<PAGE> 1
ANNUAL REPORT
HARBOR FUND LOGO
OCTOBER 31, 1997
---------------------------------------------------------------------------
HARBOR FUND
<PAGE> 2
HARBOR FUND
ANNUAL REPORT OVERVIEW
Harbor Fund completed its most recent fiscal year on October 31, 1997.
Total annual return is shown below for each one of the nine portfolios. All
performance figures included in this report are total returns and assume the
reinvestment of dividends. The Long-Term Historic Returns represent unmanaged
indices and are included as an indication of longer-term potential associated
with taking different levels of market risk.
<TABLE>
<CAPTION>
YEAR ENDED
HARBOR FUNDS IN DESCENDING ORDER OF MARKET RISK 10/31/97
- ----------------------------------------------- ----------
<S> <C>
Growth...................................................... 18.64%
International Growth........................................ 8.13%
Capital Appreciation........................................ 35.73%
International II............................................ 16.64%
International............................................... 19.26%
Value....................................................... 31.08%
Bond........................................................ 8.96%
Short Duration.............................................. 5.48%
Money Market................................................ 5.11%
</TABLE>
<TABLE>
<CAPTION>
COMMONLY USED MARKET INDICES
- ----------------------------
<S> <C>
Morgan Stanley Capital International Europe, Australia, and
Far East (EAFE); international equity..................... 4.63%
Standard & Poor's 500 (S&P 500); domestic equity............ 32.23%
Lehman Brothers Aggregate (LB AGG); domestic bonds.......... 8.89%
One-Year Government Bonds (1-YR GVT)........................ 5.79%
90-Day U.S. Treasury Bills (T-Bills); domestic short-term... 5.29%
</TABLE>
<TABLE>
<CAPTION>
30 YEARS
1967-1996
LONG-TERM HISTORIC RETURNS ANNUAL RATES
- -------------------------- ------------
<S> <C>
EAFE........................................................ 12.79%
S&P 500..................................................... 11.85%
Domestic Bonds (intermediate and long)(1)................... 8.16%
1-YR GVT(2)................................................. 7.83%
T-Bills..................................................... 6.74%
Consumer Price Index........................................ 5.38%
</TABLE>
<TABLE>
<CAPTION>
LIPPER
HARBOR FUND EXPENSE RATIOS 1993 1994 1995 1996 1997 MEDIAN**
- -------------------------- ---- ---- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C>
Growth................................. 0.90% 0.93% 0.93% 0.92% 1.12% 1.15%
International Growth................... NA% 1.32%* 1.21%* 1.10% 1.02% 0.99%
Capital Appreciation................... 0.86% 0.81% 0.75% 0.75% 0.70% 0.84%
International II....................... NA% NA% NA% 1.44%+ 0.98%* 1.32%
International.......................... 1.20%++ 1.10%++ 1.04%++ 0.99%++ 0.97%++ 0.96%
Value.................................. 0.88% 1.04% 0.90% 0.83% 0.83% 0.89%
Bond................................... 0.72%* 0.77%* 0.70%* 0.70%* 0.67%* 0.66%
Short Duration***...................... 0.43%* 0.38%* 0.38%* 0.33%* 0.36%* 0.52%
Money Market........................... 0.71%* 0.67%* 0.61%* 0.64%* 0.62%* 0.59%
</TABLE>
------------------
(1) LB AGG not available for 30 year period; blended historic data used
to approximate total Bond Market Return.
(2) Historic data used to approximate total One-Year Government Bonds
Return.
* Reflects the Adviser's agreement not to impose all or a portion of its
advisory fees.
** Includes all funds in the 9/30/97 Lipper Universe with the same
investment objective as the comparable Harbor Fund portfolio and with
similar total assets.
*** For operating expenses only. Total expense ratio, including interest
expense for the Short Duration Fund, is 1.12% for 1993, 1.64% for
1994, 1.84% for 1995, 1.59% for 1996, and 1.00% for the year ended
10/31/97.
+ Annualized figure.
++ Reflects the Adviser's and Subadviser's agreement not to impose a
portion of the advisory fee.
<PAGE> 3
DEAR SHAREHOLDER:
Concern over trauma in Far East financial markets reined in widespread
euphoria in the domestic equity market in the last few days of Harbor Fund's
fiscal year which ended on October 31.
Still, it was another year of stellar returns in both the U.S. equity and
bond markets.
During the year, the nation's current economic expansion reached its
seventh anniversary, making it the third longest in U.S. history. Because of the
virtually unparalleled mix of strong growth, low inflation, attractive interest
rates and fiscal stability, the dollar grew stronger against most foreign
currencies throughout the period.
Capital spending by U.S. industry blossomed in the second half of Harbor's
fiscal year. Consumer spending was strong in that same period and the
unemployment rate dropped to below 5 percent at the end of October, the lowest
in more than two decades. Corporate profits on average continued strong although
future earnings growth came under intense scrutiny in the volatile last few days
of our fiscal year.
But perhaps the most impressive part of that rosy economic picture was
subdued inflation, which fell to an annual rate of about 2 percent for our
fiscal year.
The U.S. economy's predominance in the world today is unrivaled. Not
surprisingly, the strength of the dollar--particularly against currencies of
nations in the Far East--was an important factor in developments throughout Asia
which brought trauma to worldwide financial markets late in October. Fueled by
rising interest rates, disappointing earnings, and most importantly overvalued
currencies, the crisis started in Thailand and finally hit hard in Hong Kong.
Worldwide markets tumbled, including the precipitous 554-point drop in the
Dow-Jones Industrial Average on October 27. While the domestic equity market
made a good recovery in the weeks that followed, tremors continued to be felt in
most financial markets, including currencies.
Which brings us to an overview of the international economic picture. Over
time Southeast Asia--which remains part of the global community of emerging
markets--will overcome the crisis. While Asian sales are relatively small for
them, U.S. manufacturing firms seem to be committed to producing things there
for the long haul.
Japan's economy continued to lag during our fiscal year in part because of
the burden of restrictive government budget policy, maintained in the attempt to
control the growing deficit. However, economic conditions throughout much of
Europe showed a marked improvement over those of the previous 12 months.
Implementation of European Monetary Union (EMU) and a single currency
appears all but certain at this point. Good performance in European markets is
at least in part attributable to the changes that are beginning to take place as
a result of EMU.
As to the domestic outlook, Federal Reserve Chairman Greenspan has warned
in recent months that the economy has been on an "unsustainable" track and that
any expectation of further stock market gains at the pace of the past two years
is "unrealistic."
He also has noted that unless demand slows and/or productivity accelerates,
the gap between demand for labor and the potential supply surely will set off a
round of wage inflation.
No doubt the Far East financial market crisis is producing some braking
action on the domestic economy and equity market, a factor which led the Federal
Reserve open market committee not to raise interest rates at its meeting on
November 12. Over the past two years, the committee has changed rates only
twice, with 0.25% increases in January, 1996, and March, 1997.
2
<PAGE> 4
DEAR SHAREHOLDER--CONTINUED
Looking ahead, we cite a report from Bill Gross, of Pacific Investment
Management Company (PIMCO) and portfolio manager of the Harbor Bond Fund, that
PIMCO's annual secular forum earlier this year remained steadfastly bullish on
the outlook for interest rates and bond prices through the turn of the century.
"Absent political icebergs," the PIMCO call is for yields approaching 5
percent at the peak of any cyclical downturn and 7 percent during any period of
strong growth and Federal Reserve tightening.
One favorable economic development during the year was enactment of the
Taxpayer Relief Act of 1997, an important step in the right direction toward the
goals of reducing the federal deficit and improving the low rate of personal
savings in the U.S.
In addition to liberalizing and broadening the provisions for individual
retirement accounts, the new law reduces the long term capital gains tax rate,
which will benefit investors who buy and hold securities.
We believe the outlook for equities remains positive, with inflation
subdued, particularly in Europe and the U.S. As always, we note that ups and
downs in financial markets are inevitable and it is important to choose an asset
allocation mix of stock and fixed income investments with the level of risk
appropriate for individual goals and to stay with it.
We took note with pride in our fiscal year 1997 of two significant
milestones for Harbor Fund. One was the 10th anniversary of the founding of our
first fund, Harbor Growth Fund, and the other was the achievement of total
assets of $10 billion, just two years after reaching $5 billion.
On balance, the Harbor funds performed very well in our 1997 fiscal year.
Particularly noteworthy was the performance of Harbor Growth Fund following the
start on May 2 of Emerging Growth Advisors, Inc., of Baltimore, as subadvisor.
Peter Welles, president of Emerging Growth Advisors, has effectively realigned
the portfolio to reduce average capitalization of holdings. Focus is on
companies with capitalization, generally $500 million or less at time of initial
investment, and above average growth rates.
We invite your careful review of the performance of the Harbor funds on the
pages which follow this letter. Because expenses are a very important element in
the performance your investments, we also invite your attention to the expense
ratios of the Harbor funds on page one of this report.
Thank you again for investing with us and as always we welcome any
inquiries.
Sincerely,
Ronald C. Boller
Ronald C. Boller
President
December 16, 1997
3
<PAGE> 5
HARBOR FUND
The following performance figures are annualized for each Fund. The date of
inception for Harbor Growth Fund was November 19, 1986; Harbor International
Growth Fund was November 1, 1993; Harbor International II was June 1, 1996;
Harbor Short Duration Fund was January 1, 1992; and all other Funds started
December 29, 1987.
<TABLE>
<S> <C> <C> <C>
HARBOR GROWTH FUND NET ASSET VALUE: 10/31/97 $14.20
10/31/96 $16.00
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------
Total Return for Periods Ended 10/31/97
------------------------------------------------------------------------
Fund/Index 12 months 5 years 10 years
------------------------------------------------------------------------
<S> <C> <C> <C>
Harbor Growth 18.64% 14.70% 13.57%
------------------------------------------------------------------------
S&P 500 32.23% 19.95% 17.16%
------------------------------------------------------------------------
<CAPTION>
Total Return for Periods Ended 9/30/97
------------------------------------------------------------------------
<S> <C> <C> <C>
Harbor Growth 19.00% 15.08% 10.48%
------------------------------------------------------------------------
</TABLE>
Despite strong performance in the second half of the fiscal year, Harbor
Growth Fund underperformed the S&P 500 index for the full year. Following a
change in the subadvisor on May 2, the Fund substantially outperformed the
S&P 500 index in the third and fourth quarters of the fiscal year, returning
26.0% for the six months, compared with a 15.3% gain in the index. In the
fiscal second half, new positions in technology, including software and
communications, and timely elimination of holdings in emerging markets were
strong positives in performance vs. the index. Substantial progress was made
by the new portfolio manager in realignment of the portfolio to focus on
companies with smaller market capitalization.
<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
HARBOR GROWTH AND S&P 500
GROWTH S&P 500
<S> <C> <C>
10/86 10000 10000
10/87 10250 10650.5
10/88 12057.6 12208
10/89 14295 15397
10/90 11803.1 14245
10/91 19913.6 19010.4
10/92 18425 20905.7
10/93 23246.1 24017.6
10/94 21318.6 24990.6
10/95 26845.6 31594.4
10/96 30829.3 39252.4
10/97 36574.8 51903.7
</TABLE>
PERIOD ENDING OCTOBER 31
<TABLE>
<CAPTION>
<S> <C> <C> <C>
HARBOR INTERNATIONAL GROWTH FUND NET ASSET VALUE: 10/31/97 $16.15
10/31/96 $15.35
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------
Total Return for Periods Ended 10/31/97
------------------------------------------------------------------------
<S> <C> <C> <C>
Since
Fund/Index 12 months 5 years Inception
------------------------------------------------------------------------
Harbor International Growth 8.13% NA 13.98%
------------------------------------------------------------------------
EAFE 4.63% 11.75% 6.11%
------------------------------------------------------------------------
<CAPTION>
Total Return for Periods Ended 9/30/97
------------------------------------------------------------------------
<S> <C> <C> <C>
Harbor International Growth 20.76% NA 17.27%
------------------------------------------------------------------------
</TABLE>
European markets favored restructuring situations this year over the type of
growth stock this fund generally holds. Currency turmoil in the Far
East/Pacific also detracted from the Fund's results. Still, the Fund
returned 8.13% for the 12 months, short of the exceptional annual gains in
each of the three full years since the Fund was founded, but well above the
gain in the EAFE index. Holdings in Hong Kong and Thailand, which accounted
for slightly less than 25% of the portfolio at the start of the fiscal year,
had negative performance. Profits were taken and the Thai positions were
eliminated in the second quarter. The Hong Kong holdings were reduced
throughout the year. Strong returns came from Portugal, Germany, and Spain,
where exposure was added because of improved earning prospects, and from new
investments in the banking and telephone industries in Italy.
<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
HARBOR INTERNATIONAL GROWTH AND EAFE
INTERNATIONAL EAFE
<S> <C> <C>
10/93 10000 10000
10/94 11536.2 11009.4
10/95 12208.2 10968.5
10/96 15609.5 12117
10/97 16878.5 12678
</TABLE>
PERIOD ENDING OCTOBER 31
4
<PAGE> 6
HARBOR FUND--CONTINUED
Performance data quoted represents past performance and is not predictive of
future performance. Actual return and principal value on an investment will
fluctuate, and the shares, when redeemed, may be worth more or less than their
original cost.
<TABLE>
<S> <C> <C> <C>
HARBOR CAPITAL APPRECIATION FUND NET ASSET VALUE: 10/31/97 $34.01
10/31/96 $25.88
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------
Total Return for Periods Ended 10/31/97
------------------------------------------------------------------------
Since
Fund/Index 12 months 5 years Inception
------------------------------------------------------------------------
<S> <C> <C> <C>
Harbor Capital Appreciation 35.73% 21.87% 19.90%
------------------------------------------------------------------------
S&P 500 32.23% 19.95% 17.64%
------------------------------------------------------------------------
<CAPTION>
Total Return for Periods Ended 9/30/97
------------------------------------------------------------------------
<S> <C> <C> <C>
Harbor Capital Appreciation 43.90% 24.13% 20.67%
------------------------------------------------------------------------
</TABLE>
Posting exceptional gains in fiscal year 1997, Harbor Capital Appreciation
Fund outperformed the S&P 500 index for the 6th time in the 7 full fiscal
years since the current subadvisor was named to manage the portfolio.
Annualized return of the Fund under the manager increased to 35.73% in the
fiscal year, compared with the annualized gain of 32.23% in the S&P 500
index in the same period. Major contributions to Fund performance came from
technology, which was overweighted vs. the index, and financial services. To
protect strong gains, toward the end of the period technology holdings were
reduced. Holdings in financial services, including banks, savings & loans,
insurance, and brokerage services, were increased.
<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
HARBOR CAPITAL APPRECIATION AND S&P 500
CAPITAL S&P 500
<S> <C> <C>
12/87 10000 10000
10/88 11670 11623.8
10/89 14109.8 14660.2
10/90 12484.4 13563.4
10/91 19394.3 18100.7
10/92 22190 19905.4
10/93 26663.5 22868.4
10/94 28596.9 23794.8
10/95 38813.7 30082.6
10/96 43945.8 37374.1
10/97 59646 49420
</TABLE>
PERIODS ENDING OCTOBER 31
<TABLE>
<S> <C> <C> <C>
HARBOR INTERNATIONAL FUND II NET ASSET VALUE: 10/31/97 $12.14
10/31/96 $10.47
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------
Total Return for Periods Ended 10/31/97
------------------------------------------------------------------------
Since
Fund/Index 12 months 5 years Inception
------------------------------------------------------------------------
<S> <C> <C> <C>
Harbor International II 16.64% NA 15.15%
------------------------------------------------------------------------
EAFE 4.63% 11.75% 2.81%
------------------------------------------------------------------------
<CAPTION>
Total Return for Periods Ended 9/30/97
------------------------------------------------------------------------
<S> <C> <C> <C>
Harbor International II 30.79% NA 25.59%
------------------------------------------------------------------------
</TABLE>
In a tumultuous year for international financial markets, Harbor
International Fund II achieved excellent returns in the first full year
since inception on June 1, 1996, widely outperforming the EAFE index. Major
gains from holdings in Europe were moderated by underperformance late in the
fiscal year from positions in Asia and Brazil. The negative effect of
currency translations on performance was somewhat offset by the portfolio's
focus on dollar exporting companies in Europe.
<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
HARBOR INTERNATIONAL II AND EAFE
HARBOR EAFE
<S> <C> <C>
05/96 10000 10000
10/96 10470 9940.89
10/97 12212.4 10401.1
</TABLE>
PERIODS ENDING OCTOBER 31
5
<PAGE> 7
HARBOR FUND--CONTINUED
<TABLE>
<S> <C> <C> <C>
HARBOR INTERNATIONAL FUND NET ASSET VALUE: 10/31/97 $35.84
10/31/96 $31.21
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------
Total Return for Periods Ended 10/31/97
------------------------------------------------------------------------
Since
Fund/Index 12 months 5 years Inception
------------------------------------------------------------------------
<S> <C> <C> <C>
Harbor International 19.26% 19.62% 17.54%
------------------------------------------------------------------------
EAFE 4.63% 11.75% 6.37%
------------------------------------------------------------------------
<CAPTION>
Total Return for Periods Ended 9/30/97
------------------------------------------------------------------------
<S> <C> <C> <C>
Harbor International 31.42% 20.28% 18.77%
------------------------------------------------------------------------
</TABLE>
At each fiscal year-end since inception, returns of Harbor International
Fund have eclipsed those of the EAFE index, posting gains more than 4 times
those of the index in fiscal 1997. Major gains from holdings in Russia,
Portugal, Spain, Brazil, and the United Kingdom dwarfed the negative results
of small positions in Malaysia, Singapore, and Australia, which were sharply
reduced by fiscal year-end. While effects of the strength of the dollar held
down gains somewhat, returns from portfolio holdings throughout continental
Europe and South America were particularly strong.
<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
HARBOR INTERNATIONAL AND EAFE
EAFA INTERNATIONAL
<S> <C> <C>
12/87 10000 10000
10/88 12038.9 13000
10/89 13019.1 17069.2
10/90 11349.9 17720.2
10/91 12139.1 20863.8
10/92 10534.6 20024.5
10/93 14480.6 27935.7
10/94 15942.3 33122.2
10/95 15883.1 34799.1
10/96 17546.2 41123.2
10/97 18358.5 49044.1
</TABLE>
PERIODS ENDING OCTOBER 31
<TABLE>
<S> <C> <C> <C>
HARBOR VALUE FUND NET ASSET VALUE: 10/31/97 $18.17
10/31/96 $16.04
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------
Total Return for Periods Ended 10/31/97
------------------------------------------------------------------------
Since
Fund/Index 12 months 5 years Inception
------------------------------------------------------------------------
<S> <C> <C> <C>
Harbor Value 31.08% 18.04% 15.77%
------------------------------------------------------------------------
S&P 500 32.23% 19.95% 17.64%
------------------------------------------------------------------------
<CAPTION>
Total Return for Periods Ended 9/30/97
------------------------------------------------------------------------
<S> <C> <C> <C>
Harbor Value 38.23% 18.25% 16.35%
------------------------------------------------------------------------
</TABLE>
Exceptionally strong returns in the third quarter highlighted Harbor Value
Fund's performance in the fiscal year as the Fund slightly underperformed
the S&P 500 index for the 12 months. Narrowness in the market--with investor
focus on a relatively small number of large-capitalization growth
stocks--began to ease somewhat just before midyear and the Fund outperformed
the index in the second half of the fiscal year. Fund holdings in the
technology, financial, and consumer durable segments of the market had
particularly strong returns for the year and were the principal sources of
outperformance in the second half. Passive management of 25% of Fund
assets--aimed at reducing volatility--added broad diversification.
<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
HARBOR VALUE AND THE S&P 500
S&P 500 VALUE
<S> <C> <C>
12/87 10000 10000
10/88 12006.8 11623.8
10/89 15205 14660.2
10/90 13228.9 13563.4
10/91 17220.8 18100.7
10/92 18436.1 19905.4
10/93 20645.8 22868.4
10/94 21636.6 23794.8
10/95 26184.7 30082.6
10/96 32228.7 37374.1
10/97 42245.2 49420
</TABLE>
PERIODS ENDING OCTOBER 31
6
<PAGE> 8
HARBOR FUND--CONTINUED
<TABLE>
<S> <C> <C> <C>
HARBOR BOND FUND NET ASSET VALUE: 10/31/97 $11.57
10/31/96 $11.28
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------
Total Return for Periods Ended 10/31/97
------------------------------------------------------------------------
Since
Fund/Index 12 months 5 years Inception
------------------------------------------------------------------------
<S> <C> <C> <C>
Harbor Bond 8.96% 8.19% 9.76%
------------------------------------------------------------------------
LB AGG 8.89% 7.51% 9.18%
------------------------------------------------------------------------
<CAPTION>
Total Return for Periods Ended 9/30/97
------------------------------------------------------------------------
<S> <C> <C> <C>
Harbor Bond 10.48% 7.76% 9.73%
------------------------------------------------------------------------
</TABLE>
Harbor Bond Fund posted a return of 8.96% in the fiscal year to edge out the
Lehman Brothers Aggregate index. After an increase in the federal funds rate
in March, the yield of the 30-year treasury bond fell steadily and the
yield curve flattened. After the Federal Reserve boosted the federal funds
rate by 0.25% in March, average duration of the Fund's portfolio was reduced
throughout the balance of the year to protect the portfolio from the
potential of further increases. Rates on the 30-year treasury bond declined
in the latter half of the fiscal year, which added to results, even with the
shorter average duration. Throughout the period, good contributions to
performance came from sector weightings relative to the index, particularly
overweighting in mortgages and underweighting in investment grade
corporates. Significant returns also came from small holdings of lower-grade
corporates, hedged foreign bonds, and dollar denominated Latin American
bonds.
<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
HARBOR BOND AND LB AGG
BOND LB AGG
<S> <C> <C>
12/87 10000 10000
10/88 10790.9 10909
10/89 12049.2 12207.1
10/90 12534.2 12977.4
10/91 15042.1 15029.6
10/92 16868.8 16507.5
10/93 19227.1 18467
10/94 18622.5 17789.2
10/95 21334.5 20572.7
10/96 22947.4 21775.7
10/97 25004.1 23712.1
</TABLE>
PERIODS ENDING OCTOBER 31
<TABLE>
<S> <C> <C> <C>
HARBOR SHORT DURATION FUND NET ASSET VALUE: 10/31/97 $8.66
10/31/96 $8.79
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------
Total Return for Periods Ended 10/31/97
------------------------------------------------------------------------
Since
Fund/Index 12 months 5 years Inception
------------------------------------------------------------------------
<S> <C> <C> <C>
Harbor Short Duration 5.48% 5.44% 5.30%
------------------------------------------------------------------------
1-Yr GVT 5.79% 5.12% 5.08%
------------------------------------------------------------------------
<CAPTION>
Total Return for Periods Ended 9/30/97
------------------------------------------------------------------------
<S> <C> <C> <C>
Harbor Short Duration 5.95% 5.26% 5.29%
------------------------------------------------------------------------
</TABLE>
Performance of the Harbor Short Duration Fund fell slightly below that on
one-year treasury bills but exceeded returns of 90-day treasury bills in the
fiscal year as yield spreads between treasuries and other obligations
widened late in the period. However, average annual returns of the Fund for
the past 5 years remain well above both the one-year and 90-day bills. As
yield spreads between returns from treasuries and asset- and mortgage-backed
securities narrowed during the year, holdings of treasuries in the portfolio
were increased to about 65% with the balance in well diversified bonds among
others. And as the yield curve flattened, average duration of holdings was
reduced after mid-year from about 18 to 12 months. Both moves added to
returns.
<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
HARBOR SHORT DURATION AND T-BILLS
SHORT 1 YR GVT
<S> <C> <C>
12/91 10000 10000
10/92 10371.8 10398.2
10/93 10909.2 10810
10/94 11185.4 11121.2
10/95 11948.7 11910.7
10/96 12814 12616.9
10/97 13515.6 13348
</TABLE>
PERIODS ENDING OCTOBER 31
7
<PAGE> 9
HARBOR FUND--CONTINUED
<TABLE>
<S> <C> <C> <C>
HARBOR MONEY MARKET FUND NET ASSET VALUE: 10/31/97 $1.00
10/31/96 $1.00
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------
Total Return for Periods Ended 10/31/97
------------------------------------------------------------------------
Since
Fund/Index 12 months 5 years Inception
------------------------------------------------------------------------
<S> <C> <C> <C>
Harbor Money Market 5.11% 4.41% 5.58%
------------------------------------------------------------------------
T-Bills 5.29% 4.67% 5.68%
------------------------------------------------------------------------
<CAPTION>
Current Yield for Periods Ended 9/30/97
------------------------------------------------------------------------
<S> <C> <C>
Harbor Money Market 7 days: 5.18% 30 days: 5.13%
------------------------------------------------------------------------
</TABLE>
Returns of Harbor Money Market Fund slightly trailed those of 90-day
treasury bills but significantly outperformed the Donaghue's average for all
taxable money market funds for the fiscal year. Interest rates were
relatively stable throughout the period and high-quality commercial paper
and bank obligations continued to make up an average of 80% of the
portfolio. In the fiscal first half, average maturity was limited to 2 1/2
months or less. Later, as the yield curve flattened, average maturity was
extended to as high as 85 days, which aided performance slightly. Money
market shares are neither insured nor guaranteed by the U.S. government.
