HARBOR FUND, 497, 1997-10-31

HARBOR FUND
497, 1997-10-31

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<PAGE> 1

PROSPECTUS

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[HARBOR FUND LOGO]

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MARCH 1, 1997

(AS REVISED NOVEMBER 1, 1997)

-------------
HARBOR FUND
<PAGE> 2

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HARBOR FUND PROSPECTUS--MARCH 1, 1997

One SeaGate Toledo, Ohio 43666 (As revised November 1, 1997)

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Harbor Fund is a family of nine no-load mutual funds that offers you
investment opportunities in six equity funds: HARBOR GROWTH FUND, HARBOR
INTERNATIONAL GROWTH FUND, HARBOR CAPITAL APPRECIATION FUND, HARBOR
INTERNATIONAL FUND II, HARBOR INTERNATIONAL FUND AND HARBOR VALUE FUND; two
fixed-income funds: HARBOR BOND FUND AND HARBOR SHORT DURATION FUND; and a money
market fund: HARBOR MONEY MARKET FUND. An investment in Harbor Money Market Fund
is neither insured nor guaranteed by the U.S. Government and there can be no
assurance that the Fund will be able to maintain a stable net asset value of
$1.00 per share.

The Funds and their investment objectives are described on the next page. You
may wish to pursue more than one investment objective by diversifying your
portfolio and investing in more than one Harbor Fund. Investing in the Funds
involves various investment risks and there can be no assurance that a Fund will
achieve its investment objective.

This prospectus gives you information about Harbor Fund that you should know
before you invest. Additional information is included in the statement of
additional information dated March 1, 1997, as amended or supplemented from time
to time, filed with the Securities and Exchange Commission ("SEC") and
incorporated by reference in this prospectus. For a copy, call 1-800-422-1050 or
write to Harbor Fund. KEEP THIS PROSPECTUS FOR FUTURE REFERENCE.

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TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................... 2
Financial Highlights..................... 6
Harbor Fund in Detail.................... 10
Your Harbor Fund Account................. 17
Shareholder and Account Policies......... 22
The Adviser, Subadvisers, Distributor and
Shareholder Servicing Agent............ 24
</TABLE>

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Description of Securities and Investment
Techniques............................. 27
Performance and Yield Information........ 36
Portfolio Transactions................... 37
Distributions and Tax Information........ 37
Organization and Capitalization.......... 39
Appendix A............................... 40
</TABLE>

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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

1
<PAGE> 3

PROSPECTUS SUMMARY

This Summary is qualified in its entirety by the more detailed information set
forth in the Prospectus.

HARBOR FUND Harbor Fund is a no-load, open-end management investment
company, consisting of nine diversified mutual funds, registered
under the Investment Company Act of 1940 ("Investment Company
Act"). Each mutual fund represents a separate and distinct
series of Harbor Fund's shares of beneficial interest. See
Organization and Capitalization.

INVESTMENT The Funds are presented here in order of descending risk.
OBJECTIVES AND Generally, if you are seeking higher returns you must assume
POLICIES greater risk as determined by the volatility of the net asset
value of a Fund's shares. See Financial Highlights.

EQUITY FUNDS

The Equity Funds may be appropriate for investors who are
willing to assume the risk of changes in the value of common
stocks.

HARBOR GROWTH FUND'S investment objective is long-term growth of
capital. The Fund seeks to achieve its objective by investing
primarily in equity and equity-related securities of companies
with market capitalizations or estimated revenues of not more
than $500 million at the time of initial investment.

HARBOR INTERNATIONAL GROWTH FUND'S investment objective is
long-term growth of capital. The Fund seeks to achieve its
objective by investing primarily in equity and equity-related
securities of foreign issuers.

HARBOR CAPITAL APPRECIATION FUND'S investment objective is
long-term growth of capital. The Fund seeks to achieve its
objective by investing primarily in equity and equity-related
securities of companies with market capitalizations of at least
$1 billion and above-average prospects for growth.

HARBOR INTERNATIONAL FUND II'S investment objective is long-term
total return principally from growth of capital. The Fund seeks
to achieve its objective by investing primarily in equity and
equity-related securities of foreign issuers.

HARBOR INTERNATIONAL FUND'S investment objective is long-term
total return principally from growth of capital. The Fund seeks
to achieve its objective by investing primarily in equity and
equity-related securities of foreign issuers.

HARBOR VALUE FUND'S investment objective is long-term total
return with an emphasis on current income. The Fund seeks to
achieve its investment objective by investing in dividend-paying
common stocks.

FIXED-INCOME FUNDS

The Fixed-Income Funds are designed for investors who are
willing to assume the risk of changing interest rates and other
factors, such as duration and maturity, that affect the market
value of bonds.

HARBOR BOND FUND'S investment objective is total return. The
Fund seeks to achieve its objective by investing in an actively
managed portfolio of fixed-income securities of corporate and
governmental issuers located in the U.S. and foreign countries.

HARBOR SHORT DURATION FUND'S investment objective is total
return that is consistent with preservation of capital. The Fund
seeks to achieve its objective by investing in an actively
managed portfolio of short-term, high grade fixed-income
securities of corporate and governmental issuers located in the
U.S. and foreign countries.

2
<PAGE> 4

MONEY MARKET FUND

The Money Market Fund is designed for investors seeking the
lowest possible investment risk associated with an investment in
a mutual fund.

HARBOR MONEY MARKET FUND'S investment objective is current
income. Consistent with its policy of preservation of capital
and liquidity, the Fund seeks to achieve its objective by
investing in money market instruments of domestic and foreign
issuers.

INVESTMENT Harbor Fund, on behalf of each Fund, has engaged Harbor Capital
ADVISER Advisors, Inc. ("Adviser") as investment adviser. The Adviser
supervises the portfolio management of each Fund by its
subadviser, recommends the hiring, termination and replacement
of subadvisers to Harbor Fund's Board of Trustees and
administers each Fund's business affairs. See The Adviser,
Subadvisers, Distributor and Shareholder Servicing Agent.

THE SUB- Each Fund's portfolio is managed by one or more subadvisers
ADVISERS ("Subadvisers") consistent with each Fund's investment objective
and policies.

HARBOR GROWTH FUND: Emerging Growth
Advisors, Inc.

HARBOR INTERNATIONAL GROWTH FUND AND
HARBOR CAPITAL APPRECIATION FUND: Jennison Associates
Capital Corp.

HARBOR INTERNATIONAL FUND II: Summit
International
Investments, Inc.

HARBOR INTERNATIONAL FUND: Northern Cross
Investments Limited

HARBOR VALUE FUND: DePrince, Race &
Zollo, Inc. and
Richards &
Tierney, Inc.

HARBOR BOND FUND: Pacific Investment
Management Company

HARBOR SHORT DURATION FUND AND
HARBOR MONEY MARKET FUND: Fischer Francis
Trees & Watts, Inc.

RISK FACTORS Each Equity Fund is subject to the risks associated with
investing in equity securities. Equity securities may include
common stocks, preferred stocks, convertible securities and
warrants. Common stocks, the most familiar type, represent an
equity (ownership) interest in a corporation. This ownership
interest often gives the Fund the right to vote on measures
affecting the company's organization and operations. Although
common stocks have a history of long-term growth in value, their
prices may fluctuate dramatically in the short term in response
to changes in market conditions, interest rates and other
company, political and economic news.

Harbor International Growth Fund, Harbor International Fund II
and Harbor International Fund invest in foreign securities.
Foreign securities and foreign currencies may involve risks in
addition to the risks associated with equity securities
generally. These include currency fluctuations, risks relating
to political or economic conditions in the foreign country and
the potentially less stringent investor protection, disclosure
standards and settlement procedures of foreign markets. These
factors could make foreign investments, especially those in
developing countries, more volatile.

Each Fixed-Income Fund is subject to the risks associated with
investing in bonds. Bonds are issued to evidence loans that
investors make to corporations and governments. Bonds in which
the Funds may invest are issued by U.S. corporations, by the
U.S. Treasury, by various cities and states and by various
federal, state and local government agencies. Foreign companies
and governments also issue bonds available to U.S. investors.

Over time, the level of interest rates available in the
marketplace changes. As prevailing rates fall, the prices of
bonds and other securities that trade on a yield basis tend to
rise. On the other hand, when prevailing interest rates rise,
bond prices generally will fall. Generally the longer the
maturity of a fixed-income security, the higher its yield and
the greater its price volatility. Conversely, usually the
shorter the maturity, the lower the yield but the greater the
price stability.
3
<PAGE> 5

These factors operate in the fixed-income market place to have
an effect on the volatility of the share price of each
Fixed-Income Fund. A change in the level of interest rates
causes the net asset value per share of a Fixed-Income Fund to
change. If sustained over time, it would also have the effect of
raising or lowering the yield of the Fund.

Fixed-Income securities are also subject to credit risk. When a
security is purchased, its anticipated yield is dependent on the
timely payment by the borrower of each interest and principal
installment. Credit analysis and resultant bond ratings take
into account the relative likelihood that such timely payment
will result. Therefore, lower-rated bonds tend to sell at higher
yields than higher-rated bonds of similar maturity. Furthermore,
as economic, political and business developments unfold,
lower-quality bonds, which possess lower levels of protection
with respect to timely payment, usually exhibit more price
fluctuation than do higher-quality bonds of like maturity. See
Description of Securities and Investment
Techniques--Fixed-Income Securities.

The Funds may engage in short-selling of securities which may
increase a Fund's costs. A Fund whose portfolio turnover rate is
greater than 100% may also incur additional costs related to
transactions in securities. See Financial Highlights.

Harbor Short Duration Fund invests in reverse repurchase
agreements which will have the effect of leveraging the Fund's
assets. The use of leverage by the Fund, which may be considered
speculative, creates an opportunity for increased returns but at
the same time creates special risks. See Description of
Securities and Investment Techniques--Reverse Repurchase
Agreements.

HOW TO BUY You may purchase shares of each Fund at the net asset value next
SHARES determined after receipt and acceptance of your purchase order.
The minimum initial investment in each Fund is $2,000. The
minimum is lowered to $500 per Fund if you are investing in an
IRA, SEP-IRA, UGMA, UTMA, profit sharing, savings or pension
plan, or if you are beginning a Systematic Investment Plan. See
Your Harbor Fund Account--How to Buy Shares.

HOW TO SELL You may redeem shares directly from a Fund at the net asset
SHARES value per share next determined after receipt of your redemption
request in proper order. Redemptions may be made by mail or
telephone. Shareholders in Harbor Money Market Fund also have a
checkwriting privilege available. See Your Harbor Fund
Account--How to Sell Shares.

DISTRIBUTION Unless you elect to receive income dividends and capital gains
OPTIONS in cash or shares of another Harbor Fund, they will be
reinvested in additional shares of the respective distributing
Fund. Dividend and capital gains distributions, if any, are made
at least annually. See Distributions and Tax Information.

EXCHANGE You may exchange your shares of any Fund for shares of another
PRIVILEGE Fund (except Harbor International Fund unless you have an
existing account) at the net asset value next determined after
receipt of your exchange request in proper order. A telephone
exchange privilege is available. See Shareholder and Account
Policies.

NET ASSET The net asset value per share of each Fund is calculated on each
VALUE day the New York Stock Exchange is open for trading. Call
1-800-422-1050 for the current day's net asset value of any
Fund. See Shareholder and Account Policies--Transaction Details.

Each Fund has qualified and has elected to be treated as a
TAXATION regulated investment company for Federal income tax purposes
under Subchapter M of the Internal Revenue Code and intends to
continue to qualify for such treatment. See Distributions and
Tax Information.

SHAREHOLDER Each shareholder will receive annual and semi-annual reports
COMMUNICATION containing financial statements, a statement confirming each
share transaction and quarterly combined statements. Financial
statements included in annual reports are audited by Harbor
Fund's independent certified public accountants.
4
<PAGE> 6

EXPENSE INFORMATION

The following table lists estimated Annual Operating Expenses for each Fund
for the fiscal year ending October 31, 1997 based on actual expenses incurred in
the most recently completed fiscal year.

<TABLE>
<CAPTION>
HARBOR HARBOR
HARBOR INTERNATIONAL CAPITAL HARBOR HARBOR HARBOR HARBOR
GROWTH GROWTH APPRECIATION INTERNATIONAL INTERNATIONAL VALUE BOND
FUND FUND FUND FUND II(1) FUND(1) FUND FUND(1)
------ ------------- ------------ ------------- ------------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Annual Fund Operating Expenses
(as a percentage of
average net assets)
Advisory Fees
(after fee adjustment)(1).... 0.75% 0.75% 0.60% 0.55% 0.80% 0.60% 0.47%
Other Expenses................. 0.17% 0.36% 0.15% 0.95% 0.19% 0.23% 0.24%
----- ----- ----- ----- ----- ----- -----
Total Operating Expenses(2).... 0.92% 1.11% 0.75% 1.50% 0.99% 0.83% 0.71%
===== ===== ===== ===== ===== ===== =====

<CAPTION>
HARBOR HARBOR
SHORT MONEY
DURATION MARKET
FUND(1) FUND(1)
-------- -------
<S> <C> <C>
Annual Fund Operating Expenses
(as a percentage of
average net assets)
Advisory Fees
(after fee adjustment)(1).... 0.20% 0.18%
Other Expenses................. 1.39%* 0.46%
----- -----
Total Operating Expenses(2).... 1.59%* 0.64%
===== =====
</TABLE>

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* Includes interest expense of 1.26%. Excluding interest expense, other expenses
would be 0.13% and total operating expenses would be 0.33%.

(1) The Adviser (and in the case of Harbor International Fund, the Subadviser)
has voluntarily agreed that all or a portion of their fees will not be
imposed during the current fiscal year. In the absence of such an
agreement, the advisory fees for Harbor International Fund II, Harbor
International Fund, Harbor Bond Fund, Harbor Short Duration Fund and Harbor
Money Market Fund would be 0.75%, 0.85%, 0.70%, 0.40% and 0.30%,
respectively; and the estimated Total Operating Expenses would be 1.70%,
1.04%, 0.94%, 1.79%, (0.53% excluding interest expense) and 0.76%,
respectively. Total operating expenses for Harbor International Growth
Fund, Harbor International II and Harbor Bond Fund are restated to reflect
current investment advisory fees.

(2) During the year ended October 31, 1996, custodian fees were reduced by
credits resulting from cash balances maintained with State Street Bank and
Trust Company. In the absence of such credits, the Total Operating Expenses
shown in the above table would be .93% for Harbor Growth Fund, 1.12% for
Harbor International Growth Fund, 1.51% for Harbor International Fund II,
1.61% for Harbor Short Duration Fund, and .65% for Harbor Money Market
Fund.

Example: You would pay the following expenses on a hypothetical $1,000
investment, assuming 5% annual return and redemption at the end of each time
period:

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Harbor Growth Fund....................... $ 9 $30 $52 $119
Harbor International Growth Fund......... $11 $36 $63 $143
Harbor Capital Appreciation Fund......... $ 8 $24 $42 $ 97
Harbor International Fund II............. $15 $48 $85 $193
Harbor International Fund................ $10 $32 $56 $128
Harbor Value Fund........................ $ 9 $27 $47 $107
Harbor Bond Fund......................... $ 7 $23 $40 $ 92
Harbor Short Duration Fund*.............. $16 $51 $90 $205
Harbor Money Market Fund................. $ 7 $21 $36 $ 83
</TABLE>

The purpose of the above table and Example is to summarize the aggregate
expenses of each Fund to assist you in understanding the various costs and
expenses that you will bear directly or indirectly. THE EXAMPLE ILLUSTRATES THE
EFFECT OF EXPENSES, AND SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES; ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
- ------------
* Includes interest expense. Excluding interest expense, the expenses would be
$3, $11, $19 and $43, respectively.
5
<PAGE> 7

FINANCIAL HIGHLIGHTS

The tables below provide share information derived from each Fund's financial
statements relating to income from investment operations, distributions, total
return and ratios and other supplemental information. The following information
has been examined by Price Waterhouse LLP, independent accountants, whose

<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
-------------------------------------------
NET REALIZED AND
UNREALIZED GAINS (LOSSES)
NET ASSET VALUE ON INVESTMENTS, FUTURES, TOTAL FROM
BEGINNING OF NET INVESTMENT OPTIONS AND FOREIGN INVESTMENT
YEAR/PERIOD ENDED PERIOD INCOME/LOSS CURRENCY CONTRACTS OPERATIONS
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HARBOR GROWTH FUND(1)
October 31, 1996................. $15.73 $(.08)(a) $ 2.20 $ 2.12
October 31, 1995................. 12.83 (.04) 3.26 3.22
October 31, 1994................. 14.01 -- (1.16) (1.16)
October 31, 1993................. 12.42 .01 2.95 2.96
October 31, 1992................. 15.76 .02 (1.01) (.99)
October 31, 1991................. 10.21 .04 6.53 6.57
October 31, 1990................. 12.95 .10 (2.24) (2.14)
October 31, 1989................. 11.04 .09 1.94 2.03
October 31, 1988................. 10.25 .12 1.56 1.68
October 31, 1987(2).............. 10.00 .07 .44 .51
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HARBOR INTERNATIONAL GROWTH FUND
October 31, 1996................. $12.10 $ .14(a) $ 3.22 $ 3.36
October 31, 1995................. 11.53 .11* .54 .65
October 31, 1994(3).............. 10.00 .07* 1.47 1.54
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HARBOR CAPITAL APPRECIATION FUND(4)
October 31, 1996................. $23.20 $ .02 $ 3.00 $ 3.02
October 31, 1995................. 17.31 .04 6.06 6.10
October 31, 1994................. 17.30 .03 1.14 1.17
October 31, 1993................. 16.30 .03 3.03 3.06
October 31, 1992................. 15.18 .02 2.12 2.14
October 31, 1991................. 10.65 .06 5.47 5.53
October 31, 1990................. 13.42 .15 (1.53) (1.38)
October 31, 1989................. 11.67 .22 2.09 2.31
October 31, 1988(5).............. 10.00 .14 1.53 1.67
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HARBOR INTERNATIONAL FUND II
October 31, 1996(6).............. $10.00 $ .01* $ .46 $ .47
- ------------------------------------------------------------------------------------------------------------
HARBOR INTERNATIONAL FUND(7)
October 31, 1996................. $26.93 $ .41* $ 4.41 $ 4.82
October 31, 1995................. 26.87 .39* .85 1.24
October 31, 1994................. 22.85 .26* 3.98 4.24
October 31, 1993................. 16.77 .17* 6.31 6.48
October 31, 1992................. 17.69 .24 (.95) (.71)
October 31, 1991................. 15.74 .16 2.47 2.63
October 31, 1990................. 15.99 .37* .27 .64
October 31, 1989................. 13.00 .18* 3.67 3.85
October 31, 1988(5).............. 10.00 .07* 2.93 3.00
- ------------------------------------------------------------------------------------------------------------

LESS DISTRIBUTIONS
-----------------------------------
DIVIDENDS FROM DISTRIBUTIONS FROM IN EXCESS OF
NET INVESTMENT NET REALIZED NET INVESTMENT
YEAR/PERIOD ENDED INCOME CAPITAL GAINS** INCOME
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
HARBOR GROWTH FUND(1)
October 31, 1996................. $ -- $(1.85) $ --
October 31, 1995................. -- (.32) --
October 31, 1994................. -- (.02) --
October 31, 1993................. (.01) (1.36) --
October 31, 1992................. (.04) (2.31) --
October 31, 1991................. (.08) (.94) --
October 31, 1990................. (.11) (.49) --
October 31, 1989................. (.12) -- --
October 31, 1988................. (.10) (.79) --
October 31, 1987(2).............. -- (.26) --
- ---------------------------------
HARBOR INTERNATIONAL GROWTH FUND
October 31, 1996................. $ (.11) $ -- $ --
October 31, 1995................. (.08) -- --
October 31, 1994(3).............. (.01) -- --
- ---------------------------------
HARBOR CAPITAL APPRECIATION FUND(
October 31, 1996................. $ (.03) $ (.31) $ --
October 31, 1995................. (.04) (.17) --
October 31, 1994................. (.03) (1.13) --
October 31, 1993................. (.02) (2.04) --
October 31, 1992................. (.04) (.98) --
October 31, 1991................. (.14) (.86) --
October 31, 1990................. (.21) (1.18) --
October 31, 1989................. (.18) (.38) --
October 31, 1988(5).............. -- -- --
- ---------------------------------
HARBOR INTERNATIONAL FUND II
October 31, 1996(6).............. $ -- $ -- $ --
- ---------------------------------
HARBOR INTERNATIONAL FUND(7)
October 31, 1996................. $ (.41) $ (.13) $ --
October 31, 1995................. (.24) (.94) --
October 31, 1994................. (.22) -- --
October 31, 1993................. (.22) (.18) --
October 31, 1992................. (.21) -- --
October 31, 1991................. (.34) (.34)
October 31, 1990................. (.17) (.72) --
October 31, 1989................. (.10) (.76) --
October 31, 1988(5).............. -- -- --
- ---------------------------------
</TABLE>

* Reflects the Adviser's or Subadviser's agreement not to impose all or a
portion of its advisory fees; the fees not imposed would have amounted to
the following:
Year ended October 31, 1996 -- International II $.01 per share;
International $.01 per share; Bond $.03 per share; Short Duration $.02 per
share; 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.
Year ended October 31, 1991 -- Value $.01 per share; Bond $.04 per share.
Year ended October 31, 1990 -- International $.01 per share; Value $.02
per share; Bond $.02 per share.
Year ended October 31, 1989 -- International $.08 per share; Value $.04
per share; Bond $.04 per share.
Period ended October 31, 1988 -- International $.07 per share; Value $.04
per share; Bond $.03 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 rates may differ.
(a) Based on monthly average of shares outstanding during the fiscal year.

