<PAGE> 1
ANNUAL REPORT
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[HARBOR FUND LOGO]
=================================================
OCTOBER 31, 1996
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HARBOR FUND
<PAGE> 2
HARBOR FUND
ANNUAL REPORT OVERVIEW
Harbor Fund completed its current fiscal year on October 31, 1996. Total
annual return is shown below for each of the nine 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 ENDED
HARBOR FUNDS IN ORDER OF MARKET RISK 10/31/96
------------------------------------ ------------
<S> <C>
International Growth......................................................................... 27.86%
Growth....................................................................................... 14.84%
Capital Appreciation......................................................................... 13.22%
International II............................................................................. 4.70%+
International................................................................................ 18.17%
Value........................................................................................ 23.08%
Bond......................................................................................... 7.56%
Short Duration............................................................................... 7.24%
Money Market................................................................................. 5.08%
</TABLE>
<TABLE>
<CAPTION>
COMMONLY USED MARKET INDICES
----------------------------
<S> <C>
Morgan Stanley Capital International Europe, Australia, and Far East
(EAFE); international equity............................................................... 10.47%
Standard & Poor's 500 (S&P 500); domestic equity............................................. 24.24%
Lehman Brothers Aggregate (LB AGG); domestic bonds........................................... 5.85%
One-Year Government Bonds (1-YR GVT)......................................................... 5.93%
90-Day U.S. Treasury Bills (T-Bills); domestic short-term.................................... 5.31%
</TABLE>
<TABLE>
<CAPTION>
30 YEARS
1966-1995
LONG-TERM HISTORIC RETURNS ANNUAL RATES
-------------------------- ------------
<S> <C>
EAFE......................................................................................... 12.39%
S&P 500...................................................................................... 10.68%
Domestic Bonds (intermediate and long)(1).................................................... 8.24%
1-YR GVT(2).................................................................................. 7.85%
T-Bills...................................................................................... 6.72%
Consumer Price Index......................................................................... 5.39%
</TABLE>
<TABLE>
<CAPTION>
LIPPER
HARBOR FUND EXPENSE RATIOS 1993 1994 1995 1996 MEDIAN**
-------------------------- ---- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C>
International Growth............................ NA 1.32%* 1.21%* 1.10% 1.19%
Growth.......................................... 0.90% 0.93% 0.93% 0.92% 1.09%
Capital Appreciation............................ 0.86% 0.81% 0.75% 0.75% 0.82%
International II................................ NA NA NA 1.44%*++ 2.00%
International................................... 1.20%+++ 1.10%+++ 1.04%+++ 0.99%+++ 0.95%
Value........................................... 0.88% 1.04% 0.90% 0.83% 0.86%
Bond............................................ 0.72%* 0.77%* 0.70%* 0.70%* 0.65%
Short Duration***............................... 0.43%* 0.38%* 0.38%* 0.33%* 0.54%
Money Market.................................... 0.71%* 0.67%* 0.61%* 0.64%* 0.60%
</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 9/30/96 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 1.12% for 1993, 1.64% for
1994, 1.84% for 1995, and 1.59% for 1996. Harbor Short Duration Fund
commenced operations 1/1/92.
+ Unannualized for the period June 1, 1996 (commencement of operations)
through October 31, 1996.
++ Annualized.
+++ Reflects the Adviser's and Subadviser's agreement not to impose a
portion of the advisory fee.
<PAGE> 3
DEAR SHAREHOLDER:
While the US economy purred along in overdrive throughout 1996, some
volatility returned to the equity and bond markets, which were soaring at the
close of Harbor's fiscal year.
Investors trying to guess market direction focused intently on every new
economic indicator as it was announced. Meanwhile the indicators gave off lots
of "feints and jukes," providing a fairly good imitation of Michael Jordan
rushing upcourt with those other kind of Bulls.
In February, employment figures showed an unanticipated gain. The bond
market began a retreat and rates trended up on news from various indicators
through May, when a sporadic bond recovery began. Then, reacting to perceived
signs of unsustainable profit growth, the equity market underwent a "correction"
in late June and July.
It turned out to be only a fair sized blip when the market began to advance
again in August and was still moving higher late in November.
For the Harbor fiscal year, equities posted an impressive double digit
advance for the second consecutive year. The domestic bond market recovered
enough to record what could be viewed as a respectable gain.
While the domestic economy--as noted--seemed to be giving off a lot of
mixed signals throughout the year, in retrospect it was 12 more months of stable
economic growth with inflation well under control and no sight of a boom or bust
on the horizon.
The Federal Reserve Board's open market committee saw it that way, even
after the November election. After making a fine-tuning increase in the federal
funds rate of 25 basis points in January, the committee voted not to ease or
tighten at any meeting since, with the last pass coming on November 13.
For international investors, performance of equity markets was relatively
uneventful. About the best summation is that economic conditions around the
world over the 12 months continued to be "investor friendly." Overall
performance--led by emerging markets--was very good, but net returns to US
investors generally were penalized somewhat by the strength of the dollar.
It's estimated that global Gross Domestic Product (GDP) will be up about
2.8 percent for all of 1996, compared with a 2.3 percent gain in 1995. Worldwide
inflation is said to be decelerating from about 7.9 percent last year to an
estimated 5.1 percent this year.
One of the few surprises occurred in Japan, where GDP grew at a rate of
more than 12 percent in the first quarter of the year. Alas, the rate fell as
the year unfolded and is expected to be up less than 4 percent for the year. At
the end of September, several equity markets outside the US also were at
all-time highs, including those of the UK, Germany, the Netherlands, Belgium and
Denmark.
In summary, the political and economic climate in the 12-month period of
our fiscal year was in many ways quietly remarkable, given these developments:
- Continuation of one of the nation's longest ever economic
expansions, consistently marked by steady moderate growth and
benign inflation.
- High levels of corporate profitability.
- Observance in October of the sixth anniversary of the bull
market.
- Re-emergence of US industry as the world's most competitive
production machine.
- Generally the best worldwide political climate in decades.
As to the outlook, we cite observations of three of our funds' portfolio
managers:
"Contained wage growth, restrained consumer spending and on-going
discipline of capital market vigilantes should combine to produce a climate in
which inflation will remain centered at a rate of about
2
<PAGE> 4
DEAR SHAREHOLDER--CONTINUED
2 percent annually for the balance of this decade. With that rate of inflation,
a range of 5 to 7 percent for long treasury bonds is the secular
forecast."--Bill Gross, Harbor Bond Fund, PIMCO.
"Prospects for synchronized low rates of economic recovery worldwide are
good. Continued slow growth in the domestic economy and low inflation produces a
climate favoring selected growth stocks."--Spiros Segalas, Harbor Capital
Appreciation, Jennison Associates.
"While the US equity market has outperformed the EAFE index (over the last
two years), conditions are such that looking ahead selected international equity
markets should do well over the next couple of years."--Hakan Castegren, Harbor
International, Northern Cross Investments.
Once again, we repeat our credo that financial markets always will have ups
and downs, making it important to choose an asset allocation mix of stock and
fixed income investments with a level of risk appropriate for individual goals
and to stay with it.
On November 19, 1996, we observed the latest in a number of significant
Harbor Fund milestones--the 10th anniversary of the founding of our first fund,
Harbor Growth. Early in the fiscal year we marked another significant event when
net assets exceeded $5 billion. Less than a full year later, on November 11,
1996, net assets topped $7 billion.
Proud as we are of having reached those milestones, they simply serve to
remind us that our only purpose is to add value to your investments. We continue
to diligently work to maintain a team of skilled portfolio managers, focused in
their efforts, who are capable of attaining this objective.
We believe our growth is evidence of the effectiveness of our unique
multiple subadvisor approach which allows us to provide access to first class
investment talent through our family of mutual funds.
During the fiscal year, on balance the Harbor Funds continued to perform
well, and our newest addition--Harbor International Fund II--recorded a very
positive performance following its start-up on June 1.
As always, we appreciate your continued confidence and your investment in
Harbor Fund.
Sincerely,
Ronald C. Boller
Ronald C. Boller
December 16, 1996
3
<PAGE> 5
HARBOR FUND
The following performance figures are annualized for each Fund, except as
noted. The date of inception for Harbor Growth Fund was November 19, 1986;
Harbor Short Duration Fund was January 1, 1992; Harbor International Growth Fund
was November 1, 1993; Harbor International Fund II was June 1, 1996; and all
other Funds started December 29, 1987.
<TABLE>
<S> <C> <C> <C>
HARBOR INTERNATIONAL GROWTH FUND NET ASSET VALUE: 10/31/96 $15.35
10/31/95 $12.10
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------
Total Return for Periods Ended 10/31/96
------------------------------------------------------------------
Since
Fund/Index 12 months 5 years Inception
------------------------------------------------------------------
<S> <C> <C> <C>
Harbor Int'l Growth 27.86% NA 16.00%
------------------------------------------------------------------
EAFE 10.47% 7.65% 6.61%
------------------------------------------------------------------
<CAPTION>
Total Return for Periods Ended 9/30/96
------------------------------------------------------------------
<S> <C> <C> <C>
Harbor Int'l Growth 25.99% NA 16.10%
------------------------------------------------------------------
</TABLE>
By substantially outperforming the EAFE index in fiscal 1996, the Harbor
International Growth Fund has bettered the index each year since its
founding. Amid slow economic growth with little to no inflation worldwide
throughout the 12 months ended October 31, earnings per share growth for the
holdings in the portfolio averaged about 18 percent. Major contributions to
performance came from holdings in Hong Kong, Sweden, Switzerland, and the
UK. Also the Fund had no investments in Japan, which helped performance
relative to the index. On October 31, the Fund held 32 equities in 13
countries.
<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN HARBOR
INTERNATIONAL GROWTH AND EAFE
INTERNATIONAL
GROWTH EAFE
<S> <C> <C>
10/93 10000 10000
10/94 11537 11010
10/95 12209 10969
10/96 15610 12118
</TABLE>
*For the period November 1, 1993 (inception) ending October 31, 1996
<TABLE>
<S> <C> <C> <C>
HARBOR GROWTH FUND NET ASSET VALUE: 10/31/96 $16.00
10/31/95 $15.73
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------
Total Return for Periods Ended 10/31/96
------------------------------------------------------------------
Since
Fund/Index 12 months 5 years Inception
------------------------------------------------------------------
<S> <C> <C> <C>
Harbor Growth 14.84% 9.13% 11.98%
------------------------------------------------------------------
S&P 500 24.24% 15.60% 14.49%
------------------------------------------------------------------
<CAPTION>
Total Return for Periods Ended 9/30/96
------------------------------------------------------------------
<S> <C> <C> <C>
Harbor Growth 16.03% 10.72% 12.31%
------------------------------------------------------------------
</TABLE>
Performance of the Harbor Growth Fund fell short of that of the S&P 500
index for the fiscal year, mirroring the pronounced relative
underperformance of small- and mid-capitalization stocks over the period. In
the fiscal first half, performance was strong, but the trend was reversed in
the third quarter when investors judged that strong earnings gains in the
growth segment of the market could not be sustained. For the 12 months, the
strongest contributions to Fund performance came from holdings in consumer
durable goods, energy, and telecommunications, but these positive effects
were offset by weak performance in consumer non-durables, technology, and
the financial 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 10385
10/88 12058 11904
10/89 14295 15013
10/90 11804 13890
10/91 19914 18536
10/92 18425 20384
10/93 23247 23418
10/94 21319 24367
10/95 26846 30806
10/96 30830 38272
</TABLE>
Periods ending October 31
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.
<TABLE>
<S> <C> <C> <C>
HARBOR CAPITAL APPRECIATION FUND NET ASSET VALUE: 10/31/96 $25.88
10/31/95 $23.20
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------
Total Return for Periods Ended 10/31/96
------------------------------------------------------------------
Since
Fund/Index 12 months 5 years Inception
------------------------------------------------------------------
<S> <C> <C> <C>
Harbor Capital 13.22% 17.77% 18.23%
Appreciation
------------------------------------------------------------------
S&P 500 24.24% 15.60% 16.10%
------------------------------------------------------------------
<CAPTION>
Total Return for Periods Ended 9/30/96
------------------------------------------------------------------
<S> <C> <C> <C>
Harbor Capital 12.10% 18.61% 18.26%
Appreciation
------------------------------------------------------------------
</TABLE>
Harbor Capital Appreciation Fund's 1996 fiscal year performance trailed that
of the S&P 500 index, reflecting the lack of breadth in the market for the
period. The Fund finished with its best quarter of the year, gaining 13.86
percent in the 3 months ended October 31. Performance of holdings in the
technology sector, while particularly volatile, recovered from a sharp
decline in June and July and made the best overall contribution to results
for the fourth quarter. During the fiscal year, some changes were made in
issues comprising various segments of the portfolio, but sector weightings
remained relatively unchanged. Performance for the entire year was hurt by
consumer durables and technology issues, where portfolio weighting was
almost triple that of the S&P 500 at year-end.
<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
HARBOR CAPITAL APPRECIATION AND S&P 500
CAPITAL
APPRECIATION S&P 500
<S> <C> <C>
12/87 10000 10000
10/88 11670 11624
10/89 14110 14661
10/90 12485 13564
10/91 19395 18101
10/92 22191 19906
10/93 26664 22869
10/94 28597 23795
10/95 38814 30083
10/96 43946 37375
</TABLE>
Periods ending October 31
<TABLE>
<S> <C> <C> <C>
HARBOR INTERNATIONAL FUND II NET ASSET VALUE: 10/31/96 $10.47
10/31/95 NA
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------
Total Return for Periods Ended 10/31/96
------------------------------------------------------------------
Since
Fund/Index 12 months 5 years Inception
(Unannualized)
------------------------------------------------------------------
<S> <C> <C> <C>
Harbor International NA NA 4.70%
II
------------------------------------------------------------------
EAFE 10.47% 7.65% -0.59%
------------------------------------------------------------------
<CAPTION>
Total Return for Periods Ended 9/30/96
------------------------------------------------------------------
<S> <C> <C> <C>
Harbor International II NA NA 3.60%
------------------------------------------------------------------
</TABLE>
In the five-month period between inception of Harbor International Fund II
on June 1 this year and the end of the fiscal year, the Fund substantially
outperformed the EAFE index. Good contributions to initial performance came
from oil and gas stocks and from holdings in France, Brazil, Denmark,
Finland, and Norway. Holdings in Japan were significantly underweighted
relative to the EAFE index, which helped performance compared to that of the
index. At the end of October, the portfolio included some 81 holdings in 20
countries.
<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000
INVESTMENT IN HARBOR INTERNATIONAL II AND EAFE
HARBOR EAFE
INTERNATIONAL II
<S> <C> <C>
05/96 10000 10000
06/96 10310 10057
07/96 9890 9763
08/96 10270 9784
09/96 10360 10044
10/96 10470 9941
</TABLE>
For the period June 1, 1996 (inception) ending October 31, 1996
5
<PAGE> 7
HARBOR FUND--CONTINUED
The following performance figures are annualized for each Fund, except as
noted. The date of inception for Harbor Growth Fund was November 19, 1986;
Harbor Short Duration Fund was January 1, 1992; Harbor International Growth Fund
was November 1, 1993; Harbor International Fund II was June 1, 1996; and all
other Funds started December 29, 1987.
<TABLE>
<S> <C> <C> <C>
HARBOR INTERNATIONAL FUND NET ASSET VALUE: 10/31/96: $31.21
10/31/95: $26.93
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------
Total Return for Periods Ended 10/31/96
------------------------------------------------------------------
Since
Fund/Index 12 months 5 years Inception
------------------------------------------------------------------
<S> <C> <C> <C>
Harbor International 18.17% 14.54% 17.35%
------------------------------------------------------------------
EAFE 10.47% 7.65% 6.57%
------------------------------------------------------------------
<CAPTION>
Total Return for Periods Ended 9/30/96
------------------------------------------------------------------
<S> <C> <C> <C>
Harbor International 15.86% 14.41% 17.41%
------------------------------------------------------------------
</TABLE>
For the ninth consecutive year since its inception, the Harbor International
Fund outperformed the EAFE index. The Fund slightly underperformed the EAFE
index in the first half of the fiscal year, but substantially outperformed
the index in the fiscal second half, when index returns declined. Strongest
contributions to fiscal second half performance came from holdings in
Russia, France, Brazil, Spain, Malaysia, Sweden, and the Netherlands.
Performance relative to the index benefited from lack of significant
exposure in Japan.
<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
HARBOR INTERNATIONAL AND EAFE
EAFE INTERNATIONAL
<S> <C> <C>
12/87 10000 10000
10/88 12039 13000
10/89 13020 17070
10/90 11350 17721
10/91 12140 20864
10/92 10535 20025
10/93 14481 27936
10/94 15943 33123
10/95 15884 34800
10/96 17547 41124
</TABLE>
Periods ending October 31
<TABLE>
<S> <C> <C> <C>
HARBOR VALUE FUND NET ASSET VALUE: 10/31/96: $16.04
10/31/95: $14.57
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------
Total Return for Periods Ended 10/31/96
------------------------------------------------------------------
Since
Fund/Index 12 months 5 years Inception
------------------------------------------------------------------
<S> <C> <C> <C>
Harbor Value 23.08% 13.35% 14.16%
------------------------------------------------------------------
S&P 500 24.24% 15.60% 16.10%
------------------------------------------------------------------
<CAPTION>
Total Return for Periods Ended 9/30/96
------------------------------------------------------------------
<S> <C> <C> <C>
Harbor Value 20.43% 12.81% 14.09%
------------------------------------------------------------------
</TABLE>
In fiscal year 1996, Harbor Value Fund posted a strong gain for the second
consecutive year, slightly underperforming the strong advance in the S&P 500
index. Active portfolio management helped the Fund weather the equity
market's midyear downturn and recover from relatively modest declines in
June and July with good results in the fiscal fourth quarter. Paper industry
holdings in the portfolio were triple weighted relative to the S&P 500 and
made a vital contribution to fourth quarter performance. Performance for the
year also was aided by the fund's holdings in technology and transportation
issues, but weak results in financial services, basic materials, and capital
goods more than offset those gains. Broad diversification was added by
quantitative techniques used to manage 25% of 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 11624
10/89 15205 14661
10/90 13229 13564
10/91 17221 18101
10/92 18437 19906
10/93 20646 22869
10/94 21637 23795
10/95 26185 30083
10/96 32229 37375
</TABLE>
Periods ending October 31
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.
<TABLE>
<S> <C> <C> <C>
HARBOR BOND FUND NET ASSET VALUE: 10/31/96: $11.28
10/31/95: $11.21
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------
Total Return for Periods Ended 10/31/96
------------------------------------------------------------------
Since
Fund/Index 12 months 5 years Inception
------------------------------------------------------------------
<S> <C> <C> <C>
Harbor Bond 7.56% 8.81% 9.85%
------------------------------------------------------------------
LB AGG 5.85% 7.70% 9.21%
------------------------------------------------------------------
<CAPTION>
Total Return for Periods Ended 9/30/96
------------------------------------------------------------------
<S> <C> <C> <C>
Harbor Bond 6.70% 8.50% 9.65%
------------------------------------------------------------------
</TABLE>
In a tumultuous period for the domestic bond market, the Harbor Bond Fund
outperformed the Lehman Brothers Aggregate index by a substantial margin.
Throughout the fiscal year, average duration of the Fund's portfolio was
maintained about one year above the LB AGG. That hurt performance as rates
increased early in 1996, but added to strong gains in the fiscal fourth
quarter. Diversified sector strategies contributed more significantly to
performance. These included investments earlier in the year in currency
hedged foreign bonds, mainly in Germany, Finland, and Canada. A modest
allocation to non- investment grade credits and reduction of investment
grade corporate debt also boosted returns.
<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
HARBOR BOND AND LB AGG
LB AGG BOND
<S> <C> <C>
12/87 10000 10000
10/88 10909 10791
10/89 12208 12050
10/90 12978 12535
10/91 15030 15043
10/92 16508 16869
10/93 18467 19228
10/94 17790 18623
10/95 20573 21335
10/96 21776 22948
</TABLE>
Periods ending October 31
<TABLE>
<S> <C> <C> <C>
HARBOR SHORT DURATION FUND NET ASSET VALUE: 10/31/96: $8.79
10/31/95: $8.82
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------
Total Return for Periods Ended 10/31/96
------------------------------------------------------------------
Since
Fund/Index 12 months 5 years Inception
------------------------------------------------------------------
<S> <C> <C> <C>
Harbor Short Duration 7.24% NA 5.26%
------------------------------------------------------------------
1-Yr GVT 5.93% 5.10% 4.93%
------------------------------------------------------------------
<CAPTION>
Total Return for Periods Ended 9/30/96
------------------------------------------------------------------
<S> <C> <C> <C>
Harbor Short Duration 6.99% NA 5.16%
------------------------------------------------------------------
</TABLE>
Buoyed by strong performance in the second half of the fiscal year, Harbor
Short Duration Fund posted excellent results for the year, outperforming
both 90-day and one-year treasury bills. In the fiscal second half, a sharp
increase in holdings of asset and mortgage backed securities and a cutback
in corporate bonds was an important factor in the strong performance. A
reduction in the average duration of the portfolio and good performance from
hedges in Swedish and Canadian notes also added to second half returns.
<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
HARBOR SHORT DURATION AND T-BILLS
SHORT
DURATION 1 YR GOVT
<S> <C> <C>
12/91 10000 10000
10/92 10372 10399
10/93 10910 10811
10/94 11186 11122
10/95 11949 11911
10/96 12815 12617
</TABLE>
Periods ending October 31
7
<PAGE> 9
HARBOR FUND--CONTINUED
The following performance figures are annualized for each Fund, except as
noted. The date of inception for Harbor Growth Fund was November 19, 1986;
Harbor Short Duration Fund was January 1, 1992; Harbor International Growth Fund
was November 1, 1993; Harbor International Fund II was June 1, 1996; and all
other Funds started December 29, 1987.