While the Money Market Fund seeks to maintain a stable price, there is no
assurance the Fund will be able to do so.
<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
HARBOR MONEY MARKET AND T-BILLS
MONEY T-BILL
<S> <C> <C>
12/87 10000 10000
10/88 10560.7 10568.4
10/89 11557.5 11494
10/90 12484.3 12427.3
10/91 13265.1 13201.2
10/92 13751.8 13712.1
10/93 14121 14135.5
10/94 14619.1 14685
10/95 15446.6 15533.2
10/96 16232 16358.2
10/97 17061.3 17223.4
</TABLE>
Periods ending October 31
8
<PAGE> 10
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND
BOARD OF TRUSTEES OF HARBOR FUND
In our opinion, the accompanying statements of assets and liabilities,
including the portfolios of investments, and the related statements of
operations, of changes in net assets and of cash flows, and the financial
highlights present fairly, in all material respects, the financial position of
each of the nine Funds constituting the Harbor Fund, (hereafter referred to as
the "Trust") at October 31, 1997, and the results of each of their operations,
the changes in each of their net assets, the cash flows for the Harbor Short
Duration Fund, and the financial highlights for the periods indicated, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Trust's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of investments at
October 31, 1997 by correspondence with the custodian and brokers and the
application of alternative auditing procedures where confirmations from brokers
were not received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
December 16, 1997
9
<PAGE> 11
HARBOR GROWTH FUND
PORTFOLIO OF INVESTMENTS--OCTOBER 31, 1997
Common Stock Holdings (%)
(Excludes net cash and short-term investments of 8.8%)
<TABLE>
<S> <C>
Domestic Oil 1.0
Pollution Control 1.3
Groceries 1.5
Hotel-Motel 1.5
Leisure & Luxury 2.0
Media 2.0
Automobile Equipment 2.1
Apparel & Textiles 2.2
Retail -- Food Stores 2.2
Machinery 2.5
Electric Power 2.6
Services 3.5
Computers & Business Equipment 4.0
Semiconductors 4.3
Retail -- All Other 4.6
Miscellaneous Hi Tech 5.0
Drugs & Medicine 5.9
Health Care -- Hospital Mgmt 6.5
Electronics Instruments 7.4
Telecommunications 13.0
Computer Services 16.1
</TABLE>
COMMON STOCKS--91.2%
<TABLE>
<CAPTION>
VALUE
SHARES (000S)
------ ------
<S> <C> <C>
APPAREL & TEXTILES--2.2%
TJX Companies Inc. New.................. 77,800 $ 2,305
--------
AUTOMOBILE EQUIPMENT--2.1%
Tower Automotive, Inc. *................ 51,200 2,144
--------
COMPUTER SERVICES--16.1%
Autodesk Inc............................ 17,900 662
BMC Software Inc........................ 28,600 1,727
Dataworks Corp.*........................ 200,000 3,962
Legato Systems Inc.*.................... 100,000 4,275
Network Appliance Inc.*................. 50,000 2,512
Project Software & Development Inc.*.... 80,000 1,850
Raptor Systems Inc.*.................... 80,000 1,100
Zitel Corp.*............................ 50,000 709
--------
16,797
--------
COMPUTERS & BUSINESS EQUIPMENT--4.0%
E M C Corp. Mass*....................... 38,100 2,134
Unison Software Inc.*................... 140,000 2,030
--------
4,164
--------
DOMESTIC OIL--1.0%
Valero Energy Corp...................... 36,200 1,091
--------
DRUGS & MEDICINE--5.9%
Dura Pharmaceuticals Inc.*.............. 41,700 2,017
Elan PLC*............................... 45,200 2,254
Molecular Devices Corp.*................ 95,000 1,900
--------
6,171
--------
ELECTRIC POWER--2.6%
AES Corp.*.............................. 55,400 2,195
PG & E Corp............................. 20,054 513
--------
2,708
--------
ELECTRONIC INSTRUMENTS--7.4%
Checkpoint Systems Inc.*................ 125,000 2,000
Lo Jack Corp.*.......................... 250,000 3,469
Tellabs Inc.*........................... 42,000 2,268
--------
7,737
--------
GROCERIES--1.5%
McKesson Corp. New...................... 14,500 1,556
--------
HEALTH CARE-HOSPITAL MANAGEMENT--6.5%
Health Management Association*.......... 104,100 2,537
Healthsouth Corp.*...................... 73,700 1,884
Safeskin Corp.*......................... 46,200 2,096
Urocor Inc.*............................ 37,500 314
--------
6,831
--------
HOTEL-MOTEL--1.5%
Four Seasons Hotels Inc................. 48,200 1,594
--------
LEISURE & LUXURY--2.0%
Carnival Corp........................... 43,800 2,124
--------
MACHINERY--2.5%
Hirsch International Group*............. 140,000 2,643
--------
</TABLE>
10
<PAGE> 12
HARBOR GROWTH FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
COMMON STOCKS--CONTINUED
<TABLE>
<CAPTION>
VALUE
SHARES (000S)
------ ------
<S> <C> <C>
MEDIA--2.0%
Chancellor Media Corp.*................. 37,100 $ 2,036
--------
MISCELLANEOUS HI TECH--5.0%
JPM Co.*................................ 100,000 2,075
Planar Systems Inc.*.................... 170,000 1,891
Sawtek Inc.*............................ 38,400 1,306
--------
5,272
--------
POLLUTION CONTROL--1.3%
USA Waste Services Inc.*................ 36,120 1,336
--------
RETAIL-ALL OTHER--4.6%
Consolidated Stores Corp.*.............. 53,250 2,123
Dollar Tree Stores Inc.*................ 65,250 2,643
--------
4,766
--------
RETAIL-FOOD STORES--2.2%
Kroger Co.*............................. 70,000 2,284
--------
SEMICONDUCTORS--4.3%
Advanced Technology Materials Inc.*..... 40,000 1,075
Dallas Semiconductor Corp............... 70,000 3,421
--------
4,496
--------
SERVICES--3.5%
Manpower Inc. Wis....................... 42,800 1,642
Robert Half International Inc.*......... 48,750 1,996
--------
3,638
--------
TELECOMMUNICATIONS--13.0%
Aspect Telecommunications Corp.*........ 125,000 3,000
Boston Technology Inc.*................. 70,000 1,899
Nextel Communications Inc.*............. 117,700 3,090
P-Com Inc.*............................. 100,000 2,013
Teleport Communications Group*.......... 25,000 1,209
Transcrypt International Inc.*.......... 110,000 2,420
--------
13,631
--------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
--------- ------
<S> <C> <C>
TOTAL COMMON STOCKS
(Cost $76,382)..................................... $ 95,324
--------
SHORT-TERM INVESTMENT--8.8%
(Cost $9,196)
REPURCHASE AGREEMENTS
Repurchase Agreement with State Street
Bank & Trust dated October 31, 1997
due November 3, 1997 at 4.50%,
collateralized by a U.S. Treasury
Note, 5.625% February 28, 2001, par
value of $9,345 (repurchase proceeds
of $9,199 when closed on November 3,
1997)................................. $9,196 9,196
--------
TOTAL INVESTMENTS--100%
(Cost $85,578)..................................... 104,520
CASH AND OTHER ASSETS,
LESS LIABILITIES--0.0%............................. 48
--------
TOTAL NET ASSETS--100.0%............................. $104,568
========
</TABLE>
- ------------
* Non-income producing security.
The accompanying notes are an integral part of the financial statements.
11
<PAGE> 13
HARBOR INTERNATIONAL GROWTH FUND
PORTFOLIO OF INVESTMENTS--OCTOBER 31, 1997
Investment Holdings By Country (%)
(Excludes net cash and short-term investments of 7.4%)
<TABLE>
<S> <C>
Malaysia (MAL) 0.6
Belgium (BEL) 2.3
Australia (AUS) 3.9
Mexico (MEX) 3.9
Spain (SP) 4.2
Netherlands (NET) 4.7
Portugal (PORT) 4.7
Switzerland (SWS) 6.5
Hong Kong (HK) 7.2
Germany (GER) 7.9
Italy (IT) 11.5
France (FR) 12.5
United Kingdom (UK) 22.7
</TABLE>
COMMON STOCKS--92.6%
<TABLE>
<CAPTION>
VALUE
SHARES (000S)
------ ------
<S> <C> <C>
APPAREL & TEXTILES--4.1%
Adidas AG (GER)....................... 258,965 $ 37,482
--------
BANKS--8.6%
AMMB Holdings Berhad Wts. (MAL)*...... 90,960 20
AMMB Holdings Berhad (MAL)............ 3,156,000 5,160
Bank of East Asia (HK)................ 3,680,614 8,236
Credito Italiano (IT)................. 18,706,100 49,887
Standard Chartered PLC (UK)........... 1,462,829 15,879
--------
79,182
--------
BUSINESS SERVICES--7.1%
Adecco SA (SWS)....................... 70,280 22,335
Rentokil Initial (UK)................. 10,604,300 42,699
--------
65,034
--------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000S)
------ ------
<S> <C> <C>
CHEMICALS--3.8%
SGL Carbon (GER)...................... 248,260 $ 34,853
--------
ELECTRICAL EQUIPMENT--5.7%
Siebe PLC (UK)........................ 2,752,523 52,877
--------
ELECTRONIC COMPONENTS--3.0%
SGS Thomson Microelectronics (FR)..... 264,949 18,855
SGS Thomson Microelectronics (FR)
Registered.......................... 128,900 9,184
--------
28,039
--------
GAS & PIPELINE UTILITIES--2.7%
Hong Kong & China Gas (HK)............ 13,027,000 24,600
--------
HOUSEHOLD PRODUCTS--3.9%
Kimberly-Clark De Mexico SA (MEX)..... 8,158,800 35,807
--------
INSURANCE--5.0%
AXA UAP (FR).......................... 677,100 46,367
--------
LEISURE--6.0%
Granada Group (UK).................... 3,998,282 55,141
--------
MEDIA--4.7%
Ver Neder Uitgevers (NET)............. 1,809,600 42,875
--------
PETROLEUM--3.9%
Santos Limited (AUS).................. 4,075,500 18,744
Woodside Petroleum (AUS).............. 2,093,692 17,683
--------
36,427
--------
PHARMACEUTICALS--13.1%
Novartis AG (SWS)..................... 24,095 37,736
Rhone Poulenc SA (FR)................. 337,100 14,698
SmithKline Beecham (UK)............... 4,421,203 41,910
Synthelabo (FR)....................... 220,639 25,972
--------
120,316
--------
REAL ESTATE--3.7%
Cheung Kong Holdings (HK)............. 2,333,000 16,219
New World Development Co. (HK)........ 5,013,886 17,639
--------
33,858
--------
RETAILING--2.3%
Delhaize Le Lion (BEL)................ 441,988 20,973
--------
TELECOMMUNICATIONS--15.0%
Portugal Telecom (PORT)............... 1,050,800 43,114
Telecom Italia MOB (IT)............... 9,113,600 33,806
Telecom Italia SPA (IT)............... 1,481,500 9,284
Telecom Italia SPA-RNC (IT)........... 3,224,000 13,025
Telefonica de Espana (SP)............. 1,404,200 38,322
--------
137,551
--------
TOTAL COMMON STOCKS
(Cost $793,763)....................... 851,382
--------
</TABLE>
12
<PAGE> 14
HARBOR INTERNATIONAL GROWTH FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
COMMON STOCKS--CONTINUED
CORPORATE BONDS--0.0%
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
--------- ------
<S> <C> <C>
AMMB Holdings Berhad (MAL)
5.000%--05/13/02...................... MYR 910 $ 202
AMMB Holdings Berhad (MAL)
7.500%--05/08/02...................... 910 142
--------
TOTAL CORPORATE BONDS
(Cost $734)....................................... 344
--------
</TABLE>
SHORT-TERM INVESTMENTS--5.2%
<TABLE>
<S> <C> <C>
COMMERCIAL PAPER
Chevron USA, Inc.
5.550%--11/03/97.................... $ 12,289 12,289
Ford Motor Credit Co.
5.630%--11/03/97.................... $ 35,000 35,000
--------
</TABLE>
<TABLE>
<CAPTION>
VALUE
(000S)
------
<S> <C>
TOTAL SHORT-TERM INVESTMENTS
(Cost $47,289).................................... $ 47,289
--------
TOTAL INVESTMENTS--97.8%
(Cost $841,786)................................... 899,015
CASH AND OTHER ASSETS, LESS LIABILITIES--2.2%.......
19,935
--------
TOTAL NET ASSETS--100%.............................. $918,950
========
</TABLE>
- ------------
* Non-income producing security.
MYR -- Malaysian Ringgit
The accompanying notes are an integral part of the financial statements.
13
<PAGE> 15
HARBOR CAPITAL APPRECIATION FUND
PORTFOLIO OF INVESTMENTS--OCTOBER 31, 1997
Common Stock Holdings (%)
(Excludes net cash and short-term investments of 4.9%)
<TABLE>
<S> <C>
Aerospace -- Defense
0.7
Machinery
1.1
Domestic Oil
1.2
Financial Services
1.2
Media
1.3
Cosmetics
1.4
Leisure & Luxury
1.4
Air Freight
1.6
Business Services
1.6
Electrical Equipment
1.7
Insurance -- Life
1.7
Insurance -- Other
1.8
Chemicals -- Fertilizers
1.9
Health Care -- Hospital Management
2.0
Savings & Loans
2.1
Hotel-Motel
2.6
Oil Well Equipment & Services
2.7
Miscellaneous Hi Tech
2.8
Computer Services
4.0
Credit & Miscellaneous Financial
4.6
Services
4.8
Banks -- Money Centers
5.0
Telecommunications
5.2
Electronic Instruments
5.3
Semiconductors
5.3
Retail -- All Other
7.9
Drugs & Medicine
11.0
Computer-Business Equipment
11.2
</TABLE>
COMMON STOCKS--95.1%
<TABLE>
<CAPTION>
VALUE
SHARES (000S)
------ ------
<S> <C> <C>
AEROSPACE-DEFENSE--0.7%
Boeing Co. .......................... 410,100 $ 19,633
----------
AIR FREIGHT--1.6%
Federal Express Corp.*............... 660,400 44,082
----------
BANKS-MONEY CENTERS--5.0%
Chase Manhattan Corp. New............ 708,300 81,720
Citicorp............................. 454,800 56,878
----------
138,598
----------
BUSINESS SERVICES--1.6%
Reuters Holdings PLC ADR Cl. B(1).... 668,300 43,941
----------
CHEMICALS-FERTILIZERS--1.9%
Monsanto Co. ........................ 1,249,600 53,420
----------
COMPUTER SERVICES--4.0%
Gartner Group Inc. New*.............. 860,200 24,301
Microsoft Corp. ..................... 353,300 45,929
SAP AG ADR(1)........................ 432,200 42,939
----------
113,169
----------
COMPUTER-BUSINESS EQUIPMENT--11.2%
3Com Corp.*.......................... 1,269,300 52,597
Cisco Systems Inc.*.................. 1,138,200 93,368
Compaq Computer Corp. ............... 928,400 59,185
Dell Computer Corp.*................. 562,600 45,078
International Business Machines...... 420,300 41,216
MMC Networks Inc. ................... 45,000 984
Xerox Corp. ......................... 263,200 20,875
----------
313,303
----------
COSMETICS--1.4%
Gillette Co. ........................ 438,700 39,072
----------
CREDIT & MISCELLANEOUS FINANCIAL--4.6%
Associates First Capital Corp. ...... 731,900 46,567
MBNA Corp. .......................... 1,243,775 32,727
Morgan Stanley Dean Witter Discover,
Inc. .............................. 1,020,220 49,991
----------
129,285
----------
DOMESTIC OIL--1.2%
Amerada Hess Corp. .................. 553,800 34,024
----------
DRUGS & MEDICINE--11.0%
Bristol Meyers Squibb Co. ........... 552,700 48,499
Eli Lilly & Co. ..................... 707,300 47,301
Pfizer Inc. ......................... 1,575,200 111,445
SmithKline Beecham PLC ADR(1)........ 1,311,500 62,460
Warner-Lambert Co. .................. 271,400 38,861
----------
308,566
----------
ELECTRICAL EQUIPMENT--1.7%
General Electric Co. ................ 722,100 46,621
----------
</TABLE>
14
<PAGE> 16
HARBOR CAPITAL APPRECIATION FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
COMMON STOCKS--CONTINUED
<TABLE>
<CAPTION>
VALUE
SHARES (000S)
------ ------
<S> <C> <C>
ELECTRONIC INSTRUMENTS--5.3%
Hewlett Packard Co. ................. 1,183,000 $ 72,976
KLA Tencor Corp.*.................... 735,700 32,325
Tellabs Inc.*........................ 792,600 42,800
----------
148,101
----------
FINANCIAL SERVICES--1.2%
Charles Schwab Corp. New............. 950,700 32,443
----------
HEALTH CARE-HOSPITAL MANAGEMENT--2.0%
Boston Scientific Corp.*............. 463,200 21,075
Healthsouth Corp. ................... 1,319,900 33,740
----------
54,815
----------
HOTEL-MOTEL--2.6%
Doubletree Corp.*.................... 726,600 30,245
Hilton Hotels Corp. ................. 1,375,400 42,379
----------
72,624
----------
INSURANCE-LIFE--1.7%
UNUM Corp. .......................... 990,800 48,302
----------
INSURANCE-OTHER--1.8%
MGIC Investment Corp. Wis............ 814,900 49,149
----------
LEISURE & LUXURY--1.4%
Walt Disney Co. ..................... 482,900 39,719
----------
MACHINERY--1.1%
Case Corp. .......................... 507,600 30,361
----------
MEDIA--1.3%
Clear Channel Communication*......... 547,900 36,161
----------
MISCELLANEOUS HI TECH--2.8%
Applied Materials Inc. .............. 1,041,600 34,763
Diebold Inc. ........................ 1,014,400 44,697
----------
79,460
----------
OIL WELL EQUIPMENT & SERVICES--2.7%
Schlumberger Ltd. ................... 860,500 75,294
----------
RETAIL-ALL OTHER--7.9%
Autozone Inc.*....................... 907,300 26,822
Dollar General Corp. ................ 1,197,452 39,591
Gap Inc. ............................ 848,600 45,135
Home Depot Inc. ..................... 610,900 33,981
Kohl's Corp.* ....................... 617,500 41,450
Sears, Roebuck & Co. ................ 828,100 34,677
----------
221,656
----------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000S)
------ ------
<S> <C> <C>
SAVINGS & LOANS--2.1%
Washington Mutual Inc. .............. 877,800 $ 60,074
----------
SEMICONDUCTORS--5.3%
Intel Corp. ......................... 364,000 28,028
International Rectifier Corp. ....... 1,430,700 19,583
Motorola Inc. ....................... 802,200 49,536
Texas Instruments Inc. .............. 481,300 51,349
----------
148,496
----------
SERVICES--4.8%
CKS Group Inc. ...................... 642,300 23,283
CUC International Inc. .............. 1,286,243 37,944
Manpower Inc. Wis.................... 802,200 30,784
Omnicom Group........................ 612,500 43,258
----------
135,269
----------
TELECOMMUNICATIONS--5.2%
Airtouch Communications, Inc. ....... 1,140,300 44,044
Ciena Corp. ......................... 383,100 21,071
Nokia Corp. ADR(1)................... 546,700 48,246
Vodafone Group PLC ADR(1)............ 595,000 32,651
----------
146,012
----------
TOTAL COMMON STOCKS
(Cost $2,105,071).................... 2,661,650
</TABLE>
----------
SHORT-TERM INVESTMENT--4.5%
(Cost $125,873)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000S)
---------
<S> <C> <C>
COMMERCIAL PAPER
Ford Motor Credit Co.
5.630%--11/03/97................... $125,873 125,873
----------
TOTAL INVESTMENTS--99.6%
(Cost $2,230,944)............................... 2,787,523
CASH AND OTHER ASSETS,
LESS LIABILITIES--0.4%.......................... 10,881
----------
TOTAL NET ASSETS--100.0%.......................... $2,798,404
==========
</TABLE>
- ------------
(1) ADR after the name of a foreign holding stands for American Depository
Receipts representing ownership of foreign securities. ADRs are issued by
U.S. banking institutions.
* Non-income producing security.
The accompanying notes are an integral part of the financial statements.
15
<PAGE> 17
HARBOR INTERNATIONAL FUND II
PORTFOLIO OF INVESTMENTS--OCTOBER 31, 1997
Investment Holdings By Country (%)
(Excludes net cash and short-term investments of 0.1%)
<TABLE>
<S> <C>
Denmark (DEN)
1.1
Norway (NOR)
1.1
South Africa (S. AFR)
1.1
Canada (CAN)
1.3
Argentina (ARG)
1.4
Poland (POL)
1.5
Portugal (PORT)
1.8
Netherlands (NET)
3.0
Malaysia (MAL)
3.7
Brazil (BR)
5.3
Russia (RUS)
5.4
Hong Kong (HK)
5.5
Japan (JP)
5.7
Sweden (SW)
6.6
Singapore (SGP)
7.1
United Kingdom (UK)
13.8
France (FR)
17.0
Switzerland (SWS)
17.5
</TABLE>
COMMON STOCKS--98.2%
<TABLE>
<CAPTION>
VALUE
SHARES (000S)
------ ------
<S> <C> <C>
AEROSPACE--2.6%
Rolls Royce (UK)................... 644,863 $ 2,315
Thomson CSF (FR)................... 45,000 1,223
--------
3,538
--------
AUTO PARTS--1.5%
Autoliv Inc. (SW).................. 50,000 2,006
--------
AUTOMOTIVE--1.5%
Jardine International Motor (HK)... 848,000 614
Volvo AB, Series B (SW)............ 55,000 1,439
--------
2,053
--------
BANKS--8.8%
Bank Slaski (POL).................. 35,000 2,039
Banque National Paris (FR)......... 40,646 1,797
Cie Fin Paribas Cl. A (FR)......... 19,000 1,380
Credit Suisse Group (SWS).......... 20,140 2,837
Malayan Bank Berhad (MAL).......... 350,000 1,355
United Overseas Bank (SGP)......... 450,052 2,486
--------
11,894
--------
BEVERAGES--4.1%
Fraser & Neave (SGP)............... 265,000 1,329
Guinness (UK)...................... 270,000 2,415
Whitbread (UK)..................... 135,000 1,805
--------
5,549
--------
BUSINESS SERVICES--2.1%
SGS Holding (SWS).................. 1,500 2,892
--------
CONGLOMERATES--9.1%
Jardine Matheson (SGP)............. 460,943 2,950
Keppel Corp. (SGP)................. 900,000 2,846
Oerlikon Buhrle AG (SWS)........... 20,000 2,557
Sime Darby Berhad (MAL)............ 950,000 1,368
Swire Pacific Ltd. Cl. A (HK)...... 285,000 1,523
Swire Pacific Ltd. Cl. B (HK)...... 1,025,000 1,087
--------
12,331
--------
</TABLE>
16
<PAGE> 18
HARBOR INTERNATIONAL FUND II
PORTFOLIO OF INVESTMENTS--CONTINUED
COMMON STOCKS--CONTINUED
<TABLE>
<CAPTION>
VALUE
SHARES (000S)
------ ------
<S> <C> <C>
CONSUMER GOODS--4.1%
BIC (FR)........................... 35,000 $ 2,394
Hunter Douglas NV (NET)............ 55,686 2,295
Salomon & Taylor (JP).............. 243,000 848
--------
5,537
--------
ELECTRIC UTILITIES--3.6%
Cataguazes Leopold, Pfd. A (BR).... 1,600,200,000 3,193
Texpar SA Pfd. (BR)................ 126,000,000 6
Unified Energy Systems Pfd
(RUS)*........................... 5,000,000 1,638
--------
4,837
--------
ELECTRONICS--2.8%
Matsushita Electrical Industries
(JP)............................. 80,000 1,343
Schneider SA (FR).................. 24,000 1,282
Sony Corp. (JP).................... 14,000 1,162
--------
3,787
--------
ENGINEERING--2.1%
Sulzer AG (SWS).................... 3,800 2,779
--------
FINANCIAL SERVICES--1.2%
ING Groep NV (NET)................. 40,000 1,679
--------
FOOD--2.6%
Cresud (ARG)....................... 1,050,000 1,923
Nestle SA (SWS).................... 1,100 1,550
--------
3,473
--------
INDUSTRIAL MACHINERY--0.9%
Komatsu (JP)....................... 225,000 1,202
--------
INSURANCE--2.3%
AXA UAP (FR)....................... 28,000 1,917
Zurich Vericherun (SWS)............ 3,000 1,238
--------
3,155
--------
MINING & METALS--6.1%
Anglo American Corp.