6
<PAGE> 8

report thereon is incorporated by reference, and attached to the Statement of
Additional Information. Further information about the performance of each Fund
is contained in Harbor Fund's Annual and Semi-Annual Reports to Shareholders
which may be obtained without charge by calling 800-422-1050.

TAX RATIO OF RATIO OF
RETURN NET ASSET NET ASSETS OPERATING EXPENSES INTEREST EXPENSE
OF TOTAL VALUE END OF TOTAL END OF PERIOD TO AVERAGE TO AVERAGE
CAPITAL DISTRIBUTIONS PERIOD RETURN ($ THOUSANDS) NET ASSETS (%) NET ASSETS (%)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ -- $(1.85) $16.00 14.84% 113,511 0.92% --
-- (.32) 15.73 25.93 137,524 0.93 --
-- (.02) 12.83 (8.29) 141,330 0.93 --
-- (1.37) 14.01 26.17 208,320 0.90 --
-- (2.35) 12.42 (7.48) 191,464 0.90 --
-- (1.02) 15.76 68.72 211,494 0.91 --
-- (.60) 10.21 (17.43) 122,622 0.94 --
-- (.12) 12.95 18.55 139,399 1.03 --
-- (.89) 11.04 17.52 115,972 1.06 --
-- (.26) 10.25 0.10++ 98,715 1.33+ --
- -----------------------------------------------------------------------------------------------------------------
$ -- $ (.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* --
- -----------------------------------------------------------------------------------------------------------------
$ -- $ (.34) $25.88 13.22% $1,583,215 0.75% --
-- (.21) 23.20 35.73 925,751 0.75 --
-- (1.16) 17.31 7.25 225,984 0.81 --
-- (2.06) 17.30 20.16 145,331 0.86 --
-- (1.02) 16.30 14.41 77,445 0.91 --
-- (1.00) 15.18 55.35 80,316 0.89 --
-- (1.39) 10.65 (11.52) 54,560 0.88 --
-- (.56) 13.42 20.91 60,367 0.92 --
-- -- 11.67 15.89++ 46,457 0.99+ --
- -----------------------------------------------------------------------------------------------------------------
$ -- $ -- $10.47 4.70%++ $ 12,573 1.44%*+ --
- -----------------------------------------------------------------------------------------------------------------
$ -- $(0.54) $31.21 18.17% $4,030,127 0.99%* --
-- (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 --
-- (.68) 17.69 17.74 205,703 1.35 --
-- (.89) 15.74 3.81 63,745 1.40* --
-- (.86) 15.99 31.30 29,018 1.15* --
-- -- 13.00 30.00++ 10,349 1.78*+ --
- -----------------------------------------------------------------------------------------------------------------

RATIO OF NET AVERAGE
INVESTMENT INCOME COMMISSION
TO AVERAGE PORTFOLIO RATE
NET ASSETS (%) TURNOVER (%) PAID***
- ---------------------------------------------------
<S> <C> <C>
(0.50)% 87.97% $.0561
(0.30) 87.94 --
-- 115.89 --
0.11 170.85 --
0.14 83.83 --
0.32 97.64 --
0.74 95.95 --
0.75 104.09 --
1.14 52.63 --
0.72+ 56.28 --
- ---------------------------------------------------
.99 % 55.17% $.0322
1.31 * 74.86 --
0.87 * 41.80 --
- ---------------------------------------------------
0.11 % 73.69% $.0629
0.23 51.65 --
0.24 72.89 --
0.24 93.24 --
0.12 69.33 --
0.47 89.99 --
1.18 162.43 --
1.77 75.11 --
1.48+ 47.67 --
- ---------------------------------------------------
0.40%*+ 2.61% $.0003
- ---------------------------------------------------
1.42%* 9.73% $.0119
1.53 * 14.01 --
1.09 * 28.70 --
1.28 * 15.70 --
1.98 24.67 --
1.76 18.63 --
2.82 * 28.28 --
1.56 * 21.05 --
0.87*+ 26.66 --
- ---------------------------------------------------
</TABLE>

(1) Effective May 2, 1997, Harbor Growth Fund appointed Emerging Growth
Advisors, Inc. as its Subadviser.
(2) For the period November 19, 1986 (commencement of operations) through
October 31, 1987.
(3) For the period November 1, 1993 (commencement of operations) through October
31, 1994.
(4) Effective May 1, 1990, Harbor Capital Appreciation Fund appointed Jennison
Associates Capital Corp. as its Subadviser.
(5) For the period December 29, 1987 (commencement of operations) through
October 31, 1988.
(6) For the period June 1, 1996 (commencement of operations) through October 31,
1996.
(7) Effective April 1, 1993, Harbor International Fund appointed Northern Cross
Investments Limited as its Subadviser.
(8) Harbor Value Fund appointed Richards & Tierney, Inc. and DePrince, Race, &
Zollo, Inc. as its Subadvisers effective November 1, 1993 and April 20,
1995, respectively.
(9) For the period January 1, 1992 (commencement of operations) through October
31, 1992.
+ Annualized
++ Unannualized

7
<PAGE> 9
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
-------------------------------------------
NET REALIZED AND
UNREALIZED GAINS (LOSSES)
NET ASSET VALUE ON INVESTMENTS, FUTURES, TOTAL FROM
BEGINNING OF NET INVESTMENT OPTIONS AND FOREIGN INVESTMENT
YEAR/PERIOD ENDED PERIOD INCOME CURRENCY CONTRACTS OPERATIONS
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HARBOR VALUE FUND(8)
October 31, 1996................. $14.57 $ .40 $ 2.74 $ 3.14
October 31, 1995................. 13.50 .40 2.13 2.53
October 31, 1994................. 14.31 .36 .27 .63
October 31, 1993................. 13.24 .35 1.22 1.57
October 31, 1992................. 13.10 .41* .49 .90
October 31, 1991................. 10.84 .46* 2.71 3.17
October 31, 1990................. 13.77 .51* (2.13) (1.62)
October 31, 1989................. 11.73 .47* 2.49 2.96
October 31, 1988(5).............. 10.00 .29* 1.69 1.98
- ------------------------------------------------------------------------------------------------------------
HARBOR BOND FUND
October 31, 1996................. $11.21 $ .72* $ .09 $ .81
October 31, 1995................. 10.41 .74* .73 1.47
October 31, 1994................. 11.92 .68* (1.02) (.34)
October 31, 1993................. 11.35 .68* .82 1.50
October 31, 1992................. 11.11 .79* .50 1.29
October 31, 1991................. 10.03 .83* 1.09 1.92
October 31, 1990................. 10.55 .84* (.44) .40
October 31, 1989................. 10.26 .76* .37 1.13
October 31, 1988(5).............. 10.00 .60* .17 .77
- ------------------------------------------------------------------------------------------------------------
HARBOR SHORT DURATION FUND
October 31, 1996................. $ 8.82 $ .63* $ (.02) $ .61
October 31, 1995................. 8.77 .52* .06 .58
October 31, 1994................. 9.68 .34* (.12) .22
October 31, 1993................. 10.09 .34* .16 .50
October 31, 1992(9).............. 10.00 .29* .08 .37
- ------------------------------------------------------------------------------------------------------------
HARBOR MONEY MARKET FUND
October 31, 1996................. $ 1.00 $ .05* $ -- $ .05
October 31, 1995................. 1.00 .06* -- .06
October 31, 1994................. 1.00 .03* -- .03
October 31, 1993................. 1.00 .03* -- .03
October 31, 1992................. 1.00 .04* -- .04
October 31, 1991................. 1.00 .06 -- .06
October 31, 1990................. 1.00 .08 -- .08
October 31, 1989................. 1.00 .08 .01 .09
October 31, 1988(5).............. 1.00 .06 -- .06
- ------------------------------------------------------------------------------------------------------------

LESS DISTRIBUTIONS
-----------------------------------
DIVIDENDS FROM DISTRIBUTIONS FROM IN EXCESS OF
NET INVESTMENT NET REALIZED NET INVESTMENT
YEAR/PERIOD ENDED INCOME CAPITAL GAINS** INCOME
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
HARBOR VALUE FUND(8)
October 31, 1996................. $ (.40) $(1.27) $ --
October 31, 1995................. (.39) (1.07) --
October 31, 1994................. (.34) (1.10) --
October 31, 1993................. (.35) (.15) --
October 31, 1992................. (.41) (.35) --
October 31, 1991................. (.47) (.44) --
October 31, 1990................. (.51) (.80) --
October 31, 1989................. (.48) (.44) --
October 31, 1988(5).............. (.25) -- --
- ---------------------------------------------------------------------------------------
HARBOR BOND FUND
October 31, 1996................. $ (.74) $ -- $ --
October 31, 1995................. (.67) -- --
October 31, 1994................. (.67) (.50) --
October 31, 1993................. (.68) (.25) --
October 31, 1992................. (.79) (.26) --
October 31, 1991................. (.84) -- --
October 31, 1990................. (.83) (.09) --
October 31, 1989................. (.77) (.07) --
October 31, 1988(5).............. (.51) -- --
- ---------------------------------------------------------------------------------------
HARBOR SHORT DURATION FUND
October 31, 1996................. $ (.60) $ -- $(.04)
October 31, 1995................. (.52) -- (.01)
October 31, 1994................. (1.08) -- --
October 31, 1993................. (.82) (.09) --
October 31, 1992(9).............. (.28) -- --
- ---------------------------------------------------------------------------------------
HARBOR MONEY MARKET FUND
October 31, 1996................. $ (.05) $ -- $ --
October 31, 1995................. (.06) -- --
October 31, 1994................. (.03) -- --
October 31, 1993................. (.03) -- --
October 31, 1992................. (.04) -- --
October 31, 1991................. (.06) -- --
October 31, 1990................. (.08) -- --
October 31, 1989................. (.08) (.01) --
October 31, 1988(5).............. (.06) -- --
- ---------------------------------------------------------------------------------------
</TABLE>

8
<PAGE> 10
<TABLE>
<CAPTION>

TAX RATIO OF RATIO OF
RETURN NET ASSET NET ASSETS OPERATING EXPENSES INTEREST EXPENSE
OF TOTAL VALUE END OF TOTAL END OF PERIOD TO AVERAGE TO AVERAGE
CAPITAL DISTRIBUTIONS PERIOD RETURN ($ THOUSANDS) NET ASSETS (%) NET ASSETS (%)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ -- $(1.67) $16.04 23.08% $ 112,109 0.83% --
-- (1.46) 14.57 21.02 84,514 0.90 --
-- (1.44) 13.50 4.80 59,390 1.04 --
-- (.50) 14.31 11.99 59,884 0.88 --
-- (.76) 13.24 7.06 63,974 0.84* --
-- (.91) 13.10 30.18 43,066 0.93* --
-- (1.31) 10.84 (13.00) 23,453 1.01* --
-- (.92) 13.77 26.64 23,418 1.02* --
-- (.25) 11.73 20.07++ 11,551 1.40*+ --
- -----------------------------------------------------------------------------------------------------------------
$ -- $ (.74) $11.28 7.56% $ 279,849 0.70%* --
-- (.67) 11.21 14.56 222,998 0.70* --
-- (1.17) 10.41 (3.14) 162,221 0.77* --
-- (.93) 11.92 13.98 164,382 0.72* --
-- (1.05) 11.35 12.14 65,420 0.77* --
-- (.84) 11.11 20.01 40,486 0.86* --
-- (.92) 10.03 4.03 24,341 1.22* --
-- (.84) 10.55 11.66 21,233 1.21* --
-- (.51) 10.26 7.91++ 11,225 1.55*+ --
- -----------------------------------------------------------------------------------------------------------------
$ -- $ (.64) $ 8.79 7.24% $ 182,292 0.33%* 1.26%
-- (.53) 8.82 6.82 105,007 0.38* 1.46
(.05) (1.13) 8.77 2.53 115,891 0.38* 1.26
-- (.91) 9.68 5.18 135,189 0.43* .69
-- (.28) 10.09 3.72++ 186,523 0.35*+ 1.19+
- -----------------------------------------------------------------------------------------------------------------
$ -- $ (.05) $ 1.00 5.08% $ 65,991 0.64%* --
-- (.06) 1.00 5.66 64,492 0.61* --
-- (.03) 1.00 3.53 60,024 0.67* --
-- (.03) 1.00 2.68 46,879 0.71* --
-- (.04) 1.00 3.67 55,244 0.69* --
-- (.06) 1.00 6.25 57,093 0.66 --
-- (.08) 1.00 8.02 49,968 0.66 --
-- (.09) 1.00 9.44 43,727 0.70 --
-- (.06) 1.00 5.61++ 68,475 0.66+ --
- -----------------------------------------------------------------------------------------------------------------

RATIO OF NET AVERAGE
INVESTMENT INCOME COMMISSION
TO AVERAGE PORTFOLIO RATE
NET ASSETS (%) TURNOVER (%) PAID***
- --------------------------------------------------
<S> <C> <C>
2.65%* 132.39% $.0448
3.00 135.93 --
2.66 150.94 --
2.48 50.20 --
3.11* 19.68 --
3.61* 32.60 --
3.96* 31.41 --
3.92* 39.89 --
3.36*+ 43.74 --
- --------------------------------------------------
6.40%* 192.64% $ --
7.11* 88.69 --
6.29* 150.99 --
6.19* 119.92 --
7.30* 52.54 --
8.12* 58.45 --
8.30* 90.99 --
8.20* 91.17 --
7.42*+ 124.15 --
- --------------------------------------------------
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 --
5.70 N/A --
7.54 N/A --
8.40 N/A --
6.97+ N/A --
- --------------------------------------------------
</TABLE>

9
<PAGE> 11

HARBOR FUND IN DETAIL

Harbor Fund offers a range of investment opportunities through the nine mutual
funds offered in this Prospectus. Each Fund has its own investment objective and
policies. The Funds' investment objectives and policies are non-fundamental and
may be changed by Harbor Fund's Board of Trustees without shareholder approval.
Harbor Fund has adopted certain fundamental investment restrictions that are
enumerated in detail in the Statement of Additional Information and which may
not be changed without shareholder approval.

THE FUNDS' INVESTMENT OBJECTIVES AND POLICIES

HARBOR GROWTH FUND. Harbor Growth Fund seeks long-term growth of capital by
investing primarily in equity and equity-related securities of companies with
market capitalization or estimated revenues of not more than $500 million at the
time of initial investment. Under normal market conditions, the Fund intends to
invest substantially all, but at least 65%, of its total assets in a diversified
portfolio of equity and equity-related securities of approximately 40 issuers.
In selecting companies for the Fund, Emerging Growth Advisors, Inc., the Fund's
Subadviser (the "Subadviser or Emerging Growth") examines a company's business
characteristics looking for those companies with favorable prospective financial
and long-term growth dynamics where management is committed to improving the
company's earnings at an above average growth rate. The companies in which the
Fund invests include those with new and innovative products or services.

The Fund's policy of investing in a small number of stocks exposes the Fund to
the risk that a substantial decrease in the value of a stock may cause the net
asset value of the Fund to fluctuate more than if the Fund were invested in a
greater number of stocks. In exceptional market circumstances or to preserve the
Fund's compliance with the SEC's policies on industry concentration and issuer
diversification, the Fund may invest in more than 40 stocks. The Fund's policy
of investing in small companies presents greater opportunities for growth, but
also involves more risk than investments in larger, more established companies,
see "Description of Securities and Investment Techniques."

For temporary defensive purposes, as determined by the Subadviser, the Fund
may invest all or a portion of its assets in cash and cash equivalents, such as
obligations of banks commercial paper and short-term obligations.

The Fund may enter into repurchase agreements, purchase securities on a
when-issued or forward commitment basis, lend portfolio securities, engage in
short sales up to 25% of its total assets and occasionally invest in securities
of foreign issuers. For additional information about the securities in which the
Fund invests and the management techniques the Subadviser employs to manage the
Fund, see "Description of Securities and Investment Techniques."

HARBOR INTERNATIONAL GROWTH FUND. Harbor International Growth Fund seeks
long-term growth of capital by investing primarily in equity and equity-related
securities of foreign issuers including issuers in emerging markets. Under
normal market conditions, the Fund invests at least 65% of its assets in equity
securities and in a minimum of three countries. Current income, if any, is a
subordinate consideration.

Unlike Harbor International Fund II and Harbor International Fund, the Fund
seeks to achieve its objective by investing in a focused selection of
approximately 20-40 common stocks or in securities with common stock
characteristics, such as preferred stock, warrants and debt securities
convertible into common stock of issuers that demonstrate a tendency towards
long-term secular growth.

The Fund's policy of investing in a narrowly focused selection of stocks may
expose the Fund to the risk that a substantial decrease in the value of a stock
may cause the net asset value of the Fund to fluctuate more than if the Fund
were invested in a greater number of stocks. In exceptional market circumstances
or to preserve the Fund's compliance with the SEC's policies on industry and
country concentration and issuer diversification, the Fund's assets may be
invested in more than 40 stocks.

The Fund may also invest in foreign securities in the form of American
Depository Receipts (ADRs), European Depository Receipts (EDRs), Global
Depository Receipts (GDRs), International Depository Receipts (IDRs) or other
similar securities representing ownership of securities of foreign issuers.

