureste
S.A. de C.V. ADR 253,440
Wireless Telecommunication Services -- 2.1%
48,900 America Movil S.A. de C.V. ADR 1,336,926
191,000 America Telecom S.A. de C.V.* 248,162
------------
4,938,546
-------------------------------------------------------------
People's Republic of China -- 6.6%
Metals and Mining -- 0.9%
838,000 Aluminum Corp. of China Ltd. 636,832
Oil and Gas -- 5.1%
708,000 CNOOC Ltd. 1,390,694
4,158,000 PetroChina Co. Ltd. 2,383,268
Transportation Infrastructure -- 0.6%
660,000 Zhejiang Expressway Co. Ltd. 463,307
------------
4,874,101
-------------------------------------------------------------
Russia -- 7.0%
Metals and Mining -- 2.2%
17,500 JSC MMC Norilsk Nickel ADR 1,163,750
64,000 Peter Hambro Mining PLC* 468,397
Oil and Gas -- 3.8%
19,300 LUKOIL ADR 1,796,830
40,952 OAO Gazprom ADR 1,060,657
Wireless Telecommunication Services -- 1.0%
4,200 Mobile Telesystems ADR 347,760
5,100 VimpelCom ADR* 374,850
------------
5,212,244
-------------------------------------------------------------
South Africa -- 6.6%
Commercial Banks -- 1.1%
88,900 Nedcor Ltd. 824,273
Metals and Mining -- 2.7%
42,435 Anglo American Platinum Corp. 1,848,971
22,718 Anglovaal Mining Ltd.* 146,527
Oil and Gas -- 1.7%
87,100 Sasol Ltd. 1,236,828
- --------------------------------------------------------------------------------
See notes to financial statements.
48
The Guardian Baillie Gifford Emerging Markets Fund
Schedule of Investments (Continued)
--------------------------------------------------------------
Shares Value
--------------------------------------------------------------
Paper and Forest Products -- 1.1%
63,000 Sappi Ltd. $ 856,938
------------
4,913,537
-----------------------------------------------------------
South Korea -- 20.3%
Automobiles -- 2.2%
38,900 Hyundai Motor Co. Ltd.* 1,648,720
Chemicals -- 0.8%
43,000 Cheil Inds., Inc. 624,339
Commercial Banks -- 1.2%
163,000 Korea Exchange Bank* 864,591
Commercial Services and Supplies -- 0.9%
35,500 S1 Corp.* 700,168
Construction and Engineering -- 2.4%
22,900 Daelim Industrial Co. Ltd.* 807,218
97,230 Hyundai Development Co. 1,007,797
Media -- 1.0%
5,300 Cheil Comms., Inc. 769,534
Metals and Mining -- 3.2%
142,200 Dongkuk Steel Mill Co. Ltd. 1,169,584
8,800 POSCO 1,203,861
Pharmaceuticals -- 1.3%
119,000 LG Corp. 827,956
2,100 Yuhan Corp. 119,497
Semiconductors and Semiconductor Equipment -- 4.5%
13,850 Samsung Electronics Co. Ltd. GDR+ 2,603,800
1,900 Samsung Electronics Co. Ltd. 719,178
Tobacco -- 0.9%
71,400 K T & G Corp. GDR+ 626,892
Trading Companies and Distributors -- 1.9%
170,200 Samsung Corp. 1,414,167
------------
15,107,302
-----------------------------------------------------------
Taiwan -- 16.1%
Airlines -- 0.4%
715,000 China Airlines* 309,588
Building Products -- 2.1%
1,550,000 Asia Cement Corp. 826,362
1,520,000 Taiwan Cement Corp. 747,688
Construction and Engineering -- 0.7%
667,000 CTCI Corp. 540,280
Distributors -- 0.4%
355,000 National Petroleum Co. Ltd. 269,779
Diversified Financial Services -- 0.8%
1,085,000 SinoPac Hldgs. 549,691
Electronic Equipment and Instruments -- 2.2%
117,168 Hon Hai Precision Inds. Co. Ltd. GDR 931,486
639,000 Sampo Corp.* 278,562
300,000 Synnex Technology Int'l. Corp. 406,480
Health Care Equipment and Supplies -- 0.7%
146,800 Pihsiang Machinery Mfg. Co. Ltd. 510,233
Machinery -- 0.4%
506,000 Yungtay Engineering Co. Ltd. 312,990
Multiline Retail -- 1.1%
2,200,000 Far Eastern Dept. Stores Ltd.* 813,255
Paper and Forest Products -- 0.8%
1,200,000 Chung Hwa Pulp Corp. 622,091
Semiconductors and Semiconductor Equipment -- 4.7%
1,320,000 Nanya Technology Corp.* 828,159
346,000 Realtek Semiconductor Corp. 591,105
404,152 Taiwan Semiconductor Mfg. Co. Ltd. 755,925
800,000 United Microelectronics Corp. 685,714
131,000 United Microelectronics Corp. ADR 648,450
Wireless Telecommunication Services -- 1.8%
1,526,800 Taiwan Cellular Corp. 1,326,674
------------
11,954,512
-----------------------------------------------------------
-----------------------------------------------------------
Shares Value
-----------------------------------------------------------
Thailand -- 1.6%
Construction Materials -- 1.6%
167,000 The Siam Cement Public Co. Ltd. $ 1,163,278
----------------------------------------------------------
Turkey -- 1.6%
Commercial Banks -- 1.0%
250,000,000 Turkiye Garanti Bankasi AS* 729,797
Industrial Conglomerates -- 0.6%
28,368,000 Koc Hldg. A.S.* 482,731
-----------
1,212,528
----------------------------------------------------------
Total Common Stocks
(Cost $49,956,167) 68,249,249
----------------------------------------------------------
Preferred Stocks -- 4.9%
Brazil -- 4.9%
Commercial Banks -- 1.7%
1,080,568 Itausa-Investimentos Itau S.A. $ 1,274,996
Diversified Telecommunication Services -- 0.5%
1,719,000 Celular CRT Participacoes S.A. 359,265
Food Products -- 0.0%
4,700,000 Comp. Lorenz S.A.* 0
Metals and Mining -- 0.9%
13,000 Comp. Vale Do Rio Doce 662,145
Oil and Gas -- 1.8%
51,900 Petroleo Brasileiro S.A. ADR 1,383,654
----------------------------------------------------------
Total Preferred Stocks
(Cost $2,214,534) 3,680,060
----------------------------------------------------------
Repurchase Agreement -- 3.7%
Principal
Amount Value
-----------------------------------------------------------
$ 2,740,000. State Street Bank and Trust Co.
repurchase agreement,
dated 12/31/2003, maturity
value $2,740,053 at
0.35%, due 1/2/2004 (1)
(Cost $2,740,000) $ 2,740,000
----------------------------------------------------------
Total Investments -- 100.5%
(Cost $54,910,701) 74,669,309
Liabilities in Excess of Cash, Receivables and
Other Assets -- (0.5)% (376,457)
----------------------------------------------------------
Net Assets -- 100% $74,292,852
----------------------------------------------------------
* Non-income producing security.
+ Rule 144A restricted security.
(1)The repurchase agreement is fully collateralized by U.S. Government and/or
agency obligations based on market prices at the date of the portfolio.
Glossary of Terms:
ADR -- American Depositary Receipt.
GDR -- Global Depositary Receipt.
- --------------------------------------------------------------------------------
See notes to financial statements.
49
.. The Guardian Investment Quality Bond Fund
Asset Backed -- 6.0%
Principal
Amount Value
---------------------------------------------------------------
$ 1,280,000 Aesop Funding II LLC
2003-2A A3
3.61% due 6/20/2009+ $ 1,272,455
123,768 Amresco
1997-1 MIF
7.42% due 3/25/2027 123,571
2,000,000 California Infrastructure SCE
1997-1 A7
6.42% due 12/26/2009 2,213,485
1,700,000 CNH Equipment Tr.
2003-A A4B
2.57% due 9/15/2009 1,668,270
2,000,000 Hyundai Auto Receivables Tr.
2003-A A4
3.02% due 10/15/2010 1,997,838
1,700,000 Residential Asset Sec. Corp.
2000-KS5 AI5
7.615% due 12/25/2031 1,783,760
1,900,000 Vanderbilt Acquisition Loan Tr.
2002-1 A3
5.70% due 9/7/2023 1,958,913
---------------------------------------------------------------
Total Asset Backed
(Cost $11,053,310) 11,018,292
---------------------------------------------------------------
Collateralized Mortgage Obligation -- 4.4%
FHLMC
H006 A2
$ 2,150,000 2.837% due 2/15/2010 $ 2,144,454
2693 QE
3,000,000 5.50% due 9/15/2028 (a) 3,078,523
2430 GD
1,554,110 6.50% due 11/15/2030 1,598,599
1,200,000 FNMA
2001-64 QG
6.00% due 3/25/2030 1,235,458
---------------------------------------------------------------
Total Collateralized Mortgage
Obligation
(Cost $8,071,540) 8,057,034
---------------------------------------------------------------
Commercial Mortgage Backed -- 9.3%
$ 1,900,000 Banc of America Comm'l. Mtg., Inc.
2003-2 A3
4.873% due 3/11/2041 $ 1,926,640
2,400,000 Bear Stearns Comm'l. Mtg. Sec., Inc.
2003-Top10 A2
4.74% due 3/13/2040 2,398,634
1,000,000 Chase Comm'l. Mtg. Sec. Corp.
2000-3 A2
7.319% due 10/15/2032 1,158,843
920,551 First Union National Bank Comm'l.
Mtg. Tr.
2000-C2 A1
6.94% due 10/15/2032 1,007,161
960,000 GMAC Comm'l. Mtg. Sec., Inc.
1997-C1 A3
6.869% due 7/15/2029 1,061,753
2,000,000 Greenwich Capital Comm'l. Funding
Corp.
2003-C1 A3
3.858% due 7/5/2035 1,909,080
-----------------------------------------------------------
Principal
Amount Value
-----------------------------------------------------------
LB-UBS Comm'l. Mtg. Tr.
2001-C7 A5
$ 2,431,000 6.133% due 12/15/2030 $ 2,674,306
2004-C4 A2
1,220,000 7.37% due 8/15/2026 1,419,795
1,000,000 Morgan Stanley Capital I
1998-WF1 A2
6.55% due 3/15/2030 1,108,479
2,105,747 Mortgage Capital Funding, Inc.
1997-MC1 A3
7.288% due 2/20/2027 2,238,752
-----------------------------------------------------------
Total Commercial Mortgage Backed
(Cost $16,840,100) 16,903,443
-----------------------------------------------------------
Corporate Bonds -- 34.7%
Aerospace and Defense -- 0.4%
$ 300,000 Lockheed Martin Corp.
8.50% due 12/1/2029 $ 393,112
100,000 Northrop Grumman Corp.
7.125% due 2/15/2011 115,659
250,000 TRW, Inc.
7.75% due 6/1/2029 299,743
-------------
808,514
-----------------------------------------------------------
Airlines -- 0.5%
800,000 Delta Air Lines, Inc.
6.417% due 7/2/2012 857,482
-----------------------------------------------------------
Automotive -- 2.3%
500,000 DaimlerChrysler NA Hldg.
4.05% due 6/4/2008 496,596
800,000 Ford Motor Co.
7.45% due 7/16/2031 808,417
Ford Motor Credit Co.
900,000 7.00% due 10/1/2013 949,211
400,000 7.375% due 10/28/2009 439,264
General Motors Corp.
650,000 7.125% due 7/15/2013 712,835
500,000 8.375% due 7/15/2033 580,407
250,000 Lear Corp.
8.11% due 5/15/2009 294,063
-------------
4,280,793
-----------------------------------------------------------
Chemicals -- 0.2%
400,000 Potash Corp.
4.875% due 3/1/2013 390,800
-----------------------------------------------------------
Diversified Manufacturing -- 0.3%
500,000 Hutchison Whampoa Int'l. Ltd.
5.45% due 11/24/2010+ 507,153
-----------------------------------------------------------
Energy -- 2.1%
350,000 Canadian Oil Sands Ltd.
5.80% due 8/15/2013+ 359,758
1,000,000 Pioneer Natural Resources Co.
7.20% due 1/15/2028 1,070,519
269,000 Pride Int'l., Inc.
9.375% due 5/1/2007 277,070
200,000 Transocean, Inc.
7.50% due 4/15/2031 229,035
350,000 Western Oil Sands, Inc.
8.375% due 5/1/2012 398,562
1,500,000 XTO Energy, Inc.
6.25% due 4/15/2013 1,578,750
-------------
3,913,694
-----------------------------------------------------------
- --------------------------------------------------------------------------------
See notes to financial statements.
50
The Guardian Investment Quality Bond Fund
Schedule of Investments (Continued)
----------------------------------------------------------
Principal
Amount Value
----------------------------------------------------------
Energy-Refining -- 0.6%
$ 850,000 Tosco Corp.
8.125% due 2/15/2030 $ 1,083,954
----------------------------------------------------------
Entertainment -- 0.7%
1,200,000 Time Warner, Inc.
7.57% due 2/1/2024 1,357,037
----------------------------------------------------------
Environmental -- 0.5%
800,000 Waste Management, Inc.
7.375% due 8/1/2010 924,424
----------------------------------------------------------
Finance Companies -- 1.6%
500,000 Capital One Bank
5.75% due 9/15/2010 528,915
General Motors Acceptance Corp.
500,000 6.125% due 9/15/2006 535,125
495,000 6.875% due 9/15/2011 533,178
Household Finance Corp.
400,000 6.375% due 11/27/2012 438,822
350,000 7.875% due 3/1/2007 399,972
375,000 MBNA America Bank Nat'l.
7.125% due 11/15/2012 428,839
-------------
2,864,851
----------------------------------------------------------
Financial -- 1.3%
650,000 Bear Stearns Cos., Inc.
5.70% due 11/15/2014 677,550
800,000 Goldman Sachs Group, Inc.
5.70% due 9/1/2012 840,762
400,000 Lehman Brothers Hldgs., Inc.
6.625% due 1/18/2012 451,406
400,000 Morgan Stanley
6.60% due 4/1/2012 446,736
-------------
2,416,454
----------------------------------------------------------
Financial-Banks -- 1.6%
425,000 Bank America Corp.
4.875% due 9/15/2012 427,176
750,000 Citigroup, Inc.
5.625% due 8/27/2012 791,731
300,000 City National Corp.
5.125% due 2/15/2013 296,677
150,000 J.P. Morgan Chase & Co.
5.75% due 1/2/2013 158,173
200,000 Regions Financial Corp.
6.375% due 5/15/2012 220,022
250,000 Sovereign Bank
5.125% due 3/15/2013 248,210
300,000 Wells Fargo Bank NA
6.45% due 2/1/2011 336,852
500,000 Zions Bancorp
6.00% due 9/15/2015 524,252
-------------
3,003,093
----------------------------------------------------------
Food and Beverage -- 0.5%
850,000 Kellogg Co.
2.875% due 6/1/2008 820,724
----------------------------------------------------------
Gaming -- 0.3%
500,000 Int'l. Game Technology
8.375% due 5/15/2009 598,529
----------------------------------------------------------
Gas Distributors -- 0.3%
500,000 Equitable Resources, Inc.
5.15% due 3/1/2018 489,560
----------------------------------------------------------
-------------------------------------------------------------
Principal
Amount Value
-------------------------------------------------------------
Home Construction -- 1.0%
$ 500,000 D.R. Horton, Inc.
5.875% due 7/1/2013 $ 500,000
500,000 Lennar Corp.
9.95% due 5/1/2010 574,375
500,000 NVR, Inc.
5.00% due 6/15/2010 490,000
300,000 Ryland Group, Inc.
5.375% due 6/1/2008 309,000
-------------
1,873,375
-------------------------------------------------------------
Industrial-Other -- 1.2%
2,000,000 Aramark Svcs., Inc.
7.10% due 12/1/2006 2,192,880
-------------------------------------------------------------
Media-Cable -- 2.0%
AT & T Broadband Corp.
400,000 8.375% due 3/15/2013 489,420
900,000 9.455% due 11/15/2022 1,219,015
1,200,000 Comcast Cable Comm., Inc.
6.875% due 6/15/2009 1,352,804
500,000 CSC Hldgs., Inc.
7.625% due 4/1/2011 526,250
-------------
3,587,489
-------------------------------------------------------------
Media-NonCable -- 1.6%
250,000 Echostar DBS Corp.
9.375% due 2/1/2009 262,813
750,000 Intelsat Ltd.
6.50% due 11/1/2013+ 782,545
150,000 News America Hldgs.
8.00% due 10/17/2016 182,223
1,500,000 Scholastic Corp.
5.75% due 1/15/2007 1,607,194
-------------
2,834,775
-------------------------------------------------------------
Merchandising-Supermarkets -- 1.1%
500,000 Delhaize America, Inc.
7.375% due 4/15/2006 537,500
850,000 Kroger Co.
7.25% due 6/1/2009 968,333
500,000 Safeway, Inc.
6.15% due 3/1/2006 534,995
-------------
2,040,828
-------------------------------------------------------------
Natural Gas-Pipelines -- 1.6%
1,700,000 Consolidated Natural Gas Co.
7.25% due 10/1/2004 1,767,345
250,000 Duke Energy Field Svcs.
8.125% due 8/16/2030 305,420
500,000 Kaneb Pipe Line Operating Partners
5.875% due 6/1/2013 512,743
400,000 Teppco Partners LP
6.125% due 2/1/2013 423,797
-------------
3,009,305
-------------------------------------------------------------
Paper and Forest Products -- 1.1%
600,000 Abitibi-Consolidated, Inc.
7.875% due 8/1/2009 648,851
250,000 Int'l. Paper Co.
5.85% due 10/30/2012 260,457
750,000 Packaging Corp. of America
5.75% due 8/1/2013 757,654
- --------------------------------------------------------------------------------
See notes to financial statements.
51
The Guardian Investment Quality Bond Fund
Schedule of Investments (Continued)
--------------------------------------------------------------
Principal
Amount Value
--------------------------------------------------------------
Weyerhaeuser Co.
$ 150,000 6.00% due 8/1/2006 $ 160,619
200,000 6.75% due 3/15/2012 218,188
-------------
2,045,769
--------------------------------------------------------------
Railroads -- 0.4%
200,000 CSX Corp.
4.875% due 11/1/2009 206,766
450,000 Norfolk Southern Corp.
6.75% due 2/15/2011 512,471
-------------
719,237
--------------------------------------------------------------
Real Estate Investment Trust -- 0.6%
250,000 Duke Realty Corp.
5.875% due 8/15/2012 265,654
100,000 EOP Operating LP
7.00% due 7/15/2011 112,841
200,000 Liberty Ppty. LP
7.25% due 3/15/2011 228,121
200,000 Prologis
5.50% due 3/1/2013 205,680
100,000 Regency Centers LP
6.75% due 1/15/2012 110,189
125,000 Simon Ppty. Group LP
5.45% due 3/15/2013 127,834
-------------
1,050,319
--------------------------------------------------------------
Retailers -- 0.5%
500,000 Office Depot, Inc.
6.25% due 8/15/2013 524,997
300,000 Staples, Inc.
7.375% due 10/1/2012 345,313
-------------
870,310
--------------------------------------------------------------
Services -- 0.5%
775,000 PHH Corp.
7.125% due 3/1/2013 867,918
--------------------------------------------------------------
Technology -- 0.6%
1,000,000 Jabil Circuit, Inc.
5.875% due 7/15/2010 1,043,071
--------------------------------------------------------------
Utilities-Electric and Water -- 2.9%
500,000 Aep Texas Central Co.
5.50% due 2/15/2013 512,201
100,000 Alabama Power Co.
5.50% due 10/15/2017 103,382
350,000 American Electric Power, Inc.
5.25% due 6/1/2015 343,715
350,000 Consumers Energy Co.
5.375% due 4/15/2013+ 351,619
200,000 Dominion Resources, Inc.
6.75% due 12/15/2032 213,799
325,000 DTE Energy Co.
6.375% due 4/15/2033 318,337
250,000 FirstEnergy Corp.
6.45% due 11/15/2011 259,112
200,000 Florida Power Corp.
5.90% due 3/1/2033 200,722
250,000 Georgia Power Co.
5.125% due 11/15/2012 255,046
425,000 National Rural Utilities Coop. Fin.
8.00% due 3/1/2032 529,334
400,000 Oncor Electric Delivery Co.
7.25% due 1/15/2033 455,033
100,000 Progress Energy, Inc.
7.00% due 10/30/2031 107,029
200,000 Public Service Electric Gas Co.
5.125% due 9/1/2012 204,355
-------------------------------------------------------------
Principal
Amount Value
-------------------------------------------------------------
$ 500,000 Sierra Pacific Resources
6.20% due 4/15/2004 $ 503,125
350,000 TXU Energy Co.
7.00% due 3/15/2013 387,099
500,000 Xcel Energy, Inc.
3.40% due 7/1/2008 488,288
-------------
5,232,196
-------------------------------------------------------------
Wireless Communications -- 1.0%
250,000 AT & T Wireless Svcs., Inc.
8.125% due 5/1/2012 293,988
650,000 Tritel PCS, Inc.
10.375% due 1/15/2011 777,693
690,000 Verizon Wireless Capital LLC
5.375% due 12/15/2006 736,300
-------------
1,807,981
-------------------------------------------------------------
Wireline Communications -- 4.7%
75,000 AT & T Corp.
8.50% due 11/15/2031 87,642
500,000 British Telecom. PLC
8.625% due 12/15/2030 653,802
200,000 Century Tel. Enterprises, Inc.
6.875% due 1/15/2028 210,810
Citizens Comm. Co.
200,000 7.625% due 8/15/2008 218,990
200,000 9.00% due 8/15/2031 233,366
500,000 Deutsche Telekom Int'l. Finance BV
8.75% due 6/15/2030 638,714
France Telecom S.A.
625,000 9.00% due 3/1/2011 750,676
1,000,000 9.75% due 3/1/2031 1,328,675
200,000 Royal KPN NV
8.375% due 10/1/2030 253,543
850,000 Sprint Capital Corp.
8.375% due 3/15/2012 992,630
500,000 Telecom Italia Capital
5.25% due 11/15/2013+ 500,996
1,000,000 Telus Corp.
8.00% due 6/1/2011 1,169,287
825,000 Verizon Global Funding Corp.
7.75% due 12/1/2030 969,136
500,000 Verizon Pennsylvania, Inc.
5.65% due 11/15/2011 524,414
-------------
8,532,681
-------------------------------------------------------------
Yankee -- 0.7%
1,200,000 Pemex Master Tr.
7.875% due 2/1/2009 1,354,800
-------------------------------------------------------------
Total Corporate Bonds
(Cost $60,329,330) 63,379,996
-------------------------------------------------------------
Mortgage Pass-Throughs -- 38.3%
FHLMC
$ 2,097,223 5.00%, 10/1/2033 $ 2,071,200
13,699,919 5.50%, 2033 13,872,428
3,153,513 6.00%, 12/1/2032 3,260,136
1,740,507 6.50%, 8/1/2032 1,823,205
26,284 7.00%, 8/1/2008 28,053
FNMA
4,250,000 5.00%, (15 yr. TBA) 4,333,674
11,600,000 6.00%, (30 yr. TBA) 11,987,881
2,924,106 5.00%, 6/1/2018 2,986,139
2,541,864 5.50%, 12/1/2014 2,646,493
316,587 5.50%, 3/1/2018 328,419
12,699,864 5.50%, 2033 12,871,803
- --------------------------------------------------------------------------------
See notes to financial statements.
52
The Guardian Investment Quality Bond Fund
Schedule of Investments (Continued)
-------------------------------------------------------
Principal
Amount Value
-------------------------------------------------------
$ 995,754 6.00%, 10/1/2013 $ 1,046,847
781,314 6.00%, 4/1/2016 820,400
412,806 6.50%, 8/1/2016 437,997
1,275,519 6.50%, 11/1/2017 1,353,355
3,090,051 6.50%, 2032 3,232,160
11,705 7.00%, 2/1/2009 12,521
81,487 7.00%, 2012 87,085
262,654 7.00%, 9/1/2014 280,894
4,580 7.00%, 8/1/2023 4,876
3,243 7.00%, 12/1/2027 3,439
52,738 7.00%, 12/1/2028 55,903
1,097,657 7.00%, 2032 1,162,271
246 7.50%, 5/1/2027 263
213,136 7.50%, 12/1/2029 227,831
874,841 7.50%, 2/1/2031 935,648
363,549 8.00%, 2030 393,056
GNMA
1,519,863 6.00%, 2033 1,580,768
1,575,860 6.50%, 5/15/2032 1,661,419
275,545 6.50%, 2/15/2033 290,510
283,137 8.00%, 2030 308,024
-------------------------------------------------------
Total Mortgage Pass-Throughs
(Cost $69,595,850) 70,104,698
-------------------------------------------------------
Sovereign Debt -- 0.7%
$ 200,000 Malaysia
7.50% due 7/15/2011 $ 236,592
1,000,000 United Mexican States
8.00% due 9/24/2022 1,094,000
-------------------------------------------------------
Total Sovereign Debt
(Cost $1,242,324) 1,330,592
-------------------------------------------------------
U.S. Government -- 8.7%
U.S. Government Agencies -- 6.8%
FNMA
$ 5,000,000 1.01%, 1/14/2004++(a) $ 4,998,350
3,600,000 3.25%, 1/15/2008 3,609,594
3,550,000 4.375%, 10/15/2006 3,729,055
-------------
12,336,999
-------------------------------------------------------
U.S. Treasury Bonds and Notes -- 1.9%
U.S. Treasury Bonds
300,000 5.375%, 2/15/2031 312,856
U.S. Treasury Notes
1,300,000 3.00%, 11/15/2007 1,311,172
1,520,000 3.00%, 2/15/2008 1,527,065
250,000 3.125%, 10/15/2008 249,521
140,000 4.25%, 11/15/2013 139,847
-------------
3,540,461
-------------------------------------------------------
Total U.S. Government
(Cost $15,824,296) 15,877,460
-------------------------------------------------------
Commercial Paper -- 6.2%
Principal
Amount Value
---------------------------------------------------------------
Food and Beverage -- 1.1%
$ 2,000,000 Coca-Cola Enterprises, Inc.
0.99% due 1/14/2004 (a) $ 1,999,285
---------------------------------------------------------------
Utilities-Electric and Water -- 2.4%
4,400,000 National Rural Utilities Coop. Fin.
1.07% due 1/20/2004 (a) 4,397,515
---------------------------------------------------------------
Wireline Communications -- 2.7%
5,000,000 Verizon Network Funding
1.01% due 1/14/2004 (a) 4,998,177
---------------------------------------------------------------
Total Commercial Paper
(Cost $11,394,977) 11,394,977
---------------------------------------------------------------
Repurchase Agreement -- 0.4%
$ 785,000 State Street Bank and Trust Co.
repurchase agreement,
dated 12/31/2003, maturity
value $785,040 at
0.92%, due 1/2/2004 (1)(a)
(Cost $785,000) $ 785,000
---------------------------------------------------------------
Total Investments -- 108.7%
(Cost $195,136,727) 198,851,492
Payables for Mortgage Pass-Throughs
Delayed Delivery Securities (a) -- (8.8)% (16,185,531)
Cash, Receivables and Other Assets
Less Liabilities -- 0.1% 269,581
---------------------------------------------------------------
Net Assets -- 100% $ 182,935,542
---------------------------------------------------------------
+ Rule 144A restricted security.
++Discount note. The rate shown is the effective yield at date of purchase.
(1)The repurchase agreement is fully collateralized by U.S. Government and/or
agency obligations based on market prices at the date of the portfolio.
(a)Securities are segregated to cover forward mortgage purchases.
- --------------------------------------------------------------------------------
See notes to financial statements.
53
.. The Guardian Low Duration Bond Fund
Asset Backed -- 8.2%
Principal
Amount Value
-------------------------------------------------------------
$ 500,000 Chase Manhattan Auto Owner Tr.
2003-A A4
2.06% due 12/15/2009 $ 489,902
254,000 GMAC Mtg. Corp. Loan Tr.
2003-GH1 A4
4.59% due 4/25/2026 260,071
308,000 Hyundai Auto Receivables Tr.
2003-A A4
3.02% due 10/15/2010 307,667
400,000 PP & L Transition Bond Co. LLC
1999-1 A7
7.05% due 6/25/2009 447,062
Residential Asset Mtg. Prods., Inc.
2003-RZ3 A3
600,000 2.14% due 2/25/2030 586,170
2002-RS5 AI4
495,000 4.428% due 9/25/2030 499,999
-------------------------------------------------------------
Total Asset Backed
(Cost $2,594,257) 2,590,871
-------------------------------------------------------------
Collateralized Mortgage Obligation -- 4.4%
$ 396,298 FHLMC
2430 GD
6.50% due 11/15/2030 $ 407,643
FNMA
2002-91 QB
310,000 5.00% due 3/25/2010 318,241
2002-55 PC
360,000 5.50% due 4/25/2026 369,678
296,769 GNMA
2002-93 NV
4.75% due 2/20/2032 297,402
-------------------------------------------------------------
Total Collateralized Mortgage
Obligation
(Cost $1,387,667) 1,392,964
-------------------------------------------------------------
Commercial Mortgage Backed -- 1.8%
$ 366,000 GMAC Comm'l. Mtg. Sec., Inc.