South Africa Ltd. (S. AFR)....... 28,000 1,210
Billiton (UK)...................... 770,000 2,232
Gencor Ltd. (S. AFR)............... 120,000 269
Pechiney (FR)...................... 48,000 1,974
Rio Tinto (UK)..................... 61,341 790
Sedna Geotech Inc. Wts. (CAN)*..... 600,000 0
Sedna Geotech Inc. (CAN)........... 900,000 1,756
--------
8,231
--------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000S)
------ ------
<S> <C> <C>
OIL & GAS PRODUCTION--8.5%
British Petroleum (UK)............. 75,288 $ 1,107
Elf Aquitaine (FR)................. 12,000 1,485
Oil Co. Lukoil ADR (RUS) (1)....... 65,000 5,679
Petrol Brasileiros, Pfd. (BR)...... 10,000,000 1,859
Total Cl. B (FR)................... 12,000 1,331
--------
11,461
--------
PHARMACEUTICALS--11.7%
Nobel Biocare (SW)................. 200,000 2,590
Novartis AG (SWS).................. 1,900 2,976
Novo Nordisk AS (DEN).............. 13,000 1,408
Rhone Poulenc SA (FR).............. 60,548 2,640
Roche Holdings AG (SWS)............ 300 2,636
SmithKline Beecham PLC (UK)........ 376,893 3,573
--------
15,823
--------
PHOTOGRAPHY--1.6%
Canon Inc. (JP).................... 42,000 1,019
Fuji Photo Film Co. (JP)........... 30,000 1,087
--------
2,106
--------
POLLUTION CONTROL--0.6%
Waste Management International
PLC ADR (UK) (1)*................ 120,000 825
--------
PUBLISHING--2.6%
Investec Consulting (PORT)......... 75,400 2,358
Reed International (UK)............ 110,000 1,088
--------
3,446
--------
REAL ESTATE--3.2%
Amoy Properties (HK)............... 1,700,000 1,462
Cheung Kong Holdings (HK).......... 400,000 2,781
--------
4,243
--------
TELECOMMUNICATION--5.4%
Ericsson (LM) Tel Co.
Ser. B (SW)...................... 65,000 2,864
Telecomunicacoes Brasil ADR (BR)
(1).............................. 21,000 2,132
Telekom Malaysia (MAL)............. 865,000 2,245
--------
7,241
--------
TIRE & RUBBER--2.6%
Bridgestone Corp. (JP)............. 50,000 1,080
Cie Fin Michel Bas (SWS)........... 5,200 2,377
--------
3,457
--------
</TABLE>
17
<PAGE> 19
HARBOR INTERNATIONAL FUND II
PORTFOLIO OF INVESTMENTS--CONTINUED
COMMON STOCKS--CONTINUED
<TABLE>
<CAPTION>
VALUE
SHARES (000S)
------ ------
<S> <C> <C>
TOBACCO--5.5%
BAT Industries (UK)................ 275,495 $ 2,410
Cie Fin Richemont (SWS)............ 1,500 1,821
Seita (FR)......................... 100,000 3,190
--------
7,421
--------
TRANSPORTATION--1.1%
Frontline Ltd. (NOR)............... 300,000 1,518
--------
TOTAL COMMON STOCKS
(Cost $136,511).................... 132,484
--------
UNITS--1.7%
(Cost $2,953)
Eurotunnel (FR)*..................... 2,425,000 2,375
--------
</TABLE>
<TABLE>
<CAPTION>
VALUE
(000S)
------
<S> <C>
TOTAL INVESTMENTS--99.9%
(Cost $139,464)................................... $134,859
CASH AND OTHER ASSETS,
LESS LIABILITIES--0.1%............................ 98
--------
TOTAL NET ASSETS--100.0%............................ $134,957
========
</TABLE>
- ------------
(1) ADR after the name of a foreign holding stands for American Depository
Receipts representing ownership of foreign securities. ADRs are issued by
U.S. banking organizations.
* Non-income producing security.
The accompanying notes are an integral part of the financial statements.
18
<PAGE> 20
HARBOR INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS--OCTOBER 31, 1997
Investment Holdings By Country (%)
(Excludes net cash and short-term investments of 3.2%)
<TABLE>
<S> <C>
Finland (FIN) 0.9
Italy (IT) 1.0
Portugal (PORT) 1.2
Singapore (SGP) 1.2
Australia (AUS) 1.3
Malaysia (MAL) 1.4
Denmark (DEN) 2.0
Argentina (ARG) 2.3
Spain (SP) 2.7
Norway (NOR) 3.0
Hong Kong (HK) 3.2
Brazil (BR) 3.3
Russia (RUS) 4.8
South Africa (S. AFR) 5.0
Netherlands (NET) 5.9
Japan (JP) 7.3
France (FR) 9.8
Sweden (SW) 9.9
Switzerland (SWS) 12.7
United Kingdom (UK) 17.9
</TABLE>
COMMON STOCKS--95.3%
<TABLE>
<CAPTION>
VALUE
SHARES (000S)
------ ------
<S> <C> <C>
AUTOMOTIVE--1.9%
Volvo AB, Series B (SW)............. 3,661,250 $ 95,810
BANKS--15.0%
ABN Amro Holdings NV (NET).......... 4,261,187 $ 85,816
Banco Bilbao Vizcaya (SP)........... 3,855,450 103,098
Banco Commercial Portugues ADR
(PORT)(1)......................... 420,000 8,400
Banco Commercial Portugues
Registered (PORT)................. 2,562,584 52,170
Bankinter SA (SP)................... 690,000 33,867
Barclays Bank PLC (UK).............. 4,182,950 104,778
Cie Fin Paribas Cl. A (FR).......... 672,120 48,810
Credit Suisse Group (SWS)........... 426,600 60,094
Malayan Bank Berhad (MAL)........... 8,107,000 31,373
National Westminster Bank (UK)...... 5,826,367 83,773
Royal Bank of Scotland Group (UK)... 6,289,575 66,691
Schweiz Bankverein (SWS)*........... 230,786 62,054
United Overseas Bank (SGP).......... 3,940,570 21,767
----------
762,691
----------
BEVERAGES--4.5%
Cadbury Schweppes (UK).............. 6,379,061 64,215
Guinness (UK)....................... 7,850,000 70,198
South African Breweries Ltd. ADR (S.
AFR)(1)........................... 2,121,602 56,253
Whitbread (UK)...................... 3,050,000 40,784
----------
231,450
----------
BUSINESS SERVICES--1.3%
SGS Holding (SWS)................... 35,500 68,452
----------
CONGLOMERATES--4.0%
Keppel Corp. (SGP).................. 12,050,000 38,101
Kvaerner ASA, Series A (NOR)........ 1,042,050 53,839
Sime Darby Berhad (MAL)............. 16,130,000 23,226
Suez Lyonn Eaux (FR)................ 520,487 54,050
Swire Pacific Ltd. Cl. A (HK)....... 6,036,000 32,243
----------
201,459
----------
CONSUMER GOODS--2.1%
BIC (FR)............................ 1,040,000 71,145
Hunter Douglas NV (NET)............. 866,324 35,697
----------
106,842
----------
ELECTRIC UTILITIES--1.6%
China Light & Power (HK)............ 15,000,000 78,963
----------
ELECTRONICS--2.4%
Ericsson L M Tel Co. ADR Cl.B
(SW)(1)........................... 646,000 28,586
Matsushita Electrical Industries
(JP).............................. 2,500,000 41,961
Sony Corp. (JP)..................... 601,000 49,888
----------
120,435
----------
</TABLE>
19
<PAGE> 21
HARBOR INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
<TABLE>
<CAPTION>
VALUE
SHARES (000S)
------ ------
<S> <C> <C>
COMMON STOCKS--CONTINUED
ENGINEERING--0.6%
Sulzer AG (SWS)..................... 41,250 $ 30,166
----------
FINANCIAL SERVICES--1.7%
ING Groep NV (NET).................. 2,032,547 85,322
----------
FOOD--1.4%
Nestle SA (SWS)..................... 50,300 70,874
----------
GAS & PIPELINE UTILITIES--1.3%
BG (UK)............................. 15,500,000 68,133
----------
INDUSTRIAL MACHINERY--0.5%
Komatsu (JP)........................ 5,000,000 26,714
----------
INSURANCE--4.4%
Assic Generali (IT)................. 2,200,000 49,185
AXA UAP (FR)........................ 1,000,000 68,478
Schweiz Ruckversicher (SWS)......... 71,500 107,690
----------
225,353
----------
INVESTMENT COMPANIES--0.8%
Kinnevik Investment Ser B (SW)...... 2,120,510 42,184
----------
MINING & METALS--4.6%
Anglo American Corp. South Africa
Ltd. ADR (S. AFR)(1).............. 1,286,000 55,620
Billiton PLC ADR (S. AFR)(1)........ 26,950,000 78,110
Gencor Ltd. ADR (S. AFR)(1)......... 5,390,000 12,128
Rio Tinto (UK)...................... 2,113,036 27,227
Trelleborg AB Cl. B (SW)............ 3,312,220 43,780
WMC Ltd. (AUS)...................... 4,965,494 17,635
----------
234,500
----------
NEWSPAPERS--0.9%
News Corp. Ltd. ADR (AUS)(1)........ 2,500,000 47,656
----------
OIL & GAS EXPLORATION--1.4%
LASMO (UK).......................... 15,934,352 73,518
----------
OIL & GAS PRODUCTION--14.7%
British Petroleum (UK).............. 6,967,373 102,400
Norsk Hydro AS (NOR)................ 872,691 48,216
Oil Co. Lukoil ADR (RUS)(1)(2)...... 2,878,800 241,100
Petrol Brasileiros (BR)............. 435,000,001 80,888
Royal Dutch Petroleum Co. ADR
(NET)(1).......................... 1,800,000 94,725
Saga Petroleum AS (NOR)............. 2,809,000 55,154
Total Cl. B (FR).................... 671,444 74,498
YPF Sociedad Anonima ADR Cl.D
(ARG)(1).......................... 1,600,000 51,200
----------
748,181
----------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (100)
------ -----
<S> <C> <C>
PAPER PRODUCTS--2.0%
Mo Och Domsjo Ab Series B (SW)...... 1,000,000 $ 27,103
Stora Kopparbergs Series A (SW)..... 1,950,000 26,946
UPM Kymmene Oy (FIN)................ 2,100,000 46,723
----------
100,772
----------
PHARMACEUTICALS--8.9%
Novartis AG (SWS)................... 69,561 108,943
Novo Nordisk AS Series B (DEN)...... 933,000 101,073
Pharmacia and Upjohn (SW) 2,000,000 63,686
Rhone Poulenc SA (FR)............... 1,357,133 59,172
SmithKline Beecham PLC ADR Cl.A
(UK)(1)........................... 2,540,000 120,968
----------
453,842
----------
PHOTOGRAPHY--3.5%
Canon Inc. (JP)..................... 3,557,000 86,302
Fuji Photo Film Co. (JP)............ 2,470,000 89,482
----------
175,784
----------
STEEL--0.0%
Von Roll AG (SWS) *................. 12,000 231
----------
TELECOMMUNICATION--6.6%
Ericsson (LM) Tel Co. Series B
(SW).............................. 2,640,000 116,316
Hong Kong Telecom (HK).............. 25,723,951 49,242
Telebras, Pfd. (BR)................. 865,000,000 86,308
Telecom Argentina Cl. B (ARG)....... 6,600,000 33,020
Telefonica De Argentina Cl. B
(ARG)............................. 12,000,000 33,860
Telekom Malaysia (MAL).............. 6,900,000 17,904
----------
336,650
----------
TIRES & RUBBER--3.0%
Bridgestone Corp. (JP).............. 2,545,000 54,981
Cie Fin Michel Bas (SWS)............ 88,700 40,541
Michelin Cl. B (FR)................. 1,116,748 57,287
----------
152,809
----------
TOBACCO--4.7%
BAT Industries (UK)................. 10,176,968 89,043
Cie Fin Richemont (SWS)............. 39,000 47,349
Seita (FR).......................... 1,407,150 44,886
Swedish Match (SW).................. 18,818,974 57,789
----------
239,067
----------
TOYS & AMUSEMENTS--1.5%
Nintendo Co. (JP)................... 200,000 17,283
Sega Enterprises (JP)............... 200,000 4,919
SMH AG Neuenburg (SWS).............. 400,000 52,419
----------
74,621
----------
TOTAL COMMON STOCKS
(Cost $2,990,572)................... 4,852,479
----------
</TABLE>
20
<PAGE> 22
HARBOR INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
COMMON STOCKS--CONTINUED
UNITS--0.4%
(Cost $65,340)
<TABLE>
<CAPTION>
UNITS VALUE
(000S) (000S)
------ ------
<S> <C> <C>
Eurotunnel (FR)*...................... 20,000 $ 19,590
----------
</TABLE>
CONVERTIBLE BONDS--1.1%
(Cost $39,600)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000S)
---------
<S> <C> <C>
LibLife International BV
6.500%--09/30/2004 (S. AFR)............ $40,000 53,800
----------
SHORT-TERM INVESTMENTS--2.7%
COMMERCIAL PAPER
American Express Credit Corp.
5.520%--11/10/1997..................... 8,014 $ 8,014
5.520%--11/12/1997..................... 6,284 6,284
5.530%--11/13/1997..................... 16,275 16,275
----------
30,573
----------
Chevron Oil Finance Co.
5.590%--11/04/1997..................... 17,689 17,689
5.450%--11/06/1997..................... 11,859 11,859
----------
29,548
----------
General Electric Capital Corp.
5.490%--11/04/1997..................... $ 8,747 $ 8,747
5.570%--11/10/1997..................... 10,000 10,000
----------
18,747
----------
Prudential Funding Corp.
5.480%--11/03/1997..................... 12,724 12,724
5.620%--11/03/1997..................... 16,067 16,067
5.490%--11/05/1997..................... 12,630 12,630
5.500%--11/07/1997..................... 19,891 19,891
----------
61,312
----------
TOTAL SHORT-TERM INVESTMENTS
(Cost $140,180).................................. 140,180
----------
TOTAL INVESTMENTS--99.5%
(Cost $3,235,692)................................ 5,066,049
CASH AND OTHER ASSETS,
LESS LIABILITIES--0.5%........................... 23,999
----------
TOTAL NET ASSETS--100.0%........................... $5,090,048
==========
</TABLE>
- ---------------
(1) ADR after the name of a foreign holding stands for American Depository
Receipts representing ownership of foreign securities. ADRs are issued by
U.S. banking organizations.
(2) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At October 31,
1997, these securities were valued at $241,100 or 4.7% of net assets.
* Non-income producing security.
The accompanying notes are an integral part of the financial statements.
21
<PAGE> 23
HARBOR VALUE FUND
PORTFOLIO OF INVESTMENTS--OCTOBER 31, 1997
Common Stock Holdings (%)
(Excludes 21.5% of holdings, of which 2.9% represents net cash and short-term
investments and 18.6% represents industry classifications less than 1.5%)
<TABLE>
<S> <C>
International Oil 1.5
Retail -- Food Stores 1.5
Liquor 1.6
Pollution Control 1.6
Coal & Uranium 1.7
Services 1.7
Soaps 1.7
Tires & Rubber 1.7
Crude Producers 1.8
Grocery Products 1.8
Railroads 1.8
Electrical Equipment 2.1
Building Material --
Construction 2.5
Domestic Oil 2.6
Automobile Equipment 2.7
Containers 2.9
Furnishings & Appliances 3.0
Natural Gas & Pipelines 3.2
Drugs & Medicine 3.3
Electronic Instruments 3.4
Electric Power 3.5
Insurance -- Other 3.5
Banks -- Regional 4.3
Paper 4.9
Telephones 5.9
Chemicals -- Fertilizers 6.1
Banks -- Money Center 6.2
</TABLE>
COMMON STOCKS--97.1%
<TABLE>
<CAPTION>
VALUE
SHARES (000S)
------ ------
<S> <C> <C>
AEROSPACE-DEFENSE--0.2%
Boeing Co. ............................ 1,000 $ 48
Lockheed Martin Corp. ................. 1,100 105
Raytheon Co. .......................... 1,900 103
United Technologies Corp. ............. 1,300 91
--------
347
--------
AIR TRANSPORTATION--0.3%
AMR Corp. Del. ........................ 3,200 373
Delta Air Lines Inc. Del. ............. 1,900 191
--------
564
--------
ALUMINUM--1.0%
Aluminum Company of America............ 1,000 73
Reynolds Metal Co. .................... 25,300 1,542
--------
1,615
--------
APPAREL & TEXTILES--0.4%
National Service Industries Inc. ...... 13,000 575
--------
AUTOMOBILE EQUIPMENT--2.7%
Echlin Inc. ........................... 70,700 2,315
TRW Inc. .............................. 35,300 2,021
--------
4,336
--------
AUTOMOBILES--0.8%
Chrysler Corp. ........................ 10,200 360
Ford Motor Co. Del. ................... 4,600 201
General Motors Corp. .................. 10,600 680
--------
1,241
--------
BANKS-MONEY CENTER--6.2%
Bank New York Inc. .................... 7,500 353
BankBoston Corp. ...................... 7,900 640
BankAmerica Corp. ..................... 25,800 1,845
Chase Manhattan Corp. New.............. 9,500 1,096
Citicorp............................... 13,000 1,626
First Chicago NBD Corp. ............... 6,900 502
J. P. Morgan & Company Inc. ........... 4,000 439
Mellon Bank Corp. ..................... 3,800 196
Northern Trust Corp. .................. 1,400 82
Republic NY Corp. ..................... 3,100 328
State Street Corp. .................... 9,000 502
Wells Fargo & Co. ..................... 8,100 2,360
--------
9,969
--------
BANKS-REGIONAL--4.3%
Banc One Corp. ........................ 1,694 88
Corestates Financial Corp. ............ 2,300 167
Crestar Financial Corp. ............... 33,700 1,594
Dime Bancorp Inc. New.................. 10,200 245
First America Bank Corp. .............. 4,300 240
First American Corp. TN................ 6,100 290
First Commercial Corp. ................ 5,300 341
First Union Corp. ..................... 14,800 726
Firstar Corp. New...................... 1,200 43
Fleet Financial Group Inc. ............ 3,000 193
Golden State Bancorp Inc. ............. 6,000 200
Greenpoint Financial Corp. ............ 2,300 148
Huntington Bancshares Inc. ............ 3,470 112
KeyCorp New............................ 2,500 153
Keystone Financial Inc. ............... 500 17
Magna Goup Inc. ....................... 15,900 628
NationsBank Corp. ..................... 16,300 976
</TABLE>
22
<PAGE> 24
HARBOR VALUE FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
COMMON STOCKS--CONTINUED
<TABLE>
<CAPTION>
VALUE
SHARES (000S)
------ ------
<S> <C> <C>
Norwest Corp. ......................... 10,000 $ 321
PNC Bank Corp. ........................ 4,000 190
SunTrust Banks Inc. ................... 3,200 207
Wachovia Corp. New..................... 1,000 75
--------
6,954
--------
BUILDING MATERIAL-CONSTRUCTION--2.5%
Armstrong World Industries Inc. ....... 28,200 1,878
Tecumseh Products Co. ................. 40,500 2,101
--------
3,979
--------
CHEMICALS-FERTILIZERS--6.1%
Dow Chemical Co. ...................... 1,400 127
E.I. DuPont De Nemours & Co. .......... 8,200 466
Eastman Chemical Co. .................. 30,500 1,819
Engelhard Corp. ....................... 71,100 1,235
Hercules Inc. ......................... 39,400 1,807
Mallinckrodt Inc. New.................. 61,200 2,295
PPG Industries Inc. ................... 33,200 1,880
Terra Nitrogen Co. LP.................. 5,700 181
--------
9,810
--------
COAL & URANIUM--1.7%
Mapco Inc. ............................ 84,600 2,792
--------
COMPUTER-BUSINESS EQUIPMENT--0.8%
Compaq Computer Corp. ................. 6,600 421
International Business Machines
Corp. ............................... 6,900 677
NCR Corp. New.......................... 1,693 51
Xerox Corp. ........................... 2,000 158
--------
1,307
--------
CONGLOMERATES--0.3%
Loews Corp. ........................... 4,300 480
--------
CONTAINERS--2.9%
Crown Cork & Seal Company Inc. ........ 58,500 2,636
Tenneco Inc. New....................... 46,100 2,072
--------
4,708
--------
COSMETICS--1.4%
International Flavours & Fragrances,
Inc. ................................ 47,200 2,283
--------
CREDIT & MISCELLANEOUS FINANCIAL--1.2%
American Express Co. .................. 2,000 156
Countrywide Credit Industries Inc. .... 8,500 292
Morgan Stanley Dean Witter Discover
Inc. ................................ 1,200 59
Travelers Group Inc. .................. 19,304 1,351
--------
1,858
--------
CRUDE PRODUCERS--1.8%
Burlington Resources Inc. ............. 1,767 86
Mitchell Energy & Dev. Corp. Cl.A...... 58,300 1,465
Mitchell Energy & Dev. Corp. Cl.B...... 8,000 200
Noble Affiliates Inc. ................. 1,200 49
Ultramar Diamond Shamrock.............. 37,200 1,149
--------
2,949
--------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000S)
------ ------
<S> <C> <C>
DOMESTIC OIL--2.6%
Amerada Hess Corp. .................... 1,400 $ 86
Amoco Corp. ........................... 7,300 669
Atlantic Richfield Co. ................ 5,000 412
Kerr McGee Corp. ...................... 39,600 2,675
Phillips Petroleum Co. ................ 4,200 203
Tosco Corp. ........................... 500 17
USX Marathon Group New................. 3,300 118
--------
4,180
--------
DRUGS & MEDICINE--3.3%
American Home Product Corp. ........... 34,900 2,587
Bristol Myers Squibb Co. .............. 3,000 263
Pharmacia & Upjohn Inc. ............... 80,300 2,550
--------
5,400
--------
ELECTRIC POWER--3.5%
American Electric Power Inc. .......... 3,000 142
Calenergy Inc. ........................ 1,200 41
Consolidated Edison Corp. NY........... 3,300 113
DPL Inc. .............................. 25,400 630
Dominion Resources Inc. VA............. 2,700 100
Duke Energy Co. ....................... 3,000 145
Edison International................... 4,800 123
Entergy Corp. ......................... 4,500 110
FPL Group Inc. ........................ 1,800 93
Houston Industries Inc. ............... 3,600 78
KU Energy Corp. ....................... 9,000 309
LG & E Energy Corp. ................... 37,000 786
Midamerican Energy Holdings Co. ....... 1,400 25
Niagara Mohawk Power Corp. ............ 9,000 87
Ohio Edison Co. ....................... 2,500 62
PP & L Resources Inc. ................. 2,000 43
Pacificorp............................. 61,700 1,338
Peco Energy Co. ....................... 3,400 77
PG & E Corp. .......................... 4,800 123
Pinnacle West Cap Corp. ............... 2,300 80
Public Service Enterprise Group........ 3,000 78
SCANA Corp. ........................... 24,600 621
Southern Co. .......................... 12,300 282
TECO Energy Inc. ...................... 1,900 45
Texas Utilities Co. ................... 1,700 61
--------
5,592
--------
ELECTRICAL EQUIPMENT--2.1%
Emerson Electric Co. .................. 2,000 105
Federal Signal Corp. .................. 77,500 1,875
General Electric Co. .................. 2,500 161
Hubbell Inc. CI.B ..................... 27,200 1,199
--------
3,340
--------
ELECTRONIC INSTRUMENTS--3.4%
General Signal Corp. .................. 77,300 3,102
Harris Corp. - Delaware................ 49,300 2,151
Micron Technology Inc. ................ 4,000 107
Teradyne Inc. ......................... 4,000 150
--------
5,510
--------
</TABLE>
23
<PAGE> 25
HARBOR VALUE FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
COMMON STOCKS--CONTINUED
<TABLE>
<CAPTION>
VALUE
SHARES (000S)
------ ------
<S> <C> <C>
FINANCIAL SERVICES--1.3%
A.G. Edwards Inc. ..................... 45,650 $ 1,498
Federal Home Loan Mortgage Co. ........ 500 19
Lehman Brothers Holdings Inc. ......... 8,500 400
Merrill Lynch & Company Inc. .......... 1,600 108
--------
2,025
--------
FOREST PRODUCTS--0.6%
Champion International Corp. .......... 500 28
Louisiana Pacific Corp. ............... 1,500 31
Rayonier Inc. ......................... 21,200 926
--------
985
--------
FURNISHINGS & APPLIANCES--3.0%
Newell Co. ............................ 35,400 1,358
Rubbermaid Inc. ....................... 115,000 2,767
Sherwin Williams Co. .................. 1,600 44
Snap-On Inc. .......................... 13,800 593
--------
4,762
--------
GOLD-PRECIOUS METALS--1.3%
Freeport McMoran Copper & Gold......... 89,500 2,137
--------
GROCERY PRODUCTS--1.8%
Archer Daniels Midland Co. ............ 3,150 70
CPC International Inc. ................ 17,800 1,762
H. J. Heinz Co. ....................... 23,600 1,096
Sara Lee Corp. ........................ 500 26
--------
2,954
--------
HEALTH CARE-HOSPITAL MANAGEMENT--1.4%
C. R. Bard Inc. ....................... 65,000 1,804
United Healthcare Corp. ............... 10,000 463
--------
2,267
--------
INSURANCE-LIFE--0.9%
American General Corp. ................ 21,100 1,076
Conseco Inc. .......................... 9,000 393
--------
1,469
--------
INSURANCE-OTHER--3.5%
Allstate Corp. ........................ 7,968 661
American International Group Inc. ..... 3,675 375
CNA Financial Group Inc. .............. 6,000 744
Progressive Corp. Ohio................. 2,000 209
TIG Holdings Inc. ..................... 31,900 1,081
Transamerica Corp. .................... 25,200 2,544
USF & G Corp. ......................... 2,000 41
--------
5,655
--------
INTERNATIONAL OIL--1.5%
Chevron Corp. ......................... 7,800 647
Exxon Corp. ........................... 14,800 909
Mobil Corp. ........................... 8,900 648
Texaco Inc. ........................... 5,000 285
--------
2,489
--------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000S)
------ ------
<S> <C> <C>
LIQUOR--1.6%
Brown Forman Corp. Cl. B............... 14,100 $ 694
Seagram Ltd. .......................... 54,900 1,849
--------
2,543
--------
MACHINE TOOLS--0.0%
Timken Co. ............................ 800 27
--------
MACHINERY--0.8%
Caterpillar Inc. ...................... 2,400 123
Deere & Co. ........................... 1,900 100
Foster Wheeler Corp. .................. 30,500 1,001
--------
1,224
--------
MANUFACTURING DIVERSIFIED--1.2%
Johnson Controls Inc. ................. 41,800 1,876
Parker Hannifin Corp. ................. 750 31
--------
1,907
--------
MISCELLANEOUS HI TECH--1.2%
Honeywell Inc. ........................ 28,500 1,940
--------
NATURAL GAS & PIPELINES--3.2%
AGL Resources Inc. .................... 44,600 808
Columbia Gas System Inc. .............. 2,000 145
Enron Corp. ........................... 6,900 262
MCN Energy Group Inc. ................. 14,800 512
National Fuel Gas Co. NJ............... 19,100 843
Nicor Inc. ............................ 22,000 848
People Energy Corp. ................... 31,800 1,137
Sonat Inc. ............................ 12,800 588
--------
5,143
--------
OFFSHORE DRILLING--0.1%
Rowan Cos Inc. ........................ 6,000 233
--------
PAPER--4.9%
Consolidated Papers Inc. .............. 36,800 1,911
International Paper Co. ............... 15,800 712
Kimberly Clark Corp. .................. 37,400 1,942
Temple Inland Inc. .................... 20,400 1,170
Union Camp Corp. ...................... 24,800 1,344
Westvaco Corp. ........................ 22,800 748
Williamette Industries Inc. ........... 1,400 46
--------
7,873
--------
POLLUTION CONTROL--1.6%
Pall Corp. ............................ 126,400 2,615
--------
PUBLISHING--0.1%
Gannett Inc. .......................... 2,000 105
--------
RAILROADS--1.8%
CSX Corp. ............................. 4,500 246
Illinois Cent. Corp. .................. 65,800 2,344
Norfolk Southern Corp. ................ 7,500 241
--------
2,831
--------
</TABLE>
24
<PAGE> 26
HARBOR VALUE FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
COMMON STOCKS--CONTINUED
<TABLE>
<CAPTION>
VALUE
SHARES (000S)
------ ------
<S> <C> <C>
RETAIL-ALL OTHER--1.3%
Borders Group Inc. .................... 9,000 $ 233
Dayton Hudson Corp. ................... 1,700 107
Federated Department Stores Inc. ...... 12,500 550
K Mart Corp. .......................... 16,500 218
Limited Inc. .......................... 3,761 89
May Department Stores Co. ............. 11,500 620
Ross Stores Inc. ...................... 5,000 187
Sears, Roebuck & Co. .................. 1,400 59
--------
2,063
--------
RETAIL-DRUG STORES--0.3%
CVS Corp. ............................. 600 37
Longs Drug Store Corp. ................ 18,600 466
--------
503
--------
RETAIL-FOOD STORES--1.5%
Food Lion Inc. Cl. A................... 74,500 577
Giant Foods Inc. Cl. A................. 59,800 1,831
Kroger Co. ............................ 1,000 33
--------
2,441
--------
SEMICONDUCTORS--0.2%
Western Digital Corp. ................. 11,400 341
--------
SERVICES--1.7%
H & R Block Inc. ...................... 74,900 2,771
--------
SOAPS--1.7%
Dial Corp. New......................... 166,800 2,815
--------
SOFT DRINKS--0.2%
Coca Cola Enterprises Inc. ............ 13,100 368
--------
STEEL--1.1%
British Steel PLC ADR (1).............. 56,800 1,541
Inland Steel Industry Inc. ............ 4,000 79
LTV Corp. New.......................... 7,400 90
--------
1,710
--------
TELECOMMUNICATION--0.1%
Lucent Technologies Inc. .............. 2,597 214
--------
TELEPHONES--5.9%
Alltel Corp. .......................... 65,200 2,306
Ameritech Corp. ....................... 1,400 91
AT&T Corp. ............................ 19,300 944
Bell Atlantic Corp. ................... 1,200 96
Bellsouth Corp. ....................... 3,900 185
Frontier Corp. ........................ 54,600 1,181
GTE Corp. ............................. 50,000 2,122
SBC Communications Inc. ............... 900 57
Southern New England Telecomm Corp. ... 49,100 2,105
Sprint Corp. .......................... 6,800 354
--------
9,441
--------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000S)
------ ------
<S> <C> <C>
TIRES & RUBBER--1.7%
B. F. Goodrich Co. .................... 59,400 $ 2,647
Goodyear Tire and Rubber Co. .......... 2,700 169
--------
2,816
--------
TOYS--0.1%
Toys R Us Inc.*........................ 4,300 146
--------
TOTAL COMMON STOCKS
(Cost $148,506)........................ 156,602
</TABLE>
--------
SHORT-TERM INVESTMENTS--4.0%
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000S)
--------
<S> <C> <C>
REPURCHASE AGREEMENTS
Repurchase Agreement with State Street
Bank & Trust dated October 31, 1997
due November 3, 1997 at 4.50%,
collateralized by a U.S. Treasury
Note, 5.625% February 28, 2001, par
value of $1,925 (repurchase proceeds
of $1,891 when closed on November 3,
1997)................................ $1,890 1,890
Repurchase Agreement with State Street
Bank & Trust dated October 31, 1997
due November 3, 1997 at 4.50%,
collateralized by a U.S. Treasury
Note, 5.625% February 28, 2001 par
value of $4,655 (repurchase proceeds
of $4,584 when closed on November 3,
1997)................................ 4,582 4,582
--------
TOTAL SHORT TERM-INVESTMENTS
(Cost $6,472).................................... 6,472
--------
TOTAL INVESTMENTS--101.1%
(Cost $154,978).................................. 163,074
CASH AND OTHER ASSETS,
LESS LIABILITIES--(1.1%)......................... (1,715)
--------
TOTAL NET ASSETS--100%............................. $161,359
========
</TABLE>
- ------------
(1) ADR after the name of a foreign holding stands for American Depository
Receipts representing ownership of foreign securities. ADRs are issued by
U.S. banking institutions.