For temporary defensive purposes, as determined by the Fund's Subadviser,
Jennison Associates Capital Corp. (the "Subadviser or Jennison"), the Fund may
invest part or all of its portfolio in equity securities of U.S. issuers; notes
and bonds which at the time of their purchase are rated investment grade, i.e.,
BBB or

10
<PAGE> 12

higher by Standard & Poor's Rating Group ("S&P") or Baa or higher by Moody's
Investors Service, Inc. ("Moody's"); and cash and cash equivalents such as
obligations of domestic and foreign banks and commercial paper and short-term
obligations of U.S. or foreign issuers. The Fund may, for temporary defensive or
hedging purposes, purchase options on foreign currencies, enter into forward
foreign currency exchange contracts and contracts for the future delivery of
foreign currencies, and purchase options on such futures contracts. The Fund's
currency management techniques associated with investments in foreign securities
involve more risk than if the Fund were invested in dollar-denominated
securities of U.S. issuers.

The Fund may enter into repurchase agreements, purchase securities on a
when-issued or forward commitment basis and may lend portfolio securities. The
Fund may write and purchase options and purchase and sell futures contracts and
related options to manage cash flow and remain fully invested in the stock
market or to hedge against a decline in the value of securities owned by it or
an increase in the price of securities which it plans to purchase.

HARBOR CAPITAL APPRECIATION FUND. Harbor Capital Appreciation Fund seeks
long-term growth of capital by investing primarily in equity and equity-related
securities of companies with market capitalizations of at least $1 billion and
above-average prospects for growth. The Fund invests substantially all, but at
least 65%, of its total assets in common stocks, convertible securities and
other equity securities of companies which typically have equity market
capitalizations of at least $1 billion. When the Fund's Subadviser Jennison
Associates Capital Corp. (the "Subadviser or Jennison"), believes that
investment in foreign securities offers opportunities for capital growth, the
Fund may invest up to 20% of its total assets in securities of foreign issuers,
including issuers located or doing business in emerging markets.

Securities of companies exhibiting superior sales growth, high levels of unit
growth, high returns on equity and assets, and strong balance sheets, will be
considered for investment by the Fund. Companies must be currently demonstrating
superior absolute and relative earnings growth and be attractively valued to
warrant inclusion in the Fund's portfolio. Jennison will devote special
attention to companies which are likely to benefit from unique marketing
competence, strong research and development resulting in a superior new product
flow and excellent management capability. Companies must be actually achieving
or exceeding expected earnings results to be purchased or retained by the Fund.
No effort is made by the Fund to time the market. For temporary defensive
purposes, as determined by the Subadviser, the Fund may invest all or a portion
of its assets in cash and cash equivalents, such as obligations of domestic and
foreign banks, and commercial paper and short-term obligations.

The Fund may enter into repurchase agreements, purchase securities on a
when-issued or forward commitment basis, engage in portfolio securities lending
and short sales of securities. The Fund may write and purchase options and
purchase and sell futures contracts and related options to manage cash flow and
remain fully invested in the stock market, or to hedge against a decline in the
value of securities owned by it or an increase in the price of securities which
it plans to purchase. The Fund may also invest in foreign securities in the form
of ADR's, EDR's, GDR's, IDR's and other similar securities convertible into
securities of foreign issuers.

For additional information about the securities in which the Fund invests and
the management techniques including currency management techniques the
Subadviser employs to manage the Fund, see "Description of Securities and
Investment Techniques."

HARBOR INTERNATIONAL FUND II. Harbor International Fund II seeks long-term
total return principally from growth of capital by investing primarily in equity
and equity-related securities of foreign issuers. Under normal market
conditions, the Fund invests at least 65% of its assets in common stocks and
comparable equity securities of foreign issuers. The Fund may also invest in
preferred stock and convertible securities of foreign issuers and in warrants.
The Fund will be invested in a minimum of three countries. The Fund's
Subadviser, Summit International Investments, Inc. ("Subadviser" or "Summit"),
currently intends to invest primarily in equity securities of issuers located in
Europe, the Pacific Basin and emerging industrialized countries, which it
believes present favorable investment opportunities and whose economies and
political regimes afford adequate protection for foreign shareholders. The Fund
may invest up to 10% of the Fund's total assets in fixed income securities of
foreign corporate issuers,

11
<PAGE> 13

supranational organizations and foreign governments and their political
subdivisions, authorities, agencies and instrumentalities. The Fund may also
invest in foreign securities in the form of ADR's, EDR's, GDR's, IDR's or other
similar securities representing ownership of securities of foreign issuers.

For temporary defensive purposes, as determined by the Subadviser, the Fund
may invest part or all of its portfolio in equity securities of U.S. issuers;
notes and bonds which at the time of their purchase are rated BBB or higher by
S&P or Baa or higher by Moody's; and cash and cash equivalents such as
obligations of domestic and foreign banks, and commercial paper and short-term
obligations of U.S. or foreign issuers. The Fund may, for temporary defensive or
hedging purposes, purchase options on foreign currencies, enter into forward
foreign currency exchange contracts and contracts for the future delivery of
foreign currencies, and purchase options on such futures contracts. The Fund's
currency management techniques associated with investments in foreign securities
involve more risk than if the Fund were invested in dollar-denominated
securities of U.S. issuers.

For a description of the risks of investing in foreign securities and
additional information about the securities in which the Fund invests and the
management techniques, including currency management techniques, the Subadviser
employs to manage the Fund, see "Description of Securities and Investment
Techniques." Although the investment objective and policies of Harbor
International Fund II are similar to those of Harbor International Fund, each
Fund's portfolio of securities is not expected to be substantially identical
because each Fund has a different portfolio manager. Over time, each portfolio
manager's investment decisions on behalf of the respective Fund will result in
different securities being selected for the Funds. Investors should not expect
that the performance of International Fund II's portfolio will be identical to
that of International Fund.

HARBOR INTERNATIONAL FUND. Sales of shares of this Fund to new investors have
been suspended. See "Shareholder and Account Policies." Harbor International
Fund seeks long-term total return principally from growth of capital by
investing primarily in equity and equity-related securities of foreign issuers.
Under normal market conditions, the Fund invests at least 65% of its assets in
common stocks and comparable equity securities of foreign issuers. The Fund may
also invest in preferred stock and convertible securities of foreign issuers and
in warrants. The Fund will be invested in a minimum of three countries. The
Fund's Subadviser, Northern Cross Investments Limited (the "Subadviser" or
"Northern Cross"), currently intends to invest primarily in equity securities of
issuers located in Europe, the Pacific Basin and the more highly developed
emerging industrialized countries, which it believes present favorable
investment opportunities. The Fund may also invest in foreign securities in the
form of ADR's, EDR's, GDR's, IDR's or other similar securities representing
ownership of securities of foreign issuers.

12
<PAGE> 14

HARBOR VALUE FUND. Harbor Value Fund seeks long-term total return with an
emphasis on current income through investment in dividend-paying common stocks.
The Fund will invest in a broadly diversified portfolio of dividend-paying
common stocks that are listed on a national securities exchange or traded in the
over-the-counter market. However, the Subadvisers at their discretion may also
invest up to 15% of their total assets in non-dividend paying stocks.

Under normal market conditions, at least 65% of the Fund is invested in common
stocks with the characteristics described below. The balance of the Fund's
assets may be invested in other equity securities or U.S. Government securities,
or may be held in cash or cash equivalents. Responsibility for investing the
Fund's portfolio is divided between two Subadvisers. DePrince, Race & Zollo,
Inc. (DRZ) manages 75% of the assets of the Fund, and Richards & Tierney, Inc.
(R&T) manages the remaining 25% of the Fund's assets.

The Fund pursues its objective with respect to the 75% of its assets managed
by DRZ by investing in stocks with an above-average current yield, which are
undervalued compared to their history relative to the market and which have
improving fundamentals. Stock selection is the key factor in DRZ's methodology.
Before buying or selling a stock, the portfolio manager analyzes current yield,
relative valuation and fundamentals. Relative valuation analysis means that the
portfolio manager reviews twenty years of yield, price/earnings, price/book, and
price/cash flow relative to the S&P 500. Fundamental analysis means that the
portfolio manager seeks to identify stocks with improving conditions. The
disciplined execution of this methodology results in an actively managed
portfolio. The portfolio has a yield strategy greater than or equal to 1.5 times
the S&P 500 yield.

The Fund pursues its objective with respect to the 25% of its assets managed
by R&T, by following investment policies emphasizing common stocks that
complement stocks selected for that portion of the portfolio managed by DRZ.
Using quantitative techniques, R&T is able to construct a broadly diversified
list of stock holdings whose presence in the portfolio does not negate the
active management by DRZ. This provides the Fund with broader exposure in the
so-called value (i.e., lower volatility) area of the market while preserving
DRZ's value adding active management capability.

For temporary defensive purposes, as determined by each Subadviser, the Fund
may invest all or a portion of its assets in cash and cash equivalents, such as
obligations of banks, commercial paper and short-term obligations.

The Fund may enter into repurchase agreements, purchase securities on a
when-issued or forward commitment basis, engage in portfolio securities lending
and short sales of securities. The Fund may write and purchase options and
purchase and sell futures contracts and related options to manage cash flow and
remain fully invested in the stock market or to hedge against a decline in the
value of securities owned by it or an increase in the price of securities which
it plans to purchase. The Fund may also invest in foreign securities in the form
of ADR's, EDR's, GDR's, IDR's and other similar securities convertible into
securities of foreign issuers.

For additional information about the securities in which the Fund invests and
the management techniques the Subadvisers employ to manage the Fund, see
"Description of Securities and Investment Techniques."

HARBOR BOND FUND. Harbor Bond Fund seeks total return by investing in an
actively managed portfolio of fixed-income securities of corporate and
governmental issuers located in the U.S. and foreign countries. Under normal
market conditions, the Fund invests at least 65% of its total assets in bonds,
such as obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities with maturities of at least five years; obligations issued or
guaranteed by a foreign government, or any of its political subdivisions,
authorities, agencies or instrumentalities or by supra-national organizations
(such as the International Bank for Reconstruction and Development); Brady
bonds; and obligations of domestic or foreign corporations and other entities
(rated Baa or better by Moody's or BBB or better by S&P or, if unrated,
determined by Pacific Investment Management Company ("PIMCO" or the
"Subadviser") to be of comparable quality); and mortgage-related and other
asset-backed securities. Mortgage-backed securities in which the Fund may invest
include mortgage pass-through certificates and multiple class pass-through
certificates, real estate mortgage investment conduit pass-through certificates,
collateralized mortgage obligations and stripped mortgage backed securities,
such as interest only and principal only securities. The Fund's investments will
be concentrated in areas of the bond market (based on quality, sector, coupon or
maturity) that PIMCO believes are relatively undervalued. In addition, the Fund
may invest in obligations of domestic and foreign commercial banks and bank
holding companies (such

13
<PAGE> 15

as commercial paper, banker's acceptances, certificates of deposit and time
deposits).

Under normal market conditions, at least 60% of the Fund's total assets will
be invested in securities of U.S. issuers and at least 80% of the Fund's total
assets, adjusted to reflect the Fund's net exposure after giving effect to
currency transactions and positions, will be denominated in U.S. dollars. The
Fund may not invest more than 25% of its total assets in the securities of
issuers located in a single country other than the United States.

The Fund may also invest up to 15% of its assets in corporate debt securities
that are not investment grade but are rated B or higher by Moody's or S&P,
although the weighted average quality of all fixed-income securities held by the
Fund will be equivalent to securities rated A or higher by Moody's and S&P.

For temporary defensive purposes, as determined by the Subadviser, the Fund
may invest all or a portion of its assets in cash and cash equivalents, such as
obligations of domestic and foreign banks, and commercial paper and short-term
obligations of U.S. or foreign issuers.

The obligations in which the Fund may invest may have fixed, variable or
floating interest rates. Depending upon the level of interest rates, the average
maturity of the Fund will vary between 8 and 15 years. Although long-term
securities generally produce higher income than short-term securities, long-term
securities are more susceptible to market fluctuations resulting from changes in
interest rates. When interest rates decline, the value of a portfolio invested
at higher yields can be expected to rise. Conversely, when interest rates rise,
the value of a portfolio invested at lower yields can be expected to decline.

In selecting securities and currencies for Harbor Bond Fund's portfolio, PIMCO
utilizes economic forecasting, interest rate expectations, credit and call risk
analysis and other security and currency selection techniques. The proportion of
the Fund's assets invested in securities with particular characteristics (such
as maturity, type, and coupon rate) may vary based on PIMCO's outlook for the
economy, the financial markets, and other factors.

Harbor Bond Fund's portfolio will normally consist of securities of varying
maturities with a portfolio duration equal to that of the market plus or minus
1.5 years. Except in unusual and temporary circumstances, the duration of the
Fund's portfolio will vary within the three- to six-year timeframe based on
PIMCO's forecast for interest rates, but under current conditions is expected to
stay within one year of what PIMCO believes to be the average duration of the
bond market as a whole. PIMCO bases its analysis of the average duration of the
bond market on bond market indices which it believes to be representative, and
other factors. The Fund may use various techniques to shorten or lengthen the
duration of its portfolio, including the acquisition of obligations at a premium
or discount, transactions in options, futures contracts, swaps combined with
options, options on futures and mortgage and interest rate swaps and interest
rate floors and caps.

Duration is a measure of the average life of a fixed-income security that was
developed as a more precise alternative to the concept of "term to maturity" as
a measure of "volatility" or "risk" associated with changes in interest rates.
Duration incorporates a security's yield, coupon interest payments, final
maturity and call features into one measure. Duration is computed by determining
the expected period of time until each scheduled payment or unscheduled
prepayment of principal or interest and averaging such time periods on a
weighted basis in accordance with the present value of such expected payments. A
reduction in the coupon interest rate would generally increase duration; an
increase in the coupon interest rate would generally reduce duration. Duration
is one of the fundamental tools used by PIMCO in security selection.

Harbor Bond Fund may also employ certain active currency and interest rate
management techniques. The techniques may be used both to hedge the foreign
currency and interest rate risks associated with the Fund's portfolio
securities, and, in the case of certain techniques, to seek to increase the
total return of the Fund. Such active management techniques include the use of
derivative instruments such as forward foreign currency exchange contracts,
options on securities and foreign currencies, futures contracts, options on
futures contracts and currency, mortgage and interest rate swaps and interest
rate floors and caps. In addition, the Fund may enter into forward foreign
currency exchange contracts, currency options and currency swaps for non-hedging
purposes when PIMCO anticipates that a foreign currency will appreciate or
depreciate in value, even though securities denominated in that currency do not
present attractive investment opportunities or are not included in the Fund's
portfolio.

In addition, the Fund may enter into repurchase agreements, purchase and sell
securities on a when-issued or forward commitment basis, including TBA ("to be
announced") purchase and sale commitments, engage in portfolio securities
lending and short

14
<PAGE> 16

selling of securities and enter into reverse repurchase agreements. For
additional information about the securities in which the Fund invests and the
management techniques and the derivative instruments the Subadviser employs to
manage the Fund, see "Description of Securities and Investment Techniques."

HARBOR SHORT DURATION FUND. Harbor Short Duration Fund seeks total return that
is consistent with preservation of capital by investing in an actively managed
portfolio of short-term, high grade fixed-income securities of corporate and
governmental issuers located in the U.S. and foreign countries. The Fund is
expected to have less volatility of return than is typically associated with
broad bond market indices such as the Lehman Brothers Government/Corporate
Index.

The Fund invests principally in high grade bonds (i.e., rated A or higher by
S&P or Moody's or, if unrated, determined by the Subadviser to be of comparable
quality), including: (i) obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities; (ii) obligations issued or
guaranteed by a foreign government, or any of its political subdivisions,
authorities, agencies or instrumentalities or by supra-national organizations
(such as the World Bank); (iii) obligations of domestic and foreign commercial
banks and bank holding companies (such as commercial paper (rated A-1 by S&P or
P-1 by Moody's or higher or, if unrated, determined by the Subadviser to be of
comparable quality), bankers' acceptances, certificates of deposit and time
deposits); and (iv) obligations of domestic and foreign corporations and other
entities (including mortgage-and other asset-backed securities). The obligations
in which the Fund may invest may have fixed, variable or floating interest
rates.

In selecting securities for the Fund's portfolio, the Fund's subadviser,
Fischer Francis Trees & Watts, Inc. ("Fischer" or the "Subadviser") considers
such factors as the security's maturity, duration, sector and credit quality
rating as well as the security's yield and prospects for capital appreciation.

Duration represents the weighted average maturity of expected cash flows on a
debt obligation, discounted to present value. Maturity, in contrast, measures
only the time until final payment is due on a bond or other debt security,
taking no account of the pattern of a security's cash flows over time. In
computing the portfolio's duration, the Fund will have to estimate the duration
of debt obligations that are subject to prepayment or redemption by the issuer.
The dollar-weighted average duration of the Fund's portfolio is expected to
approximate one year and will not vary from one year by more than two years,
that is, from an average of three years to minus one year (taking into account
the negative duration of all short positions). For a portfolio at one year,
average maturity approximates average duration. The Fund may use various
techniques to shorten or lengthen the dollar-weighted average duration of its
portfolio, including the acquisition of obligations at a premium or discount,
transactions in options, futures contracts, options on futures and mortgage and
interest rate swaps and interest rate floors and caps. Subject to the policy of
maintaining a dollar-weighted average portfolio duration not exceeding three
years, the Fund may invest in individual obligations of any duration.

The assets of the Fund are actively managed and are bought and sold in
response to changes in value resulting from new information affecting the supply
of and demand for securities in the Fund's portfolio. Active management of the
Fund entails frequent decisions concerning the changing relative attractiveness
of various investments. In that connection, the Fund may also employ certain
active currency and interest rate management techniques. The techniques may be
used both to hedge the foreign currency and interest rate risks associated with
the Fund's portfolio securities, and, in the case of certain techniques, to seek
to increase the total return of the Fund. Such active management techniques
include derivative instruments such as forward foreign currency exchange
contracts, options on securities and foreign currencies, futures contracts,
options on futures contracts and currency, mortgage and interest rate swaps,
swaps combined with options, interest rate floors and caps and, at times,
combinations of these techniques. In addition, the Fund may enter into forward
foreign currency exchange contracts, currency options and currency swaps for
non-hedging purposes when Fischer anticipates that a foreign currency will
appreciate or depreciate in value, even though securities denominated in that
currency

15
<PAGE> 17

do not present attractive investment opportunities or are not included in the
Fund's portfolio. In addition, the Fund may acquire securities on a when-issued
or forward commitment basis, including TBA ("to be announced") purchase and sale
commitments, enter into repurchase agreements and engage in portfolio securities
lending. The Fund engages in short selling of securities. The Fund enters into
reverse repurchase agreements with banks and broker-dealers. While not
considered senior securities for purposes of the Investment Company Act, reverse
repurchase agreements are considered by the staff of the SEC to be borrowings.
As such, the Fund's use of reverse repurchase agreements is subject to the
requirement in the Investment Company Act that the Fund maintain continuous
asset coverage of at least 300% with respect to any such borrowing. The
percentage of the Fund's total assets that may be leveraged will vary during the
fiscal year depending on the portfolio management strategies of the Subadviser.
For a discussion of the special risks associated with the Fund's use of (i)
reverse repurchase agreements and the resultant leveraging effect of such
agreements on the Fund's portfolio and (ii) short sales, see "Description of
Securities and Investment Techniques."

For additional information about the securities in which the Fund may invest
and the management techniques and the derivative instruments the Subadviser
employs to manage the Fund, see "Description of Securities and Investment
Techniques."

