<PAGE> 1
ANNUAL REPORT
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[LOGO]
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OCTOBER 31, 1995
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HARBOR FUND
<PAGE> 2
HARBOR FUND
ANNUAL REPORT OVERVIEW
Harbor Fund completed its current fiscal year on October 31, 1995. Total
annual return is shown below for each of the eight portfolios. All performance
figures included in this report are total returns and assume the reinvestment of
dividends. The Long-Term Historic Returns represent unmanaged indices and are
included as an indication of longer-term potential associated with taking
different levels of market risk.
<TABLE>
<CAPTION>
YEAR
HARBOR FUNDS IN ORDER OF MARKET RISK ENDED 10/31/95
----------------------------------------------------------------------------- --------------------------
<S> <C>
International Growth......................................................... 5.83%
International................................................................ 5.06%
Growth....................................................................... 25.93%
Capital Appreciation......................................................... 35.73%
Value........................................................................ 21.02%
Bond......................................................................... 14.56%
Short Duration............................................................... 6.82%
Money Market................................................................. 5.66%
</TABLE>
<TABLE>
<CAPTION>
COMMONLY USED MARKET INDICES
-----------------------------------------------------------------------------
<S> <C>
Morgan Stanley Capital International Europe, Australia, and Far East
(EAFE); international equity............................................... -0.37%
Standard & Poor's 500
(S&P 500); domestic equity................................................. 26.43%
Lehman Brothers Aggregate
(LB AGG); domestic bonds................................................... 15.65%
One-Year Government Bonds
(1-YR GVT)................................................................. 7.10%
90-Day U.S. Treasury Bills
(T-Bills); domestic short-term............................................. 5.78%
</TABLE>
<TABLE>
<CAPTION>
30 YEARS
1965-1994
LONG-TERM HISTORIC RETURNS ANNUAL RATES
----------------------------------------------------------------------------- --------------------------
<S> <C>
EAFE......................................................................... 12.15%
S&P 500...................................................................... 9.95%
Domestic Bonds (intermediate and long)(1).................................... 7.55%
1-YR GVT(2).................................................................. 7.71%
T-Bills...................................................................... 6.66%
Consumer Price Index......................................................... 5.36%
</TABLE>
<TABLE>
<CAPTION>
LIPPER
HARBOR FUND EXPENSE RATIOS 1992 1993 1994 1995 MEDIAN**
----------------------------------------------------------- ---- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C>
International Growth....................................... N/A % N/A % 1.32%* 1.21%* 1.40%
International.............................................. 1.28 1.20+++ 1.10+++ 1.04+++ 1.09
Growth..................................................... 0.90 0.90 0.93 0.93 0.96
Capital Appreciation....................................... 0.91 0.86 0.81 0.75 0.90
Value...................................................... 0.84* 0.88 1.04 0.90 0.93
Bond....................................................... 0.77* 0.72* 0.77* 0.70* 0.63
Short Duration***.......................................... 0.35*++ 0.43* 0.38* 0.38 0.61
Money Market............................................... 0.69* 0.71* 0.67* 0.61* 0.55
</TABLE>
------------------
(1) LB AGG not available for 30 year period; blended historic data used
to approximate total Bond Market Return.
(2) Historic data used to approximate total One-Year Government Bonds
Return.
* Reflects the Adviser's agreement not to impose all or a portion of its
advisory fees.
** Includes all funds in the 9/30/95 Lipper Universe with the same
investment objective as the comparable Harbor Fund portfolio and with
similar total assets.
*** For operating expenses only. Total expense ratio, including interest
expense for the Short Duration Fund, is 1.54% for 1992, 1.12% for
1993, 1.64% for 1994 and 1.84% for 1995. Short Duration Fund commenced
operations 1/1/92.
++ Annualized.
+++ Reflects the Adviser's and Subadviser's agreement not to impose a
portion of the advisory fee.
<PAGE> 3
DEAR SHAREHOLDER:
Summing up highlights of U.S. economic and financial market events during
our fiscal year 1995 perhaps is best done in the form of a question:
What's not to like?
Answer -- not much.
Chalking up a symbolic stock market milestone, the Dow Jones Industrial
Average closed above the 5,000 mark for the first time on November 22.
At Harbor Fund, we also celebrated a milestone when net assets exceeded $5
billion on November 16, just 3 days before the 9th anniversary of the inception
of the first Harbor Fund -- Harbor Growth -- on November 19, 1986.
For serious investors -- like those of you who we at Harbor aim to serve --
these milestones should only serve as a reminder of one of the most important
principles of sound investing: Invest for the longer term.
As long as there is buying and selling, the market will have ups and downs,
so it's important to choose an asset allocation mix of stock and fixed income
investments with a level of risk appropriate for your individual goals and to
STAY WITH IT.
It is important, of course, to periodically review your objectives and
program and what better time than near year-end. Consideration of economic and
market developments is helpful in the process.
Again, there's a lot to like about our fiscal year 1995. Two important
areas that had almost no developments at all stand out:
- Inflation
- Adjustment of the federal funds rate.
In contrast to the upward trend of inflation in every previous extended
period of economic expansion over the last three decades, inflation continued
its downward trend in 1995 and stood at an annual rate of less than 2 percent at
the close of our fiscal year.
After making not less than six increases in short-term interest rates in
1994, the Federal Reserve open market committee tacked on one rate boost in
January this year. Then with the economy showing signs of slowing down, the
Federal Reserve reversed its field in July by lowering the rate a quarter of a
percent and has taken no action since that time.
Moderate growth resumed in the calendar third quarter after an inventory
correction earlier in the year. Both equity and bond markets responded favorably
to the continued growth.
Other developments worth noting in the last 12 months include:
- Continued strong improvement in U.S. productivity.
Business investment in new equipment and construction has accounted for
almost 40 percent of the economic growth in the current extended expansion,
according to a recent study. Restructuring of corporations continued while
merger and acquisition activity proceeded at a record pace.
The resulting upsurge in productivity -- estimated to have posted a
year-to-year increase of 3.5 percent in the second quarter this year -- is
making a strong contribution to corporate profits. Unit labor costs are flat,
owing to the offsetting effect of improving productivity. U.S. industry now is
2
<PAGE> 4
DEAR SHAREHOLDER--CONTINUED
proclaimed to be the low cost producer among industrialized nations and is ahead
in leading edge high-tech industries.
- Rebound of the dollar in currency exchange.
Early in the year, the dollar weakened against many currencies, including
the Japanese yen and German mark, making American export industries more
competitive in world markets and contributing to reported earnings of U.S.
multinational companies.
The dollar strengthened a bit as the year progressed, causing some concern
about potential erosion of corporate profits, but that had no significant
adverse effect on continuation of the stock market upturn.
- Continued generally favorable worldwide economic conditions.
With the major exception of Japan where the economy remained depressed,
markets in most of Europe and the Pacific Rim recorded gains based on generally
stronger earnings than anticipated and lower interests rates. Equity and bond
markets in the emerging countries rebounded strongly after a poor first quarter.
As always, we invite your attention to the detailed reports on the
performance of the individual Harbor funds set forth on the pages which follow
this letter. Because expenses associated with your investments are important, we
also call your attention to the expense ratios of the Harbor fund portfolios on
page one of this report.
Adding value to your money is our only business at Harbor Fund. Our
overriding objective is to increase the value of your investment relative to a
managed portfolio of the sector of the market in which the fund is invested.
In general, the Harbor family of funds performed very well in the 1995
fiscal year, when remarkable advances were made in both equities and fixed
income investments.
Particularly noteworthy were the performances of our two international
funds -- Harbor International and Harbor International Growth. Both funds have
outperformed the EAFE index each year since inception -- Harbor International
for eight consecutive years since it was launched on December 29, 1987, and
Harbor International Growth for the second year since start up on November 1,
1993.
An exceptional gain was also recorded by the Harbor Capital Appreciation
Fund, which substantially outperformed the S&P 500 index. Harbor Growth Fund and
Harbor Value Fund also had substantial gains, but performance was behind the S&P
500 index. Harbor Bond Fund had a solid gain, but narrowly trailed the Lehman
Brothers Aggregate index after posting returns exceeding the index over the
previous four consecutive years.
As always, we thank you for your continued confidence and your investment
in Harbor Fund.
Sincerely,
/s/ Ronald C. Boller
Ronald C. Boller
President
3
<PAGE> 5
HARBOR FUND
The following performance figures are annualized for each Fund. The date of
inception for Harbor International Growth Fund was November 1, 1993; Harbor
Growth Fund was November 19, 1986; Harbor Short Duration Fund was January 1,
1992; all other Funds started December 29, 1987.
HARBOR INTERNATIONAL GROWTH FUND NET ASSET VALUE: 10/31/95: $12.10
10/31/94: $11.53
<TABLE>
<CAPTION>
------------------------------------------------------------------
Total Return for Periods Ended 10/31/95
------------------------------------------------------------------
Since
Fund/Index 12 months 5 years Inception
------------------------------------------------------------------
<S> <C> <C> <C>
Harbor International 5.83% -- 10.49%
Growth
------------------------------------------------------------------
EAFE -0.37% 6.95% 4.73%
------------------------------------------------------------------
Total Return for Periods Ended 9/30/95
------------------------------------------------------------------
Harbor International Growth 7.66% -- 11.26%
------------------------------------------------------------------
</TABLE>
Harbor International Growth Fund significantly outperformed the EAFE
index during the 1995 fiscal year. Devaluation of the Mexican peso early in
the fiscal year was a catalyst for a sell-off in worldwide emerging markets,
adversely affecting the fund's Mexican, Argentine, and southeast Asia
holdings. The balance -- and majority -- of the fund's holdings were in
Europe, where performance was good. Growth companies, in which the fund has
significant investments, performed well, and the economic cycle favored
these companies as the year progressed. Continued decline in global interest
rates had a beneficial effect on the portfolio. Major portfolio changes
included reduction of bank holdings and addition of pharmaceutical
companies. Holdings were reduced in Mexico and Argentina and increased in
France and Switzerland.
<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
HARBOR INTERNATIONAL GROWTH AND EAFE
INTERNATIONAL EAFE
<S> <C> <C>
10/93 10000 10000
10/94 11536.17 11009.41
10/95 12208.22 10968.48
*For the period November 1, 1993 (inception) ending October 31, 1995
</TABLE>
HARBOR INTERNATIONAL FUND NET ASSET VALUE: 10/31/95: $26.93
10/31/94: $26.87
<TABLE>
<CAPTION>
------------------------------------------------------------------
Total Return for Periods Ended 10/31/95
------------------------------------------------------------------
Since
Fund/Index 12 months 5 years Inception
------------------------------------------------------------------
<S> <C> <C> <C>
Harbor International 5.06% 14.45% 17.24%
------------------------------------------------------------------
EAFE -0.37% 6.95% 6.08%
------------------------------------------------------------------
Total Return for Periods Ended 9/30/95
------------------------------------------------------------------
Harbor International 9.16% 16.04% 17.61%
------------------------------------------------------------------
</TABLE>
Harbor International Fund outperformed the EAFE index in fiscal 1995.
Performance of holdings in Europe -- which account for almost 60 percent of
total investments -- was positive. Good contributions in Switzerland, the UK
and The Netherlands more than offset poor performance in France. Economies
in the Pacific Rim and Latin America were a mixed bag, but stock market
results were generally negative. Currency exposure, particularly in Europe,
was an important contributor to performance.
<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
HARBOR INTERNATIONAL AND EAFE
INTERNATIONAL EAFE
<S> <C> <C>
12/87 10000 10000
10/88 13000 12039
10/89 17069 13019
10/90 17720 11350
10/91 20864 12139
10/92 20024 10535
10/93 27936 14481
10/94 33122 15942
10/95 34799 15883
Period ending October 31
</TABLE>
4
<PAGE> 6
HARBOR FUND--CONTINUED
Performance data quoted represents past performance and is not predictive
of future performance. Actual return and principal value on an investment will
fluctuate, and the shares, when redeemed, may be worth more or less than their
original cost.
HARBOR GROWTH FUND NET ASSET VALUE: 10/31/95: $15.73
10/31/94: $12.83
<TABLE>
<CAPTION>
------------------------------------------------------------------
Total Return for Periods Ended 10/31/95
------------------------------------------------------------------
Since
Fund/Index 12 months 5 years Inception
------------------------------------------------------------------
<S> <C> <C> <C>
Harbor Growth 25.93% 17.86% 11.67%
------------------------------------------------------------------
S&P 500 26.43% 17.27% 13.45%
------------------------------------------------------------------
Total Return for Periods Ended 9/30/95
------------------------------------------------------------------
Harbor Growth 29.57% 17.66% 11.90%
------------------------------------------------------------------
</TABLE>
Performance of Harbor Growth Fund was just short of the S&P 500 index
return in fiscal 1995. About 80 percent of the portfolio is invested in
mid-capitalization growth companies and this sector of the market did not
perform as well as the larger-capitalization growth stocks which dominate
the S&P 500. The portfolio did benefit from a shift by investors from the
large-capitalization to mid-capitalization stocks as the year progressed.
Overweighting in the technology sector was a major positive contributor to
overall performance. This was partially offset by lower performance of
holdings in the consumer non-durable sector.
<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
HARBOR GROWTH AND S&P 500
GROWTH S&P 500
<S> <C> <C>
11/86 10000 10000
10/87 10250 10384
10/88 12058 11905
10/89 14295 15015
10/90 11803 13893
10/91 19914 18540
10/92 18425 20389
10/93 23246 23424
10/94 21319 24373
10/95 26846 30813
Period Ending October 31
</TABLE>
HARBOR CAPITAL APPRECIATION FUND NET ASSET VALUE: 10/31/95: $23.20
10/31/94: $17.31
<TABLE>
<CAPTION>
------------------------------------------------------------------
Total Return for Periods Ended 10/31/95
------------------------------------------------------------------
Since
Fund/Index 12 months 5 years Inception
------------------------------------------------------------------
<S> <C> <C> <C>
Harbor Capital 35.73% 25.47% 18.89%
Appreciation
------------------------------------------------------------------
S&P 500 26.43% 17.27% 15.10%
------------------------------------------------------------------
Total Return for Periods Ended 9/30/95
------------------------------------------------------------------
Harbor Capital Appreciation 41.37% 25.16% 19.08%
------------------------------------------------------------------
</TABLE>
Buoyed by the strong performance of its portfolio holdings which are
almost exclusively larger capitalization growth stocks, Harbor Capital
Appreciation Fund substantially outperformed the S&P 500 index during the
fiscal year. Significant overweighting in the technology sector, which had
outstanding performance in the fiscal year, was by far the major
contributor to the fund's exceptional gain. Holdings of Mexican securities,
liquidated in January, had a modest negative effect on performance.
<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
HARBOR CAPITAL APPRECIATION AND THE S&P 500
CAPITAL APPRECIATION S&P 500
<S> <C> <C>
12/87 10000 10000
10/88 11670 11625
10/89 14110 14663
10/90 12484 13567
10/91 19394 18105
10/92 22190 19911
10/93 26663 22874
10/94 28597 23801
10/95 38814 30090
Period ending October 31
</TABLE>
5
<PAGE> 7
HARBOR FUND--CONTINUED
The following performance figures are annualized for each Fund. The date of
inception for Harbor International Growth Fund was November 1, 1993; Harbor
Growth Fund was November 19, 1986; Harbor Short Duration Fund was January 1,
1992; and all other Funds started December 29, 1987.
HARBOR VALUE FUND NET ASSET VALUE: 10/31/95: $14.57
10/31/94: $13.50
<TABLE>
------------------------------------------------------------------
Total Return for Periods Ended 10/31/95
------------------------------------------------------------------
Since
Fund/Index 12 months 5 years Inception
------------------------------------------------------------------
<S> <C> <C> <C>
Harbor Value 21.02% 14.63% 13.07%
------------------------------------------------------------------
S&P 500 26.43% 17.27% 15.10%
------------------------------------------------------------------
Total Return for Periods Ended 9/30/95
------------------------------------------------------------------
Harbor Value 23.14% 14.32% 13.30%
------------------------------------------------------------------
</TABLE>
Performance of the Harbor Value Fund represented a substantial gain but
lagged the S&P 500 index return for the fiscal year. Value oriented stocks
generally did not perform as well as growth stocks over the 12 months and
the S&P 500 Index is weighted in favor of growth stocks. Important
contributions to the Fund's performance came from holdings in the financial
sector, where consolidation was a positive factor, and utilities, which
benefitted from proposed telecommunications legislation. Overall
performance was hurt by a lack of holdings in the technology sector -- most
technology stocks do not meet the Fund's investment criteria. On April 20,
1995, the Harbor Fund Board of Trustees appointed the newly formed firm of
DePrince, Race & Zollo as subadvisor for 75 percent of the Fund's assets.
Responsibility for management of the assets remained with Greg DePrince,
the portfolio manager formerly with the predecessor subadvisor. Richards &
Tierney continue to use quantitative techniques as subadvisor for 25
percent of the Fund's assets.
<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
HARBOR VALUE AND THE S&P 500
VALUE S&P 500
<S> <C> <C>
12/87 10000 10000
10/88 12007 11625
10/89 15205 14663
10/90 13229 13567
10/91 17221 18105
10/92 18436 19911
10/93 20646 22874
10/94 21637 23801
10/95 26185 30090
Period ending October 31
</TABLE>
HARBOR BOND FUND NET ASSET VALUE: 10/31/95: $11.21
10/31/94: $10.41
<TABLE>
------------------------------------------------------------------
Total Return for Periods Ended 10/31/95
------------------------------------------------------------------
Since
Fund/Index 12 months 5 years Inception
------------------------------------------------------------------
<S> <C> <C> <C>
Harbor Bond 14.56% 11.22% 10.15%
------------------------------------------------------------------
LB AGG 15.65% 9.65% 9.65%
------------------------------------------------------------------
Total Return for Periods Ended 9/30/95
------------------------------------------------------------------
Harbor Bond 12.62% 11.02% 10.03%
------------------------------------------------------------------
</TABLE>
For the fiscal year, Harbor Bond Fund performance trailed that of the
Lehman Brothers Aggregate index. During late 1994 and early 1995,
performance was adversely affected by higher than expected economic growth
and a subsequent sell-off in the bond market. The Fund also was
underweighted in corporate bonds -- the best performing sector in the first
half. As fears of inflation subsided during the year interest rates --
beyond the very short term -- declined significantly with the resulting
price increases producing appreciable performance for the Fund. During the
second half, an increase in hedged foreign bond exposure -- mainly in
Germany, Canada and the UK -- had a positive effect on performance and the
Fund outperformed the LB AGG over the last third of the fiscal year.
<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
HARBOR BOND AND LB AGG
BOND LB AGG
<S> <C> <C>
12/87 10000 10000
10/88 10791 10909
10/89 12049 12207
10/90 12534 12977
10/91 15042 15030
10/92 16869 16508
10/93 19227 18467
10/94 18622 17789
10/95 21334 20573
Period ending October 31
</TABLE>
6
<PAGE> 8
HARBOR FUND--CONTINUED
Performance data quoted represents past performance and is not predictive of
future performance. Actual return and principal value on an investment will
fluctuate, and the shares, when redeemed, may be worth more or less than their
original cost.
HARBOR SHORT DURATION FUND NET ASSET VALUE: 10/31/95: $8.82
10/31/94: $8.77
<TABLE>
<CAPTION>
------------------------------------------------------------------
Total Return for Periods Ended 10/31/95
------------------------------------------------------------------
Since
Fund/Index 12 months 5 years Inception
------------------------------------------------------------------
<S> <C> <C> <C>
Harbor Short Duration 6.82% -- 4.75%
------------------------------------------------------------------
1-YR GVT 7.10% 5.63% 4.67%
------------------------------------------------------------------
Total Return for Periods Ended 9/30/95
------------------------------------------------------------------
Harbor Short Duration 6.46% -- 4.67%
------------------------------------------------------------------
</TABLE>
Total return of the Harbor Short Duration Fund in the fiscal year
exceeded that of 90-day treasury bills but fell a bit short of the 1-year
U.S. Government bond. High quality corporate bonds and asset backed
securities provided superior returns relative to treasury securities. The
Fund's strategy is to outperform very short-term fixed income funds using
active management. Portfolio duration changes throughout the year aided
performance by capturing some of the bond market rally. Foreign currency
investments had a modest negative effect on performance. T-Bills is an
index of 90-day T-bills; 1-YR GVT is an index of T-Bills with maturities of
8 to 12 months and therefore, provides a more accurate representative
comparison with Harbor Short Duration Fund.
<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
HARBOR SHORT DURATION AND T-BILLS
SHORT
DURATION T-BILLS 1-YR. GVT.
<S> <C> <C> <C>
12/91 10000 10000 10000
10/92 10372 10307 10398
10/93 10909 10625 10810
10/94 11185 11038 11121
10/95 11949 11675 11911
Period ending October 31
</TABLE>
HARBOR MONEY MARKET FUND NET ASSET VALUE: 10/31/95: $1.00
10/31/94: $1.00
<TABLE>
<CAPTION>
------------------------------------------------------------------
Total Return for Periods Ended 10/31/95
------------------------------------------------------------------
Since
Fund/Index 12 months 5 years Inception
------------------------------------------------------------------
<S> <C> <C> <C>
Harbor Money Market 5.66% 4.35% 5.71%
------------------------------------------------------------------
T-Bills 5.78% 4.56% 5.78%
------------------------------------------------------------------
Current Yield for Periods Ended 9/30/95
------------------------------------------------------------------
Harbor Money Market 7 days: 5.37% 30 days: 5.32%
------------------------------------------------------------------
</TABLE>
Harbor Money Market Fund performance fell slightly below that of 90-day
treasury bills in the 1995 fiscal year. Highly rated commercial paper made
up the Fund's portfolio throughout the period. Early in the fiscal year,
maturity of the holdings was shortened to between 20 and 40 days. This
improved performance as interest rates continued to rise. Later, as the
economy began to slow, maturity was extended to between 45 and 70 days and
performance benefitted as interest rates began to decline. Money market
shares are neither insured nor guaranteed by the U.S. Government. While
Harbor Money Market Fund seeks to maintain a stable price per share, there
is no assurance this Fund will be able to do so.