1997-C1 A3
6.869% due 7/15/2029 $ 404,793
146,825 Morgan Stanley Capital I
1999-WF1 A1
5.91% due 11/15/2031 156,158
-------------------------------------------------------------
Total Commercial Mortgage Backed
(Cost $563,073) 560,951
-------------------------------------------------------------
Corporate Bonds -- 70.0%
Aerospace and Defense -- 1.8%
$ 500,000 Northrop Grumman Corp.
7.00% due 3/1/2006 $ 547,694
-------------------------------------------------------------
Automotive -- 6.7%
500,000 DaimlerChrysler NA Hldg.
7.40% due 1/20/2005 527,062
500,000 Delphi Corp.
6.55% due 6/15/2006 536,520
500,000 Ford Motor Credit Co.
7.50% due 3/15/2005 527,706
500,000 General Motors Acceptance Corp.
5.25% due 5/16/2005 518,063
------------
2,109,351
-------------------------------------------------------------
--------------------------------------------------------
Principal
Amount Value
--------------------------------------------------------
Energy -- 3.4%
$ 500,000 Anadarko Petroleum Corp.
6.50% due 5/15/2005 $ 530,176
500,000 Repsol Int'l. Fin. BV
7.45% due 7/15/2005 537,576
------------
1,067,752
--------------------------------------------------------
Entertainment -- 3.3%
1,000,000 Time Warner, Inc.
5.625% due 5/1/2005 1,046,793
--------------------------------------------------------
Finance Companies -- 10.3%
500,000 American General Fin. Corp.
5.875% due 12/15/2005 535,053
500,000 Capital One Bank
6.875% due 2/1/2006 540,899
500,000 CIT Group, Inc.
6.625% due 6/15/2005 534,093
500,000 General Electric Capital Corp.
6.80% due 11/1/2005 542,944
500,000 Household Fin. Corp.
6.50% due 1/24/2006 540,738
500,000 MBNA America Bank NA
6.50% due 6/20/2006 544,393
------------
3,238,120
--------------------------------------------------------
Financial -- 2.5%
500,000 Bear Stearns Cos., Inc.
3.00% due 3/30/2006 507,528
250,000 Lehman Brothers Hldgs., Inc.
6.25% due 5/15/2006 271,600
------------
779,128
--------------------------------------------------------
Financial-Banks -- 0.8%
250,000 KeyCorp
4.625% due 5/16/2005 259,749
--------------------------------------------------------
Food and Beverage -- 3.4%
500,000 Kellogg Co.
6.00% due 4/1/2006 535,770
500,000 Kraft Foods, Inc.
4.625% due 11/1/2006 521,764
------------
1,057,534
--------------------------------------------------------
Gaming -- 0.8%
250,000 Int'l. Game Technology
7.875% due 5/15/2004 255,208
--------------------------------------------------------
Home Construction -- 0.9%
250,000 Lennar Corp.
9.95% due 5/1/2010 287,188
--------------------------------------------------------
Lodging -- 0.9%
250,000 Marriott Int'l., Inc.
6.875% due 11/15/2005 269,739
--------------------------------------------------------
Media-Cable -- 1.8%
500,000 Cox Comm., Inc.
7.75% due 8/15/2006 560,826
--------------------------------------------------------
Media-NonCable -- 0.8%
250,000 Echostar DBS Corp.
9.375% due 2/1/2009 262,813
--------------------------------------------------------
Natural Gas-Pipelines -- 1.7%
500,000 Duke Energy Field Svcs.
7.50% due 8/16/2005 537,231
--------------------------------------------------------
- --------------------------------------------------------------------------------
See notes to financial statements.
54
The Guardian Low Duration Bond Fund
Schedule of Investments (Continued)
-------------------------------------------------------------
Principal
Amount Value
-------------------------------------------------------------
Paper and Forest Products -- 0.8%
$ 250,000 Abitibi-Consolidated, Inc.
8.30% due 8/1/2005 $ 264,535
-------------------------------------------------------------
Real Estate Investment Trust -- 7.5%
505,000 Avalon Bay Communities, Inc.
6.80% due 7/15/2006 554,579
EOP Operating LP
500,000 6.625% due 2/15/2005 525,311
500,000 6.63% due 4/13/2005 529,863
300,000 Gables Realty LP
6.80% due 3/15/2005 314,522
400,000 Simon Ppty. Group LP
6.875% due 10/27/2005 430,647
------------
2,354,922
-------------------------------------------------------------
Restaurants -- 1.7%
500,000 YUM! Brands, Inc.
7.45% due 5/15/2005 533,125
-------------------------------------------------------------
Services -- 0.9%
250,000 Cendant Corp.
6.875% due 8/15/2006 274,286
-------------------------------------------------------------
Supermarkets -- 2.5%
250,000 Kroger Co.
7.375% due 3/1/2005 264,863
500,000 Safeway, Inc.
3.80% due 8/15/2005 510,522
------------
775,385
-------------------------------------------------------------
Utilities-Electric and Water -- 8.1%
500,000 Dominion Resources, Inc.
2.80% due 2/15/2005 505,155
500,000 National Rural Utilities Coop. Fin.
3.00% due 2/15/2006 506,244
250,000 Niagara Mohawk Power Corp.
6.625% due 7/1/2005 267,341
500,000 Nisource Fin. Corp.
7.625% due 11/15/2005 546,248
425,000 PSEG Power LLC
6.875% due 4/15/2006 463,332
250,000 Sierra Pacific Resources
6.20% due 4/15/2004 251,563
------------
2,539,883
-------------------------------------------------------------
Wireless Communications -- 1.7%
498,000 AT & T Wireless Svcs., Inc.
6.875% due 4/18/2005 526,554
-------------------------------------------------------------
Wireline Communications -- 7.7%
500,000 British Telecom. PLC
7.875% due 12/15/2005 551,006
500,000 Deutsche Telekom Int'l. Fin. BV
8.25% due 6/15/2005 542,378
250,000 Qwest Corp.
7.20% due 11/1/2004 255,625
----------------------------------------------------------------
Principal
Amount Value
----------------------------------------------------------------
$ 500,000 Sprint Capital Corp.
7.90% due 3/15/2005 $ 532,634
500,000 Telefonica Europe BV
7.35% due 9/15/2005 542,585
------------
2,424,228
----------------------------------------------------------------
Total Corporate Bonds
(Cost $21,895,749) 21,972,044
----------------------------------------------------------------
Municipal Bonds -- 1.6%
$ 500,000 Beaver Cnty., PA Industrial Dev. Auth.
Poll. Control Rev.
4.85% due 6/1/2030
(Cost $510,087) $ 504,660
----------------------------------------------------------------
Sovereign Debt -- 1.7%
$ 500,000 Petroleos Mexicanos
6.50% due 2/1/2005
(Cost $519,915) $ 523,125
----------------------------------------------------------------
U.S. Government -- 10.9%
U.S. Treasury Notes -- 10.9%
U.S. Treasury Notes
$ 130,000 2.375%, 8/15/2006 $ 130,701
2,950,000 2.625%, 11/15/2006 2,976,043
300,000 3.375%, 12/15/2008 302,074
----------------------------------------------------------------
Total U.S. Government
(Cost $3,391,020) 3,408,818
----------------------------------------------------------------
Repurchase Agreement -- 0.2%
$ 52,000 State Street Bank and Trust Co.
repurchase agreement,
dated 12/31/2003, maturity
value $52,003 at
0.92%, due 1/2/2004(1)
(Cost $52,000) $ 52,000
----------------------------------------------------------------
Total Investments -- 98.8%
(Cost $30,913,768) 31,005,433
Cash, Receivables and Other Assets
Less Liabilities -- 1.2% 370,024
----------------------------------------------------------------
Net Assets -- 100% $ 31,375,457
----------------------------------------------------------------
(1)The repurchase agreement is fully collateralized by U.S. Government and/or
agency obligations based on market prices at the date of the portfolio.
- --------------------------------------------------------------------------------
See notes to financial statements.
55
.. The Guardian High Yield Bond Fund
Corporate Bonds -- 95.0%
Rating
Principal Moody's/
Amount S&P* Value
- ------------------------------------------------------------------
Aerospace and Defense -- 1.9%
$ 417,000 K & F Ind., Inc.
Sr. Sub. Nt. Ser. B
9.625% due 12/15/2010 B3/B $ 467,561
800,000 Sequa Corp.
Sr. Nt.
8.875% due 4/1/2008 B1/BB- 868,000
------------
1,335,561
- ---------------------------------------------------------------
Automotive -- 3.6%
Keystone Automotive
Operations
522,000 Sr. Sub. Nt. +
9.75% due 11/1/2013 B3/B- 561,150
Tenneco Automotive, Inc.
298,000 Sr. Sec. Nt. Ser. B
10.25% due 7/15/2013 B2/CCC+ 338,975
596,000 Sr. Sub. Nt. Ser. B
11.625% due 10/15/2009 B2/CCC+ 643,680
278,000 TRW Automotive, Inc.
Sr. Nt.
9.375% due 2/15/2013 B1/B+ 317,615
667,000 United Components, Inc.
Sr. Sub. Nt.
9.375% due 6/15/2013 B3/B 728,697
------------
2,590,117
- ---------------------------------------------------------------
Banking -- 0.5%
350,000 Western Financial Bank
Sub. Cap. Debt.
9.625% due 5/15/2012 B1/BB- 390,250
- ---------------------------------------------------------------
Building Materials -- 2.0%
280,000 Associated Materials, Inc.
Sr. Sub. Nt.
9.75% due 4/15/2012 B3/B- 306,600
71,000 Collins & Aikman Floor Cover
Sr. Sub. Nt.
9.75% due 2/15/2010 B2/B 75,970
584,000 Koppers, Inc.
Sr. Sec. Nt.+
9.875% due 10/15/2013 B2/B 643,860
343,000 Norcraft Cos. Fin.
Sr. Sub. Nt.+
9.00% due 11/1/2011 B3/B- 370,440
------------
1,396,870
- ---------------------------------------------------------------
Chemicals -- 6.4%
245,000 Compass Minerals Group, Inc.
Sr. Sub. Nt.
10.00% due 8/15/2011 B3/B- 274,400
670,000 Equistar Chemicals LP
Sr. Nt.
10.125% due 9/1/2008 B2/BB- 733,650
280,000 FMC Corp.
Sr. Sec. Nt.
10.25% due 11/1/2009 Ba2/BB+ 327,600
300,000 Huntsman Advanced Materials
Sr. Sec. Nt.+
11.00% due 7/15/2010 B2/B 331,500
295,000 Huntsman Int'l. LLC
Sr. Nt.
9.875% due 3/1/2009 B3/B- 323,025
Lyondell Chemical Co.
372,000 Nt. Ser. A
9.625% due 5/1/2007 B1/BB- 394,320
- --------------------------------------------------------------------
Rating
Principal Moody's/
Amount S&P* Value
- --------------------------------------------------------------------
$ 372,000 Sr. Sub. Nt.
10.875% due 5/1/2009 B3/B $ 381,300
670,000 Millennium America, Inc.
Sr. Nt.
7.00% due 11/15/2006 B1/BB- 686,750
Nalco Co.
298,000 Sr. Nt.+
7.75% due 11/15/2011 B2/B 318,860
298,000 Sr. Sub. Nt.+
8.875% due 11/15/2013 Caa1/B 315,880
Resolution Performance Product
298,000 Sec. Nt.+
8.00% due 12/15/2009 B2/B+ 308,430
150,000 Sr. Sec. Nt.
9.50% due 4/15/2010 B3/B- 152,250
------------
4,547,965
- -----------------------------------------------------------------
Construction Machinery -- 2.8%
140,000 Joy Global, Inc.
Sr. Sub. Nt.
8.75% due 3/15/2012 B2/B+ 156,100
140,000 NMHG Hldg. Co.
Sr. Nt.
10.00% due 5/15/2009 B3/B+ 154,700
Terex Corp.
285,000 Sr. Sub. Nt.
9.25% due 7/15/2011 B3/B 313,500
285,000 Sr. Sub. Nt.
10.375% due 4/1/2011 B3/B 319,200
1,043,000 United Rentals NA, Inc.
Sr. Sub. Nt.+
7.75% due 11/15/2013 B2/B+ 1,065,164
------------
2,008,664
- -----------------------------------------------------------------
Consumer Cyclical Services -- 1.8%
350,000 Coinmach Corp.
Sr. Nt.
9.00% due 2/1/2010 B2/B 379,750
860,000 Iron Mountain, Inc.
Sr. Sub. Nt.
8.625% due 4/1/2013 B2/B 928,800
------------
1,308,550
- -----------------------------------------------------------------
Consumer Products -- 2.2%
435,000 Elizabeth Arden, Inc.
Sr. Sec. Nt. Ser. B
11.75% due 2/1/2011 B1/B+ 517,650
745,000 Rayovac Corp.
Sr. Sub. Nt.
8.50% due 10/1/2013 B3/B- 789,700
286,000 Sealy Mattress Co.
Sr. Sub. Nt. Ser. B
9.875% due 12/15/2007 B3/B- 296,010
------------
1,603,360
- -----------------------------------------------------------------
Electric -- 7.1%
Calpine Corp.
894,000 Sr. Sec. Nt.+
8.50% due 7/15/2010 NR/B 871,650
745,000 Sr. Sec. Nt.+
8.75% due 7/15/2013 NR/B 726,375
596,000 Sr. Sec. Nt.+
9.875% due 12/1/2011 B/B 612,390
745,000 Dynegy Hldgs., Inc.
Sr. Sec. Nt.+
10.125% due 7/15/2013 B3/B- 856,750
- --------------------------------------------------------------------------------
See notes to financial statements.
56
The Guardian High Yield Bond Fund
Schedule of Investments (Continued)
- --------------------------------------------------------------------
Rating
Principal Moody's/
Amount S&P* Value
- --------------------------------------------------------------------
$ 745,000 Nevada Power Co.
2nd Mtg. Nt.+
9.00% due 8/15/2013 Ba2/BB $ 824,156
447,000 NRG Energy, Inc.
Sec. Nt.+
8.00% due 12/15/2013 B2/B+ 469,909
666,000 Southern California Edison Co.
1st Ref. Mtg. Ser. 93C
7.25% due 3/1/2026 Baa2/BBB 682,650
------------
5,043,880
- -----------------------------------------------------------------
Energy -- 4.2%
447,000 Dresser, Inc.
Sr. Nt.
9.375% due 4/15/2011 B2/B 486,112
280,000 Newfield Exploration Co.
Sr. Sub. Nt.
8.375% due 8/15/2012 Ba3/BB- 313,600
700,000 Newpark Resources, Inc.
Sr. Sub. Nt. Ser. B
8.625% due 12/15/2007 B2/B+ 724,500
335,000 Pioneer Natural Resources Co.
Sr. Nt.
7.20% due 1/15/2028 Ba1/BB+ 358,624
280,000 Pride Int'l., Inc.
Sr. Nt.
10.00% due 6/1/2009 Ba2/BB 300,300
298,000 Western Oil Sands, Inc.
Sr. Sec. Nt.
8.375% due 5/1/2012 Ba2/BB+ 339,348
420,000 Westport Resources Corp.
Sr. Sub. Nt.
8.25% due 11/1/2011 Ba3/B+ 462,000
------------
2,984,484
- -----------------------------------------------------------------
Entertainment -- 2.8%
Intrawest Corp.
447,000 Sr. Nt.+
7.50% due 10/15/2013 B1/B+ 464,880
185,000 Sr. Nt.
10.50% due 2/1/2010 B1/B+ 204,425
287,000 Premier Parks, Inc.
Sr. Nt.
9.75% due 6/15/2007 B2/B- 300,991
1,005,000 Six Flags, Inc.
Sr. Nt.+
9.625% due 6/1/2014 B2/B- 1,050,225
------------
2,020,521
- -----------------------------------------------------------------
Environmental -- 0.5%
335,000 Allied Waste NA, Inc.
Sr. Nt.
7.875% due 4/15/2013 Ba3/BB- 362,638
- -----------------------------------------------------------------
Finance Companies -- 0.4%
298,000 Dollar Financial Group, Inc.
Sr. Nt.+
9.75% due 11/15/2011 B3/B 308,430
- -----------------------------------------------------------------
Food and Beverage -- 6.7%
560,000 American Seafood Group LLC
Sr. Sub. Nt.
10.125% due 4/15/2010 B3/B 668,500
350,000 B & G Foods, Inc.
Sr. Sub. Nt. Ser. D
9.625% due 8/1/2007 B3/B- 360,938
- --------------------------------------------------------------------
Rating
Principal Moody's/
Amount S&P* Value
- --------------------------------------------------------------------
$ 224,000 Constellation Brands, Inc.
Sr. Sub. Nt.
8.125% due 1/15/2012 Ba3/B+ $ 245,280
635,000 Del Monte Corp.
Sr. Sub. Nt.
9.25% due 5/15/2011 B2/B 701,675
968,000 Merisant Co.
Sr. Sub. Nt.+
9.50% due 7/15/2013 B3/B- 1,030,920
373,000 Michael Foods, Inc.
Sr. Sub. Nt.+
8.00% due 11/15/2013 B3/B- 388,852
288,000 Pinnacle Foods Hldgs. Corp.
Sr. Sub. Nt.+
8.25% due 12/1/2013 B3/B 298,080
670,000 Premium Standard Farms, Inc.
Sr. Nt.
9.25% due 6/15/2011 B1/BB 676,700
372,000 Seminis Vegetable Seeds, Inc.
Sr. Sub. Nt.+
10.25% due 10/1/2013 B3/B- 399,900
------------
4,770,845
- -----------------------------------------------------------------
Gaming -- 0.4%
285,000 Sun Int'l. Hotels Ltd.
Sr. Sub. Nt.
8.875% due 8/15/2011 B2/B+ 311,363
- -----------------------------------------------------------------
Gas Distributors -- 1.2%
190,000 AmeriGas Partners LP
Sr. Nt.
8.875% due 5/20/2011 B2/BB- 209,000
328,000 Gazprom OAO
Nt.+
9.625% due 3/1/2013 NR/BB- 361,620
298,000 Suburban Propane Partners
Sr. Nt.+
6.875% due 12/15/2013 B1/B 300,980
------------
871,600
- -----------------------------------------------------------------
Health Care -- 3.3%
382,000 Fisher Scientific Int'l., Inc.
Sr. Sub. Nt.
8.125% due 5/1/2012 B2/B+ 409,695
570,000 Fresenius Medical Care
Capital Tr.
7.875% due 6/15/2011 Ba2/BB- 615,600
381,000 Insight Health Svcs. Corp.
Sr. Sub. Nt. Ser. B
9.875% due 11/1/2011 B3/B- 403,860
National Nephrology
Assocs., Inc.
288,000 Sr. Sub. Nt.+
9.00% due 11/1/2011 B3/B- 301,680
560,000 PerkinElmer, Inc.
Sr. Sub. Nt.
8.875% due 1/15/2013 Ba3/BB- 641,200
------------
2,372,035
- -----------------------------------------------------------------
Home Construction -- 1.7%
280,000 Beazer Homes USA, Inc.
Sr. Nt.
8.375% due 4/15/2012 Ba2/BB 308,700
286,000 Meritage Corp.
Sr. Nt.
9.75% due 6/1/2011 Ba3/B+ 319,605
- --------------------------------------------------------------------------------
See notes to financial statements.
57
The Guardian High Yield Bond Fund
Schedule of Investments (Continued)
- --------------------------------------------------------------
Rating
Principal Moody's/
Amount S&P* Value
- --------------------------------------------------------------
$ 280,000 Standard Pacific Corp.
Sr. Sub. Nt.
9.25% due 4/15/2012 Ba3/B+ $ 312,200
280,000 WCI Communities, Inc.
Sr. Sub. Nt.
9.125% due 5/1/2012 Ba3/B 308,000
------------
1,248,505
- --------------------------------------------------------------
Industrial-Other -- 2.3%
Bombardier Recreational
Products
286,000 Sr. Sub. Nt.+
8.375% due 12/15/2013 B3/B- 298,870
645,000 Briggs & Stratton Corp.
Sr. Nt.
8.875% due 3/15/2011 Ba1/BB+ 757,875
575,000 General Cable Corp.
Sr. Nt.+
9.50% due 11/15/2010 B2/B 615,250
------------
1,671,995
- --------------------------------------------------------------
Lodging -- 0.6%
122,000 HMH Pptys., Inc.
Sr. Nt. Ser. C
8.45% due 12/1/2008 Ba3/B+ 127,185
John Q. Hammons
Hotels LP
280,000 1st Mtg. Nt. Ser. B
8.875% due 5/15/2012 B2/B 308,700
------------
435,885
- --------------------------------------------------------------
Media-Cable -- 4.1%
744,000 Charter Comm. Hldgs. II
Sr. Nt.+
10.25% due 9/15/2010 Caa1/CCC- 781,200
670,000 CSC Hldgs., Inc.
Sr. Debt. Ser. B
8.125% due 8/15/2009 B1/BB- 720,250
Insight Midwest LP
52,000 Sr. Nt.
10.50% due 11/1/2010 B2/B+ 56,550
618,000 Sr. Nt.+
10.50% due 11/1/2010 B2/B+ 672,075
596,000 Mediacom Broadband LLC
Sr. Nt.
11.00% due 7/15/2013 B2/B+ 669,010
------------
2,899,085
- --------------------------------------------------------------
Media-NonCable -- 7.9%
209,000 Allbritton Comm. Co.
Sr. Sub. Nt.
7.75% due 12/15/2012 B3/B- 216,838
American Media Operations,
Inc.
596,000 Sr. Sub. Nt.
8.875% due 1/15/2011 B2/B- 646,660
570,000 Sr. Sub. Nt. Ser. B
10.25% due 5/1/2009 B2/B- 607,762
285,000 Corus Entertainment, Inc.
Sr. Sub. Nt.
8.75% due 3/1/2012 B1/B+ 313,500
Dex Media East LLC
223,000 Nt.+
8.00% due 11/15/2013 Caa1/B 234,150
265,000 Sr. Nt.
9.875% due 11/15/2009 B2/B 303,425
- ---------------------------------------------------------------
Rating
Principal Moody's/
Amount S&P* Value
- ---------------------------------------------------------------
$ 265,000 Sr. Sub. Nt.
12.125% due 11/15/2012 B3/B $ 325,950
Dex Media West Fin.
75,000 Sr. Nt.+
8.50% due 8/15/2010 B2/B 83,531
75,000 Sr. Sub. Nt.+
9.875% due 8/15/2013 B3/B 87,188
278,000 DirecTV Hldgs. Finance
Sr. Nt.
8.375% due 3/15/2013 B1/BB- 322,480
286,000 Emmis Comm. Corp.
Sr. Sub. Nt.
8.125% due 3/15/2009 B2/B- 299,942
280,000 Entravision Comm. Corp.
Sr. Sub. Nt.
8.125% due 3/15/2009 B3/B- 299,600
1,043,000 Houghton Mifflin Co.
Sr. Sub. Nt.
9.875% due 2/1/2013 B3/B 1,147,300
R.H. Donnelley Fin. Corp. I
160,000 Sr. Nt.+
8.875% due 12/15/2010 B1/B+ 180,000
465,000 Sr. Sub. Nt.+
10.875% due 12/15/2012 B2/B+ 551,606
------------
5,619,932
- ---------------------------------------------------------------
Metals and Mining -- 1.5%
745,000 AK Steel Corp.
Sr. Nt.
7.75% due 6/15/2012 B3/B+ 636,975
286,000 Luscar Coal Ltd.
Sr. Nt.
9.75% due 10/15/2011 Ba3/BB 323,895
70,000 Steel Dynamics, Inc.
Sr. Nt.
9.50% due 3/15/2009 B1/B+ 77,700
------------
1,038,570
- ---------------------------------------------------------------
Natural Gas-Pipelines -- 4.6%
372,000 El Paso Partners
Sr. Sub. Nt. Ser. B
8.50% due 6/1/2011 B1/BB- 418,500
667,000 El Paso Production Hldg. Co.
Sr. Nt.+
7.75% due 6/1/2013 B2/B 656,995
38,000 Gulfterra Energy Partners
Sr. Sub. Nt. Ser. B
8.50% due 6/1/2010 B1/BB- 43,130
208,000 Northwest Pipeline Corp.
Sr. Nt.+
8.125% due 3/1/2010 B1/B+ 230,880
623,000 Southern Natural Gas Co.
Nt.
7.35% due 2/15/2031 B1/B 615,212
Transcontinental Gas
Pipeline Corp.
630,000 Nt. Ser. B
7.00% due 8/15/2011 B1/B+ 670,950
Williams Cos., Inc.
240,000 Nt.
8.125% due 3/15/2012 B3/B+ 266,400
360,000 Sr. Nt.
8.625% due 6/1/2010 B3/B+ 404,100
------------
3,306,167
- ---------------------------------------------------------------
- --------------------------------------------------------------------------------
See notes to financial statements.
58
The Guardian High Yield Bond Fund
Schedule of Investments (Continued)
- --------------------------------------------------------------------
Rating
Principal Moody's/
Amount S&P* Value
- --------------------------------------------------------------------
Packaging -- 2.2%
$ 355,000 Crown European Hldgs. S.A.
Sec. Nt.
9.50% due 3/1/2011 B1/B+ $ 402,037
522,000 Graphic Packaging Int'l., Inc.
Sr. Sub. Nt.+
9.50% due 8/15/2013 B3/B- 576,810
Owens-Brockway Glass
Container
133,000 Sr. Sec. Nt.
7.75% due 5/15/2011 B1/BB 142,809
133,000 Sr. Nt.
8.25% due 5/15/2013 B2/B+ 142,809
298,000 Silgan Hldgs., Inc.
Sr. Sub. Nt.+
6.75% due 11/15/2013 B1/B+ 298,745
------------
1,563,210
- -----------------------------------------------------------------
Paper and Forest Products -- 4.0%
Abitibi-Consolidated, Inc.
210,000 Nt.
6.00% due 6/20/2013 Ba1/BB+ 201,475
125,000 Debt.
8.85% due 8/1/2030 Ba1/BB+ 135,128
75,000 Cascades, Inc.
Sr. Nt.
7.25% due 2/15/2013 Ba1/BB+ 79,125
400,000 Jefferson Smurfit Corp. US
Sr. Sec. Nt.
7.50% due 6/1/2013 B2/B 418,000
670,000 Kappa Beheer BV
Sr. Sub. Nt.
10.625% due 7/15/2009 B2/B 716,900
150,000 Millar Western Forest
Products Ltd.
Sr. Nt.+
7.75% due 11/15/2013 B3/B+ 155,625
670,000 Stone Container Corp.
Sr. Nt.
9.75% due 2/1/2011 B2/B 740,350
447,000 Tembec Inds., Inc.
Sr. Nt.
7.75% due 3/15/2012 Ba3/BB 444,765
------------
2,891,368
- -----------------------------------------------------------------
Restaurants -- 0.4%
298,000 Jack in the Box, Inc.
Sr. Sub. Nt.
8.375% due 4/15/2008 Ba3/B+ 311,470
- -----------------------------------------------------------------
Retailers -- 5.4%
280,000 Cole National Group, Inc.
Sr. Sub. Nt.
8.875% due 5/15/2012 B3/B 299,600
420,000 Hollywood Entertainment Corp.
Sr. Sub. Nt.
9.625% due 3/15/2011 B3/B- 451,500
720,000 J.C. Penney Co., Inc.
Nt.
9.00% due 8/1/2012 Ba3/BB+ 861,300
828,000 Jafra Cosmetics
Sr. Sub. Nt.
10.75% due 5/15/2011 B3/B- 908,730
285,000 Petco Animal Supplies, Inc.
Sr. Sub. Nt.
10.75% due 11/1/2011 B2/B 333,450
- ------------------------------------------------------------------
Rating
Principal Moody's/
Amount S&P* Value
- ------------------------------------------------------------------
$ 280,000 Rite Aid Corp.
Sr. Nt.
11.25% due 7/1/2008 Caa2/B- $ 312,200
373,000 Sonic Automotive, Inc.
Sr. Sub. Nt.
8.625% due 8/15/2013 B2/B+ 393,515
280,000 United Auto Group, Inc.
Sr. Sub. Nt.
9.625% due 3/15/2012 B3/B 313,600
------------
3,873,895
- ---------------------------------------------------------------
Supermarkets -- 0.4%
284,000 Pathmark Stores, Inc.
Sr. Sub. Nt.
8.75% due 2/1/2012 B2/B 296,780
- ---------------------------------------------------------------
Technology -- 0.6%
361,000 AMI Semiconductor, Inc.
Sr. Sub. Nt.
10.75% due 2/1/2013 B3/B 430,493
- ---------------------------------------------------------------
Textile -- 2.8%
300,000 Oxford Inds., Inc.