* Non-income producing security.
The accompanying notes are an integral part of the financial statements.
25
<PAGE> 27
HARBOR BOND FUND
PORTFOLIO OF INVESTMENTS--OCTOBER 31, 1997
Total Investments (%)
(Excludes net cash and short-term investments of -23.7%)
<TABLE>
<S> <C>
Asset Backed Securities 2.7
U.S. Government Obligations 6.9
Foreign Government Obligations 8.7
Corporate Bonds & Notes 32.1
Mortgage Related Securities 73.3
</TABLE>
ASSET BACKED SECURITIES--2.7%
(Cost $9,993)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
--------- ------
<S> <C> <C>
Student Loan Marketing Association
6.080%--06/30/2000+ MTN (1)............ $ 5,000 $ 5,001
Series 1995 Cl. A-2
5.934%--10/25/2007+.................... 5,000 5,025
--------
10,026
--------
CORPORATE BONDS & NOTES--32.1%
Banco Nacional De Obras Y Serv(2)
6.875%--10/01/1998..................... 3,000 2,918
Banesto Del Inc.
8.250%--07/28/2002..................... 3,000 3,200
Banesto Finance Euro CD
7.437%--04/25/2003+.................... 2,000 2,010
Bancomer SA(2)
8.000%--07/07/1998..................... 4,000 4,005
Cemex SA MTN(1)
8.500%--08/31/2000..................... 1,000 1,000
Chrysler Financial Corp. MTN(1)
5.665%--07/05/2000+.................... 10,000 9,997
Comerica Inc.
10.125%--06/01/1998.................... 50 51
Commonwealth Edison Co.
Series 26
8.000%--10/15/2003..................... 3,000 3,085
Consolidated Edison Co. NY Inc.
5.818%--12/15/2001+.................... 10,000 10,004
Dean Witter Discover & Co.
6.125%--10/05/2002+.................... 9,000 9,054
First Chicago Corp. MTN Bank(1)
Series 178
5.818%--06/26/2002+.................... 10,000 9,996
General Motors Acceptance Corp. MTN(1)
5.830%--03/16/1999+.................... 8,000 7,977
General Motors Acceptance Corp.
5.906%--04/29/2002+.................... 10,000 10,017
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
--------- ------
<S> <C> <C>
Hydro Quebec Yankee Bonds
9.500%--11/15/2030 Deb................. $ 775 $ 1,006
Long Island Lighting Co.
6.250%--07/15/2001..................... 5,000 4,972
Merrill Lynch & Company Inc.
5.768%--09/30/2000+.................... 10,000 9,981
PDV American Inc. Sr. Note
7.250%--08/01/1998..................... 5,000 5,035
Prudential Funding Corp.
MTN Tranche 20(1)
5.890%--08/01/2000+.................... 5,000 5,000
Saferco Products Inc. MTN(1)
9.630%--05/31/2000..................... 500 542
Salomon Inc. CPI Bond(3)
3.650%--02/14/2002..................... 5,060 4,936
TCI Communications Inc.
6.375%--09/15/1999 Sr. Notes........... 2,000 2,007
6.355%--09/11/2000+ MTN (1)............ 5,000 4,963
--------
6,970
--------
Time Warner Inc
7.975%--08/15/2004..................... 450 478
United Air Lines Inc.
6.750%--12/01/1997 MTN(1).............. 4,000 4,002
Xerox Credit Corp.
10.000%--04/01/1999.................... 50 53
--------
TOTAL CORPORATE BONDS AND NOTES
(Cost $115,819)................................... 116,289
--------
FOREIGN GOVERNMENT OBLIGATIONS--8.7%
British Government Treasury
7.000%--06/07/02....................... 10,000 17,019
New Zealand
10.000%--03/15/2002.................... NZ$ 6,400 4,469
8.000%--04/15/2004..................... 7,000 4,666
--------
9,135
--------
Republic of Argentina+
5.718%--04/01/2000..................... $ 1,197 1,140
6.687%--03/31/2005 Series L............ 4,800 4,104
--------
5,244
--------
TOTAL FOREIGN BONDS
(Cost $31,429).................................... 31,398
--------
MORTGAGE RELATED SECURITIES--73.3%
COLLATERALIZED MORTGAGE OBLIGATIONS:
Capstead Securities Corp. IV
Series 91 Class VII
8.900%--12/25/2021..................... 350 356
Series 92 Class E
8.500%--02/25/2022..................... 750 768
--------
1,124
--------
</TABLE>
26
<PAGE> 28
HARBOR BOND FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
MORTGAGE RELATED SECURITIES--CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
--------- ------
<S> <C> <C>
Chase Mortgage Financial Corp. REMIC(4)
Series 1990 Cl. 2A2,
7.500%--03/25/2025..................... $ 122 $ 122
Collateralized Mortgage Securities Corp.
Series F-4
11.450%--11/01/2015.................... 287 286
Series 1988 B-4
8.750%--04/20/2019..................... 331 351
--------
637
--------
Drexel Burnham Lambert Series H-4
8.500%--04/01/2017..................... 8,465 9,024
Federal Home Loan Mortgage Corp.
Cl. 50
9.500%--05/15/2018..................... 18 18
Cl. 78
8.700%--02/15/2020..................... 2,752 2,814
Cl. 1029
9.000%--12/15/2020..................... 3,024 3,218
--------
6,050
--------
Federal National Mortgage
Association MTN(1)
5.840%--06/19/1998..................... 15,000 15,023
Federal National Mortgage
Association REMIC(4)
Series 1993
6.500%--02/25/2007 IO(5)............... 3,007 289
Cl. PN
6.000%--07/25/2017 IO(5)............... 2,865 352
--------
641
--------
Kidder Peabody Acceptance Corp. I
Series 1994 A1
8.133%--09/25/2024+.................... 3,000 3,060
L & N Funding Corp. GNMA Coll.,
Series A-4
12.000%--03/17/2014.................... 678 684
MDC Mortgage Funding Corp. Cl. Q-6
9.000%--03/20/2018..................... 14 14
Norwest Mortgage Insurance Corp.
GNMA Coll. Cl. 1-Z
12.375%--01/01/2014.................... 130 130
Prudential Home Mortgage Securities Co.
Series 1993 Cl. A-8
6.750%--08/25/2008..................... 6,015 5,918
Cl. AI
8.081%--12/26/2023..................... 4,683 4,851
--------
10,769
--------
Resolution Trust Corp.
Mortgage Pass Thru Series 1991 L-1
8.716%--08/25/2021+.................... 3,000 3,130
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
--------- ------
<S> <C> <C>
Ryland Mortgage Securities Corp.
Series 1992 B-9
7.914%--07/25/2022+.................... $ 3,000 $ 3,046
Sears Mortgage Securities Corp.
Series 92 Cl. A(2)
7.586%--10/25/2022+.................... 1,131 1,142
Sears Savings Bank Mortgage Pass
Thru Series 1992 REMIC
8.661%--05/25/2032+(4)................. 791 787
--------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS....................................... 55,383
--------
OTHER MORTGAGE RELATED SECURITIES:
Federal Housing Authority
Project Banco-221D
7.400%--02/01/2021..................... 854 885
Project Banco-15
7.450%--05/01/2021..................... 347 358
Project Reilly #52
5.150%--06/01/2018..................... 313 275
--------
1,518
--------
Federal Home Loan Mortgage Corp.
Forward Gold 30 year, TBA(6)
January Delivery
6.500%................................. 3,500 3,437
November Delivery
6.500%................................. 25,000 24,626
December Delivery
6.500%................................. 15,000 14,723
--------
42,786
--------
Federal Home Loan Mortgage Corp. Deb
5.950%--06/19/1998..................... 10,000 10,025
Federal Home Loan Mortgage Corp.
Pass Thru Certificates
10.500%--09/01/2000.................... 19 21
7.500%--03/01/2002..................... 17 17
8.000%--06/01/2011..................... 87 90
8.500%--02/01/2017..................... 102 106
7.986%--06/01/2024..................... 2,183 2,301
8.000%--04/01/2025..................... 914 949
8.000%--05/01/2025..................... 19 19
8.000%--06/01/2025..................... 329 342
8.000%--07/01/2025..................... 435 451
8.000%--08/01/2025..................... 372 386
8.000%--09/01/2025..................... 396 412
8.000%--10/01/2025..................... 1,156 1,201
8.000%--11/01/2025..................... 363 377
--------
6,672
--------
Federal National Mortgage Association
Pass Thru Certificates
9.000%--03/01/2005..................... 229 240
9.000%--11/01/2009..................... 1,759 1,872
</TABLE>
27
<PAGE> 29
HARBOR BOND FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
MORTGAGE RELATED SECURITIES--CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
--------- ------
<S> <C> <C>
8.500%--12/01/2009..................... $ 17 $ 18
9.500%--04/01/2011..................... 62 66
--------
2,196
--------
Federal National Mortgage
Association TBA Nov 30(6)
6.080%................................. 2,000 1,997
Government National Mortgage Association
7.125%--01/20/1999..................... 6,307 6,515
7.000%--03/20/2017..................... 1,576 1,623
6.750%--08/15/2017..................... 418 415
7.125%--08/20/2022..................... 4,111 4,247
7.125%--09/20/2023..................... 3,017 3,117
7.375%--05/20/2024..................... 4,295 4,442
7.125%--07/20/2024..................... 88 91
6.875%--12/20/2024..................... 712 731
7.000%--01/20/2025..................... 3,018 3,101
7.000%--02/20/2025..................... 2,541 2,610
6.500%--10/20/2025..................... 2,194 2,263
6.875%--10/20/2025..................... 763 783
6.000%--12/20/2026..................... 1,930 1,947
--------
31,885
--------
Government National Mortgage Association
II
5.500%--07/20/2027..................... 9,984 9,974
6.500%--07/20/2027..................... 14,745 15,153
--------
25,127
--------
Government National Mortgage Association
TBA(6)
8.500%--01/15/1999..................... 66,000 69,239
8.000%--01/15/1999..................... 5,000 5,186
7.500%--12/15/1999..................... 10,000 10,211
--------
84,636
--------
United Airlines Pass Thru Certificate
Series 1993 C-2
9.060%--06/17/2015+.................... 3,000 3,553
TOTAL OTHER MORTGAGE RELATED SECURITIES.............
210,395
--------
TOTAL MORTGAGE RELATED SECURITIES
(Cost $263,653)...................................
265,778
--------
U.S. GOVERNMENT OBLIGATIONS--6.9%
U.S. Treasury Notes
6.000%--09/30/1998..................... 3,000 3,013
CPI Index Treasury(3)
3.625%--07/15/2002..................... 10,040 10,062
--------
13,075
--------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
--------- ------
<S> <C> <C>
U.S. Treasury Bond
6.000%--02/15/2026..................... $ 10,000 $ 9,728
6.750%--08/15/2026..................... 2,000 2,149
--------
11,877
--------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $24,869)....................................
24,952
--------
SHORT-TERM INVESTMENTS--15.0%
REPURCHASE AGREEMENTS
Repurchase Agreement with State Street
Bank & Trust dated October 31, 1997 due
November 3, 1997 at 4.500%,
collateralized by a U.S. Treasury Note,
8.375% August 15, 2008, par value of
$4,120 (repurchase proceeds of $4,590
when closed on November 3, 1997)....... 4,588 4,588
--------
U.S. TREASURY BILLS (7)
4.90%--11/13/1997...................... 930 929
4.89%--12/11/1997...................... 710 706
5.08%--02/05/1998...................... 1,575 1,554
--------
3,189
--------
COMMERCIAL PAPER
Bank of America NT & SA
6.050%--06/10/1998..................... 10,000 9,997
Electricite De France
5.470%--12/10/1997..................... 800 795
Federal Home Loan Mortgage
Discount Notes
.010%--12/17/1997...................... 2,100 2,085
Ford Motor Credit Co.
5.540%--01/07/1998..................... 3,000 2,969
International Business Machines
5.520%--11/18/1997..................... 8,500 8,478
KFW International Finance Co.
5.490%--12/01/1997..................... 400 398
5.500%--12/15/1997..................... 1,600 1,589
--------
1,987
--------
National Rural Utilities Coop. Fin.
5.490%--12/01/1997..................... 2,500 2,489
5.500%--12/18/1997..................... 1,900 1,886
--------
4,375
--------
Ontario Hydro
5.500%--12/15/1997..................... 5,000 4,966
Procter & Gamble Co.
5.470%--12/08/1997..................... 3,300 3,282
Western Australian Treasury
5.500%--12/18/1997..................... 6,100 6,056
</TABLE>
28
<PAGE> 30
HARBOR BOND FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
<TABLE>
<CAPTION>
SHORT-TERM INVESTMENTS--CONTINUED
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
--------- ------
<S> <C> <C>
Wool International
5.490%--12/02/1997..................... $ 1,800 $ 1,792
--------
TOTAL COMMERCIAL PAPER.............................. 46,782
--------
TOTAL SHORT-TERM INVESTMENTS
(Cost $54,559).................................... 54,559
--------
TOTAL INVESTMENTS--138.7%
(Cost $500,322)................................... $503,002
CASH AND OTHER ASSETS
LESS LIABILITIES--(38.7)%......................... (140,408)
--------
TOTAL NET ASSETS--100.0%............................ $362,594
========
</TABLE>
SWAP AGREEMENTS AT OCTOBER 31, 1997 ARE AS FOLLOWS:
<TABLE>
<CAPTION>
UNREALIZED
NOTIONAL APPRECIATION/
AMOUNTS (DEPRECIATION)
(000S) DESCRIPTION COUNTER PARTY (000S)
- -------- ----------- ------------- --------------
<C> <S> <C> <C>
$5,000 To make or receive quarterly payments through 4/11/2002 Merrill Lynch Capital $ 33
based on the difference between (A) the excess of the 10 Services, Inc.
year interest rate swap rate over (B) the 10 year U.S.
Treasury Note rate plus 36.25 basis points.
7,500 To make or receive quarterly payments through 4/11/2002 Merrill Lynch Capital 49
based on the difference between (A) the excess of the 10 Services, Inc.
year interest rate swap rate over (B) the 10 year U.S.
Treasury Note rate plus 36.50 basis points.
7,000 To make or receive quarterly payments through 5/30/2002 Merrill Lynch Capital 44
based on the difference between (A) the excess of the 10 Services, Inc.
year interest rate swap rate over (B) the 10 year U.S.
Treasury Note rate plus 37.00 basis points.
4,000 To make or receive quarterly payments through 6/5/2002 based Merrill Lynch Capital 26
on the difference between (A) the excess of the 10 year Services, Inc.
interest rate swap rate over (B) the 10 year U.S. Treasury
Note rate plus 35.75 basis points.
9,000 To make or receive quarterly payments through 6/6/2002 based Morgan Grenfell & Co, 58
on the difference between (A) the excess of the 10 year Ltd.
interest rate swap rate over (B) the 10 year U.S. Treasury
Note rate plus 36.50 basis points.
----
$210
====
</TABLE>
- ------------
(1) MTN after the name of a security stands for Medium Term Note.
(2) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At October 31,
1997, these securities were valued at $8,065 or 2.2% of net assets.
(3) Treasury inflation-protected securities (TIPS) are securities in which the
prinicpal amount is adjusted for inflation and interest payments are applied
to the inflation-adjusted principal.
(4) REMICs are CMOs which can hold mortgages secured by any type of real
property and issue multiple-class securities backed by those mortgages.
(5) Interest only (IO) securities represent the right to receive the monthly
interest payments on an underlying pool of mortgage loans. These are subject
to the risk of accelerated principal paydowns. The principal amount
represents the notional amount on which current interest is calculated.
(6) TBA's are mortgage-backed securities traded under delayed delivery
commitments, settling after October 31, 1997. Although the unit price for
the trades has been established, the principal value has not been finalized.
However, the amount of the commitments will not fluctuate more than 1% from
the principal amount. Income on TBA's is not earned until settlement date.
(See Note 2 to the Financial Statements).
(7) At October 31, 1997, U.S. Treasury Bills held by the Fund were pledged to
cover margin requirements for open futures contracts and written options on
futures contracts. (See Note 2 to the Financial Statements). The securities
pledged had an aggregate market value of $3,189.
+ Variable rate or floating rate security. The stated rate represents the rate
in effect at October 31, 1997.
NZ$--New Zealand Dollar
The accompanying notes are an integral part of the financial statements.
29
<PAGE> 31
HARBOR BOND FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
(All dollar values are represented in thousands)
FUTURES CONTRACTS WHICH WERE OPEN AT OCTOBER 31, 1997 ARE AS FOLLOWS:
<TABLE>
<CAPTION>
AGGREGATE UNREALIZED
FACE VALUE OF APPRECIATION/
NUMBER OF CONTRACTS EXPIRATION DATE (DEPRECIATION)
DESCRIPTION CONTRACTS (000S) OF CONTRACTS (000S)
----------- --------- ------------- --------------- --------------
<S> <C> <C> <C> <C>
U.S. Treasury Bond--30 Yr. (Buy)....................... 513 $51,300 December, 1997 $1,725
U.S. Treasury Note--10 Yr. (Buy)....................... 580 58,000 December, 1997 1,550
U.S. Treasury Note--5 Yr. (Buy)........................ 80 8,000 December, 1997 111
Municipal Bond Index--5 Yr. (Buy)...................... 109 109 December, 1997 169
------
$3,555
======
</TABLE>
WRITTEN OPTIONS WHICH WERE OPEN AT OCTOBER 31, 1997 ARE AS FOLLOWS:
<TABLE>
<CAPTION>
NUMBER OF EXPIRATION DATE/ VALUE
DESCRIPTION CONTRACTS STRIKE PRICE (000S)
----------- --------- ---------------- ------
<S> <C> <C> <C>
U.S. Treasury Bond (Call)........................................... 300 November, 1997/116 $(815)
Euro Dollar Futures (Put)........................................... 200 December, 1997/93.75 (3)
-----
Written options outstanding, at value (premiums received of $376)... $(818)
=====
</TABLE>
FORWARD CURRENCY CONTRACTS WHICH WERE OPEN AT OCTOBER 31, 1997 ARE AS
FOLLOWS:
<TABLE>
<CAPTION>
UNREALIZED
MARKET AGGREGATE APPRECIATION/
VALUE FACE VALUE DELIVERY DATE (DEPRECIATION)
CURRENCY COUNTRY (000S) (000S) OF CONTRACT (000S)
-------- ------- ------ ---------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Dollar (Sell)........................... New Zealand $4,527 $4,661 December 4, 1997 $(134)
Dollar (Buy)............................ New Zealand 9,037 9,154 December 11, 1997 117
-----
$ (17)
=====
</TABLE>
TBA SALE COMMITMENTS WHICH WERE OPEN AT OCTOBER 31, 1997 ARE AS FOLLOWS:
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT DELIVERY COUPON VALUE
(000S) MONTH RATE (000S)
--------- -------- ------ ------
<S> <C> <C> <C> <C>
Government National Mortgage Assoc., 30 year............ $15,000 November 8.50% $15,736
Government National Mortgage Assoc., 30 year............ 10,000 November 8.50% 10,491
Federal Home Loan Mortgage Corp. ....................... 3,500 November 6.50% 3,448
-------
$29,675
=======
</TABLE>
The accompanying notes are an integral part of the financial statements.