<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
HARBOR MONEY MARKET AND T-BILLS
MONEY MARKET T-BILLS
<S> <C> <C>
12/87 10000 10000
10/88 10561 10568
10/89 11557 11494
10/90 12484 12427
10/91 13265 13201
10/92 13752 13712
10/93 14121 14135
10/94 14619 14685
10/95 15447 15533
Period ending October 31
</TABLE>
7
<PAGE> 9
HARBOR INTERNATIONAL GROWTH FUND
PORTFOLIO OF INVESTMENTS--OCTOBER 31, 1995
Investment Holdings By Country (%)
(Excludes net cash and short-term investments of 3.8%)
<TABLE>
<S> <C>
GERMANY (GER) 2.3
ARGENTINA (ARG) 2.7
AUSTRALIA (AUS) 3.1
NETHERLANDS (NET) 3.4
MEXICO (MEX) 3.7
SWEDEN (SW) 7.3
SPAIN (SP) 7.6
THAILAND (THAI) 8.3
UNITED KINGDOM (UK) 11.3
FRANCE (FR) 14.2
HONG KONG (HK) 14.2
SWITZERLAND (SWS) 18.1
</TABLE>
COMMON STOCKS--95.2%
<TABLE>
<CAPTION>
SHARES VALUE
---------- ------------
<S> <C> <C>
APPAREL & TEXTILES--4.2%
Christian Dior (FR)........ 52,100 $ 5,111,083
------------
AUTOMOBILE PARTS--4.2%
Autoliv AB (SW)............ 89,700 5,144,172
------------
BANKS--12.0%
Banco Popular Espanol
(SP)..................... 33,280 $ 5,278,520
Bangkok Bank (THAI)........ 340,400 3,517,644
Standard Chartered PLC
(UK)..................... 59,400 486,019
Thai Farmers Bank PCL
(THAI)................... 649,700 5,371,124
------------
14,653,307
------------
BROADCASTING--1.3%
British Sky Broadcasting
PLC (UK)................. 264,300 1,576,407
------------
BUSINESS SERVICES--3.8%
Societe Generale Surveill
Holding (SWS)............ 2,496 4,710,839
------------
COMPUTER SOFTWARE--2.3%
Sap AG (GER)............... 18,270 2,802,259
------------
CONGLOMERATES--16.1%
BBC Brown Boveri AG
(SWS).................... 4,518 5,235,502
Cheung Kong
(Holdings)(HK)........... 805,000 4,539,437
Siebe PLC (UK)............. 446,600 5,302,791
Swire Pacific Ltd. Cl. A
(HK)..................... 623,300 4,675,680
------------
19,753,410
------------
ELECTRICAL EQUIPMENT--3.2%
Legrand-ADP (FR)........... 35,885 3,945,747
------------
HOUSEHOLD PRODUCTS--3.7%
Kimberly-Clark De Mexico
Cl. A (MEX).............. 349,700 4,554,878
------------
LEISURE--5.3%
Granada Group (UK)......... 606,100 6,474,590
------------
</TABLE>
8
<PAGE> 10
HARBOR INTERNATIONAL GROWTH FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
COMMON STOCKS--CONTINUED
<TABLE>
<CAPTION>
SHARES VALUE
---------- ------------
<S> <C> <C>
PETROLEUM--6.4%
Repsol SA (SP)............. 136,400 $ 4,066,895
Woodside Petroleum (AUS)... 798,100 3,818,518
------------
7,885,413
------------
PHARMACEUTICALS--15.1%
Astra A Fria (SW).......... 101,700 3,735,157
Ciba Geigy AG (SWS)........ 5,941 5,138,536
Roche Genuss Holdings AG
(SWS).................... 973 7,063,064
Synthelabo (FR)............ 39,500 2,541,358
------------
18,478,115
------------
PUBLISHING--3.4%
Wolters Kluwer (NET)....... 46,000 4,180,394
------------
REAL ESTATE--6.7%
Amoy Properties (HK)....... 2,663,500 2,566,426
Sun Hung Kai Properties
(HK)..................... 699,300 5,584,961
------------
8,151,387
------------
RETAILING--4.8%
Carrefour (FR)............. 5,890 3,457,273
Castorama DuBois Investisse
(FR)..................... 14,750 2,390,558
------------
5,847,831
------------
UTILITIES--2.7%
Telecom Argentina Cl. B
(ARG).................... 846,400 $ 3,259,054
------------
TOTAL COMMON STOCKS
(Cost $103,153,821)........ 116,528,886
------------
</TABLE>
CONVERTIBLE BONDS--1.0%
(Cost $1,326,350)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
---------
<S> <C> <C>
Bangkok Bank (THAI)
3.250%--03/03/2004........ $1,270,000 1,301,750
------------
SHORT-TERM INVESTMENTS--2.0%
(Cost $2,419,000)
COMMERCIAL PAPER
Ford Motor Credit Company
5.760%--11/01/95.......... 2,419,000 2,419,000
------------
TOTAL INVESTMENTS--98.2%
(Cost $106,899,171).................... 120,249,636
CASH AND OTHER ASSETS, LESS
LIABILITIES--1.8%...................... 2,165,017
------------
TOTAL NET ASSETS--100%................... $122,414,653
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE> 11
HARBOR INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS--OCTOBER 31, 1995
Investment Holdings By Country (%)
(Excludes net cash and short-term investments of 4.4%)
<TABLE>
<S> <C>
PORTUGAL (PORT) 0.9
AUSTRALIA (AUS) 1.2
DENMARK (DEN) 1.8
SOUTH KOREA (S.KOR) 1.9
BRAZIL (BR) 2.0
ARGENTINA (ARG) 2.4
SPAIN (SP) 2.8
NORWAY (NOR) 2.9
SINGAPORE (SGP) 3.7
MALAYSIA (MAL) 4.1
HONG KONG (HK) 6.2
NETHERLANDS (NET) 6.3
JAPAN (JP) 7.4
SWEDEN (SW) 8.1
SOUTH AFRICA (S.AFR) 8.4
FRANCE (FR) 9.2
SWITZERLAND (SWS) 11.2
UNITED KINGDOM (UK) 15.1
</TABLE>
COMMON STOCKS--93.4%
<TABLE>
<CAPTION>
SHARES VALUE
----------- --------------
<S> <C> <C>
AUTOMOTIVE--2.2%
Hyundai Motor Co. GDR
(S. KOR)(1)........... 680,000 $ 12,240,000
Hyundai Motor Co. GDR
Nonvoting (S.
KOR)(1)............... 50,000 900,000
Volvo AB (SW)(a)........ 2,625,000 59,070,212
--------------
72,210,212
--------------
BANKS--17.2%
ABN Amro Holdings NV
(NET)................. 993,395 41,681,226
Banco Bilbao Vizcaya
(SP).................. 1,285,150 39,211,525
Banco Commercial
Portugues (PORT)...... 1,845,999 25,053,456
Banco Commercial
Portugues ADR
(PORT)(2)............. 420,000 5,670,000
Banco Intercontinental
Espana (SP)........... 250,000 21,635,989
Bank of Seoul
(S. KOR).............. 3,631,887 34,935,226
Barclays Bank PLC
(UK).................. 3,758,513 44,064,024
Cie Fin Paribas
Cl. A (FR)............ 647,505 35,598,313
Credit National (FR).... 171,489 10,479,522
CS Holding (SWS)........ 415,720 42,431,195
Korea Limited Credit
Bank (S. KOR)......... 373,496 12,779,357
Malayan Bank Berhad
(MAL)................. 7,707,000 62,130,324
National Westminster
Bank (UK)............. 5,391,829 53,769,064
Royal Bank of Scotland
Group (UK)............ 5,893,809 47,661,665
SCHW Bankverein (SWS)... 112,646 46,187,882
United Overseas Bank
(Alien Market)
(SGP)................. 4,500,693 39,451,799
--------------
562,740,567
--------------
</TABLE>
10
<PAGE> 12
HARBOR INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
COMMON STOCKS--CONTINUED
<TABLE>
<CAPTION>
SHARES VALUE
----------- --------------
<S> <C> <C>
BEVERAGES--7.3%
Cadbury Schweppes
(UK).................. 6,116,207 $ 50,425,215
Guinness (UK)........... 5,750,000 45,999,710
Heineken NV (NET)....... 250,000 44,299,928
South African Breweries
Ltd. ADR
(S. AFR)(2)........... 2,042,470 67,069,404
Whitbread (UK).......... 3,050,000 29,838,076
--------------
237,632,333
--------------
BUSINESS MACHINES--1.8%
Canon Inc. (JP)......... 3,500,000 59,905,124
--------------
BUSINESS SERVICES--2.0%
SGS Holding (SWS)....... 35,000 66,057,434
--------------
CHEMICALS--2.6%
Ciba Geigy AG (SWS)..... 65,214 56,405,404
Rhone Poulenc
SA (FR)............... 1,300,000 28,322,695
--------------
84,728,099
--------------
CONGLOMERATES--8.6%
Cheung Kong (Holdings)
(HK).................. 7,000,000 39,473,369
Hutchison Whampoa
(HK).................. 10,000,000 55,097,167
Jardine Matheson
(HK).................. 3,645,233 22,235,921
Keppel Corp. (SGP)...... 6,600,000 54,121,230
Kvaerner AS (NOR)....... 652,050 27,425,916
Sime Darby Berhad
(MAL)................. 15,600,000 38,954,957
Swire Pacific Ltd.
Cl. A (HK)............ 6,000,000 45,008,953
--------------
282,317,513
--------------
CONSTRUCTION--0.6%
Hunter Douglas NV
(NET)................. 413,994 20,042,896
--------------
CONSUMER GOODS--1.5%
BIC (FR)................ 500,000 47,415,682
--------------
ELECTRIC UTILITIES--0.4%
AO Mosenergo ADR
(RUS)(2)(a)........... 40,000 $ 370,000
Sydkraft AB Series C
(SW).................. 763,000 13,092,646
--------------
13,462,646
--------------
ELECTRONICS--1.9%
Matsushita Electrical
Industries (JP)....... 2,500,000 35,454,053
Sony Corp. (JP)......... 600,000 26,993,983
--------------
62,448,036
--------------
ENGINEERING--0.8%
Sulzer AG (SWS)......... 41,250 26,314,087
--------------
FOOD--1.0%
Nestle SA (SWS)......... 32,000 33,506,055
--------------
HOUSEHOLD APPLIANCES--0.3%
Electrolux AB (SW)...... 250,000 10,687,014
--------------
INSURANCE--3.7%
International
Nederlanden (NET)..... 739,467 44,036,562
SCHW Ruckversicher
(SWS)................. 71,500 78,136,507
--------------
122,173,069
--------------
INVESTMENT COMPANIES--1.4%
Kinnevik Investment
Ser. B (SW)........... 1,600,000 44,313,477
--------------
MINING & METALS--8.1%
Anglo American Corp.
South Africa Ltd.
ADR (S. AFR)(2)....... 1,260,000 71,505,000
Gencor Ltd. ADR (S.
AFR)(2)............... 26,250,000 92,134,875
Pasminco Ltd. (AUS)*.... 3,000,000 3,308,843
RTZ Corp. (UK).......... 2,077,341 28,681,056
Trelleborg AB
Cl. B (SW)............ 3,312,220 37,142,700
</TABLE>
11
<PAGE> 13
HARBOR INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
COMMON STOCKS--CONTINUED
<TABLE>
<CAPTION>
SHARES VALUE
----------- --------------
<S> <C> <C>
Western Mining Corp.
(AUS)................. 4,867,716 $ 31,176,274
--------------
263,948,748
--------------
OIL & GAS
EXPLORATION--2.4%
Ampolex Ltd. (AUS)...... 2,400,000 4,746,478
Lasmo (UK).............. 15,571,836 37,839,016
Saga Petroleum AS
(NOR)................. 2,809,000 35,174,286
--------------
77,759,780
--------------
OIL & GAS PRODUCTION--8.4%
British Gas (UK)........ 11,000,000 41,830,111
British Petroleum
(UK).................. 6,226,280 45,732,782
Norsk Hydro AS (NOR).... 833,333 33,177,924
Petrol Brasileiros
(BR).................. 350,000,000 30,207,894
Royal Dutch Petroleum
Co. ADR (NET)(2)...... 450,000 55,293,750
Total Cl. B (FR)........ 644,615 39,813,365
YPF Sociedad Anonima ADR
(ARG)(2).............. 1,600,000 27,400,000
--------------
273,455,826
--------------
PHARMACEUTICALS--6.1%
Astra AB Ser. A (SW).... 950,000 34,890,843
Novo Nordisk AS
(DEN)................. 450,000 57,212,047
Roussel Uclaf (FR)...... 250,000 40,977,777
SmithKline Beecham PLC
ADR (UK)(2)........... 1,270,000 65,881,250
--------------
198,961,917
--------------
PHOTOGRAPHY--1.9%
Fuji Photo Film Co.
(JP).................. 2,450,000 60,623,986
--------------
SHIPYARD--0.8%
Jurong Shipyard (SGP)... 4,000,000 26,579,914
--------------
STEEL--0.0%
Von Roll AG (SWS)*...... 12,000 263,966
Von Roll AG Wts.
12/18/95 (SWS)*....... 12,000 47,514
--------------
311,480
--------------
TELECOMMUNICATION--7.9%
Ericsson (LM) Tel Co.
Ser. B (SW)........... 2,640,000 $ 56,030,057
Ericsson (LM) Tel Co.
ADR Cl. B (SW)(2)..... 440,000 9,398,125
Hong Kong Telecom
(HK).................. 23,284,400 40,655,423
Telebras (BR)........... 865,000,000 35,066,413
Telecom Argentina
Cl. B (ARG)........... 6,600,000 25,413,228
Telefonica De Argentina
Cl. B (ARG)........... 12,000,000 25,323,216
Telefonica De Espana
(SP).................. 2,500,000 31,492,838
Telekom Malaysia
(MAL)................. 4,600,000 32,922,562
--------------
256,301,862
--------------
TIRE & RUBBER--2.9%
Bridgestone Corp.
(JP).................. 2,500,000 34,720,521
CIE Fin Michel Bas
(SWS)................. 34,700 16,792,622
Michelin Cl. B (FR)..... 1,100,000 44,401,107
Michelin Wts. 12/31/95
(FR)*................. 100,000 18,599
--------------
95,932,849
--------------
TOYS & AMUSEMENTS--0.8%
Nintendo Co. (JP)....... 200,000 14,709,764
Sega Enterprises (JP)... 200,000 10,601,985
--------------
25,311,749
--------------
WATER DISTRIBUTION--0.8%
Lyonnaise Des Eaux SA
(FR).................. 264,750 25,810,021
--------------
TOTAL COMMON STOCKS
(Cost $2,228,691,545)... 3,050,952,376
--------------
UNITS--0.8%
(Cost $61,968,374)
Eurotunnel (FR)......... 17,650,000 27,595,620
--------------
</TABLE>
12
<PAGE> 14
HARBOR INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
CONVERTIBLE BONDS--1.4%
(Cost $39,600,000)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- --------------
<S> <C> <C>
LibLife International BV
6.500%--09/30/2004 (S.
AFR).................... $40,000,000 $ 44,800,000
--------------
SHORT-TERM INVESTMENTS--4.1%
COMMERCIAL PAPER
American Express Credit
Corp.
5.700%--11/13/1995.... 11,053,000 11,053,000
--------------
Exxon Asset Management
5.700%--11/08/1995.... 6,289,000 6,289,000
--------------
General Electric Capital
Corp.
5.720%--11/03/1995.... 5,846,000 5,846,000
--------------
General Motors
Acceptance Corp.
5.780%--11/01/1995.... 13,000,000 13,000,000
5.780%--11/02/1995.... 13,519,000 13,519,000
5.780%--11/03/1995.... 1,803,000 1,803,000
5.750%--11/06/1995.... $ 9,666,000 $ 9,666,000
5.730%--11/07/1995.... 12,268,000 12,268,000
5.760%--11/10/1995.... 12,389,000 12,389,000
5.760%--11/14/1995.... 15,922,000 15,922,000
5.790%--11/16/1995.... 8,833,000 8,833,000
--------------
87,400,000
--------------
Prudential Funding Corp.
5.720%--11/09/1995.... 11,346,000 11,346,000
5.730%--11/15/1995.... 10,538,000 10,538,000
--------------
21,884,000
--------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $132,472,000)................. 132,472,000
--------------
TOTAL INVESTMENTS--99.7%
(Cost $2,462,731,919)............... 3,255,819,996
CASH AND OTHER ASSETS,
LESS LIABILITIES--0.3%.............. 11,336,822
--------------
TOTAL NET ASSETS--100.0%.............. $3,267,156,818
==============
</TABLE>
- - ------------
(a) Securities exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions, exempt from
registration, normally to qualified institutional buyers. At October 31,
1995, these securities were valued at $59,440,212 or 1.82% of net assets.
(1) GDR after the name of a foreign holding stands for Global Depository
Receipts representing ownership of foreign securities. GDRs are issued by
either U.S. or non-U.S. banking organizations.
(2) ADR after the name of a foreign holding stands for American Depository
Receipts representing ownership of foreign securities. ADRs are issued by
U.S. banking organizations.
* Non-income producing security.
The accompanying notes are an integral part of the financial statements.
13
<PAGE> 15
HARBOR GROWTH FUND
PORTFOLIO OF INVESTMENTS--OCTOBER 31, 1995
COMMON STOCK HOLDINGS (%)
(Excludes net cash and short-term investments of 5.0%)
<TABLE>
<S> <C>
PAPER PRODUCTS 0.4
CREDIT & FINANCE 0.6
NEWSPAPERS 0.7
TRUCKING & FREIGHT FORWARDING 0.8
PETROLEUM 1.0
GAS EXPLORATION 1.1
AIRLINES 1.3
PETROLEUM SERVICES 1.3
BEVERAGES 1.4
OFFICE SUPPLIES 1.4
ENTERTAINMENT 1.6
TOYS 1.7
APPAREL & TEXTILES 1.9
LEISURE TIME 1.9
HOTELS & RESTAURANTS 2.1
BROADCASTING 2.5
HOME BUILDING 2.5
TELECOMMUNICATIONS EQUIPMENT 2.6
CHEMICALS 2.9
INSURANCE 4.1
TELECOMMUNICATIONS 6.3
COMPUTER & BUSINESS EQUIPMENT 7.3
ELECTRONICS 7.3
COMPUTER SOFTWARE 8.0
BUSINESS SERVICES 9.4
RETAILING 9.5
DRUGS & HEALTH CARE 13.4
</TABLE>
COMMON STOCKS--95.0%
<TABLE>
<CAPTION>
SHARES VALUE
---------- ------------
<S> <C> <C>
AIRLINES--1.3%
Atlantic Southeast Airlines
Inc. .................... 70,000 $ 1,732,500
------------
APPAREL & TEXTILES--1.9%
Nike Inc. ................. 46,000 2,610,500
------------
BEVERAGES--1.4%
Canandaigua Wine Inc. ..... 40,000 1,920,000
------------
BROADCASTING--2.5%
Infinity Broadcasting
Corp.*................... 52,600 1,709,500
Tele-Communications Inc.*
TCI Group, Series A...... 75,000 1,275,000
Tele-Communications Inc.*
Liberty Media Group
Series A................. 18,750 461,719
------------
3,446,219
------------
BUSINESS SERVICES--9.4%
America Online Inc. ....... 34,000 2,720,000
Computer Sciences Corp.*... 24,600 1,645,125
Concord EFS Inc. .......... 65,000 2,242,500
CUC International Inc.*.... 76,950 2,664,394
Equifax Inc. .............. 45,000 1,755,000
SunAmerica Inc. ........... 30,000 1,867,500
------------
12,894,519
------------
CHEMICALS--2.9%
Arcadian Corp. ............ 112,000 2,310,000
IMC Global Inc. ........... 23,400 1,638,000
------------
3,948,000
------------
COMPUTER & BUSINESS
EQUIPMENT--7.3%
Ceridian Corp.*............ 42,900 1,866,150
Cisco Systems Inc. ........ 23,000 1,782,500
FORE Systems............... 31,000 1,643,000
Input / Output Inc. ....... 45,000 1,681,875
Silicon Graphics Inc.*..... 44,300 1,472,975
3Com Corp.*................ 33,200 1,560,400
------------
10,006,900
------------
</TABLE>
14
<PAGE> 16
HARBOR GROWTH FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
COMMON STOCKS--CONTINUED
<TABLE>
<CAPTION>
SHARES VALUE
---------- ------------
<S> <C> <C>
COMPUTER SOFTWARE--8.0%
Cadence Design Systems
Inc.*.................... 124,200 $ 4,005,450
Oracle Systems Corp.*...... 7,100 309,738
Parametric Technology
Corp. ................... 28,000 1,876,000
Sterling Software Inc.*.... 45,000 2,075,625
Symantec Corp.*............ 42,500 1,033,281
Synopsys Inc. ............. 46,000 1,725,000
------------
11,025,094
------------
CREDIT & FINANCE--0.6%
Green Tree Financial
Corp. ................... 33,800 899,925
------------
DRUGS & HEALTH CARE--13.4%
Amgen Inc.*................ 49,600 2,380,800
Biogen Inc.*............... 35,000 2,143,750
Cephalon Inc. ............. 55,000 1,650,000
Columbia / HCA Healthcare
Corp. ................... 32,000 1,572,000
Cordis Corp.*.............. 21,500 2,375,750
Genzyme Corp.*............. 37,000 2,155,250
Healthsource Inc. ......... 31,100 1,648,300
Medtronic Inc. ............ 36,400 2,102,100
Omnicare Inc. ............. 45,000 1,631,250
Vencor Inc.*............... 28,100 779,775
------------
18,438,975
------------
ELECTRONICS--7.3%
Atmel Corp.*............... 80,000 2,500,000
DSC Communications
Corp.*................... 19,900 736,300
Intel Corp. ............... 28,000 1,956,500
Oak Technology............. 45,000 2,463,750
Maxim Integrated Products
Inc.*.................... 28,000 2,093,000
Read Rite Corp.*........... 7,600 265,050
------------
10,014,600
------------
ENTERTAINMENT--1.6%
Viacom Inc.*............... 45,000 2,250,000
------------
GAS EXPLORATION--1.1%
Triton Energy Corp. ....... 33,000 1,538,625
------------
HOTELS & RESTAURANTS--2.1%
HFS Inc. .................. 27,700 $ 1,696,625
Host Marriott Corp.*....... 98,300 1,216,462
------------
2,913,087
------------
HOME BUILDING--2.5%
Centex Corp. .............. 55,000 1,801,250
Pulte Corp. ............... 50,000 1,581,250
------------
3,382,500
------------
INSURANCE--4.1%
Allstate Corp. ............ 42,000 1,543,500
MGIC Investment Corp. ..... 35,900 2,041,812
PMI Group Inc. ............ 43,000 2,064,000
------------
5,649,312
------------
LEISURE TIME--1.9%
Mirage Resorts Inc.*....... 44,600 1,460,650
Station Casinos Inc. ...... 85,000 1,105,000
------------
2,565,650
------------
NEWSPAPERS--0.7%
News Corp LTD ADR(1)....... 52,300 1,039,462
------------
OFFICE SUPPLIES--1.4%
Alco Standard.............. 21,600 1,911,600
------------
PAPER PRODUCTS--0.4%
Boise Cascade Corp. ....... 15,600 565,500
------------
PETROLEUM--1.0%
Pogo Producing Co. ........ 69,800 1,404,725
------------
PETROLEUM SERVICES--1.3%
Western Atlas, Inc.*....... 39,500 1,733,063
------------
RETAILING--9.5%
Borders Group Inc. ........ 47,300 810,013
Federated Department Stores
Inc. .................... 36,300 921,112
Kohl's Corp.*.............. 35,000 1,588,125
Micro Warehouse Inc.*...... 23,700 1,054,650
Staples Inc.*.............. 115,875 3,085,172
</TABLE>
15
<PAGE> 17
HARBOR GROWTH FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
COMMON STOCKS--CONTINUED
<TABLE>
<CAPTION>
SHARES VALUE
---------- ------------
<S> <C> <C>
Sunglass Hut International
Inc. .................... 102,000 $ 2,779,500
Tandy Corp. ............... 28,200 1,392,375
Viking Office Products
Inc.*.................... 30,900 1,375,050
------------
13,005,997
------------
TELECOMMUNICATIONS
EQUIPMENT--2.6%
Allen Group Inc. .......... 50,000 1,225,000
Glenayre Technologies
Inc.*.................... 37,100 2,383,675
------------
3,608,675
------------
TELECOMMUNICATIONS--6.3%
LCI International Inc.*.... 130,000 2,340,000
Mobile Telecommunication
Technologies Corp.*...... 53,700 1,523,737
Paging Network Inc.*....... 70,000 1,610,000
Vodafone Group PLC
ADR(1)................... 25,800 1,054,575
Worldcom Inc. GA........... 66,600 2,172,825
------------
8,701,137
------------
TOYS--1.7%
Mattel, Inc. .............. 82,500 2,371,875
------------
TRUCKING & FREIGHT
FORWARDING--0.8%
Tidewater Inc. ............ 41,300 1,089,288
------------
TOTAL COMMON STOCKS
(Cost $99,265,461)......... $130,667,728
------------
SHORT-TERM INVESTMENTS--5.5%
<CAPTION>
PRINCIPAL
AMOUNT
----------
<S> <C> <C>
COMMERCIAL PAPER
Merrill Lynch & Co. Inc.