<TABLE>
<S> <C> <C> <C>
HARBOR MONEY MARKET FUND NET ASSET VALUE: 10/31/96: $1.00
10/31/95: $1.00
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------
Total Return for Periods Ended 10/31/96
------------------------------------------------------------------
Since
Fund/Index 12 months 5 years Inception
------------------------------------------------------------------
<S> <C> <C> <C>
Harbor Money Market 5.08% 4.12% 5.63%
------------------------------------------------------------------
T-Bills 5.31% 4.38% 5.73%
------------------------------------------------------------------
<CAPTION>
Current Yield for Periods Ended 9/30/96
------------------------------------------------------------------
<S> <C> <C>
Harbor Money Market 7 days: 5.25% 30 days: 5.19%
------------------------------------------------------------------
</TABLE>
Performance of Harbor Money Market Fund fell just short of the 90-day
treasury bill but exceeded that of the Donaghue's average for all taxable
money funds for the fiscal year. With the 90-day treasury trading in an
exceptionally narrow range--from a low of 4.9% to a high of 5.3%
--throughout the 12-month period, opportunities for adding value through
active management of the Fund were very limited. Average duration of the
Fund ranged from 1 to 2.5 months and the mix of securities remained
relatively unchanged, with commercial paper the largest holding. Money
Market shares are neither insured nor guaranteed by the US Government. While
the Money Market Fund seeks to maintain a stable price per share, there is
no assurance the 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 10569
10/89 11558 11494
10/90 12485 12428
10/91 13266 13202
10/92 13752 13713
10/93 14121 14136
10/94 14620 14685
10/95 15447 15534
10/96 16232 16359
</TABLE>
Periods ending October 31
8
<PAGE> 10
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 nine Funds constituting the Harbor Fund, (hereafter referred to as
the "Trust") at October 31, 1996, 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 at
October 31, 1996 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 16, 1996
9
<PAGE> 11
HARBOR INTERNATIONAL GROWTH FUND
PORTFOLIO OF INVESTMENTS--OCTOBER 31, 1996
Investment Holdings By Country (%)
(Excludes net cash and short-term investments of 1.6%)
<TABLE>
<S> <C>
Germany (GER) 2.2
Australia (AUS) 2.6
Portugal (PORT) 3.4
Mexico (MEX) 3.6
Belgium (BEL) 3.7
Netherlands (NET) 4.0
Thailand (THAI) 5.8
Spain (SP) 7.3
Sweden (SW) 7.5
France (FR) 11.4
Switzerland (SWS) 11.6
United Kingdom (UK) 16.8
Hong Kong (HK) 18.5
</TABLE>
COMMON STOCKS--98.4%
<TABLE>
<CAPTION>
VALUE
SHARES (000S)
---------- --------
<S> <C> <C>
AIRLINES--2.4%
Citic Pacific Ltd. (HK)............... 2,436,000 $ 11,846
--------
APPAREL & TEXTILES--2.2%
Adidas AG (GER)....................... 121,390 10,404
--------
AUTOMOBILE PARTS--3.7%
Autoliv AB (SW)....................... 420,000 17,820
--------
BANKS--13.1%
Bangkok Bank (THAI)................... 1,339,900 14,295
Bank of East Asia (HK)................ 3,517,503 13,738
Standard Chartered PLC (UK)........... 1,959,662 21,147
Thai Farmers Bank PCL (THAI).......... 1,737,800 13,292
Thai Farmers Bank PCL Wts (THAI)*..... 149,225 146
--------
62,618
--------
<CAPTION>
VALUE
SHARES (000S)
---------- --------
<S> <C> <C>
BUSINESS SERVICES--4.6%
Rentokil Initial PLC (UK)............. 1,698,300 $ 11,402
SGS Holding (SWS)..................... 4,708 10,690
--------
22,092
--------
CONGLOMERATES--4.4%
Siebe PLC (UK)........................ 1,352,844 21,226
--------
ELECTRONIC COMPONENTS--3.2%
SGS Thomson Microelectronics (FR)..... 201,840 10,695
SGS Thomson Microelectronics ADR
(FR)(1)............................. 84,000 4,400
--------
15,095
--------
ELECTRICAL EQUIPMENT--3.8%
ABB AB, Series A (SW)................. 160,000 18,127
--------
HOUSEHOLD PRODUCTS--5.5%
BIC (FR).............................. 62,075 9,313
Kimberly-Clark De Mexico
Cl. A (MEX)......................... 890,000 17,163
--------
26,476
--------
LEISURE--5.6%
Granada Group (UK).................... 1,847,006 26,605
--------
PETROLEUM--2.6%
Woodside Petroleum (AUS).............. 1,781,130 12,565
--------
PHARMACEUTICALS--12.6%
Ciba Geigy AG (SWS)................... 20,800 25,621
Roche Genuss Holdings AG (SWS)........ 2,550 19,286
Roche Genuss Holdings AG Wts (SWS)*... 1,380 37
Synthelabo (FR)....................... 161,050 15,373
--------
60,317
--------
PUBLISHING--4.0%
Ver Ned Uitgevers (NET)............... 1,060,000 19,242
--------
REAL ESTATE--13.2%
Amoy Properties (HK).................. 14,096,000 17,410
Cheung Kong (Holdings) (HK)........... 3,180,000 25,499
New World Development Company (HK).... 539,000 3,137
Sun Hung Kai Properties (HK).......... 1,516,800 17,263
--------
63,309
--------
</TABLE>
10
<PAGE> 12
HARBOR INTERNATIONAL GROWTH FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
<TABLE>
<CAPTION>
VALUE
SHARES (000S)
---------- --------
<S> <C> <C>
COMMON STOCKS--CONTINUED
RETAILING--6.8%
Castorama DuBois Investisse (FR)...... 86,475 $ 14,800
Delhaize Le Lion (BEL)................ 313,580 17,544
--------
32,344
--------
UTILITIES--10.7%
Iberdrola SA (SP)..................... 1,640,000 17,416
Portugal Telecom (PORT)............... 620,000 16,123
Telefonica de Espana (SP)............. 873,300 17,521
--------
51,060
--------
TOTAL COMMON STOCKS
(Cost $417,106).................................. 471,146
--------
</TABLE>
SHORT-TERM INVESTMENT--1.6%
(Cost $7,920)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
---------- --------
<S> <C> <C>
COMMERCIAL PAPER
Ford Motor Credit Company
5.290%--11/01/96.................... $7,920 $ 7,920
--------
TOTAL INVESTMENTS--100.0%
(Cost $425,026).................................. 479,066
CASH AND OTHER ASSETS,
LESS LIABILITIES--(0.0)%......................... (97)
--------
TOTAL NET ASSETS--100%............................. $478,969
=========
</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 organizations.
* Non-income producing security.
The accompanying notes are an integral part of the financial statements.
11
<PAGE> 13
HARBOR GROWTH FUND
PORTFOLIO OF INVESTMENTS--OCTOBER 31, 1996
Common Stock Holdings (%)
(Excludes net cash and short-term investments of 3.4%)
<TABLE>
<S> <C>
Other Consumer Durables 0.9
Hotels & Restaurants 1.0
Insurance 1.1
Electronic Instruments 1.3
Medical Supplies 1.3
Natural Gas 1.6
Environmental Services 1.7
Paper Products 1.7
Electronics 2.0
Leisure Time/Gaming 2.1
Recreational Products 2.2
Broadcasting 2.3
Oil & Gas Production 2.4
Biotechnology 3.9
Drugs & Health Care 4.2
Credit & Finance 5.6
Computer & Business Automation 6.0
Telecommunications 6.3
Oil Services & Equipment 6.4
Apparel & Textiles 6.5
Computer Software 7.9
Retailing 9.0
Other Communication/Industrial
Services 9.4
Telecommunications Equipment 9.8
</TABLE>
COMMON STOCKS--96.6%
<TABLE>
<CAPTION>
VALUE
SHARES (000S)
--------- --------
<S> <C> <C>
APPAREL & TEXTILES--6.5%
Fila Holdings SPA ADR(1)................ 16,200 $ 1,166
Gucci Group NV ADR(1)................... 25,000 1,725
Nautica Enterprises, Inc. .............. 84,000 2,583
Nike Inc., Cl. B ....................... 31,600 1,860
--------
7,334
--------
<CAPTION>
VALUE
SHARES (000S)
--------- --------
<S> <C> <C>
BIOTECHNOLOGY--3.9%
Biogen Inc.*............................ 19,600 $ 1,460
Genetics Institute Inc.* ADR(1)......... 15,400 1,009
Mentor Corp. Minn. ..................... 60,000 1,327
Vertex Pharmaceuticals Inc. ............ 20,200 672
--------
4,468
--------
BROADCASTING--2.3%
Infinity Broadcasting Corp.*............ 30,300 879
Tele-Communications Inc. New,* Series
A..................................... 68,750 1,770
--------
2,649
--------
COMPUTER & BUSINESS
AUTOMATION--6.0%
Ceridian Corp.*......................... 35,000 1,737
Cisco Systems Inc.*..................... 20,400 1,262
Computer Sciences Corp.*................ 20,600 1,530
Dell Computer Corp. .................... 21,600 1,758
HMT Technology Corp. ................... 37,900 526
--------
6,813
--------
COMPUTER SOFTWARE--7.9%
Acxiom Corp. ........................... 50,000 1,962
Cadence Design Systems Inc.*............ 33,950 1,239
Netscape Communications Corp. .......... 31,500 1,394
Parametric Technology Corp. ............ 56,000 2,737
Synopsys Inc. .......................... 35,000 1,575
--------
8,907
--------
CREDIT & FINANCE--5.6%
Equifax Inc. ........................... 64,800 1,928
Green Tree Financial Corp. ............. 14,400 571
Household International Inc. ........... 18,200 1,611
SunAmerica Inc. ........................ 61,000 2,287
--------
6,397
--------
DRUGS & HEALTH CARE--4.2%
Dura Pharmaceuticals.................... 38,700 1,335
Healthsouth Corp. ...................... 50,000 1,875
Tenet Healthcare Corp. ................. 76,000 1,587
--------
4,797
--------
ELECTRONICS--2.0%
Intel Corp. ............................ 20,800 2,285
--------
ELECTRONIC INSTRUMENTS--1.3%
FORE Systems............................ 36,000 1,431
--------
ENVIRONMENTAL SERVICES--1.7%
Republic Industries, Inc. .............. 60,200 1,874
--------
HOTELS & RESTAURANTS--1.0%
Cracker Barrel Old Country Store........ 16,300 332
Host Marriott Corp.*.................... 52,900 813
--------
1,145
--------
INSURANCE--1.1%
MGIC Investment Corp. Wis. ............. 17,700 1,215
--------
LEISURE TIME/GAMING--2.1%
International Game Technology........... 110,000 2,324
--------
</TABLE>
12
<PAGE> 14
HARBOR GROWTH FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
COMMON STOCKS--CONTINUED
<TABLE>
<CAPTION>
VALUE
SHARES (000S)
--------- --------
<S> <C> <C>
MEDICAL SUPPLIES--1.3%
Boston Scientific Corp. ................ 27,100 $ 1,474
--------
NATURAL GAS--1.6%
Williams Cos. Inc....................... 35,000 1,829
--------
OIL & GAS PRODUCTION--2.4%
Pogo Producing Co. ..................... 47,100 2,090
Triton Energy Corp. .................... 15,100 674
--------
2,764
--------
OIL SERVICES & EQUIPMENT--6.4%
Ensco International Inc. ............... 40,000 1,730
Input/Output Inc. ...................... 67,000 1,993
Tidewater Inc. ......................... 17,200 752
Western Atlas, Inc.*.................... 39,500 2,740
--------
7,215
--------
OTHER COMMUNICATION/INDUSTRIAL SERVICES--9.4%
Accustaff Inc. ......................... 54,200 1,450
CUC International Inc.*................. 58,425 1,431
Corrections Corp. America............... 56,500 1,469
MFS Communications Inc. ................ 23,500 1,178
Pittston Brinks Group................... 55,000 1,568
Sabre Group Holdings Inc., Cl. A ....... 60,000 1,830
Sitel Corp. ............................ 88,000 1,738
--------
10,664
--------
OTHER CONSUMER
DURABLES--0.9%
Tag Heur Intl. SA ADR(1)................ 65,000 1,040
--------
PAPER PRODUCTS--1.7%
Fort Howard Corp. New................... 73,800 1,891
--------
RECREATIONAL PRODUCTS--2.2%
Harley Davidson, Inc. .................. 55,000 2,482
--------
RETAILING--9.0%
Borders Group Inc. ..................... 17,400 548
Consolidated Stores Corp. .............. 42,000 1,622
Home Depot Inc. ........................ 29,000 1,588
Kohl's Corp.*........................... 45,000 1,620
Lowes Cos Inc. ......................... 36,000 1,454
Proffitts Inc.*......................... 53,900 2,176
Staples Inc.*........................... 66,912 1,246
--------
10,254
--------
VALUE
SHARES (000S)
--------- --------
TELECOMMUNICATIONS--6.3%
LCI International Inc.*................. 47,700 $ 1,520
Nextel Communications Inc., Cl. A*...... 157,600 2,522
Teleport Communications Group, Cl. A.... 80,000 1,960
Winstar Communications Inc. ............ 57,300 1,203
--------
7,205
--------
TELECOMMUNICATIONS
EQUIPMENT--9.8%
Andrew Corp. ........................... 29,700 1,448
Aspect Telecommunications Corp. ........ 22,900 1,363
Newbridge Networks Corp................. 69,200 2,188
Octel Communications Corp. ............. 83,600 1,327
P-Com Inc. ............................. 47,500 1,045
Tellabs Inc. ........................... 44,600 3,797
--------
11,168
--------
TOTAL COMMON STOCKS
(Cost $88,227).......................... 109,625
--------
SHORT-TERM INVESTMENT--2.2%
(Cost $2,510)
PRINCIPAL
AMOUNT
(000S)
---------
COMMERCIAL PAPER
UBS Finance Delaware Inc.
5.625%--11/01/1996.................... $ 2,510 2,510
--------
TOTAL INVESTMENTS--98.8%
(Cost $90,737).................................... 112,135
CASH AND OTHER ASSETS,
LESS LIABILITIES--1.2%............................ 1,376
--------
TOTAL NET ASSETS--100.0%............................ $113,511
========
</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.
13
<PAGE> 15
HARBOR CAPITAL APPRECIATION FUND
PORTFOLIO OF INVESTMENTS--OCTOBER 31, 1996
Common Stock Holdings (%)
(Excludes net cash and short-term investments of 3.0%)
<TABLE>
<S> <C>
Apparel & Textiles 0.9
Biotechnology 1.0
Beverage 1.2
Construction & Mining Equip 1.2
Railway 1.2
Telecommunications Services 1.2
Pharmaceuticals 1.4
Petroleum Services 1.7
Banking 1.8
Hotels 2.0
Media 2.2
Airline 2.7
Aerospace 2.9
Insurance 3.2
Finance 3.3
Household Products 4.3
Telecommunications Equipment 4.9
Computer Software 5.4
Retailing 7.3
Networking 7.5
Electronics 8.4
Business Services 9.4
Computer &
Business Equipment 9.8
Drugs & Healthcare 12.1
</TABLE>
COMMON STOCKS--97.0%
<TABLE>
<CAPTION>
VALUE
SHARES (000S)
--------- ----------
<S> <C> <C>
AEROSPACE--2.9%
Boeing Co. .......................... 484,300 $ 46,190
------------
AIRLINE--2.7%
AMR Corp. Del*....................... 289,800 24,343
Delta Air Lines Inc De............... 253,400 17,960
------------
42,303
------------
APPAREL & TEXTILES--0.9%
Nike Inc. ........................... 250,000 14,719
------------
BANKING--1.8%
Citicorp............................. 285,200 28,235
------------
BEVERAGE--1.2%
Pepsico, Inc. ....................... 638,900 18,927
------------
BIOTECHNOLOGY--1.0%
Chiron Corp.*........................ 660,000 15,098
------------
BUSINESS SERVICES--9.4%
America Online Inc. ................. 216,660 5,877
CKS Group Inc. ...................... 582,600 11,288
CUC International Inc.*.............. 1,082,643 26,525
First Data Corporation............... 273,437 21,807
Manpower Inc. Wis.................... 605,400 17,178
Omnicom Group........................ 550,900 27,407
Reuters Holdings PLC ADR CI. B(1).... 510,400 37,961
------------
148,043
------------
COMPUTER & BUSINESS EQUIPMENT--9.8%
Compaq Computer Corp.*............... 322,100 22,426
Dell Computer Corp.*................. 276,500 22,500
Hewlett-Packard Company.............. 732,000 32,300
International Business Machines...... 270,200 34,856
SAP AG ADR(1)........................ 353,500 15,854
Seagate Technology................... 412,600 27,541
------------
155,477
------------
COMPUTER SOFTWARE--5.4%
Computer Associates International,
Inc. .............................. 690,000 40,796
Intuit, Inc.*........................ 343,200 9,266
Microsoft Corp.*..................... 262,200 35,987
------------
86,049
------------
CONSTRUCTION & MINING EQUIPMENT--1.2%
Caterpillar Inc. .................... 269,000 18,460
------------
DRUGS & HEALTHCARE--12.1%
Astra A Fria, Series A(2)............ 536,500 24,640
Bristol Myers Squibb Co. ............ 196,400 20,769
Eli Lilly & Co. ..................... 295,000 20,798
Healthsouth Corp. ................... 571,200 21,420
Johnson & Johnson.................... 492,400 24,251
Pfizer Inc. ......................... 386,600 31,991
</TABLE>
14
<PAGE> 16
HARBOR CAPITAL APPRECIATION FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
COMMON STOCKS--CONTINUED
<TABLE>
<CAPTION>
VALUE
SHARES (000S)
--------- ----------
<S> <C> <C>
Phycor, Inc.*........................ 627,462 $ 19,451
SmithKline Beecham PLC ADR(1)........ 457,200 28,632
------------
191,952
------------
ELECTRONICS--8.4%
Electronic Data Systems Corp. ....... 207,000 9,315
Intel Corp. ......................... 584,200 64,189
International Rectifier Corp.*....... 943,300 11,673
KLA Instruments Inc.*................ 427,000 10,355
LSI Logic Corp.*..................... 602,460 15,965
Texas Instruments Inc. .............. 165,300 7,955
Xilinix Inc. ........................ 414,200 13,565
------------
133,017
------------
FINANCE--3.3%
Chase Manhattan Corp. ............... 405,900 34,806
Federal National Mortgage
Association........................ 453,400 17,739
------------
52,545
------------
HOTELS--2.0%
Hilton Hotels Corp. ................. 1,061,800 32,252
------------
HOUSEHOLD PRODUCTS--4.3%
Gillette Co. ........................ 546,700 40,866
Kimberly Clark Corp. ................ 298,400 27,826
------------
68,692
------------
INSURANCE--3.2%
Cigna Corp. ......................... 150,100 19,588
MGIC Investment Corp. ............... 456,500 31,327
------------
50,915
------------
MEDIA--2.2%
Disney (Walt) Co. ................... 525,400 34,611
------------
NETWORKING--7.5%
Ascend Communications Inc. .......... 326,600 21,351
Cisco Systems, Inc.*................. 781,400 48,349
Shiva Corp. ......................... 207,000 8,487
3Com Corp.*.......................... 590,500 39,933
------------
118,120
------------
PETROLEUM SERVICES--1.7%
Schlumberger LTD..................... 264,500 26,219
------------
PHARMACEUTICALS--1.4%
Ciba Geigy AG(2)..................... 18,540 22,838
------------
VALUE
SHARES (000S)
--------- ----------
RAILWAY--1.2%
Wisconsin Central Transportation
Corp.*............................. 543,700 $ 19,573
------------
RETAILING--7.3%
Autozone Inc.*....................... 869,000 22,268
Dollar General Corp. ................ 796,450 22,102
Gucci Group NV....................... 265,000 18,285
Kohl's Corp.*........................ 594,900 21,416
Lowes Cos Inc. ...................... 779,000 31,452
------------
115,523
------------
TELECOMMUNICATIONS EQUIPMENT--4.9%
Ericsson (LM) Telephone Co.-- ADR Cl.
B(1)............................... 789,300 21,804
Nokia Corp. ......................... 545,400 25,293
Tellabs Inc. ........................ 349,900 29,785
------------
76,882
------------
TELECOMMUNICATIONS SERVICES--1.2%
Vodafone Group PLC ADR(1)............ 494,400 19,096
------------
TOTAL COMMON STOCKS
(Cost $1,224,567).................... 1,535,736
------------
</TABLE>
SHORT-TERM INVESTMENT--3.0%
(Cost $47,595)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000S)
---------
<S> <C> <C>
COMMERCIAL PAPER
Ford Motor Credit Co.
5.50%--11/01/96.................... $ 47,595 47,595
-----------
TOTAL INVESTMENTS--100.0%
(Cost $1,272,162).............................. 1,583,331
CASH AND OTHER ASSETS, LESS
LIABILITIES--(0.0)%............................ (116)
-----------
TOTAL NET ASSETS--100.0%......................... $1,583,215
===========
</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.
15
<PAGE> 17
HARBOR INTERNATIONAL FUND II
PORTFOLIO OF INVESTMENTS--OCTOBER 31, 1996
Investment Holdings By Country (%)
(Excludes net cash and short-term investments of 1.4%)
<TABLE>
<S> <C>
Portugal (PORT) 0.8
Denmark (DEN) 0.9
Finland (FIN) 1.0
Malaysia (MAL) 2.2
Argentina (ARG) 2.2
Australia (AUS) 2.4
Netherlands (NET) 3.0
Poland (POL) 3.9
Brazil (BR) 4.1
South Africa (S. AFR) 4.5
Singapore (SGP) 4.6
Norway (NOR) 5.1
Russia (RUS) 5.4
Spain (SP) 5.5
Japan (JP) 6.6
Switzerland (SWS) 7.4
Hong Kong (HK) 8.0
Sweden (SW) 9.0
France (FR) 10.2
United Kingdom (UK) 11.8
</TABLE>
COMMON STOCKS--97.4%
<TABLE>
<CAPTION>
VALUE
SHARES (000S)
----------- -------
<S> <C> <C>
AEROSPACE--1.4%
Hong Kong Aircraft (HK)............... 24,800 $ 63
Oerlikon Buhrle AG (SWS)*............. 1,200 118
-------
181
-------
APPAREL & TEXTILES--1.6%
Giordano International (HK)........... 200,000 202
-------
AUTOMOTIVE--2.2%
Rolls Royce (UK)...................... 50,000 207
Volvo AB, Series B (SW)............... 3,600 75
-------
282
-------
BANKS--11.8%
Banco Commercial Portugues (PORT)..... 7,800 97
Banco Intercontinental Espana (SP).... 2,100 252
Bank Slaski (POL)..................... 1,200 111
Banque National Paris (FR)............ 4,400 165
Barclays Bank PLC (UK)................ 5,570 87
CS Holding (SWS)...................... 1,150 115
Cie Fin Paribas Cl. A (FR)............ 2,150 138
Keppel Bank (SGP)..................... 25,000 68
Malayan Bank Berhad (MAL)............. 9,400 93
Schweiz Bankverein (SWS).............. 600 116
United Overseas Bank (Alien Market)
(SGP)............................... 25,000 243
-------
1,485
-------
BEVERAGES--3.3%
Amalg Beverage (S. AFR)............... 15,000 64
Guinness (UK)......................... 30,000 215
Whitbread (UK)........................ 12,000 140
-------
419
-------
BUSINESS MACHINES--1.7%
Canon Inc. (JP)....................... 11,000 211
-------
BUSINESS SERVICES--1.4%
SGS Holding (SWS)..................... 80 182
-------
CHEMICALS--2.9%
Ciba Geigy AG (SWS)................... 140 172
Rhone Poulenc SA (FR)................. 6,500 193
-------
365
-------
</TABLE>
16
<PAGE> 18
HARBOR INTERNATIONAL FUND II
PORTFOLIO OF INVESTMENTS--CONTINUED
COMMON STOCKS--CONTINUED
<TABLE>
<CAPTION>
VALUE
SHARES (000S)
----------- -------
<S> <C> <C>
CONGLOMERATES--8.3%
Amer Group (FIN)...................... 3,000 $ 68
ISS International Series B (DEN)...... 4,000 114
Keppel Corp. (SGP).................... 35,000 261
Kvaerner ASA, Series A (NOR).......... 5,000 189
Sime Darby Berhad (MAL)............... 35,000 124
Swire Pacific Ltd. Cl. B (HK)......... 202,500 284
-------
1,040
-------
CONSTRUCTION--1.7%
Hunter Douglas NV (NET)............... 3,000 212
-------
CONSUMER GOODS--1.3%
BIC (FR).............................. 1,100 165
-------
CONTAINERS & GLASS--1.1%
Krosno SA (POL)....................... 7,000 132
-------
ELECTRIC UTILITIES--6.1%
Cataguazes Leopold, Pfd. A (BR)....... 212,000,000 262
China Light & Power (HK).............. 25,000 116
Gas Natural SDG SA (SP)............... 600 105
Unified Energy Systems ADR
(RUS)(1)*........................... 3,500,000 286
-------
769
-------
ELECTRONICS--2.7%
Matsushita Electrical Industries
(JP)................................ 11,000 176
Sony Corp. (JP)....................... 2,800 168
-------
344
-------
FINANCIAL SERVICES--1.0%
Cie Bancaire (FR)..................... 1,300 130
-------
FOOD--2.6%
Cresud (ARG).......................... 121,500 218
Nestle SA (SWS)....................... 105 114
-------
332
-------
INSURANCE--1.0%
SCHW Ruckversicher (SWS).............. 105 113
-------
MINING & METALS--5.1%
Anglo American Corp. South Africa Ltd.