30
<PAGE> 32
HARBOR SHORT DURATION FUND
PORTFOLIO OF INVESTMENTS--OCTOBER 31, 1997
Total Investments (%)
(Excludes net cash and short-term investments of 7.5%)
[BAR GRAPH]
<TABLE>
<S> <C>
Corporate Notes & Bonds 0.9
U.S. Government Obligations 24.4
Mortgage Related Securities 28.5
Asset Backed Securities 38.7
</TABLE>
ASSET BACKED SECURITIES--38.7%
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
--------- ------
<S> <C> <C>
AT&T Universal Card Master Trust
5.878%--04/17/2003+................... $ 4,000 $ 4,005
Beneficial Home Equity Loan Trust
5.836%--04/28/2026+................... 5,101 5,110
5.776%--05/28/2037+................... 2,461 2,459
--------
7,569
--------
Chase Manhattan Owner Trust
6.100%--01/17/2000.................... 5,000 5,019
Discover Card Trust
7.850%--11/21/2000.................... 5,100 5,187
Discover Card Trust
5.975%--10/16/2004+................... 5,000 5,052
Ford Credit Auto Owner Trust
5.950%--01/15/2000.................... 5,000 4,998
Green Tree Financial Corp.
6.000%--10/15/2027.................... 693 694
Household Affinity Credit Card
7.000%--12/15/1999.................... 1,000 1,002
Household Revolving Home Equity Loan
5.765%--02/20/2018+................... 5,299 5,294
ML Home Equity Loan Trust
6.087%--07/15/2022+................... 4,862 4,874
Nationsbank Auto Owners Trust
6.125%--07/15/1999.................... 3,234 3,241
Premier Auto Trust
7.900%--05/04/1999.................... 966 968
Signet(1)
5.200%--02/15/2002.................... 4,978 4,958
Standard Credit Card Master Trust I
7.875%--11/07/1998.................... 6,865 7,008
9.250%--09/07/1999.................... 3,000 3,073
--------
10,081
--------
TOTAL ASSET BACKED SECURITIES
(Cost $62,857)..................................... 62,942
--------
</TABLE>
CORPORATE NOTES & BONDS--0.9%
(Cost $1,500)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
--------- ------
<S> <C> <C>
Arkaig Finance
5.658%--03/19/1999+................... $ 1,500 $ 1,500
--------
MORTGAGE RELATED SECURITIES--28.5%
GOVERNMENT AGENCY PASS-THROUGHS:
Federal Farm Credit Bank Bonds
5.700%--11/03/1998.................... 1,500 1,500
Federal National Mortgage Association
5.820%--08/25/1999.................... 16,000 16,029
5.820%--10/18/1999.................... 5,000 5,006
--------
21,035
--------
Government National Mortgage Association
Pass Thru Certificates
7.500%--12/15/1998.................... 945 946
7.500%--04/15/1999.................... 201 202
7.500%--08/15/1999.................... 405 408
--------
1,556
--------
Government National Mortgage Association
Project Construction Loan
7.500%--04/01/1998.................... 47 48
7.500%--05/01/1998.................... 160 161
7.500%--08/15/1998.................... 184 185
--------
394
--------
TOTAL GOVERNMENT AGENCY PASS-THROUGHS................ 24,485
--------
COLLATERALIZED MORTGAGE OBLIGATIONS
Aames Mortgage Trust
5.745%--08/15/2013+................... 4,879 4,879
Champion Home Equity Loan Trust
6.590%--11/25/2010.................... 5,000 5,006
Federal Home Loan Mortgage
Pass Thru Certificates
5.500%--07/15/2004.................... 4,500 4,497
Federal National Mortgage Association
REMIC Series 1994 Cl. PC
7.000%--05/25/2013 PAC(3)............. 3,465 3,474
GE Cap Mortgage Services
6.530%--12/25/2010.................... 3,916 3,918
--------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS........................................ 21,774
--------
TOTAL MORTGAGE RELATED SECURITIES
(Cost $46,076)..................................... 46,259
--------
</TABLE>
31
<PAGE> 33
HARBOR SHORT DURATION FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
GOVERNMENT OBLIGATIONS--24.4%
(Cost $65,503)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
--------- ------
<S> <C> <C>
U.S. Treasury Notes
6.000%--09/30/1998.................... $13,500 $ 13,559
5.875%--01/31/1999.................... 4,350 4,364
5.750%--09/30/1999.................... 8,000 8,020
5.750%--10/31/2000.................... 8,790 8,801
3.625%--07/15/2002.................... 3,012 3,019
6.250%--08/31/2002.................... 1,860 1,897
--------
39,660
--------
SHORT-TERM INVESTMENTS--9.3%
BANK OBLIGATIONS
Bank of Montreal
5.500%--11/03/1997.................... 7,085 7,085
Banque National de Paris
5.562%--11/03/1997.................... 7,000 7,000
--------
TOTAL BANK OBLIGATIONS............................... 14,085
--------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
--------- ------
<S> <C> <C>
U.S. GOVERNMENT OBLIGATIONS--SHORT-TERM
U.S. Treasury Bills(2)
5.170%--01/08/1998.................... $ 1,000 $ 990
--------
TOTAL SHORT TERM INVESTMENTS
(Cost $15,075)..................................... 15,075
--------
TOTAL INVESTMENTS--101.8%
(Cost $165,011).................................... 165,436
CASH AND OTHER ASSETS
LESS LIABILITIES--(1.8%)........................... (2,960)
--------
TOTAL NET ASSETS--100.0%............................. $162,476
========
</TABLE>
FUTURES CONTRACTS WHICH WERE OPEN AT OCTOBER 31, 1997 ARE AS FOLLOWS:
<TABLE>
<CAPTION>
AGGREGATE UNREALIZED
FACE VALUE OF APPRECIATION/
NUMBER OF CONTRACTS EXPIRATION DATE (DEPRECIATION)
DESCRIPTION CONTRACTS (000S) OF CONTRACTS (000S)
----------- --------- ------------- --------------- --------------
<S> <C> <C> <C> <C>
Euro Dollar (Buy)......................................... 13 E$3,250 December, 1997 $ 1
Euro Dollar (Buy)......................................... 16 E$4,000 June, 1998 11
---
$12
===
</TABLE>
- ------------
(1) Interest only (IO) securities represent the right to receive the monthly
interest payments on an underlying pool of mortgage loans. These are subject
to the risk of accelerated principal paydowns. The principal amount
represents the notional amount on which current interest is calculated.
(2) At October 31, 1997, U.S. Treasury Bills held by the Fund were pledged to
cover margin requirements for open futures contracts and written options on
futures contracts. (See Note 2 to the Financial Statements). The securities
pledged had an aggregate market value of $990.
(3) REMICS are CMOs which can hold mortgages secured by any type of real
property and issue multiple-class securities backed by those mortgages.
+ Variable rate or floating rate security. The stated rate represents the rate
in effect at October 31, 1997.
The accompanying notes are an integral part of the financial statements.
32
<PAGE> 34
HARBOR MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS--OCTOBER 31, 1997
Total Investments (%)
(Excludes net cash of -3.6%)
[BAR GRAPH]
<TABLE>
<S> <C>
Mortgage Related Securities 4.1
Bank Obligations 48.9
Commercial Paper 50.6
</TABLE>
MORTGAGE BACKED SECURITIES--4.1%
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
--------- ------
<S> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $3,000)
Triangle Fund
5.773%--11/15/1998+.................... $3,000 $ 3,000
-------
BANK OBLIGATIONS--48.9%
Abby National Treasury Services PLC Corp.
5.570%--11/28/1997..................... 3,000 3,000
Banque National De Paris
5.562%--11/03/97....................... 2,000 2,000
Barclays Bank Euro CD
5.640%--01/05/1998..................... 3,000 3,000
Bayerische Landesbank Euro CD
5.750%--12/29/1997..................... 3,000 3,000
Den Danske Bank
5.625%--11/03/1997..................... 1,998 1,998
Mellon Bank N.A.
5.800%--12/15/1997..................... 3,000 3,000
Morgan Guaranty Trust Co. NY
5.560%--11/19/1997..................... 3,000 3,000
National Westminster Bank PLC
5.760%--12/31/1997..................... 3,000 3,000
Rabobank Nederland N. V.
5.670%--01/30/1998..................... 3,000 3,000
Royal Bank Canada New York Branch
5.800%--03/04/1998..................... 3,000 2,999
Societe Generale New York
5.870%--11/24/1997..................... 2,000 2,000
Sudwest Deutsche Landesbank
5.780%--12/16/1997..................... 3,000 3,000
Toronto Dominion Bank
5.580%--12/03/1997..................... 3,000 3,000
-------
TOTAL BANK OBLIGATIONS
(Cost $35,997)...................................... 35,997
-------
</TABLE>
COMMERCIAL PAPER--50.6%
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------ ------
<S> <C> <C>
ABN Amro North America
5.480%--12/29/1997..................... $3,000 $ 2,974
Bayer Corp.
5.490%--12/23/1997..................... 3,000 2,976
Daimler Benz N.A.
5.520%--12/11/1997..................... 3,000 2,982
El DuPont De Nemours & Co.
5.530%--12/17/1997..................... 3,000 2,979
General Electric Cap Corp. Disc.
5.580%--01/20/1998..................... 3,000 2,963
Glaxo PLC
5.570%--01/27/1998..................... 2,500 2,466
Hershey Foods Corp.
5.470%--11/10/1997..................... 3,000 2,996
KFW International Finance Inc.
5.650%--11/26/1997..................... 3,000 2,988
Lloyds Bank PLC
5.520%--12/08/1997..................... 3,000 2,983
Mobil Australia Finance Co.
5.670%--11/06/1997..................... 2,000 1,998
National Australia FDG
5.590%--01/21/1998..................... 3,000 2,962
Repsol International Financial
5.470%--11/14/1997..................... 3,000 2,994
Suntrust Banks Inc.
5.560%--01/27/1998..................... 3,000 2,960
-------
TOTAL COMMERCIAL PAPER
(Cost $37,221)...................................... 37,221
-------
TOTAL INVESTMENTS--103.6%
(Cost $76,218)(1)................................... 76,218
CASH AND OTHER ASSETS,
LESS LIABILITIES--(3.6%)............................ (2,678)
-------
TOTAL NET ASSETS--100.0%.............................. $73,540
=======
</TABLE>
- ------------
(1) The aggregate identified cost on a tax basis is the same.
+ Variable rate or floating rate security. The stated rate represents the
rate in effect at October 31, 1997.
The accompanying notes are an integral part of the financial statements.
33
<PAGE> 35
HARBOR FUND
STATEMENT OF ASSETS AND LIABILITIES--OCTOBER 31, 1997
(All amounts in Thousands, except per share amount)
<TABLE>
<CAPTION>
HARBOR HARBOR
HARBOR INTERNATIONAL CAPITAL
GROWTH GROWTH APPRECIATION
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
INVESTMENTS, AT IDENTIFIED COST*............................ $ 85,578 $841,786 $2,230,944
- ---------------------------------------------------------------------------------------------------------
Investments, at value....................................... $ 95,324 $899,015 $2,787,523
Repurchase agreements....................................... 9,196 -- --
Cash........................................................ 1 -- 1
Foreign currency, at value
(cost: $0; $0; $0; $23; $0; $0; $1,587; $14; $0).......... -- -- --
Receivables for:
Investments sold.......................................... -- 92,479 33,033
Capital shares sold....................................... 206 1,549 7,364
Dividends................................................. -- 749 1,344
Interest.................................................. 1 7 20
Open forward currency contracts........................... -- -- --
Swap agreements........................................... -- -- --
Variation margin on futures contracts..................... -- -- --
Deferred organization costs................................. -- -- --
Withholding tax reclaims receivable......................... -- 833 31
Other assets................................................ 20 12 11
- ---------------------------------------------------------------------------------------------------------
TOTAL ASSETS.......................................... 104,748 994,644 2,829,327
LIABILITIES
Payables for:
Investments purchased..................................... -- 73,894 23,618
Capital shares reacquired................................. 15 813 5,620
Dividends to shareholders................................. -- -- --
Written options, at value
(premiums received $0; $0; $0; $0; $0; $0; $376; $0;
$0)..................................................... -- -- --
Open forward currency contracts........................... -- -- --
Variation margin on futures contracts..................... -- -- --
Accrued expenses:
Adviser's fees............................................ 141 607 1,444
Trustees' fees............................................ -- 4 10
Transfer agent's fees..................................... 14 67 112
Other..................................................... 10 309 119
TBA sale commitments at value (proceeds receivable $0; $0;
$0; $0; $0; $0; $29,613; $0; $0)........................ -- -- --
- ---------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES..................................... 180 75,694 30,923
NET ASSETS
NET ASSETS.................................................. $104,568 $918,950 $2,798,404
- ---------------------------------------------------------------------------------------------------------
Net assets consist of:
Paid-in capital........................................... $ 68,635 $825,455 $1,835,524
Undistributed/(overdistributed) net investment income..... -- 7,075 4,876
Accumulated net realized gain/(loss)...................... 16,991 29,207 401,425
Unrealized appreciation/(depreciation) of investments,
swap agreements, written options, foreign currency,
investments sold short and translation of assets and
liabilities in foreign currencies....................... 18,942 57,213 556,579
Unrealized appreciation of futures and forward currency
contracts............................................... -- -- --
- ---------------------------------------------------------------------------------------------------------
$104,568 $918,950 $2,798,404
- ---------------------------------------------------------------------------------------------------------
Shares of beneficial interest............................... 7,361 56,916 82,289
Net asset value, offering and redemption price per share.... $14.20 $16.15 $34.01
</TABLE>
- ------------
* Including repurchase agreements and short term investments
The accompanying notes are an integral part of the financial statements.
34
<PAGE> 36
HARBOR FUND
STATEMENT OF ASSETS AND LIABILITIES--CONTINUED
<TABLE>
<CAPTION>
HARBOR HARBOR HARBOR HARBOR HARBOR HARBOR
INTERNATIONAL II INTERNATIONAL VALUE BOND SHORT DURATION MONEY MARKET
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$139,464 $3,235,692 $154,978 $500,322 $165,011 $76,218
- ----------------------------------------------------------------------------------------
$134,859 $5,066,049 $156,602 $498,414 $165,436 $76,218
-- -- 6,472 4,588 -- --
-- 1 1 -- 14 1
23 -- -- 1,561 14 --
8,401 -- 1,400 49,812 3,836 --
193 19,272 276 826 68 323
188 8,090 216 -- -- --
-- 440 1 3,304 1,172 573
-- -- -- 117 -- --
-- -- -- 210 -- --
-- -- -- 214 -- --
17 -- -- -- -- --
128 6,903 5 -- -- --
16 112 3 17 27 7
- ----------------------------------------------------------------------------------------
143,825 5,100,867 164,976 559,063 170,567 77,122
8,405 -- 3,459 165,480 7,873 3,000
367 4,753 27 179 184 543
-- -- -- -- -- 13
-- -- -- 818 -- --
-- -- -- 134 -- --
-- -- -- -- 1 --
66 3,930 93 141 25 7
-- -- 1 -- -- --
22 199 7 25 2 14
8 1,937 30 17 6 5
-- -- -- 29,675 -- --
- ----------------------------------------------------------------------------------------
8,868 10,819 3,617 196,469 8,091 3,582
$134,957 $5,090,048 $161,359 $362,594 $162,476 $73,540
- ----------------------------------------------------------------------------------------
$132,724 $3,078,170 $119,290 $350,632 $187,347 $73,540
1,069 54,083 288 1,923 903 --
5,765 127,360 33,684 4,012 (26,211) --
(4,601) 1,830,435 8,097 2,489 425 --
-- -- -- 3,538 12 --
- ----------------------------------------------------------------------------------------
$134,957 $5,090,048 $161,359 $362,594 $162,476 $73,540
- ----------------------------------------------------------------------------------------
11,120 142,036 8,880 31,334 18,766 73,540
$12.14 $35.84 $18.17 $11.57 $8.66 $1.00
</TABLE>
35
<PAGE> 37
HARBOR FUND
STATEMENT OF OPERATIONS--YEAR ENDED OCTOBER 31, 1997
(All Amounts in Thousands)
<TABLE>
<CAPTION>
HARBOR
HARBOR INTERNATIONAL
GROWTH GROWTH
- -------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends................................................. $ 207 $15,178
Interest.................................................. 450 2,302
Securities lending income................................. -- 4
Foreign taxes withheld.................................... (4) (1,537)
- -------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME................................... 653 15,947
EXPENSES:
Investment adviser's fees................................. 758 6,241
Shareholder communications................................ 17 111
Custodian fees............................................ 179 1,245
Transfer agent fees....................................... 96 650
Professional fees......................................... 54 95
Trustees' fees and expenses............................... 2 12
Registration fees......................................... 22 132
Amortization of organization costs........................ -- 7
Insurance expense......................................... 4 5
Miscellaneous............................................. 6 18
- -------------------------------------------------------------------------------------
Total expenses......................................... 1,138 8,516
Advisory fee waived....................................... -- --
Other expense reimbursements and reductions............... (4) (45)
- -------------------------------------------------------------------------------------
Total operating expenses............................... 1,134 8,471
Interest expense.......................................... -- --
- -------------------------------------------------------------------------------------
NET INVESTMENT INCOME/(LOSS)................................ (481) 7,476
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENT
TRANSACTIONS:
Net realized gain/(loss) on:
Investments............................................ 19,531 30,055
Foreign currency transactions.......................... -- (5)
Short sales............................................ -- --
Futures contracts...................................... -- --
Written options........................................ -- --
Swap agreements........................................ -- --
Change in net unrealized appreciation/depreciation on:
Investments, written options, swap agreements and short
sales................................................. (2,456) 3,189
Futures contracts...................................... -- --
Forward currency contracts............................. -- --
Translation of assets and liabilities in foreign
currencies............................................ -- (18)
- -------------------------------------------------------------------------------------
Net gain on investment transactions....................... 17,075 33,221
- -------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS...... $16,594 $40,697
- -------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
36
<PAGE> 38
HARBOR FUND
STATEMENT OF OPERATIONS--CONTINUED
<TABLE>
<CAPTION>
HARBOR HARBOR
CAPITAL HARBOR HARBOR HARBOR HARBOR SHORT HARBOR
APPRECIATION INTERNATIONAL II INTERNATIONAL VALUE BOND DURATION MONEY MARKET
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 18,327 $1,839 $103,468 $ 3,719 $ 3 $-- $--
3,400 245 14,724 175 20,883 10,032 3,716
-- -- 5 -- -- -- --
(525) (208) (12,592) (20) -- -- --
- ----------------------------------------------------------------------------------------------------
21,202 1,876 105,605 3,874 20,886 10,032 3,716
13,511 605 41,290 826 2,174 651 199
245 13 413 7 56 2 20
364 156 4,737 146 121 74 46
1,310 98 2,444 74 300 14 162
135 52 282 48 85 145 38
31 1 80 2 7 3 2
197 33 103 30 39 47 27
-- 4 -- -- -- 1 --
9 1 16 4 5 4 3
45 4 102 8 10 7 6
- ----------------------------------------------------------------------------------------------------
15,847 967 49,467 1,145 2,797 948 503
-- (163) (2,350) -- (708) (326) (80)
(72) (7) (62) (3) (9) (25) (12)
- ----------------------------------------------------------------------------------------------------
15,775 797 47,055 1,142 2,080 597 411
-- -- -- -- -- 1,046 --
- ----------------------------------------------------------------------------------------------------
5,427 1,079 58,550 2,732 18,806 8,389 3,305
406,517 5,749 126,878 33,809 3,608 1,406 13
(13) 1 (131) -- 1,219 1,629 --
-- -- -- -- -- (1,086) --
-- -- -- -- 6,278 (478) --
-- -- -- -- 317 (274) --
-- -- -- -- -- 41 --
245,410 (4,814) 588,364 (626) (1,737) (954) --
-- -- -- -- (752) 450 --
-- -- -- -- (348) (174) --
1 4 (172) 1 (174) (13) --
- ----------------------------------------------------------------------------------------------------
651,915 940 714,939 33,184 8,411 547 13
- ----------------------------------------------------------------------------------------------------
$657,342 $2,019 $773,489 $35,916 $27,217 $ 8,936 $ 3,318
- ----------------------------------------------------------------------------------------------------
</TABLE>
37
<PAGE> 39
HARBOR FUND
STATEMENT OF CHANGES IN NET ASSETS
(All amounts in Thousands)
<TABLE>
<CAPTION>
HARBOR HARBOR HARBOR
GROWTH INTERNATIONAL GROWTH CAPITAL APPRECIATION
------------------------- ------------------------- -------------------------
NOVEMBER 1, NOVEMBER 1, NOVEMBER 1, NOVEMBER 1, NOVEMBER 1, NOVEMBER 1,
1996 1995 1996 1996 1996 1995
THROUGH THROUGH THROUGH THROUGH THROUGH THROUGH
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 1996 1997 1996 1997 1996
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income/(loss)............. $ (481) $ (653) $ 7,476 $ 2,845 $ 5,427 $ 1,345
Net realized gain (loss) on investments,
foreign currency transactions,
investments sold short, futures, swap
agreements and written options......... 19,531 29,141 30,050 16,393 406,504 49,265
Net unrealized appreciation
(depreciation) of investments, swap
agreements, written options,
investments sold short, futures,
forward foreign currency contracts and
translation of assets and liabilities
in foreign currencies.................. (2,456) (10,004) 3,171 40,691 245,411 115,877
- -------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS................ 16,594 18,484 40,697 59,929 657,342 166,487
- -------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
Net investment income/(loss)............. -- -- (3,010) (1,243) (1,310) (1,102)
Net realized gain on investments......... (28,481) (15,306) (13,704) -- (53,466) (13,411)
In excess of net investment income....... -- -- -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS...... (28,481) (15,306) (16,714) (1,243) (54,776) (14,513)
- -------------------------------------------------------------------------------------------------------------------------------
Capital share transactions:
Net proceeds from sale of shares......... 25,126 30,154 683,701 363,320 1,068,440 806,799
Net asset value of shares issued in
connection with reinvestment of:
Dividends from net investment income... -- -- 2,695 1,098 1,097 901
Distributions from net realized gain... 26,974 14,703 13,051 -- 47,557 11,286
Cost of shares reacquired................ (49,156) (72,048) (283,449) (66,550) (504,471) (313,496)
- -------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) DERIVED FROM
CAPITAL TRANSACTIONS................... 2,944 (27,191) 415,998 297,868 612,623 505,490
- -------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets.... (8,943) (24,013) 439,981 356,554 1,215,189 657,464
NET ASSETS:
Beginning of period........................ 113,511 137,524 478,969 122,415 1,583,215 925,751
- -------------------------------------------------------------------------------------------------------------------------------
END OF PERIOD*............................. $104,568 $113,511 $918,950 $478,969 $2,798,404 $1,583,215
- ------------------------------------------------------------------------------------------------------------------------------
NUMBER OF CAPITAL SHARES:
Sold....................................... 1,875 1,935 41,977 25,679 36,171 33,867
Reinvested in payment of investment income
dividends................................ -- -- 169 88 41 39
Reinvested in payment of capital gain
distributions............................ 2,215 1,025 818 -- 1,772 506
Reacquired................................. (3,821) (4,610) (17,259) (4,669) (16,869) (13,136)
- -------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in shares
outstanding.............................. 269 (1,650) 25,705 21,098 21,115 21,276
Outstanding:
Beginning of period...................... 7,092 8,742 31,211 10,113 61,174 39,898
- -------------------------------------------------------------------------------------------------------------------------------
End of period............................ 7,361 7,092 56,916 31,211 82,289 61,174
- ------------------------------------------------------------------------------------------------------------------------------
* Includes undistributed (over-distributed)
net investment income of:................. $ 0 $ 0 $ 7,075 $ 2,716 $ 4,876 $ 899
<CAPTION>
HARBOR
INTERNATIONAL II(A)
-------------------------
NOVEMBER 1, JUNE 1,
1996 1996
THROUGH THROUGH
OCTOBER 31, OCTOBER 31,
1997 1996
- -----------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income/(loss)............. $ 1,079 $ 12
Net realized gain (loss) on investments,
foreign currency transactions,
investments sold short, futures, swap
agreements and written options......... 5,750 72
Net unrealized appreciation
(depreciation) of investments, swap
agreements, written options,
investments sold short, futures,
forward foreign currency contracts and
translation of assets and liabilities
in foreign currencies.................. (4,810) 209
- -------------------------------------------- -------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS................ 2,019 293
- -------------------------------------------- -------------------------
Distributions to shareholders:
Net investment income/(loss)............. (31) --
Net realized gain on investments......... (55) --
In excess of net investment income....... -- --
- -------------------------------------------- -------------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS...... (86) --
- -------------------------------------------- -------------------------
Capital share transactions:
Net proceeds from sale of shares......... 143,553 12,877
Net asset value of shares issued in
connection with reinvestment of:
Dividends from net investment income... 30 --
Distributions from net realized gain... 52 --
Cost of shares reacquired................ (23,184) (597)
- -------------------------------------------- -------------------------
NET INCREASE (DECREASE) DERIVED FROM
CAPITAL TRANSACTIONS................... 120,451 12,280
- -------------------------------------------- -------------------------
Net increase (decrease) in net assets.... 122,384 12,573
NET ASSETS:
Beginning of period........................ 12,573 --
- -------------------------------------------- -------------------------
END OF PERIOD*............................. $134,957 $12,573
- -------------------------------------------- -------------------------
NUMBER OF CAPITAL SHARES:
Sold....................................... 11,761 1,259
Reinvested in payment of investment income
dividends................................ 3 --
Reinvested in payment of capital gain
distributions............................ 5 --
Reacquired................................. (1,850) (58)
- -------------------------------------------- -------------------------
Net increase (decrease) in shares
outstanding.............................. 9,919 1,201
Outstanding:
Beginning of period...................... 1,201 --
- -------------------------------------------- -------------------------
End of period............................ 11,120 1,201
- -------------------------------------------- -------------------------
* Includes undistributed (over-distributed)
net investment income of:................. $ 1,069 $ 17
</TABLE>
- ------------
(a) International II commenced operations on June 1, 1996.