5.870%--11/01/1995....... $6,693,000 $ 6,693,000
Philip Morris Cos. Inc.
5.850%--11/01/1995....... 812,000 812,000
------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $7,505,000)..................... 7,505,000
------------
TOTAL INVESTMENTS--100.5%
(Cost $106,770,461)................... 138,172,728
CASH AND OTHER ASSETS,
LESS LIABILITIES--(0.5%).............. (648,900)
------------
TOTAL NET ASSETS--100.0%................ $137,523,828
============
</TABLE>
- - ------------
(1) ADR after the name of a foreign holding stands for American Depository
Receipts representing ownership of foreign securities. ADRs are issued by
U.S. banking institutions.
* Non-income producing security.
The accompanying notes are an integral part of the financial statements.
16
<PAGE> 18
HARBOR CAPITAL APPRECIATION FUND
PORTFOLIO OF INVESTMENTS--OCTOBER 31, 1995
COMMON STOCK HOLDINGS (%)
(Excludes net cash and short-term investments of 3.4%)
<TABLE>
<S> <C>
RAILWAY 0.9
MACHINERY 1.0
MINERALS 1.0
PAPER PRODUCTS 1.4
BROADCASTING 1.5
TELECOMMUNICATIONS SERVICES 2.1
CONGLOMERATES 2.2
FINANCE 2.3
NEWSPAPERS 2.3
AEROSPACE 2.4
AIRLINE 2.4
BEVERAGE 2.8
HOUSEHOLD PRODUCTS 2.8
INSURANCE 2.8
HOTELS & RESTAURANTS 3.0
LEISURE TIME 3.3
BUSINESS SERVICES 4.0
RETAILING 5.2
TELECOMMUNICATIONS EQUIPMENT 5.7
COMPUTER SOFTWARE 9.9
ELECTRONICS 11.3
DRUGS & HEALTHCARE 13.0
COMPUTER & BUSINESS EQUIPMENT 13.3
</TABLE>
COMMON STOCKS--96.6%
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
AIRLINE--2.4%
AMR Corp. Del*................ 191,200 $ 12,619,200
UAL Corp.*.................... 55,000 9,673,125
------------
22,292,325
------------
AEROSPACE--2.4%
Boeing Co. ................... 338,500 22,214,062
------------
BEVERAGE--2.8%
Coca-Cola Co.................. 173,400 12,463,125
Pepsico, Inc. ................ 258,400 13,630,600
------------
26,093,725
------------
BROADCASTING--1.5%
Infinity Broadcasting
Corp.*...................... 437,700 14,225,250
------------
BUSINESS SERVICES--4.0%
CUC International Inc.*....... 356,062 12,328,647
First Data Corporation........ 226,537 14,979,759
Omnicom Group................. 147,800 9,440,725
------------
36,749,131
------------
COMPUTER & BUSINESS
EQUIPMENT--13.3%
Cisco Systems, Inc.*.......... 397,800 30,829,500
Compaq Computer Corp.*........ 295,400 16,468,550
Dell Computer Corp.*.......... 246,000 11,469,750
Hewlett-Packard Company....... 414,000 38,346,750
Silicon Graphics Inc.*........ 343,600 11,424,700
3Com Corp.*................... 315,500 14,828,500
------------
123,367,750
------------
COMPUTER SOFTWARE--9.9%
Adobe Systems Inc............. 301,400 17,179,800
Autodesk Inc.*................ 303,200 10,308,800
Computer Associates
International, Inc.......... 360,400 19,822,000
Intuit, Inc.*................. 91,800 6,609,600
Microsoft Corp.*.............. 204,500 20,450,000
Pyxis Corp.*.................. 261,400 3,300,175
SAP AG ADR(1)................. 280,800 14,342,028
------------
92,012,403
------------
</TABLE>
17
<PAGE> 19
HARBOR CAPITAL APPRECIATION FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
COMMON STOCKS--CONTINUED
<TABLE>
<CAPTION>
SHARES VALUE
------- ------------
<S> <C> <C>
CONGLOMERATES--2.2%
ITT Corp...................... 164,600 $ 20,163,500
------------
DRUGS & HEALTHCARE--13.0%
Astra A Fria, Ser A(2)........ 470,200 17,269,131
Chiron Corp.*................. 132,400 12,048,400
Eli Lilly & Co................ 156,500 15,121,812
Merck & Co. .................. 254,500 14,633,750
Phycor, Inc.*................. 309,675 11,380,556
SmithKline Beecham PLC
ADR(1)...................... 378,000 19,608,750
United Healthcare Corp. ...... 272,700 14,487,188
Upjohn Co..................... 313,600 15,915,200
------------
120,464,787
------------
ELECTRONICS--11.3%
Amphenol Corp. Cl. A*......... 100,300 2,168,987
Applied Materials Inc.*....... 291,000 14,586,375
Intel Corp.................... 555,200 38,794,600
International Rectifier
Corp.*...................... 313,400 14,142,175
LSI Logic Corp.*.............. 506,000 23,845,250
Texas Instruments Inc. ....... 160,000 10,920,000
------------
104,457,387
------------
FINANCE--2.3%
Federal National Mortgage
Association................. 199,700 20,943,537
------------
HOTELS & RESTAURANTS--3.0%
Hilton Hotels Corp............ 115,100 7,711,700
McDonald's Corporation........ 332,900 13,648,900
Promus Hotel Corp.*........... 287,100 6,316,200
------------
27,676,800
------------
HOUSEHOLD PRODUCTS--2.8%
Duracell International,
Inc. ....................... 230,000 12,046,250
Gillette Co. ................. 295,500 14,294,813
------------
26,341,063
------------
INSURANCE--2.8%
American International Group,
Inc. ....................... 117,700 9,930,938
MGIC Investment Corp.......... 277,400 15,777,125
------------
25,708,063
------------
LEISURE TIME--3.3%
Disney (Walt) Co. ............ 352,800 $ 20,330,100
Harrahs Entertainment Inc.*... 404,600 10,013,850
------------
30,343,950
------------
MACHINERY--1.0%
Harnischfeger Industries
Inc......................... 306,000 9,639,000
------------
MINERALS--1.0%
Minerals Technologies Inc..... 233,000 9,290,875
------------
NEWSPAPERS--2.3%
News Corp. LTD ADR(1)......... 83,200 1,653,600
Reuters Holdings PLC ADR
Cl. B(1).................... 350,100 19,430,550
------------
21,084,150
------------
PAPER PRODUCTS--1.4%
Champion International
Corp. ...................... 240,100 12,845,350
------------
RAILWAY--0.9%
Wisconsin Central
Transportation Corp.*....... 142,000 8,555,500
------------
RETAILING--5.2%
Autozone Inc.*................ 498,100 12,327,975
Dollar General Corp........... 302,850 7,419,825
Kohl's Corp.*................. 188,600 8,557,725
Micro Warehouse, Inc.*........ 223,000 9,923,500
Office Max, Inc.*............. 387,950 9,601,763
------------
47,830,788
------------
TELECOMMUNICATIONS
EQUIPMENT--5.7%
Ericsson (LM) Telephone Co. --
ADR Cl. B(1)................ 342,000 7,304,906
Motorola, Inc................. 364,100 23,894,063
Nokia Corp. .................. 382,800 21,341,100
------------
52,540,069
------------
TELECOMMUNICATIONS
SERVICES--2.1%
Vodafone Group PLC ADR(1)..... 484,600 19,808,025
------------
TOTAL COMMON STOCKS
(Cost $699,355,762)........... 894,647,490
------------
</TABLE>
18
<PAGE> 20
HARBOR CAPITAL APPRECIATION FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
SHORT-TERM INVESTMENTS--2.5%
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ------------
<S> <C> <C>
COMMERCIAL PAPER
Ford Motor Credit Co.
5.760%--11/01/95........ $22,571,000 $ 22,571,000
------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $22,571,000).................... 22,571,000
------------
<CAPTION>
VALUE
------------
<S> <C>
TOTAL INVESTMENTS--99.1%
(Cost $721,926,762)................... $917,218,490
CASH AND OTHER ASSETS, LESS
LIABILITIES--0.9%..................... 8,532,418
------------
TOTAL NET ASSETS--100.0%................ $925,750,908
============
</TABLE>
- - ------------
(1) ADR after the name of a foreign holding stands for American Depository
Receipts representing ownership of foreign securities. ADRs are issued by
U.S. banking institutions.
(2) Foreign currency-denominated. Market value is translated at the current
exchange rate.
* Non-income producing security.
The accompanying notes are an integral part of the financial statements.
19
<PAGE> 21
HARBOR VALUE FUND
PORTFOLIO OF INVESTMENTS--OCTOBER 31, 1995
COMMON STOCK HOLDINGS (%)
(Excludes net cash and short-term investments of 4.4%)
<TABLE>
<S> <C>
AEROSPACE 0.1
BROADCASTING 0.1
ENTERTAINMENT 0.1
HOTELS & RESTAURANTS 0.1
MINING 0.1
PHOTOGRAPHIC EQUIPMENT 0.1
POLLUTION CONTROL 0.1
RAILROADS 0.1
FINANCIAL SERVICES 0.2
COMPUTER & BUSINESS EQUIPMENT 0.3
CONSTRUCTION MATERIALS 0.3
APPAREL 0.4
AUTOMOBILE 0.4
MACHINERY 0.5
METALS 0.5
NEWSPAPERS 0.8
PAPER PRODUCTS 0.9
TOBACCO 1.0
TOOLS 1.3
PETROLEUM SERVICES 1.7
ELECTRONICS 1.8
PUBLISHING 1.8
GAS EXPLORATION 2.0
BUSINESS SERVICES 2.5
HOUSEHOLD PRODUCTS 2.5
CONGLOMERATES 3.2
NATURAL GAS 3.5
INSURANCE 3.6
RETAILING 3.9
DRUGS & HEALTHCARE 4.1
PUBLIC UTILITIES/ELECTRIC 4.5
CHEMICALS 4.7
FOOD & BEVERAGE 5.2
ELECTRICAL EQUIPMENT 5.5
PETROLEUM INTERNATIONAL 6.2
PETROLEUM DOMESTIC 7.8
BANKING 9.4
TELECOMMUNICATIONS 14.3
</TABLE>
COMMON STOCKS--95.2%
<TABLE>
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C>
AEROSPACE--0.1%
Lockheed Martin Corp. ......... 600 $ 40,875
United Technologies Corp....... 500 44,375
-----------
85,250
-----------
APPAREL--0.4%
Intibrands Inc. ............... 22,300 373,525
-----------
AUTOMOBILE--0.4%
Chrysler Corp. ................ 1,100 56,787
Federal Signal Corp............ 2,900 64,888
Ford Motor Co. ................ 7,600 218,500
General Motors Corp. .......... 800 35,000
-----------
375,175
-----------
BANKING--9.4%
AmSouth Bancorp................ 16,000 638,000
Banc One Corp.................. 1,540 51,975
BankAmerica Corp............... 600 34,500
BayBanks Inc. ................. 9,000 729,000
Boatmens Bancshares, Inc....... 1,000 38,000
Central Fiduciary Banks,
Inc.......................... 29,900 926,900
Chemical Banking Corp. ........ 300 17,062
Corestates Financial Corp...... 1,600 58,200
Crestar Financial Corp. ....... 17,550 1,000,350
First America Bank Corp........ 600 25,575
First American Corp. TN........ 23,300 1,022,288
Firstar Corp. New.............. 600 21,225
Great Western Financial
Corp......................... 500 11,313
H F Ahmanson & Co.............. 500 12,500
Huntington Bancshares, Inc. ... 1,050 25,069
J P Morgan & Co Inc. .......... 500 38,562
Jefferson Bankshares Inc. ..... 27,000 597,375
Magna Group Inc................ 42,600 1,049,025
NationsBank Corp............... 1,400 92,050
Roosevelt Financial Group
Inc. ........................ 37,000 596,625
Summit Bancorporation.......... 33,470 949,711
US Bancorp OR.................. 1,000 29,625
-----------
7,964,930
-----------
BROADCASTING--0.1%
Capital Cities/ABC, Inc........ 1,000 118,625
-----------
BUSINESS SERVICES--2.5%
Automatic Data Processing,
Inc.......................... 300 21,450
</TABLE>
20
<PAGE> 22
HARBOR VALUE FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
COMMON STOCKS--CONTINUED
<TABLE>
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C>
General Motors Corp. Cl. E..... 1,100 $ 51,838
H & R Block, Inc............... 300 12,375
Kelly Services Inc. Cl. A...... 25,200 633,150
Ogden Corp..................... 58,600 1,333,150
Sysco Corp. ................... 1,300 39,487
-----------
2,091,450
-----------
CHEMICALS--4.7%
Betz Laboratories Inc.......... 13,500 543,375
Crompton & Knowles Corp........ 52,600 664,075
Dow Chemical Co................ 2,900 199,013
E I DuPont De Nemours & Co. ... 1,600 99,800
Eastman Chemical Co............ 500 29,750
Ethyl Corp. ................... 112,600 1,252,675
Lawter International Inc. ..... 33,300 353,812
Nalco Chemical Co. ............ 16,500 495,000
PPG Industries, Inc. .......... 1,000 42,500
Potash Corp. Saskatchewan
Inc.(2)...................... 1,000 69,625
Witco Corp..................... 7,800 217,831
-----------
3,967,456
-----------
COMPUTERS & BUSINESS
EQUIPMENT--0.3%
Hewlett Packard Co............. 1,400 129,675
International Business Machines
Corp......................... 1,400 136,150
-----------
265,825
-----------
CONGLOMERATES--3.2%
Hanson PLC ADR(1).............. 102,800 1,593,400
ITT Corp....................... 500 61,250
Minnesota Mining &
Manufacturing Co............. 18,900 1,074,937
-----------
2,729,587
-----------
CONSTRUCTION MATERIALS--0.3%
Armstrong World Industries,
Inc.......................... 1,000 59,375
Sherwin Williams Co............ 300 11,288
Vulcan Materials Co............ 3,100 172,437
-----------
243,100
-----------
CONTAINERS & GLASS--0.0%
Crown Cork & Seal Inc.*........ 600 $ 20,925
-----------
DRUGS & HEALTHCARE--4.1%
Abbott Labs.................... 1,400 55,650
Bristol Myers Squibb Co. ...... 16,200 1,235,250
Johnson & Johnson.............. 1,000 81,500
Merck & Co. Inc................ 5,200 299,000
Pfizer Inc..................... 1,100 63,112
Rhone Poulenc Rorer, Inc....... 600 28,275
Schering Plough Corp........... 1,200 64,350
Warner Lambert Co.............. 19,500 1,659,938
-----------
3,487,075
-----------
ELECTRICAL EQUIPMENT--5.5%
Cooper Industries Inc.......... 35,000 1,181,250
Eaton Corp..................... 19,800 1,014,750
General Electric Co............ 12,900 815,925
General Signal Corp. .......... 49,800 1,587,375
National Service Industries,
Inc. ........................ 300 8,925
Westinghouse Electric Corp. ... 1,000 14,125
-----------
4,622,350
-----------
ELECTRONICS--1.8%
Motorola Inc................... 500 32,812
Thomas & Betts Corp............ 22,700 1,466,988
-----------
1,499,800
-----------
ENTERTAINMENT--0.1%
Polygram NV ADR(1)............. 700 43,400
-----------
FINANCIAL SERVICES--0.2%
Dean Witter Discover & Co...... 600 29,850
Merrill Lynch & Co Inc. ....... 800 44,400
Travelers Group Inc............ 1,202 60,701
-----------
134,951
-----------
FOOD & BEVERAGE--5.2%
Campbell Soup Co............... 900 47,138
Coca Cola Co................... 8,200 589,375
Conagra Inc.................... 1,400 54,075
General Mills Inc.............. 11,500 659,812
Grand Met PLC ADR(1)........... 39,900 1,097,250
H J Heinz Co................... 13,700 637,050
</TABLE>
21
<PAGE> 23
HARBOR VALUE FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
COMMON STOCKS--CONTINUED
<TABLE>
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C>
Lance Inc...................... 41,200 $ 695,250
Pepsico Inc. .................. 800 42,200
Sara Lee Corp.................. 2,000 58,750
Tasty Baking Corp.............. 13,300 182,875
Unilever NV.................... 2,300 301,300
-----------
4,365,075
-----------
GAS EXPLORATION--2.0%
Burlington Resources, Inc...... 700 25,200
Occidental Petroleum Corp...... 76,900 1,653,350
Oryx Energy Co. ............... 500 5,750
Union Texas Petroleum Holdings
Inc.......................... 500 9,000
-----------
1,693,300
-----------
GROCERIES--0.0%
Kroger Co.*.................... 500 16,687
-----------
HOTELS & RESTAURANTS--0.1%
Dial Corp. DE.................. 400 9,750
Harrahs Entertainment Inc.*.... 300 7,425
McDonald's Corporation......... 1,800 73,800
Promus Hotel Corp.*............ 150 3,300
-----------
94,275
-----------
HOUSEHOLD PRODUCTS--2.5%
Colgate Palmolive Co. ......... 17,100 1,184,175
Corning Inc. .................. 25,200 658,350
Gillette Co. .................. 600 29,025
Procter & Gamble Co. .......... 2,900 234,900
-----------
2,106,450
-----------
INSURANCE--3.6%
Allstate Corp.................. 3,868 142,149
American General Corp. ........ 33,500 1,101,313
American International Group,
Inc.......................... 1,050 88,594
Aon Corp. ..................... 14,800 608,650
Loews Corp..................... 1,000 146,625
Ohio Casualty Corp............. 6,400 227,200
Safeco Corp.................... 300 19,256
St. Paul Companies, Inc........ 400 20,300
Torchmark Inc.................. 15,200 630,800
Unitrin, Inc................... 300 $ 13,875
-----------
2,998,762
-----------
MACHINERY--0.5%
Barnes Group, Inc.............. 300 11,250
Caterpillar Inc. .............. 800 44,900
Deere & Co. ................... 300 26,812
Goulds Pumps Inc............... 13,300 315,875
Timken Co...................... 400 16,100
-----------
414,937
-----------
METALS--0.5%
Alcan Aluminum LTD............. 1,800 56,925
Allegheny Ludlum Corp.......... 2,600 43,875
Aluminum Co. of America........ 600 30,600
Barrick Gold Corp. ............ 1,400 32,375
Inco LTD(2).................... 2,600 89,375
Reynolds Metals Co. ........... 1,600 80,600
USX U S Steel.................. 2,100 62,737
-----------
396,487
-----------
MINING--0.1%
Freeport McMoran Copper & Gold
Cl. A........................ 150 3,431
Freeport McMoran Copper & Gold
Cl. B........................ 2,806 63,836
Homestake Mining Co. .......... 700 10,763
Placer Dome, Inc. ............. 1,000 21,875
Santa Fe Pacific Gold Corp..... 1,320 13,035
-----------
112,940
-----------
NATURAL GAS--3.5%
Brooklyn Union Gas Co.......... 20,500 515,062
Enron Corp. ................... 500 17,187
Enserch Corp. ................. 7,100 102,950
MCN Corp....................... 16,800 365,400
Nova Corp. Alberta(2).......... 11,000 83,875
Questar Corp................... 19,500 587,438
Sonat, Inc..................... 39,000 1,121,250
Transcanada Pipelines
Ltd.(2)...................... 5,800 77,575
Westcoast Energy, Inc.(2)...... 1,500 22,125
Williams Companies, Inc. ...... 600 23,175
-----------
2,916,037
-----------
</TABLE>
22
<PAGE> 24
HARBOR VALUE FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