(S. AFR)............................ 4,000 241
Bougainville CPR (AUS)*............... 40,000 14
Gencor Ltd. (S. AFR).................. 65,000 226
RTZ Corp. (UK)........................ 8,000 128
VALUE
SHARES (000S)
----------- -------
WMC Ltd. (AUS)........................ 5,500 $ 35
-------
644
-------
NEWSPAPERS--2.0%
News Corp. Ltd. ADR (AUS)(1).......... 45,000 256
-------
OIL & GAS EXPLORATION--2.2%
LASMO (UK)............................ 35,000 121
Saga Petroleum AS, Series B (NOR)..... 10,000 157
-------
278
-------
OIL & GAS PRODUCTION--11.5%
Argonaut AB Ser. A (SW)*.............. 40,000 77
Argonaut AB Ser. B (SW)*.............. 20,000 40
British Gas (UK)...................... 33,500 104
Lukoil Holdings (RUS)................. 8,000 79
Neste OY (FIN)........................ 2,500 52
Norsk Hydro AS (NOR).................. 3,000 138
Oil Co. Lukoil ADR (RUS)(1)........... 8,000 316
Petrol Brasileiros Pfd. (BR).......... 2,000,000 257
Royal Dutch Petroleum Co. ADR (NET)
(1)................................. 1,000 165
Total Cl. B (FR)...................... 2,000 156
YPF Sociedad Anonima ADR (ARG) (1).... 2,700 61
-------
1,445
-------
PHARMACEUTICALS--7.9%
Jelfa (POL)*.......................... 11,500 163
Nobel Biocare (SW).................... 27,000 456
Pharmacia and Upjohn (SW)............. 6,100 213
SmithKline Beecham PLC (UK)........... 12,523 155
-------
987
-------
PHOTOGRAPHY--2.7%
China HK Photo (HK)................... 500,000 189
Fuji Photo Film Co. (JP).............. 5,000 144
-------
333
-------
POLLUTION CONTROL--1.3%
Waste Mgmt Intl PLC ADR (UK)(1)*...... 18,000 164
-------
REAL ESTATE--1.6%
Vallehermoso SA (SP).................. 10,000 197
-------
RETAIL TRADE--0.3%
Pepkor LTD (S. AFR)................... 10,000 37
-------
</TABLE>
17
<PAGE> 19
HARBOR INTERNATIONAL FUND II
PORTFOLIO OF INVESTMENTS--CONTINUED
COMMON STOCKS--CONTINUED
<TABLE>
<CAPTION>
VALUE
SHARES (000S)
----------- -------
<S> <C> <C>
TELECOMMUNICATION--4.9%
Ericsson (LM) Tel Co. Ser. B (SW)..... 10,000 $ 271
Hong Kong Telecom (HK)................ 88,000 155
Telefonica De Espana (SP)............. 4,000 80
Telefonica De Espana ADR (SP)(1)...... 1,000 60
Telekom Malaysia (MAL)................ 6,000 53
-------
619
-------
TIRE & RUBBER--3.2%
Bridgestone Corp. (JP)................ 8,000 135
Debica Series A (POL)*................ 4,000 81
Michelin Cl. B (FR)................... 3,808 184
-------
400
-------
TOBACCO--1.4%
BAT Industries (UK)................... 25,000 173
-------
TRUCKING AND FREIGHT--1.2%
Bergesen DY AS (NOR).................. 7,000 153
-------
TOTAL COMMON STOCKS
(Cost $12,028)........................ 12,250
-------
</TABLE>
UNITS--1.2%
(Cost $159)
<TABLE>
<CAPTION>
VALUE
SHARES (000S)
----------- -------
<S> <C> <C>
Eurotunnel (FR)*...................... 100,000 $ 146
-------
SHORT-TERM INVESTMENT--2.1%
(Cost $271)
<CAPTION>
PRINCIPAL
AMOUNT
(000S)
-----------
<S> <C> <C>
REPURCHASE AGREEMENTS
Repurchase Agreement with State Street
Bank & Trust dated October 31, 1996
due November 1, 1996 4.250%,
collateralized by a U.S. Treasury
Note, 5.875% July 31, 1997, par
value of $275 (repurchase proceeds
of $271 when closed on November 1,
1996)............................... $271 271
-------
TOTAL INVESTMENTS--100.7%
(Cost $12,458).................................... 12,667
CASH AND OTHER ASSETS,
LESS LIABILITIES--(0.7%).......................... (94)
-------
TOTAL NET ASSETS--100.0%............................ $12,573
========
</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 organizations.
* Non-income producing security.
The accompanying notes are an integral part of the financial statements.
18
<PAGE> 20
HARBOR INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS--OCTOBER 31, 1996
Investment Holdings By Country (%)
(Excludes net cash and short-term investments of 4.1%)
<TABLE>
<S> <C>
South Korea (S.KOR) 0.7
Portugal (PORT) 0.8
Denmark (DEN) 1.9
Australia (AUS) 2.1
Argentina (ARG) 2.2
Brazil (BR) 3.0
Singapore (SGP) 3.2
Norway (NOR) 3.3
Spain (SP) 3.5
Russia (RUS) 3.6
Hong Kong (HK) 4.1
Malaysia (MAL) 4.3
Netherlands (NET) 5.5
South Africa (S.AFR) 6.7
Japan (JP) 6.8
Sweden (SW) 7.0
Switzerland (SWS) 10.3
France (FR) 10.7
United Kingdom (UK) 16.2
</TABLE>
COMMON STOCKS--94.0%
<TABLE>
<CAPTION>
VALUE
SHARES (000S)
----------- ----------
<S> <C> <C>
AUTOMOTIVE--1.6%
Hyundai Motor Co. GDR (S.KOR)(1).... 680,000 $ 7,653
Hyundai Motor Co. GDR Nonvoting
(S.KOR)(1)........................ 50,000 563
Volvo AB, Series B (SW)............. 2,625,000 54,490
----------
62,706
----------
BANKS--15.6%
ABN Amro Holdings NV (NET).......... 1,012,138 57,208
Banco Bilbao Vizcaya (SP)........... 1,285,150 62,447
Banco Commercial Portugues (PORT)... 2,277,684 28,276
Banco Commercial Portugues ADR
(PORT)(2)......................... 420,000 5,145
Banco Intercontinental Espana
(SP).............................. 250,000 29,958
Barclays Bank PLC (UK).............. 3,889,629 61,060
CS Holding (SWS).................... 415,720 41,523
Cie Fin Paribas Cl. A (FR).......... 672,120 43,252
Malayan Bank Berhad (MAL)........... 7,707,000 76,262
National Westminster Bank (UK)...... 5,605,296 63,999
Royal Bank of Scotland Group (UK)... 6,074,548 49,731
Schweiz Bankverein Wts. (SWS)*...... 27,470 71
Schweiz Bankverein (SWS)............ 230,786 44,459
Seoul Bank (S.KOR).................. 3,631,887 21,099
United Overseas Bank (Alien Market)
(SGP)............................. 4,500,693 43,777
----------
628,267
----------
BEVERAGES--4.9%
Cadbury Schweppes (UK).............. 6,178,025 51,484
Guinness (UK)....................... 7,850,000 56,217
South African Breweries Ltd. ADR
(S.AFR)(2)........................ 2,086,044 54,229
Whitbread (UK)...................... 3,050,000 35,792
----------
197,722
----------
BUSINESS MACHINES--1.7%
Canon Inc. (JP)..................... 3,500,000 67,015
----------
BUSINESS SERVICES--2.0%
SGS Holding (SWS)................... 35,000 79,470
----------
CHEMICALS--3.0%
Ciba Geigy AG (SWS)................. 65,214 80,331
Rhone Poulenc SA (FR)............... 1,329,597 39,400
----------
119,731
----------
</TABLE>
19
<PAGE> 21
HARBOR INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
COMMON STOCKS--CONTINUED
<TABLE>
<CAPTION>
VALUE
SHARES (000S)
----------- ----------
<S> <C> <C>
CONGLOMERATES--5.6%
Keppel Corp. (SGP).................. 9,600,000 $ 71,565
Kvaerner ASA, Series A (NOR)........ 1,252,050 47,289
Sime Darby Berhad (MAL)............. 15,600,000 55,262
Swire Pacific Ltd. Cl. A (HK)....... 6,000,000 52,960
----------
227,076
----------
CONSTRUCTION--0.8%
Hunter Douglas NV (NET)............. 422,618 29,890
----------
CONSUMER GOODS--1.9%
BIC (FR)............................ 500,000 75,012
----------
ELECTRIC UTILITIES--1.8%
AO Mosenergo ADR (RUS)(2)(a)........ 40,000 1,180
China Light & Power (HK)............ 15,000,000 69,644
----------
70,824
----------
ELECTRONICS--1.9%
Matsushita Electrical Industries
(JP).............................. 2,500,000 39,963
Sony Corp. (JP)..................... 600,000 35,993
----------
75,956
----------
ENGINEERING--0.6%
Sulzer AG (SWS)..................... 41,250 23,464
----------
FINANCIAL SERVICES--1.5%
Ing Groep NV (NET).................. 1,910,625 59,570
----------
FOOD--1.3%
Nestle SA (SWS)..................... 50,000 54,312
----------
INSURANCE--3.1%
AXA (FR)............................ 800,000 49,964
SCHW Ruckversicher (SWS)............ 71,500 76,704
----------
126,668
----------
INVESTMENT COMPANIES--1.4%
Kinnevik Investment Ser. B (SW)..... 2,120,510 57,562
----------
MINING & METALS--6.8%
Anglo American Corp.
South Africa Ltd. ADR
(S.AFR)(2)........................ 1,260,000 75,915
Gencor Ltd. ADR (S.AFR)(2).......... 26,250,000 91,169
RTZ Corp. (UK)...................... 2,095,573 33,511
Trelleborg AB Cl. B (SW)............ 3,312,220 42,815
WMC Ltd. (AUS)...................... 4,867,716 30,597
----------
274,007
----------
NEWSPAPERS--1.4%
News Corp. Ltd. ADR (AUS)(2)........ 2,500,000 56,563
----------
OIL & GAS EXPLORATION--2.5%
LASMO (UK).......................... 15,571,836 53,984
Saga Petroleum AS, Series A (NOR)... 2,809,000 47,765
----------
101,749
----------
VALUE
SHARES (000S)
----------- ----------
OIL & GAS PRODUCTION--12.5%
British Gas (UK).................... 11,000,000 $ 34,285
British Petroleum (UK).............. 6,466,588 69,571
Lukoil Holdings ADR (RUS)(2)........ 3,698,250 145,859
Norsk Hydro AS (NOR)................ 833,333 38,396
Petrol Brasileiros (BR)............. 435,000,000 56,312
Royal Dutch Petroleum Co. ADR
(NET)(2).......................... 450,000 74,419
Total Cl. B (FR).................... 644,615 50,422
YPF Sociedad Anonima ADR (ARG)(2)... 1,600,000 36,400
----------
505,664
----------
PHARMACEUTICALS--6.5%
Novo Nordisk AS Cl. B (DEN)......... 450,000 74,945
Pharmacia and Upjohn (SW)........... 1,200,000 41,881
Roussel Uclaf (FR).................. 250,000 66,161
SmithKline Beecham PLC ADR (UK) Cl.
A(2).............................. 1,270,000 79,534
----------
262,521
----------
PHOTOGRAPHY--1.7%
Fuji Photo Film Co. (JP)............ 2,450,000 70,366
----------
SHIPYARD--0.3%
Jurong Shipyard (SGP)............... 2,589,000 12,132
----------
STEEL--0.0%
Von Roll AG (SWS)*.................. 12,000 218
----------
TELECOMMUNICATION--8.3%
Ericsson (LM) Tel Co. Ser. B (SW)... 2,640,000 71,463
Ericsson (LM) Tel Co. ADR Cl. B (SW)
(2)............................... 440,000 12,155
Hong Kong Telecom (HK).............. 23,815,779 42,043
Telebras Pfd. (BR).................. 865,000,000 64,239
Telecom Argentina Cl. B (ARG)....... 6,600,000 24,917
Telefonica De Argentina Cl. B
(ARG)............................. 12,000,000 27,963
Telefonica De Espana (SP)........... 2,500,000 50,159
Telekom Malaysia (MAL).............. 4,600,000 40,602
----------
333,541
----------
TIRE & RUBBER--2.7%
Bridgestone Corp. (JP).............. 2,500,000 42,159
CIE Fin Michel Bas (SWS)............ 34,700 15,318
Michelin Cl. B (FR)................. 1,100,000 53,037
----------
110,514
----------
TOBACCO--1.5%
BAT Industries (UK)................. 8,900,000 61,709
----------
TOYS & AMUSEMENTS--0.5%
Nintendo Co. (JP)................... 200,000 12,788
Sega Enterprises (JP)............... 200,000 8,081
----------
20,869
----------
</TABLE>
20
<PAGE> 22
HARBOR INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
COMMON STOCKS--CONTINUED
<TABLE>
<CAPTION>
VALUE
SHARES (000S)
----------- ----------
<S> <C> <C>
WATER DISTRIBUTION--0.6%
Lyonnaise Des Eaux SA
(FR).............................. 270,558 $ 23,920
----------
TOTAL COMMON STOCKS
(Cost $2,518,729).............................. 3,789,018
----------
UNITS--0.7%
(Cost $65,340)
Eurotunnel (FR)*...................... 20,000,000 29,144
----------
</TABLE>
CONVERTIBLE BONDS--1.2%
(Cost $39,600)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000S)
-----------
<S> <C> <C>
LibLife International BV
6.500%--09/30/2004 (S.AFR).......... $40,000 47,500
----------
SHORT-TERM INVESTMENTS--4.0%
COMMERCIAL PAPER
American Express Credit Corp.
5.210%--11/05/1996................ 13,728 13,728
5.230%--11/13/1996................ 18,265 18,265
5.240%--11/18/1996................ 12,041 12,041
----------
44,034
----------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
----------- ----------
<S> <C> <C>
Exxon Asset Management
5.220%--11/01/96.................. $ 9,960 $ 9,960
----------
Exxon Funding B V
5.220%--11/04/96.................. 14,504 14,504
----------
General Electric Capital Corp.
5.220%--11/06/1996................ 17,574 17,574
5.250%--11/14/1996................ 9,607 9,607
----------
27,181
----------
General Motors Acceptance Corp.
5.240%--11/08/1996................ 10,539 10,539
5.240%--11/12/1996................ 10,608 10,608
----------
21,147
----------
Prudential Funding Corp.
5.220%--11/07/1996................ 18,195 18,195
5.240%--11/15/1996................ 10,778 10,778
5.250%--11/19/1996................ 14,911 14,911
----------
43,884
----------
TOTAL SHORT-TERM INVESTMENTS
(Cost $160,710)................................ 160,710
----------
TOTAL INVESTMENTS--99.9%
(Cost $2,784,379).............................. 4,026,372
CASH AND OTHER ASSETS,
LESS LIABILITIES--0.1%......................... 3,755
----------
TOTAL NET ASSETS--100.0%......................... $4,030,127
==========
</TABLE>
- ------------
(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.
(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,
1996 these securities were valued at $1,180 or .03% of net assets.
* Non-income producing security.
The accompanying notes are an integral part of the financial statements.