HARBOR MONEY MARKET FUND. Harbor Money Market Fund seeks current income,
consistent with its policy of preservation of capital and liquidity, by
investing in money market instruments of domestic and foreign issuers. Under
normal market conditions, at least 80% of the Fund's net assets are invested in:

(A) short-term (maturing in thirteen months or less) U.S. Government
securities;

(B) treasury receipts; treasury investment growth receipts ("TIGR's");
certificates of accrual on treasury receipts ("CATS"); and separately
traded principal and interest components of securities issued or guaranteed
by the U.S. Treasury traded under the Separate Trading of Registered
Interest and Principal of Securities program ("STRIPS");

(C) U.S. dollar-denominated obligations issued by major U.S. and foreign
banks (including certificates of deposit and bankers' acceptances) that
meet the $100,000,000 standard set forth under "Cash Equivalents" and other
obligations of U.S. and non-U.S. issuers denominated in U.S. dollars and in
securities of foreign branches of U.S. banks and major foreign banks, such
as negotiable certificates of deposit (Eurodollars), and including variable
rate master demand notes and floating rate notes, provided they are (i)
rated in the highest rating category of at least two nationally recognized
statistical rating organizations ("NRSROs") or, if only rated by one NRSRO,
that NRSRO, or (ii) issued or guaranteed by a company which at the date of
investment has outstanding a comparable debt issue rated in one of the two
highest rating categories by at least two NRSROs or, if only one NRSRO has
rated the security, that NRSRO;

(D) commercial paper (including variable and floating rate commercial
paper with interest rates which adjust in accordance with changes in
interest rate indices) which is rated in the highest rating category of at
least two NRSROs or, if not rated, is issued by a company having
outstanding comparable debt rated in one of the two highest rating
categories by at least two NRSROs or, if only one NRSRO has rated the
security, that NRSRO;

(E) short-term (maturing in thirteen months or less) corporate
obligations which are rated in one of the two highest rating categories by
at least two NRSROs or, if only one NRSRO has rated the security, that
NRSRO;

(F) repurchase agreements; and

(G) asset-backed securities (including, but not limited to, interests in
pools of assets such as motor vehicle installment purchase obligations and
credit card receivables) which are determined to be of high quality by
Fischer Francis Trees & Watts, Inc., the Fund's Subadviser, pursuant to
criteria approved by the Board of Trustees.

The Fund may invest up to 20% of the value of its net assets in debt
instruments not specifically described in (A) through (G) above, including
unrated instruments, provided that such instruments are deemed by Harbor Fund's
Trustees to be of comparable high quality and liquidity and that they meet the
Fund's maturity requirements.

The Fund may invest more than 25% of the value of its total assets in the
securities of banks and bank holding companies, including certificates of
deposit and bankers' acceptances. The Fund, however, may

16
<PAGE> 18

not invest more than 5% of its total assets (taken at amortized cost) in
securities issued by or subject to puts from any one issuer (except U.S.
Government securities and repurchase agreements collateralized by such
securities), except that a single investment may exceed such limit if such
security (i) is rated in the highest rating category by the requisite number of
NRSROs or, if unrated, is determined to be of comparable quality and (ii) is
held for not more than three business days. In addition, the Fund may not invest
more than 5% of its total assets (taken at amortized cost) in securities of
issuers not in the highest rating category as determined by the requisite number
of NRSROs or, if unrated, of comparable quality, with investment in any one such
issuer being limited to no more than 1% of such total assets or $1 million,
whichever is greater. For a description of each NRSROs' rating categories, see
Appendix A to the Statement of Additional Information. For more information
about the foregoing instruments, see "Description of Securities and Investment
Techniques."

Fischer may employ a number of professional money management techniques in
anticipation of or in response to shifts in market conditions and fiscal or
monetary policy. These techniques include varying the composition of the Fund's
investments and the average maturity of the Fund's portfolio based upon an
assessment of the relative values of various money market instruments and future
interest rate patterns. As a result, the Fund may engage in more active
portfolio trading and experience more volatility in its distributions than many
other money market funds.

In addition, the Fund may purchase securities on a when-issued or forward
commitment basis, engage in portfolio securities lending, and engage in short
sales of securities. The collateral securing loans of portfolio securities or
short sales will consist only of cash, cash equivalents, or U.S. Government
securities that satisfy the quality and maturity standards applicable to the
Fund's investments under the rule allowing amortized cost valuation.

The Fund seeks to maintain a stable net asset value of $1.00 per share. There
is no assurance that the Fund will be able to achieve this objective. However,
to facilitate this, the Fund's portfolio securities are valued by the amortized
cost method as permitted by a rule of the SEC. The rule requires that all
portfolio securities have at the time of purchase a maximum remaining maturity
of thirteen months (as defined in the rule) and that they meet certain quality
standards. The Fund must also maintain a dollar-weighted average portfolio
maturity of 90 days or less. For additional information about the securities in
which the Fund may invest and the management techniques the Subadviser employs
to manage the Fund, see "Description of Securities and Investment Techniques."

YOUR HARBOR FUND ACCOUNT

HOW TO BUY SHARES

Shares of each Fund are available for purchase from Harbor Fund's distributor,
HCA Securities, Inc. (the "Distributor"). The Distributor has appointed Harbor
Transfer, Inc. (the "Shareholder Servicing Agent") as its agent to accept
payment for all shares of Harbor Fund sold. The minimum initial investment in
each Fund is $2,000, with minimum subsequent investments of $500 per Fund. If
your account is an IRA, SEP-IRA, UGMA, UTMA profit sharing, savings or pension
plan, or if you are beginning a Systematic Investment Plan, the minimums are
lowered to $500 per Fund for initial and $100 per Fund for subsequent
investments. ALL CHECKS MUST BE MADE PAYABLE TO HARBOR FUND, AND MAY BE MAILED
TO:
HARBOR FUND,
C/O HARBOR TRANSFER, INC.,
P.O. Box 10048,
Toledo, OH 43699-0048.

When making a subsequent investment, you should include the detachable stub from
your confirmation statement to provide additional information.

Any order by mail or by wire to purchase shares of a Fund must be received
before 4 p.m., Eastern time. Investments received after that time will be deemed
received on the next business day.

IF YOU ARE NEW TO HARBOR FUND, please complete and sign the appropriate new
account application and mail it along with your check. If you did not receive
the proper application form with this Prospectus, please contact the Fund at
800-422-1050. All orders to purchase shares are subject to acceptance or
rejection by Harbor Fund, Harbor Transfer, Inc. or HCA Securities, Inc. If you
are establishing an account with an investment of $25,000 or more, you may also
open your account by wire. Please contact the Fund for specific instructions.

17
<PAGE> 19

Shares of each Fund will be purchased at the net asset value next determined
after receipt of your request in proper order. Harbor Fund does not issue share
certificates. The sale of shares of any Fund will be suspended during any period
when the determination of its net asset value is suspended pursuant to rules or
orders of the SEC.

Retirement and institutional investing involves its own investment procedures.
If you are investing in an IRA, SEP-IRA, or if you are an institutional client,
please contact the Fund at 800-422-1050 for the appropriate application and
information.

IF YOU BUY SHARES BY CHECK, YOU MAY NOT EXCHANGE THOSE SHARES FOR 15 CALENDAR
DAYS TO ENSURE THAT YOUR CHECK HAS CLEARED. You may redeem those shares;
however, the payment of the proceeds of that redemption may be delayed for up to
the same 15 days. To avoid the 15-day holding period for investments in any
Fund, you can wire federal funds to Harbor Fund from your bank, which may charge
you a fee. "Wiring federal funds" means that your bank sends money to Harbor
Fund's bank through the Federal Reserve System. Wire instructions are referenced
below, for your convenience. You may also wish to consider buying shares by U.S.
Postal money order, U.S. Treasury check, or Federal Reserve check to avoid the
15-day holding period.

Harbor Fund will not accept any third party checks. Make your check payable to
Harbor Fund. No exchanges on the amount will be allowed for 15 days and payment
of proceeds for redemptions may be delayed for 15 days to ensure that your check
has cleared. Checks must be drawn on U.S. banks, and are accepted subject to
collection at full value. If your check, wire or Automatic Clearing House
("ACH") transaction does not clear, your purchase will be cancelled. There will
be a $15 fee for any check, wire or ACH transaction rejected for any reason.
Harbor Fund reserves the right to deduct the fee from any existing shareholder
account, and you may be prohibited from future investment in Harbor Fund.

You may purchase shares of a Fund at net asset value through a broker, who may
charge you a transaction fee for this service, no part of which is paid by or
received by the Fund, the Adviser, the Distributor or the Shareholder Servicing
Agent. The Funds may allow certain brokers, dealers or institutional investors
with whom the Distributor and the Funds have entered into agreements to purchase
shares of the Funds for next day settlement.

PURCHASES BY WIRE

Any purchases by bank wire must use the following instructions and must arrive
at the Fund before the close of the New York Stock Exchange (normally 4 p.m.
Eastern time). Wires received after the close of the New York Stock Exchange or
on a bank holiday will be purchased the next business day. If wires are received
in a format other than that referenced, they may be rejected by State Street
Bank and Trust Company.

RECEIVING BANK INFORMATION:

- - State Street Bank and Trust Company

- - Boston, MA

- - ABA Routing #0110 0002 8

FOR DEPOSIT TO:

- - Harbor Fund
(Please name the fund you wish to invest in)

- - Account (DDA) #3018-065-7

FOR FURTHER CREDIT TO:

- - Your name as registered on your account

- - Your Harbor Fund account number

Harbor Fund is not responsible of any delays in the wire transfer system nor
is it responsible for inadequate wire instructions.

SHARE PRICE

Each Fund's net asset value (NAV) per share is calculated after 4 p.m. each
business day that the New York Stock Exchange is open. See "Shareholder and
Account Policies -- Transactions Details," for a discussion of how the Fund
computes its NAV. Shares of each Fund are purchased or sold at the share price
next calculated after your request is received in good order and accepted.

HOW TO SELL SHARES

You may take money out of your account(s) at any time by selling (redeeming)
some or all of your shares. Your shares will be sold at the next share price
calculated after your order is received in good form and accepted by Harbor Fund
and the Shareholder Servicing Agent. Any order to redeem shares of a Fund must
be received before 4 p.m. Eastern time. Redemption requests received after that
time will be deemed

18
<PAGE> 20

received on the next business day. You may realize a gain or loss, and certain
shareholders may be subject to backup withholding of federal income tax when
they redeem shares.

YOU MAY SELL SHARES IN A NON-IRA ACCOUNT by mail or by phone, if the Telephone
Redemption privilege is requested on your application form. Telephone
redemptions are limited to $50,000 per day.

TO SELL SHARES IN AN IRA OR SEP-IRA ACCOUNT, your request must be made in
writing, including tax withholding information. If withholding information is
not specified, Harbor Fund will withhold 10%. Please call 800-422-1050 to ask
for an IRA Distribution form or for additional instructions.

IF YOU ARE MAILING A LETTER TO REDEEM SHARES, please include in the letter:

- your name;

- the Fund from which you are redeeming;

- your Harbor Fund account number;

- the dollar amount or number of shares, including fractional shares, to be
redeemed; and

- any other applicable requirements as listed in the table relating to selling
shares on the next page.

ALL REDEMPTION REQUESTS SHOULD BE MAILED TO:

HARBOR FUND
C/O HARBOR TRANSFER, INC.
P.O. Box 10048
Toledo, Ohio 43699-0048

Proceeds of the redemption will be mailed to the address of record, or wired the
next day to a specified bank account, if complete and accurate instructions are
included on your application. Normally, redemption proceeds that are being
mailed are sent on the next business day. Harbor Fund reserves the right to
suspend redemptions or postpone payments for up to seven days or longer, as
permitted by Federal securities laws. Unless otherwise instructed, Harbor Fund
will send a redemption check to the address of record. Neither Harbor Fund nor
Harbor Transfer has any obligation to pay interest on redemption proceeds under
any circumstances.

THE MINIMUM BALANCE FOR EACH FUND TO KEEP IT OPEN is $1,000 ($500 for IRA,
SEP-IRA, UGMA, UTMA or profit sharing, savings or pension plans).

CERTAIN REQUESTS MUST INCLUDE A SIGNATURE GUARANTEE. Signature guarantees are
designed to protect you and Harbor Fund from fraud. Your written request to sell
shares must include a signature guarantee if any of the following situations
apply:

- you are redeeming more than $50,000 worth of shares;

- your address of record has been changed within the last 30 days;

- you are requesting that the redemption check be mailed to an address other
than the address of record;

- you are requesting that the redemption proceeds be wired to a banking
institution other than the banking institution of record;

- you are requesting that the redemption check is made payable to someone
other than the registered shareholder; or

- the redemption proceeds are being transferred to an account with a different
registration.

You may obtain a signature guarantee from a bank, broker-dealer, credit union
(if authorized under state law), any securities exchange or association,
clearing agency, savings association or trust company. A NOTARY PUBLIC CANNOT
PROVIDE A SIGNATURE GUARANTEE.

19
<PAGE> 21

<TABLE>
<CAPTION>
SELLING SHARES ACCOUNT TYPE SPECIAL REQUIREMENT
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
BY MAIL Individual, Joint Tenant, Sole - The letter of instruction must be
Proprietorship, UGMA/UTMA signed by all authorized persons
required to sign for transactions,
exactly as their names appear on the
account.
IRA or SEP-IRA - Please call 800-422-1050 to request a
retirement distribution form or for
additional instructions.
Trust - The trustee must sign the letter
indicating capacity to act.
Business or Organization - At least one person authorized by
corporate resolution to act on the
account must sign the letter.
- Include a corporate resolution with
corporate seal or a signature
guarantee.
Executor, Administrator, - Please call 800-422-1050 for
Conservator, Guardian instructions.
BY PHONE All account types except retirement - Have the Fund name, account number and
800-422-1050 tax identification number available
when you call. You may redeem up to
$50,000 by telephone per day.
All account types - You may exchange to other Funds if both
accounts are registered with the same
name(s), address and taxpayer ID
number.
- -----------------------------------------------------------------------------------------------------------
</TABLE>

INVESTOR SERVICES

Harbor Fund provides you with a variety of services to help you manage your
account and pursue your financial goals. Customer Service Representatives are
available during normal business hours to provide information and answer
questions you may have or you may call the Harbor Navigator at 800-422-1050
(anytime day or night) to access information on your account.

Harbor Fund offers convenient services that let you systematically purchase
into your account or exchange between Harbor Funds. By using the Systematic
Investment or Exchange Plans, you are purchasing shares of a Fund on a scheduled
basis without regard to fluctuations in net asset value per share. Over time,
your average cost per share may be lower than if you tried to time the market.
While regular investment plans do not guarantee a profit and will not protect
you against loss in a declining market, they can be an excellent way to invest
for retirement, a home, educational expenses, and other long-term financial
goals.

THE SYSTEMATIC INVESTMENT PLAN allows you to make regular monthly or quarterly
investments through an automatic withdrawal from your bank account. The minimum
for each systematic investment is $100 per Fund. You must have invested the
minimum of $500 in each Fund before you may begin making systematic investments.
You may use your Harbor Fund account application to add this feature, or if you
already have an account established, please contact the Fund at 800-422-1050 for
the appropriate form.

THE SYSTEMATIC EXCHANGE PLAN allows you to automatically exchange between
Harbor Funds either monthly or quarterly with a minimum of $100. Exchanges may
only be made out of a Fund having a minimum balance of $5,000 to a Fund having a
minimum balance of $500. You must remain in the Plan for a minimum of six
exchanges.

THE DIVIDEND EXCHANGE PROGRAM allows you to direct that dividends and capital
gain distributions from one Harbor Fund, net of any required withholding, be
invested in shares of another existing Harbor Fund. Distribution dollar amounts
are calculated based on the record date for each Fund. A Fund's distributions
are paid on the dividend payment date, which is later than the ex-dividend date.
Shares of the other Harbor Fund purchased with distributions from the existing
Harbor Fund are purchased and credited to your account on the dividend payment
date.

20
<PAGE> 22

HARBOR FUND ALSO OFFERS CONVENIENT TELEPHONE PRIVILEGES.

THE TELEPHONE EXCHANGE PRIVILEGE allows you to exchange your shares of a Fund
for shares of any other Harbor Fund by telephone. You should consider the
differences in investment objectives and expenses of a Fund as described in its
prospectus before making an exchange (a redemption from one fund and purchase to
another). Exchanges are taxable transactions which may cause you to realize a
gain or loss, and certain shareholders may be subject to backup withholding of
federal income tax upon an exchange. For complete policies and restrictions
governing exchanges, including circumstances under which a shareholder's
exchange privilege may be suspended or revoked, see "Shareholder and Account
Policies -- Exchange Restrictions."

THE TELEPHONE REDEMPTION PRIVILEGE allows you to sell shares of up to $50,000
by telephone, with proceeds either mailed to the address of record or wired the
next day to a bank account, if you have provided proper wire instructions on
your application. Please see the previous section on "How to Sell Shares" for
more information on redeeming shares from your account.

HARBOR FUND OFFERS A SYSTEMATIC WITHDRAWAL PLAN that will allow you to make
monthly or quarterly redemptions from any Fund that has a minimum balance of
$10,000. You may direct Harbor Fund to withdraw a specific number of shares or
dollars (minimum of $100). If these payments are to be made payable or to be
mailed to someone other than the registered owner(s) of the account, a signature
guarantee is required on the Systematic Withdrawal Plan application. Harbor Fund
reserves the right to institute a charge of $5 per withdrawal, upon 30 days'
notice, for this service. Harbor Fund may amend or terminate the Systematic
Withdrawal Plan without notice to any participating shareholders.

Withdrawal payments should not be considered dividends, yield or income. If
systematic withdrawals continuously exceed reinvested dividends and capital gain
distributions, your original investment will be reduced and ultimately
exhausted. Withdrawals are redemptions of shares and therefore may cause you to
realize gains or losses for tax purposes. You should consult your tax adviser.

HARBOR FUND OFFERS A CHECKWRITING PRIVILEGE FOR SHAREHOLDERS IN THE MONEY
MARKET FUND ONLY. Shareholders may redeem shares of Harbor Money Market Fund by
writing checks in amounts of $500 or more. The check is presented to State
Street Bank and Trust Company (the "Bank") for payment through normal banking
channels. These checks may be used in the same manner as any other checks
payable through the Bank except that they may not be certified and are payable
upon review. Your investment in Harbor Money Market Fund is not covered by
insurance, by the Federal Deposit Insurance Corporation or any other government
agency.

There is no charge to you for redemptions by use of checks. If you elect this
option, you are subject to the procedures, rules and regulations established by
the Bank with respect to clearance and collection of checks. The Bank will not
honor checks which are in amounts exceeding the available value of your account
at the time the check is presented for payment and will not honor checks drawn
against uncollected funds. Since interest in the Money Market Fund is accrued
daily, but paid monthly, the total value of the Fund may not be determined in
advance. THEREFORE, YOU CANNOT CLOSE YOUR ACCOUNT BY CHECK. This service may be
terminated at any time by Harbor Fund or the Bank upon notice to you. Your
cancelled checks will be returned monthly by the Bank. To add the Checkwriting
feature to your account, please complete the Authorization Form and Signature
Card enclosed with your application. You must have a Harbor Money Market Fund
account established before you can add this feature.

YOU WILL RECEIVE CONFIRMATION OF EACH SHARE TRANSACTION MADE TO YOUR ACCOUNT,
as well as a quarterly combined statement. Harbor Fund also distributes reports
of its financial statements semi-annually.