Sr. Nt.+
8.875% due 6/1/2011 B2/B 328,125
350,000 Russell Corp.
Sr. Nt.
9.25% due 5/1/2010 B1/BB 362,687
750,000 St. John Knits Int'l., Inc.
Sr. Sub. Nt.
12.50% due 7/1/2009 B3/B- 802,500
422,000 William Carter Co.
Sr. Sub. Nt. Ser. B
10.875% due 8/15/2011 B3/B 487,410
------------
1,980,722
- ---------------------------------------------------------------
Transportation -- 0.8%
220,000 Omi Corp.
Sr. Nt.+
7.625% due 12/1/2013 B1/B+ 221,925
280,000 Teekay Shipping Corp.
Sr. Nt.
8.875% due 7/15/2011 Ba2/BB- 317,800
------------
539,725
- ---------------------------------------------------------------
Wireless Communications -- 4.3%
700,000 Centennial Cell Comm. Corp.
Sr. Nt.
10.125% due 6/15/2013 Caa1/CCC 768,250
Crown Castle Int'l. Corp.
364,000 Sr. Nt.+
7.50% due 12/1/2013 B3/CCC 365,820
381,000 Sr. Nt.
10.75% due 8/1/2011 B3/CCC 428,625
1,043,000 Nextel Comm., Inc.
Sr. Nt.
7.375% due 8/1/2015 B2/B+ 1,121,225
350,000 Nextel Partners, Inc.
Sr. Nt.
8.125% due 7/1/2011 Caa1/CCC+ 372,750
------------
3,056,670
- ---------------------------------------------------------------
Wireline Communications -- 3.6%
300,000 Qwest Capital Funding, Inc.
Nt.
5.875% due 8/3/2004 Caa2/CCC+ 300,750
- --------------------------------------------------------------------------------
See notes to financial statements.
59
The Guardian High Yield Bond Fund
Schedule of Investments (Continued)
- -------------------------------------------------------------------
Rating
Principal Moody's/
Amount S&P* Value
- -------------------------------------------------------------------
Qwest Corp.
$ 1,260,000 Debt.
7.20% due 11/10/2026 Ba3/B- $ 1,241,100
560,000 Debt.
8.875% due 6/1/2031 Ba3/B- 588,000
355,000 Qwest Svcs. Corp.
Nt.+
13.50% due 12/15/2010 NR/CCC+ 431,325
------------
2,561,175
- ----------------------------------------------------------------
Total Corporate Bonds
(Cost $62,938,774) 67,952,780
- ----------------------------------------------------------------
Sovereign Debt -- 0.9%
$ 575,000 Federative Republic of Brazil
Nt.
9.25% due 10/22/2010 B2/B+
(Cost $569,321) $ 618,125
- ----------------------------------------------------------------
Warrants -- 0.0%
- -------------------------------------------------------------------
Shares Value
- -------------------------------------------------------------------
417 Hayes Lemmerz Int'l., Inc.
exp. 6/3/2006 $ 605
330 XM Satellite Radio, Inc.
exp. 3/15/2010+ 6,847
- ----------------------------------------------------------------
Total Warrants
(Cost $358,885) 7,452
- ----------------------------------------------------------------
Repurchase Agreement -- 2.1%
Principal
Amount Value
- --------------------------------------------------------------------
$ 1,486,000 State Street Bank and Trust Co.
repurchase agreement,
dated 12/31/2003, maturity
value $1,486,076 at
0.92% due 1/2/2004 (1)
(Cost $1,486,000) $ 1,486,000
- -----------------------------------------------------------------
Total Investments -- 98.0%
(Cost $65,352,980) 70,064,357
Cash, Receivables and Other Assets
Less Liabilities -- 2.0% 1,439,514
- -----------------------------------------------------------------
Net Assets -- 100% $ 71,503,871
- -----------------------------------------------------------------
* Unaudited.
+ Rule 144A restricted security.
(1)The repurchase agreement is fully collateralized by U.S. Government and/or
agency obligations based on market prices at the date of the portfolio.
- --------------------------------------------------------------------------------
See notes to financial statements.
60
.. The Guardian Tax-Exempt Fund
Municipal Bonds -- 98.1%
Rating
Principal Moody's/
Amount S&P* Value
- ----------------------------------------------------------------------
Alabama -- 2.4%
$ 2,205,000 Alabama Pub. Housing Auth.
Ser. B,
2.50% due 1/1/2007 Aaa/AAA $ 2,219,553
- -------------------------------------------------------------------
Arizona -- 3.1%
1,500,000 Phoenix, AZ Civic Impt. Corp.
Wtr. Sys. Rev.,
5.50% due 7/1/2020 Aaa/AAA 1,663,965
1,000,000 Phoenix, AZ G.O. Ser. B,
5.375% due 7/1/2020 Aa1/AA+ 1,104,930
------------
2,768,895
- -------------------------------------------------------------------
Arkansas -- 1.3%
1,000,000 Arkansas St. G.O. Fed. Hwy.
Grant Ser. A,
5.50% due 8/1/2011 Aa2/AA 1,139,810
- -------------------------------------------------------------------
California -- 1.6%
1,500,000 California St. Pub. Wks. Brd.
Ser. C,
5.00% due 6/1/2025 Baa2/BBB- 1,450,185
- -------------------------------------------------------------------
Colorado -- 2.7%
2,165,000 South Suburban Park & Rec.
Dist., CO Rev.,
5.50% due 9/15/2019 Aaa/AAA 2,406,203
- -------------------------------------------------------------------
Connecticut -- 2.0%
1,750,000 Connecticut St. Housing Fin.
Auth. Sub. Ser. E1,
5.05% due 11/15/2027 Aaa/AAA 1,786,978
- -------------------------------------------------------------------
Florida -- 4.3%
2,000,000 Florida St. Brd. of Ed. Lottery
Rev. Ser. A,
5.50% due 7/1/2017 Aaa/AAA 2,258,700
1,500,000 Florida St. Brd. of Ed. Lottery
Rev. Ser. C,
5.25% due 7/1/2016 Aaa/AAA 1,642,080
------------
3,900,780
- -------------------------------------------------------------------
Georgia -- 4.4%
1,000,000 Fulton Cnty., GA Dev. Auth.
Rev. Georgia Tech. Foundation
Ser. A,
5.125% due 11/1/2021 Aa1/AA+ 1,063,110
Gainesville, GA Wtr. & Swg.
Rev.,
700,000 5.25% due 11/15/2018 Aaa/AAA 762,412
2,000,000 5.375% due 11/15/2020 Aaa/AAA 2,168,340
------------
3,993,862
- -------------------------------------------------------------------
Idaho -- 2.0%
1,625,000 Boise City, ID Urban Renewal
Agy. Lease,
6.00% due 8/15/2023 Aaa/AAA 1,857,830
- -------------------------------------------------------------------
Illinois -- 1.2%
1,000,000 Chicago, IL Brd. of Ed.
Ser. A,
5.25% due 12/1/2018 Aaa/AAA 1,094,380
- -------------------------------------------------------------------
Iowa -- 1.2%
1,000,000 Cedar Rapids, IA G.O.,
5.25% due 6/1/2019 Aaa/NR 1,076,250
- -------------------------------------------------------------------
- -----------------------------------------------------------------------
Rating
Principal Moody's/
Amount S&P* Value
- -----------------------------------------------------------------------
Kansas -- 7.1%
$ 2,000,000 Butler Cnty., KS Pub. Bldg.
Comm. Rev.,
5.55% due 10/1/2021 Aaa/NR $ 2,201,180
1,500,000 Kansas St. Dept. Trans. Hwy.
Rev. Ser. A Preref.,
5.75% due 9/1/2013 Aa2/AA+ 1,762,860
2,370,000 Topeka, KS Ref. Ser. B,
3.00% due 8/15/2006 Aaa/NR 2,445,793
------------
6,409,833
- -----------------------------------------------------------------
Kentucky -- 1.8%
1,430,000 Kentucky St. Ppty. & Bldgs.
Comm. Ser. A, Preref.,
5.70% due 5/1/2018 Aaa/AAA 1,669,496
- -----------------------------------------------------------------
Maryland -- 1.8%
1,500,000 Prince Georges Cnty., MD
Industrial Dev. Auth. Ref.,
5.00% due 6/30/2019 Aaa/AAA 1,602,750
- -----------------------------------------------------------------
Michigan -- 3.7%
2,000,000 Detroit, MI City Sch. Dist.
Ser. A,
5.50% due 5/1/2020 Aaa/AAA 2,213,400
1,000,000 Garden City, MI Sch. Dist.,
5.50% due 5/1/2018 Aa1/AAA 1,113,760
------------
3,327,160
- -----------------------------------------------------------------
Minnesota -- 1.7%
1,500,000 St. Paul, MN Port Auth.
Lease Rev.,
5.125% due 12/1/2027 Aa2/AA+ 1,559,580
- -----------------------------------------------------------------
Missouri -- 1.2%
1,000,000 Springfield, MO Sch.
Dist. G.O.,
5.125% due 3/1/2020 Aaa/AAA 1,079,100
- -----------------------------------------------------------------
New Jersey -- 0.6%
500,000 New Jersey St. Trans. Auth.
Ser. A,
6.50% due 6/15/2005 Aaa/AAA 536,115
- -----------------------------------------------------------------
New Mexico -- 1.3%
1,000,000 New Mexico St. Hwy. Comm.
Tax Rev.,
6.00% due 6/15/2010 Aa2/AA+ 1,158,270
- -----------------------------------------------------------------
New York -- 7.4%
1,255,000 New York City Industrial Dev.
Agy.,
5.25% due 3/1/2018 Aaa/AAA 1,373,171
1,500,000 New York St. Dorm. Auth.
Lease Ser. A, Preref.,
6.25% due 7/1/2020 A1/AA- 1,828,485
1,000,000 New York St. Ref. Ser. A G.O.,
5.25% due 3/15/2015 A2/AA 1,104,050
1,250,000 New York St. Thruway Auth.
Hwy. & Brdg. Tr. Fd. Ser. B,
5.375% due 4/1/2015 Aaa/AAA 1,399,287
500,000 New York, NY G.O. Sub. Ser.
E2,
1.17% due 8/1/2020 (1) Aa3/AAA 500,000
500,000 New York, NY G.O. Sub. Ser.
B2,
1.17% due 8/15/2019 (1) Aa3/AAA 500,000
------------
6,704,993
- -----------------------------------------------------------------
- --------------------------------------------------------------------------------
See notes to financial statements.
61
The Guardian Tax-Exempt Fund
Schedule of Investments (Continued)
- ------------------------------------------------------------------------
Rating
Principal Moody's/
Amount S&P* Value
- ------------------------------------------------------------------------
North Carolina - 0.7%
$ 595,000 Univ. of NC Hosp. Chapel Hill
Rev. Ser. A,
1.16% due 2/15/2031 (1) A1/AA $ 595,000
- ------------------------------------------------------------------
North Dakota - 1.2%
1,000,000 North Dakota St. Wtr. Comm.
Rev.,
5.75% due 8/1/2020 Aaa/AAA 1,132,880
- ------------------------------------------------------------------
Ohio - 10.4%
500,000 Cleveland, OH Parking Facs.
Rev.,
5.50% due 9/15/2016 Aaa/AAA 554,960
3,000,000 Dayton, OH City Sch. Dist.
Ser. D,
2.00% due 12/1/2006 Aaa/AAA 3,023,670
1,000,000 Franklin Cnty., OH Hosp. Rev.
Ref. Ser. C,
5.25% due 5/15/2024 A1/A+ 1,016,200
750,000 Ohio St. Bldg. Auth. Disalle
Gov't. Ctr. Ser. A,
6.00% due 10/1/2005 Aa2/AA 808,545
1,300,000 Ohio St. Higher Ed. Fac.
Comm.,
5.50% due 12/1/2020 Aaa/AAA 1,443,897
1,235,000 River Valley, OH Local Sch.
Dist. Facs.,
5.25% due 11/1/2020 Aaa/NR 1,330,836
1,050,000 Univ. of Cincinnati, OH
General Rcpts. Ser. A,
5.50% due 6/1/2011 Aaa/AAA 1,222,305
------------
9,400,413
- ------------------------------------------------------------------
Oregon - 1.4%
1,105,000 McMinnville, OR Sch. Dist.
Ref. G.O.,
5.50% due 6/15/2016 Aaa/NR 1,299,447
- ------------------------------------------------------------------
Pennsylvania - 2.5%
Delaware River Port Auth. PA
& NJ,
1,000,000 5.10% due 1/1/2020 Aaa/AAA 1,068,920
1,000,000 6.00% due 1/1/2017 Aaa/AAA 1,162,670
------------
2,231,590
- ------------------------------------------------------------------
Puerto Rico - 7.4%
1,500,000 Puerto Rico Comwlth. Hwy. &
Trans. Auth. Rev. Ser. G,
5.00% due 7/1/2033 Baa1/A 1,521,495
2,200,000 Puerto Rico Elec. Power Auth.
Ser. NN Rev.,
5.125% due 7/1/2029 A3/A- 2,265,780
1,750,000 Puerto Rico Housing Finance
Authority,
5.00% due 12/1/2020 Aa3/AA 1,852,217
1,000,000 Puerto Rico Muni. Fin. Agency
Ser. A,
5.25% due 8/1/2021 Aaa/AAA 1,088,390
------------
6,727,882
- ------------------------------------------------------------------
South Carolina - 4.8%
350,000 Charleston Cnty., SC Sch. Dist.
Ref. Ser. B,
5.00% due 2/1/2016 Aa1/AA+ 377,934
1,250,000 Charleston, SC Wtrwks. & Swr.
Rev.,
5.25% due 1/1/2018 Aa3/AA- 1,359,462
- -------------------------------------------------------------------
Rating
Principal Moody's/
Amount S&P* Value
- -------------------------------------------------------------------
$ 1,500,000 Charleston, SC Wtrwks. & Swr.
Rev. Ser. B,
5.00% due 1/1/2028 Aa3/AA- $ 1,541,520
1,000,000 Mount Pleasant, SC Wtr. &
Swr. Rev. Ref. & Impt.,
5.25% due 12/1/2019 Aaa/AAA 1,096,740
------------
4,375,656
- ----------------------------------------------------------------
Tennessee - 3.1%
1,000,000 Knox Cnty., TN Pub.
Impt. G.O.,
5.375% due 5/1/2020 Aa2/AA 1,078,940
1,700,000 Tennessee Housing Dev.
Agency Mtg. Fin. Ser. A,
5.20% due 7/1/2023 Aa2/AA 1,771,043
------------
2,849,983
- ----------------------------------------------------------------
Virginia - 10.4%
3,000,000 Fairfax Cnty., VA Ref. Pub.
Impt. Ser. A,
4.25% due 6/1/2008 Aaa/AAA 3,248,790
1,500,000 Riverside, VA Regional Jail
Auth. Rev.,
5.00% due 7/1/2021 Aaa/AAA 1,588,695
1,000,000 Stafford Cnty., VA Wtr. &
Swg. Rev. Ref.,
4.00% due 6/1/2005 Aaa/AAA 1,037,970
1,500,000 Virginia St. Pub. Sch. Auth.
Ser. A Rev.,
5.50% due 8/1/2018 Aa1/AA+ 1,680,975
1,790,000 Virginia St. Pub. Sch. Auth.
Ser. A,
5.00% due 8/1/2019 Aa1/AA+ 1,908,247
------------
9,464,677
- ----------------------------------------------------------------
Washington -- 3.4%
1,500,000 Cowlitz Cnty., WA Sch. Dist.
G.O.,
5.50% due 12/1/2019 Aaa/NR 1,666,125
1,250,000 Snohomish Cnty., WA G.O.,
5.375% due 12/1/2019 Aaa/AAA 1,369,863
------------
3,035,988
- ----------------------------------------------------------------
Total Municipal Bonds
(Cost $84,081,123) 88,855,539
- ----------------------------------------------------------------
Total Investments -- 98.1%
(Cost $84,081,123) 88,855,539
Cash, Receivables and Other Assets
Less Liabilities -- 1.9% 1,722,279
- ----------------------------------------------------------------
Net Assets -- 100% $ 90,577,818
- ----------------------------------------------------------------
* Unaudited.
(1)Variable rate demand notes.
Glossary:
G.O. -- General Obligation.
- --------------------------------------------------------------------------------
See notes to financial statements.
62
.. The Guardian Cash Management Fund
Asset Backed -- 0.5%
Principal Maturity
Amount Date Value
- --------------------------------------------------------------------------
$ 3,111,274 First Franklin Mtg. Loan
2002-FF1 1A2
3.79% 5/1/2004
(Cost $3,129,447) $ 3,129,447
- --------------------------------------------------------------------
Corporate Bonds -- 6.2%
Building Materials -- 0.1%
$ 250,000 Vulcan Materials
5.75% 4/1/2004 $ 252,792
- --------------------------------------------------------------------
Financial-Banks -- 0.1%
500,000 National City Corp.
6.625% 3/1/2004 504,398
- --------------------------------------------------------------------
Financial-Other -- 2.0%
2,200,000 Bear Stearns Cos., Inc.
6.15% 3/2/2004 2,218,281
1,000,000 Lehman Brothers Hldgs., Inc.
6.625% 4/1/2004 1,012,957
8,110,000 Morgan Stanley
5.625% 1/20/2004 8,128,749
-------------
11,359,987
- --------------------------------------------------------------------
Food and Beverage -- 0.4%
2,460,000 Pepsi Bottling Hldgs., Inc.
5.375% 2/17/2004+ 2,472,432
- --------------------------------------------------------------------
Machinery-Industrial Specialty -- 0.3%
1,750,000 Stanley Works
5.75% 3/1/2004 1,763,132
- --------------------------------------------------------------------
Merchandising-Mass -- 1.4%
7,500,000 Wal-Mart Stores, Inc.
5.199% 6/1/2004 7,625,872
- --------------------------------------------------------------------
Telecommunications -- 1.9%
3,750,000 Bell Atlantic-NJ
5.875% 2/1/2004 3,764,151
4,600,000 GTE California, Inc.
6.75% 3/15/2004 4,649,594
2,145,000 New York Telephone Co.
6.25% 2/15/2004 2,157,679
-------------
10,571,424
- --------------------------------------------------------------------
Total Corporate Bonds
(Cost $34,550,037) 34,550,037
- --------------------------------------------------------------------
Municipal Bonds -- 4.7%
$ 20,000,000 California St. Rev. Antic
Ser. A
2.00% 6/16/2004 $ 20,056,322
6,000,000 Connecticut St. Ref. Ser. B
5.97% 8/1/2004 6,160,372
- --------------------------------------------------------------------
Total Municipal Bonds
(Cost $26,216,694) 26,216,694
- --------------------------------------------------------------------
U.S. Government -- 7.8%
U.S. Government Agencies -- 7.8%
FHLB
$ 4,000,000 1.125% 10/1/2004 $ 3,997,155
5,000,000 1.52% 11/26/2004 5,000,000
FHLMC
10,000,000 1.40% 9/21/2004 10,000,000
5,000,000 1.40% 11/12/2004 5,000,000
- -------------------------------------------------------------------
Principal Maturity
Amount Date Value
- -------------------------------------------------------------------
FNMA
$ 5,000,000 1.20% 8/16/2004 $ 5,000,000
5,000,000 1.20% 8/17/2004 5,000,000
5,000,000 1.30% 8/30/2004 5,000,000
5,000,000 1.30% 8/31/2004 5,000,000
- ----------------------------------------------------------------
Total U.S. Government
(Cost $43,997,155) 43,997,155
- ----------------------------------------------------------------
Commercial Paper -- 48.3%
ASSET BACKED -- 1.3%
$ 7,500,000 Galleon Capital Corp.
1.10% 1/20/2004 $ 7,495,646
- ----------------------------------------------------------------
FINANCIAL -- 25.5%
Automotive -- 2.3%
$ 13,155,000 American Honda Fin. Corp.
1.06% 1/7/2004 $ 13,152,676
- ----------------------------------------------------------------
Financial-Banks -- 9.8%
10,000,000 Credit Suisse First Boston
1.08% 1/22/2004 9,993,700
10,000,000 Dexia Delaware LLC
1.05% 1/8/2004 9,997,958
Dresdner Bank AG
10,000,000 1.05% 1/22/2004 9,993,875
5,000,000 1.07% 1/5/2004 4,999,406
5,000,000 Societe Generale NA
1.055% 1/15/2004 4,997,949
State Street Corp.
5,000,000 1.04% 1/15/2004 4,997,978
10,000,000 1.05% 1/12/2004 9,996,791
-------------
54,977,657
- ----------------------------------------------------------------
Financial-Other -- 11.6%
10,000,000 Barton Capital Corp.
1.08% 1/7/2004 9,998,200
10,000,000 CBA Delaware Fin., Inc.
1.07% 1/12/2004 9,996,731
Citigroup Global Markets
10,000,000 1.05% 1/9/2004 9,997,667
5,000,000 1.08% 1/13/2004 4,998,200
10,000,000 Countrywide Home Loan
1.13% 1/5/2004 9,998,744
Household Financial Corp.
10,000,000 1.08% 1/8/2004 9,997,900
5,000,000 1.08% 1/12/2004 4,998,350
5,000,000 Systems United Corp.
1.09% 1/13/2004 4,998,183
-------------
64,983,975
- ----------------------------------------------------------------
Insurance -- 1.8%
10,000,000 American General Fin. Corp.
1.06% 1/12/2004 9,996,761
- ----------------------------------------------------------------
TOTAL FINANCIAL 143,111,069
- ----------------------------------------------------------------
INDUSTRIAL -- 21.5%
Commercial Services -- 1.8%
$ 10,000,000 Deluxe Corp.
1.07% 1/15/2004 $ 9,995,839
- ----------------------------------------------------------------
Education -- 4.7%
6,110,000 Massachusetts Coll. of
Pharmacy
1.09% 1/8/2004 6,108,705
- --------------------------------------------------------------------------------
See notes to financial statements.
63
The Guardian Cash Management Fund
Schedule of Investments (Continued)
- -------------------------------------------------------------------
Principal Maturity
Amount Date Value
- -------------------------------------------------------------------
Northwestern University
$ 5,000,000 1.08% 2/17/2004 $ 4,992,950
5,000,000 1.08% 3/25/2004 4,987,400
10,000,000 University of California
1.06% 1/7/2004 9,998,233
-------------
26,087,288
- -------------------------------------------------------------------
Electronics and Instruments -- 0.9%
5,000,000 Sharp Electronics
1.10% 1/20/2004 4,997,097
- -------------------------------------------------------------------
Metals-Miscellaneous -- 4.1%
Rio Tinto America, Inc.
3,006,000 1.07% 1/6/2004 3,005,553
10,000,000 1.07% 1/12/2004 9,996,731
10,000,000 1.10% 1/8/2004 9,997,861
-------------
23,000,145
- -------------------------------------------------------------------
Oil and Gas Services -- 4.1%
Koch Industries
10,000,000 1.06% 1/8/2004 9,997,939
5,800,000 1.10% 1/6/2004 5,799,114
7,000,000 Motiva Enterprises
1.01% 1/13/2004 6,997,643
-------------
22,794,696
- -------------------------------------------------------------------
Telecommunications -- 2.2%
SBC Int'l., Inc.
5,000,000 1.05% 1/12/2004 4,998,396
7,500,000 1.05% 1/22/2004 7,495,406
-------------
12,493,802
- -------------------------------------------------------------------
Utilities-Electric and Water -- 2.8%
Southern Co.
8,000,000 1.05% 1/27/2004 7,993,934
8,000,000 1.09% 1/5/2004 7,999,031
-------------
15,992,965
- -------------------------------------------------------------------
Wireline Communications -- 0.9%
5,000,000 Verizon Network Funding
1.03% 1/26/2004 4,996,424
- -------------------------------------------------------------------
TOTAL INDUSTRIAL 120,358,256
- -------------------------------------------------------------------
Total Commercial Paper
(Cost $270,964,971) 270,964,971
- -------------------------------------------------------------------
Floating Rate Notes and Bonds -- 25.6%
Principal Reset
Amount Date* Value
- -------------------------------------------------------------------
Alaska -- 2.0%
$ 11,345,000 Alaska St. Housing Fin. Corp.
1.25% 1/8/2004 $ 11,345,000
- -------------------------------------------------------------------
California -- 5.8%
13,590,000 California Housing Fin.
Agency
1.26% 1/7/2004 13,590,000
11,000,000 Los Angeles, CA Wtr. &
Power
1.10% 1/8/2004 11,000,000
8,100,000 Sacramento Cnty., CA
1.24% 1/7/2004 8,100,000
-------------
32,690,000
- -------------------------------------------------------------------
- ------------------------------------------------------------------
Principal Reset
Amount Date* Value
- ------------------------------------------------------------------
Colorado -- 2.6%
$ 14,250,000 Colorado Housing & Fin.
Auth.
1.25% 1/7/2004 $ 14,250,000
- ------------------------------------------------------------------
Connecticut -- 1.4%
8,000,000 Connecticut St. Housing &
Fin. Auth.
1.10% 1/8/2004 8,000,000
- ------------------------------------------------------------------
Financial-Other -- 1.8%
10,000,000 Countrywide Home Loan
1.295% 3/24/2004 10,001,991
- ------------------------------------------------------------------
Florida -- 1.4%
8,000,000 Miami Dade Cnty. Florida
Aviation
1.21% 1/7/2004 8,000,000
- ------------------------------------------------------------------
Michigan -- 1.1%
4,000,000 Michigan St. Housing Dev.
Auth.
1.25% 1/7/2004 4,000,000
1,905,000 Michigan St. Housing Dev.
Rental Revenue
1.13% 1/8/2004 1,905,000
-------------
5,905,000
- ------------------------------------------------------------------
New York -- 4.0%
22,530,000 New York City Trans.
1.25% 1/7/2004 22,530,000
- ------------------------------------------------------------------
Utah -- 4.5%
16,540,000 Utah Housing Corp. Single
Family
1.25% 1/7/2004 16,540,000
8,450,000 Utah St. Housing Fin. Agency
1.25% 1/7/2004 8,450,000
-------------
24,990,000
- ------------------------------------------------------------------
Washington -- 1.0%
5,595,000 Seattle, WA
1.55% 9/1/2004 5,595,000
- ------------------------------------------------------------------
Total Floating Rate Notes and Bonds
(Cost $143,306,991) 143,306,991
- ------------------------------------------------------------------
- --------------------------------------------------------------------------------
See notes to financial statements.
64
The Guardian Cash Management Fund
Schedule of Investments (Continued)
Repurchase Agreement -- 8.1%
Principal
Amount Value
- --------------------------------------------------------------------
$45,411,000 State Street Bank and Trust Co.
repurchase agreement,
dated 12/31/2003, maturity
value $45,413,321 at
0.92% due 1/2/2004(1)
(Cost $45,411,000) $ 45,411,000
- -------------------------------------------------------------------
Total Investments -- 101.2%
(Cost $567,576,295) 567,576,295
Liabilities in Excess of Cash, Receivables and
Other Assets -- (1.2)% (6,988,751)
- -------------------------------------------------------------------
Net Assets -- 100% $560,587,544
- -------------------------------------------------------------------
+ Rule 144A restricted security.
* Floating rate note. The rate shown is the rate in effect at December 31, 2003.
(1)The repurchase agreement is fully collateralized by U.S. Government and/or
agency obligations based on market prices at the date of the portfolio.
- --------------------------------------------------------------------------------
See notes to financial statements.