21
<PAGE> 23
HARBOR VALUE FUND
PORTFOLIO OF INVESTMENTS--OCTOBER 31, 1996
Common Stock Holdings (%)
(Excludes net cash and short-term investments of 2.3%)
<TABLE>
<S> <C>
Computer Software 0.1
Hotels & Restaurants 0.1
Leisure Time 0.1
Mining 0.1
Natural Gas 0.1
Petroleum Services 0.1
Photographic Equipment 0.1
Pollution Control 0.1
Railroads 0.1
Aerospace 0.2
Tobacco 0.2
Financial Services 0.3
Computers & Business Equipment 0.4
Automobile 0.8
Apparel 0.9
Gas Exploration 0.9
Household Products 1.0
Newspapers 1.2
Machinery 1.3
Cosmetics 1.5
Auto Parts 1.6
Publishing 1.6
Metals 1.9
Business Services 2.1
Conglomerates 2.1
Construction Materials 2.1
Tools 2.3
Food & Beverage 3.4
Retailing 3.5
Petroleum Domestic 4.2
Electronics 4.4
Electrical Equipment 4.6
Paper Products 4.9
Public Utilities/Electric 5.5
Banking 5.7
Insurance 5.7
Drugs & Healthcare 6.2
Chemicals 6.7
Petroleum International 9.7
Telecommunications 9.9
</TABLE>
COMMON STOCKS--97.7%
<TABLE>
<CAPTION>
VALUE
SHARES (000S)
-------- --------
<S> <C> <C>
AEROSPACE--0.2%
Boeing Co. ............................ 500 $ 48
Lockheed Martin Corp. ................. 1,100 99
United Technologies Corp. ............. 500 64
--------
211
--------
APPAREL--0.9%
Shaw Inds Inc. ........................ 85,900 1,009
--------
AUTOMOBILE--0.8%
Chrysler Corp. ........................ 2,200 74
Federal Signal Corp. .................. 19,700 507
Ford Motor Co. Del..................... 7,600 238
General Motors Corp. .................. 800 43
--------
862
--------
AUTO PARTS--1.6%
Echlin Inc. ........................... 54,200 1,768
--------
BANKING--5.7%
Banc One Corp. ........................ 3,694 157
BankAmerica Corp. ..................... 600 55
Central Fiduciary Banks, Inc. ......... 56,400 1,431
Chase Manhattan Corp. New.............. 300 26
Citicorp............................... 400 40
Corestates Financial Corp. ............ 1,600 78
Crestar Financial Corp. ............... 26,850 1,651
First America Bank Corp. .............. 600 33
First American Corp. TN................ 16,400 816
Firstar Corp. New...................... 600 29
Firstar UN Corp. ...................... 1,600 116
Great Western Financial Corp. ......... 500 14
H F Ahmanson & Co. .................... 500 16
Huntington Bancshares, Inc. ........... 2,155 52
J P Morgan & Co Inc. .................. 1,300 112
Jefferson Bankshares Inc. ............. 20,700 569
Keycorp New............................ 2,500 117
Keystone Financial Inc. ............... 500 13
National Comm Bancorp.................. 400 14
NationsBank Corp. ..................... 1,400 132
Roosevelt Financial Group Inc. ........ 43,600 758
Suntrust BKS Inc. ..................... 2,700 126
US Bancorp OR.......................... 1,000 40
--------
6,395
--------
BUSINESS SERVICES--2.1%
Automatic Data Processing, Inc. ....... 600 25
H & R Block, Inc. ..................... 67,800 1,678
Ogden Corp. ........................... 31,700 575
Polygram NV............................ 700 33
R.R. Donelley & Sons Co. .............. 1,500 46
Viad Corp. ............................ 400 6
--------
2,363
--------
CHEMICALS--6.7%
Akzo Nobel NV ADR(1)................... 23,300 1,471
Dow Chemical Co. ...................... 2,900 225
E I DuPont De Nemours & Co. ........... 1,600 148
Eastman Chemical Co. .................. 500 26
</TABLE>
22
<PAGE> 24
HARBOR VALUE FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
COMMON STOCKS--CONTINUED
<TABLE>
<CAPTION>
VALUE
SHARES (000S)
-------- --------
<S> <C> <C>
Ethyl Corp. ........................... 124,300 $ 1,025
Lawter International Inc. ............. 33,300 391
Loctite Corp. ......................... 7,700 451
Morton International Inc. ............. 1,400 55
PPG Industries, Inc. .................. 1,000 57
Potash Corp. Saskatchewan Inc.(2)...... 1,000 71
R.P.M. Inc. OH......................... 13,500 226
Rohm & Haas Co. ....................... 22,700 1,620
Witco Corp. ........................... 57,600 1,786
--------
7,552
--------
COMPUTERS & BUSINESS EQUIPMENT--0.4%
Hewlett Packard Co. ................... 4,800 212
International Business Machines
Corp. ............................... 1,400 181
--------
393
--------
COMPUTER SOFTWARE--0.1%
Microsoft Corp. ....................... 1,000 137
--------
CONGLOMERATES--2.1%
Harcourt General Inc. ................. 2,300 114
ITT Industries Inc. ................... 87,900 2,044
Minnesota Mining & Manufacturing
Co. ................................. 2,100 161
--------
2,319
--------
CONSTRUCTION MATERIALS--2.1%
Armstrong World Industries, Inc........ 10,100 674
Masco Corp. ........................... 54,100 1,697
Sherwin Williams Co. .................. 300 15
--------
2,386
--------
CONTAINERS & GLASS--0.0%
Crown Cork & Seal Inc.*................ 600 29
--------
COSMETICS--1.5%
International Flavours................. 41,000 1,696
--------
DRUGS & HEALTHCARE--6.2%
Abbott Labs............................ 5,100 258
Baxter International Inc. ............. 44,400 1,848
Bristol Myers Squibb Co. .............. 3,700 391
Johnson & Johnson...................... 2,000 99
Merck & Co. Inc. ...................... 5,200 385
Pfizer Inc. ........................... 1,100 91
Pharmacia and Upjohn Inc. ............. 53,600 1,930
Rhone Poulenc Rorer, Inc. ............. 600 40
Schering Plough Corp. ................. 1,200 77
Warner Lambert Co. .................... 27,900 1,775
--------
6,894
--------
ELECTRICAL EQUIPMENT--4.6%
Emerson Electric Co. .................. 500 44
General Electric Co. .................. 13,800 1,335
National Service Industries, Inc. ..... 51,300 1,770
Philips Electronics NV ADR(1).......... 54,800 1,932
Westinghouse Electric Corp. ........... 1,000 17
--------
5,098
--------
VALUE
SHARES (000S)
-------- --------
ELECTRONICS--4.4%
AMP Inc. .............................. 50,300 $ 1,704
Electronic Data Systems Corp. New...... 1,100 49
Harris Corp. Del....................... 20,600 1,290
Intel Corp. ........................... 800 88
Motorola Inc. ......................... 2,500 115
Raytheon Co. .......................... 900 44
Thomas & Betts Corp. .................. 38,400 1,627
--------
4,917
--------
FINANCIAL SERVICES--0.3%
American Express Co. .................. 1,500 71
Dean Witter Discover & Co. ............ 600 35
Federal National Mortgage
Association ......................... 3,200 125
Merrill Lynch & Co Inc. ............... 800 56
Travelers Group Inc. .................. 1,803 98
--------
385
--------
FOOD & BEVERAGE--3.4%
Cadbury Schweppes ADR(1) .............. 31,700 1,070
Campbell Soup Co. ..................... 900 72
Coca Cola Co. ......................... 20,400 1,030
Conagra Inc. .......................... 1,400 70
Lance Inc. ............................ 49,600 868
Pepsico Inc. .......................... 2,900 86
Sara Lee Corp. ........................ 2,000 71
Sysco Corp. ........................... 1,300 44
Tasty Baking Corp. .................... 13,300 186
Unilever NV ADR(1) .................... 2,300 352
--------
3,849
--------
GAS EXPLORATION--0.9%
Burlington Resources, Inc. ............ 700 35
ENI SPA ADR(1) ........................ 13,600 646
Occidental Petroleum Corp. ............ 13,200 323
Oryx Energy Co.* ...................... 500 10
Union Pacific Res Group Inc. .......... 508 14
Union Texas Petroleum Holdings Inc. ... 500 11
--------
1,039
--------
GROCERIES--0.0%
Albertsons Inc. ....................... 800 28
Kroger Co.* ........................... 500 22
--------
50
--------
HOTELS & RESTAURANTS--0.1%
Harrahs Entertainment Inc.* ........... 300 5
McDonald's Corporation ................ 1,800 80
--------
85
--------
HOUSEHOLD PRODUCTS--1.0%
Gillette Co. .......................... 600 45
Procter & Gamble Co. .................. 2,900 287
Rubbermaid Inc. ....................... 35,500 825
--------
1,157
--------
</TABLE>
23
<PAGE> 25
HARBOR VALUE FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
COMMON STOCKS--CONTINUED
<TABLE>
<CAPTION>
VALUE
SHARES (000S)
-------- --------
<S> <C> <C>
INSURANCE--5.7%
Allstate Corp. ........................ 3,868 $ 217
American Financial Group, Inc. ........ 14,300 513
American General Corp. ................ 37,800 1,408
American International Group, Inc. .... 5,050 549
ITT Hartford Group Inc. ............... 25,700 1,619
Lincoln National Corp. ................ 22,200 1,077
Loews Corp. ........................... 2,000 165
Safeco Corp. .......................... 600 23
St. Paul Companies, Inc. .............. 400 22
Torchmark Inc. ........................ 16,600 803
Unitrin, Inc. ......................... 300 15
--------
6,411
--------
LEISURE TIME--0.1%
Carnival Corp., Cl. A ................. 1,700 51
Disney (Walt) Co. ..................... 1,000 66
--------
117
--------
MACHINERY--1.3%
Barnes Group, Inc. .................... 300 17
Caterpillar Inc. ...................... 800 55
Deere & Co. ........................... 900 38
Parker Hannafin Corp. ................. 1,400 53
Timken Co. ............................ 30,100 1,343
--------
1,506
--------
METALS--1.9%
Alcan Aluminum LTD .................... 1,800 59
Allegheny Teldyne Inc. ................ 2,600 56
Aluminum Co. of America ............... 600 35
Barrick Gold Corp. .................... 1,400 37
Inco LTD (2) .......................... 2,600 83
Reynolds Metals Co. ................... 33,000 1,856
USX U S Steel ......................... 2,100 57
--------
2,183
--------
MINING--0.1%
Freeport McMoran Copper & Gold Cl. A... 150 4
Freeport McMoran Copper & Gold Cl. B... 2,656 81
Homestake Mining Co. .................. 700 10
Placer Dome, Inc. ..................... 1,000 24
Santa Fe Pacific Gold Corp. ........... 1,320 16
--------
135
--------
NATURAL GAS--0.1%
Enron Corp. ........................... 500 23
Sonat, Inc. ........................... 500 25
Transcanada Pipelines Ltd.(2).......... 5,800 98
--------
146
--------
NEWSPAPERS--1.2%
Dow Jones & Co. Inc. .................. 37,300 1,231
Gannett Inc. .......................... 1,000 76
--------
1,307
--------
VALUE
SHARES (000S)
-------- --------
PAPER PRODUCTS--4.9%
Champion International Corp. .......... 1,500 65
Consolidated Papers Inc. .............. 19,200 962
International Paper Co. ............... 42,200 $ 1,804
Kimberly Clark Corp. .................. 800 75
Union Camp Corp. ...................... 22,800 1,111
Westvaco Corp. ........................ 51,500 1,468
--------
5,485
--------
PETROLEUM DOMESTIC--4.2%
Amerada Hess Corp. .................... 400 22
Ashland Inc. .......................... 300 13
Atlantic Richfield Co. ................ 2,700 358
Freeport McMoran Inc. ................. 666 21
Kerr McGee Corp. ...................... 30,500 1,914
Sun Inc. .............................. 18,700 418
Tenneco, Inc. ......................... 35,900 1,777
USX Marathon Group .................... 5,300 116
Westcoast Energy Inc. ................. 1,500 25
--------
4,664
--------
PETROLEUM INTERNATIONAL--9.7%
Amoco Corp. ........................... 33,400 2,530
Chevron Corp. ......................... 11,300 743
Exxon Corp. ........................... 31,900 2,827
Mobil Corp. ........................... 22,000 2,569
Royal Dutch Petroleum Corp. ADR(1) .... 7,500 1,240
Texaco, Inc. .......................... 9,100 925
--------
10,834
--------
PETROLEUM SERVICES--0.1%
Schlumberger Ltd. ..................... 1,200 119
--------
PHOTOGRAPHIC EQUIPMENT--0.1%
Eastman Kodak Co. ..................... 2,000 159
--------
POLLUTION CONTROL--0.1%
WMX Technologies Inc. ................. 1,900 65
--------
PUBLIC UTILITIES/ELECTRIC--5.5%
Baltimore Gas & Electric Co. .......... 2,800 76
Central & South West Corp. ............ 40,300 1,068
Chilgener SA ADR(1) ................... 20,100 455
Cinergy Corp. ......................... 35,300 1,169
Consolidated Edison Co. NY Inc. ....... 2,100 61
DPL Inc. .............................. 13,000 310
Dominion Resources Inc. VA ............ 4,000 151
Duke Power Co. ........................ 1,000 49
Edison International .................. 4,900 97
Entergy Corp. ......................... 1,500 42
Houston Industries, Inc. .............. 5,200 119
Illinova Corp. ........................ 11,400 311
LG & E Energy Corp. ................... 13,300 308
Midamerican Energy Co. ................ 1,400 22
Northeast Utilities ................... 3,600 39
Nova Corp. Alta ....................... 11,000 95
PP & L Resources Inc. ................. 3,100 72
Pacificorp ............................ 3,800 80
Scana Corp. ........................... 7,600 203
</TABLE>
24
<PAGE> 26
HARBOR VALUE FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
COMMON STOCKS--CONTINUED
<TABLE>
<CAPTION>
VALUE
SHARES (000S)
-------- --------
<S> <C> <C>
Southern Co. .......................... 15,100 $ 334
Unicom Corp. .......................... 5,000 130
Western Res. Inc. ..................... 31,100 933
--------
6,124
--------
PUBLISHING--1.6%
American Greetings, Cl. A ............. 14,300 419
McGraw Hill Cos. Inc. ................. 27,900 1,308
Time Warner Inc. ...................... 500 19
--------
1,746
--------
RAILROADS--0.1%
CSX Corp. ............................. 800 34
Union Pacific Corp. ................... 600 34
--------
68
--------
RETAILING--3.5%
Autozone Inc.* ........................ 600 15
Footstar Inc. ......................... 173 4
J. C. Penney Inc. ..................... 36,800 1,932
Limited, Inc. ......................... 761 14
May Department Stores Co. ............. 35,700 1,691
Melville Corp. ........................ 600 22
Sears, Roebuck & Co. .................. 1,800 87
Toys R Us, Inc.* ...................... 300 10
WalMart Stores, Inc. .................. 3,900 104
--------
3,879
--------
TELECOMMUNICATIONS--9.9%
AT & T Corp. .......................... 11,100 387
Airtouch Communications Inc.* ......... 9,800 256
Alltel Corp. .......................... 55,600 1,696
Ameritech Corp. ....................... 7,200 394
Bell Atlantic Corp. ................... 5,000 301
BellSouth Corp. ....................... 16,000 652
Frontier Corp. ........................ 51,400 1,491
GTE Corp. ............................. 60,700 2,557
Lucent Technologies Inc. .............. 3,597 169
Northern Telecom Ltd. ................. 2,000 130
Nynex Corp. ........................... 11,900 530
Pacific Telesis Group ................. 4,600 156
SBC Communications Inc. ............... 7,500 365
Southern New England Telecomm Corp..... 44,400 1,654
Sprint Corp. .......................... 4,800 188
U S West Inc. ......................... 7,100 216
--------
11,142
--------
VALUE
SHARES (000S)
-------- --------
TIRES & RUBBER--0.0%
Goodyear Tire and Rubber Co. .......... 600 $ 28
--------
TOBACCO--0.2%
Philip Morris Companies Inc. .......... 2,300 213
--------
TOOLS--2.3%
Snap On Inc. .......................... 37,850 1,216
Stanley Works ......................... 49,800 1,407
--------
2,623
--------
TOTAL COMMON STOCKS
(Cost $100,826)........................ 109,548
--------
SHORT-TERM INVESTMENTS--1.4%
PRINCIPAL
AMOUNT
(000S)
--------
REPURCHASE AGREEMENTS
Repurchase Agreement with State Street
Bank & Trust dated October 31, 1996
due on demand at 4.250%,
collateralized by a U.S. Treasury
Note, 5.625% February 28, 2001, par
value of $1,180 (repurchase proceeds
of $1,146 when closed on November 1,
1996)................................ $1,146 1,146
Repurchase Agreement with State Street
Bank & Trust dated October 31, 1996
due on demand at 4.250%,
collateralized by a U.S. Treasury
Bond, 9.875% November 15, 2015, par
value of $285 (repurchase proceeds of
$382 when closed on November 1,
1996)................................ 382 382
--------
TOTAL SHORT TERM-INVESTMENTS
(Cost $1,528)................................... 1,528
--------
TOTAL INVESTMENTS--99.1%
(Cost $102,354)................................. 111,076
CASH AND OTHER ASSETS,
LESS LIABILITIES--0.9%.......................... 1,033
--------
TOTAL NET ASSETS--100%............................ $112,109
========
</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.
25
<PAGE> 27
HARBOR BOND FUND
PORTFOLIO OF INVESTMENTS--OCTOBER 31, 1996
Total Investments (%)
(Excludes net cash and short-term investments of 0.5%)
<TABLE>
<S> <C>
Options 0.7
Asset Backed Securities 1.8
Foreign Bonds 8.3
U.S. Government Obligations 15.9
Corporate Bonds & Notes 20.1
Mortgage Related Securities 52.7
</TABLE>
ASSET BACKED SECURITIES--1.8%
(Cost $5,000)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
--------- --------
<S> <C> <C>
Student Loan Marketing Association
Series 1995 Cl. A-2
6.810%--10/25/2007+.................. $ 5,000 $ 5,008
--------
CORPORATE BONDS & NOTES--20.1%
AMR Corp. MTN(1)
10.000%--03/07/2001.................. 2,000 2,237
Banco Nacional De Obras Y Serv
6.875%--10/01/1998(a)................ 3,000 2,924
Banesto Del Inc.
8.250%--07/28/2002................... 3,000 3,207
Banesto Finance
6.562%--04/21/2003+.................. 2,000 1,971
Bancomer SA
8.000%--07/07/1998(a)................ 4,000 3,988
CTC Mansfield Funding Corp.
11.125%--09/30/2016.................. 2,000 2,125
Cemex SA MTN(1)
8.500%--08/31/2000................... 1,000 952
Chrysler Financial Corp. MTN(1)
7.250%--03/18/1997................... 2,500 2,516
Comerica Inc.
10.125%--06/01/1998.................. 50 53
Commonwealth Edison Co.
5.375%--04/01/1997................... 569 567
8.000%--10/15/2003................... 3,000 3,068
--------
3,635
--------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
--------- --------
<S> <C> <C>
General Motors Acceptance Corp. MTN(1)
7.850%--03/05/1997................... $ 1,750 $ 1,763
General Motors Acceptance Corp.
7.750%--04/15/1997................... 2,000 2,018
Great Western Bank
10.500%--05/30/2000.................. 700 755
Heller Financial, Inc.
6.450%--02/15/1997................... 50 50
Hydro Quebec Yankee Bonds
9.500%--11/15/2030................... 775 948
Long Island Lighting Co.
6.250%--07/15/2001................... 5,000 4,706
National Rural Utilities Corp Fin
5.300%--11/04/1996................... 5,200 5,198
5.250%--12/06/1996................... 3,800 3,781
--------
8,979
--------
Saferco Products Inc. MTN(1)
9.630%--05/31/2000................... 500 552
Texas New Mexico Power Co.
11.250%--01/15/1997.................. 775 782
Texas Utilities Electric Co.
6.265%--05/01/1999+.................. 5,000 5,015
Time Warner Inc.
6.835%--08/15/2000+.................. 750 750
7.975%--08/15/2004................... 450 463
8.110%--08/15/2006................... 900 910
8.180%--08/15/2007................... 900 937
--------
3,060
--------
United Air Lines Inc.
6.750%--12/01/1997 MTN(1)............ 4,000 4,015
Xerox Credit Corp.
10.000%--04/01/1999.................. 50 54
--------
TOTAL CORPORATE BONDS AND NOTES
(Cost $ 55,438).................................... 56,305
--------
FOREIGN BONDS--8.3%
Canadian Government Series A-79
8.750%--12/01/2005................... C $ 9,300 8,059
Mexico (UTD MES ST)
(Mexican Value Recovery
Rights Attached)
5.812%--12/31/2019+.................. $ 1,250 1,027
</TABLE>
26
<PAGE> 28
HARBOR BOND FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
FOREIGN BONDS--CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
--------- --------
<S> <C> <C>
New Zealand
10.000%--03/15/2002.................. NZ $ 6,400 $ 5,059
8.000%--04/15/2004................... 7,000 5,145
--------
10,204
--------
Republic of Argentina, Series L
6.312%--05/31/2005+.................. $ 4,900 4,018
--------
TOTAL FOREIGN BONDS
(Cost $21,701)....................... 23,308
--------
MORTGAGE RELATED SECURITIES--52.7%
COLLATERALIZED MORTGAGE OBLIGATIONS:
Capstead Securities Corp. IV
Series 91 Class VII
8.900%--12/25/2021................... 484 498
Series 92 Class E
8.500%--02/25/2022................... 750 762
--------
1,260
Chase Mortgage Financial Corp. REMIC
Series 1990 Cl. 2A2,
7.500%--03/25/2025................... 406 406
Series 1992 Cl. A1 Pass Thru REMIC
8.000%--06/25/2024................... 54 54
--------
460
--------
Collateralized Mortgage Securities
Corp. Series F-4
11.450%--11/01/2015.................. 383 420
Series 1988 B-4
8.750%--04/20/2019................... 413 429
--------
849
--------
Drexel Burnham Lambert Series H-4
8.500%--04/01/2017................... 7,782 8,173
Federal Home Loan Mortgage Corp.
Series 30, Cl. C
9.500%--05/15/2018................... 95 96
Series 78, Cl. D
8.700%--02/15/2020................... 4,138 4,261
Series 1029, Cl. Z
9.000%--12/15/2020................... 3,750 3,980
--------
8,337
--------
Federal National Mortgage Association
REMIC
Series 1993, Cl. 129T
6.500%--02/25/2007 IO(2)............. 4,887 487
Series 1994, Cl. 23A
6.000%--07/25/2017 IO(2)............. 2,865 482
Series 1991, Cl. Z
6.500%--06/25/2021................. 4,578 4,101
--------
5,070
--------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
--------- --------
<S> <C> <C>
First Boston Mortgage Securities Corp.
Series 92, Cl. A3
7.500%--04/25/2021................... $ 1,589 $ 1,588
Kidder Peabody Acceptance Corp. I
Series 1994 A1+
7.239%--09/25/2024................... 3,000 3,047
L & N Funding Corp. GNMA Coll., Series
A-4
12.000%--03/17/2014+................. 891 899
MDC Mortgage Funding Corp. Cl. Q-6
9.000%--03/20/2018................... 14 14
Norwest Mortgage Insurance Corp.
GNMA Coll. Cl. 1-Z
12.375%--01/01/2014.................. 169 183
Prudential Home Mortgage Securities Co.
Series 1993 Cl. A-8
6.750%--08/25/2008................... 6,015 5,725
Residential Funding Mortgage,
Secs. Conduit Series 1991 A-8
9.000%--12/25/2021................... 289 292
Resolution Trust Corporation
Mortgage Pass Thru Series 1991 L-1
8.780%--08/25/2021+.................. 3,000 3,088
Ryland Mortgage Securities Corp.,
Series 1992 B-9
7.193%--07/25/2022+.................. 3,000 3,047
Sears Mortgage Securities Corp.
Series 92 Cl. A
7.586%--10/25/2022 +(a).............. 1,588 1,626
Sears Savings Bank Mortgage Pass Thru
Series 1992 REMIC
8.708%--05/25/2032+.................. 980 992
--------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS.......................... 44,650
--------
OTHER MORTGAGE RELATED SECURITIES:
Federal Housing Authority
Project Banco-221D
7.400%--02/01/2021................... 887 911
Project Banco-15
7.450%--05/01/2021................... 352 362
Project Reilly #52
5.150%--06/01/2018................... 320 265
--------
1,538
--------
Federal Home Loan Mortgage Corp.
Forward Gold 30 year, TBA(b)
November Delivery
6.500%--01/01/1999................... 15,000 14,372
December Delivery
6.500%--12/11/2026................... 15,000 14,348
--------
28,720
--------
</TABLE>
27
<PAGE> 29
HARBOR BOND FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
<TABLE>
<CAPTION>
MORTGAGE RELATED SECURITIES--CONTINUED
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
--------- --------
<S> <C> <C>
Federal Home Loan Mortgage Corp.
Pass Thru Certificates
5.750%--03/01/1999................... $ 5 $ 5
10.500%--09/01/2000................... 25 26
7.500%--03/01/2002................... 28 29
8.000%--06/01/2011................... 101 105
8.500%--02/01/2017................... 146 151
8.000%--08/01/2024................... 2,963 3,056
8.000%--04/01/2025................... 533 546
8.000%--04/01/2025................... 391 400
8.000%--05/01/2025................... 20 21
8.000%--06/01/2025................... 390 399
8.000%--07/01/2025................... 31 32
8.000%--07/01/2025................... 422 433
8.000%--07/01/2025................... 16 16
8.000%--08/01/2025................... 456 468
8.000%--09/01/2025................... 424 434
8.000%--10/01/2025................... 403 413
8.000%--10/01/2025................... 498 511
8.000%--10/01/2025................... 479 491
8.000%--11/01/2025................... 32 32
8.000%--11/01/2025................... 403 414
-------
7,982
-------
Federal National Mortgage Association
Pass Thru Certificates
9.000%--03/01/2005................... 296 311
9.000%--11/01/2009................... 2,079 2,188
8.500%--12/01/2009................... 18 19
9.500%--04/01/2011................... 89 96
6.308%--12/01/2027................... 2,549 2,542
-------
5,156
-------
Government National Mortgage
Association
7.250%--01/20/1999................... 7,487 7,645
6.500%--03/20/2017................... 1,773 1,801
6.750%--08/20/2017................... 428 412
7.125%--08/20/2022................... 5,058 5,159
7.000%--09/20/2023................... 3,639 3,714
6.500%--05/20/2024................... 3,724 3,803
7.000%--05/20/2024................... 1,563 1,594
7.375%--06/20/2024................... 7,189 7,340
7.250%--07/20/2024................... 103 105
7.250%--08/20/2024................... 3,771 3,850
7.500%--12/20/2024................... 761 776
7.000%--01/20/2025................... 3,708 3,756
7.000%--02/20/2025................... 1,355 1,382
7.000%--02/20/2025................... 1,744 1,779
7.000%--10/20/2025................... 1,041 1,062
-------
44,178
-------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
--------- --------
<S> <C> <C>
Government National Mortgage
Association TBA(b)
November Delivery
6.000%--12/23/2026................... $ 2,000 $ 2,004
December Delivery
7.000%--11/19/2026................... 10,000 9,816
--------
11,820
--------
United Airlines Pass Thru Certificate
Series 1993 C-2
9.060%--06/17/2015+.................. 3,000 3,286
--------
TOTAL OTHER MORTGAGE RELATED
SECURITIES........................... 102,680
--------
TOTAL MORTGAGE RELATED SECURITIES
(Cost $145,877)...................... 147,330
--------
OPTIONS--0.7%
NO. OF
CONTRACTS
---------
CME Put Option, Eurodollars,
Strike Price @ 91.50
Expiration, 03/17/1997............... 100 3
U.S. Treasury Note Call Option
Strike Price @ 92.72
Expiration, 01/06/1997............... 25,000 1,999
--------
TOTAL OPTIONS
(Cost $1,955)........................ 2,002
--------
U.S. GOVERNMENT OBLIGATIONS--15.9%
U.S. Treasury Notes
5.625%--06/30/1997................... 30,000 30,056
5.750%--09/30/1997................... 10,000 10,028
6.000%--09/30/1998................... 3,000 3,015
--------
43,099
--------
U.S. Treasury Bond
6.875%--08/15/2025................... 1,500 1,534
--------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $44,418)....................... 44,633
--------
SHORT-TERM INVESTMENTS--16.2%
REPURCHASE AGREEMENTS
Repurchase Agreement with State Street
Bank & Trust dated October 31, 1996
due November 1, 1996 at 4.250%,
collateralized by a U.S. Treasury
Note, 9.125% May 15, 1999, par value
of $3,580 (repurchase proceeds of
$3,922 when closed on November 1,
1996)................................ 3,922 3,922
--------
</TABLE>
28
<PAGE> 30
HARBOR BOND FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
<TABLE>
<CAPTION>
SHORT-TERM INVESTMENTS--CONTINUED
<S> <C> <C>
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
--------- --------
U.S. TREASURY BILLS
6.125%--11/14/1996#.................. $ 310 $ 310
5.380%--11/21/1996#.................. 730 728
5.350%--01/23/1997#.................. 840 830
--------
1,868
--------
COMMERCIAL PAPER
Caisse D. Amortissement
5.320%--11/20/1996................... 5,100 5,086
5.270%--11/21/1996................... 2,300 2,293
5.300%--12/04/1996................... 1,000 995
--------
8,374
--------
Canadian Wheat Board
5.250%--11/13/1996................... 700 699
E I DuPont De Nemours & Co.