The accompanying notes are an integral part of the financial statements.
38
<PAGE> 40
HARBOR FUND
STATEMENT OF CHANGES IN NET ASSETS--CONTINUED
<TABLE>
<CAPTION>
HARBOR HARBOR HARBOR HARBOR
INTERNATIONAL VALUE BOND SHORT DURATION
------------------------- ------------------------- ------------------------- -------------------------
NOVEMBER 1, NOVEMBER 1, NOVEMBER 1, NOVEMBER 1, NOVEMBER 1, NOVEMBER 1, NOVEMBER 1, NOVEMBER 1,
1996 1995 1996 1995 1996 1995 1996 1995
THROUGH THROUGH THROUGH THROUGH THROUGH THROUGH THROUGH THROUGH
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1997 1996 1997 1996 1997 1996 1997 1996
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 58,550 $ 52,833 $ 2,732 $ 2,720 $ 18,806 $ 15,752 $ 8,389 $ 9,236
126,747 103,423 33,809 14,008 11,422 (2,713) 1,238 (764)
588,192 448,771 (625) 3,771 (3,011) 5,637 (691) 1,252
- ------------------------------------------------------------------------------------------------------------------
773,489 605,027 35,916 20,499 27,217 18,676 8,936 9,724
- ------------------------------------------------------------------------------------------------------------------
(54,226) (49,438) (2,696) (2,656) (18,878) (16,286) (11,444) (9,846)
(103,297) (15,558) (13,934) (7,407) -- -- -- --
-- -- -- -- -- -- -- (600)
- ------------------------------------------------------------------------------------------------------------------
(157,523) (64,996) (16,630) (10,063) (18,878) (16,286) (11,444) (10,446)
- ------------------------------------------------------------------------------------------------------------------
809,204 593,874 33,555 24,176 130,443 124,191 233,482 462,578
46,590 42,301 2,560 2,514 15,418 13,367 11,420 10,425
93,381 13,889 13,178 6,973 -- -- -- --
(505,220) (427,125) (19,329) (16,504) (71,455) (83,097) (262,216) (394,990)
- ------------------------------------------------------------------------------------------------------------------
443,955 222,939 29,964 17,159 74,406 54,461 (17,314) 78,013
- ------------------------------------------------------------------------------------------------------------------
1,059,921 762,970 49,250 27,595 82,745 56,851 (19,822) 77,291
4,030,127 3,267,157 112,109 84,514 279,849 222,998 182,298 105,007
- ------------------------------------------------------------------------------------------------------------------
$5,090,048 $4,030,127 $161,359 $112,109 $362,594 $279,849 $ 162,476 $ 182,298
- ------------------------------------------------------------------------------------------------------------------
22,725 20,382 2,007 1,611 11,476 11,140 26,849 52,668
1,479 1,528 156 166 1,366 1,213 1,323 1,192
2,963 502 886 492 -- -- -- --
(14,257) (14,625) (1,158) (1,080) (6,307) (7,447) (30,149) (45,019)
- ------------------------------------------------------------------------------------------------------------------
12,910 7,787 1,891 1,189 6,535 4,906 (1,977) 8,841
129,126 121,339 6,989 5,800 24,799 19,893 20,743 11,902
- ------------------------------------------------------------------------------------------------------------------
142,036 129,126 8,880 6,989 31,334 24,799 18,766 20,743
- ------------------------------------------------------------------------------------------------------------------
$ 54,083 $ 50,361 $ 288 $ 199 $ 1,923 $ 1,684 $ 903 $ 636
<CAPTION>
HARBOR
MONEY MARKET
-------------------------
NOVEMBER 1, NOVEMBER 1,
1996 1995
THROUGH THROUGH
OCTOBER 31, OCTOBER 31,
1997 1996
-------------------------
<S> <C>
$ 3,305 $ 3,029
13 80
-- --
- ----------------------------
3,318 3,109
- ----------------------------
(3,305) (3,029)
(13) (80)
-- --
- ----------------------------
(3,318) (3,109)
- ----------------------------
138,417 86,059
3,162 2,997
-- --
(134,030) (87,557)
- ----------------------------
7,549 1,499
- ----------------------------
7,549 1,499
65,991 64,492
- ----------------------------
$ 73,540 $ 65,991
- ----------------------------
138,417 86,059
3,162 2,997
-- --
(134,030) (87,557)
- ----------------------------
7,549 1,499
65,991 64,492
- ----------------------------
73,540 65,991
- ----------------------------
$ 0 $ 0
</TABLE>
39
<PAGE> 41
HARBOR FUND FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING FOR THE PERIODS PRESENTED
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
-----------------------------------------------
NET REALIZED AND
UNREALIZED GAINS/(LOSSES)
NET ASSET VALUE ON INVESTMENTS, FUTURES, TOTAL FROM
BEGINNING OF NET INVESTMENT OPTIONS, SWAP AGREEMENTS INVESTMENT
YEAR/PERIOD ENDED PERIOD INCOME/LOSS AND FOREIGN CURRENCY CONTRACTS OPERATIONS
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HARBOR GROWTH FUND(1)
October 31, 1997.... $16.00 $-- $ 2.30 $ 2.30
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
- ---------------------------------------------------------------------------------------------------
HARBOR INTERNATIONAL GROWTH FUND
October 31, 1997.... $15.35 $ .12 $ 1.12 $ 1.24
October 31, 1996.... 12.10 .14(a) 3.22 3.36
October 31, 1995.... 11.53 .11* .54 .65
October 31, 1994
(2)............... 10.00 .07* 1.47 1.54
- ---------------------------------------------------------------------------------------------------
HARBOR CAPITAL APPRECIATION FUND(3)
October 31, 1997.... $25.88 $ .06 $ 8.95 $ 9.01
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
- ---------------------------------------------------------------------------------------------------
HARBOR INTERNATIONAL FUND II
October 31, 1997.... $10.47 $ .10* $ 1.63 $ 1.73
October 31, 1996
(4)............... 10.00 .01* .46 .47
- ---------------------------------------------------------------------------------------------------
HARBOR INTERNATIONAL FUND(5)
October 31, 1997.... $31.21 $ .41* $ 5.44 $ 5.85
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
- ---------------------------------------------------------------------------------------------------
HARBOR VALUE FUND(6)
October 31, 1997.... $16.04 $ .34 $ 4.13 $ 4.47
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
- ---------------------------------------------------------------------------------------------------
<CAPTION>
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, 1997.... $ -- $(4.10) $--
October 31, 1996.... -- (1.85) --
October 31, 1995.... -- (.32) --
October 31, 1994.... -- (.02) --
October 31, 1993.... (.01) (1.36) --
- --------------------------------------------------------------------------
HARBOR INTERNATIONAL GROWTH FUND
October 31, 1997.... $(.08) $ (.36) $--
October 31, 1996.... (.11) -- --
October 31, 1995.... (.08) -- --
October 31, 1994
(2)............... (.01) -- --
- --------------------------------------------------------------------------
HARBOR CAPITAL APPRECIATION FUND(S)
October 31, 1997.... $(.02) $ (.86) $--
October 31, 1996.... (.03) (.31) --
October 31, 1995.... (.04) (.17) --
October 31, 1994.... (.03) (1.13) --
October 31, 1993.... (.02) (2.04) --
- --------------------------------------------------------------------------
HARBOR INTERNATIONAL FUND II
October 31, 1997.... $(.02) $ (.04) $--
October 31, 1996
(4)............... .00 .00
- --------------------------------------------------------------------------
HARBOR INTERNATIONAL FUND(S)
October 31, 1997.... $(.42) $ (.80) $--
October 31, 1996.... (.41) (.13) --
October 31, 1995.... (.24) (.94) --
October 31, 1994.... (.22) -- --
October 31, 1993.... (.22) (.18) --
- --------------------------------------------------------------------------
HARBOR VALUE FUND(6)
October 31, 1997.... $(.34) $(2.00) $--
October 31, 1996.... (.40) (1.27) --
October 31, 1995.... (.39) (1.07) --
October 31, 1994.... (.34) (1.10) --
October 31, 1993.... (.35) (.15) --
- --------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
40
<PAGE> 42
HARBOR FUND FINANCIAL HIGHLIGHTS--CONTINUED
SELECTED DATA FOR A SHARE OUTSTANDING FOR THE PERIODS PRESENTED
<TABLE>
<CAPTION>
TAX RATIO OF ADVISER OR RATIO OF
RETURN NET ASSET NET ASSETS OPERATING EXPENSES SUBADVISER FEES INTEREST EXPENSE
OF TOTAL VALUE END TOTAL END OF PERIOD TO AVERAGE NOT IMPOSED TO AVERAGE
CAPITAL DISTRIBUTIONS OF PERIOD RETURN ($ THOUSANDS) NET ASSETS (%) (PER SHARE) NET ASSETS (%)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$-- $(4.10) $14.20 18.64% $ 104,568 1.12% -- --%
-- (1.85) 16.00 14.84 113,511 .92 -- --
-- (.32) 15.73 25.93 137,524 .93 -- --
-- (.02) 12.83 (8.29) 141,330 .93 -- --
-- (1.37) 14.01 26.17 208,320 .90 -- --
- -----------------------------------------------------------------------------------------------------------------------
$-- $ (.44) $16.15 8.13% $ 918,950 1.02% $-- --%
-- (.11) 15.35 27.86 478,969 1.10 -- --
-- (.08) 12.10 5.83 122,415 1.21* .01 --
-- (.01) 11.53 15.36 74,734 1.32* .02 --
- -----------------------------------------------------------------------------------------------------------------------
$-- $ (.88) $34.01 35.73% $2,798,404 .70% $-- --%
-- (.34) 25.88 13.22 1,583,215 .75 -- --
-- (.21) 23.20 35.73 925,751 .75 -- --
-- (1.16) 17.31 7.25 225,984 .81 -- --
-- (2.06) 17.30 20.16 145,331 .86 -- --
- -----------------------------------------------------------------------------------------------------------------------
$-- $ (.06) $12.14 16.64% $ 134,957 .98%* $.02 --%
-- 0.00 10.47 4.70++ 12,573 1.44*+ .01 --
- -----------------------------------------------------------------------------------------------------------------------
$-- $(1.22) $35.84 19.26% $5,090,048 .97%* $.02 --%
-- (.54) 31.21 18.17 4,030,127 .99* .01 --
-- (1.18) 26.93 5.06 3,267,157 1.04* .01 --
-- (.22) 26.87 18.57 3,129,634 1.10* .01 --
-- (.40) 22.85 39.51 2,275,053 1.20* -- +++ --
- -----------------------------------------------------------------------------------------------------------------------
$-- $(2.34) $18.17 31.08% $ 161,359 .83% $-- --%
-- (1.67) 16.04 23.08 112,109 .83 -- --
-- (1.46) 14.57 21.02 84,514 .90 -- --
-- (1.44) 13.50 4.80 59,390 1.04 -- --
-- (.50) 14.31 11.99 59,884 .88 -- --
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
RATIO OF NET
INVESTMENT INCOME AVERAGE
TO AVERAGE PORTFOLIO COMMISSION
NET ASSETS (%) TURNOVER (%) RATE PAID
- --------------------------------------------------
<S> <C> <C>
(.47)% 147.37% $0.0120
(.50) 87.97 0.0561
(.30) 87.94 --
-- 115.89 --
.11 170.85 --
- ------------------------------------------------
.91% 76.19% $0.0190
.99 55.17 0.0322
1.31* 74.86 --
.87* 41.80 --
- ------------------------------------------------
.23% 72.80% $0.0605
.11 73.69 0.0629
.23 51.65 --
.24 72.89 --
.24 93.24 --
- ------------------------------------------------
1.33%* 57.61% $0.0005
.40*+ 2.61+ 0.0003
- ------------------------------------------------
1.20%* 6.39% $0.0248
1.42* 9.73 0.0119
1.53* 14.01 --
1.09* 28.70 --
1.28* 15.70 --
- ------------------------------------------------
1.98% 145.85% $0.0494
2.65 132.39 0.0448
3.00 135.93 --
2.66 150.94 --
2.48 50.20 --
- ------------------------------------------------
</TABLE>
41
<PAGE> 43
HARBOR FUND FINANCIAL HIGHLIGHTS--CONTINUED
SELECTED DATA FOR A SHARE OUTSTANDING FOR THE PERIODS PRESENTED
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
------------------------------------------
NET REALIZED AND
UNREALIZED GAINS (LOSSES)
ON INVESTMENTS, FUTURES,
NET ASSET VALUE OPTIONS, SWAP AGREEMENTS TOTAL FROM
BEGINNING OF NET INVESTMENT AND FOREIGN CURRENCY INVESTMENT
YEAR/PERIOD ENDED PERIOD INCOME CONTRACTS OPERATIONS
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HARBOR BOND FUND
October 31, 1997................ $11.28 $.68* $ .30 $ .98
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
- ----------------------------------------------------------------------------------------------------------
HARBOR SHORT DURATION FUND
October 31, 1997................ $ 8.79 $.45*(a) $ .01 $ .46
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
- ----------------------------------------------------------------------------------------------------------
HARBOR MONEY MARKET FUND
October 31, 1997................ $ 1.00 $.02* $ -- $ .02
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
- ----------------------------------------------------------------------------------------------------------
<CAPTION>
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 BOND FUND
October 31, 1997................ $ (.69) $-- $--
October 31, 1996................ (.74) -- --
October 31, 1995................ (.67) -- --
October 31, 1994................ (.67) (.50) --
October 31, 1993................ (.68) (.25) --
- --------------------------------------------------------------------------------------
HARBOR SHORT DURATION FUND
October 31, 1997................ $ (.59) $-- $--
October 31, 1996................ (.60) -- (.04)
October 31, 1995................ (.52) -- (.01)
October 31, 1994................ (1.08) -- --
October 31, 1993................ (.82) (.09) --
- --------------------------------------------------------------------------------------
HARBOR MONEY MARKET FUND
October 31, 1997................ $ (.02) $-- $ --
October 31, 1996................ (.05) -- --
October 31, 1995................ (.06) -- --
October 31, 1994................ (.03) -- --
October 31, 1993................ (.03) -- --
- --------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
42
<PAGE> 44
HARBOR FUND FINANCIAL HIGHLIGHTS--CONTINUED
SELECTED DATA FOR A SHARE OUTSTANDING FOR THE PERIODS PRESENTED
<TABLE>
<CAPTION>
TAX RATIO OF ADVISER OR RATIO OF
RETURN NET ASSET NET ASSETS OPERATING EXPENSES SUBADVISER FEES INTEREST EXPENSE
OF TOTAL VALUE END TOTAL END OF PERIOD TO AVERAGE NOT IMPOSED TO AVERAGE
CAPITAL DISTRIBUTIONS OF PERIOD RETURN ($ THOUSANDS) NET ASSETS (%) (PER SHARE) NET ASSETS (%)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ -- $ (.69) $11.57 8.96% $362,594 .67%* $ .03 -- %
-- (.74) 11.28 7.56 279,849 .70* .03 --
-- (.67) 11.21 14.56 222,998 .70* .03 --
-- (1.17) 10.41 (3.14) 162,221 .77* .03 --
-- (.93) 11.92 13.98 164,382 .72* .02 --
- --------------------------------------------------------------------------------------------------------------------------
$ -- $ (.59) $ 8.66 5.48% $162,476 .36%* $ .02 .64%
-- (.64) 8.79 7.24 182,292 .33* .02 1.26
-- (.53) 8.82 6.82 105,007 .38* .02 1.46
(.05) (1.13) 8.77 2.53 115,891 .38* -- +++ 1.26
-- (.91) 9.68 5.18 135,189 .43* .02 .69
- --------------------------------------------------------------------------------------------------------------------------
$ -- $ (.02) $ 1.00 5.11% $ 73,540 .62%* $ -- +++ -- %
-- (.05) 1.00 5.08 65,991 .64* -- +++ --
-- (.06) 1.00 5.66 64,492 .61* -- +++ --
-- (.03) 1.00 3.53 60,024 .67* -- +++ --
-- (.03) 1.00 2.68 46,879 .71* -- +++ --
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
RATIO OF NET
INVESTMENT INCOME AVERAGE
TO AVERAGE PORTFOLIO COMMISSION
NET ASSETS (%) TURNOVER (%) RATE PAID
- -----------------------------------------------
<S> <C> <C>
6.04%* 252.37% $ --
6.40* 192.64 --
7.11* 88.69 --
6.29* 150.99 --
6.19* 119.92 --
- -----------------------------------------------
5.14%* 1,518.68% $ --
6.84* 1,277.82 --
6.19* 725.96 --
4.61* 895.76 --
4.19* 1,212.20 --
- -----------------------------------------------
4.97%* N/A $ --
4.85* N/A --
5.42* N/A --
3.38* N/A --
2.58* N/A --
- -----------------------------------------------
</TABLE>
(1) Effective May 2, 1997, Harbor Growth Fund appointed Emerging Growth
Advisors, Inc. as its Subadviser.
(2) For the period November 1, 1993 (commencement of operations) through October
31, 1994.
(3) Effective May 1, 1990, Harbor Capital Appreciation Fund appointed Jennison
Associates Capital Corp. as its Subadviser.
(4) For the period June 1, 1996 (commencement of operations) through October 31,
1996.
(5) Effective April 1, 1993, Harbor International Fund appointed Northern Cross
Investments Limited as its Subadviser.
(6) Harbor Value Fund appointed Richards & Tierney, Inc. and DePrince, Race, &
Zollo, Inc. as its Subadvisers effective November 1, 1993 and April 20,
1995, respectively.
+ Annualized
++ Not Annualized
+++ Amount is less than $.01 per share.
* Reflects the Adviser's or Subadviser's agreement not to impose all or a
portion of its advisory fees.
** Includes both short-term and long-term capital gains.
(a) Based on monthly average of shares outstanding during the fiscal year.
43
<PAGE> 45
HARBOR SHORT DURATION FUND
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED
OCTOBER 31, 1997
--------------------
AMOUNTS IN
THOUSANDS
<S> <C>
Cash flows provided by operating activities:
Investment income received (excluding net amortization of
$575)................................................... $ 11,553
Payment of operating expenses............................. (683)
Interest paid............................................. (1,660)
Purchase of investments................................... (1,764,030)
Proceeds from sales and maturities of investments......... 1,777,069
Net purchase of short-term investments.................... 37,243
Cash used for futures contracts........................... (987)
Cash provided by forward currency contracts............... 1,803
Cash provided by other assets............................. 9
-----------
CASH PROVIDED BY OPERATING ACTIVITIES................... 60,317
-----------
Cash flows used for financing activities:
Capital stock proceeds.................................... 233,420
Payment to repurchase capital stock....................... (262,098)
Cash dividends paid....................................... (24)
Net proceeds from reverse repurchase agreements........... (56,462)
-----------
NET CASH USED BY FINANCING ACTIVITIES................... (85,164)
-----------
Net decrease in cash........................................ (24,847)
Cash at beginning of period................................. 0
Foreign currency at beginning of period, at cost............ 24,875
-----------
Total cash at beginning of period........................... 24,875
Cash at end of period....................................... 14
Foreign currency at end of period, at cost.................. 14
-----------
Total cash at end of period............................... $ 28
===========
RECONCILIATION OF NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS TO NET CASH PROVIDED BY OPERATING ACTIVITIES:
Net increase in net assets resulting from operations........ $ 8,936
-----------
Decrease in investments................................... 87,031
Decrease in securities sold short and TBA sales........... (88,181)
Change in unrealized depreciation -- net.................. 967
Decrease in receivables for securities sold............... 125,657
Decrease in interest receivable........................... 2,096
Decrease in payables for futures.......................... (59)
Decrease in receivables for forward currency contracts.... 174
Decrease in other assets.................................. 9
Decrease in payable for securities purchased.............. (75,613)
Decrease in accrued expense and other liabilities......... (700)
-----------
Total adjustments....................................... 51,381
-----------
Cash provided by operating activities....................... $ 60,317
===========
</TABLE>
During the period ended October 31, 1997 cash payments of interest expense
on reverse repurchase agreements and short sales were $1,046.
The accompanying notes are an integral part of the financial statements
44
<PAGE> 46
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--OCTOBER 31, 1997
($ in Thousands)
NOTE 1--ORGANIZATIONAL MATTERS
Harbor Fund (the "Trust") is registered under the Investment Company Act of
1940, as amended, as an open-end management investment company, consisting of a
series of nine diversified investment portfolios (the "Funds"), each of which is
represented by a separate series of shares of beneficial interest and having an
unlimited number of shares authorized. As of October 31, 1997, the Trust
consisted of the following funds: Harbor Growth Fund, Harbor International
Growth Fund, Harbor Capital Appreciation Fund, Harbor International Fund II,
Harbor International Fund, Harbor Value Fund, Harbor Bond Fund, Harbor Short
Duration Fund and Harbor Money Market Fund.
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Trust in the preparation of its financial statements. The preparation of
financial statements in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts and disclosures in the financial statements. Actual results could differ
from those estimates. The policies are in conformity with generally accepted
accounting principles for investment companies.
SECURITY VALUATION
Equity securities are valued at the last sale price on an exchange or the
National Association of Securities Dealers Automated Quotation ("NASDAQ") system
or, in the case of unlisted securities or listed securities for which there were
no sales on the valuation day, the mean between the closing bid and asked price.
Securities listed or traded on foreign exchanges are valued at the last sale
price on that exchange on the valuation day, or if no sale occurs, at the
official bid price (both the last sale price and official bid price are
determined as of the close of the London Stock Exchange).
Except for Harbor Money Market Fund, debt securities, other than short-term
securities with a remaining maturity of less than sixty days, are valued at
prices furnished by a pricing service or as otherwise described below, selected
by the Adviser, which determines valuation for normal institutional-size trading
units of such securities using market information, transactions for comparable
securities and various relationships between securities which are generally
recognized by institutional traders. Short-term securities with a remaining
maturity of less than sixty days are stated at the amortized cost which
approximates value. Open futures contracts are valued based on the last sale
price on the exchange on which such futures are principally traded.
Securities for which there are no such prices or for which prices are
deemed by the Adviser or Subadviser not to be representative of market values,
are valued at their fair value as determined in good faith under consistently
applied procedures established by and under the supervision of the Board of
Trustees. The actual calculation of fair market value may be done by others
including the Adviser and Subadviser.
Securities of the Harbor Money Market Fund are valued utilizing the
amortized cost method as set forth in Rule 2a-7 under the Investment Company Act
of 1940, as amended and the Fund's Rule 2a-7 procedures.
FUTURES CONTRACTS
A futures contract is an agreement between two parties to buy and sell a
security at a set price on a future date. Upon entering into such a contract, a
Fund is required to pledge to the broker an amount of cash, U.S. Government
securities or other liquid securities equal to the minimum "initial margin"
requirements of the exchange. Pursuant to the contract, the fund agrees to
receive from or pay to the broker an amount of cash
45
<PAGE> 47
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
($ in Thousands)
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
equal to the daily fluctuation in value of the contract. Such receipts or
payments are known as "variation margin," and are recorded by the Fund as
unrealized gains or losses. When the contract is closed or expired, the Fund
records a realized gain or loss equal to the difference between the value of the
contract at the time it was opened and the value at the time it was closed.
Consistent with its investment policies, each Fund (excluding the Money
Market Fund) may use futures contracts to manage its exposure to the stock and
bond markets and to fluctuations in currency values. Future contracts tend to
increase or decrease the Fund's exposure to the underlying instrument or hedge
other fund investments. Losses may arise from changes in the value of the
underlying instruments, if there is an illiquid secondary market for the
contracts or if the counterparties do not perform under the contracts' terms.
The maximum potential loss on a long futures contract is the US dollar value of
the notional amount at the time the contract is opened. The potential loss on a
short futures contract is unlimited. See Note 3 for open futures contracts held
as of October 31, 1997.
OPTIONS
Consistent with its investment policies, each Fund (excluding the Money
Market Fund) may use options contracts to manage its exposure to the stock and
bond markets and to fluctuations in interest rates and currency values. Options
contracts tend to increase or decrease the Fund's exposure to the underlying
instrument, or hedge other fund investments.
When a Fund purchases an option, the premium paid by the Fund is included
in the Fund's Statement of Assets and Liabilities as an investment and
subsequently "marked-to-market" to reflect the option's current market value.
Purchased options are valued at the last sale price on the market on which it is
principally traded. If the purchased option expires, the Fund realizes a loss in
the amount of the premium. If the Fund enters into a closing sale transaction,
it realizes a gain or loss, depending on whether the proceeds from the sale are
greater or less than the cost of the option. If the Fund exercises a call
option, the cost of the securities acquired by exercising the call is increased
by the premium paid to buy the call. If the Fund exercises a put option, it
realizes a gain or loss from the sale of the underlying security and the
proceeds from such sale are decreased by the premium originally paid. The risk
associated with purchasing options is limited to the premium originally paid.