65
.. The Park Avenue Portfolio
Statements of Assets and Liabilities
December 31, 2003
- --------------------------------------
The Guardian The Guardian The Guardian The Guardian The Guardian
Park Avenue UBS Large Park Avenue UBS Small Asset
Fund Cap Value Small Cap Cap Value Allocation
-------------- Fund Fund Fund Fund
------------ ------------ ------------ ------------
ASSETS
Investments, at identified cost (includes majority-
owned subsidiary of $132,417,998 and non
controlled affiliated issue of $21,206,382 for
GAAF)................................................ $1,138,874,853 $66,507,026 $158,882,958 $30,634,015 $184,307,188
============== ============ ============ ============ ============
Investments, at market -- Note 1 (includes majority-
owned subsidiary of $116,565,880 and non
controlled affiliated issue of $22,097,901 for
GAAF)................................................ 1,301,883,364 85,076,473 202,456,159 38,795,110 167,808,350
Cash.................................................. -- 608 789 28 829
Foreign Currency (cost $15,057 GBGIF and
$80,133 GBGEMF, respectively)........................ -- -- -- -- --
Receivable for securities sold........................ 15,613,086 419,238 -- 92,559 --
Dividends receivable.................................. 1,306,500 92,384 68,494 46,795 112,648
Receivable for fund shares sold....................... 362,180 541 390,695 25,670 62,625
Interest receivable................................... -- 62 82 25 111
Dividend reclaim receivable........................... -- -- -- -- --
Receivable for variation margin -- Note 1............. -- -- -- -- 72,500
Other assets.......................................... 25,349 641 2,955 144 2,980
-------------- ------------ ------------ ------------ ------------
Total Assets....................................... 1,319,190,479 85,589,947 202,919,174 38,960,331 168,060,043
-------------- ------------ ------------ ------------ ------------
LIABILITIES
Payable for fund shares redeemed...................... 2,806,835 -- 1,628,137 -- 354,879
Due to custodian...................................... 2,614,044 -- -- -- --
Accrued expenses...................................... 296,161 166,131 64,018 131,494 66,200
Payable for securities purchased...................... -- 513,881 -- 57,660 --
Payable for variation margin -- Note 1................ -- -- -- -- 25,493
Distributions payable................................. -- -- -- -- --
Accrued foreign capital gains tax..................... -- -- -- -- --
Payable for forward mortgage securities purchased --
Note 7............................................... -- -- -- -- --
Due to GIS............................................ 965,073 82,880 204,073 38,318 47,426
-------------- ------------ ------------ ------------ ------------
Total Liabilities.................................. 6,682,113 762,892 1,896,228 227,472 493,998
-------------- ------------ ------------ ------------ ------------
Net Assets......................................... $1,312,508,366 $84,827,055 $201,022,946 $38,732,859 $167,566,045
============== ============ ============ ============ ============
COMPONENTS OF NET ASSETS
Shares of beneficial interest, at par................. $ 439,116 $ 66,208 $ 106,652 $ 30,603 $ 157,859
Additional paid-in capital............................ 1,878,623,946 63,203,836 155,265,892 28,565,896 235,842,261
Undistributed/(distributions in excess) of net
investment income.................................... 4,863,135 729 -- -- 1,448,759
Accumulated net realized gain/(loss) on investments
and foreign currency related transactions............ (734,426,342) 2,986,835 2,077,201 1,975,265 (53,956,415)
Net unrealized appreciation/(depreciation) of
investment and foreign currency related
transactions......................................... 163,008,511 18,569,447 43,573,201 8,161,095 (15,926,419)
-------------- ------------ ------------ ------------ ------------
Net Assets......................................... $1,312,508,366 $84,827,055 $201,022,946 $38,732,859 $167,566,045
============== ============ ============ ============ ============
NET ASSETS
Class A............................................... $1,133,468,121 $21,704,583 $160,049,396 $10,081,305 $118,987,792
Class B............................................... $ 165,273,929 $21,377,595 $ 22,988,650 $ 9,736,920 $ 32,862,609
Class C............................................... $ 6,621,625 $20,800,596 $ 8,092,015 $ 9,422,407 $ 7,856,553
Class K............................................... $ 7,144,691 $20,944,281 $ 9,892,885 $ 9,492,227 $ 7,859,091
Shares of Beneficial Interest Outstanding -- $0.01 Par Value
Class A............................................... 37,685,792 1,692,528 8,403,057 792,947 11,190,976
Class B............................................... 5,754,278 1,670,165 1,281,985 771,918 3,110,076
Class C............................................... 233,402 1,625,063 453,798 746,978 743,669
Class K............................................... 238,164 1,633,031 526,381 748,434 741,147
Net Asset Value Per Share
Class A............................................... $30.08 $12.82 $19.05 $12.71 $10.63
Class B............................................... $28.72 $12.80 $17.93 $12.61 $10.57
Class C............................................... $28.37 $12.80 $17.83 $12.61 $10.56
Class K............................................... $30.00 $12.83 $18.79 $12.68 $10.60
Maximum Offering Price Per Share
Class A Only (Net Asset Value x 104.71%)*............. $31.50 $13.42 $19.95 $13.31 $11.13
* Based on sale of less than $100,000. On sale of $100,000 or more, the
offering price is reduced.
**No load is charged on Class A shares.
See notes to financial statements.
66
The Guardian The Guardian The Guardian The Guardian The Guardian The Guardian The Guardian The Guardian
S&P 500 Baillie Gifford Baillie Gifford Investment Low Duration High Yield Tax-Exempt Cash
Index International Emerging Quality Bond Fund Bond Fund Management
Fund Fund Markets Fund Bond Fund Fund Fund
- ------------ --------------- --------------- ------------ ------------ ------------ ------------ ------------
$161,113,217 $ 40,283,744 $54,910,701 $195,136,727 $30,913,768 $ 65,352,980 $84,081,123 $567,576,295
============ =============== =============== ============ ============ ============ ============ ============
157,353,560 51,230,126 74,669,309 198,851,492 31,005,433 70,064,357 88,855,539 567,576,295
106,766 -- -- 96,291 90,947 95,702 693,327 178,643
-- 15,130 80,108 -- -- -- -- --
2,849,271 16,822 551,900 -- 314,436 -- -- --
222,918 70,046 216,407 -- -- -- -- --
289,392 3,214 119,660 64,633 14,934 43,775 45,547 495,186
27 1,901 27 1,614,702 371,339 1,442,481 1,105,730 1,713,332
-- 36,275 -- -- -- -- -- --
4,601 -- -- -- -- -- -- --
2,550 1,222 1,015 4,329 596 1,283 1,829 13,175
- ------------ --------------- --------------- ------------ ------------ ------------ ------------ ------------
160,829,085 51,374,736 75,638,426 200,631,447 31,797,685 71,647,598 90,701,972 569,976,631
- ------------ --------------- --------------- ------------ ------------ ------------ ------------ ------------
149,615 96,717 681,548 1,048,085 -- 30,842 10,000 8,849,511
-- 10,058 7,192 -- -- -- -- --
63,791 60,123 70,873 63,152 86,626 42,349 39,594 127,056
2,843,220 -- 450,989 67,736 302,572 -- -- --
-- -- -- -- -- -- -- --
-- -- -- 180,371 138 -- 6,499 1,021
-- -- 102,492 -- -- -- -- --
-- -- -- 16,185,531 -- -- -- --
85,550 21,525 32,480 151,030 32,892 70,536 68,061 411,499
- ------------ --------------- --------------- ------------ ------------ ------------ ------------ ------------
3,142,176 188,423 1,345,574 17,695,905 422,228 143,727 124,154 9,389,087
- ------------ --------------- --------------- ------------ ------------ ------------ ------------ ------------
$157,686,909 $ 51,186,313 $74,292,852 $182,935,542 $31,375,457 $ 71,503,871 $90,577,818 $560,587,544
============ =============== =============== ============ ============ ============ ============ ============
$ 206,784 $ 45,877 $ 61,379 $ 181,271 $ 31,298 $ 95,982 $ 87,850 $ 5,605,876
258,122,176 81,755,005 57,777,513 178,576,633 31,266,241 85,790,892 85,690,490 554,981,668
10,951 81,893 (4,769) -- -- -- -- --
(96,920,163) (41,648,669) (3,300,556) 462,873 (13,747) (19,094,380) 25,062 --
(3,732,839) 10,952,207 19,759,285 3,714,765 91,665 4,711,377 4,774,416 --
- ------------ --------------- --------------- ------------ ------------ ------------ ------------ ------------
$157,686,909 $ 51,186,313 $74,292,852 $182,935,542 $31,375,457 $ 71,503,871 $90,577,818 $560,587,544
============ =============== =============== ============ ============ ============ ============ ============
$129,227,788 $ 32,126,160 $43,560,552 $143,536,104 $ 8,456,923 $ 42,588,602 $80,024,939 $529,321,075
$ 12,069,644 $ 6,534,712 $ 9,388,923 $ 18,373,504 $ 7,742,807 $ 10,017,780 -- $ 12,498,476
$ 8,795,756 $ 5,546,359 $ 9,540,000 $ 11,206,219 $ 7,610,810 $ 9,316,259 $10,552,879 $ 9,085,531
$ 7,593,721 $ 6,979,082 $11,803,377 $ 9,819,715 $ 7,564,917 $ 9,581,230 -- $ 9,682,462
16,941,910 2,811,432 3,516,865 14,223,120 843,621 5,716,240 7,761,503 529,321,075
1,584,773 625,382 820,702 1,821,176 772,375 1,345,134 -- 12,498,476
1,155,906 529,721 831,783 1,110,750 759,207 1,251,297 1,023,538 9,085,531
995,772 621,118 968,514 972,020 754,630 1,285,557 -- 9,682,462
$7.63 $11.43 $12.39 $10.09 $10.02 $7.45 $10.31 $1.00
$7.62 $10.45 $11.44 $10.09 $10.02 $7.45 -- $1.00
$7.61 $10.47 $11.47 $10.09 $10.02 $7.45 $10.31 $1.00
$7.63 $11.24 $12.19 $10.10 $10.02 $7.45 -- $1.00
$7.99 $11.97 $12.97 $10.57 $10.49 $7.80 $10.80 N/A**
67
.. The Park Avenue Portfolio
Statements of Operations
Year Ended December 31, 2003
- -------------------------------------
The The Guardian The Guardian The Guardian The Guardian
Guardian UBS Large Park Avenue UBS Small Asset
Park Avenue Cap Value Small Cap Cap Value Allocation
Fund Fund* Fund Fund* Fund
------------ ------------ ------------ ------------ ------------
INVESTMENT INCOME
Dividends (includes $1,277,360 from a majority-owned
subsidiary and $1,516,814 from a non controlled
affiliate for GAAF)..................................... $ 20,320,166 $ 1,757,373 $ 910,225 $ 735,254 $ 2,535,340
Interest................................................. 224,544 24,332 39,450 15,517 51,089
Less: Foreign tax withheld................................ -- -- (2,471) (69) --
------------ ------------ ------------ ------------ ------------
Total Income.......................................... 20,544,710 1,781,705 947,204 750,702 2,586,429
------------ ------------ ------------ ------------ ------------
Expenses:
Investment advisory fees -- Note 2....................... 6,410,892 625,113 1,198,953 357,381 995,215
Administrative fees -- Class A -- Note 2................. 2,198,474 47,505 316,193 22,714 275,158
Administrative fees -- Class B -- Note 2................. 407,455 47,250 46,978 22,393 73,210
Administrative fees -- Class C -- Note 2................. 15,406 46,706 16,799 22,088 17,297
Administrative fees -- Class K -- Note 2................. 15,633 46,826 19,681 22,150 17,110
12b-1 fees -- Class B -- Note 3.......................... 1,222,363 141,749 140,933 67,178 219,629
12b-1 fees -- Class C -- Note 3.......................... 46,218 140,119 50,398 66,265 51,892
12b-1 fees -- Class K -- Note 3.......................... 25,013 74,921 31,490 35,440 27,377
Transfer agent fees -- Class A........................... 1,548,776 21,483 145,707 21,415 165,293
Transfer agent fees -- Class B........................... 483,166 21,105 58,015 21,041 68,749
Transfer agent fees -- Class C........................... 35,425 20,700 32,672 20,726 33,402
Transfer agent fees -- Class K........................... -- 1,660 -- 1,661 --
Custodian fees........................................... 218,143 79,855 112,333 81,098 101,230
Printing expense......................................... 92,744 13,805 13,413 9,078 11,055
Registration fees........................................ 91,596 92,014 73,530 92,057 76,063
Trustees' fees -- Note 2................................. 88,614 5,035 9,717 2,331 10,345
Legal fees............................................... 50,532 74,273 4,733 34,386 6,027
Audit fees............................................... 26,664 26,665 22,125 22,125 22,125
Insurance expense........................................ 26,247 1,355 3,548 798 3,808
Loan commitment fees -- Note 9........................... 20,455 1,253 2,063 585 2,606
Other.................................................... 336 457 457 457 456
------------ ------------ ------------ ------------ ------------
Total Expenses before Reimbursement and
Custody credits...................................... 13,024,152 1,529,849 2,299,738 923,367 2,178,047
Less: Expenses assumed by investment
adviser -- Note 2.................................... -- -- -- -- (1,180,646)
Custody credits -- Note 1............................. -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Expenses Net of Reimbursement and Custody
credits.............................................. 13,024,152 1,529,849 2,299,738 923,367 997,401
------------ ------------ ------------ ------------ ------------
Net Investment Income/(Loss)............................... 7,520,558 251,856 (1,352,534) (172,665) 1,589,028
------------ ------------ ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN/(LOSS) ON
INVESTMENTS AND FOREIGN CURRENCIES --
NOTE 4
Net realized gain/(loss) on investments -- Note 1........ (76,280,304) 4,603,444 16,253,102 4,660,235 1,931,418
Net realized loss on sale of affiliated underlying
funds................................................... -- -- -- -- (513,254)
Net realized gains received from affiliated underlying
funds................................................... -- -- -- -- 652,143
Foreign capital gains tax................................ -- -- -- -- --
Net realized loss on foreign currency related
transactions -- Note 1.................................. -- -- -- -- --
Net change in unrealized appreciation/(depreciation) on
investments -- Note 4................................... 310,795,254 18,569,447 44,032,029 8,161,095 31,908,656
Net change in unrealized depreciation of futures
contracts -- Note 1..................................... -- -- -- -- 1,847,930
Net change in unrealized depreciation from translation
of other assets and liabilities denominated in foreign
currencies -- Note 1.................................... -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Net Realized and Unrealized Gain on Investments and
Foreign Currencies........................................ 234,514,950 23,172,891 60,285,131 12,821,330 35,826,893
------------ ------------ ------------ ------------ ------------
NET INCREASE IN NET ASSETS FROM
OPERATIONS.............................................. $242,035,508 $23,424,747 $58,932,597 $12,648,665 $37,415,921
============ ============ ============ ============ ============
*Period from February 3, 2003 to December 31, 2003.
**Period from July 30, 2003 to December 31, 2003.
See notes to financial statements.
68
The Guardian The Guardian The Guardian The Guardian The Guardian The Guardian The Guardian The Guardian
S&P 500 Baillie Gifford Baillie Gifford Investment Low Duration High Yield Tax-Exempt Cash
Index International Emerging Quality Bond Fund** Bond Fund Fund Management
Fund Fund Markets Fund Bond Fund Fund
- ------------ --------------- --------------- ------------ ------------ ------------ ------------ ------------
$ 2,365,483 $ 1,529,340 $ 1,639,750 -- -- -- -- --
27,452 19,849 6,238 $ 9,009,847 $ 343,288 $ 5,566,537 $ 4,000,777 $8,103,902
-- (172,932) (164,409) -- -- -- -- --
- ------------ --------------- --------------- ------------ ------------ ------------ ------------ ------------
2,392,935 1,376,257 1,481,579 9,009,847 343,288 5,566,537 4,000,777 8,103,902
- ------------ --------------- --------------- ------------ ------------ ------------ ------------ ------------
334,817 466,684 555,220 1,060,329 58,007 395,372 457,919 3,230,632
276,788 105,165 80,254 429,324 8,330 98,837 203,769 1,529,984
24,166 14,339 17,619 49,553 8,019 22,932 -- 40,439
17,818 11,710 18,350 27,483 7,953 21,207 25,191 22,950
16,045 14,625 22,583 23,804 7,923 21,762 -- 21,943
72,497 43,019 52,855 148,660 24,058 68,797 -- 121,319
53,455 35,130 55,051 82,450 23,860 63,622 75,572 68,848
25,672 23,400 36,132 38,087 12,677 34,819 -- 35,109
44,179 97,460 37,590 95,438 9,764 36,988 37,939 460,544
38,696 41,417 33,019 43,178 9,264 35,434 -- 30,775
33,183 29,252 32,467 32,929 9,273 32,169 32,073 7,088
-- -- -- -- 1,650 -- -- 2,200
149,831 248,456 289,921 146,135 30,388 101,278 72,663 166,989
23,046 11,862 8,459 24,318 3,308 10,529 9,759 62,003
101,214 84,444 72,355 106,828 65,006 69,941 36,182 108,225
8,503 4,279 3,384 15,332 457 4,313 6,838 48,074
12,119 2,410 1,702 9,991 7,626 2,230 1,312 31,874
22,125 26,985 26,851 22,125 23,400 26,665 22,124 21,200
3,655 2,063 1,482 3,695 141 1,509 2,369 11,392
2,098 1,084 829 3,632 144 1,059 1,565 2,374
455 456 456 455 455 455 456 455
- ------------ --------------- --------------- ------------ ------------ ------------ ------------ ------------
1,260,362 1,264,240 1,346,579 2,363,746 311,703 1,049,918 985,731 6,024,417
(398,926) -- -- (291,989) (147,985) (322,570) (99,461) (307,067)
-- -- -- -- -- -- (32,236) --
- ------------ --------------- --------------- ------------ ------------ ------------ ------------ ------------
861,436 1,264,240 1,346,579 2,071,757 163,718 727,348 854,034 5,717,350
- ------------ --------------- --------------- ------------ ------------ ------------ ------------ ------------
1,531,499 112,017 135,000 6,938,090 179,570 4,839,189 3,146,743 2,386,552
- ------------ --------------- --------------- ------------ ------------ ------------ ------------ ------------
(317,473) (4,550,780) 2,479,760 5,743,920 (14,521) 2,660,574 3,094,286 --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- (150,898) -- -- -- -- --
-- (29,996) (80,548) -- -- -- -- --
32,396,692 18,753,402 22,842,057 (3,814,085) 91,665 4,375,476 (1,854,464) --
61,498 -- -- -- -- -- -- --
-- (12,076) 3,290 -- -- -- -- --
- ------------ --------------- --------------- ------------ ------------ ------------ ------------ ------------
32,140,717 14,160,550 25,093,661 1,929,835 77,144 7,036,050 1,239,822 --
- ------------ --------------- --------------- ------------ ------------ ------------ ------------ ------------
$33,672,216 $14,272,567 $25,228,661 $ 8,867,925 $ 256,714 $11,875,239 $ 4,386,565 $2,386,552
============ =============== =============== ============ ============ ============ ============ ============
69
.. The Park Avenue Portfolio
Statements of Changes in Net Assets
The
Guardian
UBS Large
The Guardian Cap Value
Park Avenue Fund Fund
------------------------------ ------------
Period from
February 3,
2003+ to
Year Ended December 31, December 31,
2003 2002 2003
-------------- -------------- ------------
INCREASE/(DECREASE) IN NET ASSETS
From Operations:
Net investment income/(loss)........................... $ 7,520,558 $ 6,268,512 $ 251,856
Net realized gain/(loss) on investments and foreign
currency related transactions......................... (76,280,304) (269,243,443) 4,603,444
Net change in unrealized appreciation/ (depreciation)
of investments and foreign currency related
transactions.......................................... 310,795,254 (151,728,126) 18,569,447
-------------- -------------- ------------
Net Increase/(Decrease) in Net Assets Resulting
from Operations....................................... 242,035,508 (414,703,057) 23,424,747
-------------- -------------- ------------
Dividends and Distributions to Shareholders from:
Net investment income
Class A............................................... (7,367,278) (4,310,369) (130,506)
Class B............................................... -- -- (25,664)
Class C............................................... -- -- (25,489)
Class K............................................... (20,780) -- (69,468)
Net realized gain on investments and foreign
currency related transactions
Class A............................................... -- -- (412,361)
Class B............................................... -- -- (408,262)
Class C............................................... -- -- (397,214)
Class K............................................... -- -- (398,772)
-------------- -------------- ------------
Total Dividends and Distributions to
Shareholders......................................... (7,388,058) (4,310,369) (1,867,736)
-------------- -------------- ------------
From Capital Share Transactions:
Net increase/(decrease) in net assets from capital
share transactions -- Note 8.......................... (221,597,031) (350,930,660) 63,270,044
Redemption fees........................................ -- -- --
-------------- -------------- ------------
(221,597,031) (350,930,660) 63,270,044
-------------- -------------- ------------
Net Increase/(Decrease) in Net Assets.................. 13,050,419 (769,944,086) 84,827,055
NET ASSETS:
Beginning of period....................................... 1,299,457,947 2,069,402,033 --
-------------- -------------- ------------
End of period*............................................ $1,312,508,366 $1,299,457,947 $84,827,055
============== ============== ============
* Includes undistributed/(distributions in excess)
of net investment income of.............................. $ 4,863,135 $ 4,730,635 $ 729
The
Guardian
The Guardian UBS Small
Park Avenue Cap Value
Small Cap Fund Fund
-------------------------- ------------
Period from
February 3,
2003+ to
Year Ended December 31, December 31,
2003 2002 2003
------------ ------------ ------------
INCREASE/(DECREASE) IN NET ASSETS
From Operations:
Net investment income/(loss)........................... $ (1,352,534) $ (1,034,582) $ (172,665)
Net realized gain/(loss) on investments and foreign
currency related transactions......................... 16,253,102 (7,577,860) 4,660,235
Net change in unrealized appreciation/ (depreciation)
of investments and foreign currency related
transactions.......................................... 44,032,029 (21,018,611) 8,161,095
------------ ------------ ------------
Net Increase/(Decrease) in Net Assets Resulting
from Operations....................................... 58,932,597 (29,631,053) 12,648,665
------------ ------------ ------------
Dividends and Distributions to Shareholders from:
Net investment income
Class A............................................... -- -- --
Class B............................................... -- -- --
Class C............................................... -- -- --
Class K............................................... -- -- --
Net realized gain on investments and foreign
currency related transactions
Class A............................................... -- -- (651,609)
Class B............................................... -- -- (632,339)
Class C............................................... -- -- (613,490)
Class K............................................... -- -- (614,867)
------------ ------------ ------------
Total Dividends and Distributions to
Shareholders......................................... -- -- (2,512,305)
------------ ------------ ------------
From Capital Share Transactions:
Net increase/(decrease) in net assets from capital
share transactions -- Note 8.......................... 526,138 (4,165,700) 28,596,499
Redemption fees........................................ -- -- --
------------ ------------ ------------
526,138 (4,165,700) 28,596,499
------------ ------------ ------------
Net Increase/(Decrease) in Net Assets.................. 59,458,735 (33,796,753) 38,732,859
NET ASSETS:
Beginning of period....................................... 141,564,211 175,360,964 --
------------ ------------ ------------
End of period*............................................ $201,022,946 $141,564,211 $38,732,859
============ ============ ============
* Includes undistributed/(distributions in excess)
of net investment income of.............................. $ -- $ -- $ --
+ Commencementof operations.
See notes to financial statements.
70
The Guardian
The Guardian The Guardian Baillie Gifford
The Guardian S&P 500 Baillie Gifford Emerging
Asset Allocation Fund Index Fund International Fund Markets Fund
- -------------------------- --------------------------- -------------------------- ------------------------
Year Ended December 31, Year Ended December 31, Year Ended December 31, Year Ended December 31,
2003 2002 2003 2002 2003 2002 2003 2002
- ------------ ------------ ------------ ------------- ------------ ------------ ----------- -----------
$ 1,589,028 $ 2,650,316 $ 1,531,499 $ 2,264,690 $ 112,017 $ 89,833 $ 135,000 $ (188,253)
2,070,307 (12,406,127) (317,473) (95,822,692) (4,580,776) (22,615,441) 2,248,314 2,907,671
33,756,586 (35,892,162) 32,458,190 18,959,704 18,741,326 5,673,231 22,845,347 (6,026,178)
- ------------ ------------ ------------ ------------- ------------ ------------ ----------- -----------
37,415,921 (45,647,973) 33,672,216 (74,598,298) 14,272,567 (16,852,377) 25,228,661 (3,306,760)
- ------------ ------------ ------------ ------------- ------------ ------------ ----------- -----------
(1,836,307) (2,611,441) (1,405,045) (2,164,053) (63,805) -- -- --
(225,527) (296,792) (50,103) (28,553) -- -- -- --
(29,885) (39,379) (36,942) (22,264) -- -- -- --
(81,064) (92,412) (55,604) (43,052) -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
-- -- -- -- -- -- -- --
- ------------ ------------ ------------ ------------- ------------ ------------ ----------- -----------
(2,172,783) (3,040,024) (1,547,694) (2,257,922) (63,805) -- -- --
- ------------ ------------ ------------ ------------- ------------ ------------ ----------- -----------
(19,929,631) (28,957,348) 5,064,300 (103,976,012) (26,483,377) (21,180,662) 1,751,043 10,313,357
-- -- -- -- 127,145 -- -- --
- ------------ ------------ ------------ ------------- ------------ ------------ ----------- -----------
(19,929,631) (28,957,348) 5,064,300 (103,976,012) (26,356,232) (21,180,662) 1,751,043 10,313,357
- ------------ ------------ ------------ ------------- ------------ ------------ ----------- -----------
15,313,507 (77,645,345) 37,188,822 (180,832,232) (12,147,470) (38,033,039) 26,979,704 7,006,597
152,252,538 229,897,883 120,498,087 301,330,319 63,333,783 101,366,822 47,313,148 40,306,551
- ------------ ------------ ------------ ------------- ------------ ------------ ----------- -----------
$167,566,045 $152,252,538 $157,686,909 $ 120,498,087 $ 51,186,313 $ 63,333,783 $74,292,852 $47,313,148
============ ============ ============ ============= ============ ============ =========== ===========
$ 1,448,759 $ 2,032,514 $ 10,951 $ 27,146 $ 81,893 $ 63,677 $ (4,769) $ (124,550)
The Guardian
Investment Quality
Bond Fund
- --------------------------
Year Ended December 31,
2003 2002
- ------------ ------------
$ 6,938,090 $ 7,971,762
5,743,920 962,427
(3,814,085) 7,351,497
- ------------ ------------
8,867,925 16,285,686
- ------------ ------------
(5,833,151) (6,694,956)
(526,000) (572,072)
(292,345) (354,303)
(286,594) (350,431)
(4,189,420) (465,319)
(528,307) (52,987)
(318,457) (29,434)
(278,194) (25,176)
- ------------ ------------
(12,252,468) (8,544,678)
- ------------ ------------
(23,611,845) 26,728,214
-- --
- ------------ ------------
(23,611,845) 26,728,214
- ------------ ------------
(26,996,388) 34,469,222
209,931,930 175,462,708
- ------------ ------------
$182,935,542 $209,931,930
============ ============
$ -- $ --
71
.. The Park Avenue Portfolio
Statements of Changes in Net Assets (Continued)
The Guardian The Guardian
Low Duration High Yield The Guardian
Bond Fund Bond Fund Tax-Exempt Fund
-------------- ------------------------ --------------------------
Period from
July 30, 2003+
to
December 31, Year Ended December 31, Year Ended December 31,
2003 2003 2002 2003 2002
-------------- ----------- ----------- ------------ ------------
INCREASE/(DECREASE) IN NET ASSETS
From Operations:
Net investment income........................ $ 179,570 $ 4,839,189 $ 4,541,788 $ 3,146,743 $ 4,478,043
Net realized gain/(loss) on investments and
foreign currency related transactions....... (14,521) 2,660,574 (5,394,424) 3,094,286 1,826,662
Net change in unrealized appreciation/
(depreciation) of investments and
foreign currency related transactions....... 91,665 4,375,476 1,260,183 (1,854,464) 5,144,825
-------------- ----------- ----------- ------------ ------------
Net Increase/(Decrease) in Net Assets
Resulting from Operations................... 256,714 11,875,239 407,547 4,386,565 11,449,530
-------------- ----------- ----------- ------------ ------------
Dividends and Distributions to
Shareholders from:
Net investment income
Class A..................................... (62,296) (3,002,350) (2,763,882) (2,868,086) (4,191,275)
Class B..................................... (35,675) (628,715) (606,359) -- --
Class C..................................... (35,327) (581,123) (563,588) (278,657) (286,768)
Class K..................................... (46,272) (627,001) (607,959) -- --
Net realized gain on investments and
foreign currency related transactions
Class A..................................... -- -- -- (2,827,113) (1,983,160)
Class C..................................... -- -- -- (372,638) (168,362)
-------------- ----------- ----------- ------------ ------------
Total Dividends and Distributions to
Shareholders (179,570) (4,839,189) (4,541,788) (6,346,494) (6,629,565)
-------------- ----------- ----------- ------------ ------------
From Capital Share Transactions:
Net increase/(decrease) in net assets from
capital share transactions -- Note 8........ 31,298,313 6,584,315 4,489,847 (31,055,047) 2,313,675
-------------- ----------- ----------- ------------ ------------
Net Increase/(Decrease) in Net Assets........ 31,375,457 13,620,365 355,606 (33,014,976) 7,133,640
NET ASSETS:
Beginning of period............................. -- 57,883,506 57,527,900 123,592,794 116,459,154
-------------- ----------- ----------- ------------ ------------
End of period................................... $31,375,457 $71,503,871 $57,883,506 $ 90,577,818 $123,592,794
============== =========== =========== ============ ============
The Guardian
Cash Management
Fund
---------------------------
Year Ended December 31,
2003 2002
------------- ------------
INCREASE/(DECREASE) IN NET ASSETS
From Operations:
Net investment income........................ $ 2,386,552 $ 6,145,223
Net realized gain/(loss) on investments and
foreign currency related transactions....... -- --
Net change in unrealized appreciation/
(depreciation) of investments and
foreign currency related transactions....... -- --
------------- ------------
Net Increase/(Decrease) in Net Assets
Resulting from Operations................... 2,386,552 6,145,223
------------- ------------
Dividends and Distributions to
Shareholders from:
Net investment income
Class A..................................... (2,318,884) (6,042,276)
Class B..................................... (33,161) (37,641)
Class C..................................... (19,118) (19,989)
Class K..................................... (15,389) (45,317)
Net realized gain on investments and
foreign currency related transactions
Class A..................................... -- --
Class C..................................... -- --
------------- ------------
Total Dividends and Distributions to
Shareholders (2,386,552) (6,145,223)
------------- ------------
From Capital Share Transactions:
Net increase/(decrease) in net assets from
capital share transactions -- Note 8........ (133,887,227) 56,129,038
------------- ------------
Net Increase/(Decrease) in Net Assets........ (133,887,227) 56,129,038
NET ASSETS:
Beginning of period............................. 694,474,771 638,345,733
------------- ------------
End of period................................... $ 560,587,544 $694,474,771
============= ============
+ Commencementof operations.