5.230%--12/20/1996................... 5,800 5,759
Federal Home Loan Mortgage Corp.
5.290%--11/13/1996................... 800 795
Ford Motor Credit Co.
5.280%--11/12/1996................... 3,500 3,494
General Electric Capital Corp.
5.250%--12/09/1996................... 6,200 6,166
Georgia Pacific Corp.
9.850%--06/15/1997................... 800 819
Kellogg Co.
5.230%--12/16/1996................... 1,300 1,292
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
--------- --------
KFW International Finance Inc.
5.300%--11/12/1996................... $ 1,200 $ 1,198
5.240%--11/22/1996................... 4,500 4,486
5.240%--11/26/1996................... 2,100 2,092
5.240%--12/06/1996................... 500 498
--------
8,274
--------
Minnesota Mining &
Manufacturing Co.
5.280%--11/22/1996................... 400 399
Mobil Australia Finance Co.
5.240%--12/12/1996................... 1,800 1,789
New Center Asset Trust
5.310%--11/05/1996................... 200 200
Procter & Gamble Co.
5.370%--11/01/1996................... 800 800
Wool International
5.270%--11/20/1996................... 700 698
--------
TOTAL COMMERCIAL PAPER................. 39,558
--------
TOTAL SHORT-TERM INVESTMENTS
(Cost $45,347)....................... 45,348
--------
TOTAL INVESTMENTS--115.7%
(Cost $319,736)...................... 323,934
--------
CASH AND OTHER ASSETS
LESS LIABILITIES--(15.7%)............ (44,085)
--------
TOTAL NET ASSETS--100.0%............... $279,849
========
</TABLE>
- ------------
# At October 31, 1996, 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 $1,868.
+ Variable rate security. The stated rate represents the rate in effect at
October 31, 1996.
(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,
1996, these securities were valued at $8,538 or 3.1% of net assets.
(b) TBA's are mortgage-backed securities traded under delayed delivery
commitments, settling after October 31, 1996. 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 1% 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 periodic
interest payments on an underlying pool of mortgage loans. These are subject
to the risk of accelerated principal paydowns. The principal amount
represents the notional amount on which current interest is calculated.
The accompanying notes are an integral part of the financial statements.
29
<PAGE> 31
HARBOR BOND FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
(All dollar values are represented in thousands)
FUTURES CONTRACTS WHICH WERE OPEN AT OCTOBER 31, 1996 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 Bond--30 Yr. (Buy)......................... 305 $30,500 December, 1996 $1,736
U.S. Treasury Note--10 Yr. (Buy)......................... 680 68,000 December, 1996 2,395
U.S. Treasury Note--5 Yr. (Buy).......................... 80 8,000 December, 1996 176
------
$4,307
======
</TABLE>
WRITTEN OPTIONS WHICH WERE OPEN AT OCTOBER 31, 1996 ARE AS FOLLOWS:
<TABLE>
<CAPTION>
NUMBER OF EXPIRATION DATE/
OPTIONS CONTRACTS STRIKE PRICE VALUE
------- ------------- ----------------- --------------
<S> <C> <C> <C>
Euro Dollar Futures (Put)............................................. 60 March, 1997/93 $ (1)
Euro Dollar Futures (Put)............................................. 50 June, 1997/93.25 (6)
Euro Dollar Futures (Put)............................................. 300 June, 1997/93.50 (59)
----
Written options outstanding, at value (premiums received $317)........ $(66)
====
</TABLE>
FORWARD CURRENCY CONTRACTS WHICH WERE OPEN AT OCTOBER 31, 1996 ARE AS
FOLLOWS:
<TABLE>
<CAPTION>
UNREALIZED
MARKET AGGREGATE APPRECIATION/
VALUE FACE VALUE DELIVERY DATE (DEPRECIATION)
CURRENCY COUNTRY (000S) (000S) OF CONTRACT (000S)
-------- ----------- --------- ------------- ----------------- --------------
<S> <C> <C> <C> <C> <C>
Dollar (Sell).............................. Canada $ 3,000 $ 2,978 January 21, 1997 $ (22)
Dollar (Sell).............................. Canada 1,500 1,494 January 30, 1997 (6)
Dollar (Sell).............................. Canada 4,529 4,392 May 22, 1997 (137)
Dollar (Sell).............................. New Zealand 10,272 10,243 November 15, 1996 (29)
Mark (Sell)................................ Germany 7,151 7,674 December 2, 1996 523
Mark (Buy)................................. Germany 7,151 7,218 December 2, 1996 (67)
Mark (Sell)................................ Germany 1,077 1,156 December 9, 1996 79
Mark (Buy)................................. Germany 1,077 1,087 December 9, 1996 (10)
-----
$ 331
=====
</TABLE>
TBA SALE COMMITMENTS AT OCTOBER 31, 1996 ARE AS FOLLOWS:
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MARKET VALUE
(000S) DELIVERY MONTH COUPON RATE (000S)
--------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
Federal Home Loan Mortgage Corp. Forward Gold 30 year.............. $15,000 November 6.500% $ 14,348
======
</TABLE>
The accompanying notes are an integral part of the financial statements.
30
<PAGE> 32
HARBOR SHORT DURATION FUND
PORTFOLIO OF INVESTMENTS--OCTOBER 31, 1996
Total Investments (%)
(Excludes net cash and short-term investments of -11.8%)
<TABLE>
<S> <C>
Options 0.4
Foreign Government Obligations 6.5
U.S. Government Obligations 35.4
Mortgage Related Securities 69.5
</TABLE>
FOREIGN GOVERNMENT OBLIGATIONS--6.5%
(Cost $11,711)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
--------- --------
<S> <C> <C>
Canadian Government Series A-80
8.000% -- 11/01/1998.................. $15,000 $ 11,953
--------
MORTGAGE RELATED SECURITIES--69.5%
GOVERNMENT AGENCY PASS-THROUGHS:
Federal Home Loan Mortgage
Pool #490010
9.000%--06/01/1997.................... 564 565
--------
Federal National Mortgage Association
Forward Gold 30 year, TBA(1)
November Delivery
8.000%--10/10/2026.................... 30,000 30,900
--------
Federal National Mortgage Association
Pass Thru Certificates
Pool #250228
9.000%--04/01/2025.................. 3,461 3,643
Pool #250239
9.000%--05/01/2025.................. 3,311 3,485
Pool #303669
9.000%--11/01/2025.................. 5,664 5,961
--------
13,089
--------
Federal National Mortgage
Association Pass Thru TBA(1)
November Delivery
7.000%--11/01/2026.................... 6,400 6,280
--------
Government National Mortgage
Association TBA(1)
November Delivery
7.500%--11/15/2026.................... 12,000 12,026
--------
Government National Mortgage
Association Pass Thru Certificates
Pool #428618
7.500%--04/15/1999.................. 49 48
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
--------- --------
<S> <C> <C>
Pool #428620
7.500%--08/15/1999.................. $ 60 $ 59
--------
107
--------
Government National Mortgage Association
Project Construction Loan
7.500%--04/01/1998.................... 392 384
7.500%--05/01/1998.................... 312 304
7.500%--08/15/1998.................... 590 578
--------
1,266
--------
TOTAL GOVERNMENT AGENCY PASS THROUGHS............... $ 64,233
--------
COLLATERALIZED MORTGAGE OBLIGATIONS
Continental Mortgage Home Equity Loan
Cl. A9
1.300%--09/15/2027 IO(3).............. 60,614 2,154
Cl. A10
0.900%--09/15/2027 IO(3).............. 22,848 611
Series 96-3, Cl. A9
0.056%--09/15/2027 IO(3).............. 60,614 85
Series 96-3, Cl. A10
0.043%--09/15/2027 IO(3).............. 22,848 43
--------
2,893
--------
Federal National Mortgage Association REMIC
Series 1993 Cl. S
4.771%--09/25/2000.................... 5,720 5,260
Series 1992 Cl. 70
1,139.681%--04/25/2007 IOette(2)...... 4 115
Series 1992 Cl. L
1,098.798%--07/25/2007 IOette(2)...... 4 112
Series 1992 Cl. 108
1,051.718%--07/25/2007 IOette(2)...... 2 67
Series 1994 Cl. PC
7.000%--05/25/2013 PAC................ 5,000 5,053
Series 1990 Cl. L
1,009.000%--09/25/2020 IOette(2)...... 7 226
Series 1993 Cl. B
12/25/2020 PO(4)...................... 828 612
Series 1992 Cl. E
449.185%--12/25/2021 IOette(2)........ 7 98
Series 1992 Cl. 8 L
887.560% 01/25/2022 IOette(2)......... 3 86
Series 1993 Cl. E
5/25/2022 PO(4)....................... 605 388
Series 1993 Cl. J
6/25/2023 PO(4)....................... 312 192
Series 1993 Cl. N
6/25/2023 PO(4)....................... 263 161
Series 1993 Cl. J
08/25/2023 PO(4)...................... 8,451 4,815
</TABLE>
31
<PAGE> 33
HARBOR SHORT DURATION FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
MORTGAGE RELATED SECURITIES--CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
--------- --------
<S> <C> <C>
Series 1993 Cl. C
8/25/2023 PO(4)....................... $ 369 $ 303
--------
17,488
--------
Federal National Mortgage Association STRIP
Series 231-2
7.500%--07/01/2023 IO(3).............. 6,061 1,917
Series 235-2
8.000%--08/01/2023 IO(3).............. 8,798 2,530
Series 264-2
8.000%--07/01/2024 IO(3).............. 2,887 887
Series 275-2
8.000%--10/01/2026 IO(3).............. 25,000 8,000
Series 275-2
10/01/2026 PO(4)...................... 25,000 17,570
--------
30,904
--------
Federal Home Loan Mortgage
Pass Thru Certificates
Inverse Floater, Series 1427S
6.349%--12/15/1997.................... 3,691 3,695
Series 1255
1,101.200%--07/15/2021 IO(3).......... 3 91
Series 10043
8.500%--03/01/2023 IO(3).............. 6,775 2,037
Series 1747, Cl. 1
8.000%--06/15/2023 PAC IO(3).......... 576 92
Series 10037
7.500%--02/01/2024 IO(3).............. 4,142 1,302
Series 31
8.000%--08/25/2026 IO(3).............. 180 61
Series 10054
8.000%--09/01/2026 IO(3).............. 71 24
--------
7,302
--------
Federal Home Loan Mortgage Corp. 1906A
7.500%--08/15/2021.................... 2,700 2,710
Prudential Home Mortgage
Series 1994 Cl. A11
8.750%--10/25/2024 IO(3).............. 2,927 491
Series 1994 Cl. A8
0.509%--10/25/2024 IO(3).............. 2,574 38
--------
529
--------
U.S. Department of Veteran Affairs REMIC
Series 1992 Cl. 2
1.041%--09/15/2022 IO(3).............. 13,172 541
Series 1994 Cl. 3
0.053%--06/15/2024 IO(3).............. 12,023 33
Series 1994 3B Cl. 2
0.322%--09/15/2024 IO(3).............. 1,447 20
Series 1995 Cl. 3
0.292%--02/15/2025 IO(3).............. 1,889 25
Series 1996 Cl. 1
0.072%--06/15/2026 IO(3).............. 12,240 45
--------
664
--------
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
--------- --------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS...........
$ 62,490
--------
TOTAL MORTGAGE RELATED SECURITIES
(Cost $125,486)................................... 126,723
--------
U.S. GOVERNMENT OBLIGATIONS--35.4%
U.S. Treasury Notes
5.375%--11/30/1997.................... $ 250 250
6.000%--08/15/1999.................... 8,000 8,019
6.250%--05/31/2000.................... 250 252
6.375%--09/30/2001+................... 20,000 20,234
6.500%--10/15/2006+................... 14,390 14,538
--------
43,293
--------
U.S. Treasury Bonds
15.750%--11/15/2001+.................. 15,000 21,187
--------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $63,985).................................... 64,480
--------
</TABLE>
OPTIONS--0.4%
<TABLE>
<CAPTION>
NO. OF
CONTRACTS
---------
<S> <C> <C>
U.S. Treasury Note Call Option
Strike Price @ 108.00
Expiration 02/22/1997................. 130 $ 321
Euro Dollar Put Option
Strike Price @ 93.50
Expiration 09/18/1997................. 25 11
Euro Dollar Call Option
Strike Price @ 93.50
Expiration 09/18/1997................. 25 54
Euro Dollar Put Option
Strike Price @ 93.25
Expiration 12/18/1997................. 25 15
Euro Dollar Call Option
Strike Price @ 93.25
Expiration 12/18/1997................. 25 62
Swap Call Option
Strike Price @ 9.00
Expiration 09/17/2011................. 75 137
Swap Call Option
Strike Price @ 10.5
Expiration 09/17/2011................. 10 91
Swap Call Option
Strike Price @ 9.00
Expiration 09/17/2011................. 75 47
TOTAL OPTIONS
(Cost $728)....................................... 738
--------
</TABLE>
32
<PAGE> 34
HARBOR SHORT DURATION FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
SHORT-TERM INVESTMENTS--27.6%
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
--------- --------
<S> <C> <C>
BANK OBLIGATION
Societe Generale Montreal
5.600%--11/01/1996.................... $ 328 328
--------
U.S. TREASURY BILLS
5.105%--02/06/1997#................... 1,000 986
5.235%--10/16/1997+................... 9,000 8,551
5.252%--10/16/1997.................... 4,000 3,800
5.381%--10/16/1997.................... 16,500 15,676
5.444%--10/16/1997.................... 22,000 20,902
--------
49,915
--------
<CAPTION>
VALUE
(000S)
--------
<S> <C>
TOTAL SHORT TERM INVESTMENTS
(Cost $50,132).......................... $ 50,243
--------
TOTAL INVESTMENTS--139.4%
(Cost $252,042)......................... 254,137
CASH AND OTHER ASSETS
LESS LIABILITIES--(39.4%)............... (71,839)
--------
TOTAL NET ASSETS--100.0%.................. $182,298
========
</TABLE>
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION ARM SWAP AGREEMENTS OPEN AT OCTOBER 31,
1996 ARE AS FOLLOWS:
<TABLE>
<CAPTION>
NOTIONAL AMOUNT (000S) DESCRIPTION VALUE
- ---------------------- ----------- -----
<C> <S> <C>
$ 50,000 Government National Mortgage Association ARM swap agreement with Lehman Brothers Special
Finance terminating 9/20/2011 to pay or receive the premium or discount on the balance of
the referenced pool of GNMA floating rate securities five days prior to the termination
date. If the pool is trading at a premium, Lehman Brothers Special Finance pays Harbor Short
Duration Fund the amount of the premium. If the pool is trading at a discount, the reverse
occurs. Also, Harbor Short Duration Fund will receive a fixed rate of 0.1315% of the
notional amount annually. $ 0
50,000 Government National Mortgage Association ARM swap agreement with Morgan Stanley terminating
9/20/2011 to pay or receive the premium or discount on the balance of the referenced pool of
GNMA floating rate securities five days prior to the termination date. If the pool is
trading at a premium, Morgan Stanley pays Harbor Short Duration Fund the amount of the
premium. If the pool is trading at a discount, the reverse occurs. Also, Harbor Short
Duration Fund will receive a fixed rate of 0.1315% of the notional amount annually. 0
---
$ 0
===
</TABLE>
- ------------
# At October 31, 1996, U.S. Treasury Bills held by the fund were pledged to
cover margin requirements for open futures contracts. (See Note 2 to the
Financial Statements). The securities pledged had aggregate market value of
$986,474.
(1) TBA's are mortgage-backed securities traded under delayed delivery
commitments, settling after October 31, 1996. 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 1% from
the principal amount. Income on TBA's is not earned until settlement date.
(2) IOette Securities are a type of CMO (often called a "double REMIC") tranche
with an extremely small principal amount and extremely high coupon rate of
interest. The characteristics of an IOette are expected to resemble an IO
security.
(3) Interest only (IO) securities represent the right to receive the periodic
interest payments on an underlying pool of mortgage loans. These are subject
to the risk of accelerated principal paydowns. The principal amount
represents the notional amount on which current interest is calculated.
(4) Principal only (PO) securities represent the right to receive periodic
principal payments on an underlying pool of mortgage loans.
+ At October 31, 1996, U.S. Treasury Securities held by the fund were pledged,
in whole or in part, as collateral for open reverse repurchase agreements.
(See Note 5 to the Financial Statements.) The securities pledged had an
aggregate market value of $56,493.
The accompanying notes are an integral part of the financial statements.
33
<PAGE> 35
HARBOR SHORT DURATION FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
(All dollar values are represented in thousands)
FUTURES CONTRACTS WHICH WERE OPEN AT OCTOBER 31, 1996 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 Note--2 Yr. (Sell).............................. 101 $ 20,200 December, 1996 $ (84)
U.S. Treasury Note--5 Yr. (Sell).............................. 388 $ 38,800 December, 1996 (524)
U.S. Treasury Note--10 Yr. (Sell)............................. 41 $ 4,100 December, 1996 (32)
U.S. Treasury Bond--30 Yr. (Sell)............................. 1 $ 100 December, 1996 (6)
U.S. Treasury Note--10 Yr. (Sell)............................. 65 $ 6,500 March, 1997 (90)
Euro Dollar (Buy)............................................. 102 E$ 25,500 June, 1997 152
Euro Dollar (Sell)............................................ 1 E$ 250 September, 1997 (1)
Euro Dollar (Sell)............................................ 2 E$ 500 December, 1997 (3)
Euro Dollar (Buy)............................................. 101 E$ 25,250 June, 1998 166
Euro Yen (Buy)................................................ 25 E YEN 6,250 December, 1996 3
Euro Yen (Sell)............................................... 25 E YEN 6,250 June, 1997 (19)
-----
$(438)
=====
</TABLE>
FORWARD CURRENCY CONTRACTS WHICH WERE OPEN AT OCTOBER 31, 1996 ARE AS
FOLLOWS:
<TABLE>
<CAPTION>
UNREALIZED
MARKET AGGREGATE APPRECIATION/
VALUE FACE VALUE DELIVERY DATE (DEPRECIATION)
CURRENCY COUNTRY (000S) (000S) OF CONTRACT (000S)
-------- ------- ------- ---------- ----------------- --------------
<S> <C> <C> <C> <C> <C>
Dollar (Buy)................................ Canada $ 6,297 $ 6,229 December 16, 1996 $ 68
Dollar (Sell)............................... Canada 6,297 6,199 December 16, 1996 (98)
Dollar (Sell)............................... Canada 12,425 12,387 December 16, 1996 (38)
Dollar (Sell)............................... Canada 24,853 24,768 December 16, 1996 (85)
Franc (Sell)/Peseta (Buy)................... Switzerland/Spain 6,202 6,264 January 28, 1997 62
Mark (Buy).................................. Germany 2,212 2,200 December 16, 1996 12
Mark (Buy).................................. Germany 2,113 2,100 December 16, 1996 13
Mark (Sell)................................. Germany 3,630 3,604 December 16, 1996 (26)
Mark (Sell)/Peseta (Buy).................... Germany/Spain 8,448 8,457 January 28, 1997 9
Yen (Buy)................................... Japan 1,804 1,800 December 16, 1996 4
Yen (Buy)................................... Japan 1,804 1,800 December 16, 1996 4
Yen (Sell).................................. Japan 10,488 10,737 December 16, 1996 249
Krona (Sell)................................ Sweden 10,596 10,596 November 7, 1996 --
Krona (Buy)................................. Sweden 10,604 10,604 December 16, 1996 --
----
$174
====
</TABLE>
TBA SALE COMMITMENTS AT OCTOBER 31, 1996 ARE AS FOLLOWS:
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MARKET VALUE
AGENCY (000S) DELIVERY MONTH COUPON RATE (000S)
------ --------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
Federal National Mortgage Association Forward Gold 30 Year......... $ 6,400 November 7.000% $ 6,294
Federal National Mortgage Association Forward Gold 30 Year......... 30,000 November 8.000% 30,666
Federal National Mortgage Association.............................. 12,500 November 9.000% 13,000
Federal National Mortgage Association.............................. 25,000 November 8.000% 25,508
Government National Mortgage Association........................... 12,000 November 7.500% 12,026
Government National Mortgage Association........................... 1,400 November 7.500% 1,403
-------
$88,897
=======
</TABLE>
The accompanying notes are an integral part of the financial statements.
34
<PAGE> 36
HARBOR MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS--OCTOBER 31, 1996
Total Investments (%)
(Excludes net cash 0.0%)
<TABLE>
<S> <C>
Foreign Government
Obligations 3.8
Federal Agencies 7.6
Repurchase Agreements 7.6
Bank Obligation 38.3
Commercial Paper 42.7
</TABLE>
BANK OBLIGATIONS--38.3%
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
--------- -------
<S> <C> <C>
Bayerische Landesbank Euro CD
5.500%--04/18/97....................... $ 3,000 $ 3,000
Bayerische Vereinsbank AG--NY
5.410%--02/21/97....................... 3,000 3,000
Chase Manhattan B/A
5.340%--12/23/96....................... 2,000 1,985
Chase Manhattan NY B A
5.350%--01/23/97....................... 350 346
Deutsche Bank AG--N Y
5.450%--11/13/96....................... 2,000 2,000
Mellon Bank N.A.