COMMON STOCKS--CONTINUED
<TABLE>
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C>
NEWSPAPERS--0.8%
Gannett Inc.................... 11,800 $ 641,625
-----------
PAPER PRODUCTS--0.9%
Champion International
Corp. ....................... 1,500 80,250
International Paper Co. ....... 1,200 44,400
Kimberly-Clark Corp. .......... 8,800 639,100
Union Camp Corp. .............. 600 30,525
-----------
794,275
-----------
PETROLEUM DOMESTIC--7.8%
Amerada Hess Corp. ............ 400 18,050
Ashland Inc. .................. 24,200 765,325
Atlantic Richfield Co. ........ 14,900 1,590,575
Freeport McMoran Inc. ......... 666 24,892
Kerr McGee Corp................ 300 16,537
Mobil Corp..................... 12,200 1,229,150
Tenneco, Inc................... 34,900 1,531,238
Unocal Corp.................... 49,000 1,286,250
USX Marathon Group............. 5,300 94,075
-----------
6,556,092
-----------
PETROLEUM INTERNATIONAL--6.2%
Amoco Corp..................... 16,200 1,034,775
Chevron Corp................... 8,000 374,000
Exxon Corp..................... 14,500 1,107,438
Repsol SA ADR(1)............... 46,100 1,365,712
Royal Dutch Petroleum Corp..... 6,800 835,550
Texaco, Inc.................... 7,900 538,188
-----------
5,255,663
-----------
PETROLEUM SERVICES--1.7%
Dresser Industries Inc......... 63,800 1,323,850
Schlumberger Ltd. ............. 1,200 74,700
-----------
1,398,550
-----------
PHOTOGRAPHIC EQUIPMENT--0.1%
Eastman Kodak Co............... 2,000 125,250
-----------
POLLUTION CONTROL--0.1%
WMX Technologies Inc........... 1,900 53,437
-----------
PUBLIC UTILITIES/ELECTRIC--4.5%
Baltimore Gas & Electric
Co. ......................... 2,800 74,900
CINergy Corp................... 35,949 1,020,053
Consolidated Edison Co. NY
Inc.......................... 4,100 $ 124,537
Dominion Resources Inc. VA..... 2,500 99,375
Duke Power Co.................. 2,500 111,875
Entergy Corp................... 3,000 85,500
Houston Industries, Inc........ 3,600 166,950
Illinova Corp.................. 3,400 96,475
Midamerican Energy Co.......... 1,400 22,400
Northeast Utilities............ 3,600 89,100
Pacificorp..................... 3,800 71,725
PECO Energy Co................. 27,400 801,450
PP & L Resources Inc........... 3,100 69,750
SCEcorp........................ 4,900 83,300
Southern Co. .................. 2,500 59,688
Texas Utilities Co............. 18,100 665,175
Unicom Corp.................... 5,000 163,750
-----------
3,806,003
-----------
PUBLISHING--1.8%
Dun & Bradstreet Corp.......... 25,000 1,493,750
Time Warner Inc................ 500 18,250
-----------
1,512,000
-----------
RAILROADS--0.1%
CSX Corp....................... 400 33,500
Union Pacific Corp............. 600 39,225
-----------
72,725
-----------
RETAILING--3.5%
Autozone Inc.*................. 600 14,850
Limited, Inc. ................. 1,400 25,725
May Department Stores Co....... 34,700 1,361,975
Melville Corp.................. 600 19,200
Mercantile Stores Inc. ........ 20,900 937,888
J. C. Penney Inc............... 11,200 471,800
Sears, Roebuck & Co............ 1,800 61,200
Toys R Us, Inc.*............... 300 6,562
WalMart Stores, Inc............ 3,900 84,338
-----------
2,983,538
-----------
TELECOMMUNICATIONS--14.3%
AT&T Corp...................... 10,900 697,600
Airtouch Communications
Inc.*........................ 9,800 279,300
Alltel Corp. .................. 22,100 676,813
</TABLE>
23
<PAGE> 25
HARBOR VALUE FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
COMMON STOCKS--CONTINUED
<TABLE>
<CAPTION>
SHARES VALUE
------- -----------
<S> <C> <C>
Ameritech Corp................. 7,200 $ 388,800
BCE Inc........................ 28,000 941,500
Bell Atlantic Corp............. 5,000 318,125
BellSouth Corp................. 8,000 612,000
Frontier Corp.................. 58,800 1,587,600
GTE Corp....................... 50,900 2,099,625
Northern Telecom Ltd........... 2,000 72,000
Nynex Corp..................... 11,900 559,300
Pacific Telesis Group.......... 4,600 139,725
SBC Communications Inc. ....... 7,500 419,062
Southern New England Telecomm
Corp. ....................... 42,200 1,524,475
Sprint Corp. .................. 38,100 1,466,850
U S West Inc................... 7,100 338,138
-----------
12,120,913
-----------
TIRES & RUBBER--0.0%
Goodyear Tire and Rubber Co.... 600 22,800
-----------
TOBACCO--1.0%
Philip Morris Companies Inc.... 2,300 194,350
RJR Nabisco Holdings Corp.
New.......................... 20,640 634,680
-----------
829,030
-----------
TOOLS--1.3%
Snap On Inc.................... 18,900 800,888
Stanley Works.................. 7,000 334,250
-----------
1,135,138
-----------
TRANSPORTATION--0.0%
Transport Holdings Inc.*....... 6 236
-----------
TOTAL COMMON STOCKS
(Cost $75,489,615)............. 80,445,649
-----------
</TABLE>
CONVERTIBLE BONDS--0.4%
(Cost $300,000)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- -----------
<S> <C> <C>
Federated Department
Stores Inc. .............. $ 300,000 $ 295,500
-----------
SHORT-TERM INVESTMENTS--4.1%
COMMERCIAL PAPER
Euro Time Deposit
5.625%--11/24/95.......... 400,000 400,000
Ford Motor Credit Co.
5.700%--12/22/95.......... 500,000 500,060
General Electric Capital
Corp. 5.660%--01/22/96.... 500,000 500,055
Repurchase Agreement with
State Street Bank & Trust
dated October 31, 1995 due
on demand at 4.750%,
collateralized by a U.S.
Treasury Bond, 8.875%
February 15, 2019, par
value of $1,650,000
(repurchase proceeds of
$2,081,275 if closed on
November 1, 1995)......... 2,081,000 2,081,000
-----------
TOTAL SHORT-TERM INVESTMENTS
(Cost $3,481,115)...................... 3,481,115
-----------
TOTAL INVESTMENTS--99.7%
(Cost $79,270,730)..................... 84,222,264
CASH AND OTHER ASSETS,
LESS LIABILITIES--0.3%................. 291,570
-----------
TOTAL NET ASSETS--100%................... $84,513,834
===========
</TABLE>
- - ------------
(1) ADR after the name of a foreign holding stands for American Depository
Receipts representing ownership of foreign securities. ADRs are issued by
U.S. banking institutions.
(2) Canadian security U. S. dollar denominated.
* Non-income producing security.
The accompanying notes are an integral part of the financial statements.
24
<PAGE> 26
HARBOR BOND FUND
PORTFOLIO OF INVESTMENTS--OCTOBER 31, 1995
TOTAL INVESTMENTS (%)
(Excludes net cash and short-term investments of 4.4%)
<TABLE>
<S> <C>
- - -----------------------------------
ASSET BACKED SECURITIES 3.1
U.S. GOVERNMENT OBLIGATIONS 4.5
FOREIGN BONDS 8.9
CORPORATE BONDS & NOTES 21.5
MORTGAGE RELATED SECURITIES 57.6
</TABLE>
ASSET BACKED SECURITIES--3.1%
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ------------
<S> <C> <C>
Premier Auto Trust Cl. A-2
5.750%--11/04/1996........ $ 1,903,486 $ 1,906,035
Student Loan Marketing
Association
Series 1995 Cl. A-2
6.130%--10/25/2007+....... 5,000,000 5,000,000
TOTAL ASSET BACKED
SECURITIES
(Cost $6,893,668)......... 6,906,035
------------
CORPORATE BONDS & NOTES--21.5%
AMR Corp. MTN(1)
10.000%--03/07/2001....... 2,000,000 2,278,928
Banco Nacional De Obras Y
Serv
6.875%--10/01/1998(a)..... 3,000,000 2,685,000
Banesto Del Inc.
8.250%--07/28/2002........ 3,000,000 3,146,385
Banesto Finance
6.125%--04/21/2003(a)+.... 2,000,000 1,970,626
Banmer SA
8.000%--07/07/1998(a)..... $ 4,000,000 $ 3,605,000
CTC Mansfield Funding Corp.
11.125%--09/30/2016....... 2,000,000 2,085,168
Capital One Bank MTN(1)
6.250%--07/11/1996+....... 5,000,000 5,003,470
Cemex SA MTN(1)
8.500%--08/31/2000(a)..... 1,000,000 858,520
Comerica Inc.
10.125%--06/01/1998....... 50,000 54,422
Commonwealth Edison Co.
8.000%--10/15/2003........ 3,000,000 3,071,763
General Motors Acceptance
Corp.
8.750%--02/01/1996........ 3,000,000 3,019,944
Great Western Bank Beverly
Hills, CA
10.500%--05/30/2000....... 700,000 780,383
Heller Financial, Inc.
6.450%--02/15/1997........ 250,000 248,697
Hydro Quebec Yankee Bonds
9.500%--11/15/2030........ 775,000 957,915
Saferco Products Inc. MTN(1)
9.630%--05/31/2000........ 500,000 565,625
Shearson Lehman Holdings
MTN(1)
6.406%--03/18/1996+....... 3,000,000 2,999,820
Texas New Mexico Power Co.
11.250%--01/15/1997....... 775,000 809,317
Texas Utilities Electric Co.
6.265%--05/01/1999........ 5,000,000 5,005,810
Time Warner Inc.
Floating Rate Note
6.835--08/15/2000+........ 750,000 753,814
7.975--08/15/2004......... 450,000 462,314
8.110--08/15/2006......... 900,000 924,034
8.180--08/15/2007......... 900,000 922,620
------------
3,062,782
------------
United Air Lines Inc.
6.750%--12/01/1997
MTN(1).................... 4,000,000 3,988,704
10.250%--07/15/2021....... 1,500,000 1,760,152
------------
5,748,856
------------
Xerox Credit Corp.
10.000%--04/01/1999....... 50,000 55,733
TOTAL CORPORATE BONDS AND NOTES
(Cost $47,655,933)........ 48,014,164
------------
</TABLE>
25
<PAGE> 27
HARBOR BOND FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
<TABLE>
<CAPTION>
FOREIGN BONDS--8.9%
PRINCIPAL
AMOUNT VALUE
----------- ------------
<S> <C> <C>
Republic of Argentina
5.875%--05/31/1996+....... $ 500,000 $ 488,500
Series L
6.813%--03/31/2005........ $ 1,000,000 593,750
------------
1,082,250
------------
Canadian Government Series
A-79
8.750%--12/01/2005........ C$ 9,300,000 7,438,093
Canadian National Railroad
Co.
13.000%--11/15/2004....... C$ 2,030,000 1,584,739
12.250%--05/01/2005....... C$ 1,647,000 1,285,747
------------
2,870,486
------------
Federal Republic of Germany
7.500%--11/11/2004..........DM10,000,000
7,586,646
Mexico (UTD MES ST)
6.875%--12/31/2019........ $ 1,250,000 834,375
TOTAL FOREIGN BONDS
(Cost $20,304,784)........ 19,811,850
------------
MORTGAGE RELATED SECURITIES--57.6%
COLLATERALIZED MORTGAGE OBLIGATIONS:
Capstead Securities Corp. IV
Series 91 Class VII
8.900%--12/25/2021........ 640,944 660,772
Chase Mortgage Financial
Corp. REMIC
Series 1990 Cl. 2A2
7.500%--03/25/2025........ 1,080,455 1,081,806
Chase Mortgage Financial
Corp. Series 1992 Cl. A1
Pass Thru REMIC
8.000%--06/25/2024........ 148,111 149,594
Collaterized Mortgage
Obligation Trust
Series 64-C
9.000%--04/20/2017........ 178,050 177,923
Collaterized Mortgage
Securities Corp. Series
F-4
11.450%--11/01/2015....... 499,439 552,764
Collaterized Mortgage
Securities Corp.
Series 1988 B-4
8.750%--04/20/2019........ 532,542 552,922
Drexel Burnham Lambert
Series H-4
8.500%--04/01/2017........ 7,154,156 7,479,305
Federal Home Loan Mortgage
Corp.
9.500%--05/15/2018........ $ 218,576 $ 223,035
8.500%--01/15/2019........ 3,981,985 3,998,506
8.700%--02/15/2020........ 5,000,000 5,160,395
9.000%--12/15/2020........ 4,627,372 4,880,161
------------
14,262,097
------------
Federal National Mortgage
Association REMIC
6.500%--02/25/2007
IO(2)................... 7,319,325 799,263
6.000%--07/25/2017
IO(2)................... 2,865,442 573,658
8.500%--11/25/2018........ 5,204,380 5,217,906
9.000%--03/25/2020........ 8,248,760 8,751,596
6.500%--06/25/2021........ 4,290,829 3,794,702
------------
19,137,125
------------
Kidder Peabody Acceptance
Corp. I Series 1994 A1
7.059%--03/25/2024........ 3,000,000 3,008,907
L & N Funding Corp. GNMA
Coll., Series A-4
12.000%--03/17/2014....... 1,210,625 1,283,642
MDC Mortgage Funding Corp.
Cl. Q-6
9.000%--03/20/2018........ 14,392 14,575
Norwest Mortgage Insurance
Corp. GNMA Coll. Cl. 1-Z
12.375%--01/01/2014....... 207,310 229,079
Prudential Home Mortgage
Securities Co.
Series 1993 Cl. A-8
6.750%--08/25/2008........ 6,014,913 5,734,131
Residential Funding
Mortgage, Secs Conduit
Series 1991 A-8
9.000%--12/25/2021........ 476,836 486,233
Resolution Trust Corporation
Mortgage Pass Thru Series
1991 L-1
8.780%--08/25/2021+....... 3,000,000 3,081,564
Ryan Mortgage Acceptance
Corp. IV
8.900%--06/01/2016........ 160,780 162,038
9.000%--08/01/2016........ 628,846 664,495
------------
826,533
------------
Ryland Mortgage Securities
Corp.,
Series 1992 B-9
8.176%--07/25/2022+....... 3,000,000 3,046,875
</TABLE>
26
<PAGE> 28
HARBOR BOND FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
MORTGAGE RELATED SECURITIES--CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ------------
<S> <C> <C>
Saxon Mortgage Securities
Corp.,
Series 1995 A-1
7.376%--04/25/2025+....... $ 2,670,937 $ 2,734,372
Sears Mortgage Securities
Corp. Series 92 Cl. A
7.589%--10/25/2022........ 2,034,338 2,059,340
Sears Savings Bank Mortgage
Pass Thru Series 1992
REMIC
8.712%--05/25/2032+....... 1,301,882 1,303,518
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS............... 67,863,077
------------
OTHER MORTGAGE RELATED SECURITIES:
Federal Housing Authority
Project Banco-221D
7.400%--02/01/2021........ 900,480 923,274
Federal Housing Authority
Project Banco-15
7.450%--05/01/2021........ 356,951 365,317
Federal Housing Authority
Project Reilly #52
5.150%--06/01/2018........ 328,479 279,002
Federal Home Loan Mortgage
Corp. Forward Gold 30
year, TBA(b)
7.500%--12/13/2025........ 5,000,000 5,045,300
Federal Home Loan Mortgage
Corp.
5.750%--03/01/1999....... 14,948 13,804
10.500%--09/01/2000....... 29,091 31,011
7.500%--03/01/2002....... 40,482 40,760
8.000%--06/01/2011....... 125,280 128,782
------------
214,357
------------
Federal Home Loan Mortgage
Corp. Pass
Thru Certificates
8.500%--02/01/2017....... 181,883 187,566
6.603%--06/01/2024....... 4,224,643 4,311,100
------------
4,498,666
------------
Federal National Mortgage
Association Pass Thru
Certificates
9.000%--03/01/2005........ $ 398,864 $ 418,903
9.000%--11/01/2009........ 2,587,801 2,708,295
8.500%--12/01/2009........ 19,047 19,773
9.500%--04/01/2011........ 129,399 137,612
------------
3,284,583
------------
Government National Mortgage
Association
6.500%--03/15/2017........ 1,957,538 1,971,278
6.750%--08/15/2017........ 436,499 427,562
7.000%--05/20/2024........ 1,885,997 1,913,109
7.375%--06/20/2024........ 9,111,982 9,318,432
7.250%--07/20/2024........ 126,575 129,164
7.250%--08/20/2024........ 4,638,656 4,733,512
7.250%--09/20/2024........ 9,392,097 9,584,156
7.500%--12/20/2024........ 1,029,644 1,049,593
7.000%--01/20/2025........ 4,708,960 4,809,025
7.000%--02/20/2025........ 1,647,874 1,677,228
7.500%--02/20/2025........ 2,090,345 2,134,113
7.000%--06/20/2025........ 4,825,197 4,927,732
------------
42,674,904
------------
United Airlines Pass Thru
Certificate Series 1993
C-2
9.060%--06/17/2015+....... 3,000,000 3,167,325
TOTAL OTHER MORTGAGE RELATED
SECURITIES................ 60,452,728
------------
TOTAL MORTGAGE RELATED SECURITIES
(Cost $127,263,484)....... 128,315,805
------------
U.S. GOVERNMENT OBLIGATIONS--4.5%
U.S. Treasury Notes
6.500%--04/30/1997(4)..... 5,000,000 5,055,859
5.625%--08/31/1997........ 5,000,000 5,003,125
------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $10,055,664)........ 10,058,984
------------
</TABLE>
OPTIONS--0.0%
(Cost $2,591)
<TABLE>
<CAPTION>
NO. OF
CONTRACTS
-----------
<S> <C> <C>
CME Put Option
Eurodollars,
Strike Price @ 91.00
Expiration 06/18/1996..... 145 5,664
</TABLE>
27
<PAGE> 29
HARBOR BOND FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
SHORT-TERM INVESTMENTS--7.5%
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ------------
<S> <C> <C>
REPURCHASE AGREEMENTS
Repurchase Agreement with
State Street Bank & Trust
dated October 31, 1995 due
on demand at 4.750%,
collateralized by a U.S.
Treasury Note, 10.375%
November 15, 2009, par
value of $1,545,000
(repurchase proceeds of
$2,012,265 if closed on
November 1, 1995)......... $ 2,012,000 $ 2,012,000
U.S. TREASURY BILLS
5.180%--11/16/1995(3)..... 40,000 39,898
4.950%--11/30/1995(3)..... 790,000 786,640
5.340%--02/08/1996(3)..... 565,000 556,703
5.320%--02/15/1996(3)..... 280,000 275,597
------------
1,658,838
------------
FOREIGN GOVERNMENT TREASURY BILLS
New South Wales Treasury
5.710%--01/25/1996...... 1,100,000 1,085,170
Western Australia Treasury
5.700%--11/17/1995...... 1,000,000 997,467
------------
2,082,637
------------
COMMERCIAL PAPER
American Telephone &
Telegraph Co.
5.650%--11/03/1995...... 100,000 99,969
5.670%--12/08/1995...... 1,000,000 994,172
------------
1,094,141
------------
Associates Corp. North
American
5.690%--11/17/1995...... $ 400,000 $ 398,989
5.680%--11/27/1995...... 800,000 796,718
5.680%--12/04/1995...... 1,000,000 994,793
------------
2,190,500
------------
Coca Cola Co.
5.700%--11/09/1995...... 500,000 499,367
E I DuPont De Nemours &
Co.
6.060%--01/03/1996...... 600,000 593,638
General Electric Capital
Corp.
5.730%--11/20/1995...... 600,000 598,185
Hewlett Packard Co.
5.810%--11/14/1995...... 100,000 99,790
5.670%--01/04/1996...... 1,000,000 989,920
------------
1,089,710
------------
KFW International Finance
Inc.
5.700%--01/17/1996...... 3,400,000 3,358,548
Minnesota Mining &
Manufacturing Co.