TRANSFER ON DEATH REGISTRATION. Transfer on Death (TOD) registration provides
Harbor Fund investors with the opportunity to indicate on the account
registration that the account ownership will transfer on death directly to one
or more named beneficiaries. TOD registration is ONLY available to individuals
and joint tenants with rights of survivorship. TOD registration is NOT available
for IRA, UGMA/UTMA, or institutional accounts. TOD registration requires that
the name(s) of the beneficiary(ies) be listed on the account registration
followed by "TOD, Subject to STA TOD Rules". The Fund reserves the right to use
the term "Beneficiaries" in an account registration rather than list each named
beneficiary. However, the shareholder MUST provide the name, address, social
security number and birth date of the beneficiary(ies). To add TOD registration
to a new account, complete the requested information on the Harbor Fund New
Account

21
<PAGE> 23

Application. To add TOD registration to an existing account or to change the
beneficiary(ies), you must complete a TOD registration form which is available
by calling 800-422-1050. Adding TOD registration to an existing account or
changing the beneficiary(ies) requires a SIGNATURE GUARANTEE which CANNOT be
provided by a Notary Public.

SHAREHOLDER AND ACCOUNT POLICIES

TRANSACTION DETAILS

HARBOR FUND IS OPEN FOR BUSINESS each day that the New York Stock Exchange
(NYSE) is open. The Custodian normally calculates a Fund's net asset value as of
the close of business of the NYSE, normally 4 p.m., Eastern time.

A FUND'S NAV per share is the value of a single share. The NAV is computed by
adding the market value (amortized cost for Harbor Money Market Fund) of the
Fund's investments, cash, and other assets, subtracting its liabilities, and
then dividing the result by the number of shares outstanding.

WHEN YOU SIGN YOUR ACCOUNT APPLICATION, you are certifying that you are not a
minor, the Social Security or other taxpayer identification number that you
provide is your correct number and that you are not subject to 31% backup
withholding of federal income tax for failing to report certain income to the
IRS or that you are a type of recipient that is exempt from backup withholding,
e.g., a corporation. If you are subject to backup withholding, the IRS requires
Harbor Fund to withhold 31% of your taxable distributions and, except in the
case of Harbor Money Market Fund, the proceeds of redemptions (including
exchanges).

YOU MAY INITIATE MANY TRANSACTIONS BY TELEPHONE. Procedures designed to
confirm that instructions communicated by telephone are genuine, including
requiring certain identifying information prior to acting upon instructions,
recording all telephone instructions and sending written confirmation of
telephone instructions, are used by the Shareholder Servicing Agent. To the
extent such procedures are reasonably designed to prevent unauthorized or
fraudulent instructions and are followed neither Harbor Fund, the Distributor
nor the Shareholder Servicing Agent is responsible for any losses from
unauthorized or fraudulent redemptions by telephone; consequently, the investor
will bear the risk of loss. In the event that such procedures are not properly
followed, Harbor Fund, the Distributor or the Shareholder Servicing Agent may be
liable.

IF YOU ARE UNABLE TO REACH HARBOR FUND BY PHONE (for example, during periods
of unusual market activity), consider placing your order by mail. Harbor Fund
and the Shareholder Servicing Agent are not responsible for any misdirected or
lost mail.

EACH FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES for a period of
time. Shares of Harbor International Fund are offered only to shareholders of
the Fund with an existing account and to beneficiaries of certain profit sharing
plans, pension funds or benefit plans and certain other investors purchasing
amounts of at least $1 million. Each Fund also reserves the right to reject any
specific purchase order, including certain purchases by exchange. See "Exchange
Restrictions." Purchase orders may be refused if, in Harbor Fund's opinion, they
are of a size that would disrupt management of a Fund.

Harbor Fund reserves the right to close your account if it has a current net
asset value of less than $1,000 ($500 in IRA, SEP-IRA, UGMA, UTMA,
Profit-sharing, savings or pension plans) by redeeming all remaining shares in
your account. No such redemption will be effected unless you have been given at
least 60 days' written notice. Harbor Fund reserves the right to redeem shares
in your account as reimbursement for loss to a Fund due to the failure of your
check, wire or ACH transaction to clear.

DISTRIBUTIONS IN KIND. Harbor Fund agrees to redeem shares of each Fund solely
in cash up to the lesser of $250,000 or 1% of the net asset value of the Fund
during any 90-day period for any one shareholder. Harbor Fund reserves the right
to pay redemptions exceeding $250,000 or 1% of the net asset value of the
redeeming Fund, either total or partial, by a distribution in kind of securities
(instead of cash) from the applicable Fund. The securities distributed in kind
would be valued for this purpose by the same method as is used to calculate the
Fund's net asset value per share. If you receive a distribution in kind, you
should expect to incur transaction costs upon the disposition of the securities
received in the distribution.

EXCHANGE RESTRICTIONS

As a shareholder, you have the privilege of exchanging shares of a Fund for
shares of any other Harbor Fund (except Harbor International Fund unless you

22
<PAGE> 24

have an existing account). However, you should note the following:

- Exchanges are available only in states where an exchange may legally be
made.

- You may only exchange between Funds that are registered in the same name,
address and taxpayer identification number.

- The minimum amount you may exchange from one Fund into another is the same
as the guidelines for minimum initial and subsequent investments, and each
Fund must have a minimum of $1,000 after the exchange.

- An exchange is a redemption of shares from one Fund and a purchase of shares
in another. Thus, exchanges may have tax consequences for you.

- Harbor Fund reserves the right to refuse exchange purchases by any person or
group if, in Harbor Fund's judgment, a Fund would be unable to invest the
money effectively in accordance with its investment objective and policies,
or would otherwise potentially be adversely affected.

- Your exchanges may be restricted or refused if a Fund receives or
anticipates simultaneous orders affecting significant portions of the Fund's
assets. In particular, a pattern of exchanges that coincides with a "market
timing" strategy may be disruptive to a Fund.

- Although Harbor Fund will attempt to give you prior notice whenever it is
reasonably able to do so, it may impose these restrictions at any time.
Harbor Fund reserves the right to terminate or modify the exchange privilege
upon 60 days' notice to shareholders.

23
<PAGE> 25

THE ADVISER, SUBADVISERS, DISTRIBUTOR AND
SHAREHOLDER SERVICING AGENT

THE ADVISER. Harbor Capital Advisors, Inc., a registered investment adviser
since 1984, is each Fund's investment adviser (Adviser). The Adviser is a
wholly-owned subsidiary of Owens-Illinois, Inc. (Owens-Illinois) and is the
investment adviser to separate accounts for the Owens-Illinois Master Retirement
Trust.

Under each of the Investment Advisory Agreements between the Adviser and
Harbor Fund on behalf of each Fund, the Adviser either continually manages the
investment portfolio of a Fund or oversees the management of a Fund by one or
more Subadvisers. Subject to review and approval by the Board of Trustees, the
Adviser sets each Fund's overall investment strategies; selects Subadvisers;
when appropriate, recommends to the Board of Trustees the allocation and
reallocation of a Fund's assets among multiple Subadvisers; monitors and
evaluates the performance of Subadvisers; and ensures that the Subadvisers
comply with the respective Fund's investment objectives, policies and
restrictions. Harbor Fund and the Adviser received an order from the SEC
permitting the Adviser, subject to approval by the Board of Trustees, to select
Subadvisers to serve as portfolio managers of the Funds or to materially modify
an existing subadvisory agreement without obtaining shareholder approval of a
new or amended subadvisory agreement.

The Adviser administers each Fund's business affairs and, in connection
therewith, furnishes each Fund with office facilities and is responsible for
clerical, recordkeeping and bookkeeping services and for the financial and
accounting records required to be maintained by each Fund, other than those
maintained by the Funds' Custodian and Shareholder Servicing Agent. Each Fund is
entitled to use its present name only so long as the Adviser acts as the Fund's
investment adviser.

For these advisory and administrative services and facilities, each Fund pays
the Adviser a monthly fee at an annual rate of the average daily net assets of
that Fund as follows:

<TABLE>
<CAPTION>
ANNUAL
RATE
------
<S> <C>
Harbor Growth Fund .75%
Harbor International Growth Fund .75%
Harbor Capital Appreciation Fund .60%
Harbor International Fund II .75%
Harbor International Fund .85%
Harbor Value Fund .60%
Harbor Bond Fund .70%
Harbor Short Duration Fund .40%
Harbor Money Market Fund .30%
</TABLE>

Each Fund also pays: shareholder service expenses, expenses of issuing reports
to shareholders, its proportionate share of custodian fees, legal fees, auditing
fees, taxes, Trustees' fees, and other expenses of administering the Fund.

THE SUBADVISERS. Pursuant to separate subadvisory agreements between the
Adviser, Harbor Fund on behalf of the Fund and the respective Subadviser, the
assets of each Fund are managed by one or more Subadvisers consistent with the
Fund's objectives and policies, and subject to the supervision of the Adviser
and the Trustees. The Adviser may from time to time recommend to the Trustees
the engagement of new subadvisers. Each Subadviser manages separate accounts for
the Owens-Illinois Master Retirement Trust. The Adviser pays quarterly out of
its own resources a fee to each Subadviser equal on an annual basis to a stated
percentage of the Fund's average net assets. For purposes of determining the
applicable fee rate and satisfying the minimum payment requirement, the assets
of the Fund and the payments by the Adviser to the Fund's Subadviser (except
Richards & Tierney) will be combined with the assets and payments of the
accounts of the Owens-Illinois Master Retirement Account that the Subadviser
manages.

Emerging Growth Advisors, Inc. is the Subadvisor to Harbor Growth Fund.
Emerging Growth is a Delaware corporation registered as an investment adviser
with assets of $148.9 million under management as of June 30, 1997. Emerging
Growth receives an advisory fee from the Adviser equal on an annual basis to
1.00% of the Fund's average actual net assets up to $5 million; 0.75% on the
next $20 million of such assets; and 0.50% on such assets over $25 million. The
Adviser will pay Emerging Growth a fee each year which is not less than $10,000.

Jennison Associates Capital Corp. is Subadviser to Harbor International Growth
Fund. Jennison is a registered investment adviser and a New York corporation
with $31.1 billion in assets under management as of December 31, 1996 and is a
wholly owned subsidiary of The Prudential Insurance Company of America. For its
services, Jennison receives from the Adviser a subadvisory fee equal on an
annual basis to .50% of the Fund's average net assets managed by Jennison up to
$1.5 billion; .45% on the next $1 billion of such assets; .40% on such assets in
excess of $2.5 billion. The Adviser will pay Jennison a fee each year which is
not less than $125,000.

24
<PAGE> 26

Jennison also serves as Subadviser to Harbor Capital Appreciation Fund.
Jennison receives an advisory fee from the Adviser equal on an annual basis to
.75% of the Fund's average net assets up to $10 million; .50% on the next $30
million of such assets; .35% on the next $25 million of such assets; .25% on the
next $335 million of such assets; .22% on the next $600 million of such assets;
and .20% on such assets in excess of $1 billion. The Adviser will pay Jennison a
fee each year which is not less than $125,000.

Summit International Investments, Inc. is the Subadviser to Harbor
International Fund II. Summit is a registered investment adviser and a
Massachusetts corporation with $41.8 million under management as of December 31,
1996. Summit receives a subadvisory fee from the Adviser equal on an annual
basis to .50% of the Fund's average net assets managed by Summit up to $1.5
billion; .45% on the next $1 billion of such assets; and .40% on such assets in
excess of $2.5 billion. Summit does not provide investment management services
to any other registered investment companies. The Adviser will pay Summit a fee
each year which is not less than $10,000.

Northern Cross Investments Limited is Subadviser to Harbor International Fund.
Northern Cross is a registered investment adviser and a Bermuda corporation with
$7.5 billion in assets under management as of December 31, 1996. Northern Cross
receives a subadvisory fee from the Adviser equal on an annual basis to .60% of
the Fund's average net assets. Northern Cross has voluntarily agreed to reduce
its subadvisory fee to .55% of the Fund's average net assets over $1.5 billion
and to .50% of the Fund's average net assets over $2.5 billion. The Adviser will
pay Northern Cross a fee each year which is not less than $6,000.

DePrince, Race & Zollo, Inc. ("DRZ") is Sub-Adviser to Harbor Value Fund. As
of December 31, 1996, DRZ had $1.3 billion in assets under management. DRZ
receives an advisory fee from the Adviser equal on an annual basis to .65% of
the average actual net assets of the portion of Harbor Value Fund managed by DRZ
up to $10 million; .40% on the next $40 million of such assets; .30% on the next
$50 million of such assets; and .25% on such assets in excess of $100 million.
The Adviser will pay DRZ a fee each year which is not less than $40,000.

In addition to DRZ, the Adviser has engaged Richards & Tierney, Inc. ("R&T")
as a second subadviser to Harbor Value Fund. R&T is a registered investment
adviser and an Illinois corporation with approximately $75 million in assets
under management as of December 31, 1996. R&T does not provide investment
management services to any other registered investment companies. The Board of
Trustees has determined that management of the assets of the Fund's portfolio
will be allocated between the two Subadvisers. Currently, DRZ manages 75% of the
Fund's assets and R&T manages 25% of the Fund's assets. The allocation of assets
between the Subadvisers may be changed at any time by the Trustees.

R&T receives an advisory fee equal on an annual basis to .30% of the portion
of Harbor Value Fund's average net assets managed by R&T up to $5 million; .25%
on the next $10 million of such assets; and .20% on such assets in excess of $15
million.

Pacific Investment Management Company is Subadviser for Harbor Bond Fund.
PIMCO is a general partnership whose partners are PIMCO Management Inc., a
Delaware corporation, and PIMCO Advisers, G.P. and is a registered investment
adviser, with $88.1 billion in assets ($79.3 billion in fixed-income) under
management as of December 31, 1996. PIMCO is also registered as a commodity
trading adviser with the Commodity Futures Trading Commission. PIMCO receives
from the Adviser an advisory fee equal on an annual basis to .50% of the Fund's
average net assets up to $25 million; .375% on the next $25 million of such
assets; and .25% on such assets in excess of $50 million. The Adviser will pay
PIMCO a fee each year which is not less than $100,000.

Fischer Francis Trees & Watts, Inc. is Subadviser to Harbor Short Duration
Fund. Fischer is a registered investment adviser and a New York corporation with
$22.8 billion in assets (all fixed income) under management as of December 31,
1996. Fischer is a wholly-owned subsidiary of Charter Atlantic Corporation, a
private holding company owned by senior employees of Fischer. Fischer receives
from the Adviser an advisory fee equal on an annual basis to .20% of Harbor
Short Duration Fund's average net assets up to $100 million and .15% on such
assets in excess of $100 million. The Adviser will pay Fischer a fee each year
which is not less than $200,000.

Fischer is subadviser to Harbor Money Market Fund. Fischer receives from the
Adviser an advisory fee equal on an annual basis to .20% of Harbor Money Market
Fund's average net assets up to $100 million and .15% on such assets in excess
of $100 million. The Adviser will pay Fischer a fee each year which is not less
than $200,000.

25
<PAGE> 27

PORTFOLIO MANAGERS. The persons primarily responsible for the day-to-day
management of each Fund are listed below:

<TABLE>
<CAPTION>
YEAR
PORTFOLIO BECAME BUSINESS EXPERIENCE
FUND MANAGER MANAGER (PAST 5 YEARS)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Growth Fund Peter Welles 1997 President of Emerging Growth Advisors, Inc.
(since 1996); and General Partner of Emerging
Growth Partners, L.P. (1992-1996).
International Howard Moss 1993 Director, Executive Vice-President of Jennison
Growth Fund (since 1993); and Portfolio manager, Arnhold and
S. Bleichroder (1983-1993).
Blair Boyer 1993 Director, Senior Vice-President of Jennison
(since 1993); and Portfolio Manager, Arnhold and
S. Bleichroder (1989-1993).
Capital Spiros Segalas 1990 President, and Chief Investment Officer (since
Appreciation 1993); and Director and Founding Member of
Fund Jennison (1969).
International James LaTorre 1996 President, Summit (since 1996); Vice President,
Fund II Boston Investor Services, Inc. (1993-1997); Vice
President, Boston Overseas Investors, Inc.
(1992-1993); and Portfolio Manager, Ivy
Management, Inc. (1989-1992).
International Hakan Castegren 1987 President, Northern Cross (since 1993);
Fund President, Boston Overseas Investors, Inc.
(1990-1993); and Principal, Marsh &
Cunningham-Castegren International. (1985-1990).
Value Fund Gregory DePrince 1994 Principal and Partner, DRZ (since April, 1995);
and Senior Vice President of SunBank
(1989-1995).
David Tierney 1993 Managing Partner and Founder, Richards & Tierney
(since 1984).
Bond Fund William Gross 1987 Managing Director, PIMCO (Del. G.P.) (since
1994); and Managing Director, PIMCO (1982-1994).
Dean Meiling 1994 Managing Director, PIMCO (Del. G.P.) (since
1994); and Managing Director, PIMCO (1987-1994).
Short Duration Stewart Russell 1994 Managing Director (since 1996) and Portfolio
Fund Manager (1992-1996), Fischer; and Trader, Global
Markets, J.P. Morgan (1987-1992).
Money Market David Marmon 1994 Managing Director (since 1996) and Portfolio
Fund Manager (1990-1996), Fischer; and Research
Analyst (futures and options), Yamaichi
International (America) (1989-1990).
- ----------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE> 28

THE DISTRIBUTOR AND SHAREHOLDER SERVICING AGENT. HCA Securities, Inc. acts as
the distributor of each Fund's shares. The Distributor is a Delaware
corporation, a registered broker-dealer and a wholly-owned subsidiary of the
Adviser.

Harbor Transfer, Inc. acts as the shareholder servicing agent for each Fund.
The Shareholder Servicing Agent is a Delaware corporation, a registered transfer
agent and a wholly-owned subsidiary of the Adviser.

DESCRIPTION OF SECURITIES AND INVESTMENT TECHNIQUES

DERIVATIVE INSTRUMENTS. Each of the Funds may invest in derivative instruments
which are securities or contracts that provide for payments based on or
"derived" from the performance of an underlying asset, index or other economic
benchmark. Essentially, a derivative instrument is a financial arrangement or a
contract between two parties (and not a true security like a stock or a bond).
Transactions in derivative instruments can be, but are not necessarily, riskier
than investments in conventional stocks, bonds and money market instruments. A
derivative instrument is more accurately viewed as a way of reallocating risk
among different parties or substituting one type of risk for another. Every
investment by a Fund, including an investment in conventional securities,
reflects an implicit prediction about future changes in the value of that
investment. Every Fund investment also involves a risk that the portfolio
manager's expectations will be wrong. Transactions in derivative instruments
often enable a Fund to take investment positions that more precisely reflect the
portfolio manager's expectations concerning the future performance of the
various investments available to the Fund. Derivative instruments can be a
legitimate and often cost-effective method of accomplishing the same investment
goals as could be achieved through other investments in conventional securities.

Derivative securities include collateralized mortgage obligations, stripped
mortgage backed securities, asset backed securities, structured notes and
floating interest rate securities (described below). Derivative contracts
include options, futures contracts, forward contracts, forward commitment and
when-issued securities transactions, forward foreign currency exchange contracts
and interest rate, mortgage and currency swaps (described below). The principal
risks associated with derivative instruments are:

Market risk: The instrument will decline in value or that an alternative
investment would have appreciated more, but this is no different from the risk
of investing in conventional securities.

Leverage and associated price volatility: Leverage causes increased volatility
in the price and magnifies the impact of adverse market changes, but this risk
may be consistent with the investment objective of even a conservative fund in
order to achieve an average portfolio volatility that is within the expected
range for that type of fund. The SEC has taken the position that the risk of
leverage is not an appropriate risk for a money market fund.

Credit risk: The issuer of the instrument may default on its obligation to pay
interest and principal, but derivatives based on U.S. Government agency mortgage
securities may actually present less credit risk than some conventional
corporate debt securities.