Harbor Short Duration Fund enters into purchased options on interest rate
swaps ("swaptions"). A purchased swaption allows the Fund, as purchaser, and
obligates the writer upon exercise, to enter into an interest rate swap
agreement, in accordance with conditions outlined in the swaption agreement
between the Fund and the counterparty to the agreement. The accounting treatment
relating to purchased swaptions is substantially the same as the policies
described above, except that swaptions are valued by the counterparty to the
swaption agreement.
The risk associated with entering into purchased swaptions is limited to
the value of the swaption. Additionally, swaption agreements involve, to varying
degrees, elements of credit risk, market risk, and interest rate risk. Such
risks involve the possibility that there is not a liquid market for these
agreements, that the counterparty to the agreements may default on its
obligation to perform and that there may be adverse changes in market conditions
or interest rates.
When a Fund writes an option, the premium received by the Fund is presented
in the Fund's Statement of Assets and Liabilities as an asset and an equivalent
liability. The amount of the liability is subsequently "marked-to-market" to
reflect the current market value of the option written. Written options are
valued at the
46
<PAGE> 48
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
($ in Thousands)
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
last sale price or, in the absence of a sale, the last offering price on the
market on which it is principally traded. If an option expires on its stipulated
expiration date, or if the Fund enters into a closing purchase transaction, the
Fund realizes a gain (or loss if the cost of a closing purchase transaction
exceeds the premium received when the option was written) without regard to any
unrealized gain or loss on the underlying security, and the liability related to
such option is extinguished. If a written call option is exercised, the Fund
realizes a gain or loss from the sale of the underlying security and the
proceeds of the sale are increased by the premium originally received. If a
written put option is exercised, the amount of the premium originally received
reduces the cost of the security which the Fund purchases upon exercise of the
option.
The risk in writing a call is that the Fund relinquishes the opportunity to
profit if the market price of the underlying security increases and the option
is exercised. In writing a put option, the Fund assumes the risk of incurring a
loss if the market price of the underlying security decreases and the option is
exercised. In addition, there is a risk the Fund may not be able to enter into a
closing transaction because of an illiquid secondary market, or if the
counterparties do not perform under the contracts' terms. See Note 3 for all
outstanding written options as of October 31, 1997.
SWAP AGREEMENTS
To the extent permitted under their respective investment policies, Harbor
Bond Fund and Harbor Short Duration Fund may invest in swap agreements which
involve the exchange of cash payments based on the specified terms and
conditions of such agreements. A swap is an agreement to exchange the return
generated by one instrument for the return generated by another instrument. The
value of each swap is determined by the counterparty to the swap agreement using
a methodology which discounts the expected future cash receipts or disbursements
related to the swap. The Fund may also enter into interest rate swap agreements
which involve the exchange by the Fund with another party of their respective
commitments to pay or receive interest, e.g., an exchange of floating rate
payments for fixed rate payments with respect to a notional amount of principal.
Interest rate swaps are marked to market daily. Unrealized gains or losses are
reported as an asset or a liability in the statement of Assets and Liabilities.
The cash paid or received on a swap is recognized as a realized loss or gain
when such a payment is paid or received.
Entering into swap agreements involves, to varying degrees, elements of
credit risk, market risk, and interest rate risk in excess of the amount
recognized in the Statement of Assets and Liabilities. Such risks involve the
possibility that there is not a liquid market for these agreements, that the
counterparty to the agreements may default on its obligation to perform and that
there may be unfavorable changes in market conditions or interest rates.
The fee from swap agreements of $68 for Harbor Short Duration is included
in interest income on the Statement of Operations.
TBA PURCHASE COMMITMENTS
Harbor Bond Fund and Harbor Short Duration Fund enter into "TBA" (to be
announced) purchase commitments to purchase securities for a fixed unit price at
a future date beyond customary settlement time. Although the unit price has been
established, the principal value has not been finalized. However, the amount of
the commitment will not fluctuate more that 1.0% from the principal amount. Each
Fund holds, and maintains until the settlement date, cash or liquid securities
in an amount sufficient to meet the purchase price. TBA purchase commitments may
be considered securities in themselves, and involve a risk of loss if the value
of the security to be purchased declines prior to the settlement date, which
risk is in addition to the risk of decline
47
<PAGE> 49
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
($ in Thousands)
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
in the value of the Fund's other assets. Risks may also arise upon entering into
these contracts from the potential inability of counterparties to meet the terms
of their contracts. Unsettled TBA purchase commitments are valued at the current
market value of the underlying securities, generally according to the procedures
described under "Security Valuation" above.
Although the Funds will generally enter into TBA purchase commitments with
the intention of acquiring securities for its portfolio, the Funds may dispose
of a commitment prior to settlement if the Fund's Subadviser deems it
appropriate to do so.
TBA SALE COMMITMENTS
Harbor Bond Fund and Harbor Short Duration Fund enter into "TBA" sale
commitments to hedge portfolio positions or to sell mortgage-backed securities
owned under delayed delivery arrangements. Proceeds of TBA sale commitments are
not received until the contractual settlement date.
Unsettled TBA sale commitments are valued at the current market value of
the underlying securities, generally according to the procedures described under
"Security Valuation" above. The contract is "marked-to-market" daily and the
change in market value is recorded by each Fund as an unrealized gain and loss.
If the TBA sale commitment is closed through the acquisition of an offsetting
purchase commitment, the Fund realizes a gain or loss on the commitment without
regard to any unrealized gain or loss on the underlying security. If the Fund
delivers securities under the commitment, the Fund realizes a gain or loss from
the sale of the securities based upon the unit price established at the date the
commitment was entered into.
FORWARD CURRENCY CONTRACTS
Consistent with its investment policies, each Fund (excluding the Money
Market Fund) may enter into forward foreign currency contracts to facilitate
transactions in foreign securities or as a hedge against either specific
transactions or portfolio positions. A forward currency contract is an agreement
between two parties to buy and sell currencies at a set price on a future date.
The U.S. dollar value of the contracts is determined using forward currency
exchange rates supplied by a pricing service. The contract is "marked-to-market"
daily and the change in market value is recorded as an unrealized gain or loss.
When the contract is closed, the Fund records a realized gain or loss equal to
the difference between the value on the open and close date. Losses may arise
from changes in the value of the foreign currency or if the counterparties do
not perform under the contracts' terms. The maximum potential loss from such
contracts is the aggregate face value in U.S. dollars at the time the contract
was opened; however, management of the Fund believes the likelihood of such loss
is remote.
FOREIGN CURRENCY TRANSLATIONS
The accounting records of the Funds are maintained in U.S. dollars.
Investment securities and other assets and liabilities denominated in a foreign
currency are translated into U.S. dollars based on the current exchange rates at
period end. Purchases and sales of securities are translated into U.S. dollars
at the current exchange rate on the respective dates of the transaction. Income
and withholding taxes are translated at the prevailing exchange rate when
accrued or incurred.
Reported net realized gains and losses on foreign currency transactions
represent net gains and losses from sales and maturities of forward currency
contracts, disposition of foreign currencies, currency gains and losses realized
between the trade and settlement dates on securities transactions, and the
difference between
48
<PAGE> 50
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
($ in Thousands)
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
the amount of net investment income accrued and the U.S. dollar amount actually
received. The effects of changes in foreign currency exchange rates on
investments in securities are not isolated in the Statement of Operations from
the effects of changes in market prices of these securities. Such fluctuations
are included with the net realized and unrealized gain or loss on investments.
REPURCHASE AGREEMENTS
Each Fund may enter into repurchase agreements with certain banks and
broker dealers whereby the Fund acquires a security for cash and obtains a
simultaneous commitment from the seller to repurchase the security at an agreed
upon price and date. The Trust's custodian takes possession through the federal
book-entry system of securities collateralizing repurchase agreements. The value
of the underlying assets at the time of purchase is required to be at least
equal to the repurchase price to protect the Fund in the event of default by the
seller.
SECURITIES TRANSACTIONS
Securities transactions are accounted for on the trade date (the date the
order to buy or sell is executed). Realized gains or losses on security
transactions are determined on the basis of identified cost for both federal
income tax and financial reporting purposes.
STATEMENT OF CASH FLOWS
Information on financial transactions which have settled through the
receipt and disbursement of cash is presented in the Statement of Cash Flows for
Harbor Short Duration Fund. The cash amounts shown in the Statement of Cash
Flows is the amount reported as cash and foreign currency in Harbor Short
Duration Fund's Statement of Assets and Liabilities and represent cash on hand
in its custodian and sub-custodian bank accounts and does not include any
short-term investments at October 31, 1997.
INVESTMENT INCOME
Dividends declared are accrued on the ex-dividend date. For Harbor
International Growth Fund, Harbor International Fund II and Harbor International
Fund, certain dividends are recorded after the ex-dividend date, but as soon as
the Fund is notified of such dividends. Interest income is accrued daily as
earned. Discounts and premiums on fixed income securities purchased are
amortized over the life of the respective securities using the straight-line
method. Discounts and premiums on high-yield securities are amortized using the
effective yield method for the Harbor Bond Fund and Harbor Short Duration Fund.
DISTRIBUTION TO SHAREHOLDERS
Distributions are recorded on the ex-dividend date.
EXPENSES
Expenses incurred by the Trust with respect to any two or more Funds are
allocated in proportion to the net assets of each Fund, except where allocations
of direct expenses to each Fund can be otherwise fairly made.
49
<PAGE> 51
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
($ in Thousands)
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
DEFERRED ORGANIZATION COSTS
Certain costs incurred by Harbor International Growth Fund and Harbor
International Fund II in connection with their organization and their
registration with the Securities and Exchange Commission and with various states
aggregated approximately $33 and $21, respectively. These costs are being
amortized on a straight-line basis over a five-year period from the commencement
of operations of the Fund.
FEDERAL TAXES
Each Fund is treated as a separate entity for federal tax purposes. Each
Fund's policy is to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute to its
shareholders all of its taxable income within the prescribed time. It is also
the intention of each Fund to distribute an amount sufficient to avoid
imposition of any excise tax under Section 4982 of the Internal Revenue Code.
Therefore, no provision has been made for federal taxes on income, capital gains
or unrealized appreciation of securities held or excise tax on income and
capital gains. During 1997, the Harbor Growth Fund reclassified $2,549 of
non-taxable security gains realized when various portfolio securities were
distributed to a redeeming shareholder as an increase to paid-in-capital in the
Statement of Assets and Liabilities.
NOTE 3--INVESTMENT PORTFOLIO TRANSACTIONS
Purchases and sales of investments, other than short-term securities, for
each Fund for the year ended October 31, 1997 were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
----------------------- -----------------------
U.S. U.S.
FUND GOVERNMENT OTHER GOVERNMENT OTHER
---- ---------- ----- ---------- -----
<S> <C> <C> <C> <C>
Harbor Growth...................................... $ -- $ 139,164 $ -- $ 156,941*
Harbor International Growth........................ -- 1,055,603 -- 708,113
Harbor Capital Appreciation........................ 9,101 2,071,365 28,505 1,596,680
Harbor International II............................ -- 177,546 -- 56,093
Harbor International............................... -- 1,015,928 -- 671,400
Harbor Value....................................... 222 211,147 352 197,114
Harbor Bond........................................ 734,487 126,524 641,531 56,067
Harbor Short Duration.............................. 1,169,386 139,475 1,313,726 65,245
</TABLE>
* For the year ended October 31, 1997, Harbor Growth Fund distributed portfolio
securities to a redeeming shareholder in the amount of $13,593.
Harbor Money Market's purchases and sales (including maturities) of
investment securities (all short term obligations) aggregated $1,305,571 and
$1,295,440, respectively.
Harbor Short Duration Fund engages in short-selling which obligates the
Fund to replace the security borrowed by purchasing it at the market price at
the time of replacement. Until the security is replaced, the Fund is required to
pay to the lender any accrued interest and may be required to pay a premium. The
Fund would realize a gain if the security declines in price between the date of
the short sale and the date on which the Fund replaces the borrowed security.
The Fund would incur a loss as a result of the short sale if the price of the
security increases between those dates. Until the Fund replaces the borrowed
security, it will maintain a segregated account of cash or liquid securities
with its custodian sufficient to cover its short position.
Harbor Bond Fund enters into forward sale commitment to sell a specified
security at a specified price on a specified future date. The forward sales that
create short positions are accounted for as short sells as described above.
50
<PAGE> 52
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
($ in Thousands)
NOTE 3--INVESTMENT PORTFOLIO TRANSACTIONS--CONTINUED
FUTURES CONTRACTS
Transactions in futures contracts for the year ended October 31, 1997 are
summarized as follows:
<TABLE>
<CAPTION>
PURCHASES OF SALES OF
FUTURES CONTRACTS FUTURES CONTRACTS
------------------------ ----------------------
U.S. BONDS U.S. BONDS
------------------------ ----------------------
NUMBER OF AGGREGATE NUMBER OF AGGREGATE
CONTRACTS FACE VALUE CONTRACTS FACE VALUE
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
HARBOR BOND FUND
Contracts outstanding at beginning of year............ 1,065 $ 106,500 -- $ --
Contracts opened...................................... 5,125 481,909 -- --
Contracts closed/expired.............................. (4,908) (471,000) -- --
------ ------------ ------ ----------
Open at 10/31/97...................................... 1,282 $ 117,409 -- $ --
====== ============ ====== ==========
HARBOR SHORT DURATION FUND
Contracts outstanding at beginning of year............ -- $ -- 596 $ 69,700
Contracts opened...................................... 638 63,800 1,460 178,350
Contracts closed/expired.............................. (638) (63,800) (2,056) (248,050)
------ ------------ ------ ----------
Open at 10/31/97...................................... -- $ -- -- $ --
====== ============ ====== ==========
</TABLE>
<TABLE>
<CAPTION>
PURCHASES OF SALES OF
FUTURES CONTRACTS FUTURES CONTRACTS
------------------------ ----------------------
FOREIGN CURRENCY FOREIGN CURRENCY
------------------------ ----------------------
NUMBER OF CURRENCY NUMBER OF CURRENCY
CONTRACTS AMOUNT* CONTRACTS AMOUNT*
--------- -------- --------- --------
<S> <C> <C> <C> <C>
HARBOR SHORT DURATION FUND
Contracts outstanding at beginning of year............ 228 57,000 28 7,000
Contracts opened...................................... 2,042 6,488,495 1,187 194,183
Contracts closed/expired.............................. (2,241) (6,538,245) (1,215) (201,183)
------ ------------ ------ ----------
Open at 10/31/97...................................... 29 E$ 7,250 -- E$ --
====== ============ ====== ==========
</TABLE>
* Amounts disclosed represent Euro Dollars and Euro Yen, throughout the year,
with Euro Dollars outstanding at year end.
SECURITY LENDING
Certain Funds may lend portfolio securities. The loans are collateralized
at all times with cash or liquid securities with a market value at least equal
to the market value of the securities on loan. As with other extensions of
credit, the Fund may bear the risk of delay in recovery or even loss of rights
in the collateral should the borrower of the securities fail financially.
Securities lending fees are negotiated by the Funds and are based on the number
and duration of lending transactions. At October 31, 1997, no securities were on
loan.
51
<PAGE> 53
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
($ in Thousands)
NOTE 3--INVESTMENT PORTFOLIO TRANSACTIONS--CONTINUED
WRITTEN OPTIONS
Transactions in written options for the year ended October 31, 1997 are
summarized as follows:
<TABLE>
<CAPTION>
OPTIONS WRITTEN
-----------------------
FOREIGN FUTURES
-----------------------
NUMBER OF AGGREGATE
CONTRACTS FACE VALUE
--------- ----------
<S> <C> <C>
HARBOR BOND FUND
Options outstanding at beginning of year.................. 410 $ 410,000
Options opened............................................ 200 200,000
Options closed/expired.................................... (410) (410,000)
------ -----------
Open at 10/31/97.......................................... 200 $ 200,000
====== ===========
</TABLE>
<TABLE>
<CAPTION>
OPTIONS WRITTEN
-----------------------
FOREIGN FUTURES
-----------------------
NUMBER OF AGGREGATE
CONTRACTS FACE VALUE
--------- ----------
<S> <C> <C>
HARBOR SHORT DURATION FUND
Options outstanding at beginning of year.................. -- $ --
Options opened............................................ 375 375,000
Options closed/expired.................................... (375) (375,000)
------ -----------
Open at 10/31/97.......................................... -- $ --
====== ===========
</TABLE>
<TABLE>
<CAPTION>
OPTIONS WRITTEN
-----------------------
U.S. TREASURY FUTURES
-----------------------
NUMBER OF AGGREGATE
CONTRACTS FACE VALUE
--------- ----------
<S> <C> <C>
HARBOR BOND FUND
Options outstanding at beginning of year.................. -- $ --
Options opened............................................ 300 300,000
Options closed/expired.................................... -- --
------ -----------
Open at 10/31/97.......................................... 300 $ 300,000
====== ===========
</TABLE>
<TABLE>
<CAPTION>
OPTIONS WRITTEN
-----------------------
U.S. TREASURY FUTURES
-----------------------
NUMBER OF AGGREGATE
CONTRACTS FACE VALUE
--------- ----------
<S> <C> <C>
HARBOR SHORT DURATION FUND
Options outstanding at beginning of year.................. -- $ --
Options opened............................................ 260 26,000
Options closed/expired.................................... (260) (26,000)
------ -----------
Open at 10/31/97.......................................... -- $ --
====== ===========
</TABLE>
52
<PAGE> 54
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
($ in Thousands)
NOTE 4--FEES AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISER
Harbor Capital Advisors, Inc. ("Harbor"), an indirect wholly-owned
subsidiary of Owens-Illinois, Inc., is the Trust's Investment adviser and is
also responsible for administrative and other services. Separate advisory
agreements for each Fund were in effect during the year ended October 31, 1997.
The agreements provide for fees based on an annual percentage rate of average
daily net assets as follows:
<TABLE>
<CAPTION>
ANNUAL
PERCENTAGE FEES
FUND RATE EARNED
---- ---------- ------
<S> <C> <C>
Harbor Growth............................................... 0.75% $ 758
Harbor International Growth................................. 0.75% 6,241
Harbor Capital Appreciation................................. 0.60% 13,511
Harbor International II..................................... 0.75% 605
Harbor International........................................ 0.85% 41,290
Harbor Value................................................ 0.60% 826
Harbor Bond................................................. 0.70% 2,174
Harbor Short Duration....................................... 0.40% 651
Harbor Money Market......................................... 0.30% 199
</TABLE>
Harbor has from time to time agreed not to impose all or a portion of its
advisory fees and bear a portion of the expenses incurred in the operation of
certain Funds in order to limit Fund expenses. During the year ended October 31,
1997, Harbor agreed not to impose advisory fees of $163, $708, $326 and $80
relating to Harbor International Fund II, Harbor Bond Fund, Harbor Short
Duration Fund and Harbor Money Market Fund, respectively; and Harbor and
Northern Cross Investments Limited agreed not to impose $2,350 of the advisory
fee for Harbor International Fund.
The Trust reimburses Harbor for certain legal expenses incurred by Harbor
with respect to the Trust. Such amounts aggregated $60 for the year-ended
October 31, 1997.
DISTRIBUTOR
HCA Securities, Inc., a wholly-owned subsidiary of Harbor Capital Advisors,
Inc., is the distributor for Harbor Fund shares. Harbor Fund does not reimburse
the distributor for expenses.
SHAREHOLDERS
On October 31, 1997, Harbor, HCA Securities, Inc., Harbor Transfer, Inc.,
and various employee benefit plans of Owens-Illinois, Inc. held the following
shares of beneficial interest in the Funds:
<TABLE>
<CAPTION>
HARBOR, HCA
SECURITIES AND BENEFIT PLANS OF
FUND HARBOR TRANSFER OWENS-ILLINOIS, INC.
---- --------------- --------------------
<S> <C> <C>
Harbor Growth............................................... 25,764 3,395,973
Harbor International Growth................................. 33,584 838,235
Harbor Capital Appreciation................................. 6 2,237,555
Harbor International II..................................... 201,192 74,598
Harbor International........................................ 5 1,757,501
Harbor Value................................................ 8 2,790,246
Harbor Bond................................................. 8 2,412,541
Harbor Short Duration....................................... 3,148,959 14,106,048
Harbor Money Market......................................... 39,545 18,901,120
</TABLE>
53
<PAGE> 55
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
($ in Thousands)
NOTE 4--FEES AND OTHER TRANSACTIONS WITH AFFILIATES--CONTINUED
TRANSFER AGENT
Harbor Transfer, Inc., a wholly-owned subsidiary of Harbor Capital
Advisors, Inc., is the shareholder servicing agent for the Funds. Fees incurred
for these transfer agent services for the year ended October 31, 1997 totaled
$5,148.
"NON-INTERESTED" TRUSTEES
The fees and expenses of the non-interested Trustees allocated to each Fund
are shown on each Fund's Statement of Operations. Trustees' fees and expenses
for all Funds aggregated $140 for the year ended October 31, 1997.
CUSTODIAN
Payments to the custodian have been reduced by balance credits applied to
each portfolio for the year ended October 31, 1997. For the Harbor Growth Fund,
Harbor International Growth Fund, Harbor Capital Appreciation Fund, Harbor
International Fund II, Harbor International Fund, Harbor Value Fund, Harbor Bond
Fund, Harbor Short Duration Fund, and Harbor Money Market Fund the reduction
amounted to $4, $45, $72, $7, $62, $3, $9, $25 and $12, respectively.
NOTE 5--BORROWINGS
Harbor Short Duration Fund may enter into reverse repurchase agreements
with third party broker-dealers. The Fund may use reverse repurchase agreements
to borrow short term funds. Interest on the value of reverse repurchase
agreements issued and outstanding is based upon competitive market rates at the
time of issuance. At the time the Fund enters into a reverse repurchase
agreement, it establishes and maintains a segregated account with the lender
containing liquid securities having a value not less that the repurchase price,
including accrued interest, of the reverse repurchase agreement. Reverse
repurchase agreements involve the risk that the market value of the securities
sold by a Fund may decline below the repurchase price of the securities and, if
the proceeds from the reverse repurchase agreement are invested in securities,
that the market value of securities bought may decline below the repurchase
price of securities sold. Activity in reverse repurchase agreements by the
Harbor Short Duration Fund for the year ended October 31, 1997 is as follows:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE DAILY
AMOUNT AMOUNT AVERAGE
BALANCE AVERAGE OUTSTANDING OUTSTANDING INTEREST RATE
CATEGORY OF AGGREGATE AT END OF INTEREST DURING THE DURING THE DURING THE
SHORT-TERM BORROWINGS PERIOD RATE PERIOD PERIOD PERIOD
--------------------- --------- -------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Reverse repurchase agreements................. $0 0.00% $56,518 $1,307 8.19%
</TABLE>
Average debt outstanding and average interest rate during the period are
calculated based on calendar days of the period.
NOTE 6--COMMITMENTS AND CONTINGENCIES
In connection with its former fidelity bond and directors and officers
errors and omissions liability insurance policy, the Trust, on behalf of each
Fund, must maintain a "reserve premium" for five years representing
approximately 100% of its allocated annual premium for each Fund. Such amounts
are included in "Other assets" in each Fund's Statement of Assets and
Liabilities.
54
<PAGE> 56
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
($ in Thousands, except per share amounts)
NOTE 7--TAX INFORMATION
The amount and character of income and net realized gains to be distributed
are determined in accordance with income tax rules and regulations, which may
differ from generally accepted accounting principles. These differences are
attributable to permanent book and tax accounting differences. Reclassifications
are made to the Funds' capital accounts to reflect income and net realized gains
available for distribution (or available capital loss carryovers) under income
tax rules and regulations. For the year ended October 31, 1997, the Funds
reclassified the following amounts:
<TABLE>
<CAPTION>
UNDISTRIBUTED ACCUMULATED
NET INVESTMENT NET REALIZED
INCOME/(LOSS) GAIN/(LOSS) PAID-IN CAPITAL
-------------- ------------ ---------------
<S> <C> <C> <C>
Harbor Growth Fund.......................................... 481 (2,547) 2,066
Harbor International Growth Fund............................ (107) 115 8
Harbor Capital Appreciation Fund............................ (140) 200 (60)
Harbor International Fund II................................ 4 2 (6)
Harbor International Fund................................... (602) 581 21
Harbor Value Fund........................................... 53 (28) (25)
Harbor Bond Fund............................................ 311 (311) --
Harbor Short Duration Fund.................................. 3,322 (4,579) 1,257
</TABLE>
At October 31, 1997 Harbor Short Duration Fund had capital loss
carryforwards of approximately $22,029, which may be available to offset future
realized capital gains, if any; $5,488, $13,538, $1,182 and $1,821 will expire
on October 31, 2001, October 31, 2002, October 31, 2004 and October 31, 2005,
respectively.