5.750%--01/28/97....................... 3,000 3,000
Morgan Guaranty Euro CD
5.400%--01/08/97....................... 3,000 3,000
Oesterreichische Kontrollbank
5.300%--11/22/96....................... 3,000 2,991
Republic National Bank New York CDA
5.510%--04/01/97....................... 2,300 2,300
Royal Bank of Canada Yankee CD
5.470%--12/31/96....................... 2,000 2,000
Societe Generale Montreal
5.600%--11/01/96....................... 1,648 1,648
-------
TOTAL BANK OBLIGATIONS
(Cost $25,270)..................................... 25,270
-------
FEDERAL AGENCIES--7.6%
(Cost $5,000)
Federal Home Loan Mortgage
Discount Notes
5.370%--11/01/96....................... 5,000 5,000
-------
COMMERCIAL PAPER--42.7%
Abbey National No. America
5.440%--03/26/97....................... 2,000 1,956
American Brands Inc.
5.320%--01/14/97....................... 3,000 2,967
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
--------- -------
<S> <C> <C>
Bank of Montreal (Montreal)
5.500%--01/03/97....................... $ 2,000 $ 2,000
Caisse D Amortissement
5.460%--12/27/96....................... 2,500 2,479
Cheltenham + Glouster PLC
5.434%--12/20/96....................... 2,500 2,482
Ciesco L P
5.399%--01/16/97....................... 2,500 2,472
Daimler Benz N.A.
5.390%--01/15/97....................... 3,000 2,966
Falcon Asset Securitization
5.390%--01/21/97....................... 3,000 2,964
General Electric Cap Corp. Disc.
5.620%--03/05/97....................... 2,000 1,961
Glaxo PLC
5.410%--01/02/97....................... 2,000 1,981
Nationsbank Corp.
5.310%--11/25/96....................... 2,000 1,993
Woolwich
5.470%--11/27/96....................... 2,000 1,992
-------
TOTAL COMMERCIAL PAPER
(Cost $28,213)..................................... 28,213
-------
FOREIGN GOVERNMENT OBLIGATION--3.8%
(Cost $2,492)
Kingdom of Sweden
5.460%--11/22/96....................... 2,500 2,492
-------
REPURCHASE AGREEMENTS--7.6%
Repurchase Agreement with Citibank dated
October 31, 1996 due October 23, 1997
at 5.42%, collateralized by a U.S.
Treasury Bill, September 18, 1997, par
value of $2,150 (repurchase proceeds
of $2,000 when closed on November 1,
1996)................................. 2,000 2,000
Repurchase Agreement with Eastbridge
Capital dated October 31, 1996 due
October 25, 1997 at 5.17%,
collateralized by a U.S. Treasury Bill,
September 18, 1997, par value of $3,245
(repurchase proceeds of $3,000 when
closed on November 1, 1996)............ 3,000 3,000
-------
TOTAL REPURCHASE AGREEMENTS
(Cost $5,000)...................................... 5,000
-------
TOTAL INVESTMENTS--100.0%
(Cost $65,975)(1).................................. 65,975
-------
CASH AND OTHER ASSETS,
LESS LIABILITIES--0.0%............................. 16
-------
TOTAL NET ASSETS--100.0%............................. $65,991
=======
</TABLE>
- ------------
(1) The aggregate identified cost on a tax basis is the same.
The accompanying notes are an integral part of the financial statements.
35
<PAGE> 37
HARBOR FUND
STATEMENT OF ASSETS AND LIABILITIES--OCTOBER 31, 1996
(All amounts in Thousands, except per share amount)
<TABLE>
<CAPTION>
HARBOR HARBOR
INTERNATIONAL HARBOR CAPITAL
GROWTH GROWTH APPRECIATION
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
ASSETS
INVESTMENTS, AT IDENTIFIED COST*.............................................. $ 425,026 $ 90,737 $1,272,162
- ----------------------------------------------------------------------------------------------------------------------------
Investments, at value......................................................... $ 479,066 $112,135 $1,583,331
Repurchase agreements......................................................... -- -- --
Cash.......................................................................... 1 1 1
Foreign currency, at value (cost: $477; $0; $0; $4; $957; $0; $0; $24,875;
$0)......................................................................... 476 -- --
Receivables for:
Investments sold............................................................ -- 1,418 14,805
Capital shares sold......................................................... 1,502 123 3,627
Dividends................................................................... 118 4 504
Interest.................................................................... 4 -- 7
Open forward currency contracts............................................. -- -- --
Variation margin on futures contracts....................................... -- -- --
Deferred organization costs................................................... 13 -- --
Withholding tax receivable.................................................... 205 -- 72
Other assets.................................................................. 22 77 25
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS............................................................ 481,407 113,758 1,602,372
LIABILITIES
Payables for:
Investments purchased....................................................... 1,510 -- 16,421
Capital shares reacquired................................................... 106 4 896
Dividends to shareholders................................................... -- -- --
Written options, at value
(premiums received $0; $0; $0; $0; $0; $0; $317; $0; $0).................. -- -- --
Reverse repurchase agreements............................................... -- -- --
Interest on reverse repurchase agreements................................... -- -- --
Open forward currency contracts............................................. -- -- --
Variation margin on futures contracts....................................... -- -- --
Accrued expenses:
Adviser's fees.............................................................. 541 227 1,537
Trustees' fees.............................................................. -- -- 5
Transfer agent's fees....................................................... 87 16 211
Other....................................................................... 194 -- 87
TBA sale commitments, at value (proceeds receivable $0; $0; $0; $0; $0; $0;
$14,293; $88,181; $0)....................................................... -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES....................................................... 2,438 247 19,157
NET ASSETS
NET ASSETS.................................................................... $ 478,969 $113,511 $1,583,215
- ----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Paid-in capital............................................................. $ 409,465 $ 63,625 $1,222,961
Undistributed (overdistributed) net investment income....................... 2,716 -- 899
Accumulated net realized gain/(loss)........................................ 12,746 28,488 48,187
Unrealized appreciation/(depreciation) of investments, written options,
foreign currency, investments sold short and translation of assets and
liabilities in foreign currencies......................................... 54,042 21,398 311,168
Unrealized appreciation/(depreciation) of futures and forward currency
contracts................................................................. -- -- --
- ----------------------------------------------------------------------------------------------------------------------------
$ 478,969 $113,511 $1,583,215
- ----------------------------------------------------------------------------------------------------------------------------
Shares of beneficial interest................................................. 31,211 7,092 61,174
Net asset value, offering and redemption price per share...................... $15.35 $16.00 $25.88
</TABLE>
- ------------
* Including repurchase agreements
The accompanying notes are an integral part of the financial statements.
36
<PAGE> 38
HARBOR FUND
STATEMENT OF ASSETS AND LIABILITIES--CONTINUED
<TABLE>
<CAPTION>
HARBOR HARBOR HARBOR HARBOR HARBOR HARBOR
INTERNATIONAL II INTERNATIONAL VALUE BOND SHORT DURATION MONEY MARKET
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------
$ 12,458 $ 2,784,379 $102,354 $319,736 $ 252,042 $65,975
==================================================================================================
$ 12,396 $ 4,026,372 $109,548 $320,012 $ 254,137 $60,975
271 -- 1,528 3,922 -- 5,000
1 -- 637 1 -- 1
4 975 -- -- 24,888 --
-- -- 2,437 50,537 129,493 --
56 2,080 89 236 6 180
13 5,905 232 -- -- --
-- 428 -- 2,883 3,268 161
-- -- -- 602 421 --
-- -- -- 260 -- --
21 -- -- -- 1 --
-- 4,169 5 -- -- --
32 54 17 22 35 23
- --------------------------------------------------------------------------------------------------
12,794 4,039,983 114,493 378,475 412,249 66,340
172 -- 2,202 83,604 83,486 --
-- 3,104 1 38 66 265
-- -- -- -- -- 12
-- -- -- 66 -- --
-- -- -- -- 56,462 --
-- -- -- -- 614 --
-- -- -- 271 247 --
-- -- -- -- 60 --
12 5,304 122 197 52 18
-- 5 1 -- 1 --
5 426 10 50 4 27
32 1,017 48 52 62 27
-- -- -- 14,348 88,897 --
- --------------------------------------------------------------------------------------------------
221 9,856 2,384 98,626 229,951 349
$ 12,573 $ 4,030,127 $112,109 $279,849 $ 182,298 $65,991
==================================================================================================
$ 12,279 $ 2,634,194 $ 89,351 $276,226 $ 203,404 $65,991
17 50,361 199 1,684 636 --
68 103,329 13,837 (7,099) (22,870) --
209 1,242,243 8,722 4,400 1,392 --
-- -- -- 4,638 (264) --
- --------------------------------------------------------------------------------------------------
$ 12,573 $ 4,030,127 $112,109 $279,849 $ 182,298 $65,991
==================================================================================================
1,201 129,126 6,989 24,799 20,743 65,991
$10.47 $31.21 $16.04 $11.28 $8.79 $1.00
</TABLE>
37
<PAGE> 39
HARBOR FUND
STATEMENT OF OPERATIONS--TWELVE MONTHS ENDED OCTOBER 31, 1996
($ in Thousands)
<TABLE>
<CAPTION>
HARBOR
INTERNATIONAL HARBOR
GROWTH GROWTH
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends.................................................................... $ 6,031 $ 329
Interest..................................................................... 592 234
Securities lending income.................................................... 68 --
Foreign taxes withheld....................................................... (672) (4)
- -----------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME...................................................... 6,019 559
EXPENSES:
Investment adviser's fees.................................................... 2,141 981
Shareholder communications................................................... 43 4
Custodian fees............................................................... 552 76
Transfer agent fees.......................................................... 366 88
Professional fees............................................................ 25 35
Trustees' fees and expenses.................................................. 3 3
Registration fees............................................................ 46 24
Amortization of organization costs........................................... 7 --
Insurance expense............................................................ 2 3
Miscellaneous................................................................ 8 7
- -----------------------------------------------------------------------------------------------------------
Total expenses............................................................ 3,193 1,221
Advisory fee waived.......................................................... -- --
Other expense reimbursements and reductions.................................. (19) (9)
- -----------------------------------------------------------------------------------------------------------
Total operating expenses.................................................. 3,174 1,212
Interest expense............................................................. -- --
- -----------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME/(LOSS)................................................... 2,845 (653)
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENT TRANSACTIONS:
Net realized gain/(loss) on:
Investments............................................................... 16,386 29,141
Foreign currency transactions............................................. 7 --
Short sales............................................................... -- --
Futures contracts......................................................... -- --
Written options........................................................... -- --
Change in net unrealized appreciation/depreciation on:
Investments, written options and short sales.............................. 40,690 (10,004)
Futures contracts......................................................... -- --
Forwards.................................................................. -- --
Translation of assets and liabilities in foreign currencies............... 1 --
- -----------------------------------------------------------------------------------------------------------
Net gain/(loss) on investment transactions................................... 57,084 19,137
- -----------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS.............. $59,929 $ 18,484
===========================================================================================================
</TABLE>
- ------------
* For the period June 1, 1996 (commencement of operations) through October 31,
1996.
The accompanying notes are an integral part of the financial statements.
38
<PAGE> 40
HARBOR FUND
STATEMENT OF OPERATIONS--CONTINUED
<TABLE>
<CAPTION>
HARBOR HARBOR
CAPITAL HARBOR HARBOR HARBOR HARBOR SHORT HARBOR
APPRECIATION INTERNATIONAL II* INTERNATIONAL VALUE BOND DURATION MONEY MARKET
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
$ 9,397 $ 41 $ 87,826 $ 3,406 $ -- $-- $--
1,792 18 11,488 226 17,465 11,386 3,427
-- -- 1,106 -- -- -- --
(299) (4) (10,665) (61) -- -- --
- ----------------------------------------------------------------------------------------------------------------
10,890 55 89,755 3,571 17,465 11,386 3,427
7,627 23 31,658 613 1,722 541 187
175 -- 411 8 40 1 19
247 8 3,559 113 124 61 39
1,165 7 2,621 35 287 12 157
77 4 200 45 73 86 32
21 -- 75 2 5 2 1
237 6 81 26 48 21 32
-- 2 -- -- -- 4 --
6 2 26 2 4 3 2
21 -- 73 9 12 10 7
- ----------------------------------------------------------------------------------------------------------------
9,576 52 38,704 853 2,315 741 476
-- (8) (1,757) -- (592) (270) (75)
(31) (1) (25) (2) (10) (23) (3)
- ----------------------------------------------------------------------------------------------------------------
9,545 43 36,922 851 1,713 448 398
-- -- -- -- -- 1,702 --
- ----------------------------------------------------------------------------------------------------------------
1,345 12 52,833 2,720 15,752 9,236 3,029
49,267 72 103,485 14,008 (2,543) 641 80
(2) -- (62) -- 228 37 --
-- -- -- -- -- (306) --
-- -- -- -- (1,117) (817) --
-- -- -- -- 719 (319) --
115,878 209 448,920 3,771 3,179 1,436 --
-- -- -- -- 2,234 (358) --
-- -- -- -- 222 174 --
(1) -- (149) -- 2 -- --
- ----------------------------------------------------------------------------------------------------------------
165,142 281 552,194 17,779 2,924 488 80
- ----------------------------------------------------------------------------------------------------------------
$166,487 $ 293 $ 605,027 $20,499 $18,676 $ 9,724 $3,109
================================================================================================================
</TABLE>
39
<PAGE> 41
HARBOR FUND
STATEMENT OF CHANGES IN NET ASSETS
(All amounts in Thousands)
<TABLE>
<CAPTION>
HARBOR
HARBOR HARBOR CAPITAL
INTERNATIONAL GROWTH GROWTH APPRECIATION
------------------------- ------------------------- -----------
NOVEMBER 1, NOVEMBER 1, NOVEMBER 1, NOVEMBER 1, NOVEMBER 1,
1995 1994 1995 1994 1995
THROUGH THROUGH THROUGH THROUGH THROUGH
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1996 1995 1996 1995 1996
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS:
Operations:
Net investment income/(loss)................. $ 2,845 $ 1,144 $ (653) $ (416) $ 1,345
Net realized gain/(loss) on investments,
foreign currency transactions, investments
sold short, futures and written options.... 16,393 (3,560) 29,141 15,819 49,265
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................................. 40,691 9,467 (10,004) 16,576 115,877
- -----------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS.............................. 59,929 7,051 18,484 31,979 166,487
- -----------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
Net investment income........................ (1,243) (533) -- -- (1,102)
Net realized gain on investments............. -- -- (15,306) (3,521) (13,411)
In excess of net investment income........... -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS.......... (1,243) (533) (15,306) (3,521) (14,513)
- -----------------------------------------------------------------------------------------------------------------------
Capital share transactions:
Net proceeds from sale of shares............. 363,320 61,329 30,154 16,884 806,799
Net asset value of shares issued in
connection with reinvestment of:
Dividends from net investment income....... 1,098 509 -- -- 901
Distributions from net realized gain....... -- -- 14,703 3,444 11,286
Cost of shares reacquired.................... (66,550) (20,675) (72,048) (52,592) (313,496)
- -----------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) DERIVED FROM CAPITAL
TRANSACTIONS............................... 297,868 41,163 (27,191) (32,264) 505,490
- -----------------------------------------------------------------------------------------------------------------------
Net increase/(decrease) in net assets........ 356,554 47,681 (24,013) (3,806) 657,464
NET ASSETS:
Beginning of period............................ 122,415 74,734 137,524 141,330 925,751
- -----------------------------------------------------------------------------------------------------------------------
END OF PERIOD*................................. $ 478,969 $ 122,415 $ 113,511 $ 137,524 $1,583,215
=======================================================================================================================
NUMBER OF CAPITAL SHARES:
Sold........................................... 25,679 5,406 1,935 1,193 33,867
Reinvested in payment of ordinary income
dividends.................................... 88 50 -- -- 39
Reinvested in payment of capital gain
distributions................................ -- -- 1,025 291 506
Reacquired..................................... (4,669) (1,824) (4,610) (3,758) (13,136)
- -----------------------------------------------------------------------------------------------------------------------
Net increase/(decrease) in shares
outstanding.................................. 21,098 3,632 (1,650) (2,274) 21,276
Outstanding:
Beginning of period.......................... 10,113 6,481 8,742 11,016 39,898
- -----------------------------------------------------------------------------------------------------------------------
End of period................................ 31,211 10,113 7,092 8,742 61,174
=======================================================================================================================
* Includes undistributed/(over-distributed) net
investment income of:......................... $ 2,716 $ 1,087 $ -- $ (211) $ 899
<CAPTION>
HARBOR
CAPITAL HARBOR
APPRECIATION INTERNATIONAL II(A)
------------ --------------------
NOVEMBER 1, JUNE 1,
1994 1996
THROUGH THROUGH
OCTOBER 31, OCTOBER 31,
1995 1996
- ------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS:
Operations:
Net investment income/(loss)................. $ 1,181 $ 12
Net realized gain/(loss) on investments,
foreign currency transactions, investments
sold short, futures and written options.... 12,262 72
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................................. 153,009 209
- ------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS.............................. 166,452 293
- ------------------------------------------------------------------------------------
Distributions to shareholders:
Net investment income........................ (531) --
Net realized gain on investments............. (2,447) --
In excess of net investment income........... -- --
- ------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS.......... (2,978) --
- ------------------------------------------------------------------------------------
Capital share transactions:
Net proceeds from sale of shares............. 684,102 12,877
Net asset value of shares issued in
connection with reinvestment of:
Dividends from net investment income....... 478 --
Distributions from net realized gain....... 2,273 --
Cost of shares reacquired.................... (150,560) (597)
- ------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) DERIVED FROM CAPITAL
TRANSACTIONS............................... 536,293 12,280
- ------------------------------------------------------------------------------------
Net increase/(decrease) in net assets........ 699,767 12,573
NET ASSETS:
Beginning of period............................ 225,984 --
- ------------------------------------------------------------------------------------
END OF PERIOD*................................. $ 925,751 $ 12,573
====================================================================================
NUMBER OF CAPITAL SHARES:
Sold........................................... 33,628 1,259
Reinvested in payment of ordinary income
dividends.................................... 29 --
Reinvested in payment of capital gain
distributions................................ 136 --
Reacquired..................................... (6,952) (58)
- ------------------------------------------------------------------------------------
Net increase/(decrease) in shares
outstanding.................................. 26,841 1,201
Outstanding:
Beginning of period.......................... 13,057 --
- ------------------------------------------------------------------------------------
End of period................................ 39,898 1,201
====================================================================================
* Includes undistributed/(over-distributed) net
investment income of:......................... $ 960 $ 17
</TABLE>
- ------------
(a) Harbor International Fund II commenced operations on June 1, 1996.
The accompanying notes are an integral part of the financial statements.