See notes to financial statements.
72
.. The Guardian Investment Quality Bond Fund
Statement of Cash Flows
Year Ended December 31, 2003
- ------------------------------------------------
Cash flows from operating activities:
Net increase in net assets resulting from operations...................................................... $ 8,867,925
Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by
operating activities:
Purchases of long-term securities.................................................................... (547,468,428)
Proceeds from sales of long-term securities.......................................................... 529,854,769
Proceeds from mortgage securities' paydown........................................................... 26,637,308
Gain on proceeds from mortgage securities' paydown................................................... 6,665,063
Premium amortization/discount accretion, net......................................................... 491,910
Purchases of short-term investments, net............................................................. 10,474,539
Decrease in receivables.............................................................................. 225,942
Increase in other assets............................................................................. (2,769)
Increase in accrued expenses......................................................................... 25,667
Decrease in distributions payable.................................................................... (6,039)
Decrease in due to GIS............................................................................... (7,761)
Net realized gain on investments..................................................................... (5,743,920)
Net change in unrealized appreciation of investments................................................. 3,814,085
-------------
Net cash provided by operating activities.......................................................... 33,828,291
-------------
Cash flows from financing activities:
Proceeds from fund shares sold........................................................................ 38,780,492
Payments for fund shares redeemed..................................................................... (71,633,087)
Cash distributions paid............................................................................... (1,862,398)
Proceeds from the financing of dollar roll transactions, net.......................................... 941,318
-------------
Net cash used in financing activities.............................................................. (33,773,675)
-------------
Increase in Cash.......................................................................................... 54,616
Cash
Beginning of year......................................................................................... 41,675
-------------
End of year............................................................................................... $ 96,291
=============
Supplemental disclosure of cash flow information
Non-cash financing activities not included above:
Reinvestment of dividends and distributions........................................................... $ 10,390,070
=============
See notes to financial statements.
73
Notes to
Financial Statements
December 31, 2003
The Park Avenue Portfolio
[_] The Guardian Park Avenue Fund
[_] The Guardian UBS Large Cap Value Fund
[_] The Guardian Park Avenue Small Cap Fund
[_] The Guardian UBS Small Cap Value Fund
[_] The Guardian Asset Allocation Fund
[_] The Guardian S&P 500 Index Fund
[_] The Guardian Baillie Gifford International Fund
[_] The Guardian Baillie Gifford Emerging Markets Fund
[_] The Guardian Investment Quality Bond Fund
[_] The Guardian Low Duration Bond Fund
[_] The Guardian High Yield Bond Fund
[_] The Guardian Tax-Exempt Fund
[_] The Guardian Cash Management Fund
Note 1. Organization and Accounting Policies
The Park Avenue Portfolio (the Portfolio) is a diversified open-end
management investment company registered under the Investment Company Act of
1940, as amended (the 1940 Act), which is organized as a business trust under
the laws of the Commonwealth of Massachusetts. The Portfolio consists of
thirteen series, namely: The Guardian Park Avenue Fund (GPAF); The Guardian UBS
Large Cap Value Fund (GULCVF); The Guardian Park Avenue Small Cap Fund
(GPASCF); The Guardian UBS Small Cap Value Fund (GUSCVF); The Guardian Asset
Allocation Fund (GAAF); The Guardian S&P 500 Index Fund (GSP500F); The Guardian
Baillie Gifford International Fund (GBGIF); The Guardian Baillie Gifford
Emerging Markets Fund (GBGEMF); The Guardian Investment Quality Bond Fund
(GIQBF); The Guardian Low Duration Bond Fund (GLDBF); The Guardian High Yield
Bond Fund (GHYBF); The Guardian Tax-Exempt Fund (GTEF); and The Guardian Cash
Management Fund (GCMF). The series are collectively referred to herein as the
"Funds".
On February 3, 2003, GULCVF and GUSCVF commenced operations. GULCVF sold
937,500 shares for each of Class A, Class B, Class C and Class K shares to The
Guardian Life Insurance Company of America (Guardian Life) for $9,375,000 each.
GUSCVF sold 437,500 shares for each of Class A, Class B, Class C and Class K
shares to Guardian Life for $4,375,000 each.
On July 30, 2003, GLDBF commenced operations. GLDBF sold 750,000 shares for
each of Class A, Class B, Class C and Class K shares to Guardian Life for
$7,500,000 each.
The Funds offer up to five classes of shares: Class A, Class B, Class C,
Class K and the Institutional Class. Each of the Funds offers Class A shares.
Class A shares are sold with an initial sales load of up to 4.50% and an
administrative fee of up to .25% on an annual basis of the Funds' average daily
net assets. A redemption fee of 2% is imposed on purchases of Class A shares of
GBGIF, GBGEMF and GHYBF if redeemed within 60 days of purchase. Class B shares
are offered by all of the Funds, except for GTEF. Class B shares are sold
without an initial sales load but are subject to a 12b-1 fee of .75% and an
administrative fee of .25% on an annual basis of the Funds' Class B average
daily net assets, and a contingent deferred sales load (CDSL) of up to 3%
imposed on certain redemptions. Each of the Funds offers Class C shares. Class
C shares are sold without an initial sales load but are subject to a 12b-1 fee
of .75% and an administrative fee of .25% on an annual basis of the Funds'
Class C average daily net assets, and a CDSL of up to 1% imposed on certain
redemptions. Class K shares are offered by all of the Funds, except for GTEF.
Class K shares are sold without an initial sales load but are subject to a
12b-1 fee of .40% and an administrative fee of .25% on an annual basis of the
Funds' Class K average daily net assets, and a CDSL of up to 1% imposed on
certain redemptions. Institutional Class shares are offered by GPAF, GPASCF,
GAAF, GSP500F, GBGIF, GBGEMF, GIQBF and GHYBF. As of December 31, 2003, none of
the Funds had issued Institutional Class shares. Institutional Class shares are
offered at net asset value, without an initial or contingent deferred sales
load. All classes of shares for each Fund represent interests in the same
portfolio of investments, have the same rights and are generally identical in
all respects except that each class bears its separate distribution and certain
class expenses, and has exclusive voting rights with respect to any matter to
which a separate vote of any class is required.
74
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States (GAAP) requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities at the date of the financial statements and the reported
amounts of income, gains (losses) and expenses during the reporting period.
Actual results could differ from those estimates.
Significant accounting policies of the Funds are as follows:
Investments
Securities listed on domestic or foreign securities exchanges are valued at
the last sale price on such exchanges, or if no sale occurred, at the mean of
the bid and asked prices. Securities that are traded on the NASDAQ National
Securities Market are valued at the NASDAQ Official Closing Price. In GAAF,
investments in the underlying Funds are valued at the closing net asset value
of each underlying Fund on the day of valuation.
Pursuant to valuation procedures approved by the Board of Trustees, certain
debt securities may be valued each business day by an independent pricing
service (Service). Debt securities for which quoted bid prices are readily
available and representative of the bid side of the market, in the judgment of
the Service, are valued at the bid price, except for GTEF. In GTEF, debt
securities are valued at the mean between the bid and asked prices obtained by
the Service. Other debt securities that are valued by the Service are carried
at fair value as determined by the Service, based on methods which include
consideration of: yields or prices of securities of comparable quality, coupon,
maturity and type; indications as to values from dealers; and general market
conditions.
Futures contracts are valued at the settlement prices established by the
exchanges on which they are traded.
Other securities, including securities for which market quotations are not
readily available (such as certain mortgage-backed securities, restricted
securities and foreign securities subject to "significant event") are valued at
fair value as determined in good faith by or under the direction of the Funds'
Board of Trustees. A "significant event" is an event that will affect the value
of a portfolio security that occurs after the close of trading in the
security's primary trading market or exchange but before the Fund's NAV is
calculated.
Repurchase agreements are carried at cost which approximates market value
(see Note 5). Short-term securities held by the Funds are valued on an
amortized cost basis which approximates market value but does not take into
account unrealized gains and losses. GCMF values its investments based on
amortized cost in accordance with Rule 2a-7 under the 1940 Act.
Investing outside of the U.S. may involve certain considerations and risks
not typically associated with domestic investments, including the possibility
of political and economic unrest and different levels of governmental
supervision and regulation of foreign securities markets.
Investment transactions are recorded on the date of purchase or sale.
Security gains or losses are determined on an identified cost basis. Interest
income, including amortization/accretion of premium/ discount, is accrued
daily. Dividend income is recorded on the ex-dividend date.
All income, expenses (other than class-specific expenses) and realized and
unrealized gains or losses are allocated daily to each class of shares based
upon the relative value of shares of each class. Class-specific expenses, which
include any items that are specifically attributed to a particular class, are
charged directly to such class. For the year ended December 31, 2003,
distribution, administrative and transfer agent fees were the only
class-specific expenses.
Foreign Currency Translation
GPAF, GULCVF, GPASCF, GUSCVF, GAAF, GBGIF, GBGEMF and GHYBF are permitted to
buy international securities that are not U.S. dollar denominated. Their books
and records are maintained in U.S. dollars as follows:
(1) The foreign currency market value of investment securities and other
assets and liabilities stated in foreign currencies are translated into U.S.
dollars at the current rate of exchange.
(2) Security purchases and sales, income and expenses are translated at the
rate of exchange prevailing on the respective dates of such transactions.
The resulting gains and losses are included in the Statement of Operations
as follows:
Gains and losses attributable to foreign currency exchange rates on sales of
securities are recorded for financial statement purposes as net realized gains
and losses on investments. Realized foreign exchange gains and losses, which
result from changes in foreign exchange rates between the date on which a Fund
earns dividends and interest or pays foreign withholding taxes or other
expenses and the date on which U.S. dollar equivalent amounts are actually
received or paid, are included in net realized gains or losses on foreign
currency related transactions. Realized foreign exchange gains and losses which
result from changes in foreign exchange rates between the trade and settlement
dates on security and currency transactions are also included in net realized
gains or losses on foreign currency related transactions. Net currency gains
and losses from valuing other assets and liabilities denominated in foreign
currency at the period end exchange rate are reflected in net change in
unrealized appreciation or depreciation from translation of other assets and
liabilities denominated in foreign currencies.
75
Forward Foreign Currency Contracts
GPAF, GULCVF, GPASCF, GUSCVF, GAAF, GBGIF, GBGEMF and GHYBF may enter into
forward foreign currency contracts in connection with planned purchases or
sales of securities, or to hedge against changes in currency exchange rates
affecting the values of its investments that are denominated in a particular
currency. A forward foreign currency contract is a commitment to purchase or
sell a foreign currency at a future date at a negotiated forward exchange rate.
Risks may arise from the potential inability of a counterparty to meet the
terms of a contract and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar. Fluctuations in the value of forward
foreign currency contracts are recorded for book purposes as unrealized gains
or losses on foreign currency related transactions by the Fund. When forward
contracts are closed, the Fund will record realized gains or losses equal to
the difference between the values of such forward contracts at the time each
was opened and the values at the time each was closed. Such amounts are
recorded in net realized gains or losses on foreign currency related
transactions. The Funds will not enter into a forward foreign currency contract
if such contract would obligate the applicable Fund to deliver an amount of
foreign currency in excess of the value of the Funds' portfolio securities or
other assets denominated in that currency.
Futures Contracts
GULCVF, GUSCVF, GAAF, GSP500F, GBGIF, GBGEMF, GIQBF, GLDBF, GHYBF and GTEF
may enter into financial futures contracts for the delayed delivery of
securities, currency or contracts based on financial indices at a fixed price
on a future date. In entering into such contracts, the Funds are required to
deposit either in cash or securities an amount equal to a certain percentage of
the contract amount. Subsequent payments are made or received by the Funds each
day, depending on the daily fluctuations in the value of the underlying
security, and are recorded for financial statement purposes as variation
margins by the Funds. The daily changes in the variation margin are recognized
as unrealized gains or losses by the Funds. The Funds' investments in financial
futures contracts are designed to hedge against anticipated future changes in
interest or exchange rates or securities prices. In addition, GAAF may enter
into financial futures contracts for non-hedging purposes. Should interest or
exchange rates or securities prices or prices of futures contracts move
unexpectedly, the Funds may not achieve the anticipated benefits of the
financial futures contracts and may realize a loss.
Dividend Distributions
Dividends from net investment income are declared and accrued daily and are
paid monthly for GIQBF, GLDBF, GHYBF and GTEF, and declared and paid
semi-annually for GPAF, GULCVF, GPASCF, GUSCVF, GAAF, GSP500F, GBGIF and
GBGEMF. Net realized short-term and long-term capital gains for these Funds
will be distributed at least annually. Dividends from GCMF's net investment
income, which includes any net realized capital gains or losses, are declared
and accrued daily and paid monthly on the last business day of each month.
All dividends and distributions are recorded on the ex-dividend date. Such
distributions are determined in conformity with federal income tax regulations.
Differences between the recognition of income on an income tax basis and
recognition of income based on GAAP may cause temporary overdistributions of
net realized gains and net investment income.
The tax character of distributions paid to shareholders during the years
ended December 31, 2003 and 2002 were as follows:
Tax Ordinary Long-Term
Exempt Income Capital Gain Total
---------- ---------- ------------ -----------
----------------------------------------------
2003
----------------------------------------------
GPAF... $ -- $7,388,058 $ -- $ 7,388,058
GULCVF. -- 1,867,736 -- 1,867,736
GUSCVF. -- 2,512,305 -- 2,512,305
GAAF... -- 2,172,784 -- 2,172,784
GSP500F -- 1,547,694 -- 1,547,694
GBGIF.. -- 63,805 -- 63,805
GIQBF.. -- 9,989,588 2,262,880 12,252,468
GLDBF.. -- 179,570 -- 179,570
GHYBF.. -- 4,839,189 -- 4,839,189
GTEF... 3,146,743 1,003,278 2,196,473 6,346,494
GCMF... -- 2,386,552 -- 2,386,552
----------------------------------------------
2002
----------------------------------------------
GPAF... $ -- $4,310,369 $ -- $ 4,310,369
GAAF... -- 3,040,024 -- 3,040,024
GSP500F -- 2,257,922 -- 2,257,922
GIQBF.. -- 7,981,745 562,933 8,544,678
GHYBF.. -- 4,541,788 -- 4,541,788
GTEF... 4,478,043 880,639 1,270,883 6,629,565
GCMF... -- 6,145,223 -- 6,145,223
For the year ended December 31, 2003, the components of distributable
earnings on a tax basis were as follows:
Long-Term
Gain/(Post-
Undistributed October Loss)/ Unrealized
Ordinary (Capital Loss Appreciation
Income Carryforward) (Depreciation)
------------- -------------- --------------
GPAF... $4,863,134 $(719,693,464) $148,275,633
GULCVF. 3,032,170 -- 18,524,841
GPASCF. -- 2,580,584 43,069,817
GUSCVF. 1,995,430 -- 8,140,930
GAAF... 1,448,758 (53,383,946) (16,498,888)
GSP500F 10,952 (96,581,166) (4,071,838)
GBGIF.. 89,358 (40,554,148) 9,850,223
GBGEMF. 128,596 (3,310,720) 19,636,084
GIQBF.. 99,020 504,707 3,573,912
GLDBF.. -- (11,668) 89,586
GHYBF.. -- (19,020,569) 4,637,566
GTEF... 27,300 8,826 4,763,353
GCMF... 8,211 (8,090) --
76
Taxes
Each Fund has qualified and intends to remain qualified to be taxed as a
"regulated investment company" under the provisions of the U.S. Internal
Revenue Code (Code), and as such will not be subject to federal income tax on
taxable income (including any realized capital gains) which is distributed in
accordance with the provisions of the Code. Therefore, no federal income tax
provision is required.
Withholding taxes on foreign interest, dividends and capital gains in GBGIF
and GBGEMF have been provided for in accordance with the applicable country's
tax rules and rates.
For the year ended December 31, 2003, for federal income tax purposes, the
following Funds have post-October capital losses and capital losses
carryforward of:
Post-October Capital Loss Expiration
Capital Loss Carryforward Date
------------ ------------ ----------
GPAF... $85,513,676 $367,844,523 2009
GPAF... -- 255,258,468 2010
GPAF... -- 11,076,797 2011
GAAF... -- 38,930,441 2009
GAAF... -- 14,453,505 2010
GSP500F -- 509,976 2009
GSP500F -- 95,906,657 2010
GSP500F -- 164,533 2011
GBGIF.. 212,471 9,713,036 2009
GBGIF.. -- 22,118,121 2010
GBGIF.. -- 8,510,520 2011
GBGEMF. 10,164 3,300,556 2009
GLDBF.. 9,011 2,657 2011
GHYBF.. -- 2,997,484 2007
GHYBF.. -- 3,128,645 2008
GHYBF.. -- 7,587,223 2009
GHYBF.. -- 5,307,217 2010
GCMF... -- 195 2007
GCMF... 2,822 5,073 2011
Expense Reductions
GTEF has entered into an arrangement with its custodian whereby credits
realized as a result of uninvested cash balances were used to reduce a portion
of the Fund's expenses. During the period, GTEF's custodian fees were reduced
by $32,326 under this arrangement. GTEF could have employed the uninvested
assets to produce income if GTEF has not entered into such arrangement.
Reclassification of Capital Accounts
The treatment for financial statement purposes of distributions made during
the year from net investment income and net realized gains may differ from
their ultimate treatment for federal income tax purposes. These differences
primarily are caused by differences in the timing of the recognition of certain
components of income or capital gains, and the recharacterization of foreign
exchange gains or losses to either ordinary income or realized capital gains
for federal income tax purposes. Where such differences are permanent in
nature, they are reclassified in the components of net assets based on their
ultimate characterization for federal income tax purposes. Any such
reclassifications will have no effect on net assets, results of operations, or
net asset value per share of the Fund.
During the year ended December 31, 2003, certain Funds reclassified amounts
to paid-in capital from undistributed/(distributions in excess) of net
investment income and accumulated net realized gain/(loss) on investment and
foreign currency related transactions. Increases/(decreases) to the various
capital accounts were as follows:
Accumulated
net realized
gain/(loss) on
Undistributed/ investments
(distributions and foreign
in excess) of currency
Paid-in net investment related
capital income transactions
----------- -------------- --------------
GPASCF $(1,352,534) $1,352,524 $ --
GUSCVF -- 172,665 (172,665)
GBGIF. -- (29,996) 29,996
GBGEMF (70,698) (15,219) 85,917
GLDBF. (774) -- 774
Note 2. Investment Advisory Agreements and Payments to or from Related Parties
Guardian Investor Services LLC (GIS), provides investment advisory services
to each of the Funds (except GBGIF and GBGEMF). Fees for investment advisory
services are at an annual rate of .50% of the average daily net assets of each
Fund, except for GPASCF, GSP500F, GHYBF and GLDBF, which pay GIS an annual rate
of .75%, .25%, 60% and .45%, respectively, of their average daily net assets.
GAAF is subject to a contractual annual advisory fee of .65% of its average
daily net assets. However, GIS has agreed to a waiver of .15% of GAAF's annual
advisory fee when GAAF is operated as a "fund of funds" so that GAAF's
effective advisory fee is .50% of its average daily net assets. There are no
duplicative advisory and administrative service fees charged to GAAF on assets
invested in other Guardian Funds. Under an SEC exemptive order, advisory and
administrative fees are paid at the underlying Fund level.
GULCVF pays investment advisory fees to GIS at an annual rate of .83% of its
average daily net assets. GUSCVF pays investment advisory fees to GIS at an
annual rate of 1.00% of its average daily net assets for the first $50 million
and an annual rate of .95% of its average daily net assets in excess of $50
million. GIS has entered into a sub-investment advisory agreement with UBS
Global Asset Management (Americas), Inc. (UBS Global AM). UBS Global AM is
responsible for the day-to-day management of GULCVF and GUSCVF. GIS continually
monitors and evaluates the per-
77
formance of UBS Global AM. As compensation for its services, GIS pays UBS
Global AM at an annual rate of .43% of GULCVF's average daily net assets and at
an annual rate of .60% for the first $50 million and at an annual rate of .55%
in excess of $50 million of GUSCVF's average daily net assets. Payment of
sub-investment advisory fees does not represent a separate or additional
expense to GULCVF or GUSCVF.
For the year ended December 31, 2003, GIS voluntarily assumed a portion of
the ordinary operating expenses (excluding interest expense associated with
reverse repurchase agreements and securities lending) that exceeded a
percentage of the average daily net assets of the respective Funds, by class,
as follows:
Fund Class A Class B Class C Class K
- ---- ------- ------- ------- -------
GSP500F .53% 1.28% 1.28% 0.93%
GIQBF .85% 1.60% 1.60% 1.25%
GLDBF .80% 1.55% 1.55% 1.20%
GHYBF .85% 1.60% 1.60% 1.25%
GTEF .85% N/A 1.60% N/A
GCMF .85% 1.60% 1.60% 1.25%
For the year ended December 31, 2003, GIS voluntarily assumed a portion of
certain Funds' expenses based on their respective average daily net assets as
follows:
- --------------------------------------------------
GSP500F
- --------------------------------------------------
Class A Class B Class C Class K
------- ------- ------- -------
Ordinary Operating
Expenses .25% .25% .25% .21%
12b-1 Fees -- .36% .42% --
----- ----- ----- ----
.25% .61% .67% .21%
===== ===== ===== ====
- --------------------------------------------------
GIQBF
- --------------------------------------------------
Class A Class B Class C Class K
------- ------- ------- -------
Ordinary Operating
Expenses .11% .11% .11% .05%
12b-1 Fees -- .16% .24% --
----- ----- ----- ----
.11% .27% .35% .05%
===== ===== ===== ====
- --------------------------------------------------
GLDBF*
- --------------------------------------------------
Class A Class B Class C Class K
------- ------- ------- -------
Ordinary Operating
Expenses 1.20% 1.20% 1.20% .97%
12b-1 Fees -- -- .01% --
----- ----- ----- ----
1.20% 1.20% 1.21% .97%
===== ===== ===== ====
- --------------------------------------------------
GHYBF
- --------------------------------------------------
Class A Class B Class C Class K
------- ------- ------- -------
Ordinary Operating
Expenses .42% .42% .42% .33%
12b-1 Fees -- .30% .29% --
----- ----- ----- ----
.42% .72% .71% .33%
===== ===== ===== ====
- ---------------------------------------------
GTEF
- ---------------------------------------------
Class A Class C
------- -------
Ordinary Operating
Expenses .09% .09%
12b-1 Fees -- .27%
---- ----
.09% .36%
==== ====
- ---------------------------------------------
GCMF
- ---------------------------------------------
Class A Class B Class C
------- ------- -------
Administrative Fees .05% .16% .05%
==== ==== ====
* Annualized.
For the year ended December 31, 2003 GIS voluntarily assumed $398,926,
$291,989, $147,985, $322,570, $99,461 and $307,067 of the ordinary operating
expenses of GSP500F, GIQBF, GLDBF, GHYBF, GTEF and GCMF, respectively.
The Portfolio, on behalf of GBGIF and GBGEMF, has an investment management
agreement with Guardian Baillie Gifford Limited (GBG), a Scottish corporation
owned by The Guardian Insurance & Annuity Company, Inc. (GIAC), a wholly-owned
subsidiary of Guardian Life, and Baillie Gifford Overseas Limited (BG
Overseas). GBG is responsible for the overall investment management of GBGIF
and GBGEMF's portfolios, subject to the supervision of the Portfolio's Board of
Trustees. GBG has entered into a sub-investment management agreement with BG
Overseas pursuant to which BG Overseas is responsible for the day-to-day
management of GBGIF and GBGEMF. GBG continually monitors and evaluates the
performance of BG Overseas. As compensation for its services, GBGIF and GBGEMF
pay GBG annual investment management fees of .80% and 1.00%, respectively, of
their respective average daily net assets. One half of these fees is payable by
GBG to BG Overseas for its services. Payment of the sub-investment management
fee does not represent a separate or additional expense to GBGIF or GBGEMF.
The Guardian Fund Complex pays trustees who are not "interested persons" (as
defined in the 1940 Act) fees consisting of a $5,000 per meeting fee and an
annual retainer of $30,500, allocated among all funds in the Guardian Fund
Complex based on relative average daily net assets. Board committee members
also receive a fee of $2,000 per committee meeting, which also is allocated
among all funds in the Guardian Fund Complex based on relative average daily
net assets. Additional compensation is paid to the Chairmen of the Nominating
and Governance Committee and the Audit Committee, respectively. GIS pays
compensation to certain trustees who are interested persons. Certain officers
and trustees of the Funds are affiliated with GIS.
GAAF received $2,794,174 in dividends from other Guardian mutual funds.
Park Avenue Securities LLC (PAS), a wholly-owned subsidiary of GIAC and an
affiliate of GIS distributes the
78
Portfolio's shares as a retail broker-dealer. For the year ended December 31,
2003, PAS received $537,497 for brokerage commissions from the Portfolio.
Administrative Services Agreement
Pursuant to the Administrative Services Agreement adopted by the Funds on
behalf of the Class A, Class B, Class C and Class K shares, each of the Funds,
except GPAF, pays GIS an administrative service fee at an annual rate of .25%
of the Funds' average daily net assets. GPAF pays this fee to GIS at an annual
rate of up to .25% of the average daily net assets for which a "dealer of
record" has been designated. For the year ended December 31, 2003, GPAF Class A
shares paid an annualized rate of .20% of its average daily net assets pursuant
to the Administrative Services Agreement.
Note 3. Underwriting Agreement and Distribution Plan
The Portfolio has entered into an Underwriting Agreement with GIS pursuant
to which GIS serves as the principal underwriter for shares of the Funds.
For the year ended December 31, 2003, aggregate front-end sales charges for
the sale of Class A shares paid to GIS were as follows:
Fund Commissions Fund Commissions
---- ----------- ------ -----------
GPAF $31,630 GBGEMF $ 304
GPASCF 2,739 GIQBF 5,595
GAAF 854 GLDBF 210
GSP500F 3,175 GHYBF 3,681
GBGIF 773 GTEF 2,506
Under Distribution Plans adopted by the Portfolio pursuant to Rule 12b-1
under the 1940 Act (the "12b-1 Plans"), each Fund is authorized to pay a
monthly 12b-1 fee for certain classes of shares at an annual rate of .75% of
average daily net assets of the Fund's Class B and Class C shares and .40% of
average daily net assets of the Fund's Class K shares as compensation for
distribution-related services provided to the Class B, Class C and Class K
shares of those Funds.