5.640%--11/14/1995...... 600,000 598,778
Treasury Corp. of Victoria
5.710%--11/30/1995...... 1,000,000 995,400
------------
</TABLE>
- - ------------
+ Variable rate security. The stated rate represents the rate in effect at
October 31, 1995.
(a) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At October 31,
1995, these securities were valued at $9,119,146 or 4.1% of net assets.
(b) TBA's are mortgage-backed securities traded under delayed delivery
commitments, settling after October 31, 1995. Although the unit price for
the trades has been established, the principal value has not been finalized.
However, the amount of the commitments will not fluctuate more than 2% from
the principal amount. Income on TBA's is not earned until settlement date.
(See Note 2 to the Financial Statements).
(1) MTN after the name of a security stands for Medium Term Note.
(2) Interest only (IO) securities represent the right to receive the monthly
interest payments on an underlying pool of mortgage loans. These are subject
to the risk of accelerated principal paydowns. The amount represents the
notional amount on which current interest is calculated.
(3) At October 31, 1995, U.S. Treasury Bills held by the Fund were pledged to
cover margin requirements for open futures contracts and written options on
futures contracts. (See Note 2 to the Financial Statements.) The securities
pledged had an aggregate market value of $1,658,838.
(4) At October 31, 1995, U.S. Treasury Notes held by the Fund were pledged as
collateral for the open TBA purchase commitment. (See Note 2 to the
Financial Statements.) The securities pledged had an aggregate market value
of $5,055,859.
The accompanying notes are an integral part of the financial statements.
28
<PAGE> 30
HARBOR BOND FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
SHORT-TERM INVESTMENTS--CONTINUED
<TABLE>
<CAPTION>
VALUE
------------
<S> <C>
TOTAL COMMERCIAL PAPER...... $ 11,018,267
------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $16,771,797).................... 16,771,742
------------
TOTAL INVESTMENTS--103.1%
(Cost $228,947,921)................... 229,884,244
CASH AND OTHER ASSETS,
LESS LIABILITIES--(3.1%).............. $ (6,885,831)
------------
TOTAL NET ASSETS--100.0%................ $222,998,413
============
</TABLE>
FUTURES CONTRACTS WHICH WERE OPEN AT OCTOBER 31, 1995 ARE AS FOLLOWS:
<TABLE>
<CAPTION>
AGGREGATE
NUMBER OF FACE VALUE OF EXPIRATION DATE UNREALIZED
CONTRACTS CONTRACTS CONTRACTS OF CONTRACTS APPRECIATION
- - --------------------------------- --------- -------------- ----------------- --------------
<S> <C> <C> <C> <C>
U.S. Treasury Bonds--30 Yr. (Buy).......... 305 $ 32,000,000 December, 1995 $ 489,375
U.S. Treasury Notes--10 Yr. (Buy).......... 320 30,500,000 December, 1995 1,085,937
Deutsche Marks--10 Yr. (Buy)............... 100 DEM 25,000,000 December, 1995 330,326
Pound Sterling--10 Yr. (Buy)............... 100 GBP 5,000,000 December, 1995 167,162
----------
$2,072,800
==========
</TABLE>
WRITTEN OPTIONS WHICH WERE OPEN AT OCTOBER 31, 1995 ARE AS FOLLOWS:
<TABLE>
<CAPTION>
NUMBER OF EXPIRATION MONTH/
OPTIONS CONTRACTS STRIKE PRICE VALUE
- - --------------------------------- -------------- ----------------- --------------
<S> <C> <C> <C>
U.S. Treasury Bond (Put)................................ 300 December/110 $ (3,077)
Euro Dollar Futures (Put)............................... 65 March/94 (11,042)
Euro Dollar Futures (Put)............................... 200 March/94.25 (63,926)
--------
Written options outstanding, at value (premium received
$369,482)............................................. $(78,045)
========
</TABLE>
FORWARD CURRENCY CONTRACTS WHICH WERE OPEN AT OCTOBER 31, 1995 ARE AS
FOLLOWS:
<TABLE>
<CAPTION>
UNREALIZED
MARKET AGGREGATE DELIVERY DATE APPRECIATION/
CURRENCY COUNTRY VALUE FACE VALUE OF CONTRACT (DEPRECIATION)
- - --------------------------------- ------- --------- -------------- ----------------- --------------
<S> <C> <C> <C> <C> <C>
Deutsche Mark (Sell)............. Germany 1,158,064 1,145,766 December 8, 1995 $(12,298)
Deutsche Mark (Sell)............. Germany 7,696,965 7,819,053 December 20, 1995 122,088
--------
$109,790
========
</TABLE>
The accompanying notes are an integral part of the financial statements.
29
<PAGE> 31
HARBOR SHORT DURATION FUND
PORTFOLIO OF INVESTMENTS--OCTOBER 31, 1995
TOTAL INVESTMENTS (%)
(Excludes net cash and short-term investments of -46.8%)
<TABLE>
<S> <C>
CORPORATE BONDS & NOTES 5.3
MORTGAGE RELATED SECURITIES 9.2
ASSET BACKED SECURITIES 25.2
U.S. GOVERNMENT OBLIGATIONS 107.1
</TABLE>
ASSET BACKED SECURITIES--25.2%
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ------------
<S> <C> <C>
Banc One Auto Trust
6.850%--11/15/1997...... $ 1,000,000 $ 1,010,679
Bridgestone Firestone
6.250%--12/01/1999...... 583,333 584,768
Carco Auto Loan
Master Trust
7.875%--03/15/1998...... 3,000,000 3,040,017
Discover Card Trust
8.625%--07/15/1996...... 2,050,000 2,084,704
First Deposit
4.900%--06/15/2000...... 2,740,000 2,735,915
MBNA Master Credit
Card Trust
7.750%--10/15/1998...... 2,250,000 2,288,833
National Credit Card Trust
9.450%--12/31/1997...... 2,000,000 2,042,098
Navistar Financial Owners
Trust
7.650%--12/22/1997...... 1,846,690 1,862,348
6.050%--04/15/2002...... 2,250,000 2,251,055
------------
4,113,403
Premier Auto Trust
7.050%--07/04/1997...... 900,000 915,074
8.050%--04/04/2000...... 600,000 629,525
------------
1,544,599
Security Pacific
Acceptance Corp.
Series 1991 Cl. A
6.500%--05/10/2020...... $ 683,067 $ 682,533
Shawmut National Home
Series 1990 Cl. A1
6.708%--12/15/2015+..... 1,292,732 1,292,732
Standard Credit Card
Master Trust I
9.000%--08/07/1997...... 3,000,000 3,068,094
8.000%--10/07/1997...... 2,000,000 2,028,338
------------
5,096,432
------------
TOTAL ASSET BACKED SECURITIES
(Cost $26,500,412)........ 26,516,713
------------
CORPORATE BONDS & NOTES--5.3%
Norwest Corp. MTN (1)
7.875%--01/30/1997...... 1,600,000 1,638,001
SBAB
7.000%--07/17/1997...... 2,000,000 2,030,000
Schering Plough Corp.
Zero Coupon Bond
(12/02/1996)............ 2,000,000 1,875,840
------------
TOTAL CORPORATE BONDS & NOTES
(Cost $5,549,563)......... 5,543,841
------------
MORTGAGE RELATED SECURITIES--9.2%
GOVERNMENT AGENCY PASS-THROUGHS
Federal Home Loan Mortgage
Corp.
Pool #490010
9.000%--06/01/1997...... 836,482 842,437
------------
COLLATERALIZED MORTGAGE OBLIGATIONS
Federal National Mortgage
Association
REMIC Series 1994 Cl. B
4.750%--06/25/2008...... 3,000,000 2,967,837
Series 1992 Cl. E
6.000%--12/25/2012...... 963,990 960,577
Series 1992 Cl. B
8.000%--07/25/2017...... 3,000,000 3,010,347
------------
6,938,761
------------
Prudential Home Mortgage
Secs Co.
Series 1995 Cl. A-1
8.750%--03/25/2025...... 1,122,729 1,124,782
</TABLE>
30
<PAGE> 32
HARBOR SHORT DURATION FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
MORTGAGE RELATED SECURITIES--CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ------------
<S> <C> <C>
NON-GOVERNMENT AGENCY
PASS-THROUGHS
Resolution Trust
Corporation
Mortgage Pass Thru
7.155%--12/25/2020+..... $ 721,798 $ 721,849
TOTAL MORTGAGE RELATED
SECURITIES
(Cost $9,657,163)......... 9,627,829
------------
U.S. GOVERNMENT OBLIGATIONS--107.1%
U.S. Treasury Bonds
11.500%--11/15/1995..... 35,000,000 35,087,500
U.S. Treasury Notes
7.500%--01/31/1997..... 5,000,000 5,114,055
6.000%--08/31/1997..... 1,350,000 1,358,438
5.750%--09/30/1997(2).. 42,500,000 42,619,467
7.250%--02/15/1998..... 2,000,000 2,067,500
7.750%--12/31/1999..... 7,400,000 7,927,250
6.250%--05/31/2000(2).. 3,500,000 3,560,151
6.250%--08/31/2000..... 14,500,000 14,753,750
------------
77,400,611
------------
TOTAL U.S. GOVERNMENT
OBLIGATIONS
(Cost $112,458,585)....... 112,488,111
------------
SHORT TERM INVESTMENTS--32.9%
U.S. TREASURY BILLS
5.315%--04/04/1996...... 1,000,000 977,095
5.280%--10/17/1996...... 2,000,000 1,897,625
5.310%--10/17/1996...... 9,500,000 9,013,719
------------
11,888,439
------------
REPURCHASE AGREEMENTS
Repurchase Agreement with
J.P. Morgan dated
October 31, 1995 due on
demand at 5.600%,
collateralized by a U.S.
Treasury Note 6.125%,
September 30, 2000, par
value of $4,000,000
(repurchase proceeds of
$4,055,040 if closed on
November 1, 1995)....... 4,050,000 4,050,000
Repurchase Agreement with
Salomon Brothers dated
October 31, 1995 due on
demand at 5.800%,
collateralized by a U.S.
Treasury Note, 6.750%
April 30, 2000, par
value of $2,000,000
(repurchase proceeds of
$2,072,834 if closed on
November 1, 1995)....... $ 2,072,500 $ 2,072,500
Repurchase Agreement with
UBS Tri-Party dated
October 31, 1995 due on
demand at 5.850%,
collateralized by a U.S.
Treasury Note, 5.625%
October 31, 1997, par
value of $16,500,000
(repurchase proceeds of
$16,502,681 if closed on
November 1, 1995)....... 16,500,000 16,500,000
------------
22,622,500
------------
TOTAL SHORT TERM INVESTMENTS
(Cost $34,504,817)........ 34,510,939
------------
TOTAL INVESTMENTS--179.7%
(Cost $188,670,540)....... 188,687,433
CASH AND OTHER ASSETS,
LESS LIABILITIES--(79.7)%............. (83,680,817)
------------
TOTAL NET ASSETS--100.0%................ $105,006,616
============
</TABLE>
- - ------------
+ Variable rate security. The stated rate represents the rate in effect at
October 31, 1995.
(1) MTN after the name of a security stands for Medium Term Note.
(2) At October 31, 1995, U.S. Treasury Notes held by the Fund were pledged as
collateral for open reverse repurchase agreements. (See Note 5 to the
Financial Statements.) The securities pledged had an aggregate market value
of $57,373,218.
The accompanying notes are an integral part of the financial statements.
31
<PAGE> 33
HARBOR SHORT DURATION FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
FUTURES CONTRACTS WHICH WERE OPEN AT OCTOBER 31, 1995 ARE AS FOLLOWS:
<TABLE>
<CAPTION>
AGGREGATE UNREALIZED
NUMBER OF FACE VALUE OF EXPIRATION DATE APPRECIATION/
CONTRACTS CONTRACTS CONTRACTS OF CONTRACTS (DEPRECIATION)
- - ----------------------------------------------- --------- -------------- --------------- --------------
<S> <C> <C> <C> <C>
U.S. Treasury Bond--30 Yr. (Sell).............. 200 $ 20,000,000 March, 1996 $ 73,806
U.S. Treasury Bond--30 Yr. (Buy)............... 200 20,000,000 December, 1995 (20,065)
U.S. Treasury Note--5 Yr. (Sell)............... 155 15,500,000 December, 1995 (135,624)
Deutsche Mark--5 Yr. (Buy)..................... 5 DEM 1,250,000 December, 1995 1,720
----------
$ (80,163)
==========
</TABLE>
STATEMENT OF SECURITIES SOLD SHORT AT OCTOBER 31, 1995 IS AS FOLLOWS:
<TABLE>
<CAPTION>
SECURITY PAR VALUE VALUE
- - ----------------------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
U.S. Treasury Note 5.625%--10/31/1997.............................................. $16,500,000 $16,510,313
U.S. Treasury Note 6.750%--04/30/2000.............................................. 2,000,000 2,073,750
U.S. Treasury Note 6.125%--09/30/2000.............................................. 4,000,000 4,051,244
-----------
Total Securities Sold Short (proceeds $22,574,453)................................. $22,635,307
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
32
<PAGE> 34
HARBOR MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS--OCTOBER 31, 1995
TOTAL INVESTMENTS (%)
(Excludes cash -0.2%)
<TABLE>
<S> <C>
FOREIGN GOVERNMENT OBLIGATIONS 9.2
COMMERCIAL PAPER 36.2
BANK OBLIGATIONS 54.8
</TABLE>
BANK OBLIGATIONS--54.8%
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- -----------
<S> <C> <C>
Abbey National PLC Euro CD
5.750%--01/02/96.......... $3,000,000 $ 2,999,590
BankAmerica Corp.
5.810%--11/17/95.......... 3,000,000 3,000,000
Banque National De Paris
5.875%--11/01/95.......... 866,000 866,000
Bayerische Hypotheken Yankee
CD 6.430%--04/19/96....... 3,000,000 3,006,814
Bayerische Landesbank
Euro CD
5.680%--12/27/95.......... 3,000,000 2,999,544
Canadian Imperial Bank of
Commerce -- CD
5.810%--11/16/95.......... 2,500,000 2,500,000
Chemical Bank of NY -- CD
5.750%--12/28/95.......... 3,000,000 3,000,000
Hessische Landesbank -- CD
5.720%--12/27/95.......... 3,000,000 2,999,745
Mellon Bank N. A.
6.240%--11/01/95.......... 1,500,000 1,500,000
5.700%--12/08/95.......... 500,000 497,071
-----------
1,997,071
-----------
Morgan Guaranty Trust Co.
5.780%--12/29/95.......... 3,000,000 3,000,047
National Westminster Bank
PLC
5.765%--12/20/95.......... $3,000,000 2,999,853
Seattle First National Bank
WA
5.800%--01/03/96.......... 3,000,000 $ 3,000,000
West Deutsche Landesbank
5.760%--12/29/95.......... 3,000,000 3,000,000
-----------
TOTAL BANK OBLIGATIONS................... 35,368,664
-----------
COMMERCIAL PAPER--36.2%
American Telephone &
Telegraph Co.
5.635%--02/22/96.......... 3,000,000 2,946,937
Bass Finance
5.810%--11/17/95.......... 3,000,000 2,980,525
Glaxo PLC
5.720%--11/21/95.......... 3,000,000 2,990,467
Mobil Australia Finance Co.
5.730%--11/16/95.......... 2,500,000 2,494,031
Sandoz Corp.
5.720%--11/02/95.......... 3,000,000 2,990,943
Societe Generale New York
5.750%--03/08/96.......... 3,000,000 3,000,000
Student Loan Corp.
5.720%--01/08/96.......... 3,000,000 2,967,587
Treasury Corp. of Victoria
5.725%--11/22/95.......... 3,000,000 2,989,981
-----------
TOTAL COMMERCIAL PAPER................... 23,360,471
-----------
FOREIGN GOVERNMENT OBLIGATIONS--9.2%
Kingdom of Sweden
5.710%--01/11/96.......... 1,000,000 988,739
5.600%--04/04/96.......... 2,000,000 1,951,777
-----------
2,940,516
-----------
New South Wales Treasury
5.690%--12/08/95.......... 3,000,000 2,982,456
-----------
TOTAL FOREIGN GOVERNMENT OBLIGATIONS.....
5,922,972
-----------
TOTAL INVESTMENTS--100.2%
(Cost $64,652,107)(1).................. 64,652,107
-----------
CASH AND OTHER ASSETS,
LESS LIABILITIES--(0.2%)............... (160,389)
-----------
TOTAL NET ASSETS--100.0%................. $64,491,718
===========
</TABLE>
- - ------------
(1) The aggregate identified cost on a tax basis is the same.
The accompanying notes are an integral part of the financial statements.
33
<PAGE> 35
HARBOR FUND
STATEMENT OF ASSETS AND LIABILITIES--OCTOBER 31, 1995
<TABLE>
<CAPTION>
HARBOR HARBOR
INTERNATIONAL GROWTH INTERNATIONAL
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
INVESTMENTS, AT IDENTIFIED COST*........................................... $ 106,899,171 $2,462,731,919
===================================================================================================================
Investments, at value...................................................... $ 120,249,636 $3,255,819,996
Repurchase agreements...................................................... -- --
Cash....................................................................... 623 397
Foreign currency, at value
(cost: $36,288; $1,920,511; $0; $0; $0; $869,188; $27; $0)............... 36,348 1,924,298
Receivables for:
Investments sold......................................................... 2,518,047 1,704,949
Capital shares sold...................................................... 61,613 1,296,374
Dividends................................................................ 23,569 5,139,872
Interest................................................................. 29,493 501,079
Open forward currency contracts, net..................................... -- --
Variation margin on futures contracts...................................... -- --
Deferred organization costs................................................ 20,143 --
Withholding tax reclaims receivable........................................ 116,586 6,268,917
Other assets............................................................... 19,866 60,124
- - -------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS......................................................... 123,075,924 3,272,716,006
LIABILITIES
Payables for:
Investments purchased.................................................... 486,512 1,565,473
Capital shares reacquired................................................ 5,000 912,968
Dividends to shareholders................................................ -- --
Short sales, at value
(proceeds $0; $0; $0; $0; $0; $0; $22,574,453; $0)..................... -- --
Written options, at value
(premiums received $0; $0; $0; $0; $0; $369,482; $0; $0)............... -- --
Reverse repurchase agreements............................................ -- --
Interest on reverse repurchase agreements and short sales................ -- --
Variation margin on futures contracts.................................... -- --
Accrued expenses:
Adviser's fees........................................................... 69,685 2,235,506
Trustees' fees........................................................... 1,483 10,500
Transfer agent's fees.................................................... 11,936 208,332
Other.................................................................... 86,655 626,409
- - -------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES.................................................... 661,271 5,559,188
NET ASSETS
NET ASSETS................................................................. $ 122,414,653 $3,267,156,818
===================================================================================================================
Net assets consist of:
Paid-in capital.......................................................... $ 111,600,332 $2,411,841,564
Undistributed (overdistributed) net investment income.................... 1,094,083 46,408,181
Accumulated net realized gain/(loss)..................................... (3,631,849) 15,434,486
Unrealized appreciation (depreciation) of investments, written options,
foreign currency, investments sold short and translation of assets and
liabilities in foreign currencies...................................... 13,352,087 793,472,587
Unrealized appreciation (depreciation) of futures and forward currency
contracts.............................................................. -- --
- - -------------------------------------------------------------------------------------------------------------------
$ 122,414,653 $3,267,156,818
===================================================================================================================
Shares of beneficial interest.............................................. 10,113,236 121,338,455
Net asset value, offering and redemption price per share................... $ 12.10 $ 26.93
</TABLE>
- - ------------
* Including repurchase agreements
The accompanying notes are an integral part of the financial statements.