Liquidity and valuation risk: Many derivative instruments are traded in
institutional markets rather than on an exchange. Nevertheless many derivative
instruments are actively traded and can be priced with as much accuracy as
conventional securities. Derivative instruments that are custom designed to meet
the specialized investment needs of a relatively narrow group of institutional
investors such as the Funds are not readily marketable and are subject to a
Fund's restrictions on illiquid investments.

Correlation risk: There may be imperfect correlation between the price of the
derivative and the underlying asset; for example, there may be price disparities
between the trading markets for the derivative contract and the underlying
asset.

Each derivative instrument purchased for a Fund's portfolio is reviewed and
analyzed by the Fund's portfolio manager to assess the risk and reward of each
such instrument in relation to the Fund's portfolio investment strategy. The
decision to invest in derivative instruments or conventional securities is made
by measuring the respective instrument's ability to provide value to the Fund
and its shareholders.

CASH EQUIVALENTS. Each of the Funds may invest in cash equivalents, which
include short-term obligations issued or guaranteed as to interest and principal
by the U.S. Government or any agency or instrumentality thereof (including
repurchase agreements collateralized by such securities). The Funds may also
invest in obligations of domestic and/or foreign banks which at

27
<PAGE> 29

the date of investment have capital, surplus, and undivided profits (as of the
date of their most recently published financial statements) in excess of $100
million. The Funds may also invest in obligations of other banks or savings and
loan associations if such obligations are insured by the FDIC. Each Fund (except
Harbor Money Market Fund) may also invest in commercial paper which at the date
of investment is rated at least A-1 by S&P or P-1 by Moody's or, if not rated,
is issued or guaranteed as to payment of principal and interest by companies
which at the date of investment have an outstanding debt issue rated AA or
better by S&P or Aa or better by Moody's; short-term corporate obligations which
at the date of investment are rated AA or better by S&P or Aa or better by
Moody's (rated A in the case of Harbor Short Duration Fund), and other debt
instruments, including unrated instruments, not specifically described if such
instruments are deemed by the Subadviser to be of comparable high quality and
liquidity.

Each Fund may hold cash and invest in cash equivalents pending investment of
proceeds from new sales or to meet ordinary daily cash needs.

U.S. GOVERNMENT SECURITIES. U.S. Government securities are obligations of, or
guaranteed by, the U.S. Government, its agencies or instrumentalities. Some U.S.
Government securities, such as Treasury bills, notes and bonds and Government
National Mortgage Association ("GNMA") certificates, are supported by the full
faith and credit of the United States; others, such as those of the Federal Home
Loan Banks, are supported by the right of the issuer to borrow from the
Treasury; others, such as those of the Federal National Mortgage Association
("FNMA"), are supported by the discretionary authority of the U.S. Government to
purchase the agency's obligations; and still others, such as those of the
Student Loan Marketing Association, are supported only by the credit of the
instrumentality. No assurance can be given that the U.S. Government will provide
financial support to U.S. Government agencies or instrumentalities as described
above in the future, since it is not obligated to do so by law, other than as
set forth above.

FIXED-INCOME SECURITIES. Corporate and foreign governmental debt securities
are subject to the risk of the issuer's inability to meet principal and interest
payments on the obligations (credit risk) and may also be subject to price
volatility due to such factors as interest rate sensitivity, market perception
of the creditworthiness of the issuer and general market liquidity (market
risk). Except to the extent that values are independently affected by currency
exchange rate fluctuations, when interest rates decline, the value of
fixed-income securities can generally be expected to rise. Conversely, when
interest rates rise, the value of fixed-income securities can be expected to
decline. The Subadviser will consider both credit risk and market risk in making
investment decisions for a Fund.

Lower-rated debt securities. Securities which are rated BBB by S&P or Baa by
Moody's are generally regarded as having adequate capacity to pay interest and
repay principal, but may have some speculative characteristics. Lower-rated
securities (rated below Baa by Moody's or BBB by S&P) may have speculative
characteristics (including the possibility of default or bankruptcy of the
issuers of such securities, market price volatility based upon interest rate
sensitivity, questionable creditworthiness and relative liquidity of the
secondary trading market). Because high yield bonds have been found to be more
sensitive to adverse economic changes or individual corporate developments and
less sensitive to interest rate changes than higher-rated investments, an
economic downturn could disrupt the market for high yield bonds and adversely
affect the value of outstanding bonds and the ability of issuers to repay
principal and interest. In addition, in a declining interest rate market,
issuers of high yield bonds may exercise redemption or call provisions, which
may force a Fund, to the extent it owns such securities, to replace those
securities with lower yielding securities. This could result in a decreased
return for investors. In the event that the rating for any security held in a
Fund's portfolio drops below the minimum acceptable rating applicable to that
Fund, such change will be considered by that Fund's Subadviser in evaluating the
overall composition of the Fund's portfolio.

PREFERRED STOCKS. Preferred stock generally has a preference as to dividends
and upon liquidation over an issuer's common stock but ranks junior to debt
securities in an issuer's capital structure. Preferred stock generally pays
dividends in cash (or additional shares of preferred stock) at a defined rate
but, unlike interest payments on debt securities, preferred stock dividends are
payable only if declared by the issuer's board of directors. Dividends on
preferred stock may be cumulative, meaning that, in the event the issuer fails
to make one or more dividend payments on the preferred stock, no dividends may
be paid on the issuer's common stock until all unpaid preferred stock dividends
have been paid. Preferred stock also may be subject to optional or mandatory
redemption provisions.

CONVERTIBLE SECURITIES. Convertible securities are bonds, preferred stocks and
other securities that nor-

28
<PAGE> 30

mally pay a fixed rate of interest or dividend and give the owner the option to
convert the security into common stock. While the value of convertible
securities depends in part on interest rate changes and the credit quality of
the issuer, the price will also change based on the price of the underlying
stock. While convertible securities generally have less potential for gain than
common stock, their income provides a cushion against the stock price's
declines. They generally pay less income than non-convertible bonds.

SMALL COMPANIES. Harbor Growth Fund invests in securities of companies with
market capitalization or estimated revenues of not more than $500 million at the
time of initial investment. Small companies may (i) be subject to more volatile
market movements than securities of larger, more established companies; (ii)
have limited product lines, markets or financial resources; and (iii) depend
upon a limited or less experienced management group. The securities of small
companies may be traded only on the over-the-counter market or on a regional
securities exchange and may not be traded daily or in the volume typical of
trading on a national securities exchange. Disposition by the Fund of small
company securities in order to meet redemptions may require the Fund to sell
these securities at a discount from market prices, over a longer period of time
or during periods when disposition is not desirable.

MORTGAGE-RELATED AND OTHER ASSET-BACKED SECURITIES. Mortgage pass-through
securities are securities representing interests in "pools" of mortgage loans
secured by residential or commercial real property in which payments of both
interest and principal on the securities are generally made monthly, in effect
"passing through" monthly payments made by the individual borrowers on the
mortgage loans which underlie the securities (net of fees paid to the issuer or
guarantor of the securities). Early repayment of principal on some
mortgage-related securities (arising from prepayments of principal due to sale
of the underlying property, refinancing, or foreclosure, net of fees and costs
which may be incurred) may expose a Fund to a lower rate of return upon
reinvestment of principal. Also, if a security subject to repayment has been
purchased at a premium, in the event of prepayment the value of the premium
would be lost. Like other fixed-income securities, when interest rates rise, the
value of a mortgage-related security generally will decline; however, when
interest rates are declining, the value of mortgage-related securities with
prepayment features may not increase as much as other fixed-income securities.

Payment of principal and interest on some mortgage pass-through securities
(but not the market value of the securities themselves) may be guaranteed by the
full faith and credit of the U.S. Government (in the case of securities
guaranteed by GNMA); or guaranteed by agencies or instrumentalities of the U.S.
Government (in the case of securities guaranteed by FNMA or the Federal Home
Loan Mortgage Corporation ("FHLMC"), which are supported only by the
discretionary authority of the U.S. Government to purchase the agency's
obligations). Mortgage-related securities created by non-governmental issuers
(such as commercial banks, savings and loan institutions, private mortgage
insurance companies, mortgage bankers and other secondary market issuers) may be
supported by various forms of insurance or guarantees, including individual
loan, title, pool and hazard insurance and letters of credit, which may be
issued by governmental entities, private insurers or the mortgage poolers.

Collateralized Mortgage Obligations ("CMOs") are hybrid mortgage-related
instruments. Similar to a bond, interest and pre-paid principal on a CMO are
paid, in most cases, semiannually. CMOs may be collateralized by whole mortgage
loans but are more typically collateralized by portfolios of mortgage
pass-through securities guaranteed by GNMA, FHLMC, or FNMA. CMOs are structured
into multiple classes, with each class bearing a different stated maturity.
Monthly payments of principal, including prepayments, are first returned to
investors holding the shortest maturity class; investors holding the longer
maturity classes receive principal only after the first class has been retired.
CMOs that are issued or guaranteed by the U.S. Government or by any of its
agencies or instrumentalities will be considered U.S. Government securities by
the Funds, while other CMOs, even if collateralized by U.S. Government
securities, will have the same status as other privately issued securities for
purposes of applying a Fund's diversification tests.

Other mortgage-related securities include securities other than those
described above that directly or indirectly represent a participation in, or are
secured by and payable from, mortgage loans on real property, such as CMO
residuals or stripped mortgage-backed securities, and may be structured in
classes with rights to receive varying proportions of principal and interest. In
addition, the Funds may invest in other asset-backed securities that have been
offered to investors. For a discussion of the characteristics of some of these
instruments, see the Statement of Additional Information.

Real Estate Mortgage Investment Conduits ("REMICs") are CMO vehicles that
qualify for special tax treatment under the Internal Revenue Code of

29
<PAGE> 31

1986, as amended (the "Code") and invest in mortgages principally secured by
interests in real property and other investments permitted by the Code.

STRIPPED MORTGAGE-BACKED SECURITIES ("SMBS"). SMBS are derivative
multiple-class mortgage-backed securities. SMBS are usually structured with two
classes that receive different proportions of interest and principal
distributions on a pool of mortgage assets. A typical SMBS will have one class
receiving some of the interest and most of the principal, while the other class
will receive most of the interest and the remaining principal. In the most
extreme case, one class will receive all of the interest (the "interest only"
class) while the other class will receive all of the principal (the "principal
only" class). The yields and market risk of interest only and principal only
SMBS, respectively, may be more volatile than those of other fixed-income
securities. The staff of the SEC considers privately issued SMBS to be illiquid.

RISK FACTORS ASSOCIATED WITH MORTGAGE-BACKED SECURITIES. Investing in
Mortgage-Backed Securities involves certain risks, including the failure of a
counter-party to meet its commitments, adverse interest rate changes and the
effects of prepayments on mortgage cash flows. In addition, investing in the
lowest tranche of CMOs and REMIC certificates involves risks similar to those
associated with investing in equity securities. Further, the yield
characteristics of Mortgage-Backed Securities differ from those of traditional
fixed-income securities. The major differences typically include more frequent
interest and principal payments (usually monthly), the adjustability of interest
rates, and the possibility that prepayments of principal may be made
substantially earlier than their final distribution dates.

Prepayment rates are influenced by changes in current interest rates and a
variety of economic, geographic, social and other factors and cannot be
predicted with certainty. Both adjustable rate mortgage loans and fixed rate
mortgage loans may be subject to a greater rate of principal prepayments in a
declining interest rate environment and to a lesser rate of principal
prepayments in an increasing interest rate environment. Under certain interest
rate and prepayment rate scenarios, a Fund may fail to recoup fully its
investment in Mortgage-Backed Securities notwithstanding any direct or indirect
governmental or agency guarantee. When a Fund reinvests amounts representing
payments and unscheduled prepayments of principal, it may receive a rate of
interest that is lower than the rate on existing adjustable rate mortgage
pass-through securities. Thus, Mortgage-Backed Securities, and adjustable rate
mortgage pass-through securities in particular, may be less effective than other
types of U.S. Government securities as a means of "locking in" interest rates.

Conversely, in a rising interest rate environment, a declining prepayment rate
will extend the average life of many Mortgage-Backed Securities. This
possibility is often referred to as extension risk. Extending the average life
of a Mortgage-Backed Security increases the risk of depreciation due to future
increases in market interest rates.

RISKS ASSOCIATED WITH SPECIFIC TYPES OF DERIVATIVE DEBT SECURITIES. Different
types of derivative debt securities are subject to different combinations of
prepayment, extension and/or interest rate risk. Conventional mortgage
pass-through securities and sequential pay CMOs are subject to all of these
risks, but are typically not leveraged. Thus, the magnitude of exposure may be
less than for more leveraged Mortgage-Backed Securities.

The risk of early prepayments is the primary risk associated with interest
only debt securities ("IOS"), super floaters, other leveraged floating rate
instruments and Mortgage-Backed Securities purchased at a premium to their par
value. In some instances, early prepayments may result in a complete loss of
investment in certain of these securities. The primary risks associated with
certain other derivative debt securities are the potential extension of average
life and/or depreciation due to rising interest rates.

These securities include floating rate securities based on the Cost of Funds
Index ("COFI floaters"), other "lagging rate" floating rate securities, floating
rate securities that are subject to a maximum interest rate ("capped floaters"),
Mortgage-Backed Securities purchased at a discount, leveraged inverse floating
rate securities ("inverse floaters"), principal only ("PO") debt securities,
certain residual or support tranches of CMOs and index amortizing notes. Index
amortizing notes are not Mortgage-Backed Securities, but are subject to
extension risk resulting from the issuer's failure to exercise its option to
call or redeem the notes before their stated maturity date. Leveraged inverse
IOs combine several elements of the Mortgage-Backed Securities described above
and thus present an especially intense combination of prepayment, extension and
interest rate risks.

Planned amortization class ("PAC") and target amortization class ("TAC") CMO
bonds involve less exposure to prepayment, extension and interest rate

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risk than other Mortgage-Backed Securities, provided that prepayment rates
remain within expected prepayment ranges or "collars." To the extent that
prepayment rates remain within these prepayment ranges, the residual or support
tranches of PAC and TAC CMOs assume the extra prepayment, extension and interest
rate risk associated with the underlying mortgage assets.

The Funds may invest only in high quality mortgage-related (or other
asset-backed) securities either (i) issued by U.S. Government sponsored
corporations (currently GNMA, FHLMC, FNMA and Resolution Trust Corp.) or (ii)
rated in one of the top two categories by an NRSRO or, if not rated, of
equivalent investment quality as determined by the Subadvisers. The Subadvisers
will monitor continuously the ratings of securities held by the Funds that they
manage and the creditworthiness of their issuers.

VARIABLE AND FLOATING RATE SECURITIES. Variable and floating rate securities
provide for a periodic adjustment in the interest rate paid on the obligations.
The terms of such obligations must provide that interest rates are adjusted
periodically based upon some appropriate interest rate adjustment index as
provided in the respective obligations. The adjustment intervals may be regular,
and range from daily up to annually, or may be event based, such as a change in
the prime rate. Variable and floating rate securities that cannot be disposed of
promptly within seven days and in the usual course of business without taking a
reduced price will be treated as illiquid and subject to the limitation on
investments in illiquid securities. See "Description of Securities and
Investment Techniques -- Restricted Securities" below.

RESTRICTED SECURITIES. Each Fund (except Harbor Money Market Fund which will
not invest more than 10%) will not invest more than 15% of its net assets in
illiquid investments, which includes repurchase agreements and fixed time
deposits maturing in more than seven days, securities that are not readily
marketable and restricted securities, unless the Board of Trustees determines,
based upon a continuing review of the trading markets for the specific
restricted security, that such restricted securities are liquid.

Each Fund may purchase and sell restricted securities (i.e., securities that
would be required to be registered under the Securities Act of 1933 (the "1933
Act") prior to distribution to the general public) including restricted
securities eligible for resale to "qualified institutional buyers" under Rule
144A under the 1933 Act. It may be expensive or difficult for a Fund to dispose
of restricted securities in the event that registration is required or an
eligible purchaser cannot be found.

The Board of Trustees may adopt guidelines and delegate to the Adviser the
daily function of determining and monitoring liquidity of restricted securities.
The Board, however, will retain sufficient oversight and be ultimately
responsible for the determinations.

REPURCHASE AGREEMENTS. Each Fund may enter into repurchase agreements with any
bank that satisfies the standards set forth under "Cash Equivalents" or with any
member firm of the National Association of Securities Dealers, Inc., or any
affiliate of a member firm, which is a primary dealer in U.S. Government
securities. In a repurchase agreement, a Fund buys a security at one price and
simultaneously agrees to sell it back at a higher price. Such agreements must be
collateralized, and the Funds' Custodian will maintain custody of the purchased
securities for the duration of the agreement. The securities will be regularly
monitored to ensure that the collateral is adequate. In the event of the
bankruptcy of the seller or the failure of the seller to repurchase the
securities as agreed, the Fund could suffer losses, including loss of interest
on or principal of the securities and costs associated with delay and
enforcement of the repurchase agreement.

REVERSE REPURCHASE AGREEMENTS. Harbor Short Duration Fund enters into reverse
repurchase agreements with banks and broker-dealers to the extent permitted by
the Fund's restrictions on borrowing. Harbor Bond Fund may also enter into
reverse repurchase agreements. (Harbor Bond Fund may enter into those agreements
only with banks for temporary or emergency purposes.) A reverse repurchase
agreement involves the sale of a portfolio security by the Fund, coupled with an
agreement to repurchase the security at a specified time and price. During the
reverse repurchase agreement, the Fund continues to receive principal and
interest payments on the underlying securities. Each Fund will maintain a
segregated account, which is marked to market daily, consisting of cash or
liquid assets to cover its obligations under reverse repurchase agreements.

While not considered senior securities, reverse repurchase agreements are
considered borrowings and as such are subject to the same risks associated with
borrowing by the Fund. When the Fund engages in borrowing for investment
purposes, also known as financial leverage, the Fund is required to maintain
continuous asset coverage (i.e., total assets including borrowings, less
liabilities exclusive of borrowings) of

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<PAGE> 33

300% of the amount borrowed. If the 300% asset coverage should decline as a
result of market fluctuations or other reasons, the Fund may be required to sell
some of its portfolio holdings within three days to reduce the debt and restore
the 300% asset coverage, even though it may be disadvantageous from an
investment standpoint to sell securities at that time. Leveraging may exaggerate
the effect on the Fund's net asset value of any increase or decrease in the
market value of the Fund's portfolio. Money borrowed for leveraging will be
subject to interest costs which may or may not be recovered by appreciation of
the securities purchased; and in certain cases, interest costs may exceed the
return received on the securities purchased. An increase in interest rates could
reduce or eliminate the benefits of leverage and could reduce the net asset
value of the Fund's shares.

LENDING OF PORTFOLIO SECURITIES. Each Fund may seek to increase its income by
lending portfolio securities. Under present regulatory policies, such loans may
be made to financial institutions, such as broker-dealers, and are required to
be secured continuously by collateral consisting of cash or liquid assets. Such
collateral must be maintained on a current basis at an amount at least equal to
the market value of the securities loaned. If the Subadviser determines to make
securities loans, it is intended that the value of the securities loaned would
not exceed 30% of the value of the total assets of the Fund. As with other
extensions of credit, there are risks of delay in recovery or even loss of
rights in the collateral should the borrower of the securities fail financially.