GIS is entitled to retain any CDSL imposed on certain Class B, Class C and
Class K share redemptions. For the year ended December 31, 2003, GIS received
CDSL charges on Class B, Class C and Class K as follows:
Fund Class B Class C Class K
- ---- -------- ------- -------
GPAF... $253,634 $ 874 --
GPASCF. 24,236 118 --
GAAF... 40,752 1,009 $ 4
GSP500F 7,219 586 6
GBGIF.. 4,307 70 4
GBGEMF. 17,299 94 --
GIQBF.. 11,547 2,733 6
GHYBF.. 5,013 777 --
GTEF... -- 279 --
GCMF... 74,587 2,509 2,378
Note 4. Investment Transactions
Purchases and proceeds from sales of securities (excluding short-term
securities) for the year ended December 31, 2003 were as follows:
- ------------------------------------
GPAF GULCVF
- ------------------------------------
Purchases $ 933,822,552 $95,030,207
Proceeds 1,137,099,626 35,534,648
- ------------------------------------
GPASCF GUSCVF
- ------------------------------------
Purchases $ 167,132,224 $59,503,121
Proceeds 164,435,939 34,519,344
- ------------------------------------
GAAF GSP500F
- ------------------------------------
Purchases $ 275,000 $11,337,501
Proceeds 13,821,648 4,719,890
- ------------------------------------
GBGIF GBGEMF
- ------------------------------------
Purchases $ 24,720,717 $40,342,394
Proceeds 52,356,654 39,729,132
- ------------------------------------
GIQBF GLDBF
- ------------------------------------
Purchases $ 546,523,894 $60,377,313
Proceeds 529,854,769 29,068,541
- ------------------------------------
GHYBF GTEF
- ------------------------------------
Purchases $ 103,266,095 $60,156,556
Proceeds 96,250,197 90,891,008
- ------------------------------------
The gross unrealized appreciation and depreciation of investments, on a tax
basis, excluding foreign currency and futures at December 31, 2003, were as
follows:
GPAF GULCVF
---- ------
Appreciation $ 178,093,082 $ 18,580,035
(Depreciation) (29,817,449) (55,194)
-------------- ------------
Net Unrealized
Appreciation $ 148,275,633 $ 18,524,841
============== ============
Cost of investments for
tax purposes $1,153,607,731 $ 66,551,632
============== ============
GPASCF GUSCVF
------ ------
Appreciation $ 44,966,950 $ 8,280,265
(Depreciation) (1,897,133) (139,335)
-------------- ------------
Net Unrealized
Appreciation $ 43,069,817 $ 8,140,930
============== ============
Cost of investments for
tax purposes $ 159,386,342 $ 30,654,180
============== ============
GAAF GSP500F
---- -------
Appreciation $ 2,803,995 $ 22,323,561
(Depreciation) (19,302,883) (26,395,399)
-------------- ------------
Net Unrealized
Depreciation $ (16,498,888) $ (4,071,838)
============== ============
Cost of investments for
tax purposes $ 184,307,237 $161,425,398
============== ============
79
GBGIF GBGEMF
----- ------
Appreciation $ 11,622,828 $21,127,098
(Depreciation) (1,778,430) (1,491,691)
------------ -----------
Net Unrealized
Appreciation $ 9,844,398 $19,635,407
============ ===========
Cost of investments for tax
purposes $ 41,385,728 $55,033,902
============ ===========
GIQBF GLDBF
----- -----
Appreciation $ 4,196,981 $ 117,349
(Depreciation) (623,069) (27,763)
------------ -----------
Net Unrealized
Appreciation $ 3,573,912 $ 89,586
============ ===========
Cost of investments for tax
purposes $195,277,580 $30,915,847
============ ===========
GHYBF GTEF
----- ----
Appreciation $ 5,108,233 $ 4,776,355
(Depreciation) (470,667) (13,002)
------------ -----------
Net Unrealized
Appreciation $ 4,637,566 $ 4,763,353
============ ===========
Cost of investments for
tax purposes $ 65,426,791 $84,092,186
============ ===========
Note 5. Repurchase Agreements
The collateral received for repurchase agreements is either cash or fully
negotiable U.S. government securities. Repurchase agreements are fully
collateralized (including the interest earned thereon) and such collateral is
marked-to-market daily while the agreements remain in force. If the value of
the collateral falls below the value of the repurchase price plus accrued
interest, the applicable Fund will require the seller to deposit additional
collateral by the next business day. If the request for additional collateral
is not met, or the seller defaults, the applicable Fund maintains the right to
sell the collateral and may claim any resulting loss against the seller.
Note 6. Reverse Repurchase Agreements
GAAF, GIQBF, GLDBF and GHYBF may enter into reverse repurchase agreements
with banks or third party broker-dealers to borrow short-term funds. Interest
on the value of reverse repurchase agreements issued and outstanding is based
upon competitive market rates at the time of issuance. At the time GAAF, GIQBF,
GLDBF and GHYBF enter into a reverse repurchase agreement, the Funds establish
and segregate cash, U.S. government securities or liquid, unencumbered
securities that are marked-to-market daily. The value of such segregated assets
must be at least equal to the value of the repurchase obligation (principal
plus accrued interest), as applicable. Reverse repurchase agreements involve
the risk that the buyer of the securities sold by GAAF, GIQBF, GLDBF and GHYBF
may be unable to deliver the securities when the Funds seek to repurchase them.
Note 7. Dollar Roll Transactions
GAAF, GIQBF, GLDBF and GHYBF may enter into dollar roll transactions with
financial institutions to take advantage of opportunities in the mortgage
market. A dollar roll transaction involves a sale by the Fund of securities
that it holds with an agreement by the Fund to repurchase similar securities at
an agreed upon price and date. The securities repurchased will bear the same
interest as those sold, but generally will be collateralized at the time of
delivery by different pools of mortgages with different prepayment histories
than those securities sold. During the period between the sale and repurchase,
the Fund will not be entitled to receive interest and principal payments on the
securities sold. Dollar roll transactions involve the risk that the buyer of
the securities sold by GAAF, GIQBF, GLDBF and GHYBF may be unable to deliver
the securities when the Funds seek to repurchase them.
Note 8. Shares of Beneficial Interest
There is an unlimited number of $0.01 par value shares of beneficial
interest authorized, divided into five classes, designated as Class A, Class B,
Class C, Class K and Institutional Class shares. As of December 31, 2003: (i)
GPAF, GPASCF, GAAF, GSP500F, GBGIF, GBGEMF, GIQBF and GHYBF offered all five
classes; (ii) GTEF offered Class A and Class C shares; and (iii) GULCVF,
GUSCVF, GLDBF and GCMF offered Class A, Class B, Class C and Class K shares.
Through December 31, 2003, no Institutional Class shares of the Funds were sold.
80
Transactions in shares of beneficial interest were as follows:
[_] The Guardian Park Avenue Fund
Year Ended December 31,
2003 2002
- -----------------------------------------------------------------------------------------------
Shares
- -----------------------------------------------------------------------------------------------
Class A
Shares sold 2,688,100 3,071,277
Shares issued in reinvestment of dividends 259,185 144,059
Shares repurchased (10,027,084) (14,071,395)
- ----------------------------------------------------------------------------------------------------------------------------------
Net decrease (7,079,799) (10,856,059)
- ----------------------------------------------------------------------------------------------------------------------------------
Class B
Shares sold 236,579 316,116
Shares repurchased (1,463,661) (2,232,897)
- ----------------------------------------------------------------------------------------------------------------------------------
Net decrease (1,227,082) (1,916,781)
- ----------------------------------------------------------------------------------------------------------------------------------
Class C
Shares sold 15,063 51,819
Shares repurchased (29,394) (51,896)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase/(decrease) (14,331) (77)
- ----------------------------------------------------------------------------------------------------------------------------------
Class K
Shares sold 7,291 4,015
Shares issued in reinvestment of dividends 756 --
Shares repurchased (310) (20)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase 7,737 3,995
- ----------------------------------------------------------------------------------------------------------------------------------
[_] The Guardian UBS Large Cap Value Fund
Period from
February 3, 2003+
to December 31, 2003
- -----------------------------------------------------------------------------------------------
Shares
- -----------------------------------------------------------------------------------------------
Class A
Shares sold 1,959,608
Shares issued in reinvestment of dividends and distributions 42,951
Shares repurchased (310,031)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase 1,692,528
- ----------------------------------------------------------------------------------------------------------------------------------
Class B
Shares sold 1,946,976
Shares issued in reinvestment of dividends and distributions 34,101
Shares repurchased (310,912)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase 1,670,165
- ----------------------------------------------------------------------------------------------------------------------------------
Class C
Shares sold 1,902,265
Shares issued in reinvestment of dividends and distributions 33,316
Shares repurchased (310,518)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase 1,625,063
- ----------------------------------------------------------------------------------------------------------------------------------
Class K
Shares sold 1,905,775
Shares issued in reinvestment of dividends and distributions 36,999
Shares repurchased (309,743)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase 1,633,031
- ----------------------------------------------------------------------------------------------------------------------------------
[_] The Guardian Park Avenue Fund
Year Ended December 31,
2003 2002
- ------------------------------------------------------------------------------------------------
Amount
- ------------------------------------------------------------------------------------------------
Class A
Shares sold $ 71,466,076 $ 87,019,350
Shares issued in reinvestment of dividends 7,135,022 4,193,466
Shares repurchased (268,695,546) (391,653,154)
- ----------------------------------------------------------------------------------------------------------------------------------
Net decrease $(190,094,448) $(300,440,338)
- ----------------------------------------------------------------------------------------------------------------------------------
Class B
Shares sold $ 6,081,629 $ 8,756,755
Shares repurchased (37,424,241) (59,546,800)
- ----------------------------------------------------------------------------------------------------------------------------------
Net decrease $ (31,342,612) $ (50,790,045)
- ----------------------------------------------------------------------------------------------------------------------------------
Class C
Shares sold $ 370,651 $ 1,532,408
Shares repurchased (741,440) (1,335,406)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase/(decrease) $ (370,789) $ 197,002
- ----------------------------------------------------------------------------------------------------------------------------------
Class K
Shares sold $ 198,820 $ 103,216
Shares issued in reinvestment of dividends 20,780 --
Shares repurchased (8,782) (495)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase $ 210,818 $ 102,721
- ----------------------------------------------------------------------------------------------------------------------------------
[_] The Guardian UBS Large Cap Value Fund
Period from
February 3, 2003+
to December 31, 2003
- ------------------------------------------------------------------------------------------------
Amount
- ------------------------------------------------------------------------------------------------
Class A
Shares sold $ 19,415,494
Shares issued in reinvestment of dividends and distributions 542,073
Shares repurchased (3,709,638)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase $ 16,247,929
- ----------------------------------------------------------------------------------------------------------------------------------
Class B
Shares sold $ 19,255,790
Shares issued in reinvestment of dividends and distributions 432,709
Shares repurchased (3,705,050)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase $ 15,983,449
- ----------------------------------------------------------------------------------------------------------------------------------
Class C
Shares sold $ 18,753,050
Shares issued in reinvestment of dividends and distributions 422,703
Shares repurchased (3,700,000)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase $ 15,475,753
- ----------------------------------------------------------------------------------------------------------------------------------
Class K
Shares sold $ 18,794,718
Shares issued in reinvestment of dividends and distributions 468,239
Shares repurchased (3,700,044)
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase $ 15,562,913
- ----------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
81
[_] The Guardian Park Avenue Small Cap Fund
Year Ended December 31, Year Ended December 31,
2003 2002 2003 2002
- ----------------------------------------------------------------------------------------------------------------
Shares Amount
- ----------------------------------------------------------------------------------------------------------------
Class A
Shares sold 1,813,369 2,782,741 $ 28,850,596 $ 42,101,323
Shares repurchased (1,819,099) (3,255,243) (27,392,677) (46,439,000)
- ----------------------------------------------------------------------------------------------------------------
Net increase/(decrease) (5,730) (472,502) $ 1,457,919 $ (4,337,677)
- ----------------------------------------------------------------------------------------------------------------
Class B
Shares sold 125,391 217,932 $ 1,962,819 $ 3,217,947
Shares repurchased (203,610) (240,199) (2,928,195) (3,301,687)
- ----------------------------------------------------------------------------------------------------------------
Net decrease (78,219) (22,267) $ (965,376) $ (83,740)
- ----------------------------------------------------------------------------------------------------------------
Class C
Shares sold 9,592 21,118 $ 145,248 $ 298,183
Shares repurchased (18,489) (6,407) (322,464) (87,676)
- ----------------------------------------------------------------------------------------------------------------
Net increase/(decrease) (8,897) 14,711 $ (177,216) $ 210,507
- ----------------------------------------------------------------------------------------------------------------
Class K
Shares sold 13,855 3,317 $ 218,871 $ 45,210
Shares repurchased (452) -- (8,060) --
- ----------------------------------------------------------------------------------------------------------------
Net increase 13,403 3,317 $ 210,811 $ 45,210
- ----------------------------------------------------------------------------------------------------------------
[_] The Guardian UBS Small Cap Value Fund
Period from Period from
February 3, 2003+ February 3, 2003+
to December 31,2003 to December 31,2003
- ----------------------------------------------------------------------------------------------------------------
Shares Amount
- ----------------------------------------------------------------------------------------------------------------
Class A
Shares sold 932,267 $ 9,277,024
Shares issued in reinvestment of distributions 50,375 648,829
Shares repurchased (189,695) (2,437,582)
- ----------------------------------------------------------------------------------------------------------------
Net increase 792,947 $ 7,488,271
- ----------------------------------------------------------------------------------------------------------------
Class B
Shares sold 921,249 $ 9,123,598
Shares issued in reinvestment of distributions 49,148 628,105
Shares repurchased (198,479) (2,529,505)
- ----------------------------------------------------------------------------------------------------------------
Net increase 771,918 $ 7,222,198
- ----------------------------------------------------------------------------------------------------------------
Class C
Shares sold 891,366 $ 8,777,985
Shares issued in reinvestment of distributions 48,004 613,488
Shares repurchased (192,392) (2,454,478)
- ----------------------------------------------------------------------------------------------------------------
Net increase 746,978 $ 6,936,995
- ----------------------------------------------------------------------------------------------------------------
Class K
Shares sold 890,722 $ 8,771,733
Shares issued in reinvestment of distributions 47,849 614,865
Shares repurchased (190,137) (2,437,563)
- ----------------------------------------------------------------------------------------------------------------
Net increase 748,434 $ 6,949,035
- ----------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
82
[_] The Guardian Asset Allocation Fund
Year Ended December 31, Year Ended December 31,
2003 2002 2003 2002
- ------------------------------------------------------------------------------------------------
Shares Amount
- ------------------------------------------------------------------------------------------------
Class A
Shares sold 1,015,158 1,524,801 $ 9,497,451 $ 14,387,848
Shares issued in reinvestment of dividends 186,765 257,058 1,766,807 2,516,751
Shares repurchased (3,099,656) (4,314,488) (28,129,262) (39,879,710)
- ------------------------------------------------------------------------------------------------
Net decrease (1,897,733) (2,532,629) $(16,865,004) $ (22,975,111)
- ------------------------------------------------------------------------------------------------
Class B
Shares sold 249,644 239,318 $ 2,356,152 $ 2,266,828
Shares issued in reinvestment of dividends 22,830 29,270 215,963 286,492
Shares repurchased (619,271) (972,783) (5,507,970) (8,982,368)
- ------------------------------------------------------------------------------------------------
Net decrease (346,797) (704,195) $ (2,935,855) $ (6,429,048)
- ------------------------------------------------------------------------------------------------
Class C
Shares sold 10,197 56,416 $ 95,189 $ 562,704
Shares issued in reinvestment of dividends 3,114 3,956 29,460 38,735
Shares repurchased (40,895) (39,534) (367,270) (359,141)
- ------------------------------------------------------------------------------------------------
Net increase/(decrease) (27,584) 20,838 $ (242,621) $ 242,298
- ------------------------------------------------------------------------------------------------
Class K
Shares sold 20,906 13,246 $ 191,338 $ 112,101
Shares issued in reinvestment of dividends 8,578 9,429 81,064 92,412
Shares repurchased (15,129) -- (158,553) --
- ------------------------------------------------------------------------------------------------
Net increase 14,355 22,675 $ 113,849 $ 204,513
- ------------------------------------------------------------------------------------------------
[_] The Guardian S&P 500 Index Fund
Year Ended December 31, Year Ended December 31,
2003 2002 2003 2002
- ------------------------------------------------------------------------------------------------
Shares Amount
- ------------------------------------------------------------------------------------------------
Class A
Shares sold 1,236,886 1,830,415 $ 8,356,406 $ 11,566,863
Shares issued in reinvestment of dividends 16,294 86,617 119,186 605,220
Shares repurchased (898,109) (20,356,324) (5,898,251) (118,000,511)
- ------------------------------------------------------------------------------------------------
Net increase/(decrease) 355,071 (18,439,292) $ 2,577,341 $(105,828,428)
- ------------------------------------------------------------------------------------------------
Class B
Shares sold 335,881 342,017 $ 2,276,274 $ 2,343,329
Shares issued in reinvestment of dividends 6,681 4,430 48,558 27,713
Shares repurchased (162,230) (173,276) (1,045,467) (1,146,882)
- ------------------------------------------------------------------------------------------------
Net increase 180,332 173,171 $ 1,279,365 $ 1,224,160
- ------------------------------------------------------------------------------------------------
Class C
Shares sold 216,791 187,627 $ 1,471,332 $ 1,400,528
Shares issued in reinvestment of dividends 5,016 3,553 36,385 22,207
Shares repurchased (90,706) (130,517) (626,275) (874,323)
- ------------------------------------------------------------------------------------------------
Net increase 131,101 60,663 $ 881,442 $ 548,412
- ------------------------------------------------------------------------------------------------
Class K
Shares sold 42,861 6,165 $ 288,767 $ 36,792
Shares issued in reinvestment of dividends 7,640 6,734 55,604 43,052
Shares repurchased (2,533) -- (18,219) --
- ------------------------------------------------------------------------------------------------
Net increase 47,968 12,899 $ 326,152 $ 79,844
- ------------------------------------------------------------------------------------------------
83
[_] The Guardian Baillie Gifford International Fund
Year Ended December 31, Year Ended December 31,
2003 2002 2003 2002
- -----------------------------------------------------------------------------------------------------------
Shares Amount
- -----------------------------------------------------------------------------------------------------------
Class A
Shares sold 10,537,973 26,379,926 $ 97,112,928 $ 268,688,195
Shares issued in reinvestment of dividends 5,562 -- 55,072 --
Shares repurchased (13,119,742) (28,286,267) (123,103,708) (288,753,391)
- -----------------------------------------------------------------------------------------------------------
Net decrease (2,576,207) (1,906,341) $ (25,935,708) $ (20,065,196)
- -----------------------------------------------------------------------------------------------------------
Class B
Shares sold 37,373 552,901 $ 344,699 $ 4,895,940
Shares repurchased (92,815) (664,735) (815,798) (6,002,347)
- -----------------------------------------------------------------------------------------------------------
Net decrease (55,442) (111,834) $ (471,099) $ (1,106,407)
- -----------------------------------------------------------------------------------------------------------
Class C
Shares sold 1,537 94,458 $ 27,531 $ 753,032
Shares repurchased (3,434) (94,502) (28,063) (763,931)
- -----------------------------------------------------------------------------------------------------------
Net decrease (1,897) (44) $ (532) $ (10,899)
- -----------------------------------------------------------------------------------------------------------
Class K
Shares sold 3,672 209 $ 51,596 $ 1,840
Shares repurchased (53) -- (489) --
- -----------------------------------------------------------------------------------------------------------
Net increase 3,619 209 $ 51,107 $ 1,840
- -----------------------------------------------------------------------------------------------------------
[_] The Guardian Baillie Gifford Emerging Markets Fund
Year Ended December 31, Year Ended December 31,
2003 2002 2003 2002
- -----------------------------------------------------------------------------------------------------------
Shares Amount
- -----------------------------------------------------------------------------------------------------------
Class A
Shares sold 2,873,147 2,084,844 $ 26,734,981 $ 19,196,380
Shares repurchased (2,744,885) (1,037,525) (25,296,414) (9,382,580)
- -----------------------------------------------------------------------------------------------------------
Net increase 128,262 1,047,319 $ 1,438,567 $ 9,813,800
- -----------------------------------------------------------------------------------------------------------
Class B
Shares sold 150,218 973,656 $ 1,342,915 $ 7,741,707
Shares repurchased (119,951) (937,516) (1,037,985) (7,477,413)
- -----------------------------------------------------------------------------------------------------------
Net increase 30,267 36,140 $ 304,930 $ 264,294
- -----------------------------------------------------------------------------------------------------------
Class C
Shares sold 44,398 28,313 $ 373,501 $ 239,626
Shares repurchased (46,386) (5,667) (397,512) (44,448)
- -----------------------------------------------------------------------------------------------------------
Net increase/(decrease) (1,988) 22,646 $ (24,011) $ 195,178
- -----------------------------------------------------------------------------------------------------------
Class K
Shares sold 9,274 4,995 $ 86,943 $ 40,085
Shares repurchased (4,707) -- (55,386) --
- -----------------------------------------------------------------------------------------------------------
Net increase 4,567 4,995 $ 31,557 $ 40,085
- -----------------------------------------------------------------------------------------------------------
84
[_] The Guardian Investment Quality Bond Fund
Year Ended December 31, Year Ended December 31,
2003 2002 2003 2002
- ----------------------------------------------------------------------------------------------------------------------
Shares Amount
- ----------------------------------------------------------------------------------------------------------------------
Class A
Shares sold 3,296,812 11,341,936 $ 34,079,857 $113,553,764
Shares issued in reinvestment of dividends and distributions 802,794 517,494 8,219,350 5,207,398
Shares repurchased (6,470,579) (9,956,834) (66,786,391) (99,280,342)
- ----------------------------------------------------------------------------------------------------------------------
Net increase/(decrease) (2,370,973) 1,902,596 $(24,487,184) $ 19,480,820
- ----------------------------------------------------------------------------------------------------------------------
Class B
Shares sold 350,698 1,016,356 $ 3,646,670 $ 10,196,034
Shares issued in reinvestment of dividends and distributions 98,401 59,127 1,005,080 594,614
Shares repurchased (506,012) (519,717) (5,234,314) (5,196,692)
- ----------------------------------------------------------------------------------------------------------------------
Net increase/(decrease) (56,913) 555,766 $ (582,564) $ 5,593,956
- ----------------------------------------------------------------------------------------------------------------------
Class C
Shares sold 51,395 114,498 $ 533,062 $ 1,152,765
Shares issued in reinvestment of dividends and distributions 58,874 37,890 600,919 380,474
Shares repurchased (45,445) (28,439) (467,508) (286,467)
- ----------------------------------------------------------------------------------------------------------------------
Net increase 64,824 123,949 $ 666,473 $ 1,246,772
- ----------------------------------------------------------------------------------------------------------------------
Class K
Shares sold 26,977 3,060 $ 279,706 $ 31,059
Shares issued in reinvestment of dividends and distributions 55,230 37,363 564,721 375,607
Shares repurchased (5,155) -- (52,997) --
- ----------------------------------------------------------------------------------------------------------------------
Net increase 77,052 40,423 $ 791,430 $ 406,666
- ----------------------------------------------------------------------------------------------------------------------
[_] The Guardian Low Duration Bond Fund
Period from Period from
July 30, 2003+ July 30, 2003+
to December 31, to December 31,
2003 2003
- ----------------------------------------------------------------------------------------------------------------------
Shares Amount
- ----------------------------------------------------------------------------------------------------------------------
Class A
Shares sold 844,512 $ 8,444,850
Shares issued in reinvestment of dividends 6,175 61,772
Shares repurchased (7,066) (70,762)
- ----------------------------------------------------------------------------------------------------------------------
Net increase 843,621 $ 8,435,860
- ----------------------------------------------------------------------------------------------------------------------
Class B
Shares sold 768,810 $ 7,688,450
Shares issued in reinvestment of dividends 3,565 35,669
- ----------------------------------------------------------------------------------------------------------------------
Net increase 772,375 $ 7,724,119
- ----------------------------------------------------------------------------------------------------------------------
Class C
Shares sold 755,679 $ 7,556,708
Shares issued in reinvestment of dividends 3,529 35,314
Shares repurchased (1) (10)
- ----------------------------------------------------------------------------------------------------------------------
Net increase 759,207 $ 7,592,012
- ----------------------------------------------------------------------------------------------------------------------
Class K
Shares sold 750,005 $ 7,500,050
Shares issued in reinvestment of dividends 4,625 46,272
- ----------------------------------------------------------------------------------------------------------------------
Net increase 754,630 $ 7,546,322
- ----------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
85
[_] The Guardian High Yield Bond Fund
Year Ended December 31, Year Ended December 31,
2003 2002 2003 2002
- ----------------------------------------------------------------------------------------------------------------
Shares Amount
- ----------------------------------------------------------------------------------------------------------------
Class A
Shares sold 1,700,337 1,022,945 $ 11,968,468 $ 7,149,700
Shares issued in reinvestment of dividends 413,138 398,176 2,932,687 2,727,625
Shares repurchased (1,462,685) (1,059,195) (10,413,890) (7,319,978)
- ----------------------------------------------------------------------------------------------------------------
Net increase 650,790 361,926 $ 4,487,265 $ 2,557,347
- ----------------------------------------------------------------------------------------------------------------
Class B
Shares sold 112,748 141,649 $ 794,370 $ 961,254
Shares issued in reinvestment of dividends 83,788 85,305 593,996 584,043
Shares repurchased (97,832) (119,806) (688,181) (814,725)
- ----------------------------------------------------------------------------------------------------------------
Net increase 98,704 107,148 $ 700,185 $ 730,572
- ----------------------------------------------------------------------------------------------------------------
Class C
Shares sold 63,604 4,786 $ 454,494 $ 32,953
Shares issued in reinvestment of dividends 81,823 82,282 580,074 563,430
Shares repurchased (47,186) (377) (339,768) (2,525)
- ----------------------------------------------------------------------------------------------------------------
Net increase 98,241 86,691 $ 694,800 $ 593,858
- ----------------------------------------------------------------------------------------------------------------
Class K
Shares sold 10,354 17 $ 75,093 $ 113
Shares issued in reinvestment of dividends 88,340 88,726 627,000 607,957
Shares repurchased (4) -- (28) --
- ----------------------------------------------------------------------------------------------------------------
Net increase 98,690 88,743 $ 702,065 $ 608,070
- ----------------------------------------------------------------------------------------------------------------
[_] The Guardian Tax-Exempt Fund
Year Ended December 31, Year Ended December 31,
2003 2002 2003 2002
- ----------------------------------------------------------------------------------------------------------------
Shares Amount
- ----------------------------------------------------------------------------------------------------------------
Class A
Shares sold 746,166 2,805,928 $ 7,845,141 $ 29,029,829
Shares issued in reinvestment of dividends and distributions 531,383 580,929 5,543,478 6,051,465
Shares repurchased (4,350,043) (3,227,880) (45,456,417) (33,353,923)
- ----------------------------------------------------------------------------------------------------------------
Net increase/(decrease) (3,072,494) 158,977 $(32,067,798) $ 1,727,371
- ----------------------------------------------------------------------------------------------------------------
Class C
Shares sold 49,048 39,077 $ 518,954 $ 417,830
Shares issued in reinvestment of dividends and distributions 62,083 43,565 646,799 453,798
Shares repurchased (14,571) (26,469) (153,002) (285,324)
- ----------------------------------------------------------------------------------------------------------------
Net increase 96,560 56,173 $ 1,012,751 $ 586,304
- ----------------------------------------------------------------------------------------------------------------
86
[_] The Guardian Cash Management Fund
Year Ended December 31,
2003 2002
- ----------------------------------------------------------------------
Shares @ $1 per share
- ----------------------------------------------------------------------
Class A
Shares sold 234,972,577 537,843,107
Shares issued in reinvestment of dividends 2,306,769 5,976,666
Shares repurchased (366,117,487) (491,705,217)
- ----------------------------------------------------------------------
Net increase/(decrease) (128,838,141) 52,114,556
- ----------------------------------------------------------------------
Class B
Shares sold 5,150,561 25,578,371
Shares issued in reinvestment of dividends 30,959 34,808
Shares repurchased (11,168,541) (22,812,305)
- ----------------------------------------------------------------------
Net increase/(decrease) (5,987,021) 2,800,874
- ----------------------------------------------------------------------
Class C
Shares sold 436,733 942,599
Shares issued in reinvestment of dividends 19,006 19,777
Shares repurchased (700,634) (123,627)
- ----------------------------------------------------------------------
Net increase/(decrease) (244,895) 838,749
- ----------------------------------------------------------------------
Class K
Shares sold 3,114,743 393,942
Shares issued in reinvestment of dividends 15,352 45,312
Shares repurchased (1,947,265) (64,395)
- ----------------------------------------------------------------------
Net increase 1,182,830 374,859
- ----------------------------------------------------------------------
Note 9. Line of Credit
A $100,000,000 line of credit available to all of the Funds and other
related Guardian Funds has been established with State Street Bank and Trust
Company and Bank of Montreal. The rate of interest charged on any borrowing is
based upon the prevailing Federal Funds rate at the time of the loan plus .50%
calculated on a 360 day basis per annum. For the year ended December 31, 2003,
none of the Funds borrowed against this line of credit.
The Funds are obligated to pay State Street Bank and Trust Company and Bank
of Montreal a commitment fee computed at a rate of .08% per annum on the
average daily unused portion of the revolving credit.
Note 10. Investments in Affiliates/1/
A summary of GAAF transactions in affiliated securities during the year
ended December 31, 2003 is set forth below:
Net
Balance of Gross Balances of Dividends Realized
Shares Held Purchases Gross Shares Held Value Included Gains from Net Realized
December 31, and Sales and December 31, December 31, in Dividend Underlying Gain/(Loss)
Name of Issuer 2002 Additions Reductions 2003 2003 Income Funds on Sales
- ------------------------------------------------------------------------------------------------------------------------------
Non-Controlled Affiliates
The Guardian Investment
Quality Bond Fund, Class A 2,479,290 -- 289,211 2,190,079 $ 22,097,901 $1,516,814 $652,143 $ 139,311
- ------------------------------------------------------------------------------------------------------------------------------
Majority-Owned Subsidiary
The Guardian S&P 500
Index Fund, Class A 15,466,689 40,801 230,179 15,277,311 116,565,880 1,277,360 -- (652,565)
/1/Affiliated issuers, as defined in the 1940 Act, include issuers in which the
Fund held 5% or more of the outstanding voting securities. Majority-owned
subsidiaries include issuers on which the Fund held 50% or more of the
outstanding voting securities.
87
Note 11. Management Information (Unaudited)
The trustees and officers of the Portfolio are named below. Information
about their principal occupations and certain other affiliations during the
past five years is also provided. The business address of each trustee and
officer is 7 Hanover Square, New York, New York 10004, unless otherwise noted.