34
<PAGE> 36
HARBOR FUND
STATEMENT OF ASSETS AND LIABILITIES--CONTINUED
<TABLE>
<CAPTION>
HARBOR HARBOR CAPITAL HARBOR HARBOR HARBOR HARBOR
GROWTH APPRECIATION VALUE BOND SHORT DURATION MONEY MARKET
- - -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$106,770,461 $ 721,926,762 $79,270,730 $228,947,921 $ 188,670,540 $64,652,107
=======================================================================================================
$138,172,728 $ 917,218,490 $82,141,264 $227,872,244 $ 166,064,933 $64,652,107
-- -- 2,081,000 2,012,000 22,622,500 --
1,358 213 602 942 78,204 790
-- -- -- 862,289 27 --
3,722,018 5,146,524 1,937,637 300,000 8,124,967 --
230,734 12,744,542 13,186 731,643 4,535 150,401
9,160 306,379 161,984 -- -- --
-- 3,612 9,522 3,015,138 3,084,127 363,922
-- -- -- 109,790 -- --
-- -- -- 219,038 -- --
-- -- -- -- 4,904 --
-- 5,097 -- -- -- --
20,442 19,324 11,937 15,843 23,969 16,108
- - ------------------------------------------------------------------------------------------------------
142,156,440 935,444,181 86,357,132 235,138,927 200,008,166 65,183,328
4,503,402 8,844,490 1,567,116 11,842,746 2,249,945 --
-- 275,929 173,138 90,309 13,510,019 638,933
-- -- -- -- -- 8,925
-- -- -- -- 22,635,307 --
-- -- -- 78,045 -- --
-- -- -- -- 56,399,375 --
-- -- -- -- 145,106 --
-- -- -- -- 2,713 --
87,232 470,505 50,534 73,750 18,795 7,399
372 2,790 1,398 551 970 985
5,148 60,497 23,009 18,964 2,675 12,397
36,458 39,062 28,103 36,149 36,645 22,971
- - ------------------------------------------------------------------------------------------------------
4,632,612 9,693,273 1,843,298 12,140,514 95,001,550 691,610
$137,523,828 $ 925,750,908 $84,513,834 $222,998,413 $ 105,006,616 $64,491,718
=======================================================================================================
$ 90,808,259 $ 717,468,325 $72,191,658 $221,764,417 $ 103,808,333 $64,491,718
-- 943,895 134,248 1,880,646 501,657 --
15,313,302 12,046,960 7,236,395 (4,047,895) 820,748 --
31,402,267 195,291,728 4,951,533 1,218,655 (43,959) --
-- -- -- 2,182,590 (80,163) --
- - -------------------------------------------------------------------------------------------------------
$137,523,828 $ 925,750,908 $84,513,834 $222,998,413 $ 105,006,616 $64,491,718
=======================================================================================================
8,742,431 39,897,668 5,800,515 19,893,177 11,902,507 64,491,718
$ 15.73 $ 23.20 $ 14.57 $ 11.21 $ 8.82 $ 1.00
</TABLE>
35
<PAGE> 37
HARBOR FUND
STATEMENT OF OPERATIONS--YEAR ENDED OCTOBER 31, 1995
<TABLE>
<CAPTION>
HARBOR
INTERNATIONAL HARBOR
GROWTH INTERNATIONAL
- - ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends.............................................................. $ 2,214,114 $ 76,620,637
Interest............................................................... 203,676 11,235,492
Securities lending income.............................................. 7,144 816,028
Foreign taxes withheld................................................. (226,098) (9,082,514)
- - ----------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME................................................ 2,198,836 79,589,643
EXPENSES:
Investment adviser's fees.............................................. 655,678 26,318,745
Shareholder communications............................................. 17,500 362,507
Custodian fees......................................................... 219,772 3,143,287
Transfer agent fees.................................................... 145,000 2,794,219
Professional fees...................................................... 45,000 200,000
Trustees' fees and expenses............................................ 2,700 74,949
Registration fees...................................................... 41,542 172,500
Amortization of organization costs..................................... 6,684 --
Insurance expense...................................................... 1,996 23,137
Miscellaneous.......................................................... 8,599 86,500
- - ----------------------------------------------------------------------------------------------------------
Total expenses....................................................... 1,144,471 33,175,844
Advisory fee waived.................................................... (88,294) (1,068,227)
Other expense reimbursements and reductions............................ (1,772) (11,285)
- - ----------------------------------------------------------------------------------------------------------
Total operating expenses............................................. 1,054,405 32,096,332
Interest expense....................................................... -- --
- - ----------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME.................................................... 1,144,431 47,493,311
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENT TRANSACTIONS:
Net realized gain/(loss) on:
Investments.......................................................... (3,554,598) 15,690,301
Foreign currency transactions........................................ (5,834) (447,501)
Short sales.......................................................... -- --
Futures contracts.................................................... -- --
Written options...................................................... -- --
Change in net unrealized appreciation/depreciation on:
Investments, written options and short sales......................... 9,465,201 93,241,531
Futures contracts.................................................... -- --
Forwards............................................................. -- --
Translation of assets and liabilities in foreign currencies.......... 1,563 380,723
- - ----------------------------------------------------------------------------------------------------------
Net gain/(loss) on investment transactions............................. 5,906,332 108,865,054
- - ----------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........ $ 7,050,763 $ 156,358,365
==========================================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
36
<PAGE> 38
HARBOR FUND
STATEMENT OF OPERATIONS--CONTINUED
<TABLE>
<CAPTION>
HARBOR
HARBOR CAPITAL HARBOR HARBOR HARBOR HARBOR
GROWTH APPRECIATION VALUE BOND SHORT DURATION MONEY MARKET
- - -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 567,416 $ 3,865,930 $ 2,507,273 -- -- --
309,668 1,249,329 205,550 $14,701,067 $8,734,927 $3,950,037
-- -- -- -- -- --
(14,764) (95,276) (36,412) -- -- --
- - -----------------------------------------------------------------------------------------------
862,320 5,019,983 2,676,411 14,701,067 8,734,927 3,950,037
1,035,019 3,073,982 411,395 1,318,022 435,320 196,587
6,500 43,000 4,480 28,000 1,681 14,000
92,484 150,879 90,535 97,018 102,213 37,084
67,000 470,500 36,314 240,000 12,000 150,001
47,188 53,487 53,000 59,000 57,460 38,682
3,300 9,050 1,493 4,088 2,248 2,500
16,000 40,000 14,700 26,500 19,000 30,000
-- -- -- -- 4,190 --
2,953 3,707 1,990 3,450 2,527 2,128
8,999 10,383 6,601 9,102 8,007 6,848
- - -----------------------------------------------------------------------------------------------
1,279,443 3,854,988 620,508 1,785,180 644,646 477,830
-- -- -- (471,474) (217,937) (78,676)
(1,386) (16,229) (535) (2,018) (17,213) (2,084)
- - -----------------------------------------------------------------------------------------------
1,278,057 3,838,759 619,973 1,311,688 409,496 397,070
-- -- -- -- 1,583,821 --
- - -----------------------------------------------------------------------------------------------
(415,737) 1,181,224 2,056,438 13,389,379 6,741,610 3,552,967
15,819,039 12,261,321 7,372,941 (1,490,707) 745,900 65,167
(19) 867 400 (157,293) (295,723) --
-- -- -- -- (133,391) --
-- -- -- 2,398,449 (339,360) --
-- -- -- 1,633,558 -- --
16,576,097 153,009,037 3,842,458 7,333,928 401,607 --
-- -- -- 2,973,081 13,901 --
-- -- -- 109,790 (3,680) --
-- -- -- (2,206) -- --
- - -----------------------------------------------------------------------------------------------
32,395,117 165,271,225 11,215,799 12,798,600 389,254 65,167
- - -----------------------------------------------------------------------------------------------
$31,979,380 $166,452,449 $13,272,237 $26,187,979 $7,130,864 $3,618,134
===============================================================================================
</TABLE>
37
<PAGE> 39
HARBOR FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
HARBOR HARBOR HARBOR
INTERNATIONAL GROWTH INTERNATIONAL GROWTH
-------------------------- ------------------------------- ---------------------------
NOVEMBER 1, NOVEMBER 1, NOVEMBER 1, NOVEMBER 1, NOVEMBER 1, NOVEMBER 1,
1994 1993 1994 1993 1994 1993
THROUGH THROUGH THROUGH THROUGH THROUGH THROUGH
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1995 1994 1995 1994 1995 1994
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income............... $ 1,144,431 $ 429,496 $ 47,493,311 $ 29,402,280 $ (415,737) $ 4,843
Net realized gain (loss) on
investments, foreign currency
transactions, investments sold
short, futures and written
options........................... (3,560,432) (21,733 ) 15,242,800 114,278,276 15,819,020 9,402,472
Net unrealized appreciation
(depreciation) of investments,
written options, investments sold
short, futures, forward foreign
currency contracts and translation
of assets and liabilities in
foreign currencies................ 9,466,764 3,885,323 93,622,254 310,581,489 16,576,097 (26,931,132)
- - -----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS........... 7,050,763 4,293,086 156,358,365 454,262,045 31,979,380 (17,523,817)
- - -----------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
Net investment income............... (533,368) (9,285 ) (28,584,757) (21,850,798) -- (20,189)
Net realized gain on investments.... -- -- (108,512,496) -- (3,521,352) (256,960)
In excess of net investment
income............................ -- -- -- -- -- --
Tax Return of Capital............... -- -- -- -- -- --
- - -----------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS...................... (533,368) (9,285 ) (137,097,253) (21,850,798) (3,521,352) (277,149)
- - -----------------------------------------------------------------------------------------------------------------------------------
Capital share transactions:
Net proceeds from sale of shares.... 61,328,962 84,704,565 508,760,305 872,284,244 16,883,782 19,892,463
Net asset value of shares issued in
connection with reinvestment of:
Dividends from net investment
income.......................... 508,914 8,329 24,870,202 19,030,096 -- 19,860
Distributions from net realized
gain............................ -- -- 97,656,598 -- 3,443,756 252,778
Cost of shares reacquired........... (20,674,167) (15,263,146) (513,025,623) (469,144,105) (52,591,542) (69,354,727)
- - -----------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) DERIVED FROM
CAPITAL TRANSACTIONS.............. 41,163,709 69,449,748 118,261,482 422,170,235 (32,264,004) (49,189,626)
- - -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net
assets............................ 47,681,104 73,733,549 137,522,594 854,581,482 (3,805,976) (66,990,592)
NET ASSETS:
Beginning of period................... 74,733,549 1,000,000 3,129,634,224 2,275,052,742 141,329,804 208,320,396
- - -----------------------------------------------------------------------------------------------------------------------------------
END OF PERIOD*........................ $122,414,653 $ 74,733,549 $3,267,156,818 $3,129,634,224 $137,523,828 $141,329,804
===================================================================================================================================
NUMBER OF CAPITAL SHARES:
Sold.................................. 5,406,005 7,761,719 19,981,750 35,270,326 1,192,603 1,515,167
Reinvested in payment of net
investment income dividends......... 49,558 747 1,023,044 781,845 -- 1,462
Reinvested in payment of net realized
gain................................ -- -- 4,017,137 -- 290,612 18,614
Reacquired............................ (1,823,877) (1,380,916 ) (20,136,448) (19,171,281) (3,756,684) (5,384,072)
- - -----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in shares
outstanding......................... 3,631,686 6,381,550 4,885,483 16,880,890 (2,273,469) (3,848,829)
Outstanding:
Beginning of period................. 6,481,550 100,000 116,452,972 99,572,082 11,015,900 14,864,729
- - -----------------------------------------------------------------------------------------------------------------------------------
End of period....................... 10,113,236 6,481,550 121,338,455 116,452,972 8,742,431 11,015,900
===================================================================================================================================
* Includes undistributed
(over-distributed) net
investment income of:................ $ 1,087,442 $ 476,379 $ 48,009,848 $ 29,101,294 $ (211,347) $ 204,390
<CAPTION>
HARBOR
CAPITAL APPRECIATION
---------------------------
NOVEMBER 1, NOVEMBER 1,
1994 1993
THROUGH THROUGH
OCTOBER 31, OCTOBER 31,
1995 1994
- - ---------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income............... $ 1,181,224 $ 362,758
Net realized gain (loss) on
investments, foreign currency
transactions, investments sold
short, futures and written
options........................... 12,262,188 2,264,085
Net unrealized appreciation
(depreciation) of investments,
written options, investments sold
short, futures, forward foreign
currency contracts and translation
of assets and liabilities in
foreign currencies................ 153,009,037 13,699,254
- - --------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS........... 166,452,449 16,326,097
- - --------------------------------------------------------------------
Distributions to shareholders:
Net investment income............... (531,337) (301,835)
Net realized gain on investments.... (2,447,010) (9,883,765)
In excess of net investment
income............................ -- --
Tax Return of Capital............... -- --
- - --------------------------------------------------------------------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS...................... (2,978,347) (10,185,600)
- - --------------------------------------------------------------------
Capital share transactions:
Net proceeds from sale of shares.... 684,101,709 119,087,014
Net asset value of shares issued in
connection with reinvestment of:
Dividends from net investment
income.......................... 477,561 282,665
Distributions from net realized
gain............................ 2,273,460 9,363,012
Cost of shares reacquired........... (150,559,997) (54,220,244)
- - --------------------------------------------------------------------
NET INCREASE (DECREASE) DERIVED FROM
CAPITAL TRANSACTIONS.............. 536,292,733 74,512,447
- - --------------------------------------------------------------------
Net increase (decrease) in net
assets............................ 699,766,835 80,652,944
NET ASSETS:
Beginning of period................... 225,984,073 145,331,129
- - --------------------------------------------------------------------
END OF PERIOD*........................ $925,750,908 $225,984,073
====================================================================
NUMBER OF CAPITAL SHARES:
Sold.................................. 33,627,694 7,351,104
Reinvested in payment of net
investment income dividends......... 28,511 17,470
Reinvested in payment of net realized
gain................................ 135,729 578,678
Reacquired............................ (6,951,697) (3,292,387)
- - --------------------------------------------------------------------
Net increase (decrease) in shares
outstanding......................... 26,840,237 4,654,865
Outstanding:
Beginning of period................. 13,057,431 8,402,566
- - --------------------------------------------------------------------
End of period....................... 39,897,668 13,057,431
====================================================================
* Includes undistributed
(over-distributed) net
investment income of:................ $ 960,261 $ 310,374
</TABLE>
The accompanying notes are an integral part of the financial statements.
38
<PAGE> 40
HARBOR FUND
STATEMENTS OF CHANGES IN NET ASSETS--CONTINUED
<TABLE>
<CAPTION>
HARBOR HARBOR HARBOR
VALUE BOND SHORT DURATION
----------------------------- ----------------------------- -----------------------------
NOVEMBER 1, NOVEMBER 1, NOVEMBER 1, NOVEMBER 1, NOVEMBER 1, NOVEMBER 1,
1994 1993 1994 1993 1994 1993
THROUGH THROUGH THROUGH THROUGH THROUGH THROUGH
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1995 1994 1995 1994 1995 1994
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 2,056,438 $ 1,568,754 $ 13,389,379 $ 10,592,130 $ 6,741,610 $ 5,663,430
7,373,341 4,758,573 2,384,007 (7,071,820) (22,574) (2,294,245)
3,842,458 (3,704,771) 10,414,593 (9,174,940) 411,828 (490,031)
- - ---------------------------------------------------------------------------------------------------
13,272,237 2,622,556 26,187,979 (5,654,630) 7,130,864 2,879,154
- - ---------------------------------------------------------------------------------------------------
(2,011,154) (1,492,665) (11,944,373) (10,291,520) (6,753,096) (15,120,710)
(4,674,163) (4,625,717) -- (7,221,303) -- --
-- -- -- -- (112,940) --
-- -- -- -- -- (707,290)
- - ---------------------------------------------------------------------------------------------------
(6,685,317) (6,118,382) (11,944,373) (17,512,823) (6,866,036) (15,828,000)
- - ---------------------------------------------------------------------------------------------------
22,822,824 9,228,247 105,017,689 75,903,558 522,143,550 520,483,962
1,895,201 1,392,825 9,623,304 8,375,355 6,849,399 15,766,230
4,428,889 4,368,521 -- 6,047,950 -- --
(10,610,411) (11,987,126) (68,106,919) (69,320,489) (540,142,259) (542,598,958)
- - ---------------------------------------------------------------------------------------------------
18,536,503 3,002,467 46,534,074 21,006,374 (11,149,310) (6,348,766)
- - ---------------------------------------------------------------------------------------------------
25,123,423 (493,359) 60,777,680 (2,161,079) (10,884,482) (19,297,612)
59,390,411 59,883,770 162,220,733 164,381,812 115,891,098 135,188,710
- - ---------------------------------------------------------------------------------------------------
$ 84,513,834 $ 59,390,411 $222,998,413 $162,220,733 $105,006,616 $115,891,098
===================================================================================================
1,674,245 690,592 9,769,878 6,864,380 59,267,963 57,297,594
141,367 108,734 893,978 777,373 778,668 1,730,384
371,240 327,112 -- 532,390 -- --
(786,808) (910,014) (6,360,695) (6,370,887) (61,358,458) (59,783,164)
- - ---------------------------------------------------------------------------------------------------
1,400,044 216,424 4,303,161 1,803,256 (1,311,827) (755,186)
4,400,471 4,184,047 15,590,016 13,786,760 13,214,334 13,969,520
- - ---------------------------------------------------------------------------------------------------
5,800,515 4,400,471 19,893,177 15,590,016 11,902,507 13,214,334
===================================================================================================
$ 121,373 $ 76,089 $ 1,445,006 $ -- $ (112,940) $ 11,486
</TABLE>
<TABLE>
<CAPTION>
HARBOR
MONEY MARKET
- - ----------------------------------------------
NOVEMBER 1, NOVEMBER 1,
1994 1993
THROUGH THROUGH
OCTOBER 31, OCTOBER 31,
1995 1994
- - ----------------- ------------------
<S> <C>
$ 3,552,967 $ 1,922,197
65,167 85,834
-- --
--------------- ---------------
3,618,134 2,008,031
--------------- ---------------
(3,552,967) (1,922,197)
(65,167) (85,834)
-- --
-- --
--------------- ---------------
(3,618,134) (2,008,031)
--------------- ---------------
83,477,627 99,902,894
3,522,178 1,782,408
-- 79,601
(82,532,152) (88,620,287)
--------------- ---------------
4,467,653 13,144,616
--------------- ---------------
4,467,653 13,144,616
60,024,065 46,879,449
--------------- ---------------
$ 64,491,718 $ 60,024,065
=============== ===============
83,477,627 99,902,894
3,522,178 1,782,408
-- 79,601
(82,532,152) (88,620,287)
--------------- ---------------
4,467,653 13,144,616
60,024,065 46,879,449
--------------- ---------------
64,491,718 60,024,065
=============== ===============
$ -- $ --
</TABLE>
39
<PAGE> 41
w
HARBOR FUND FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING FOR THE PERIODS PRESENTED
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
------------------------------------------
NET REALIZED AND
UNREALIZED GAINS (LOSSES)
NET ASSET VALUE ON INVESTMENTS, FUTURES,
BEGINNING OF NET INVESTMENT OPTIONS AND FOREIGN
YEAR/PERIOD ENDED PERIOD INCOME CURRENCY CONTRACTS
- - ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
HARBOR INTERNATIONAL GROWTH FUND
October 31, 1995........................ $ 11.53 $ .11* $ .54
October 31, 1994(1)..................... 10.00 .07* 1.47
HARBOR INTERNATIONAL FUND(2)
October 31, 1995........................ $ 26.87 $ .39* $ .85
October 31, 1994........................ 22.85 .26* 3.98
October 31, 1993........................ 16.77 .17* 6.31
October 31, 1992........................ 17.69 .24 (.95)
October 31, 1991........................ 15.74 .16 2.47
October 31, 1990........................ 15.99 .37* .27
HARBOR GROWTH FUND(3)
October 31, 1995........................ $ 12.83 $ (.04) $ 3.26
October 31, 1994........................ 14.01 -- (1.16)
October 31, 1993........................ 12.42 .01 2.95
October 31, 1992........................ 15.76 .02 (1.01)
October 31, 1991........................ 10.21 .04 6.53
October 31, 1990........................ 12.95 .10 (2.24)
HARBOR CAPITAL APPRECIATION FUND(4)
October 31, 1995........................ $ 17.31 $ .04 $ 6.06
October 31, 1994........................ 17.30 .03 1.14
October 31, 1993........................ 16.30 .03 3.03
October 31, 1992........................ 15.18 .02 2.12
October 31, 1991........................ 10.65 .06 5.47
October 31, 1990........................ 13.42 .15 (1.53)
HARBOR VALUE FUND(5)
October 31, 1995........................ $ 13.50 $ .40 $ 2.13
October 31, 1994........................ 14.31 .36 .27
October 31, 1993........................ 13.24 .35 1.22
October 31, 1992........................ 13.10 .41* .49
October 31, 1991........................ 10.84 .46* 2.71
October 31, 1990........................ 13.77 .51* (2.13)
HARBOR BOND FUND
October 31, 1995........................ $ 10.41 $ .74* $ .73
October 31, 1994........................ 11.92 .68* (1.02)
October 31, 1993........................ 11.35 .68* .82
October 31, 1992........................ 11.11 .79* .50
October 31, 1991........................ 10.03 .83* 1.09
October 31, 1990........................ 10.55 .84* (.44)
HARBOR SHORT DURATION FUND
October 31, 1995........................ $ 8.77 $ .52* $ .06
October 31, 1994........................ 9.68 .34* (.12)
October 31, 1993........................ 10.09 .34* .16
October 31, 1992(6)..................... 10.00 .29* .08
HARBOR MONEY MARKET FUND
October 31, 1995........................ $ 1.00 $ .06* $ --
October 31, 1994........................ 1.00 .03* --
October 31, 1993........................ 1.00 .03* --
October 31, 1992........................ 1.00 .04* --
October 31, 1991........................ 1.00 .06 --
October 31, 1990........................ 1.00 .08 --
<CAPTION>
LESS DISTRIBUTIONS
----------------------------------
TOTAL FROM DIVIDENDS FROM DISTRIBUTIONS FROM IN EXCESS OF
INVESTMENT NET INVESTMENT NET REALIZED NET INVESTMENT
YEAR/PERIOD ENDED OPERATIONS INCOME CAPITAL GAINS** INCOME
- - ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HARBOR INTERNATIONAL GROWTH FUND
October 31, 1995........................ $ .65 $ (.08) $ -- --
October 31, 1994(1)..................... 1.54 (.01) -- --
HARBOR INTERNATIONAL FUND(2)
October 31, 1995........................ $ 1.24 $ (.24) $ (.94) --
October 31, 1994........................ 4.24 (.22) -- --
October 31, 1993........................ 6.48 (.22) (.18) --
October 31, 1992........................ (.71) (.21) -- --
October 31, 1991........................ 2.63 (.34) (.34) --
October 31, 1990........................ .64 (.17) (.72) --
HARBOR GROWTH FUND(3)
October 31, 1995........................ $ 3.22 $ -- $ (.32) --
October 31, 1994........................ (1.16) -- (.02) --
October 31, 1993........................ 2.96 (.01) (1.36) --
October 31, 1992........................ (.99) (.04) (2.31) --
October 31, 1991........................ 6.57 (.08) (.94) --
October 31, 1990........................ (2.14) (.11) (.49) --
HARBOR CAPITAL APPRECIATION FUND(4)
October 31, 1995........................ $ 6.10 $ (.04) $ (.17) --
October 31, 1994........................ 1.17 (.03) (1.13) --
October 31, 1993........................ 3.06 (.02) (2.04) --
October 31, 1992........................ 2.14 (.04) (.98) --
October 31, 1991........................ 5.53 (.14) (.86) --
October 31, 1990........................ (1.38) (.21) (1.18) --
HARBOR VALUE FUND(5)
October 31, 1995........................ $ 2.53 $ (.39) $(1.07) --
October 31, 1994........................ .63 (.34) (1.10) --
October 31, 1993........................ 1.57 (.35) (.15) --
October 31, 1992........................ .90 (.41) (.35) --
October 31, 1991........................ 3.17 (.47) (.44) --
October 31, 1990........................ (1.62) (.51) (.80) --
HARBOR BOND FUND
October 31, 1995........................ $ 1.47 $ (.67) $ -- --
October 31, 1994........................ (.34) (.67) (.50) --
October 31, 1993........................ 1.50 (.68) (.25) --
October 31, 1992........................ 1.29 (.79) (.26) --
October 31, 1991........................ 1.92 (.84) -- --
October 31, 1990........................ .40 (.83) (.09) --
HARBOR SHORT DURATION FUND
October 31, 1995........................ $ .58 $ (.52) $ -- (.01)
October 31, 1994........................ .22 (1.08) -- --
October 31, 1993........................ .50 (.82) (.09) --
October 31, 1992(6)..................... .37 (.28) -- --
HARBOR MONEY MARKET FUND
October 31, 1995........................ $ .06 $ (.06) $ -- --
October 31, 1994........................ .03 (.03) -- --
October 31, 1993........................ .03 (.03) -- --
October 31, 1992........................ .04 (.04) -- --
October 31, 1991........................ .06 (.06) -- --
October 31, 1990........................ .08 (.08) -- --
</TABLE>
* Reflects the Adviser's or Subadviser's agreement not to impose all or a
portion of its advisory fees; the fees not imposed would have amounted to the
following:
Year ended October 31, 1995 -- International Growth $.01 per share;
International $.01 per share; Bond $.03 per share; Short Duration $.02 per
share; and Money Market less than $.01 per share.