FOREIGN SECURITIES. Each Fund is permitted to invest in the securities of
corporate and governmental issuers located in or doing business in a foreign
country (foreign issuers). A company is located in or doing business in a
foreign country if it satisfies at least one of the following criteria: (i) the
equity securities of the company are traded principally on stock exchanges in
one or more foreign countries; (ii) it derives 50% or more of its total revenue
from goods produced, sales made or services performed in one or more foreign
countries; (iii) it maintains 50% or more of its assets in one or more foreign
countries; (iv) it is organized under the laws of a foreign country; or (v) its
principal executive offices are located in a foreign country. Harbor Money
Market Fund may purchase only U.S. dollar-denominated foreign securities.
Investing in securities of foreign companies and governments may involve risks
which are not ordinarily associated with investing in domestic securities. These
risks include changes in currency exchange rates and currency exchange control
regulations or other foreign or U.S. laws or restrictions applicable to such
investments. A decline in the exchange rate would reduce the value of certain
portfolio securities. Also, if the exchange rate for the currency in which a
Fund receives interest payments declines against the U.S. dollar before such
interest is paid as dividends to shareholders, the Fund may have to sell
portfolio securities to obtain sufficient cash to pay such dividends. As
discussed below, a Fund may employ certain investment techniques to hedge its
foreign currency exposure; however, such techniques also entail certain risks.

In addition, investments in foreign countries could be affected by other
factors generally not thought to be present in the United States. Such factors
include the unavailability of financial information or the difficulty of
interpreting financial information prepared under foreign accounting standards;
less liquidity and more volatility in foreign securities markets; the
possibility of expropriation; the imposition of foreign withholding and other
taxes; the impact of political, social or diplomatic developments; limitations
on the movement of funds or other assets of a Fund between different countries;
difficulties in invoking legal process abroad and enforcing contractual
obligations; and the difficulty of assessing economic trends in foreign
countries.

Emerging Markets. Investments in emerging markets involve risks in addition to
those generally associated with investments in foreign securities. Political and
economic structures in many emerging markets may be undergoing significant
evolution and rapid development, and such countries may lack the social,
political and economic stability characteristic of more developed countries. As
a result, the risks described above relating to investments in foreign
securities, including the risks of nationalization or expropriation of assets,
may be heightened. In addition, unanticipated political or social developments
may affect the values of the Fund's investments and the availability to the Fund
of additional investments in such emerging markets. The small size and
inexperience of the securities markets in certain emerging markets and the
limited volume of trading in securities in those markets may make the Fund's
investments in such countries less liquid and more volatile than investments in
countries with more developed securities markets (such as the U.S., Japan and
most Western European countries).

ADR's, EDR's, IDR's and GDR's. American Depository Receipts (ADR's) (sponsored
or unsponsored) are receipts typically issued by a U.S. bank or trust company
evidencing ownership of the underlying

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foreign securities. Most ADR's are traded on a U.S. stock exchange. Issuers of
unsponsored ADR's are not contractually obligated to disclose material
information in the U.S., so there may not be a correlation between such
information and the market value of the unsponsored ADR. European Depository
Receipts (EDR's) and International Depository Receipts (IDR's) are receipts
typically issued by a European bank or trust company evidencing ownership of the
underlying foreign securities. Global Depository Receipts (GDR's) are receipts
issued by either a U.S. or non-U.S. banking institution evidencing ownership of
the underlying foreign securities.

BRADY BONDS. Harbor Bond Fund may invest in Brady Bonds which are securities
created through the exchange of existing commercial bank loans to sovereign
entities for new obligations in connection with debt restructurings under a debt
restructuring plan introduced by former U.S. Secretary of the Treasury, Nicholas
P. Brady. Brady Bonds have been issued only recently, and for that reason do not
have a long payment history. Brady Bonds may be collateralized or
uncollateralized, are issued in various currencies (but primarily the U.S.
dollar), and are actively traded in the over-the-counter secondary market. Brady
Bonds are not considered to be U.S. Government securities. In light of the
residual risk of Brady Bonds and, among other factors, the history of defaults
with respect to commercial bank loans by public and private entities in
countries issuing Brady Bonds, investments in Brady Bonds may be viewed as
speculative. There can be no assurance that Brady Bonds acquired by a Fund will
not be subject to restructuring arrangements or to requests for new credit,
which may cause the Fund to suffer a loss of interest or principal on any of its
holdings. See the Statement of Additional Information for additional discussion
of the risks of investing in foreign securities.

FOREIGN CURRENCY TRANSACTIONS. Each Fund, except Harbor Money Market Fund, may
enter into forward foreign currency exchange contracts in order to protect
against adverse changes in future foreign currency exchange rates. Because
investment in foreign companies and governments will usually involve currencies
of foreign countries and because each Fund may temporarily hold funds in bank
deposits in foreign currencies during the course of investment programs, the
value of the assets of the Fund as measured in U.S. dollars will be affected by
changes in foreign currency exchange rates. In addition, each Fund may incur
costs in connection with conversion between various currencies. Each such Fund
may enter into contracts to purchase foreign currencies to protect against an
anticipated rise in the U.S. dollar price of securities it intends to purchase.
Each such Fund may also enter into contracts to sell foreign currencies to
protect against a decline in value of its foreign currency denominated portfolio
securities due to a decline in the value of foreign currencies against the U.S.
dollar. Contracts to sell foreign currency could limit any potential gain which
might be realized by a Fund if the value of the hedged currency increased.
Fluctuations in differences in values between a Fund's portfolio holdings of
securities denominated in a particular currency and forward contracts entered
into by a Fund may cause the Fund to sustain losses which will prevent the Fund
from achieving a complete hedge or expose the Fund to risk of foreign exchange
loss.

Harbor Bond Fund and Harbor Short Duration Fund may also enter into forward
foreign currency exchange contracts for non-hedging purposes when the Subadviser
anticipates that the foreign currency will appreciate or depreciate in value,
but securities denominated in that currency do not present attractive investment
opportunities and are not held in the Fund's portfolio. Harbor Bond Fund and
Harbor Short Duration Fund may also engage in cross-hedging by using forward
contracts in one currency to hedge against fluctuations in the value of
securities denominated in a different currency if the Subadviser determines that
there is a pattern of correlation between the two currencies. These practices
may be limited by the requirements for qualification of the Fund as a regulated
investment company for tax purposes.

If a Fund enters into a forward foreign currency exchange contract to sell
foreign currency to seek to increase total return or to buy foreign currency for
any purpose, the Fund will be required to place cash or liquid, high grade debt
securities in a segregated account with the Fund's custodian in an amount equal
to the value of the Fund's total assets committed to the consummation of the
forward contract. If the value of the securities placed in the segregated
account declines, additional cash or securities will be placed in the account so
that the value of the account will equal the amount of the Fund's commitment
with respect to the contract.

CURRENCY SWAPS, MORTGAGE SWAPS AND INTEREST RATE SWAPS, CAPS, FLOORS AND
COLLARS. Harbor Bond Fund and Harbor Short Duration Fund may enter into currency
swaps for hedging purposes and may also enter into mortgage and interest rate
swaps and interest rate caps and floors for hedging purposes or to seek to

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increase total return. The Fund may from time to time combine swaps with
options. Interest rate swaps involve the exchange by the Fund with another party
of their respective commitments to pay or receive interest, such as an exchange
of fixed rate payments for floating rate payments. Mortgage swaps are similar to
interest rate swaps in that they represent commitments to pay and receive
interest. The notional principal amount, however, is tied to a reference pool or
pools of mortgages. Currency swaps involve the exchange of their respective
rights to make or receive payments in specified currencies. The purchase of an
interest rate cap entitles the purchaser, to the extent that a specified index
exceeds a predetermined interest rate, to receive payment of interest on a
notional principal amount from the party selling such interest rate cap. The
purchase of an interest rate floor entitles the purchaser, to the extent that a
specified index falls below a predetermined interest rate, to receive payments
of interest on a notional principal amount from the party selling the interest
rate floor.

The Fund will enter into interest rate and mortgage swaps only on a net basis,
which means that the two payment streams are netted out, with the Fund receiving
or paying, as the case may be, only the net amount of the two payments. Interest
rate and mortgage swaps do not involve the delivery of securities, other
underlying assets or principal. Accordingly, the risk of loss with respect to
interest rate and mortgage swaps is limited to the net amount of interest
payments that the Fund is contractually obligated to make. If the other party to
an interest rate or mortgage swap defaults, the Fund's risk of loss consists of
the net amount of interest payments that the Fund is contractually entitled to
receive. In contrast, currency swaps usually involve the delivery of a gross
payment stream in one designated currency in exchange for the gross payment
stream in another designated currency. Therefore, the entire payment stream
under a currency swap is subject to the risk that the other party to the swap
will default on its contractual delivery obligations. To the extent that the net
amount payable by the Fund under an interest rate or mortgage swap and the
entire amount of the payment stream payable by the Fund under a currency swap or
an interest rate floor, cap or collar are held in a segregated account
consisting of cash or liquid assets, the Fund and the Subadviser believe that
swaps do not constitute senior securities under the Act and, accordingly, will
not treat them as being subject to the Fund's borrowing restriction.

The Fund will not enter into currency swap, interest rate swap, mortgage swap,
cap or floor transactions unless the unsecured commercial paper, senior debt or
claims paying ability of the other party is rated either AA of A-1 or better by
S&P or Aa or P-1 or better by Moody's or, if unrated by such rating
organizations, determined to be of comparable quality by the Subadviser.

OPTIONS ON FOREIGN CURRENCIES. Each Fund, except Harbor Value Fund and Harbor
Money Market Fund, may each purchase and write put and call options on foreign
currencies for the purpose of protecting against declines in the dollar value of
foreign portfolio securities and against increases in the U.S. dollar cost of
foreign securities to be acquired. Harbor Bond Fund and Harbor Short Duration
Fund may also use options on currency to cross-hedge, which involves writing or
purchasing options on one currency to hedge against changes in exchange rates
for a different currency with a pattern of correlation. The writing of an option
on foreign currency will constitute only a partial hedge, up to the amount of
the premium received, and the Fund could be required to purchase or sell foreign
currencies at disadvantageous exchange rates, thereby incurring losses. The
purchase of an option on foreign currency may constitute an effective hedge
against exchange rate fluctuations. However, in the event of unanticipated rate
movements adverse to the Fund's option position, the Fund may forfeit the entire
amount of the premium plus related transaction costs. In addition, Harbor Bond
Fund and Harbor Short Duration Fund may purchase call or put options on currency
for non-hedging purposes when the Subadviser anticipates that the currency will
appreciate or depreciate in value, but the securities denominated in that
currency do not present attractive investment opportunities and are not held in
the Fund's portfolio. Options on foreign currencies to be written or purchased
by the Fund will be traded on U.S. and foreign exchanges or over-the-counter.
Options on foreign currencies which are traded in the over-the-counter market
may be considered to be illiquid securities and subject to the restriction on
illiquid securities. See "Description of Securities and Investment Techniques --
Restricted Securities" above.

OPTIONS ON SECURITIES AND SECURITIES INDICES. To realize greater income than
would be realized on portfolio securities transactions alone, a Fund (other than
Harbor Money Market Fund) may write (sell) covered call and put options. A Fund
may write and purchase put and call options on any securities in which it may
invest or options on any securities index based on securities in which the Fund
may invest. A Fund is also authorized to enter into closing sale transactions in
order to realize

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gains or minimize losses on options purchased by the Fund.

The writing and purchase of options is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. A Fund pays brokerage commissions or
spreads in connection with its options transactions, as well as for purchases
and sales of underlying securities. The writing of options could result in
significant increases in a Fund's turnover rate. A Fund's transactions in
options, including options on foreign currencies, may be limited by the
requirements of the Code for qualification as a regulated investment company.

FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. A Fund (other than Harbor
Money Market Fund) may enter into futures contracts and purchase and sell
options on such contracts.

Each Fund may sell or purchase futures contracts only for hedging purposes.
Harbor Bond Fund and Harbor Short Duration Fund may enter into futures contracts
on debt securities. Harbor International Growth Fund, Harbor Growth Fund, Harbor
Capital Appreciation Fund, Harbor International Fund II, Harbor International
Fund, Harbor Value Fund, Harbor Bond Fund and Harbor Short Duration Fund may
enter into futures contracts on securities indices. Each Fund, except Harbor
Value Fund and Harbor Money Market Fund, may also enter into currency futures
contracts. The Funds may enter into other types of futures contracts when they
become available, provided they correspond to securities held by the relevant
Fund.

A Fund may engage in futures transactions for bona fide hedging and
non-hedging purposes as defined in regulations of the Commodity Futures Trading
Commission. A Fund may not purchase or sell futures contracts or options on
futures for non-hedging purposes, if immediately thereafter the sum of initial
margin deposits on the Fund's outstanding futures and options positions (net of
the amount that positions are "in the money") and premiums paid for outstanding
options on futures in connection with non-hedging positions, adjusted to reflect
annualized profits and losses, would exceed 5% of the value of the Fund's net
assets. These transactions involve brokerage costs, require margin deposits and,
in the case of contracts and options obligating a Fund to purchase securities,
require the Fund to segregate assets to cover such contracts and options. In
addition, a Fund's activities in futures contracts and options may be limited by
the requirements of the Code for qualification as a regulated investment
company.

RISKS OF OPTIONS AND FUTURE STRATEGIES. Participation by a Fund in the options
and futures markets involves investment risk and transaction costs to which a
Fund would not be subject absent the use of these strategies. If the
Subadviser's prediction of movement in the direction of the securities and
interest rate markets is inaccurate, the adverse consequences to a Fund may
leave the Fund in a worse position than if such strategies were not used. Risks
inherent in the use of options and futures include: the imperfect correlation
between the prices of options and futures contracts and movement in the price of
securities being hedged; the possible absence of a liquid secondary market; in
the case of over-the-counter options, the risk of default by the counterparty;
and the dependence upon the Subadviser's ability to correctly predict movements
in the direction of interest rates and securities prices.

SHORT SELLING. Each Fund, except Harbor International Growth Fund, Harbor
International Fund II and Harbor International Fund, may attempt to limit
exposure to a possible market decline in the value of portfolio securities
through short sales of securities which the Subadviser believes possess
volatility characteristics similar to those being hedged. To effect such a
transaction, a Fund will borrow the security sold short to make delivery to the
buyer. The Fund then is obligated 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 or
dividends and may be required to pay a premium.

A Fund will 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.
On the other hand, the Fund will incur a loss as a result of the short sale if
the price of the security increases between those dates. The amount of any gain
will be decreased, and the amount of any loss increased, by the amount of any
premium or interest or dividends the Fund may be required to pay in connection
with a short sale. The successful use of short selling may be adversely affected
by imperfect correlation between movements in the price of the security sold
short and the securities being hedged.

The Funds, except Harbor International Growth Fund, Harbor International Fund
II and Harbor International Fund, may engage in short selling to the extent
permitted by the Investment Company Act and the rules and regulations
promulgated thereunder. To the

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<PAGE> 37

extent that a Fund engages in short sales it will provide collateral to the
lender and (except in the case of short sales "against the box") also will
maintain additional assets consisting of cash or liquid assets in a segregated
account with the Fund's custodian. The Fund does not intend to enter into short
sales (other than those "against the box") if immediately after such sale the
aggregate of the value of all collateral plus the amount in such segregated
account exceeds one-third (or, in extraordinary circumstances, one-half) of the
value of the Fund's net assets. These percentages may be varied by action of the
Trustees. A short sale is "against-the-box" to the extent that the Fund
contemporaneously owns or has the right to obtain at no added cost securities
identical to those sold short.

FORWARD COMMITMENTS AND WHEN-ISSUED SECURITIES. Each Fund may purchase and
sell when-issued securities and make contracts to purchase and sell securities
for a fixed price at a future date beyond customary settlement time. The Fund is
required to hold and maintain in a segregated account until the settlement date,
cash or liquid assets in an amount sufficient to meet the purchase price and
this account is marked to market daily. This requirement must be met unless the
Fund enters into offsetting contracts for the forward sale of other securities
it owns. Purchasing securities on a when-issued or forward commitment basis
involves 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 value of the Fund's other assets. Although a Fund would generally purchase
securities on a when-issued or forward commitment basis with the intention of
acquiring securities for its portfolio, the Fund may dispose of a when-issued
security or forward commitment prior to settlement if the Subadviser deems it
appropriate to do so. A Fund may enter into a forward-commitment sale to hedge
its portfolio positions or to sell securities it owned under delayed delivery
arrangement. Proceeds of such a sale are not received until the contractual
settlement date. While such a contract is outstanding, the Fund must segregate
equivalent deliverable securities or hold an offsetting purchase commitment. A
Fund may realize short-term gains or losses upon such purchases and sales.

PERFORMANCE AND YIELD INFORMATION

MONEY MARKET FUND. From time to time quotations of Harbor Money Market Fund's
"yield" and "effective yield" may be included in advertisements and
communications to shareholders. Both yield figures are based on historical
earnings and are not intended to indicate future performance. The "yield" of the
Fund refers to the net income generated by an investment in the Fund over a
specified seven-day period. This income is then "annualized." That is, the
amount of income generated by the investment during that week is assumed to be
generated each week over a 52-week period and is shown as a percentage of the
investment. The "effective yield" is expressed similarly but, when annualized,
the income earned by an investment in the Fund is assumed to be reinvested. The
"effective yield" will be slightly higher than the "yield" because of the
compounding effect of this assumed reinvestment. "Yield" and "effective yield"
for the Fund will vary based on changes in market conditions, the level of
interest rates and the level of the Fund's expenses. The Fund may include in its
advertisements and communications to shareholders total return quotations which
include realized and unrealized gains and losses.

OTHER FUNDS. From time to time a Fund, other than Harbor Money Market Fund,
may publish its yield and/or average annual total return in advertisements and
communications to shareholders. The yield of a Fund will be calculated by
dividing the net investment income per share during a recent 30-day period by
the maximum offering price (i.e. net asset value) per share of the Fund on the
last day of the period. The results are compounded on a bond equivalent
(semi-annual) basis and then annualized. A Fund's total return is determined by
computing the annual percentage change in value of $1,000 invested at the
maximum public offering price (i.e. net asset value) for specified periods
ending with the most recent calendar quarter, assuming reinvestment of all
dividends and distributions at net asset value.

You should note that the investment results of a Fund will fluctuate over
time, and any presentation of a Fund's yield or total return for any prior
period should not be considered as a representation of what an investment may
earn or what an investor's yield or total return may be in any future period.
Because yield accounting methods differ from the methods used for other
accounting purposes, a Fund's yield may not equal the income paid to a
shareholder's account or the income reported in a Fund's financial statements.

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PORTFOLIO TRANSACTIONS

The Subadvisers are responsible for making specific decisions to buy and sell
securities for the respective Funds that they manage. They are also responsible
for selecting brokers and dealers to effect these transactions and negotiating,
if possible, brokerage commissions and dealers' charges. In the over-the-counter
markets, securities (i.e. debt securities) are generally traded on a net basis
with dealers acting as principal for their own accounts without a stated
commission. The primary consideration in selecting broker-dealers to execute
portfolio security transactions is the execution of such portfolio transactions
at the most favorable prices. Subject to this requirement, securities may be
bought from or sold to brokers or dealers who have furnished statistical,
research and other information or services to the Subadvisers. Higher
commissions may be paid to broker-dealers that provide research services and the
Subadvisers may enter into such arrangements.