The "Guardian Fund Complex" referred to in this biographical information is
composed of (1) the Portfolio/2/, (2) The Guardian Variable Contract Funds,
Inc./3/ (a series fund that issues its shares in seven series), (3) The
Guardian Bond Fund, Inc., (4) The Guardian Cash Fund, Inc. and (5) GIAC Funds,
Inc. (a series fund that issues its shares in three series).
Number
of Funds
in the
Guardian
Fund
Complex
Position Term of Office Overseen
With and Length of Principal Occupations by Other
Name, Address and Age Portfolio Time Served+ During Past 5 Years Trustee Directorships
- --------------------------------------------------------------------------------------------------------------------------
Interested Trustees*
Arthur V. Ferrara (73) Trustee Since 1987 Retired. Former Chairman of the 25 Director of various
Box 902 Board and Chief Executive Officer, mutual funds
East Orleans, Massachusetts The Guardian Life Insurance sponsored by Gabelli
02463 Company of America. Director Asset Management.
(Trustee) of all of the mutual funds
within the Guardian Fund Complex.
Leo R. Futia (84) Trustee Since 1982 Retired. Former Chairman of the 25 None
18 Interlaken Road Board and Chief Executive Officer,
Greenwich, Connecticut The Guardian Life Insurance
06830 Company of America. Director
(Trustee) of all of the mutual funds
within the Guardian Fund Complex.
Dennis J. Manning (56) Trustee Since 2003 Chairman of The Board and Chief 25 Director of The
81 Graenest Ridge Road Executive Officer, The Guardian Life Guardian Insurance &
Wilton, Connecticut Insurance Company of America, since Annuity Company,
06897 1/03. President and Chief Operating Inc. Manager,
Officer, 1/02 to 12/02; Director since Guardian Investor
1/02; Executive Vice President and Services LLC and Park
Chief Operating Officer, 1/01 to Avenue Securities
12/01; Executive Vice President, LLC. Director of
Individual Markets and Group various Guardian Life
Pensions, 1/99 to 12/00. Director subsidiaries.
(Trustee) of all of the mutual funds
within the Guardian Fund Complex.
/2/During the year, the Portfolio included three new series: The Guardian UBS
Large Cap Value Fund, The Guardian UBS Small Cap Value Fund and The Guardian
Low Duration Bond Fund.
/3/During the year, The Guardian Variable Contract Funds, Inc. included three
new series: The Guardian UBS VC Large Cap Value Fund, The Guardian UBS VC
Small Cap Value Fund and The Guardian VC Low Duration Bond Fund.
*"Interested" Trustee means one who is an "interested person" under the
Investment Company Act of 1940 by virtue of a current or past position with
The Guardian Life Insurance Company of America, the indirect parent company of
Guardian Investor Services LLC, the investment adviser of certain Funds in the
Guardian Fund Complex.
+There is no set term of office for Trustees and Officers. The table reflects
the year from which each person has served as Trustee and/or Officer.
88
Number
of Funds
in the
Guardian
Fund
Complex
Position Term of Office Overseen
With and Length of Principal Occupations by
Name, Address and Age Portfolio Time Served+ During Past 5 Years Trustee
- --------------------------------------------------------------------------------------------------------------
Disinterested Trustees
Frank J. Fabozzi, Ph.D. (55) Trustee Since 1992 Adjunct Professor of Finance, School 25
858 Tower View Circle of Management -- Yale University,
New Hope, Pennsylvania 2/94 to present; Editor, Journal of
18938 Portfolio Management. Director
(Trustee) of all of the mutual funds
within the Guardian Fund Complex
William W. Hewitt, Jr. (75) Trustee Since 1989 Retired. Former Executive Vice 25
c/o Guardian Investor Services LLC President, Shearson Lehman Brothers,
7 Hanover Square Inc. Director (Trustee) of all of the
New York, New York mutual funds within the Guardian
10004 Fund Complex.
Dr. Sidney I. Lirtzman (73) Trustee Since 1987 Emanuel Saxe Professor of 25
38 West 26th Street Management 9/96 to present, City
New York, New York University of New York -- Baruch
10010 College; Dean of the Zicklin School of
Business 10/95 to 9/02; Interim
President 9/99 to 9/00. President,
Fairfield Consulting Associates, Inc.
Director (Trustee) of all of the mutual
funds within the Guardian Fund
Complex.
Carl W. Schafer (67) Trustee Since 1996 President, Atlantic Foundation (a 25
66 Witherspoon Street, #1100 private charitable foundation).
Princeton, New Jersey Director of Labor Ready, Inc.
08542 (provider of temporary manual labor)
and Frontier Oil Corporation. Director
(Trustee) of all of the mutual funds
within the Guardian Fund Complex.
Robert G. Smith, Ph.D. (71) Trustee Since 1982 Chairman and Chief Executive 25
132 East 72nd Street Officer, Smith Affiliated Capital Corp.
New York, New York since 4/82. Director (Trustee) of all of
10021 the mutual funds within the Guardian
Fund Complex.
Other
Name, Address and Age Directorships
- -------------------------------------------------------------
Disinterested Trustees
Frank J. Fabozzi, Ph.D. (55) Director (Trustee) of
858 Tower View Circle various closed-end
New Hope, Pennsylvania investment companies
18938 sponsored by BlackRock
Financial Management.
Director of BlackRock
Funds.
William W. Hewitt, Jr. (75) None.
c/o Guardian Investor Services LLC
7 Hanover Square
New York, New York
10004
Dr. Sidney I. Lirtzman (73) None.
38 West 26th Street
New York, New York
10010
Carl W. Schafer (67) Director (Trustee) of
66 Witherspoon Street, #1100 various mutual funds
Princeton, New Jersey sponsored by UBS Global
08542 Asset Management (US)
Inc. (f/k/a Mitchell
Hutchins Asset
Management, Inc.) and
UBS PaineWebber, Inc.,
Harding Loevner (3 funds)
and Ell Realty Securities
Trust.
Robert G. Smith, Ph.D. (71) Governor appointments as
132 East 72nd Street Director of New York
New York, New York Health Care Reform Act
10021 Charitable Organization
and Nassau County Interim
Finance Authority. Senior
private member of the New
York State Financial
Control Board for New
York City. Senior Director
for the New York State
Comptroller's Investment
Advisory Committee for
State Pension Funds
(Common Fund).
+There is no set term of office for Trustees and Officers. The table reflects
the year from which each person has served as Trustee and/or Officer.
89
Number of Funds
in the
Position Term of Office Guardian Fund
With and Length of Principal Occupations Complex for which
Name, Address and Age Portfolio Time Served+ During Past 5 Years Officer Serves
- ----------------------------------------------------------------------------------------------------------------
Officers
Joseph A. Caruso (51) Senior Vice Since 1992 Senior Vice President and Corporate 25
President and Secretary, The Guardian Life
Secretary Insurance Company of America
since 1/01; Vice President and
Corporate Secretary prior thereto.
Director, Senior Vice President and
Secretary, The Guardian Insurance
& Annuity Company, Inc. Manager,
Senior Vice President and Corporate
Secretary, Guardian Investor
Services LLC. Senior Vice
President and Secretary, Park
Avenue Life Insurance Company,
Park Avenue Securities LLC,
Guardian Baillie Gifford Limited,
and all of the mutual funds within
the Guardian Fund Complex.
Howard W. Chin (51) Managing Since 1997 Managing Director, The Guardian 15
Director Life Insurance Company of
America since 9/97. Officer of
various mutual funds within the
Guardian Fund Complex.
Richard A. Cumiskey (43) Compliance Since 2002 Second Vice President, Equity 25
Officer Administration and Oversight, The
Guardian Life Insurance Company
of America since 1/01; Assistant
Vice President, Equity
Administration and Oversight, 6/99
to 12/00; Director Compliance
Officer, 10/97 to 5/99; Manager
prior thereto. Second Vice President
and Compliance Officer of The
Guardian Insurance & Annuity
Company, Inc. and Guardian
Investor Services LLC. Officer of
all of the mutual funds within the
Guardian Fund Complex.
Richard A. Goldman (41) Managing Since 2001 Managing Director, The Guardian 23
Director Life Insurance Company of
America since 7/01. Director,
Citigroup Asset Management prior
thereto. Officer of various mutual
funds within the Guardian Fund
Complex.
Alexander M. Grant, Jr. (54) Managing Since 1993 Managing Director, The Guardian 15
Director Life Insurance Company of America
since 3/99; Second Vice President,
prior thereto. Officer of various
mutual funds within the Guardian
Fund Complex.
+There is no set term of office for Trustees and Officers. The table reflects
the year from which each person has served as Trustee and/or Officer.
90
Number of Funds
in the
Position Term of Office Guardian Fund
With and Length of Principal Occupations Complex for which
Name, Address and Age Portfolio Time Served+ During Past 5 Years Officer Serves
- --------------------------------------------------------------------------------------------------------------------
Edward H. Hocknell (43) Vice President Since 1997 Partner, Baillie Gifford & Co., since 16
c/o Baillie Gifford Overseas, 5/98. Director, Baillie Gifford
Limited Overseas Limited since 10/92.
Calton Square Officer of various mutual funds
1 Greenside Row within the Guardian Fund Complex.
Edinburgh, EH1 3AN,
Scotland
Jonathan C. Jankus (56) Managing Since 1993 Managing Director, The Guardian 20
Director Life Insurance Company of
America since 3/98. Officer of
various mutual funds within the
Guardian Fund Complex.
Peter J. Liebst (47) Managing Since 1999 Managing Director, The Guardian 20
Director Life Insurance Company of
America, since 8/98. Officer of
various mutual funds within the
Guardian Fund Complex.
R. Robin Menzies (51) Vice President Since 1991 Partner, Baillie Gifford & Co. 4/81 to 16
c/o Baillie Gifford Overseas, present. Director, Baillie Gifford
Limited Overseas Limited 11/90 to present.
Calton Square Director, Guardian Baillie Gifford
1 Greenside Row Limited 11/90 to present. Trustee,
Edinburgh, EH1 3AN, Baillie Gifford Funds, Inc. (2 funds).
Scotland Officer of various mutual funds
within the Guardian Fund Complex.
Nydia Morrison (45) Controller Since 2003 Manager, The Guardian Life 25
Insurance Company of America
since 9/99; Supervisor prior thereto.
Officer of all of the mutual funds
within the Guardian Fund Complex.
John B. Murphy (56) Managing Since 1991 Managing Director, The Guardian 23
Director Life Insurance Company of
America since 3/98. Officer of
various mutual funds within the
Guardian Fund Complex.
Frank L. Pepe (61) Vice President Since 1995 Vice President and Equity 25
and Treasurer Controller, The Guardian Life
Insurance Company of America.
Vice President and Controller, The
Guardian Insurance & Annuity
Company, Inc. Senior Vice
President and Controller, Guardian
Investor Services LLC. Officer of
all of the mutual funds within the
Guardian Fund Complex.
+There is no set term of office for Trustees and Officers. The table reflects
the year from which each person has served as Trustee and/or Officer.
91
Number of Funds
in the
Position Term of Office Guardian Fund
With and Length of Principal Occupations Complex for which
Name, Address and Age Portfolio Time Served+ During Past 5 Years Officer Serves
- ------------------------------------------------------------------------------------------------------------------
Richard T. Potter, Jr. (49) Vice President Since 1992 Vice President and Equity Counsel, 25
and Counsel The Guardian Life Insurance
Company of America. Vice President
and Counsel, The Guardian Insurance
& Annuity Company, Inc., Guardian
Investor Services LLC, Park Avenue
Securities LLC and all of the mutual
funds within the Guardian Fund
Complex.
Robert A. Reale (43) Managing Since 2001 Managing Director, The Guardian 25
Director Life Insurance Company of America,
The Guardian Insurance & Annuity
Company, Inc. and Guardian Investor
Services LLC since 3/01; Second
Vice President, 10/99 to 2/01.
Assistant Vice President,
Metropolitan Life prior thereto.
Officer of all of the mutual funds
within the Guardian Fund Complex.
Thomas G. Sorell (48) President Since 2003 Executive Vice President and Chief 25
Investment Officer, The Guardian
Life Insurance Company of America
since 1/03; Senior Managing
Director, Fixed Income Securities
since 3/00; Vice President, Fixed
Income Securities prior thereto.
Managing Director, Investments: Park
Avenue Life Insurance Company.
Officer of all of the mutual funds
within the Guardian Fund Complex.
Donald P. Sullivan, Jr. (49) Vice President Since 1995 Vice President, Equity 25
Administration, The Guardian Life
Insurance Company of America since
3/99; Second Vice President, Equity
Administration prior thereto. Vice
President, The Guardian Insurance &
Annuity Company, Inc., and
Guardian Investor Services LLC.
Officer of all of the mutual funds
within the Guardian Fund Complex.
Matthew Ziehl (36) Managing Since 2002 Managing Director, The Guardian 16
Director Life Insurance Company of America
since 1/02; prior thereto, Team
Leader, Salomon Brothers Asset
Management, Inc. from 1/01 to 12/01;
Co-Portfolio Manager, 8/99 to 12/00;
Analyst, Small Cap Equity, 1/95 to
7/99. Officer of various mutual funds
within the Guardian Fund Complex.
The Statement of Additional Information includes additional information
about fund trustees and is available upon request, without charge, by calling
(800) 221-3253.
+There is no set term of office for Trustees and Officers. The table reflects
the year from which each person has served as Trustee and/or Officer.
92
(This page intentionally left blank)
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout the
periods indicated:
Net Realized
& Unrealized
Gain/(Loss) on Increase/
Net Asset Net Investments and (Decrease) Dividends
Value, Investment Foreign from from Net
Beginning Income/ Currency Related Investment Investment
of Period (Loss) Transactions Operations Income
--------- ---------- ---------------- ---------- ----------
The Guardian Park Avenue Fund
Class A:
Year ended 12/31/2003.................... $25.03 $ 0.23 $ 5.00 $ 5.23 $(0.18)
Year ended 12/31/2002.................... 32.00 0.17 (7.06) (6.89) (0.08)
Year ended 12/31/2001.................... 41.18 0.12 (9.06) (8.94) (0.03)
Year ended 12/31/2000.................... 59.42 (0.09) (10.57) (10.66) (0.00)++
Year ended 12/31/1999.................... 51.88 0.13 15.04 15.17 (0.08)
Class B:
Year ended 12/31/2003.................... 23.99 (0.16) 4.89 4.73 --
Year ended 12/31/2002.................... 30.88 (0.20) (6.69) (6.89) --
Year ended 12/31/2001.................... 40.08 (0.23) (8.76) (8.99) --
Year ended 12/31/2000.................... 58.57 (0.43) (10.48) (10.91) --
Year ended 12/31/1999.................... 51.59 (0.31) 14.84 14.53 --
Class C:
Year ended 12/31/2003.................... 23.75 (0.16) 4.78 4.62 --
Year ended 12/31/2002.................... 30.64 (0.19) (6.70) (6.89) --
Year ended 12/31/2001.................... 39.85 (0.25) (8.75) (9.00) --
Period from 8/7/2000+ to 12/31/2000...... 58.01 (0.11) (12.59) (12.70) --
Class K:
Year ended 12/31/2003.................... 24.96 0.11 5.02 5.13 (0.09)
Year ended 12/31/2002.................... 31.93 0.05 (7.02) (6.97) --
Period from 5/15/2001+ to 12/31/2001..... 35.55 0.00 (3.41) (3.41) --
The Guardian UBS Large Cap Value Fund
Class A:
Period from 2/3/2003+ to 12/31/2003...... 10.00 0.08 3.06 3.14 (0.07)
Class B:
Period from 2/3/2003+ to 12/31/2003...... 10.00 0.00++ 3.06 3.06 (0.01)
Class C:
Period from 2/3/2003+ to 12/31/2003...... 10.00 0.00++ 3.06 3.06 (0.01)
Class K:
Period from 2/3/2003+ to 12/31/2003...... 10.00 0.05 3.07 3.12 (0.04)
The Guardian Park Avenue Small Cap Fund
Class A:
Year ended 12/31/2003.................... 13.30 (0.10) 5.85 5.75 --
Year ended 12/31/2002.................... 15.74 (0.07) (2.37) (2.44) --
Year ended 12/31/2001.................... 16.93 (0.06) (1.13) (1.19) --
Year ended 12/31/2000.................... 17.48 (0.05) (0.37) (0.42) --
Year ended 12/31/1999.................... 12.80 (0.07) 4.75 4.68 --
Class B:
Year ended 12/31/2003.................... 12.64 (0.24) 5.53 5.29 --
Year ended 12/31/2002.................... 15.10 (0.20) (2.26) (2.46) --
Year ended 12/31/2001.................... 16.39 (0.20) (1.09) (1.29) --
Year ended 12/31/2000.................... 17.06 (0.20) (0.34) (0.54) --
Year ended 12/31/1999.................... 12.61 (0.19) 4.64 4.45 --
Class C:
Year ended 12/31/2003.................... 12.59 (0.27) 5.51 5.24 --
Year ended 12/31/2002.................... 15.07 (0.22) (2.26) (2.48) --
Year ended 12/31/2001.................... 16.39 (0.21) (1.11) (1.32) --
Period from 8/7/2000+ to 12/31/2000...... 19.37 (0.08) (2.77) (2.85) --
Class K:
Year ended 12/31/2003.................... 13.15 (0.14) 5.78 5.64 --
Year ended 12/31/2002.................... 15.62 (0.11) (2.36) (2.47) --
Period from 5/15/2001+ to 12/31/2001..... 15.71 (0.07) (0.02) (0.09) --
+Commencement of operations.
++Rounds to less than $0.01.
94
Distributions Ratios/Supplemental Data
from Net --------------------------------------------------
Realized Gain on Net
Investments and Net Asset Net Assets, Investment
Foreign Value, End of Expenses Income/(Loss) Portfolio
Currency Related End of Total Period to Average to Average Turnover
Transactions Period Return* (000's Omitted) Net Assets Net Assets Rate
- ---------------- --------- ------- --------------- ---------- ------------- ---------
-- $30.08 20.95% $1,133,468 0.89% 0.72% 74%
-- 25.03 (21.56) 1,120,351 0.87 0.51 60
$(0.21) 32.00 (21.75) 1,779,818 0.83 0.31 143
(7.58) 41.18 (18.62) 2,589,059 0.79 (0.16) 108
(7.55) 59.42 30.25 3,334,722 0.77 0.24 74
-- 28.72 19.72 165,274 1.84 (0.24) 74
-- 23.99 (22.31) 167,471 1.83 (0.44) 60
(0.21) 30.88 (22.46) 274,761 1.75 (0.61) 143
(7.58) 40.08 (19.34) 431,206 1.67 (1.03) 108
(7.55) 58.57 29.13 507,764 1.67 (0.66) 74
-- 28.37 19.45 6,622 2.12 (0.52) 74
-- 23.75 (22.49) 5,884 2.07 (0.67) 60
(0.21) 30.64 (22.62) 7,594 1.96 (0.81) 143
(5.46) 39.85 (21.79)(a) 8,222 2.18 (b) (1.29)(b) 108
-- 30.00 20.58 7,145 1.20 0.41 74
-- 24.96 (21.83) 5,752 1.21 0.19 60
(0.21) 31.93 (9.63)(a) 7,229 1.22 (b) 0.02 (b) 143
(0.25) 12.82 31.48 (a) 21,705 1.59 (b) 0.78 (b) 45
(0.25) 12.80 30.65 (a) 21,378 2.33 (b) 0.03 (b) 45
(0.25) 12.80 30.65 (a) 20,801 2.33 (b) 0.04 (b) 45
(0.25) 12.83 31.22 (a) 20,944 1.88 (b) 0.49 (b) 45
-- 19.05 43.23 160,049 1.27 (0.67) 105
-- 13.30 (15.50) 111,803 1.25 (0.45) 108
-- 15.74 (7.03) 139,774 1.28 (0.37) 131
(0.13) 16.93 (2.35) 150,022 1.25 (0.31) 125
-- 17.48 36.56 119,032 1.34 (0.48) 92
-- 17.93 41.85 22,989 2.21 (1.61) 105
-- 12.64 (16.29) 17,189 2.19 (1.40) 108
-- 15.10 (7.87) 20,876 2.18 (1.27) 131
(0.13) 16.39 (3.11) 24,977 2.12 (1.18) 125
-- 17.06 35.29 22,430 2.23 (1.36) 92
-- 17.83 41.62 8,092 2.39 (1.79) 105
-- 12.59 (16.46) 5,824 2.40 (1.60) 108
-- 15.07 (8.05) 6,752 2.34 (1.43) 131
(0.13) 16.39 (14.67)(a) 7,033 2.22 (b) (1.12)(b) 125
-- 18.79 42.89 9,893 1.55 (0.96) 105
-- 13.15 (15.81) 6,748 1.55 (0.75) 108
-- 15.62 (0.57)(a) 7,959 1.61 (b) (0.77)(b) 131
* Excludes the effect of sales load.
(a)Not annualized.
(b)Annualized.
95
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout the
periods indicated:
Net Realized
& Unrealized
Gain/(Loss) on
Investments Increase/
Net Asset Net and Foreign (Decrease) Dividends
Value, Investment Currency from from Net
Beginning Income/ Related Investment Investment
of Period (Loss) Transactions Operations Income
--------- ---------- -------------- ---------- ----------
The Guardian UBS Small Cap Value Fund
Class A:
Period from 2/3/2003+ to 12/31/2003...... $10.00 $(0.01) $ 3.60 $ 3.59 --
Class B:
Period from 2/3/2003+ to 12/31/2003...... 10.00 (0.09) 3.58 3.49 --
Class C:
Period from 2/3/2003+ to 12/31/2003...... 10.00 (0.10) 3.59 3.49 --
Class K:
Period from 2/3/2003+ to 12/31/2003...... 10.00 (0.03) 3.59 3.56 --
The Guardian Asset Allocation Fund
Class A:
Year ended 12/31/2003.................... 8.45 0.14 2.20 2.34 $(0.16)
Year ended 12/31/2002.................... 10.84 0.17 (2.38) (2.21) (0.18)
Year ended 12/31/2001.................... 13.00 0.30 (1.61) (1.31) (0.18)
Year ended 12/31/2000.................... 14.77 0.45 (0.29) 0.16 (0.44)
Year ended 12/31/1999.................... 14.78 0.37 1.47 1.84 (0.37)
Class B:
Year ended 12/31/2003.................... 8.41 0.05 2.18 2.23 (0.07)
Year ended 12/31/2002.................... 10.77 0.09 (2.37) (2.28) (0.08)
Year ended 12/31/2001.................... 12.95 0.19 (1.59) (1.40) (0.11)
Year ended 12/31/2000.................... 14.72 0.32 (0.27) 0.05 (0.33)
Year ended 12/31/1999.................... 14.73 0.23 1.47 1.70 (0.23)
Class C:
Year ended 12/31/2003.................... 8.39 0.02 2.19 2.21 (0.04)
Year ended 12/31/2002.................... 10.77 0.05 (2.38) (2.33) (0.05)
Year ended 12/31/2001.................... 12.94 0.17 (1.64) (1.47) (0.03)
Period from 8/7/2000+ to 12/31/2000...... 14.72 0.15 (0.78) (0.63) (0.23)
Class K:
Year ended 12/31/2003.................... 8.43 0.09 2.19 2.28 (0.11)
Year ended 12/31/2002.................... 10.82 0.13 (2.39) (2.26) (0.13)
Period from 5/15/2001+ to 12/31/2001..... 12.06 0.11 (0.68) (0.57) --
The Guardian S&P 500 Index Fund
Class A:
Year ended 12/31/2003.................... 6.04 0.08 1.59 1.67 (0.08)
Year ended 12/31/2002.................... 7.90 0.10 (1.86) (1.76) (0.10)
Year ended 12/31/2001.................... 9.07 0.06 (1.17) (1.11) (0.06)
Period from 7/25/2000+ to 12/31/2000..... 10.06 0.03 (0.99) (0.96) (0.03)
Class B:
Year ended 12/31/2003.................... 6.03 0.03 1.59 1.62 (0.03)
Year ended 12/31/2002.................... 7.88 0.02 (1.85) (1.83) (0.02)
Year ended 12/31/2001.................... 9.05 0.01 (1.18) (1.17) (0.00)++
Period from 7/25/2000+ to 12/31/2000..... 10.06 0.00 (1.01) (1.01) --
Class C:
Year ended 12/31/2003.................... 6.03 0.03 1.58 1.61 (0.03)
Year ended 12/31/2002.................... 7.88 0.02 (1.85) (1.83) (0.02)
Year ended 12/31/2001.................... 9.05 0.01 (1.17) (1.16) (0.01)
Period from 7/25/2000+ to 12/31/2000..... 10.06 0.00 (1.01) (1.01) --
Class K:
Year ended 12/31/2003.................... 6.04 0.06 1.59 1.65 (0.06)
Year ended 12/31/2002.................... 7.90 0.05 (1.86) (1.81) (0.05)
Period from 5/15/2001+ to 12/31/2001..... 8.59 0.02 (0.69) (0.67) (0.02)
+Commencement of operations.
++Rounds to less than $0.01.
96
Distributions
from Ratios/Supplemental Data
Net Realized --------------------------------------------------------------------------
Gain on Net
Investments and Net Asset Net Assets, Expenses GAAF Investment
Foreign Value, End of Expenses Waived/ Gross Income/(Loss) Portfolio
Currency Related End of Total Period to Average Subsidized Expense to Average Turnover
Transactions Period Return* (000's Omitted) Net Assets(a) by GIS Ratio(b) Net Assets Rate
- ---------------- --------- ------- --------------- ------------- ---------- -------- ------------- ---------
$(0.88) $12.71 35.76%(c) $ 10,081 2.17%(d) -- -- (0.07)%(d) 94%
(0.88) 12.61 34.76 (c) 9,737 2.91(d) -- -- (0.81)(d) 94
(0.88) 12.61 34.76 (c) 9,422 2.91(d) -- -- (0.81)(d) 94
(0.88) 12.68 35.46 (c) 9,492 2.35(d) -- -- (0.25)(d) 94
-- 10.63 27.87 118,988 0.43 0.77% 0.97% 1.25 0
-- 8.45 (20.64) 110,593 0.42 0.73 0.95 1.60 4
(0.67) 10.84 (10.23) 169,386 0.47 0.63 0.93 2.44 51
(1.49) 13.00 1.00 227,228 0.46 0.60 1.10 3.07 11
(1.48) 14.77 12.99 227,031 0.48 0.58 1.08 2.48 16
-- 10.57 26.65 32,863 1.27 0.77 1.81 0.43 0
-- 8.41 (21.31) 29,064 1.25 0.73 1.78 0.78 4
(0.67) 10.77 (10.99) 44,813 1.28 0.63 1.74 1.62 51
(1.49) 12.95 0.26 51,024 1.28 0.60 1.91 2.29 11
(1.48) 14.72 12.09 40,914 1.31 0.58 1.91 1.66 16
-- 10.56 26.39 7,857 1.51 0.77 2.06 0.19 0
-- 8.39 (21.70) 6,470 1.50 0.73 2.03 0.58 4
(0.67) 10.77 (11.48) 8,080 1.46 0.63 1.92 1.43 51
(0.92) 12.94 (4.18)(c) 8,544 1.49(d) 0.55(d) 2.07(d) 2.61 (d) 11
-- 10.60 27.20 7,859 0.68 0.77 1.22 1.04 0
-- 8.43 (21.05) 6,126 0.70 0.73 1.22 1.39 4
(0.67) 10.82 (4.85)(c) 7,619 0.75(d) 0.72(d) 1.29(d) 1.57 (d) 51
-- 7.63 27.78 129,228 0.53 0.25 -- 1.26 4
-- 6.04 (22.35) 100,129 0.53 0.13 -- 1.03 10
-- 7.90 (12.25) 276,645 0.53 0.10 -- 0.87 1
(0.00)(e) 9.07 (9.53)(c) 167,487 0.53(d) 0.21(d) -- 0.71 (d) 4
-- 7.62 26.94 12,070 1.28 0.61 -- 0.51 4
-- 6.03 (23.22) 8,472 1.28 0.52 -- 0.33 10
-- 7.88 (12.87) 9,705 1.28 0.47 -- 0.09 1
(0.00)(e) 9.05 (10.00)(c) 7,677 1.28(d) 0.47(d) -- (0.04)(d) 4
-- 7.61 26.77 8,796 1.28 0.67 -- 0.51 4
-- 6.03 (23.21) 6,175 1.28 0.57 -- 0.33 10
-- 7.88 (12.87) 7,598 1.28 0.49 -- 0.09 1
(0.00)(e) 9.05 (10.00)(c) 7,296 1.28(d) 0.47(d) -- (0.04)(d) 4
-- 7.63 27.31 7,594 0.93 0.21 -- 0.86 4
-- 6.04 (23.00) 5,722 0.93 0.10 -- 0.68 10
-- 7.90 (7.76)(c) 7,383 0.93(d) 0.15(d) -- 0.47 (d) 1
* Excludes the effect of sales load.