Year ended October 31, 1994 -- International Growth $.02 per share;
International $.01 per share; Bond $.03 per share; Short Duration less than
$.01 per share; and Money Market less than $.01 per share.
Year ended October 31, 1993 -- International less than $.01 per share; Bond
$.02 per share; Short Duration $.02 per share; and Money Market less than
$.01 per share.
Year ended October 31, 1992 -- Value $.01 per share; Bond $.04 per share;
Short Duration $.01 per share; and Money Market less than $.01 per share.
Year ended October 31, 1991 -- Value $.01 per share; Bond $.04 per share.
Year ended October 31, 1990 -- International $.01 per share; Value $.02 per
share; Bond $.02 per share.
** Includes both short-term and long-term capital gains.
The accompanying notes are an integral part of the financial statements.
40
<PAGE> 42
HARBOR FUND FINANCIAL HIGHLIGHTS--CONTINUED
SELECTED DATA FOR A SHARE OUTSTANDING FOR THE PERIODS PRESENTED
<TABLE>
<CAPTION>
RATIO OF
OPERATING EXPENSES RATIO OF
NET ASSETS TO INTEREST EXPENSE
TAX RETURN TOTAL NET ASSET VALUE TOTAL END OF PERIOD AVERAGE TO AVERAGE NET
OF CAPITAL DISTRIBUTIONS END OF PERIOD RETURN ($ THOUSANDS) NET ASSETS (%) ASSETS (%)
- - -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ -- $ (.08) $ 12.10 5.83% $ 122,415 1.21%* --
-- (.01) 11.53 15.36 74,734 1.32* --
$ -- $ (1.18) $ 26.93 5.06% $ 3,267,157 1.04%* --
-- (.22) 26.87 18.57 3,129,634 1.10* --
-- (.40) 22.85 39.51 2,275,053 1.20* --
-- (.21) 16.77 (4.08) 700,733 1.28 --
-- (.68) 17.69 17.74 205,703 1.35 --
-- (.89) 15.74 3.81 63,745 1.40* --
$ -- $ (.32) $ 15.73 25.93% $ 137,524 0.93% --
-- (.02) 12.83 (8.29) 141,330 0.93 --
-- (1.37) 14.01 26.17 208,320 0.90 --
-- (2.35) 12.42 (7.48) 191,464 0.90 --
-- (1.02) 15.76 68.72 211,494 0.91 --
-- (.60) 10.21 (17.43) 122,622 0.94 --
$ -- $ (.21) $ 23.20 35.73% $ 925,751 0.75% --
-- (1.16) 17.31 7.25 225,984 0.81 --
-- (2.06) 17.30 20.16 145,331 0.86 --
-- (1.02) 16.30 14.41 77,445 0.91 --
-- (1.00) 15.18 55.35 80,316 0.89 --
-- (1.39) 10.65 (11.52) 54,560 0.88 --
$ -- $ (1.46) $ 14.57 21.02% $ 84,514 0.90% --
-- (1.44) 13.50 4.80 59,390 1.04 --
-- (.50) 14.31 11.99 59,884 0.88 --
-- (.76) 13.24 7.06 63,974 0.84* --
-- (.91) 13.10 30.18 43,066 0.93* --
-- (1.31) 10.84 (13.00) 23,453 1.01* --
$ -- $ (.67) $ 11.21 14.56% $ 222,998 0.70%* --
-- (1.17) 10.41 (3.14) 162,221 0.77* --
-- (.93) 11.92 13.98 164,382 0.72* --
-- (1.05) 11.35 12.14 65,420 0.77* --
-- (.84) 11.11 20.01 40,486 0.86* --
-- (.92) 10.03 4.03 24,341 1.22* --
$ -- $ (.53) $ 8.82 6.82% $ 105,007 0.38%* 1.46%
(.05) (1.13) 8.77 2.53 115,891 0.38* 1.26
-- (.91) 9.68 5.18 135,189 0.43* .69
-- (.28) 10.09 3.72++ 186,523 0.35*+ 1.19+
$ -- $ (.06) $ 1.00 5.66% $ 64,492 0.61%* --
-- (.03) 1.00 3.53 60,024 0.67* --
-- (.03) 1.00 2.68 46,879 0.71* --
-- (.04) 1.00 3.67 55,244 0.69* --
-- (.06) 1.00 6.25 57,093 0.66 --
-- (.08) 1.00 8.02 49,968 0.66 --
<CAPTION>
RATIO OF NET
INVESTMENT INCOME
TO AVERAGE NET PORTFOLIO
ASSETS (%) TURNOVER (%)
- - -------------------------------------------
<S> <C>
1.31%* 74.86%
0.87* 41.80
1.53%* 14.01%
1.09* 28.70
1.28* 15.70
1.98 24.67
1.76 18.63
2.82* 28.28
(0.30)% 87.94%
-- 115.89
0.11 170.85
0.14 83.83
0.32 97.64
0.74 95.95
0.23% 51.65%
0.24 72.89
0.24 93.24
0.12 69.33
0.47 89.99
1.18 162.43
3.00% 135.93%
2.66 150.94
2.48 50.20
3.11* 19.68
3.61* 32.60
3.96* 31.41
7.11%* 88.69%
6.29* 150.99
6.19* 119.92
7.30* 52.54
8.12* 58.45
8.30* 90.99
6.19%* 3,107.53%
4.61* 895.76
4.19* 1,212.20
3.79*+ 2,759.70
5.42%* N/A
3.38* N/A
2.58* N/A
3.39* N/A
5.70 N/A
7.54 N/A
</TABLE>
(1) For the period November 1, 1993 (commencement of operations) through October
31, 1994.
(2) Effective April 1, 1993, Harbor International Fund appointed Northern Cross
Investments Limited as its Subadviser.
(3) Effective January 1, 1993, Harbor Growth Fund appointed Nicholas Applegate
Capital Management as its Subadviser.
(4) Effective May 1, 1990, Harbor Capital Appreciation Fund appointed Jennison
Associates Capital Corp. as its Subadviser.
(5) Harbor Value Fund appointed Richards & Tierney, Inc. and DePrince, Race, &
Zollo, Inc. as its Subadvisers effective November 1, 1993 and April 20,
1995, respectively.
(6) For the period January 1, 1992 (commencement of operations) through October
31, 1992.
+ Annualized
++ Not Annualized
41
<PAGE> 43
HARBOR SHORT DURATION FUND
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE PERIOD
NOVEMBER 1, 1994
THROUGH
OCTOBER 31, 1995
----------------
<S> <C>
Cash flows used for operating activities:
Interest (excluding net amortization of $1,046,792)......................................... $ 7,263,363
Operating expenses paid..................................................................... (386,732)
Interest paid............................................................................... (1,444,682)
Purchase of long-term portfolio investments................................................. (681,400,577)
Proceeds from disposition of long-term portfolio investments................................ 637,191,284
Purchase of short-term portfolio investments................................................ (3,507,408,560)
Proceeds from disposition of short-term portfolio investments............................... 3,500,845,475
Purchase of securities sold short........................................................... (101,245,278)
Proceeds from securities sold short......................................................... 123,619,619
Net cash used for futures contracts......................................................... (327,484)
Net cash used for forward currency contracts................................................ (289,068)
Cash used for interest purchased............................................................ (4,801,774)
Cash provided by interest sold.............................................................. 4,683,054
Cash provided by other assets............................................................... 5,131
---------------
NET CASH USED FOR OPERATING ACTIVITIES.................................................... (23,696,229)
---------------
Cash flows provided by financing activities:
Cash provided from issuance of shares of capital stock...................................... 522,264,113
Cash used to repurchase shares of capital stock............................................. (534,637,259)
Cash dividends paid......................................................................... (16,637)
Cash provided from reverse repurchase agreements............................................ 513,072,313
Cash used to liquidate reverse repurchase agreements........................................ (478,100,438)
---------------
NET CASH PROVIDED BY FINANCING ACTIVITIES................................................. 22,582,092
Net decrease in cash.......................................................................... (1,114,137)
---------------
Cash at beginning of year..................................................................... 284
Foreign currency at beginning of year, at cost................................................ 1,192,084
---------------
Total cash at beginning of year............................................................... 1,192,368
Cash at end of year........................................................................... 78,204
Foreign currency at end of year, at cost...................................................... 27
---------------
Total cash at end of year................................................................. $ 78,231
===============
RECONCILIATION OF NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS TO NET CASH USED FOR
OPERATING ACTIVITIES:
Net increase in net assets resulting from operations.......................................... $ 7,130,864
---------------
Increase in investments..................................................................... (53,671,772)
Decrease in securities sold short........................................................... 22,507,731
Change in unrealized depreciation -- net.................................................... (401,607)
Decrease in receivables for securities sold................................................. 20,424,713
Increase in interest receivable............................................................. (543,492)
Decrease in receivable for variation margin on futures contract............................. 3,401
Decrease in receivable for forward currency contracts....................................... 6,655
Decrease in other assets.................................................................... 5,131
Decrease in payable for securities purchased................................................ (19,319,755)
Increase in accrued expense and other liabilities........................................... 161,902
---------------
Total adjustments......................................................................... (30,827,093)
---------------
Net cash used for operating activities........................................................ $ (23,696,229)
===============
</TABLE>
The accompanying notes are an integral part of the financial statements.
42
<PAGE> 44
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--OCTOBER 31, 1995
NOTE 1--ORGANIZATIONAL MATTERS
Harbor Fund (the "Trust") is registered under the Investment Company Act of
1940, as amended, as an open-end management investment company, consisting of a
series of eight diversified investment portfolios (the "Funds"), each of which
is represented by a separate series of shares of beneficial interest and having
an unlimited number of shares authorized. As of October 31, 1995, the Trust
consisted of the following funds: Harbor International Growth Fund, Harbor
International Fund, Harbor Growth Fund, Harbor Capital Appreciation Fund, Harbor
Value Fund, Harbor Bond Fund, Harbor Short Duration Fund and Harbor Money Market
Fund.
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Trust in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles for investment
companies.
SECURITY VALUATION
Equity securities are valued at the last sale price on an exchange or the
National Association of Securities Dealers Automated Quotation ("NASDAQ") system
or, in the case of unlisted securities or listed securities for which there were
no sales on the valuation day, the mean between the closing bid and asked price.
Securities listed or traded on foreign exchanges are valued at the last sale
price on that exchange on the valuation day, or if no sale occurs, at the
official bid price (both the last sale price and official bid price are
determined as of the close of the London Foreign Exchange).
Except for Harbor Money Market Fund, debt securities, other than short-term
securities with a remaining maturity of less than sixty days, are valued at
prices furnished by a pricing service, selected by the adviser, which determines
valuations for normal institutional-size trading units of such securities using
market information, transactions for comparable securities and various
relationships between securities which are generally recognized by institutional
traders. Short-term securities with a remaining maturity of less than sixty days
are stated at amortized cost which approximates value. Open futures contracts
are valued based on the last sale price on the exchange on which such futures
are principally traded.
Securities for which there are no such prices are valued at their fair
value as determined in good faith under consistently applied procedures
established by and under the supervision of the Board of Trustees.
Securities of the Harbor Money Market Fund are valued utilizing the
amortized cost method as set forth in Rule 2a-7 under the Investment Company Act
of 1940, as amended.
43
<PAGE> 45
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
FUTURES CONTRACTS
A futures contract is an agreement between two parties to buy and sell a
security at a set price on a future date. Upon entering into such a contract, a
Fund is required to pledge to the broker an amount of cash, U.S. Government
securities or other high quality debt securities equal to the minimum "initial
margin" requirements of the exchange. Pursuant to the contract, the Fund agrees
to receive from or pay to the broker an amount of cash equal to the daily
fluctuation in value of the contract. Such receipts or payments are known as
"variation margin," and are recorded by the Fund as unrealized gains or losses.
When the contract is closed, the Fund records a realized gain or loss equal to
the difference between the value of the contract at the time it was opened and
the value at the time it was closed.
Each Fund (excluding the Money Market Fund) may use futures contracts to
manage its exposure to the stock and bond markets and to fluctuations in
currency values. Futures contracts tend to increase or decrease the Fund's
exposure to the underlying instrument or hedge other fund investments. Losses
may arise from changes in the value of the underlying instruments, if there is
an illiquid secondary market for the contracts, or if the counterparties do not
perform under the contracts' terms.
OPTIONS
Each Fund (excluding the Money Market Fund) may use options contracts to
manage its exposure to the stock and bond markets and to fluctuations in
interest rates and currency values. Options contracts tend to increase or
decrease the Fund's exposure to the underlying instrument, or hedge other fund
investments.
When a Fund purchases an option, the premium paid by the Fund is included
in the Fund's Statement of Assets and Liabilities as an investment and
subsequently "marked-to-market" to reflect the option's current market value.
Purchased options are valued at the last sale price on the market on which it is
principally traded. If the purchased option expires, the Fund realizes a loss in
the amount of the premium. If the Fund enters into a closing sale transaction,
it realizes a gain or loss, depending on whether the proceeds from the sale are
greater or less than the cost of the option. If the Fund exercises a call
option, the cost of the securities acquired by exercising the call is increased
by the premium paid to buy the call. If the Fund exercises a put option, it
realizes a gain or loss from the sale of the underlying security and the
proceeds from such sale are decreased by the premium originally paid. The risk
associated with purchasing options is limited to the premium originally paid.
44
<PAGE> 46
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
When a Fund writes an option, the premium received by the Fund is presented
in the Fund's Statement of Assets and Liabilities as an asset and an equivalent
liability. The amount of the liability is subsequently "marked-to-market" to
reflect the current market value of the option written. Written options are
valued at the last sale price or, in the absence of a sale, the last offering
price on the market on which it is principally traded. If an option expires on
its stipulated expiration date, or if the Fund enters into a closing purchase
transaction, the Fund realizes a gain (or loss if the cost of a closing purchase
transaction exceeds the premium received when the option was written) without
regard to any unrealized gain or loss on the underlying security, and the
liability related to such option is extinguished. If a written call option is
exercised, the Fund realizes a gain or loss from the sale of the underlying
security and the proceeds of the sale are increased by the premium originally
received. If a written put option is exercised, the amount of the premium
originally received reduces the cost of the security which the Fund purchases
upon exercise of the option.
The risk in writing a call is that the Fund relinquishes the opportunity to
profit if the market price of the underlying security increases and the option
is exercised. In writing a put option, the Fund assumes the risk of incurring a
loss if the market price of the underlying security decreases and the option is
exercised. In addition, there is a risk the Fund may not be able to enter into a
closing transaction because of an illiquid secondary market, or if the
counterparties do not perform under the contracts' terms.
OPTIONS ON FUTURES CONTRACTS
The valuation, accounting principles and risks involved with options on
futures are similar to those described above relating to options purchased or
written directly on the underlying debt securities. In addition, upon exercise,
the premium paid would decrease the unrealized gain or increase the unrealized
loss on the futures.
PURCHASED INTEREST RATE CAP AGREEMENTS
Harbor Bond Fund and Harbor Short Duration Fund may purchase interest rate
caps for hedging purposes in order to seek to increase total return. A purchased
interest rate cap is an agreement to receive periodic interest payments, based
on a notional principal amount, to the extent that a specified interest index
rises above a specified interest rate in exchange for the premium paid. When a
Fund purchases an interest rate cap, the premium paid by the Fund is amortized
to income over the life of the cap (or over the life of the investment(s) hedged
by the cap, if shorter) on a straight line basis. Interest rate caps are
marked-to-market daily based on quotations from market makers and the change, if
any, is recorded as an unrealized gain or loss in the Statement of Assets and
Liabilities. Periodic payments of interest, if any, are reported as interest
income in the Statement
45
<PAGE> 47
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
of Operations. If there is a default by the other party to such a transaction,
the Fund will have contractual remedies pursuant to the agreements related to
the transaction.
Because there is no organized market for these agreements, the value
reported in the Statement of Assets and Liabilities may differ from that which
would be realized in the event the Fund terminated its position in the
agreement. Entering into these agreements involves, to varying degrees, elements
of credit, interest rate and market risk in excess of the amount recognized in
the Statement of Assets and Liabilities. Such risks involve the possibility that
there is no liquid market for these agreements, that the counterparty to the
agreements may default on its obligation to perform and that there may be
adverse changes in interest rates and unfavorable changes in the price of the
security or index underlying these transactions.
TBA PURCHASE COMMITMENTS
Bond Fund enters into "TBA" (to be announced) purchase commitments to
purchase securities for a fixed unit price at a future date beyond customary
settlement time. Although the unit price has been established, the principal
value has not been finalized. However, the amount of the commitment will not
fluctuate more than 2.0% from the principal amount. The Fund holds, and
maintains until the settlement date, cash or high-grade debt obligations in an
amount sufficient to meet the purchase price. TBA purchase commitments may be
considered securities in themselves, and involve a risk of loss if the value of
the security to be purchased declines prior to the settlement date, which risk
is in addition to the risk of decline in the value of the Fund's other assets.
Risks may also arise upon entering into these contracts from the potential
inability of counterparties to meet the terms of their contracts. Unsettled TBA
purchase commitments are valued at the current market value of the underlying
securities, generally according to the procedures described under "Security
Valuation" above.
Although the Fund will generally enter into TBA purchase commitments with
the intention of acquiring securities for its portfolio, the Fund may dispose of
a commitment prior to settlement if the Fund's Subadviser deems it appropriate
to do so.
TBA SALE COMMITMENTS
Bond Fund enters into "TBA" sale commitments to hedge its portfolio
positions or to sell mortgage-backed securities it owns under delayed delivery
arrangements. Proceeds of TBA sale commitments are not received until the
contractual settlement date. During the time a TBA sale commitment is
outstanding, equivalent deliverable securities, or an offsetting TBA purchase
commitment (deliverable on or before the sale commitment date), are held as
"cover" for the transaction.
46
<PAGE> 48
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
Unsettled TBA sale commitments are valued at the current market value of
the underlying securities, generally according to the procedures described under
"Security Valuation" above. The contract is "marked-to-market" daily and the
change in market value is recorded by the Fund as an unrealized gain and loss.
If the TBA sale commitment is closed through the acquisition of an offsetting
purchase commitment, the Fund realizes a gain or loss on the commitment without
regard to any unrealized gain or loss on the underlying security. If the Fund
delivers securities under the commitment, the Fund realizes a gain or loss from
the sale of the securities upon the unit price established at the date the
commitment was entered into.
FORWARD CURRENCY CONTRACTS
Each Fund may enter into forward foreign currency contracts in order to
manage currency exposure. A forward currency contract is an agreement between
two parties to buy and sell currencies at a set price on a future date. The U.S.
dollar value of the contracts is determined using forward currency exchange
rates supplied by a pricing service. The contract is "marked-to-market" daily
and the change in market value is recorded as an unrealized gain or loss. When
the contract is closed, the Fund records a realized gain or loss equal to the
difference between the value on the open and close date. Purchases and sales of
forward currency contracts having the same settlement date and broker are offset
and any realized gain or loss is recognized on the date of offset; otherwise a
gain or loss is recognized upon settlement. Losses may arise from changes in the
value of the foreign currency or if the counterparties do not perform under the
contracts' terms. The maximum potential loss from such contracts is the
aggregate face value in U.S. dollars at the time the contract was opened;
however, management of the Fund believes the likelihood of such loss is remote.
FOREIGN CURRENCY TRANSLATIONS
The accounting records of the Funds are maintained in U.S. dollars.
Investment securities and other assets and liabilities denominated in a foreign
currency are translated into U.S. dollars based on the current exchange rates at
period end. Purchases and sales of securities are translated into U.S. dollars
at the current exchange rate on the respective dates of the transaction. Income
and withholding taxes are translated at the prevailing exchange rates when
accrued or incurred.
Effective November 1, 1994, the Funds adopted Statement of Position (SOP)
93-4: Foreign Currency Accounting and Financial Statement Presentation for
Investment Companies. In accordance with this SOP, reported net realized gains
and losses on foreign currency transactions represent net gains and losses from
sales and maturities of forward currency contracts, disposition of foreign
currencies, currency gains and losses realized between the trade and settlement
dates on securities transactions, and the difference between the amount of net
investment income accrued and the U.S. dollar amount actually received. The
effects of changes in foreign currency exchange rates on
47
<PAGE> 49
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
investments in securities are not isolated in the Statement of Operations from
the effects of changes in market prices of these securities. Such fluctuations
are included with the net realized and unrealized gain or loss on investments.