PORTFOLIO TURNOVER. Securities in a Fund's portfolio will be sold whenever the
respective Subadviser believes it is appropriate to do so without regard to
length of time the particular security may have been held. This policy is
subject to certain requirements for qualification of a Fund as a regulated
investment company under the Code. Each of the Funds will engage in portfolio
trading if its Subadviser believes a transaction, net of costs (including
custodian charges), will help in achieving such Fund's investment objective. The
frequency of each Fund's portfolio transactions or turnover rate may vary from
year to year depending on market conditions. A higher turnover rate involves
greater expense to the Fund and could increase the Fund's realization of capital
gains that would be taxable to shareholders upon distribution to them by the
Fund. For the fiscal year ended October 31, 1996, the portfolio turnover rates
for Harbor Value Fund, Harbor Bond Fund and Harbor Short Duration Fund were
132%, 193% and 1,278%, respectively. A portfolio turnover rate of over 100% is
higher than the rate experienced by many other investment companies and is a
result of an actively managed portfolio. Although the higher turnover rate
creates expenses for these Funds, the Subadvisers believe that the portfolio
transactions are in the best interests of shareholders. Major shareholders of
Harbor Short Duration Fund use it as a liquidity reserve and, therefore, there
is frequent purchase and sales activity.

DISTRIBUTIONS AND TAX INFORMATION

Each Fund has elected or intends to elect to be treated as a regulated
investment company under Subchapter M of the Code, which requires meeting
certain requirements relating to its sources of income, diversification of its
assets, and distribution of its income to shareholders and has qualified as such
for its taxable year ended October 31, 1996. Each Fund intends to qualify as a
regulated investment company for each taxable year. As a regulated investment
company, a Fund will not be subject to Federal income or excise taxes on its net
investment income and net realized capital gains to the extent such income and
gains are distributed to its shareholders in accordance with the timing
requirements imposed by the Code.

Each of Harbor International Growth Fund, Harbor International Fund II and
Harbor International Fund may be subject to foreign withholding or other foreign
taxes on its income from foreign securities (possibly including, in some cases,
capital gains) and may be eligible to elect to pass such taxes and related
foreign tax credits or deductions through to shareholders. Other Funds may also
be subject to foreign taxes with respect to their foreign investments but
generally will not be eligible to make this election. Certain foreign exchange
gains and losses realized by a Fund may be treated as ordinary income and
losses. Investment by any Fund in zero coupon, stripped or certain other
securities with original issue discount or market discount could require the
Fund to liquidate investments in order to generate cash for distributions.

Harbor Money Market Fund will declare a dividend of its net investment income
(which is composed of dividends, if applicable, and interest less expenses)
daily and distribute such dividend monthly. Each other Fund will declare and
distribute a dividend of its net investment income including, in the case of
Harbor International Growth Fund, Harbor International Fund II, Harbor
International Fund, Harbor Bond Fund and Harbor Short Duration Fund, any net
foreign exchange gains treated as ordinary income, if any, at least annually.
Such distributions will be taxable to shareholders as ordinary income and, in
the cases of Harbor Growth Fund, Harbor Capital Appreciation Fund and Harbor
Value Fund, may qualify in part for a 70% dividends-received deduction for
corporations, subject to the limitations on availability of the deduction and
possible

37
<PAGE> 39

tax adjustments. Distributions reinvested in shares or paid in cash will be made
shortly after the first business day of the month following declaration of the
dividend. Certain dividends paid by a Fund in January of a given year will be
taxable to shareholders as if received on December 31 of the prior year.

Each Fund will distribute at least annually on or about the close of the
calendar year its net short-term and long-term capital gains, if any.
Distributions of the excess of net short-term capital gain over net long-term
capital loss will be taxable to shareholders as ordinary income, and
distributions of the excess of net long-term capital gain over net short-term
capital loss (taking into account any capital loss carryforwards used to offset
net long-term or short-term capital gains) will be taxable as long-term capital
gain regardless of how long the shareholders have held their shares.
Shareholders will be informed about the amount and character of distributions
from a Fund for federal income tax purposes, which will be the same whether a
shareholder receives cash distributions or reinvests in additional shares of the
distributing Fund or exchanges into another Harbor Fund. Investors purchasing
shares (other than shares of the Harbor Money Market Fund) just prior to a
distribution should be aware that the share price at that time includes the
amount of the forthcoming distribution, and the distribution will be taxable to
them even though it represents a return of a portion of their investment.

A Fund's transactions involving options, futures contracts, forward contracts
and short sales, including such transactions involving foreign exchange gain or
loss, will be subject to special tax rules, the effect of which may be to
accelerate income to the Fund, defer Fund losses, cause adjustments in the
holding periods of securities, convert capital gain or loss into ordinary income
or loss or affect the treatment as short-term or long-term of certain capital
gains and losses. These rules could therefore affect the amount, timing and
character of distributions to shareholders and increase the amount of gains
realized from the disposition of securities and certain other instruments held
less than three months, which must be less than 30% of the Fund's gross income
in any taxable year.

Shareholders subject to the information reporting requirements of the Code,
including most non-corporate shareholders, are required to provide Harbor with
their social security or other taxpayer identification numbers and certain
required certifications. Harbor may refuse to accept an application or may be
required to withhold (as "backup withholding") 31% of reportable dividends,
capital gain distributions and proceeds from the redemption or exchange of
shares (other than shares of the Harbor Money Market Fund) if such numbers and
certifications are not provided or if notified by the Internal Revenue Service
or a broker that a number provided is incorrect or that a shareholder is subject
to backup withholding for failure to report all taxable interest or dividend
payments. Amounts treated as ordinary dividends to non-U.S. persons may be
subject to nonresident alien withholding tax at a rate of up to 30%, and certain
payments to such persons may be subject to backup withholding.

In addition to federal taxes, a shareholder may also be subject to foreign,
state and local taxes on distributions of a Fund or the value of the
shareholder's investment in the Fund depending on the laws of the jurisdictions
in which the shareholder is subject to tax.

DISTRIBUTION OPTIONS. You must select one of the following options and may
change your selection as often as desired by notifying the Shareholder Servicing
Agent in writing:

Option A-- Dividends and capital gain distributions reinvested. This option
will be assigned if no other option is specified and is the only
option for Systematic Withdrawal Plans.

Option B-- Dividends in cash; capital gain distributions reinvested.

Option C-- Dividends and capital gain distributions in cash.

Option D-- Dividends and capital gains from one Harbor Fund invested in
shares of another Harbor Fund of your choice.

Under Option A, dividends, net of any required withholding taxes, will be
reinvested in additional full and fractional shares of the same Fund at the net
asset value determined at the close of business on the ex-dividend date. Under
Options A and B, capital gain distributions, net of any required withholding
taxes, will be reinvested in additional full and fractional shares of the same
Fund at the net asset value determined at the close of business on the
ex-dividend date. Under Option D, dividends and capital gain distributions, net
of any required withholding taxes, will be invested in full and fractional
shares of another Harbor Fund at the net asset value determined at the close of
business on the payable date, which is later than the date on which the dividend
is declared. For federal income tax purposes, dividends and capital gain
distributions are

38
<PAGE> 40

taxable as described below under "Distributions and Tax Information" whether
paid in cash or reinvested under these options. For Harbor Money Market Fund,
all dividends and capital gain distributions of $25 or less will be
automatically reinvested.

Unless otherwise instructed, Harbor Fund will send dividends and capital gain
distributions elected to be received as cash to the address of record. If postal
or other delivery service is unable to deliver checks to the address of record
or if dividends and capital gain distributions are not cashed within sixty (60)
days, the shareholder's distribution option will automatically be converted to
having all dividend and other distributions reinvested in additional shares.
Neither Harbor Fund nor Harbor Transfer has any obligation, under any
circumstances, to pay interest on dividends or capital gain distributions
distributed to a shareholder.

ORGANIZATION AND CAPITALIZATION

Harbor was established as a Massachusetts business trust on May 20, 1986 and
reorganized as a Delaware business trust on June 25, 1993. The Trustees of
Harbor Fund are responsible for the overall management and supervision of its
affairs. Each share represents an equal proportionate interest in the Fund to
which it relates with each other share in that Fund. Shares entitle their
holders to one vote per share. Shares have noncumulative voting rights, do not
have preemptive or subscription rights and are transferable. Pursuant to the
Investment Company Act, shareholders of each Fund are required to approve the
adoption of any investment advisory agreement relating to such Fund and of any
changes in fundamental investment restrictions or policies of such Fund.
Pursuant to an exemptive order of the SEC, shareholders are not required to vote
to approve a new or amended subadvisory agreement. Shares of a Fund will be
voted with respect to that Fund only, except for the election of Trustees and
the ratification of independent accountants. The Trustees are empowered, without
shareholder approval, by the Agreement and Declaration of Trust (the
"Declaration of Trust") and By-Laws to create additional series of shares and to
classify and reclassify any new or existing series of shares into one or more
classes.

As of January 31, 1997, an Owens-Illinois Master Retirement Trust pension
portfolio owned beneficially and of record 80% of the outstanding shares of
beneficial interest of Harbor Short Duration Fund. As of January 31, 1997, the
Owens-Illinois 401(k) Trust owned beneficially and of record 44%, 29% and 28% of
the outstanding shares of beneficial interest of Harbor Growth Fund, Harbor
Value Fund and Harbor Money Market Fund, respectively.

Although all shareholders reserve the right to terminate their investments in
any of the Funds at any time in the future, the Owens-Illinois Master Retirement
Trust pension portfolio and Owens-Illinois savings plans have no present
intention of doing so.

Harbor does not intend to hold annual shareholder meetings. Shareholders have
certain rights, as set forth in the Declaration of Trust, including the right to
call a meeting of shareholders for the purpose of voting on the removal of one
or more Trustees. Such removal can be effected upon the action of two-thirds of
the outstanding shares of Harbor.

39
<PAGE> 41

APPENDIX A
PORTFOLIO COMPOSITION CHART
OCTOBER 31, 1996
HARBOR BOND FUND

<TABLE>
<CAPTION>
SECURITY PERCENT OF NET ASSETS
-------- ---------------------
<S> <C>
U.S. Government Securities*................................. 53%
Short-Term Obligations and Other Assets..................... 9%
Debt -- Unrated by S&P...................................... N/A
Debt -- S&P Rating
AAA....................................................... 13%
AA........................................................ 4%
A......................................................... 4%
BBB....................................................... 6%
BB........................................................ 10%
B......................................................... 1%
---
100%
</TABLE>

- -------------------------
* Obligations issued or guaranteed by the U.S. Government or its agencies,
authorities or instrumentalities.

The chart above indicates the composition of Harbor Bond Fund's portfolio at
October 31, 1996, with the debt securities rated by S&P separated into quality
categories. The chart does not necessarily indicate what the composition of the
Fund's portfolio will be in subsequent years. Rather, the Fund's investment
objective, policies and restrictions indicate the extent to which the Trust may
purchase securities in the various categories.

40
<PAGE> 42

HARBOR FUND SUMMARY

<TABLE>
<S> <C>
Minimum Initial Investment $2,000

Minimum Subsequent Investment $500

Minimum Subsequent Account Balance $1,000

Telephone Exchange Yes, if selected on application. Same minimum initial and
subsequent investments.

Telephone Redemption Yes, if selected on application.

UGMA, UTMA, profit-sharing, savings $500 minimum initial investment; $100 minimum subsequent
or pension plans investment; and $500 minimum subsequent account balance.

Systematic Investment Plan $500 minimum initial investment; $100 minimum subsequent
investment per month or quarter.

Systematic Withdrawal Plan $10,000 minimum initial balance to begin plan.

Systematic Exchange Plan $5,000 minimum initial balance to begin exchange out; $500
minimum initial balance to begin exchange in; $100 minimum
subsequent exchange per month or quarter; minimum
requirement of six exchanges.

IRA Plans and Fees $500 minimum initial investment; $100 minimum subsequent
investment; and $500 minimum subsequent account balance.
</TABLE>

SUBADVISERS

HARBOR GROWTH FUND
Emerging Growth Advisors, Inc.
401 E. Pratt Street
Suite 211
Baltimore, Maryland 21202

HARBOR INTERNATIONAL GROWTH FUND
HARBOR CAPITAL APPRECIATION FUND
Jennison Associates Capital Corp.
466 Lexington Avenue
New York, New York 10017

HARBOR INTERNATIONAL FUND II
Summit International Investments, Inc.
125 Summer Street
Boston, Massachusetts 02110

HARBOR INTERNATIONAL FUND
Northern Cross Investments Limited
Clarendon House
2 Church Street
Hamilton, Bermuda HMDX

HARBOR VALUE FUND
DePrince, Race & Zollo, Inc.
201 Orange Avenue, Suite 850
Orlando, Florida 32801

Richards & Tierney, Inc.
111 W. Jackson Blvd.
Chicago, Illinois 60604

HARBOR BOND FUND
Pacific Investment Management Company
840 Newport Center Drive
P.O. Box 6430
Newport Beach, California 92658-6430

HARBOR SHORT DURATION FUND
HARBOR MONEY MARKET FUND
Fischer Francis Trees & Watts, Inc.
200 Park Avenue
New York, New York 10166
<PAGE> 43

TRUSTEES AND OFFICERS
Ronald C. Boller Chairman, President
and Trustee
Howard P. Colhoun Trustee
John P. Gould Trustee
Rodger F. Smith Trustee
Constance L. Souders Secretary and
Treasurer
INVESTMENT ADVISER
Harbor Capital Advisors, Inc.
One SeaGate
Toledo, OH 43666
DISTRIBUTOR AND
PRINCIPAL UNDERWRITER
HCA Securities, Inc.
One SeaGate
Toledo, OH 43666
(419) 247-2477

SHAREHOLDER SERVICING AGENT
Harbor Transfer, Inc.
P.O. Box 10048
Toledo, OH 43699-0048
1-800-422-1050

CUSTODIAN
State Street Bank and Trust Company
P.O. Box 1713
Boston, MA 02105

INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110

LEGAL COUNSEL
Hale and Dorr LLP
60 State Street
Boston, MA 02109

[HARBOR FUND LOGO]

One SeaGate
Toledo, Ohio 43666
1-800-422-1050

10/97/238,000 [LOGO]
recycled paper
<PAGE> 44
HARBOR FUND

SUPPLEMENT TO STATEMENT OF ADDITIONAL INFORMATION DATED MARCH 1, 1997

The information on page 22 under the caption "The Subadvisers" is supplemented
with the following information:

Effective May 2, 1997, Harbor Fund's Board of Trustees on behalf of Harbor
Growth Fund appointed Emerging Growth Advisers, Inc., a registered investment
adviser, as the Fund's subadviser. Therefore, Emerging Growth Advisers, Inc.
hereby replaces all references to Nicholas-Applegate Capital Management, except
for references to actual subadvisory fees paid to Nicholas-Applegate.

The shareholders of Harbor Fund approved the following fundamental investment
restrictions for the Funds. Investment restrictions no. 1-12 under the caption
"Investment Restrictions" are deleted and the following are added:

Each Fund may not:

1. with respect to 75% of the total assets of the Fund, purchase
the securities of any issuer if such purchase would cause more
than 5% of the Fund's total assets (taken at market value) to be
invested in the securities of such issuer, or purchase securities
of any issuer if such purchase would cause more than 10% of the
total voting securities of such issuer to be held by the Fund,
except obligations issued or guaranteed by the U.S. Government, it
agencies or instrumentalities;

2. borrow money, except (a) the Fund may borrow from banks (as
defined in the Investment Company Act) or through reverse
repurchase agreements in amounts up to 33 1/3% of its total assets
(including the amount borrowed), (b) the Fund may, to the extent
permitted by applicable law, borrow up to an additional 5% of its
total assets for temporary purposes, (c) the Fund may obtain such
credit as may be necessary for the clearance of purchases and
sales of portfolio securities, and (d) the Fund may engage in
transactions in mortgage dollar rolls which are accounted for as
financings. Harbor Money Market Fund is not permitted to invest
in reverse repurchase agreements and mortgage dollar rolls
accounted for as a financing;

3. act as underwriter of the securities issued by others, except
to the extent that the purchase of securities in accordance with a
Fund's investment objective and policies directly from the issuer
thereof and the later disposition thereof may be deemed to be
underwriting;

4. invest 25% or more of its total assets in the securities of one
or more issuers conducting their principal business activities in
the same industry (excluding the U.S. Government or any of its
agencies or instrumentalities). Harbor Money Market Fund may
invest more than 25% of its total assets in the securities of
banks and bank holding companies, including certificates of
deposit and bankers' acceptances;

5. issue senior securities, except as permitted under the
Investment Company Act, and except that Harbor Fund may issue
shares of beneficial interest in multiple series or classes;

6. purchase, hold or deal in real estate, although the Fund may
purchase and sell securities that are secured by real estate or
interests therein, securities of real estate investment trusts and
mortgage-related securities and may hold and sell real estate
acquired by the Fund as a result of the ownership of securities;

7. generally may not invest in commodities or commodity contracts,
except that the Fund may invest in currency and financial
instruments and contracts that are commodities or commodity
contracts which are not deemed to be prohibited commodities or
commodities contracts for the purpose of this restriction;

8. make loans to other persons, except loans of portfolio
securities and except to the extent that the purchase of debt
obligations and the entry into repurchase agreements in accordance
with such Fund's investment objectives and policies may be deemed
to be loans; and

<PAGE> 45

9. notwithstanding the investment policies and restrictions of a
Fund, a Fund may invest its assets in an open-end management
investment company with substantially the same investment
objective, policies and restrictions as the Fund.

Although the restriction on borrowing has been changed, the Funds, other than
Short Duration Fund, have no present intention to borrow money for investment
purposes. Under the caption, "Investment Techniques - Borrowing" on page 3,
the reference to Harbor Value Fund in the second sentence is deleted. The
first full sentence in the carryover paragraph on page 4 is also deleted.

The Harbor Fund Board of Trustees approved the following non-fundamental
investment restrictions. Investment restrictions no. (a) to (g) under the
caption "Investment Restrictions" are deleted and the following added:

Each Fund may not:

(a) purchase securities on margin (but a Fund may obtain such
short-term credits as may be necessary for the clearance of
purchase and sales securities);

(b) make short sales of securities, except as permitted under the 1940
Act;

(c) purchase or sell any put or call options or any combination
thereof, except that a Fund may (i) purchase and sell or write
options on any futures contracts in to which it may enter, (ii)
purchase put and call options on securities, on securities indexes
and on currencies, (iii) write covered put and call options on
securities and on currencies, and (iv) engage in closing
purchase transactions with respect to any put or call option
purchased or written by a Fund, provided that the aggregate value
of premiums paid by the Fund for all of such options shall not
exceed 20% of that Fund's net assets;

(d) acquire put and call options with a market value exceeding 5% of
the value of a Fund's total assets;

(e) invest more than 15% (10% in the case of Harbor Money Market Fund)
of the Fund's net assets in illiquid investments including
repurchase agreements maturing in more than seven days, securities
which are not readily marketable and restricted securities not
eligible for resale pursuant to Rule 144A under the Securities Act
of 1933;

(f) invest in other companies for the purpose of exercising control or
management;

(g) for purposes of fundamental investment restriction no. 4,
telephone companies are considered to be a separate industry from
water, gas or electric utilities; personal credit finance
companies and business credit finance companies are deemed to be
separate industries; wholly-owned finance companies are considered
to be in the industry of their parents if their activities are
primarily related to financing the activities of their parents;
and privately issued mortgage-backed securities collateralized by
mortgages insured or guaranteed by the U.S. Government, its
agencies or instrumentalities do not represent interests in any
industry.

Rule 17f-5 under the Investment Company Act (the "Rule"), governs how Harbor
Fund and the Custodian manage relevant subcustody arrangements in foreign
countries. The Rule has recently been amended. Harbor Fund intends to comply
with the amended Rule. Accordingly, the disclosure under the caption "Foreign
Securities" is changed as follows: The last two sentences in the carryover
paragraph on page 5 are deleted.

Supplement Dated November 1, 1997