40
<PAGE> 42
HARBOR FUND
STATEMENT OF CHANGES IN NET ASSETS--CONTINUED
<TABLE>
<CAPTION>
HARBOR HARBOR HARBOR HARBOR
INTERNATIONAL VALUE BOND SHORT DURATION
------------------------- --------------------------- --------------------------- ---------------------------
NOVEMBER 1, NOVEMBER 1, NOVEMBER 1, NOVEMBER 1, NOVEMBER 1, NOVEMBER 1, NOVEMBER 1, NOVEMBER 1,
1995 1994 1995 1994 1995 1994 1995 1994
THROUGH THROUGH THROUGH THROUGH THROUGH THROUGH THROUGH THROUGH
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1996 1995 1996 1995 1996 1995 1996 1995
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 52,833 $ 47,493 $ 2,720 $ 2,056 $ 15,752 $ 13,389 $ 9,236 $ 6,742
103,423 15,243 14,008 7,373 (2,713) 2,384 (764) (23)
448,771 93,622 3,771 3,843 5,637 10,415 1,252 412
- -------------------------------------------------------------------------------------------------------------------------------
605,027 156,358 20,499 13,272 18,676 26,188 9,724 7,131
- -------------------------------------------------------------------------------------------------------------------------------
(49,438) (28,585) (2,656) (2,011) (16,286) (11,944) (9,846) (6,753)
(15,558) (108,512) (7,407) (4,674) -- -- -- --
-- -- -- -- -- -- (600) (113)
- -------------------------------------------------------------------------------------------------------------------------------
(64,996) (137,097) (10,063) (6,685) (16,286) (11,944) (10,446) (6,866)
- -------------------------------------------------------------------------------------------------------------------------------
593,874 508,760 24,176 22,823 124,191 105,018 462,578 522,144
42,301 24,870 2,514 1,895 13,367 9,623 10,425 6,849
13,889 97,657 6,973 4,429 -- -- -- --
(427,125) (513,025) (16,504) (10,610) (83,097) (68,108) (394,990) (540,142)
- -------------------------------------------------------------------------------------------------------------------------------
222,939 118,262 17,159 18,537 54,461 46,533 78,013 (11,149)
- -------------------------------------------------------------------------------------------------------------------------------
762,970 137,523 27,595 25,124 56,851 60,777 77,291 (10,884)
3,267,157 3,129,634 84,514 59,390 222,998 162,221 105,007 115,891
- -------------------------------------------------------------------------------------------------------------------------------
$4,030,127 $3,267,157 $ 112,109 $ 84,514 $ 279,849 $ 222,998 $ 182,298 $ 105,007
===============================================================================================================================
20,382 19,982 1,611 1,675 11,140 9,770 52,668 59,268
1,528 1,023 166 141 1,213 894 1,192 779
502 4,017 492 371 -- -- -- --
(14,625) (20,136) (1,080) (787) (7,447) (6,361) (45,019) (61,359)
- -------------------------------------------------------------------------------------------------------------------------------
7,787 4,886 1,189 1,400 4,906 4,303 8,841 (1,312)
121,339 116,453 5,800 4,400 19,893 15,590 11,902 13,214
- -------------------------------------------------------------------------------------------------------------------------------
129,126 121,339 6,989 5,800 24,799 19,893 20,743 11,902
===============================================================================================================================
$ 50,361 $ 48,010 $ 199 $ 121 $ 1,684 $ 1,445 $ 636 $ (113)
<CAPTION>
HARBOR
MONEY MARKET
---------------------------
NOVEMBER 1, NOVEMBER 1,
1995 1994
THROUGH THROUGH
OCTOBER 31, OCTOBER 31,
1996 1995
- ---------------------------------
<S> <C> <C>
$ 3,029 $ 3,553
80 65
-- --
- ---------------------------------
3,109 3,618
- ---------------------------------
(3,029) (3,553)
(80) (65)
-- --
- ---------------------------------
(3,109) (3,618)
- ---------------------------------
86,059 83,478
2,997 3,522
-- --
(87,557) (82,532)
- ---------------------------------
1,499 4,468
- ---------------------------------
1,499 4,468
64,492 60,024
- ---------------------------------
$ 65,991 $ 64,492
=================================
86,059 83,478
2,997 3,522
-- --
(87,557) (82,532)
- ---------------------------------
1,499 4,468
64,492 60,024
- ---------------------------------
65,991 64,492
=================================
$ -- $ --
</TABLE>
41
<PAGE> 43
HARBOR FUND FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING FOR THE PERIODS PRESENTED
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
-----------------------------------------
NET REALIZED AND LESS DISTRIBUTIONS
UNREALIZED GAINS/(LOSSES) ----------------------------------
NET ASSET VALUE ON INVESTMENTS, FUTURES, TOTAL FROM DIVIDENDS FROM DISTRIBUTIONS FROM
BEGINNING OF NET INVESTMENT OPTIONS AND FOREIGN INVESTMENT NET INVESTMENT NET REALIZED
YEAR/PERIOD ENDED PERIOD INCOME/(LOSS) CURRENCY CONTRACTS OPERATIONS INCOME CAPITAL GAINS**
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
HARBOR INTERNATIONAL GROWTH FUND
October 31, 1996.... $ 12.10 $ .14(a) $ 3.22 $ 3.36 $ (.11) $--
October 31, 1995.... 11.53 .11* .54 .65 (.08) --
October 31,
1994(1)........... 10.00 .07* 1.47 1.54 (.01) --
- ------------------------------------------------------------------------------------------------------------------------------
HARBOR GROWTH FUND(2)
October 31, 1996.... $ 15.73 $ (.08)(a) $ 2.20 $ 2.12 $-- $(1.85)
October 31, 1995.... 12.83 (.04) 3.26 3.22 -- (.32)
October 31, 1994.... 14.01 -- (1.16) (1.16) -- (.02)
October 31, 1993.... 12.42 .01 2.95 2.96 (.01) (1.36)
October 31, 1992.... 15.76 .02 (1.01) (.99) (.04) (2.31)
- ------------------------------------------------------------------------------------------------------------------------------
HARBOR CAPITAL APPRECIATION FUND(3)
October 31, 1996.... $ 23.20 $ .02 $ 3.00 $ 3.02 $ (.03) $ (.31)
October 31, 1995.... 17.31 .04 6.06 6.10 (.04) (.17)
October 31, 1994.... 17.30 .03 1.14 1.17 (.03) (1.13)
October 31, 1993.... 16.30 .03 3.03 3.06 (.02) (2.04)
October 31, 1992.... 15.18 .02 2.12 2.14 (.04) (.98)
- ------------------------------------------------------------------------------------------------------------------------------
HARBOR INTERNATIONAL FUND II(4)
October 31, 1996.... $ 10.00 $ .01* $ .46 $ .47 $ .00 $ .00
- ------------------------------------------------------------------------------------------------------------------------------
HARBOR INTERNATIONAL FUND(5)
October 31, 1996.... $ 26.93 $ .41* $ 4.41 $ 4.82 $ (.41) $ (.13)
October 31, 1995.... 26.87 .39* .85 1.24 (.24) (.94)
October 31, 1994.... 22.85 .26* 3.98 4.24 (.22) --
October 31, 1993.... 16.77 .17* 6.31 6.48 (.22) (.18)
October 31, 1992.... 17.69 .24 (.95) (.71) (.21) --
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
IN EXCESS OF
NET INVESTMENT
YEAR/PERIOD ENDED INCOME
- ------------------------------------
<S> <C>
HARBOR INTERNATIONAL GROWTH FUND
October 31, 1996.... $--
October 31, 1995.... --
October 31,
1994(1)........... --
- ------------------------------------
HARBOR GROWTH FUND(2)
October 31, 1996.... $--
October 31, 1995.... --
October 31, 1994.... --
October 31, 1993.... --
October 31, 1992.... --
- ------------------------------------
HARBOR CAPITAL APPRECIATION FUND(3)
October 31, 1996.... $--
October 31, 1995.... --
October 31, 1994.... --
October 31, 1993.... --
October 31, 1992.... --
- ------------------------------------
HARBOR INTERNATIONAL FUND II(4)
October 31, 1996.... $--
- ------------------------------------
HARBOR INTERNATIONAL FUND(5)
October 31, 1996.... $--
October 31, 1995.... --
October 31, 1994.... --
October 31, 1993.... --
October 31, 1992.... --
- ------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
42
<PAGE> 44
HARBOR FUND FINANCIAL HIGHLIGHTS--CONTINUED
SELECTED DATA FOR A SHARE OUTSTANDING FOR THE PERIODS PRESENTED
<TABLE>
<CAPTION>
TAX RATIO OF RATIO OF
RETURN NET ASSET NET ASSETS OPERATING EXPENSES INTEREST EXPENSE
OF TOTAL VALUE END TOTAL END OF PERIOD TO AVERAGE TO AVERAGE
CAPITAL DISTRIBUTIONS OF PERIOD RETURN ($ THOUSANDS) NET ASSETS (%) NET ASSETS (%)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$-- $ (.11) $ 15.35 27.86% $ 478,969 1.10% --
-- (.08) 12.10 5.83 122,415 1.21* --
-- (.01) 11.53 15.36 74,734 1.32* --
- --------------------------------------------------------------------------------------------------------------------
$-- $ (1.85) $ 16.00 14.84% $ 113,511 .92% --
-- (.32) 15.73 25.93 137,524 .93 --
-- (.02) 12.83 (8.29) 141,330 .93 --
-- (1.37) 14.01 26.17 208,320 .90 --
-- (2.35) 12.42 (7.48) 191,464 .90 --
- --------------------------------------------------------------------------------------------------------------------
$-- $ (.34) $ 25.88 13.22% $ 1,583,215 .75% --
-- (.21) 23.20 35.73 925,751 .75 --
-- (1.16) 17.31 7.25 225,984 .81 --
-- (2.06) 17.30 20.16 145,331 .86 --
-- (1.02) 16.30 14.41 77,445 .91 --
- --------------------------------------------------------------------------------------------------------------------
$-- $ 0.00 $ 10.47 4.70%++ $ 12,573 1.44%*+ --
- --------------------------------------------------------------------------------------------------------------------
$-- $ (0.54) $ 31.21 18.17% $ 4,030,127 .99%* --
-- (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 --
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
RATIO OF NET
INVESTMENT INCOME AVERAGE
TO AVERAGE PORTFOLIO COMMISSION
NET ASSETS (%) TURNOVER (%) RATE PAID***
- ---------------------------------------------------------
<S> <C> <C> <C>
.99% 55.17% $ 0.0322
1.31* 74.86 --
.87* 41.80 --
- ---------------------------------------------------------
(.50)% 87.97% $ 0.0561
(.30) 87.94 --
-- 115.89 --
.11 170.85 --
.14 83.83 --
- ---------------------------------------------------------
.11% 73.69% $ 0.0629
.23 51.65 --
.24 72.89 --
.24 93.24 --
.12 69.33 --
- ---------------------------------------------------------
.40%*+ 2.61%+ $ 0.0003
- ---------------------------------------------------------
1.42%* 9.73% $ 0.0119
1.53* 14.01 --
1.09* 28.70 --
1.28* 15.70 --
1.98 24.67 --
- ---------------------------------------------------------
</TABLE>
43
<PAGE> 45
HARBOR FUND FINANCIAL HIGHLIGHTS--CONTINUED
SELECTED DATA FOR A SHARE OUTSTANDING FOR THE PERIODS PRESENTED
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
-----------------------------------------
NET REALIZED AND LESS DISTRIBUTIONS
UNREALIZED GAINS/(LOSSES) ----------------------------------
NET ASSET VALUE ON INVESTMENTS, FUTURES, TOTAL FROM DIVIDENDS FROM DISTRIBUTIONS FROM IN EXCESS OF
YEAR/PERIOD BEGINNING OF NET INVESTMENT OPTIONS AND FOREIGN INVESTMENT NET INVESTMENT NET REALIZED NET INVESTMENT
ENDED PERIOD INCOME/(LOSS) CURRENCY CONTRACTS OPERATIONS INCOME CAPITAL GAINS** INCOME
<S> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
HARBOR VALUE FUND(6)
October
31,
1996... $ 14.57 $ .40 $ 2.74 $ 3.14 $ (.40) $(1.27) $--
October
31,
1995... 13.50 .40 2.13 2.53 (.39) (1.07) --
October
31,
1994... 14.31 .36 .27 .63 (.34) (1.10) --
October
31,
1993... 13.24 .35 1.22 1.57 (.35) (.15) --
October
31,
1992... 13.10 .41* .49 .90 (.41) (.35) --
HARBOR BOND FUND
October
31,
1996... $ 11.21 $ .72* $ .09 $ .81 $ (.74) $-- $--
October
31,
1995... 10.41 .74* .73 1.47 (.67) -- --
October
31,
1994... 11.92 .68* (1.02) (.34) (.67) (.50) --
October
31,
1993... 11.35 .68* .82 1.50 (.68) (.25) --
October
31,
1992... 11.11 .79* .50 1.29 (.79) (.26) --
HARBOR SHORT DURATION FUND
October
31,
1996... $ 8.82 $ .63* $ (.02) $ .61 $ (.60) $-- $ (.04)
October
31,
1995... 8.77 .52* .06 .58 (.52) -- (.01)
October
31,
1994... 9.68 .34* (.12) .22 (1.08) -- --
October
31,
1993... 10.09 .34* .16 .50 (.82) (.09) --
October
31,
1992(7)... 10.00 .29* .08 .37 (.28) -- --
HARBOR MONEY MARKET FUND
October
31,
1996... $ 1.00 $ .05* $-- $ .05 $ (.05) $-- $--
October
31,
1995... 1.00 .06* -- .06 (.06) -- --
October
31,
1994... 1.00 .03* -- .03 (.03) -- --
October
31,
1993... 1.00 .03* -- .03 (.03) -- --
October
31,
1992... 1.00 .04* -- .04 (.04) -- --
</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:
Period ended October 31, 1996--International II $.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, 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 $.01 per share.
** Includes both short-term and long-term capital gains.
*** Average commission rate paid may vary from period to period and fund to fund
depending on the mix of trades executed in various markets where trading
practices and commission rate structures may differ.
(a) Based on monthly average of shares outstanding during the fiscal year.
The accompanying notes are an integral part of the financial statements.
44
<PAGE> 46
HARBOR FUND FINANCIAL HIGHLIGHTS--CONTINUED
SELECTED DATA FOR A SHARE OUTSTANDING FOR THE PERIODS PRESENTED
<TABLE>
<CAPTION>
TAX RATIO OF RATIO OF
RETURN NET ASSET NET ASSETS OPERATING EXPENSES INTEREST EXPENSE
OF TOTAL VALUE END TOTAL END OF PERIOD TO AVERAGE TO AVERAGE
CAPITAL DISTRIBUTIONS OF PERIOD RETURN ($ THOUSANDS) NET ASSETS (%) NET ASSETS (%)
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
$ -- $ (1.67) $ 16.04 23.08% $ 112,109 .83% --
(1.46) 14.57 21.02 84,514 .90 --
(1.44) 13.50 4.80 59,390 1.04 --
(.50) 14.31 11.99 59,884 .88 --
(.76) 13.24 7.06 63,974 .84* --
$ -- $ (.74) $ 11.28 7.56% $ 279,849 .70%* --
(.67) 11.21 14.56 222,998 .70* --
(1.17) 10.41 (3.14) 162,221 .77* --
(.93) 11.92 13.98 164,382 .72* --
(1.05) 11.35 12.14 65,420 .77* --
$ -- $ (.64) $ 8.79 7.24% $ 182,292 .33%* 1.26%
(.53) 8.82 6.82 105,007 .38* 1.46
(.05) (1.13) 8.77 2.53 115,891 .38* 1.26
(.91) 9.68 5.18 135,189 .43* .69
(.28) 10.09 3.72++ 186,523 .35*+ 1.19+
$ -- $ (.05) $ 1.00 5.08% $ 65,991 .64%* --
(.06) 1.00 5.66 64,492 .61* --
(.03) 1.00 3.53 60,024 .67* --
(.03) 1.00 2.68 46,879 .71* --
(.04) 1.00 3.67 55,244 .69* --
<CAPTION>
RATIO OF NET
INVESTMENT INCOME AVERAGE
TO AVERAGE PORTFOLIO COMMISSION
NET ASSETS (%) TURNOVER (%) RATE PAID***
<S> <C> <C>
----------------------------------------------------
2.65% 132.39% $ 0.0448
3.00 135.93 --
2.66 150.94 --
2.48 50.20 --
3.11* 19.68 --
6.40%* 192.64% --
7.11* 88.69 --
6.29* 150.99 --
6.19* 119.92 --
7.30* 52.54 --
6.84%* 1,277.82% --
6.19* 725.96 --
4.61* 895.76 --
4.19* 1,212.20 --
3.79*+ 2,759.70 --
4.85%* N/A --
5.42* N/A --
3.38* N/A --
2.58* N/A --
3.39* N/A --
</TABLE>
(1) For the period November 1, 1993 (commencement of operations) through October
31, 1994.
(2) Effective January 1, 1993, Harbor Growth Fund appointed Nicholas Applegate
Capital Management as its Subadviser.
(3) Effective May 1, 1990, Harbor Capital Appreciation Fund appointed Jennison
Associates Capital Corp. as its Subadviser.
(4) For the period June 1, 1996 (commencement of operations) through October 31,
1996.
(5) Effective April 1, 1993, Harbor International Fund appointed Northern Cross
Investments Limited as its Subadviser.
(6) Harbor Value Fund appointed Richards & Tierney, Inc. and DePrince, Race, &
Zollo, Inc. as its Subadvisers effective November 1, 1993 and April 20,
1995, respectively.
(7) For the period January 1, 1992 (commencement of operations) through October
31, 1992.
+ Annualized
++ Unannualized
45
<PAGE> 47
HARBOR SHORT DURATION FUND
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
OCTOBER 31, 1996
------------------
AMOUNTS IN
THOUSANDS
<S> <C>
Cash flows used for operating activities:
Investment income received (excluding net amortization of ($60))....................... $ 11,262
Payment of operating expenses.......................................................... (387)
Interest paid.......................................................................... (1,233)
Purchase of investments................................................................ (1,779,958)
Proceeds from sales and maturities of investments...................................... 1,757,102
Net purchases of short-term investments................................................ (15,627)
Cash used for futures contracts........................................................ (402)
Cash used for forward currency contracts............................................... (137)
Cash provided by other assets.......................................................... (7)
-----------
CASH USED BY OPERATING ACTIVITIES.................................................... (29,387)
-----------
Cash flows from financing activities:
Capital stock proceeds................................................................. 462,575
Payment to repurchase capital stock.................................................... (408,433)
Cash dividends paid.................................................................... (21)
Net proceeds from reverse repurchase agreements........................................ 63
-----------
NET CASH FROM FINANCING ACTIVITIES................................................... 54,184
-----------
Net increase in cash..................................................................... 24,797
-----------
Cash at beginning of period.............................................................. 78
Foreign currency at beginning of period, at cost......................................... 0
-----------
Total cash at beginning of period........................................................ 78
Cash at end of period.................................................................... 0
Foreign currency at end of period, at cost............................................... 24,875
-----------
Total cash at end of period.......................................................... $ 24,875
===========
RECONCILIATION OF NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS TO NET CASH USED
BY OPERATING ACTIVITIES:
Net increase in net assets resulting from operations..................................... $ 9,724
-----------
Increase in investments................................................................ (63,371)
Increase in securities sold short and TBA sales........................................ 65,607
Change in unrealized depreciation--net................................................. (1,436)
Increase in receivables for securities sold............................................ (121,368)
Increase in interest receivable........................................................ (184)
Increase in receivables for futures and forward currency contracts..................... (117)
Increase in other assets............................................................... (7)
Increase in payable for securities purchased........................................... 81,236
Increase in accrued expense and other liabilities...................................... 529
-----------
Total adjustments.................................................................... (39,111)
-----------
Cash used by operating activities........................................................ $ (29,387)
===========
</TABLE>
During the year ended October 31, 1996, cash payments of interest expense
on reverse repurchase agreements and short sales were $1,233.
The accompanying notes are an integral part of the financial statements.
46
<PAGE> 48
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--OCTOBER 31, 1996
($ in Thousands)
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 nine 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, 1996, the Trust
consisted of the following funds: Harbor International Growth Fund, Harbor
Growth Fund, Harbor Capital Appreciation Fund, Harbor International Fund II,
Harbor International 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 preparation of
financial statements in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates. 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 or as otherwise described below, selected
by the adviser which determines valuation 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 the 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 or for which prices are
deemed by the adviser or subadviser not to be representative of market values,
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. The actual calculation of fair market value may be done by others
including the adviser and subadviser.
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.
FUTURE 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
47
<PAGE> 49
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
($ in Thousands)
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
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.
Harbor Short Duration Fund enters into purchased options on interest rate
swaps ("swaptions"). A purchased swaption allows the Fund, as purchaser, and
obligates the writer upon exercise, to enter into an interest rate swap
agreement, in accordance with conditions outlined in the swaption agreement
between the Fund and the counterparty to the agreement. The accounting treatment
relating to purchased swaptions is substantially the same as the policies
described above, except that swaptions are valued by the counterparty to the
swaption agreement.
The risk associated with entering into purchased swaptions is limited to
the value of the swaption. Additionally, swaption agreements involve, to varying
degrees, elements of credit risk, market risk, and interest rate risk. Such
risks involve the possibility that there is not a 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 market conditions
or interest rates.
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 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
48
<PAGE> 50
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
($ in Thousands)
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
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.
SWAP AGREEMENTS
Harbor Short Duration Fund enters into swap agreements which involve the
exchange of cash payments based on the specified terms and conditions of such
agreements. The cash paid or received on a swap is recognized as a realized loss
or gain when such payment is paid or received. The value of each swap is
determined by the counterparty to the swap agreement using a methodology which
discounts the expected future cash receipts or disbursements related to the
swap. Unrealized gains or losses are reported as an asset or a liability in the
Statement of Assets and Liabilities.
Entering into swap agreements involves, to varying degrees, elements of
credit risk, market risk, and interest rate risk in excess of the amount
recognized in the Statement of Assets and Liabilities. Such risks involve the
possibility that there is not a 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 market conditions or interest rates.
The fee from swap agreements of .1375% of the notional amount is included
in interest income on the Statement of Operations.
TBA PURCHASE COMMITMENTS
Harbor Bond Fund and Harbor Short Duration Fund enter 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 that 1.0% from the principal amount. 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 Funds 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.
49
<PAGE> 51
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
($ in Thousands)
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
TBA SALE COMMITMENTS
Harbor Bond Fund and Harbor Short Duration Fund enter into "TBA" sale
commitments to hedge portfolio positions or to sell mortgage-backed securities
owned under delayed delivery arrangements. Proceeds of TBA sale commitments are
not received until the contractual settlement date.
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 based upon the unit price established at the date the
commitment was entered into.
FORWARD CURRENCY CONTRACTS
Each Fund (excluding the Money Market 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. 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 rate when
accrued or incurred.
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 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.
50
<PAGE> 52
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
($ in Thousands)
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
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.
STATEMENT OF CASH FLOWS
Information on financial transactions which have settled through the
receipt and disbursement of cash is presented in the Statement of Cash Flows for
Harbor Short Duration Fund. The cash amounts shown in the Statement of Cash
Flows is the amount reported as cash and foreign currency in Harbor Short
Duration Fund's Statement of Assets and Liabilities and represents cash on hand
in its custodian bank account and does not include any short-term investments at
October 31, 1996.
INVESTMENT INCOME
Dividends declared are accrued on the ex-dividend date, except that, for
Harbor International Growth Fund, Harbor International Fund II 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.
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, Harbor
International Fund II 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, $21 and $21, respectively.
These costs are being amortized on a straight-line basis over a five-year period
from the commencement of operations of the Fund.
FEDERAL TAXES
Each Fund is treated as a separate entity for federal tax purposes. Each
Fund's policy is to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute to its
shareholders all of its taxable income within the prescribed time. It is also
the intention of each Fund to distribute an amount sufficient to avoid
imposition of any excise tax under Section 4982 of the Internal Revenue Code.
Therefore, no provision has been made for federal taxes on income, capital gains
or unrealized appreciation of securities held or excise tax on income and
capital gains.
51
<PAGE> 53
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
($ in Thousands)
NOTE 3--INVESTMENT PORTFOLIO TRANSACTIONS
Purchases and sales of investments, other than short-term securities, for
each Fund for the year ended October 31, 1996 were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
------------------------ ----------------------
U.S. U.S.
FUND GOVERNMENT OTHER GOVERNMENT OTHER
- ----------------------------------------------------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C>
Harbor International Growth.......................... $ -- $ 449,752 $ -- $153,508
Harbor Growth........................................ -- 110,947 -- 150,878
Harbor Capital Appreciation.......................... 2,877 1,389,640 14,353 902,407
Harbor International II.............................. -- 12,533 -- 414
Harbor International................................. -- 344,874 -- 535,553
Harbor Value......................................... 97 137,651 -- 128,884
Harbor Bond.......................................... 440,070 30,203 399,530 31,461
Harbor Short Duration................................ 1,426,494 88,934 1,340,786 95,515
</TABLE>
Harbor Money Market's purchases and sales (including maturities) of
investment securities (all short term obligations) aggregated $1,783 and $1,784,
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.
Transactions in futures contracts for the year ended October 31, 1996 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.............. 625 $ 62,500 -- --
Contracts opened.......................................... 4,200 420,000 -- --
Contracts closed.......................................... (3,760) (376,000) -- --
------ ------------ ------ ------------
Open at 10/31/96.......................................... 1,065 $ 106,500 -- --
====== ============ ====== ============
HARBOR SHORT DURATION FUND
Contracts outstanding at beginning of period.............. 200 $ 20,000 355 $ 35,500
Contracts opened.......................................... 652 79,650 1,880 199,100
Contracts closed.......................................... (852) (99,650) (1,639) (164,900)
------ ------------ ------ ------------
Open at 10/31/96.......................................... -- $ -- 596 $ 69,700
====== ============ ====== ============
</TABLE>
52
<PAGE> 54
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
($ in Thousands)
NOTE 3--INVESTMENT PORTFOLIO TRANSACTIONS--CONTINUED
<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............ 200 $ 30,000 -- $ --
Contracts opened........................................ 296 34,800 -- --
Contracts closed........................................ (496) (64,800) -- --
----- ------------ ---- ----------
Open at 10/31/96........................................ -- $ -- --
===== ============ ==== ==========
HARBOR SHORT DURATION FUND
Contracts outstanding at beginning of period............ 5 $ 1,250 -- $ --
Contracts opened........................................ 1,067 249,750 760 105,350
Contracts closed........................................ (844) (194,000) (732) (98,350)
----- ------------ ---- ---------
Open at 10/31/96........................................ 228 $ 57,000 28 $ 7,000
===== ============ ==== ==========
</TABLE>
SECURITIES LENDING
The market value of securities on loan to broker/dealers at October 31,
1996, 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...................................... $ 7,275 $ 8,668
Harbor International............................................. 19,304 20,403
</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, 1996 all collateral received was
cash and was subsequently invested in cash equivalents.
Securities lending fees are negotiated by the Fund and are based on the
number and duration of lending transactions.