REPURCHASE AGREEMENTS
The Trust's custodian takes possession through the federal book-entry
system of securities collateralizing repurchase agreements. The value of the
underlying assets at the time of purchase is required to be at least equal to
the repurchase price to protect the Fund in the event of default by the seller.
SECURITIES TRANSACTIONS
Securities transactions are accounted for on the trade date (the date the
order to buy or sell is executed). Realized gains or losses on security
transactions are determined on the basis of identified cost for both federal
income tax and financial reporting purposes.
INVESTMENT INCOME
Dividends declared are accrued on the ex-dividend date, except that, for
Harbor International Growth Fund and Harbor International Fund, certain
dividends are recorded as soon as the Fund is notified of the ex-dividend date.
Interest income is accrued daily as earned. Discounts and premiums on securities
purchased are amortized over the life of the respective securities using the
straight-line method. Discount on zero coupon bonds is accreted using the
effective yield method.
DISTRIBUTION TO SHAREHOLDERS
Distributions are recorded on the ex-dividend date.
EXPENSES
Expenses incurred by the Trust with respect to any two or more Funds are
allocated in proportion to the net assets of each Fund, except where allocations
of direct expense to each Fund can be otherwise fairly made.
DEFERRED ORGANIZATION COSTS
Certain costs incurred by Harbor International Growth Fund and Harbor Short
Duration Fund in connection with its organization and its registration with the
Securities and Exchange Commission and with various states aggregated
approximately $33,000 and $21,000, respectively. These costs are being amortized
on a straight-line basis over a five-year period from the commencement of
operations of the Fund.
48
<PAGE> 50
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
FEDERAL TAXES
Each Fund is treated as a separate entity for federal tax purposes. Each
Fund's policy is to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute to its
shareholders all of its taxable income within the prescribed time. It is also
the intention of each Fund to distribute an amount sufficient to avoid
imposition of any excise tax under Section 4982 of the Internal Revenue Code.
Therefore, no provision has been made for federal taxes on income, capital gains
or unrealized appreciation of securities held or excise tax on income and
capital gains.
NOTE 3--INVESTMENT PORTFOLIO TRANSACTIONS
Purchases and sales of investments, other than short-term securities, for
each Fund for the year ended October 31, 1995 were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
---------------------------- ----------------------------
U.S. U.S.
FUND GOVERNMENT OTHER GOVERNMENT OTHER
- - --------------------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Harbor International Growth...... $ -- $104,248,698 $ -- $ 64,027,713
Harbor International............. -- 560,752,221 -- 409,371,765
Harbor Growth.................... -- 116,651,658 -- 152,248,909
Harbor Capital Appreciation...... 16,063,100 750,024,039 1,864,225 256,129,223
Harbor Value..................... -- 102,052,602 -- 88,178,524
Harbor Bond...................... 148,680,715 55,433,007 108,056,782 45,166,219
Harbor Short Duration............ 607,409,473 51,680,196 572,466,913 44,332,098
</TABLE>
Harbor Money Market's purchases and sales (including maturities) of
investment securities (all short term obligations) aggregated $1,880,520,097 and
$1,885,548,463, respectively.
Harbor Short Duration Fund engages in short-selling which obligates the
Fund to replace the security borrowed by purchasing it at the market price at
the time of replacement. Until the security is replaced, the Fund is required to
pay to the lender any accrued interest and may be required to pay a premium. The
Fund would realize a gain if the security declines in price between the date of
the short sale and the date on which the Fund replaces the borrowed security.
The Fund would incur a loss as a result of the short sale if the price of the
security increases between those dates. Until the Fund replaces the borrowed
security, it will maintain a segregated account of cash and/or U.S. Government
securities with its custodian sufficient to cover its short position.
Harbor Bond Fund enters into forward sale commitments to sell a specified
security at a specified price on a specified future date. The forward sales that
create short positions are accounted for as short sells as described above.
49
<PAGE> 51
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 3--INVESTMENT PORTFOLIO TRANSACTIONS--CONTINUED
Transactions in futures contracts during the year ended October 31, 1995
are summarized as follows:
<TABLE>
<CAPTION>
PURCHASES OF SALES OF
FUTURES CONTRACTS FUTURES CONTRACTS
--------------------------- ---------------------------
U.S. BONDS U.S. BONDS
--------------------------- ---------------------------
NUMBER OF AGGREGATE NUMBER OF AGGREGATE
CONTRACTS FACE VALUE CONTRACTS FACE VALUE
--------- --------------- --------- ---------------
<S> <C> <C> <C> <C>
HARBOR BOND FUND
Contracts outstanding at beginning of
period...................................... 349 $ 34,900,000 -- --
Contracts opened.............................. 2,633 263,300,000 -- --
Contracts closed.............................. (2,357) (235,700,000) -- --
-------- -------------- ------- --------------
Open at 10/31/95.............................. 625 $ 62,500,000 -- --
======== ============== ======= ==============
HARBOR SHORT DURATION FUND
Contracts outstanding at beginning of
period...................................... 75 $ 15,000,000 22 $ 2,200,000
Contracts opened.............................. 347 45,400,000 849 89,700,000
Contracts closed.............................. (222) (40,400,000) (516) (56,400,000)
-------- -------------- ------- --------------
Open at 10/31/95.............................. 200 $ 20,000,000 355 $ 35,500,000
======== ============== ======= ==============
</TABLE>
<TABLE>
<CAPTION>
PURCHASES OF SALES OF
FUTURES CONTRACTS FUTURES CONTRACTS
--------------------------- ---------------------------
FOREIGN BONDS FOREIGN BONDS
--------------------------- ---------------------------
NUMBER OF CURRENCY NUMBER OF CURRENCY
CONTRACTS AMOUNT CONTRACTS AMOUNT
--------- --------------- --------- ---------------
<S> <C> <C> <C> <C>
HARBOR BOND FUND
Contracts outstanding at beginning of
period...................................... -- $ -- -- --
Contracts opened.............................. 1,100 135,000,000 -- --
Contracts closed.............................. (900) (105,000,000) -- --
------- --------------
Open at 10/31/95.............................. 200 $ 30,000,000 -- --
======= ============== ====== ==============
HARBOR SHORT DURATION FUND
Contracts outstanding at beginning of
period...................................... -- $ -- -- $ --
Contracts opened.............................. 5 1,250,000 98 24,500,000
Contracts closed.............................. -- -- (98) (24,500,000)
------- -------------- ------ --------------
Open at 10/31/95.............................. 5 $ 1,250,000 -- $ --
======= ============== ====== ==============
</TABLE>
50
<PAGE> 52
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 3--INVESTMENT PORTFOLIO TRANSACTIONS--CONTINUED
SECURITIES LENDING
The market value of securities on loan to broker/dealers at October 31,
1995, and the securities collateralizing such loans, were:
<TABLE>
<CAPTION>
MARKET VALUE MARKET VALUE
OF LOANED OF COLLATERAL
FUND SECURITIES SECURITIES
---------------------------------------------------- ------------ -----------------
<S> <C> <C>
Harbor International Growth......................... $ 7,355,362 $ 7,733,345
Harbor International................................ 156,453,571 167,600,470
</TABLE>
The Fund receives securities issued or guaranteed by the U.S. Government or
its agencies, cash or letters of credit as collateral against the loaned
securities in an amount at least equal to 100% of the current market value of
securities loaned; however, in the event of default or bankruptcy by the other
party to the agreement, realization and/or retention of the collateral may be
subject to legal proceedings. At October 31, 1995 all collateral received was
cash and was subsequently invested in cash equivalents.
WRITTEN OPTIONS
Transactions in written options for the year ended October 31, 1995 are
summarized as follows:
<TABLE>
<CAPTION>
OPTIONS WRITTEN
----------------------------
U.S. TREASURY FUTURES
----------------------------
NUMBER OF AGGREGATE
CONTRACTS FACE VALUE
--------- -------------
<S> <C> <C>
HARBOR BOND FUND
Options outstanding at beginning of period................... 300 $ 30,000,000
Options opened............................................... 2,000 200,000,000
Options closed............................................... (2,000) (200,000,000)
-------- -------------
Open at 10/31/95............................................. 300 $ 30,000,000
======== =============
</TABLE>
51
<PAGE> 53
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 3--INVESTMENT PORTFOLIO TRANSACTIONS--CONTINUED
<TABLE>
<CAPTION>
OPTIONS WRITTEN
------------------------------
FOREIGN FUTURES
------------------------------
NUMBER OF CURRENCY
CONTRACTS AMOUNT
--------- ---------------
<S> <C> <C>
HARBOR BOND FUND
Options outstanding at beginning of period................. 500 $ 500,000,000
Options opened............................................. 2,265 2,265,000,000
Options closed............................................. (1,500) (1,500,000,000)
Options expired............................................ (1,000) (1,000,000,000)
-------- ---------------
Open at 10/31/95........................................... 265 $ 265,000,000
======== ===============
</TABLE>
NOTE 4--FEES AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISER
Harbor Capital Advisors, Inc. ("Harbor"), an indirect wholly-owned
subsidiary of Owens-Illinois, Inc., is the Trust's investment adviser and is
also responsible for administrative and other services. Separate advisory
agreements for each Fund were in effect during the year ended October 31, 1995.
The agreements provide for fees based on an annual percentage rate of average
daily net assets as follows:
<TABLE>
<CAPTION>
ANNUAL
PERCENTAGE FEES
FUND RATE EARNED
-------------------------------------------------------- ---------- -----------
<S> <C> <C>
Harbor International Growth............................. 0.75% $ 655,678
Harbor International.................................... 0.85% 26,318,745
Harbor Growth........................................... 0.75% 1,035,019
Harbor Capital Appreciation............................. 0.60% 3,073,982
Harbor Value............................................ 0.60% 411,395
Harbor Bond............................................. 0.70% 1,318,022
Harbor Short Duration................................... 0.40% 435,320
Harbor Money Market..................................... 0.30% 196,587
</TABLE>
Harbor has from time to time agreed not to impose all or a portion of its
advisory fees and bear a portion of the expenses incurred in the operation of
certain Funds in order to limit Fund expenses. During the year ended October 31,
1995, Harbor agreed not to impose advisory fees of $88,294, $471,474, $217,937,
and $78,676, relating to Harbor International Growth Fund, Harbor Bond Fund,
Harbor Short Duration Fund and Harbor Money Market Fund, respectively; and
Harbor and Northern
52
<PAGE> 54
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 4--FEES AND OTHER TRANSACTIONS WITH AFFILIATES--CONTINUED
Cross Investments Limited agreed not to impose $1,068,227 of the advisory fee
for Harbor International Fund.
DISTRIBUTOR
HCA Securities, Inc., a wholly-owned subsidiary of Harbor Capital Advisors,
Inc., is the distributor for Harbor Fund shares. Harbor Fund does not reimburse
the distributor for expenses.
SHAREHOLDERS
On October 31, 1995, Harbor, HCA Securities, Inc., Harbor Transfer, Inc.,
and various employee benefit plans of Owens-Illinois, Inc. held the following
shares of beneficial interest in the Funds:
<TABLE>
<CAPTION>
HARBOR, HCA BENEFIT PLANS OF
SECURITIES AND OWENS-ILLINOIS,
FUND HARBOR TRANSFER INC.
----------------------------------------------- --------------- -----------------
<S> <C> <C>
Harbor International Growth.................... 100,811 155,220
Harbor International........................... 4 1,580,169
Harbor Growth.................................. 17,071 6,069,077
Harbor Capital Appreciation.................... 6 1,910,328
Harbor Value................................... 6 1,821,821
Harbor Bond.................................... 7 1,609,456
Harbor Short Duration.......................... 1,405,636 9,474,280
Harbor Money Market............................ 38,211 18,640,139
</TABLE>
TRANSFER AGENT
Harbor Transfer, Inc., a wholly-owned subsidiary of Harbor Capital
Advisors, Inc., is the shareholder servicing agent for the Funds. Fees incurred
for these transfer agent services for the year ended October 31, 1995 totalled
$3,915,034.
"NON-INTERESTED" TRUSTEES
The fees and expenses of the non-interested Trustees allocated to each Fund
are shown on each Fund's Statement of Operations. Trustees' fees and expenses
for all Funds aggregated $100,328 for the year ended October 31, 1995.
53
<PAGE> 55
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 4--FEES AND OTHER TRANSACTIONS WITH AFFILIATES--CONTINUED
CUSTODIAN
Payments to the custodian have been reduced by balance credits applied to
each portfolio for the year ended October 31, 1995. For the Harbor International
Growth Fund, Harbor International Fund, Harbor Growth Fund, Harbor Capital
Appreciation Fund, Harbor Value Fund, Harbor Bond Fund, Harbor Short Duration
Fund, and Harbor Money Market Fund the reduction amounted to $1,772, $11,285,
$1,386, $16,229, $535, $2,018, $17,213, and $2,084, respectively.
NOTE 5--BORROWINGS
Short Duration Fund enters into reverse repurchase agreements with third
party broker-dealers. The Fund may use reverse repurchase agreements 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 the Fund enters into a reverse repurchase agreement, it establishes
and maintains a segregated account with the lender containing liquid high grade
securities having a value not less than the repurchase price, including accrued
interest, of the reverse repurchase agreement. Reverse repurchase agreements
involve the risk that the market value of the securities sold by a Fund may
decline below the repurchase price of the securities and, if the proceeds from
the reverse repurchase agreement are invested in securities, that the market
value of the securities bought may decline below the repurchase price of
securities sold. Activity in reverse repurchase agreements by the Short Duration
Fund for the year ended October 31, 1995 is as follows:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE DAILY
AMOUNT AMOUNT AVERAGE
BALANCE AVERAGE OUTSTANDING OUTSTANDING INTEREST RATE
CATEGORY OF AGGREGATE AT END OF INTEREST DURING THE DURING THE DURING THE
SHORT-TERM BORROWINGS PERIOD RATE PERIOD PERIOD PERIOD
- - --------------------------------- ----------- ------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Reverse repurchase agreements
with maturity dates from
8/15/98 thru 12/31/99.......... $56,399,375 5.77% $59,129,597 $ 23,999,198 5.53%
</TABLE>
NOTE 6--COMMITMENTS AND CONTINGENCIES
In connection with its former fidelity bond and directors and officers
errors and omissions liability insurance policy, the Trust, on behalf of each
Fund, must maintain for five years a "reserve premium" representing
approximately 100% of its allocated annual premium for each Fund. Such amounts
are included in "Other assets" in each Fund's Statement of Assets and
Liabilities.
NOTE 7--TAX INFORMATION
The amount and character of income and net realized gains to be distributed
are determined in accordance with income tax rules and regulations, which may
differ from generally accepted
54
<PAGE> 56
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 7--TAX INFORMATION--CONTINUED
accounting principles. These differences are attributable to permanent book and
tax accounting differences. Reclassifications are made to the Funds' capital
accounts to reflect income and net realized gains available for distribution (or
available capital loss carryovers) under income tax rules and regulations. For
the year ended October 31, 1995, the Funds reclassified the following amounts:
<TABLE>
<CAPTION>
UNDISTRIBUTED ACCUMULATED
NET INVESTMENT NET REALIZED PAID-IN
(LOSS) INCOME GAIN (LOSS) CAPITAL
---------------- ------------ ------------
<S> <C> <C> <C>
Harbor International Growth Fund................ 6,641 10,204 (16,845)
Harbor International Fund....................... (1,601,667) 2,055,114 (453,447)
Harbor Growth Fund.............................. 211,347 (211,347) --
Harbor Capital Appreciation Fund................ (16,366) 22,056 (5,690)
Harbor Value Fund............................... 12,875 (13,230) 355
Harbor Bond Fund................................ 435,640 (450,313) 14,673
Harbor Short Duration Fund...................... 614,597 20,322,391 (20,936,988)
</TABLE>
At October 31, 1995, Harbor Short Duration Fund had capital loss
carryforwards of approximately $5,578,000, $13,538,000 and $2,000, which may be
available to offset future realized capital gains, if any. These amounts will
expire October 31, 2001, October 31, 2002 and October 31, 2003, respectively.
At October 31, 1995 Harbor International Growth Fund had capital loss
carryforwards of approximately $65,058 and $3,162,965, which may be available to
offset future realized capital gains, if any. These amounts will expire on
October 31, 2002 and October 31, 2003, respectively.
At October 31, 1995 Harbor Bond Fund had a capital loss carryforward of
approximately $1,957,911 which may be available to offset future realized
capital gains, if any. This amount will expire October 31, 2002. A capital loss
of $4,985,470 was utilized during the year ended October 31, 1995.
The identified cost for federal income tax purposes of investments owned by
each Fund (including earned discount on corporate short-term notes and
commercial paper) and their respective gross unrealized appreciation and
depreciation at October 31, 1995 were as follows:
<TABLE>
<CAPTION>
GROSS UNREALIZED NET UNREALIZED
----------------------------- APPRECIATION/
NAME OF FUND IDENTIFIED COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
- - ------------------------------------ --------------- ------------ -------------- --------------
<S> <C> <C> <C> <C>
Harbor International Growth Fund.... $ 107,302,997 $ 15,560,556 $ (2,613,917) $ 12,946,639
Harbor International Fund........... 2,462,857,598 892,617,312 (99,654,914) 792,962,398
Harbor Growth Fund.................. 106,770,461 33,075,277 (1,673,010) 31,402,267
Harbor Capital Appreciation Fund.... 723,286,961 205,409,475 (11,477,946) 193,931,529
Harbor Value Fund................... 79,441,526 6,865,732 (2,084,994) 4,780,738
Harbor Bond Fund.................... 228,945,882 3,651,604 (2,713,242) 938,362
Harbor Short Duration Fund.......... 189,862,819 585,747 (1,761,133) (1,175,386)
</TABLE>
55
<PAGE> 57
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND
BOARD OF TRUSTEES OF
HARBOR FUND
In our opinion, the accompanying statements of assets and liabilities,
including the portfolios of investments, and the related statements of
operations, of changes in net assets and of cash flows, and the financial
highlights present fairly, in all material respects, the financial position of
each of the eight Funds constituting the Harbor Fund, (hereafter referred to as
the "Trust") at October 31, 1995, and the results of each of their operations,
the changes in each of their net assets, the cash flows for the Harbor Short
Duration Fund, and the financial highlights for the periods indicated, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Trust's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards, which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of investments owned at
October 31, 1995 by correspondence with the custodian and brokers and the
application of alternative auditing procedures where confirmations from brokers
were not received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
December 14, 1995
56
<PAGE> 58
HARBOR FUND
ADDITIONAL INFORMATION
ADDITIONAL FEDERAL TAX INFORMATION
Harbor Value Fund designates 42% of its distributions from investment
company taxable income for the fiscal year as qualifying for the dividends
received deduction for corporate shareholders. The Fund paid a long-term capital
gain dividend of $2,598,041 or $.51 per share on December 27, 1994.
The Form 1099 you receive in January, 1996 for each of the Funds will show
the tax status of all distributions paid to your account in calendar year 1995.
ADDITIONAL INFORMATION
On August 3, 1995 a special meeting of shareholders of Harbor Value Fund
was held for the purpose of voting on the following:
1: To approve or disapprove the Subadvisory Agreement by and among the
Trust, on behalf of Harbor Value Fund, Harbor Capital Advisors, Inc. and
DePrince, Race & Zollo, Inc. ("DRZ"), the Fund's subadviser, under which
DRZ will manage a portion of the Fund's assets ("Proposal 1").
2: To approve or disapprove an amendment to a fundamental investment
restriction of Harbor Value Fund ("Proposal 2").
The results of the vote on Proposal 1 were as follows:
<TABLE>
<CAPTION>
% OF
OUTSTANDING % OF SHARES
VOTE NO. OF SHARES SHARES VOTED
- - -------------------------------------------------------- ------------- ----------- -----------
<S> <C> <C> <C>
Affirmative............................................. 4,154,819 81.28% 98.25%
Against................................................. 56,088 1.10 1.33
Abstain................................................. 17,590 0.34 .42
------------- ----------- -----------
TOTAL: ............................................... 4,228,497 82.72% 100.00%
</TABLE>
The results of the vote on Proposal 2 were as follows:
<TABLE>
<CAPTION>
% OF
OUTSTANDING % OF SHARES
VOTE NO. OF SHARES SHARES VOTED
- - -------------------------------------------------------- ------------- ----------- -----------
<S> <C> <C> <C>
Affirmative............................................. 4,092,062 80.05% 96.77%
Against................................................. 109,159 2.14 2.58
Abstain................................................. 27,276 0.53 .65
------------- ----------- -----------
TOTAL: ............................................... 4,228,497 82.72% 100.00%
</TABLE>
(This document must be preceded or accompanied by a Prospectus.)
57
<PAGE> 59
<TABLE>
<S> <C> <C>
TRUSTEES AND OFFICERS SHAREHOLDER SERVICING AGENT
Ronald C. Boller Chairman, President and Harbor Transfer, Inc.
Howard P. Colhoun Trustee P.O. Box 2282
John P. Gould Trustee Toledo, Ohio 43603-2282
Rodger F. Smith Trustee 1-800-422-1050
Constance L. Souders Trustee
Secretary and Treasurer CUSTODIAN
State Street Bank and Trust
Company
INVESTMENT ADVISER P.O. Box 1713
Harbor Capital Advisors, Boston, MA 02105
Inc.
One SeaGate
Toledo, OH 43666 INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
160 Federal Street
DISTRIBUTOR AND Boston, MA 02110
PRINCIPAL UNDERWRITER
HCA Securities, Inc. LEGAL COUNSEL
One SeaGate Hale and Dorr
Toledo, OH 43666 60 State Street
(419) 247-2477 Boston, MA 02109
</TABLE>
(HARBOR FUND LOGO)
196,000/12/95 (RECYCLED PAPER LOGO)