(a)After expenses subsidized by GIS and do not include the expenses of the
underlying Funds.
(b)Amounts include the expenses of the underlying Funds.
(c)Not annualized.
(d)Annualized.
(e)Rounds to less than $0.01.
97
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout the
periods indicated:
Net Realized
& Unrealized
Gain/(Loss) on
Investments Increase/
Net Asset Net and Foreign (Decrease) Dividends
Value, Investment Currency from from Net
Beginning Income/ Related Investment Investment
of Period (Loss) Transactions Operations Income
--------- ---------- -------------- ---------- ----------
The Guardian Baillie Gifford International Fund
Class A:
Year ended 12/31/2003....................... $ 8.90 $ 0.18 $ 2.33 $ 2.51 $(0.01)
Year ended 12/31/2002....................... 11.09 0.06 (2.25) (2.19) --
Year ended 12/31/2001....................... 14.28 0.01 (3.20) (3.19) --
Year ended 12/31/2000....................... 23.36 (0.06) (5.52) (5.58) --
Year ended 12/31/1999....................... 18.41 0.01 6.68 6.69 --
Class B:
Year ended 12/31/2003....................... 8.22 (0.16) 2.36 2.20 --
Year ended 12/31/2002....................... 10.38 (0.19) (1.97) (2.16) --
Year ended 12/31/2001....................... 13.54 (0.20) (2.96) (3.16) --
Year ended 12/31/2000....................... 22.61 (0.11) (5.46) (5.57) --
Year ended 12/31/1999....................... 17.97 (0.12) 6.47 6.35 --
Class C:
Year ended 12/31/2003....................... 8.24 (0.08) 2.28 2.20 --
Year ended 12/31/2002....................... 10.40 (0.09) (2.07) (2.16) --
Year ended 12/31/2001....................... 13.55 (0.12) (3.03) (3.15) --
Period from 8/7/2000+ to 12/31/2000......... 19.19 (0.09) (2.20) (2.29) --
Class K:
Year ended 12/31/2003....................... 8.76 0.00(a) 2.45 2.45 --
Year ended 12/31/2002....................... 10.94 0.00(a) (2.18) (2.18) --
Period from 5/15/2001+ to 12/31/2001........ 12.96 (0.04) (1.98) (2.02) --
The Guardian Baillie Gifford Emerging Markets Fund
Class A:
Year ended 12/31/2003....................... 8.07 0.05 4.27 4.32 --
Year ended 12/31/2002....................... 8.45 0.01 (0.39) (0.38) --
Year ended 12/31/2001....................... 8.31 0.01 0.13 0.14 --
Year ended 12/31/2000....................... 11.13 (0.55) (2.05) (2.60) (0.22)
Year ended 12/31/1999....................... 6.66 (0.07) 4.72 4.65 (0.18)
Class B:
Year ended 12/31/2003....................... 7.55 (0.04) 3.93 3.89 --
Year ended 12/31/2002....................... 7.98 (0.10) (0.33) (0.43) --
Year ended 12/31/2001....................... 7.97 (0.10) 0.11 0.01 --
Year ended 12/31/2000....................... 10.65 0.08 (2.76) (2.68) --
Year ended 12/31/1999....................... 6.44 (0.27) 4.48 4.21 --
Class C:
Year ended 12/31/2003....................... 7.56 (0.04) 3.95 3.91 --
Year ended 12/31/2002....................... 8.00 (0.09) (0.35) (0.44) --
Year ended 12/31/2001....................... 7.98 (0.09) 0.11 0.02 --
Period from 8/7/2000+ to 12/31/2000......... 9.92 (0.08) (1.86) (1.94) --
Class K:
Year ended 12/31/2003....................... 7.97 0.03 4.19 4.22 --
Year ended 12/31/2002....................... 8.36 (0.03) (0.36) (0.39) --
Period from 5/15/2001+ to 12/31/2001........ 8.35 (0.06) 0.07 0.01 --
+ Commencement of operations.
(a)Rounds to less than $0.01.
98
Distributions
from Ratios/Supplemental Data
Net Realized -------------------------------------------------
Distributions Gain on Net
in Excess Investments Net Asset Net Assets, Investment
of Net and Foreign Value, End of Expenses Income/(Loss) Portfolio
Investment Currency Related Redemption Tax Return End of Total Period to Average to Average Turnover
Income Transactions Fees of Capital Period Return* (000's Omitted) Net Assets Net Assets Rate
- ------------- ---------------- ---------- ---------- --------- ------- --------------- ---------- ------------- ---------
-- -- $0.03 -- $11.43 28.57% $ 32,126 1.93% 0.50% 44%
-- -- -- -- 8.90 (19.75) 47,948 1.62 0.29 45
-- -- -- -- 11.09 (22.34) 80,856 1.53 0.06 63
-- $(3.26) -- $(0.24) 14.28 (23.81) 94,482 1.45 (0.29) 78
$(0.03) (1.71) -- -- 23.36 37.21 148,727 1.44 (0.03) 54
-- -- 0.03 -- 10.45 27.13 6,535 3.19 (1.00) 44
-- -- -- -- 8.22 (20.81) 5,598 2.87 (0.98) 45
-- -- -- -- 10.38 (23.34) 8,228 2.62 (1.05) 63
-- (3.26) -- (0.24) 13.54 (24.56) 12,747 2.43 (1.27) 78
-- (1.71) -- -- 22.61 36.16 15,623 2.45 (1.03) 54
-- -- 0.03 -- 10.47 27.06 5,546 3.10 (0.93) 44
-- -- -- -- 8.24 (20.77) 4,381 2.85 (0.99) 45
-- -- -- -- 10.40 (23.25) 5,530 2.60 (1.04) 63
-- (3.11) -- (0.24) 13.55 (11.72)(a) 7,208 2.51(b) (1.52)(b) 78
-- -- 0.03 -- 11.24 28.31 6,979 2.13 0.04 44
-- -- -- -- 8.76 (19.93) 5,407 1.86 0.01 45
-- -- -- -- 10.94 (15.59)(a) 6,753 1.84(b) (0.60)(b) 63
-- -- -- -- 12.39 53.53 43,561 2.10 0.57 74
-- -- -- -- 8.07 (4.50) 27,356 2.10 (0.04) 81
-- -- -- -- 8.45 1.68 19,777 2.39 (0.19) 101
-- -- -- -- 8.31 (23.88) 18,439 2.18 (0.86) 101
-- -- -- -- 11.13 69.91 32,940 2.43 (1.07) 96
-- -- -- -- 11.44 51.52 9,389 3.20 (0.54) 74
-- -- -- -- 7.55 (5.39) 5,965 3.21 (1.16) 81
-- -- -- -- 7.98 0.13 6,023 3.51 (1.28) 101
-- -- -- -- 7.97 (25.16) 6,105 3.79 (2.54) 101
-- -- -- -- 10.65 65.37 2,320 5.07 (3.70) 96
-- -- -- -- 11.47 51.72 9,540 3.17 (0.51) 74
-- -- -- -- 7.56 (5.50) 6,306 3.12 (1.08) 81
-- -- -- -- 8.00 0.25 6,486 3.34 (1.12) 101
-- -- -- -- 7.98 (19.56)(a) 6,466 3.49(b) (2.31)(b) 101
-- -- -- -- 12.19 52.95 11,803 2.38 0.29 74
-- -- -- -- 7.97 (4.67) 7,685 2.36 (0.32) 81
-- -- -- -- 8.36 0.12 (a) 8,020 2.63(b) (1.23)(b) 101
* Excludes the effect of sales load.
(a)Not annualized.
(b)Annualized.
99
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout the
periods indicated:
Net Realized
& Unrealized
Gain/(Loss) on
Investments Increase/
Net Asset and Foreign (Decrease) Dividends
Value, Net Currency from from Net
Beginning Investment Related Investment Investment
of Period Income Transactions Operations Income
--------- ---------- -------------- ---------- ----------
The Guardian Investment Quality Bond Fund
Class A:
Year ended 12/31/2003.................... $10.28 $0.35 $ 0.11 $ 0.46 $(0.35)
Year ended 12/31/2002.................... 9.86 0.44 0.45 0.89 (0.44)
Year ended 12/31/2001.................... 9.61 0.50 0.30 0.80 (0.50)
Year ended 12/31/2000.................... 9.33 0.60 0.28 0.88 (0.60)
Year ended 12/31/1999.................... 9.99 0.53 (0.63) (0.10) (0.53)
Class B:
Year ended 12/31/2003.................... 10.28 0.27 0.11 0.38 (0.27)
Year ended 12/31/2002.................... 9.86 0.37 0.45 0.82 (0.37)
Year ended 12/31/2001.................... 9.60 0.43 0.31 0.74 (0.43)
Period from 8/7/2000+ to 12/31/2000...... 9.41 0.22 0.19 0.41 (0.22)
Class C:
Year ended 12/31/2003.................... 10.28 0.27 0.11 0.38 (0.27)
Year ended 12/31/2002.................... 9.86 0.37 0.45 0.82 (0.37)
Year ended 12/31/2001.................... 9.60 0.43 0.31 0.74 (0.43)
Period from 8/7/2000+ to 12/31/2000...... 9.41 0.22 0.19 0.41 (0.22)
Class K:
Year ended 12/31/2003.................... 10.29 0.31 0.11 0.42 (0.31)
Year ended 12/31/2002.................... 9.87 0.40 0.45 0.85 (0.40)
Period from 5/15/2001+ to 12/31/2001..... 9.68 0.28 0.24 0.52 (0.28)
The Guardian Low Duration Bond Fund
Class A:
Period from 7/30/2003+ to 12/31/2003..... 10.00 0.08 0.02 0.10 (0.08)
Class B:
Period from 7/30/2003+ to 12/31/2003..... 10.00 0.05 0.02 0.07 (0.05)
Class C:
Period from 7/30/2003+ to 12/31/2003..... 10.00 0.05 0.02 0.07 (0.05)
Class K:
Period from 7/30/2003+ to 12/31/2003..... 10.00 0.06 0.02 0.08 (0.06)
The Guardian High Yield Bond Fund
Class A:
Year ended 12/31/2003.................... 6.69 0.54 0.76 1.30 (0.54)
Year ended 12/31/2002.................... 7.19 0.55 (0.50) 0.05 (0.55)
Year ended 12/31/2001.................... 7.66 0.69 (0.47) 0.22 (0.69)
Year ended 12/31/2000.................... 8.98 0.77 (1.32) (0.55) (0.77)
Year ended 12/31/1999.................... 9.84 0.78 (0.84) (0.06) (0.78)
Class B:
Year ended 12/31/2003.................... 6.69 0.48 0.76 1.24 (0.48)
Year ended 12/31/2002.................... 7.18 0.50 (0.49) 0.01 (0.50)
Year ended 12/31/2001.................... 7.66 0.64 (0.48) 0.16 (0.64)
Year ended 12/31/2000.................... 8.97 0.68 (1.31) (0.63) (0.68)
Year ended 12/31/1999.................... 9.83 0.67 (0.84) (0.17) (0.67)
Class C:
Year ended 12/31/2003.................... 6.69 0.48 0.76 1.24 (0.48)
Year ended 12/31/2002.................... 7.18 0.50 (0.49) 0.01 (0.50)
Year ended 12/31/2001.................... 7.65 0.64 (0.47) 0.17 (0.64)
Period from 8/7/2000+ to 12/31/2000...... 8.47 0.28 (0.82) (0.54) (0.28)
Class K:
Year ended 12/31/2003.................... 6.69 0.51 0.76 1.27 (0.51)
Year ended 12/31/2002.................... 7.19 0.53 (0.50) 0.03 (0.53)
Period from 5/15/2001+ to 12/31/2001..... 7.68 0.39 (0.49) (0.10) (0.39)
+Commencement of operations.
100
Distributions
from Ratios/Supplemental Data
Net Realized ----------------------------------------------------------------------------------
Gain on Expenses Net
Investments and Net Asset Net Assets, (excluding Investment
Foreign Value, End of Expenses interest expense) Expenses Income Portfolio
Currency Related End of Total Period to Average to average Subsidized to Average Turnover
Transactions Period Return* (000's Omitted) Net Assets(a)(b) Net Assets(a) by GIS Net Assets Rate
- ---------------- --------- ------- --------------- ---------------- ----------------- ---------- ---------- ---------
$(0.30) $10.09 4.53% $143,536 0.85% 0.85% 0.11% 3.40% 257%
(0.03) 10.28 9.25 170,658 0.85 0.85 0.08 4.37 275
(0.05) 9.86 8.55 144,900 0.86 0.85 0.09 5.11 414
-- 9.61 9.81 124,805 0.85 0.85 0.09 6.41 344
(0.03) 9.33 (1.02) 139,661 0.81 0.80 0.13 5.49 271
(0.30) 10.09 3.75 18,374 1.60 1.60 0.27 2.65 257
(0.03) 10.28 8.43 19,308 1.60 1.60 0.27 3.58 275
(0.05) 9.86 7.86 13,036 1.61 1.60 0.31 4.31 414
-- 9.60 4.40 (c) 8,493 1.60(d) 1.60(d) 0.34(d) 5.78(d) 344
(0.30) 10.09 3.75 11,206 1.60 1.60 0.35 2.66 257
(0.03) 10.28 8.44 10,753 1.60 1.60 0.36 3.64 275
(0.05) 9.86 7.85 9,090 1.61 1.60 0.36 4.36 414
-- 9.60 4.39 (c) 8,356 1.60(d) 1.60(d) 0.34(d) 5.78(d) 344
(0.30) 10.10 4.11 9,820 1.25 1.25 0.05 3.00 257
(0.03) 10.29 8.81 9,213 1.25 1.25 0.03 4.00 275
(0.05) 9.87 5.43 (c) 8,436 1.26(d) 1.25(d) 0.08(d) 4.48(d) 414
-- 10.02 0.99 (c) 8,457 0.80(d) -- 1.20(d) 1.87(d) 97
-- 10.02 0.67 (c) 7,743 1.55(d) -- 1.20(d) 1.11(d) 97
-- 10.02 0.67 (c) 7,611 1.55(d) -- 1.21(d) 1.11(d) 97
-- 10.02 0.82 (c) 7,565 1.20(d) -- 0.97(d) 1.46(d) 97
-- 7.45 20.11 42,589 0.85 -- 0.42 7.59 153
-- 6.69 0.96 33,894 0.85 -- 0.45 8.17 69
-- 7.19 2.87 33,797 0.85 -- 0.47 9.21 141
-- 7.66 (6.53) 38,646 0.85 -- 0.38 9.03 163
(0.02) 8.98 (0.63) 54,178 0.75 -- 0.40 8.34 152
-- 7.45 19.22 10,018 1.60 -- 0.72 6.85 153
-- 6.69 0.35 8,336 1.60 -- 0.77 7.42 69
-- 7.18 1.96 8,182 1.60 -- 0.78 8.42 141
-- 7.66 (7.32) 7,567 1.74 -- 0.77 8.37 163
(0.02) 8.97 (1.78) 3,184 1.87 -- 1.00 7.22 152
-- 7.45 19.22 9,316 1.60 -- 0.71 6.85 153
-- 6.69 0.35 7,710 1.60 -- 0.77 7.42 69
-- 7.18 2.09 7,657 1.60 -- 0.71 8.43 141
-- 7.65 (6.42)(c) 7,491 1.60(d) -- 0.63(d) 8.74(d) 163
-- 7.45 19.63 9,581 1.25 -- 0.33 7.20 153
-- 6.69 0.55 7,944 1.25 -- 0.35 7.77 69
-- 7.19 (1.31)(c) 7,893 1.25(d) -- 0.41(d) 8.36(d) 141
* Excludes the effect of sales load.
(a)After expenses subsidized by GIS.
(b)Expense ratio includes interest expense associated with reverse repurchase
agreements.
(c)Not annualized.
(d)Annualized.
101
Financial Highlights
Selected data for a share of beneficial interest outstanding throughout the
periods indicated:
Net Realized
& Unrealized
Gain/(Loss) on
Investments Increase/
Net Asset and Foreign (Decrease) Dividends
Value, Net Currency from from Net
Beginning Investment Related Investment Investment
of Period Income Transactions Operations Income
--------- ---------- -------------- ---------- ----------
The Guardian Tax-Exempt Fund
Class A:
Year ended 12/31/2003.................... $10.51 $ 0.37 $ 0.18 $ 0.55 $ (0.37)
Year ended 12/31/2002.................... 10.09 0.40 0.61 1.01 (0.40)
Year ended 12/31/2001.................... 10.10 0.41 0.06 0.47 (0.41)
Year ended 12/31/2000.................... 9.40 0.43 0.70 1.13 (0.43)
Year ended 12/31/1999.................... 10.13 0.40 (0.73) (0.33) (0.40)
Class C:
Year ended 12/31/2003.................... 10.51 0.29 0.18 0.47 (0.29)
Year ended 12/31/2002.................... 10.09 0.32 0.61 0.93 (0.32)
Year ended 12/31/2001.................... 10.10 0.34 0.06 0.40 (0.34)
Period from 8/7/2000+ to 12/31/2000...... 9.77 0.14 0.33 0.47 (0.14)
The Guardian Cash Management Fund
Class A:
Year ended 12/31/2003.................... 1.000 0.004 -- -- (0.004)
Year ended 12/31/2002.................... 1.000 0.009 -- -- (0.009)
Year ended 12/31/2001.................... 1.000 0.032 -- -- (0.032)
Year ended 12/31/2000.................... 1.000 0.056 -- -- (0.056)
Year ended 12/31/1999.................... 1.000 0.044 -- -- (0.044)
Class B:
Year ended 12/31/2003.................... 1.000 0.002 -- -- (0.002)
Year ended 12/31/2002.................... 1.000 0.002 -- -- (0.002)
Year ended 12/31/2001.................... 1.000 0.025 -- -- (0.025)
Year ended 12/31/2000.................... 1.000 0.052 -- -- (0.052)
Year ended 12/31/1999.................... 1.000 0.044 -- -- (0.044)
Class C:
Year ended 12/31/2003.................... 1.000 0.002 -- -- (0.002)
Year ended 12/31/2002.................... 1.000 0.002 -- -- (0.002)
Year ended 12/31/2001.................... 1.000 0.025 -- -- (0.025)
Period from 8/7/2000+ to 12/31/2000...... 1.000 0.020 -- -- (0.020)
Class K:
Year ended 12/31/2003.................... 1.000 0.002 -- -- (0.002)
Year ended 12/31/2002.................... 1.000 0.005 -- -- (0.005)
Period from 5/15/2001+ to 12/31/2001..... 1.000 0.013 -- -- (0.013)
+ Commencement of operations.
102
Distributions
from Ratios/Supplemental Data
Net Realized ---------------------------------------------------- ---------
Gain on Net
Investments and Net Asset Net Assets, Investment
Foreign Value, End of Expenses Expenses Income Portfolio
Currency Related End of Total Period to Average Subsidized to Average Turnover
Transactions Period Return* (000's Omitted) Net Assets(a) by GIS Net Assets Rate
- ---------------- --------- ------- --------------- ------------- ---------- ---------- ---------
$(0.38) $10.31 5.34% $ 80,025 0.89%(b) 0.09% 3.52% 68%
(0.19) 10.51 10.20 113,852 0.87(b) 0.06 3.85 99
(0.07) 10.09 4.78 107,676 0.91(b) 0.09 4.03 181
-- 10.10 12.29 97,185 0.88(b) 0.07 4.43 124
(0.00)(c) 9.40 (3.29) 97,908 0.86(b) 0.08 4.11 144
(0.38) 10.31 4.54 10,553 1.64(b) 0.36 2.77 68
(0.19) 10.51 9.37 9,741 1.62(b) 0.37 3.11 99
(0.07) 10.09 3.99 8,783 1.66(b) 0.37 3.28 181
-- 10.10 4.87(d) 8,391 1.65(b)(e) 0.31(e) 3.62(e) 124
-- 1.000 0.37 529,321 0.85 0.05 0.38 --
-- 1.000 0.95 658,159 0.85 0.02 0.94 --
-- 1.000 3.27 606,045 0.85 0.04 3.13 --
-- 1.000 5.69 462,183 0.85 0.07 5.57 --
-- 1.000 4.45 390,106 0.85 0.09 4.41 --
-- 1.000 0.21 12,498 1.60 0.16 0.21 --
-- 1.000 0.23 18,485 1.60 0.37 0.22 --
-- 1.000 2.48 15,685 1.60 0.12 2.37 --
-- 1.000 5.34 11,860 1.14 0.63 5.25 --
-- 1.000 4.45 13,782 0.85 0.93 4.41 --
-- 1.000 0.21 9,086 1.60 0.05 0.21 --
-- 1.000 0.22 9,330 1.60 0.25 0.22 --
-- 1.000 2.48 8,492 1.60 0.04 2.47 --
-- 1.000 2.03(d) 8,193 1.60(e) 0.13(e) 5.06(e) --
-- 1.000 0.18 9,682 1.25 -- 0.18 --
-- 1.000 0.55 8,500 1.25 -- 0.54 --
-- 1.000 1.26(d) 8,125 1.25(e) 0.01(e) 1.99(e) --
* Excludes the effect of sales load.
(a)After expenses subsidized by GIS.
(b)Before offset of custody credits. Including the custody credits in Class A,
the expense ratio is 0.80% for 1999 and 0.85% for 2000, 2001, 2002 and 2003;
in Class C the expense ratio is 1.60% for 2000, 2001, 2002 and 2003.
(c)Rounds to less than $0.01.
(d)Not annualized.
(e)Annualized.
103
Report of Ernst & Young LLP,
Independent Auditors
Board of Trustees and Shareholders
The Park Avenue Portfolio
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of The Park Avenue Portfolio
(comprising, respectively, The Guardian Park Avenue Fund, The Guardian UBS
Large Cap Value Fund, The Guardian Park Avenue Small Cap Fund, The Guardian UBS
Small Cap Value Fund, The Guardian Asset Allocation Fund, The Guardian S&P 500
Index Fund, The Guardian Baillie Gifford International Fund, The Guardian
Baillie Gifford Emerging Markets Fund, The Guardian Investment Quality Bond
Fund, The Guardian Low Duration Bond Fund, The Guardian High Yield Bond Fund,
The Guardian Tax-Exempt Fund and The Guardian Cash Management Fund) as of
December 31, 2003, and the related statements of operations (and cash flows for
The Guardian Investment Quality Bond Fund), the statements of changes in net
assets, and the financial highlights for each of the periods indicated therein.
These financial statements and financial highlights are the responsibility of
the Portfolios' management. Our responsibility is to express an opinion on
these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of December 31, 2003, by correspondence
with the custodian and brokers or by other appropriate auditing procedures
where replies from brokers were not received. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective Funds constituting The Park Avenue Portfolio at December 31,
2003, the results of their operations (and cash flows for The Guardian
Investment Quality Bond Fund), the changes in their net assets, and the
financial highlights for each of the indicated periods, in conformity with
accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Boston, Massachusetts
February 6, 2004
104
.. Trustees
Dennis J. Manning, CLU, ChFC -- Chair
Frank J. Fabozzi, Ph.D.
Arthur V. Ferrara, CLU
Leo R. Futia, CLU
William W. Hewitt, Jr
Sidney I. Lirtzman, Ph.D.
Carl W. Schafer
Robert G. Smith, Ph.D.
.. Officers
Thomas G. Sorell -- President
Joseph A. Caruso
Howard W. Chin
Robert J. Crimmins, Jr.
Richard A. Cumiskey
Richard A. Goldman
Alexander M. Grant, Jr.
Edward H. Hocknell
Jonathan C. Jankus
Stewart M. Johnson
Peter J. Liebst
R. Robin Menzies
Nydia Morrison
John B. Murphy
Karen L. Olvany
Frank L. Pepe
Richard T. Potter, Jr.
Robert A. Reale
Donald P. Sullivan, Jr.
Mathew P. Ziehl
Shares of the Funds are not deposits or obligations of, or guaranteed or
endorsed by, any bank or depository institution, nor are they federally insured
by the Federal Deposit Insurance Corporation, The Federal Reserve Board, the
National Credit Union Association or any other agency. They involve investment
risk, including possible loss of principal amount invested.
This report is authorized for distribution to the public only when accompanied
or preceded by a current prospectus for the funds which comprise The Park
Avenue Portfolio.
.. Investment Adviser & Distributor
Guardian Investor Services LLC
7 Hanover Square
New York, New York 10004
.. Custodian of Assets
State Street Bank and Trust Company
Custody Division
1776 Heritage Drive
North Quincy, Massachusetts 02171
.. Shareholder Servicing Agent, Transfer Agent & Dividend Paying Agent for
State Street Bank and Trust Company
Boston Financial Data Services
Post Office Box 219611
Kansas City, Missouri 64121-9611
.. Independent Auditors
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116
[LOGO] Guardian
Guardian Investor Services LLC
7 Hanover Square
New York, New York 10004
PRSRT STANDARD
U.S. POSTAGE PAID
[LOGO] Guardian BOWNE FULFILLMENT SOLUTIONS
Guardian Investor Services LLC
7 Hanover Square
New York, NY 10004
EB 011566 (12/03)
ITEM 2. CODE OF ETHICS.
The registrant has adopted a code of ethics, as defined in Item 2 of Form N-CSR,
applicable to its principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar
functions (the "Code"). A copy of the Code is filed as an exhibit to this Form
N-CSR. There were no substantive amendments made to the Code, nor were there any
waivers granted under the Code, during the period covered by this report.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT
The registrant's Board of Directors/Trustees has determined that Robert G. Smith
qualifies as an audit committee financial expert, as defined in Item 3 of Form
N-CSR. Dr. Smith serves as Chairman of the registrant's audit committee and is
considered "independent" for purposes of Item 3 of Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) - (d) Aggregate fees billed to the registrant for the last two fiscal years
for professional services rendered by the registrant's principal accountant were
as follows: 2003 - (a) Audit Fees $239,315; (c) Tax Fees $72,000; 2002 - (a)
Audit Fees $172,531; (c) Tax Fees $42,469.
Audit Fees include amounts related to the audit and report on the registrant's
annual financial statements. Tax fees include amounts related to tax compliance
services.
(e)(1) Pursuant to the Audit Committee charter, the Audit Committee of the Board
is responsible for pre- approving any engagement of the Registrant's accountant
to provide any non-prohibited services to the Registrant, including the fees and
other compensation to be paid to the accountant. The Chairman of the Audit
Committee may grant the pre-approval of services to the Registrant for
non-prohibited services. All such delegated pre-approvals shall be presented to
the Audit Committee no later than the next Audit Committee meeting.
The Audit Committee of the Board is responsible for pre-approving any engagement
of the Registrant's accountant, including the fees and other compensation to be
paid to the accountant, to provide any non- audit services to the Registrant's
investment adviser (or any entity controlling, controlled by, or under common
control with the adviser that provides ongoing services to the Registrant), if
the engagement relates directly to the operations and financial reporting of the
Registrant. The Chairman of the Audit Committee may pre-approve non-audit
services, which are not prohibited, to the adviser (or any entity controlling,
controlled by, or under common control with the adviser that provides ongoing
services to the Registrant). All such delegated pre-approvals shall be presented
to the Audit Committee no later than the next Audit Committee meeting.
(2) No services described in paragraph (b) - (d) of Item 4, were approved by
the Audit Committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of
Regulation S-X.
(f) Not Applicable.
(g) Not Applicable.
(h) Not Applicable.
ITEM 5. AUDIT COMMITTE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. [RESERVED.]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. [RESERVED.]
ITEM 9. CONTROLS AND PROCEDURES.
a) The registrant's certifying officers have evaluated the registrant's
disclosure controls and procedures within 90 days of this filing and have
concluded that the registrant's disclosure controls and procedures were
effective, as of that date, in ensuring that information required to be
disclosed by the registrant in this Form N-CSR was recorded, processed,
summarized, and reported timely.
(b) The registrant's certifying officers are aware of no changes in the
registrant's internal control over financial reporting that occurred during the
registrant's most recent fiscal half-year that has materially affected, or is
reasonably likely to materially affect, the registrant's internal control over
financial reporting.
ITEM 10. EXHIBITS.
(a)(1) The registrant's code of ethics pursuant to Item 2 of Form N-CSR is
attached.
(a)(2) Separate certifications by the registrant's certifying officers, pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002 and required by Rule 30a-2(a)
under the Investment Company Act of 1940, are attached.
(b) A certification by the registrant's certifying officers, pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 and required by Rule 30a-2(b)
under the Investment Company Act of 1940, is attached.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
The Park Avenue Portfolio
By: /s/ Thomas G. Sorell
-----------------------------
Thomas G. Sorell
President of
The Park Avenue Portfolio
Date: March 4, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Thomas G. Sorell
-----------------------------
Thomas G. Sorell
President of
The Park Avenue Portfolio
Date: March 4, 2004
By: /s/ Frank L. Pepe
-----------------------------
Frank L. Pepe
Vice President and Treasurer of
The Park Avenue Portfolio
Date: March 4, 2004