WRITTEN OPTIONS
Transactions in written options for the year ended October 31, 1996 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
Options opened.............................................................. 400 40,000
Options expired............................................................. (700) (70,000)
---- ----------
Open at 10/31/96............................................................ -- $ --
==== ==========
</TABLE>
53
<PAGE> 55
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
($ in Thousands)
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................................. 265 $ 265,000
Options opened............................................................. 410 410,000
Options closed/expired..................................................... (265) (265,000)
---- ---------
Open at 10/31/96........................................................... 410 $ 410,000
==== =========
</TABLE>
<TABLE>
<CAPTION>
OPTIONS WRITTEN
-------------------------
U.S. TREASURY FUTURES
-------------------------
NUMBER OF AGGREGATE
CONTRACTS FACE VALUE
--------- ----------
<S> <C> <C>
HARBOR SHORT DURATION FUND
Options outstanding at beginning of period.................................. -- $ --
Options opened.............................................................. 223 22,300
Options closed/expired...................................................... (223) (22,300)
---- -------
Open at 10/31/96............................................................ -- $ --
==== =======
</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, 1996.
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% $ 2,141
Harbor Growth.......................................................... 0.75% 981
Harbor Capital Appreciation............................................ 0.60% 7,627
Harbor International II................................................ 0.75% 23
Harbor International................................................... 0.85% 31,658
Harbor Value........................................................... 0.60% 613
Harbor Bond............................................................ 0.70% 1,722
Harbor Short Duration.................................................. 0.40% 541
Harbor Money Market.................................................... 0.30% 187
</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,
1996, Harbor agreed not to impose advisory fees of $8, $592, $270, and $75
relating to Harbor International Fund II, Harbor Bond Fund, Harbor Short
Duration Fund and Harbor Money Market Fund, respectively; and Harbor and
Northern Cross Investments Limited agreed not to impose $1,757 of the advisory
fee for Harbor International Fund.
54
<PAGE> 56
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
($ in Thousands)
NOTE 4--FEES AND OTHER TRANSACTIONS WITH AFFILIATES--CONTINUED
The Trust reimburses Harbor for certain legal expenses incurred by Harbor
with respect to the Trust. Such amounts aggregated $59 for the year ended
October 31, 1996.
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, 1996, 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
SECURITIES AND BENEFIT PLANS OF
FUND HARBOR TRANSFER OWENS-ILLINOIS, INC.
---- --------------- --------------------
<S> <C> <C>
Harbor International Growth................................. 32,677 576,058
Harbor Growth............................................... 19,273 3,793,808
Harbor Capital Appreciation................................. 6 2,041,449
Harbor International II..................................... 200,000 31,486
Harbor International........................................ 4 1,624,321
Harbor Value................................................ 7 2,216,468
Harbor Bond................................................. 8 1,870,222
Harbor Short Duration....................................... 1,238,144 18,540,386
Harbor Money Market......................................... 37,604 18,766,061
</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, 1996 totaled
$4,738.
"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 $112 for the year ended October 31, 1996.
CUSTODIAN
Payments to the custodian have been reduced by balance credits applied to
each portfolio for the year ended October 31, 1996. For the Harbor International
Growth Fund, Harbor Growth Fund, Harbor Capital Appreciation Fund, Harbor
International Fund II, Harbor International Fund, Harbor Value Fund, Harbor Bond
Fund, Harbor Short Duration Fund, and Harbor Money Market Fund the reduction
amounted to $19, $9, $31, $1, $25, $2, $10, $23, and $3, respectively.
NOTE 5--BORROWINGS
Short Duration Fund enters into reverse repurchase agreements with third
party broker-dealers. The Fund may use reverse repurchase agreements to borrow
short term funds. Interest on the value of reverse repurchase agreements issued
and outstanding is based upon competitive market rates at the time of
55
<PAGE> 57
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
($ in Thousands)
NOTE 5--BORROWINGS--CONTINUED
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 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, 1996 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 of 11/01/96........................... $ 56,462 5.23% $56,462 $19,388 5.24%
</TABLE>
Average debt outstanding and average interest rate during the period is
calculated based on calendar days.
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 a "reserve premium" for five years 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 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, 1996, the Funds
reclassified the following amounts:
<TABLE>
<CAPTION>
ACCUMULATED
UNDISTRIBUTED NET
NET INVESTMENT REALIZED
(LOSS) INCOME GAIN (LOSS) PAID-IN CAPITAL
-------------- ----------- ---------------
<S> <C> <C> <C>
Harbor International Growth Fund............................. 20 (16) (4)
Harbor Growth Fund........................................... 653 (660) 7
Harbor Capital Appreciation Fund............................. (287) 287 --
Harbor International Fund II................................. 5 (4) (1)
Harbor International Fund.................................... 557 30 (587)
Harbor Value Fund............................................ -- -- --
Harbor Bond Fund............................................. 338 (338) --
Harbor Short Duration Fund................................... 1,344 (22,927) 21,583
</TABLE>
At October 31, 1996 Harbor Short Duration Fund had capital loss
carryforwards of approximately $19,384, which may be available to offset future
realized capital gains, if any; $5,488, $13,538 and $358 will expire on October
31, 2001, October 31, 2002 and October 31, 2004, respectively.
56
<PAGE> 58
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
($ in Thousands)
NOTE 7--TAX INFORMATION--CONTINUED
At October 31, 1996 Harbor Bond Fund had capital loss carryforwards of
approximately $2,454, which may be available to offset future realized capital
gains, if any; $2,281 and $173 will expire on October 31, 2002 and October 31,
2004, respectively.
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, 1996 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.................... $ 426,022 $ 58,891 $ (5,847) $ 53,044
Harbor Growth Fund.................................. 90,737 25,556 (4,158) 21,398
Harbor Capital Appreciation Fund.................... 1,277,466 348,844 (42,979) 305,865
Harbor International Fund II........................ 12,458 532 (323) 209
Harbor International Fund........................... 2,784,379 1,362,587 (120,594) 1,241,993
Harbor Value Fund................................... 102,503 11,279 (2,706) 8,573
Harbor Bond Fund.................................... 319,739 5,591 (1,396) 4,195
Harbor Short Duration Fund.......................... 255,279 966 (2,108) (1,142)
</TABLE>
HARBOR FUND
ADDITIONAL INFORMATION
($ in Thousands, except per share amounts)
ADDITIONAL FEDERAL TAX INFORMATION
Harbor Value Fund designates 25% 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 $706 or $.12 per share on December 26, 1995.
The Form 1099 you receive in January, 1997 for each of the Funds will show
the tax status of all distributions paid to your account in calendar year 1996.
(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.
Trustee P.O. Box 10048
Howard P. Colhoun Trustee Toledo, Ohio 43699-0048
John P. Gould Trustee 1-800-422-1050
Rodger F. Smith Trustee CUSTODIAN
Constance L. Souders Secretary and Treasurer State Street Bank and Trust
INVESTMENT ADVISER Company
Harbor Capital Advisors, P.O. Box 1713
Inc. Boston, MA 02105
One SeaGate INDEPENDENT ACCOUNTANTS
Toledo, OH 43666 Price Waterhouse LLP
DISTRIBUTOR AND 160 Federal Street
PRINCIPAL UNDERWRITER Boston, MA 02110
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]
One SeaGate
Toledo, Ohio 43666
1-800-422-1050
222,500/12/96 (RECYCLE LOGO)
recycled paper
<PAGE> 60
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- --------- ----------- ------------
<S> <C> <C>
EX-27.1 Financial Data Schedule
EX-27.2 Financial Data Schedule
EX-27.3 Financial Data Schedule
EX-27.4 Financial Data Schedule
EX-27.5 Financial Data Schedule
EX-27.6 Financial Data Schedule
EX-27.7 Financial Data Schedule
EX-27.8 Financial Data Schedule
EX-27.9 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) HARBOR
FUND'S ANNUAL REPORT TO SHAREHOLDERS FILED ON FORM N-30D ON DEC. 26, 1996 (FILE
NO. 811-04676) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B)
FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 1
<NAME> HARBOR INTERNATIONAL GROWTH FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 425,026
<INVESTMENTS-AT-VALUE> 479,066
<RECEIVABLES> 1,829
<ASSETS-OTHER> 512
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 481,407
<PAYABLE-FOR-SECURITIES> 1,510
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 928
<TOTAL-LIABILITIES> 2,438
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 409,465
<SHARES-COMMON-STOCK> 31,211
<SHARES-COMMON-PRIOR> 10,113
<ACCUMULATED-NII-CURRENT> 2,716
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 12,746
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 54,042
<NET-ASSETS> 478,969
<DIVIDEND-INCOME> 6,031
<INTEREST-INCOME> 592
<OTHER-INCOME> (604)
<EXPENSES-NET> 3,174
<NET-INVESTMENT-INCOME> 2,845
<REALIZED-GAINS-CURRENT> 16,393
<APPREC-INCREASE-CURRENT> 40,691
<NET-CHANGE-FROM-OPS> 59,929
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,243)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 25,679
<NUMBER-OF-SHARES-REDEEMED> (4,669)
<SHARES-REINVESTED> 88
<NET-CHANGE-IN-ASSETS> 356,554
<ACCUMULATED-NII-PRIOR> 1,094
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (3,632)
<GROSS-ADVISORY-FEES> 2,141
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,193
<AVERAGE-NET-ASSETS> 287,452
<PER-SHARE-NAV-BEGIN> 12.10
<PER-SHARE-NII> 0.14
<PER-SHARE-GAIN-APPREC> 3.22
<PER-SHARE-DIVIDEND> (0.11)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 15.35
<EXPENSE-RATIO> 1.10
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) HARBOR
FUND'S ANNUAL REPORT TO SHAREHOLDERS FILED ON FORM N-30D ON DEC. 26, 1996 (FILE
NO. 811-04676) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B)
FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 2
<NAME> HARBOR GROWTH FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 90,737
<INVESTMENTS-AT-VALUE> 112,135
<RECEIVABLES> 1,545
<ASSETS-OTHER> 78
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 113,758
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 247
<TOTAL-LIABILITIES> 247
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 63,625
<SHARES-COMMON-STOCK> 7,092
<SHARES-COMMON-PRIOR> 8,742
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 28,488
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 21,398
<NET-ASSETS> 113,511
<DIVIDEND-INCOME> 329
<INTEREST-INCOME> 234
<OTHER-INCOME> (4)
<EXPENSES-NET> 1,212
<NET-INVESTMENT-INCOME> (653)
<REALIZED-GAINS-CURRENT> 29,141
<APPREC-INCREASE-CURRENT> (10,004)
<NET-CHANGE-FROM-OPS> 18,484
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (15,306)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,935
<NUMBER-OF-SHARES-REDEEMED> (4,610)
<SHARES-REINVESTED> 1,025
<NET-CHANGE-IN-ASSETS> (24,013)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 15,313
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 981
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,221
<AVERAGE-NET-ASSETS> 131,072
<PER-SHARE-NAV-BEGIN> 15.73
<PER-SHARE-NII> (0.08)
<PER-SHARE-GAIN-APPREC> 2.20
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (1.85)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 16.00
<EXPENSE-RATIO> 0.92
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) HARBOR
FUND'S ANNUAL REPORT TO SHAREHOLDERS FILED ON FORM N-30D ON DEC. 26, 1996 (FILE
NO. 811-04676) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B)
FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 3
<NAME> HARBOR CAPITAL APPRECIATION FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 1,272,162
<INVESTMENTS-AT-VALUE> 1,583,331
<RECEIVABLES> 19,015
<ASSETS-OTHER> 26
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,602,372
<PAYABLE-FOR-SECURITIES> 16,421
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,736
<TOTAL-LIABILITIES> 19,157
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,222,961
<SHARES-COMMON-STOCK> 61,174
<SHARES-COMMON-PRIOR> 39,898
<ACCUMULATED-NII-CURRENT> 899
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 48,187
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 311,168
<NET-ASSETS> 1,583,215
<DIVIDEND-INCOME> 9,397
<INTEREST-INCOME> 1,792
<OTHER-INCOME> (299)
<EXPENSES-NET> 9,545
<NET-INVESTMENT-INCOME> 1,345
<REALIZED-GAINS-CURRENT> 49,265
<APPREC-INCREASE-CURRENT> 115,877
<NET-CHANGE-FROM-OPS> 166,487
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,102)
<DISTRIBUTIONS-OF-GAINS> (13,411)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 33,867
<NUMBER-OF-SHARES-REDEEMED> (13,136)
<SHARES-REINVESTED> 545
<NET-CHANGE-IN-ASSETS> 657,464
<ACCUMULATED-NII-PRIOR> 944
<ACCUMULATED-GAINS-PRIOR> 12,047
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 7,627
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 9,576
<AVERAGE-NET-ASSETS> 1,277,531
<PER-SHARE-NAV-BEGIN> 23.20
<PER-SHARE-NII> 0.02
<PER-SHARE-GAIN-APPREC> 3.00
<PER-SHARE-DIVIDEND> (0.03)
<PER-SHARE-DISTRIBUTIONS> (0.31)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 25.88
<EXPENSE-RATIO> 0.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) HARBOR
FUND'S ANNUAL REPORT TO SHAREHOLDERS FILED ON FORM N-30D ON DEC. 26, 1996 (FILE
NO. 811-04676) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B)
FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 4
<NAME> HARBOR INTERNATIONAL FUND II
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 5-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> JUN-01-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 12,458
<INVESTMENTS-AT-VALUE> 12,667
<RECEIVABLES> 69
<ASSETS-OTHER> 58
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 12,794
<PAYABLE-FOR-SECURITIES> 172
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 49
<TOTAL-LIABILITIES> 221
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 12,279
<SHARES-COMMON-STOCK> 1,201
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 17
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 68
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 209
<NET-ASSETS> 12,573
<DIVIDEND-INCOME> 41
<INTEREST-INCOME> 18
<OTHER-INCOME> (4)
<EXPENSES-NET> 43
<NET-INVESTMENT-INCOME> 12
<REALIZED-GAINS-CURRENT> 72
<APPREC-INCREASE-CURRENT> 209
<NET-CHANGE-FROM-OPS> 293
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,259
<NUMBER-OF-SHARES-REDEEMED> (58)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 12,573
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 23
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 52
<AVERAGE-NET-ASSETS> 7,203
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.01
<PER-SHARE-GAIN-APPREC> 0.46
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.47
<EXPENSE-RATIO> 1.44
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) HARBOR
FUND'S ANNUAL REPORT TO SHAREHOLDERS FILED ON FORM N-30D ON DEC. 26, 1996 (FILE
NO. 811-04676) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B)
FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 5
<NAME> HARBOR INTERNATIONAL FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 2,784,379
<INVESTMENTS-AT-VALUE> 4,026,372
<RECEIVABLES> 12,582
<ASSETS-OTHER> 1,029
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 4,039,983
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 9,856
<TOTAL-LIABILITIES> 9,856
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,634,194
<SHARES-COMMON-STOCK> 129,126
<SHARES-COMMON-PRIOR> 121,339
<ACCUMULATED-NII-CURRENT> 50,361
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 103,329
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,242,243
<NET-ASSETS> 4,030,127
<DIVIDEND-INCOME> 87,826
<INTEREST-INCOME> 11,488
<OTHER-INCOME> (9,559)
<EXPENSES-NET> 36,922
<NET-INVESTMENT-INCOME> 52,833
<REALIZED-GAINS-CURRENT> 103,423
<APPREC-INCREASE-CURRENT> 448,771
<NET-CHANGE-FROM-OPS> 605,027
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (49,438)
<DISTRIBUTIONS-OF-GAINS> (15,558)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 20,382
<NUMBER-OF-SHARES-REDEEMED> (14,625)
<SHARES-REINVESTED> 2,030
<NET-CHANGE-IN-ASSETS> 762,970
<ACCUMULATED-NII-PRIOR> 46,408
<ACCUMULATED-GAINS-PRIOR> 15,434
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 31,658
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 38,704
<AVERAGE-NET-ASSETS> 3,724,445
<PER-SHARE-NAV-BEGIN> 26.93
<PER-SHARE-NII> 0.41
<PER-SHARE-GAIN-APPREC> 4.41
<PER-SHARE-DIVIDEND> (0.41)
<PER-SHARE-DISTRIBUTIONS> (0.13)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 31.21
<EXPENSE-RATIO> 0.99
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) HARBOR
FUND'S ANNUAL REPORT TO SHAREHOLDERS FILED ON FORM N-30D ON DEC. 26, 1996 (FILE
NO. 811-04676) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B)
FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 6
<NAME> HARBOR VALUE FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 102,354
<INVESTMENTS-AT-VALUE> 111,076
<RECEIVABLES> 2,763
<ASSETS-OTHER> 654
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 114,493
<PAYABLE-FOR-SECURITIES> 2,202
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 182
<TOTAL-LIABILITIES> 2,384
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 89,351
<SHARES-COMMON-STOCK> 6,989
<SHARES-COMMON-PRIOR> 5,800
<ACCUMULATED-NII-CURRENT> 199
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 13,837
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 8,722
<NET-ASSETS> 112,109
<DIVIDEND-INCOME> 3,406
<INTEREST-INCOME> 226
<OTHER-INCOME> (61)
<EXPENSES-NET> 851
<NET-INVESTMENT-INCOME> 2,720
<REALIZED-GAINS-CURRENT> 14,008
<APPREC-INCREASE-CURRENT> 3,771
<NET-CHANGE-FROM-OPS> 20,499
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,656)
<DISTRIBUTIONS-OF-GAINS> (7,407)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,611
<NUMBER-OF-SHARES-REDEEMED> (1,080)
<SHARES-REINVESTED> 658
<NET-CHANGE-IN-ASSETS> 27,595
<ACCUMULATED-NII-PRIOR> 134
<ACCUMULATED-GAINS-PRIOR> 7,236
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 613
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 853
<AVERAGE-NET-ASSETS> 102,509
<PER-SHARE-NAV-BEGIN> 14.57
<PER-SHARE-NII> 0.40
<PER-SHARE-GAIN-APPREC> 2.74
<PER-SHARE-DIVIDEND> (0.40)
<PER-SHARE-DISTRIBUTIONS> (1.27)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 16.04
<EXPENSE-RATIO> 0.83
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) HARBOR
FUND'S ANNUAL REPORT TO SHAREHOLDERS FILED ON FORM N-30D ON DEC. 26, 1996 (FILE
NO. 811-04676) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B)
FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 7
<NAME> HARBOR BOND FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 319,736
<INVESTMENTS-AT-VALUE> 323,934
<RECEIVABLES> 54,518
<ASSETS-OTHER> 23
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 378,475
<PAYABLE-FOR-SECURITIES> 83,604
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 15,022
<TOTAL-LIABILITIES> 98,626
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 276,226
<SHARES-COMMON-STOCK> 24,799
<SHARES-COMMON-PRIOR> 19,893
<ACCUMULATED-NII-CURRENT> 1,684
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (7,099)
<ACCUM-APPREC-OR-DEPREC> 9,038
<NET-ASSETS> 279,849
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 17,465
<OTHER-INCOME> 0
<EXPENSES-NET> 1,713
<NET-INVESTMENT-INCOME> 15,752
<REALIZED-GAINS-CURRENT> (2,713)
<APPREC-INCREASE-CURRENT> 5,637
<NET-CHANGE-FROM-OPS> 18,676
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (16,286)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 11,140
<NUMBER-OF-SHARES-REDEEMED> (7,447)
<SHARES-REINVESTED> 1,213
<NET-CHANGE-IN-ASSETS> 56,851
<ACCUMULATED-NII-PRIOR> 1,881
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (4,048)
<GROSS-ADVISORY-FEES> 1,722
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,315
<AVERAGE-NET-ASSETS> 246,021
<PER-SHARE-NAV-BEGIN> 11.21
<PER-SHARE-NII> 0.72
<PER-SHARE-GAIN-APPREC> 0.09
<PER-SHARE-DIVIDEND> (0.74)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.28
<EXPENSE-RATIO> 0.70
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) HARBOR
FUND'S ANNUAL REPORT TO SHAREHOLDERS FILED ON FORM N-30D ON DEC. 26, 1996 (FILE
NO. 811-04676) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B)
FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 8
<NAME> HARBOR SHORT DURATION FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 252,042
<INVESTMENTS-AT-VALUE> 254,137
<RECEIVABLES> 133,188
<ASSETS-OTHER> 24,924
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 412,249
<PAYABLE-FOR-SECURITIES> 83,486
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 146,465
<TOTAL-LIABILITIES> 229,951
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 203,404
<SHARES-COMMON-STOCK> 20,743
<SHARES-COMMON-PRIOR> 11,902
<ACCUMULATED-NII-CURRENT> 636
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (22,870)
<ACCUM-APPREC-OR-DEPREC> 1,128
<NET-ASSETS> 182,298
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 11,386
<OTHER-INCOME> 0
<EXPENSES-NET> 2,150
<NET-INVESTMENT-INCOME> 9,236
<REALIZED-GAINS-CURRENT> (764)
<APPREC-INCREASE-CURRENT> 1,252
<NET-CHANGE-FROM-OPS> 9,724
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (9,846)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (600)
<NUMBER-OF-SHARES-SOLD> 52,668
<NUMBER-OF-SHARES-REDEEMED> (45,019)
<SHARES-REINVESTED> 1,192
<NET-CHANGE-IN-ASSETS> 77,291
<ACCUMULATED-NII-PRIOR> 502
<ACCUMULATED-GAINS-PRIOR> 821
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 541
<INTEREST-EXPENSE> 1,702
<GROSS-EXPENSE> 741
<AVERAGE-NET-ASSETS> 135,120
<PER-SHARE-NAV-BEGIN> 8.82
<PER-SHARE-NII> 0.63
<PER-SHARE-GAIN-APPREC> (0.02)
<PER-SHARE-DIVIDEND> (0.64)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 8.79
<EXPENSE-RATIO> 0.33
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) HARBOR
FUND'S ANNUAL REPORT TO SHAREHOLDERS FILED ON FORM N-30D ON DEC. 26, 1996 (FILE
NO. 811-04676) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B)
FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 9
<NAME> HARBOR MONEY MARKET FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 65,975
<INVESTMENTS-AT-VALUE> 65,975
<RECEIVABLES> 341
<ASSETS-OTHER> 24
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 66,340
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 349
<TOTAL-LIABILITIES> 349
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 65,991
<SHARES-COMMON-STOCK> 65,991
<SHARES-COMMON-PRIOR> 64,492
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 65,991
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,427
<OTHER-INCOME> 0
<EXPENSES-NET> 398
<NET-INVESTMENT-INCOME> 3,029
<REALIZED-GAINS-CURRENT> 80
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 3,109
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3,029)
<DISTRIBUTIONS-OF-GAINS> (80)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 86,059
<NUMBER-OF-SHARES-REDEEMED> (87,557)
<SHARES-REINVESTED> 2,997
<NET-CHANGE-IN-ASSETS> 1,499
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 187
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 476
<AVERAGE-NET-ASSETS> 62,468
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> (0.05)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.64
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