The identified cost for federal income tax purposes of investments owned by
each Fund (including earned discount on corporate short-term notes and
commercial paper) and their respective gross unrealized appreciation and
depreciation at October 31, 1997 are described below along with long-term
capital gains and the amount of long-term capital gains per share paid on
December 31, 1996:
<TABLE>
<CAPTION>
LONG-TERM CAPITAL
GROSS UNREALIZED NET UNREALIZED GAINS
----------------------------- APPRECIATION/ -----------------------
NAME OF FUND IDENTIFIED COST APPRECIATION (DEPRECIATION) (DEPRECIATION) ($000S) ($ PER SHARE)
------------ --------------- ------------ -------------- -------------- ------- -------------
<S> <C> <C> <C> <C> <C> <C>
Harbor Growth Fund.................. 85,578 21,317 (2,375) 18,942 26,626 3.83
Harbor International Growth Fund.... 845,863 106,629 (53,477) 53,152 11,758 .31
Harbor Capital Appreciation Fund.... 2,235,001 600,471 (47,947) 552,522 53,491 .86
Harbor International Fund II........ 139,468 10,700 (15,301) (4,609) -- --
Harbor International Fund........... 3,235,692 2,009,591 (179,234) 1,830,357 82,242 .63
Harbor Value Fund................... 155,236 12,162 (4,324) 7,838 3,608 .52
Harbor Bond Fund.................... 500,798 4,245 (2,041) 2,204 -- --
Harbor Short Duration Fund.......... 165,012 470 (46) 424 -- --
</TABLE>
55
<PAGE> 57
HARBOR FUND
ADDITIONAL INFORMATION
ADDITIONAL FEDERAL TAX INFORMATION--(UNAUDITED)
The Form 1099 you receive in January, 1998 for each of the Funds will show
the tax status of all distributions paid to your account in calendar year 1997.
ADDITIONAL INFORMATION--(UNAUDITED)
On August 12, 1997, a special meeting of shareholders of Harbor Fund was
held for the purpose of voting on the following matters. Mr. John P. Gould was
elected as a Trustee -- Mr. Ronald C. Boller, Mr. Howard P. Colhoun and Mr.
Rodger F. Smith will continue to serve as Trustees.
<TABLE>
<CAPTION>
HARBOR HARBOR HARBOR
HARBOR INTERNATIONAL CAPITAL INTERNATIONAL HARBOR
HARBOR GROWTH GROWTH APPRECIATION FUND INTERNATIONAL
PROPOSALS FUND FUND FUND FUND II FUND
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 The election of Mr. Gould.
FOR 241,302,074
AGAINST 3,003,514
ABSTAIN 1,017,223
- ----------------------------------------------------------------------------------------------------------------------------
2 The ratification of the
selection of Price Waterhouse,
LLP as the Independent
Accountants of the Trust for
the fiscal year ending October
31, 1997.
FOR 242,314,102
AGAINST 762,641
ABSTAIN 2,313,245
- ----------------------------------------------------------------------------------------------------------------------------
3a The approval of the restatement
of the investment policy on
issuer diversification
FOR 4,552,012 28,842,683 39,072,850 3,925,265 74,057,634
AGAINST 13,923 212,633 4,054,416 77,354 1,286,486
ABSTAIN 37,940 358,230 1,443,215 57,347 3,058,574
BROKER NON-VOTE 37,949 3,046,441 4,546,102 274,378 3,386,263
- ----------------------------------------------------------------------------------------------------------------------------
3b The approval of the
clarification of the investment
policy on industry
concentration
FOR 4,558,188 28,668,300 38,551,929 3,927,287 73,762,496
AGAINST 12,069 212,920 4,057,416 76,933 1,365,766
ABSTAIN 33,617 532,326 1,961,137 55,927 3,274,432
BROKER NON-VOTE 37,950 3,046,441 4,546,101 274,377 3,386,263
- ----------------------------------------------------------------------------------------------------------------------------
3c The approval of a change to the
investment policies on
borrowing and pledging assets
FOR 4,542,761 27,850,076 38,178,446 3,831,688 71,613,070
AGAINST 25,039 881,366 4,785,857 148,875 3,222,935
ABSTAIN 36,074 682,104 1,595,835 79,585 3,566,689
BROKER NON-VOTE 37,950 3,046,441 4,556,445 274,376 3,386,263
- ----------------------------------------------------------------------------------------------------------------------------
3d The approval of the restatement
of the investment policy on
real estate and oil and gas.
FOR 4,543,312 28,537,520 35,901,372 3,829,566 69,391,113
AGAINST 26,150 304,017 7,138,920 148,359 5,653,573
ABSTAIN 34,412 572,010 1,519,847 82,222 3,358,008
BROKER NON-VOTE 37,950 3,046,440 4,556,444 274,377 3,386,263
- ----------------------------------------------------------------------------------------------------------------------------
3e The approval of the restatement
of the investment policy on
commodities.
FOR 4,546,055 28,276,021 35,698,815 3,818,369 69,120,891
AGAINST 26,962 525,239 7,273,063 143,590 5,796,863
ABSTAIN 30,857 612,286 1,588,260 98,188 3,484,940
BROKER NON-VOTE 37,950 3,046,441 4,556,445 274,377 3,386,263
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
HARBOR HARBOR
HARBOR HARBOR SHORT MONEY
VALUE BOND DURATION MARKET
PROPOSALS FUND FUND FUND FUND
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 The election of Mr. Gould.
FOR
AGAINST
ABSTAIN
- -------------------------------------------------------------------------------------------------------
2 The ratification of the
selection of Price Waterhouse,
LLP as the Independent
Accountants of the Trust for
the fiscal year ending October
31, 1997.
FOR
AGAINST
ABSTAIN
- -------------------------------------------------------------------------------------------------------
3a The approval of the restatement
of the investment policy on
issuer diversification
FOR 4,065,922 13,289,955 17,190,190 34,335,775
AGAINST 113,771 166,556 903 309,708
ABSTAIN 33,656 401,407 8,265 737,770
BROKER NON-VOTE 50,743 2,263,975 69,526 0
- -------------------------------------------------------------------------------------------------------
3b The approval of the
clarification of the investment
policy on industry
concentration
FOR 4,133,431 13,267,000 17,191,336 34,495,152
AGAINST 37,701 159,561 903 315,247
ABSTAIN 42,219 431,357 7,119 582,855
BROKER NON-VOTE 50,741 2,263,975 69,526 0
- -------------------------------------------------------------------------------------------------------
3c The approval of a change to the
investment policies on
borrowing and pledging assets
FOR 4,026,170 12,902,817 17,181,822 33,502,506
AGAINST 150,562 474,316 5,773 996,008
ABSTAIN 36,618 480,785 11,764 894,740
BROKER NON-VOTE 50,742 2,263,975 69,525 0
- -------------------------------------------------------------------------------------------------------
3d The approval of the restatement
of the investment policy on
real estate and oil and gas.
FOR 4,051,248 13,119,515 17,188,932 33,926,655
AGAINST 117,683 254,850 2,800 573,443
ABSTAIN 44,420 483,553 7,626 893,156
BROKER NON-VOTE 50,741 2,263,975 69,526 0
- -------------------------------------------------------------------------------------------------------
3e The approval of the restatement
of the investment policy on
commodities.
FOR 4,033,776 13,026,922 17,187,509 33,462,527
AGAINST 147,395 361,407 4,699 873,225
ABSTAIN 32,179 469,588 7,150 1,057,501
BROKER NON-VOTE 50,742 2,263,976 69,526 0
- -------------------------------------------------------------------------------------------------------
</TABLE>
56
<PAGE> 58
HARBOR FUND
ADDITIONAL INFORMATION--CONTINUED
<TABLE>
<CAPTION>
HARBOR HARBOR HARBOR
HARBOR INTERNATIONAL CAPITAL INTERNATIONAL HARBOR
HARBOR GROWTH GROWTH APPRECIATION FUND INTERNATIONAL
PROPOSALS FUND FUND FUND FUND II FUND
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
3f The approval of
reclassification as
non-fundamental investment
policy on investments to
exercise control.
FOR 4,543,592 26,605,228 35,352,404 3,847,137 66,300,853
AGAINST 25,597 657,478 7,648,031 121,481 6,320,563
ABSTAIN 34,685 2,150,840 1,570,046 91,530 5,781,278
BROKER NON-VOTE 37,950 3,046,441 4,546,102 274,376 3,386,263
- ----------------------------------------------------------------------------------------------------------------------------
3g The approval of the elimination
of the investment policy
concerning unseasoned issuers.
FOR 4,532,526 26,456,649 34,259,341 3,229,027 65,034,641
AGAINST 29,577 808,689 8,708,537 720,829 7,338,941
ABSTAIN 41,772 2,148,209 1,602,603 110,291 6,029,111
BROKER NON-VOTE 37,949 3,046,440 4,546,102 274,377 3,386,264
- ----------------------------------------------------------------------------------------------------------------------------
3h The approval of the elimination
of the investment policy
concerning transactions with
affiliated persons.
FOR 4,533,396 26,168,289 37,904,951 3,138,637 63,836,447
AGAINST 32,150 2,526,533 4,999,134 790,575 10,764,063
ABSTAIN 38,329 718,724 1,666,396 130,935 3,802,183
BROKER NON-VOTE 37,949 3,046,441 4,546,102 274,377 3,386,264
- ----------------------------------------------------------------------------------------------------------------------------
4 The approval of the
reclassification of each Fund's
investment objective from
fundamental to non-fundamental.
FOR 4,520,324 25,931,405 34,226,809 3,763,942 63,755,514
AGAINST 48,124 2,827,155 8,725,859 190,896 10,706,902
ABSTAIN 35,426 654,986 1,617,813 105,309 3,940,278
BROKER NON-VOTE 37,950 3,046,441 4,546,102 274,377 3,386,263
- ----------------------------------------------------------------------------------------------------------------------------
5 The approval of a policy to
permit the Trust's Board of
Trustees to appoint subadvisers
and make material changes to
subadvisory agreements without
further shareholder approval.
FOR 4,516,588 25,363,073 41,098,222 3,796,507 69,551,148
AGAINST 45,827 3,589,747 1,817,952 192,557 5,304,444
ABSTAIN 41,459 460,727 1,643,964 71,082 3,541,102
BROKER NON-VOTE 37,950 3,046,440 4,556,445 274,378 3,386,263
- ----------------------------------------------------------------------------------------------------------------------------
6 The approval of a change to
Harbor Value Fund's investment
objective.
FOR
AGAINST
ABSTAIN
BROKER NON-VOTE
- ----------------------------------------------------------------------------------------------------------------------------
7 The approval of the subadvisory
agreement with Emerging Growth
Advisors, Inc.
FOR 4,586,849
AGAINST 12,219
ABSTAIN 42,754
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
HARBOR
HARBOR HARBOR SHORT HARBOR
VALUE BOND DURATION MARKET
PROPOSALS FUND FUND FUND FUND
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
3f The approval of
reclassification as
non-fundamental investment
policy on investments to
exercise control.
FOR 4,041,816 13,027,958 17,188,692 33,607,419
AGAINST 137,344 351,219 3,164 1,072,149
ABSTAIN 34,190 478,740 7,502 713,685
BROKER NON-VOTE 50,742 2,263,976 69,526 0
- ----------------------------------------------------------------------------------------------------------------------------
3g The approval of the elimination
of the investment policy
concerning unseasoned issuers.
FOR 4,020,619 12,865,271 17,176,874 33,368,889
AGAINST 157,024 471,660 13,931 1,291,299
ABSTAIN 35,708 520,987 8,553 733,066
BROKER NON-VOTE 50,741 2,263,975 69,526 0
- ----------------------------------------------------------------------------------------------------------------------------
3h The approval of the elimination
of the investment policy
concerning transactions with
affiliated persons.
FOR 4,017,921 12,748,740 17,186,951 32,495,994
AGAINST 147,805 564,430 3,473 1,782,054
ABSTAIN 47,624 544,748 8,934 1,115,205
BROKER NON-VOTE 50,742 2,263,975 69,526 0
- ----------------------------------------------------------------------------------------------------------------------------
4 The approval of the
reclassification of each Fund's
investment objective from
fundamental to non-fundamental.
FOR 4,012,221 12,602,326 17,166,266 32,826,378
AGAINST 167,022 769,670 24,169 1,864,187
ABSTAIN 34,108 485,921 8,924 702,689
BROKER NON-VOTE 50,741 2,263,976 69,525 0
- ----------------------------------------------------------------------------------------------------------------------------
5 The approval of a policy to
permit the Trust's Board of
Trustees to appoint subadvisers
and make material changes to
subadvisory agreements without
further shareholder approval.
FOR 4,081,584 13,601,128 17,184,370 32,615,349
AGAINST 91,705 695,904 6,785 1,861,975
ABSTAIN 40,060 560,885 8,203 915,929
BROKER NON-VOTE 50,743 2,263,976 69,526 0
- ----------------------------------------------------------------------------------------------------------------------------
6 The approval of a change to
Harbor Value Fund's investment
objective.
FOR 4,039,353
AGAINST 66,848
ABSTAIN 107,148
BROKER NON-VOTE 50,743
- ----------------------------------------------------------------------------------------------------------------------------
7 The approval of the subadvisory
agreement with Emerging Growth
Advisors, Inc.
FOR
AGAINST
ABSTAIN
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(This document must be preceded or accompanied by a Prospectus.)
57
<PAGE> 59
<TABLE>
<S> <C> <C>
TRUSTEES AND OFFICERS SHAREHOLDER SERVICING AGENT
Ronald C. Boller Chairman, President and Harbor Transfer, Inc.
Trustee P.O. Box 10048
Howard P. Colhoun Trustee Toledo, Ohio 43699-0048
John P. Gould Trustee 1-800-422-1050
Rodger F. Smith Trustee CUSTODIAN
Constance L. Souders Secretary and Treasurer State Street Bank and Trust
INVESTMENT ADVISER Company
Harbor Capital Advisors, Inc. P.O. Box 1713
One SeaGate Boston, MA 02105
Toledo, OH 43666 INDEPENDENT ACCOUNTANTS
DISTRIBUTOR AND Price Waterhouse LLP
PRINCIPAL UNDERWRITER 160 Federal Street
HCA Securities, Inc. Boston, MA 02110
One SeaGate LEGAL COUNSEL
Toledo, OH 43666 Hale and Dorr LLP
(419) 247-2477 60 State Street
Boston, MA 02109
</TABLE>
HARBOR FUND LOGO
One SeaGate
Toledo, Ohio 43666
1-800-422-1050
230,000/12/97 (RECYCLED LOGO)
recycled paper
<PAGE> 60
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- -------- ----------- -------------
<S> <C> <C>
EX-27.1 Financial Data Schedule
EX-27.2 Financial Data Schedule
EX-27.3 Financial Data Schedule
EX-27.4 Financial Data Schedule
EX-27.5 Financial Data Schedule
EX-27.6 Financial Data Schedule
EX-27.7 Financial Data Schedule
EX-27.8 Financial Data Schedule
EX-27.9 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM HARBOR
FUND'S ANNUAL REPORT TO SHAREHOLDERS FILED ON FORM N-30D ON DEC. 22, 1997 (FILE
NO. 811-04676) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 1
<NAME> HARBOR INTERNATIONAL GROWTH FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 841,786
<INVESTMENTS-AT-VALUE> 899,015
<RECEIVABLES> 94,784
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 833
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 73,894
<TOTAL-LIABILITIES> 4
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 6,950
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 825,455
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 29,332
<NET-ASSETS> 918,950
<DIVIDEND-INCOME> 15,178
<INTEREST-INCOME> 2,302
<OTHER-INCOME> (1,658)
<EXPENSES-NET> 8,471
<NET-INVESTMENT-INCOME> 7,351
<REALIZED-GAINS-CURRENT> 30,175
<APPREC-INCREASE-CURRENT> 3,171
<NET-CHANGE-FROM-OPS> 40,697
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3,010)
<DISTRIBUTIONS-OF-GAINS> (13,704)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 41,977
<NUMBER-OF-SHARES-REDEEMED> (17,259)
<SHARES-REINVESTED> 987
<NET-CHANGE-IN-ASSETS> 439,981
<ACCUMULATED-NII-PRIOR> 2,716
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 12,747
<GROSS-ADVISORY-FEES> 6,241
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 8,616
<AVERAGE-NET-ASSETS> 833,769
<PER-SHARE-NAV-BEGIN> 15.35
<PER-SHARE-NII> 0.12
<PER-SHARE-GAIN-APPREC> 1.12
<PER-SHARE-DIVIDEND> (0.11)
<PER-SHARE-DISTRIBUTIONS> (0.36)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 16.15
<EXPENSE-RATIO> 1.02
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM HARBOR
FUND'S ANNUAL REPORT TO SHAREHOLDERS FILED ON FORM N-30D ON DEC. 22, 1997 (FILE
NO. 811-04676) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 2
<NAME> HARBOR GROWTH FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 85,578
<INVESTMENTS-AT-VALUE> 104,520
<RECEIVABLES> 207
<ASSETS-OTHER> 1
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 0
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 68,635
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 16,991
<NET-ASSETS> 104,568
<DIVIDEND-INCOME> 207
<INTEREST-INCOME> 450
<OTHER-INCOME> (4)
<EXPENSES-NET> 1,134
<NET-INVESTMENT-INCOME> (481)
<REALIZED-GAINS-CURRENT> 19,531
<APPREC-INCREASE-CURRENT> (2,456)
<NET-CHANGE-FROM-OPS> 16,594
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (28,481)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,875
<NUMBER-OF-SHARES-REDEEMED> (3,821)
<SHARES-REINVESTED> 2,215
<NET-CHANGE-IN-ASSETS> (8,943)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 28,488
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 758
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,138
<AVERAGE-NET-ASSETS> 101,542
<PER-SHARE-NAV-BEGIN> 16.00
<PER-SHARE-NII> (0.07)
<PER-SHARE-GAIN-APPREC> 2.37
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> (1.85)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 14.20
<EXPENSE-RATIO> 1.12
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM HARBOR
FUND'S ANNUAL REPORT TO SHAREHOLDERS FILED ON FORM N-30D ON DEC. 22, 1997
(FILE NO. 811-04676) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 3
<NAME> HARBOR CAPITAL APPRECIATION FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 2,230,944
<INVESTMENTS-AT-VALUE> 2,787,523
<RECEIVABLES> 41,761
<ASSETS-OTHER> 1
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 31
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 23,618
<TOTAL-LIABILITIES> 10
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 4,876
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,835,524
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 401,425
<NET-ASSETS> 2,798,404
<DIVIDEND-INCOME> 18,327
<INTEREST-INCOME> 3,400
<OTHER-INCOME> (525)
<EXPENSES-NET> 15,776
<NET-INVESTMENT-INCOME> 5,427
<REALIZED-GAINS-CURRENT> 406,504
<APPREC-INCREASE-CURRENT> 245,411
<NET-CHANGE-FROM-OPS> 657,342
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,310)
<DISTRIBUTIONS-OF-GAINS> (53,466)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 36,171
<NUMBER-OF-SHARES-REDEEMED> (16,869)
<SHARES-REINVESTED> 1,813
<NET-CHANGE-IN-ASSETS> 1,215,189
<ACCUMULATED-NII-PRIOR> 899
<ACCUMULATED-GAINS-PRIOR> 48,187
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 13,511
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 15,847
<AVERAGE-NET-ASSETS> 2,256,369
<PER-SHARE-NAV-BEGIN> 25.88
<PER-SHARE-NII> 0.07
<PER-SHARE-GAIN-APPREC> 8.94
<PER-SHARE-DIVIDEND> (0.02)
<PER-SHARE-DISTRIBUTIONS> (0.86)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 34.01
<EXPENSE-RATIO> 0.70
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM HARBOR
FUND'S ANNUAL REPORT TO SHAREHOLDERS FILED ON FORM N-30D ON DEC. 22, 1997 (FILE
NO. 811-04676) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 6
<NAME> HARBOR INTERNATIONAL FUND II
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 139,464
<INVESTMENTS-AT-VALUE> 134,859
<RECEIVABLES> 8,782
<ASSETS-OTHER> 40
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 128
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 8,405
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 1,069
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 132,724
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5,765
<NET-ASSETS> 134,957
<DIVIDEND-INCOME> 1,839
<INTEREST-INCOME> 245
<OTHER-INCOME> (208)
<EXPENSES-NET> 797
<NET-INVESTMENT-INCOME> 1,079
<REALIZED-GAINS-CURRENT> 5,750
<APPREC-INCREASE-CURRENT> (4,810)
<NET-CHANGE-FROM-OPS> 2,019
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (31)
<DISTRIBUTIONS-OF-GAINS> (55)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 11,761
<NUMBER-OF-SHARES-REDEEMED> (1,850)
<SHARES-REINVESTED> 8
<NET-CHANGE-IN-ASSETS> 122,384
<ACCUMULATED-NII-PRIOR> 17
<ACCUMULATED-GAINS-PRIOR> 68
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 605
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 967
<AVERAGE-NET-ASSETS> 80,911
<PER-SHARE-NAV-BEGIN> 10.47
<PER-SHARE-NII> 0.12
<PER-SHARE-GAIN-APPREC> 1.62
<PER-SHARE-DIVIDEND> (0.02)
<PER-SHARE-DISTRIBUTIONS> (0.04)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 12.14
<EXPENSE-RATIO> 0.98
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM HARBOR
FUND'S ANNUAL REPORT TO SHAREHOLDERS FILED ON FORM N-30D ON DEC. 22, 1997 (FILE
NO. 811-04676) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND?
<SERIES>
<NUMBER> 5
<NAME> HARBOR INTERNATIONAL FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 3,235,692
<INVESTMENTS-AT-VALUE> 5,066,049
<RECEIVABLES> 27,802
<ASSETS-OTHER> 1
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 6,903
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 54,083
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 3,078,170
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 127,360
<NET-ASSETS> 5,090,048
<DIVIDEND-INCOME> 103,468
<INTEREST-INCOME> 14,724
<OTHER-INCOME> (12,587)
<EXPENSES-NET> 47,055
<NET-INVESTMENT-INCOME> 58,550
<REALIZED-GAINS-CURRENT> 126,747
<APPREC-INCREASE-CURRENT> 588,192
<NET-CHANGE-FROM-OPS> 773,489
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (54,226)
<DISTRIBUTIONS-OF-GAINS> (103,297)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 22,725
<NUMBER-OF-SHARES-REDEEMED> (14,257)
<SHARES-REINVESTED> 4,442
<NET-CHANGE-IN-ASSETS> 1,059,921
<ACCUMULATED-NII-PRIOR> 50,361
<ACCUMULATED-GAINS-PRIOR> 103,329
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 41,290
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 49,467
<AVERAGE-NET-ASSETS> 4,870,901
<PER-SHARE-NAV-BEGIN> 31.21
<PER-SHARE-NII> 0.41
<PER-SHARE-GAIN-APPREC> 5.44
<PER-SHARE-DIVIDEND> (0.42)
<PER-SHARE-DISTRIBUTIONS> (0.80)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 35.84
<EXPENSE-RATIO> 0.97
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM HARBOR
FUND'S ANNUAL REPORT TO SHAREHOLDERS FILED ON FORM N-30D ON DEC. 22, 1997 (FILE
NO. 811-04676) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 6
<NAME> HARBOR VALUE FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 154,978
<INVESTMENTS-AT-VALUE> 163,074
<RECEIVABLES> 1,893
<ASSETS-OTHER> 1
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 5
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,459
<TOTAL-LIABILITIES> 1
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 288
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 119,290
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 33,684
<NET-ASSETS> 161,359
<DIVIDEND-INCOME> 3,719
<INTEREST-INCOME> 175
<OTHER-INCOME> (20)
<EXPENSES-NET> 1,142
<NET-INVESTMENT-INCOME> 2,732
<REALIZED-GAINS-CURRENT> 33,809
<APPREC-INCREASE-CURRENT> (625)
<NET-CHANGE-FROM-OPS> 35,916
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,696)
<DISTRIBUTIONS-OF-GAINS> (13,934)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,007
<NUMBER-OF-SHARES-REDEEMED> (1,158)
<SHARES-REINVESTED> 1,042
<NET-CHANGE-IN-ASSETS> 49,250
<ACCUMULATED-NII-PRIOR> 199
<ACCUMULATED-GAINS-PRIOR> 13,837
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 826
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,145
<AVERAGE-NET-ASSETS> 138,060
<PER-SHARE-NAV-BEGIN> 16.04
<PER-SHARE-NII> 0.33
<PER-SHARE-GAIN-APPREC> 4.14
<PER-SHARE-DIVIDEND> (0.34)
<PER-SHARE-DISTRIBUTIONS> (2.00)
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 18.17
<EXPENSE-RATIO> 0.83
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM HARBOR
FUND'S ANNUAL REPORT TO SHAREHOLDERS FILED ON FORM N-30D ON DEC. 22, 1997 (FILE
NO. 811-04676) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 7
<NAME> HARBOR BOND FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 500,322
<INVESTMENTS-AT-VALUE> 503,002
<RECEIVABLES> 54,059
<ASSETS-OTHER> 1,775
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 0
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 166,432
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 3,358
<SHARES-COMMON-PRIOR> 1,923
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 350,632
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,012
<NET-ASSETS> 362,594
<DIVIDEND-INCOME> 3
<INTEREST-INCOME> 20,883
<OTHER-INCOME> 0
<EXPENSES-NET> 2,080
<NET-INVESTMENT-INCOME> 18,806
<REALIZED-GAINS-CURRENT> 11,422
<APPREC-INCREASE-CURRENT> (3,011)
<NET-CHANGE-FROM-OPS> 27,217
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (18,878)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 11,476
<NUMBER-OF-SHARES-REDEEMED> (6,307)
<SHARES-REINVESTED> 1,366
<NET-CHANGE-IN-ASSETS> 82,745
<ACCUMULATED-NII-PRIOR> 1,685
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (7,099)
<GROSS-ADVISORY-FEES> 2,174
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,797
<AVERAGE-NET-ASSETS> 311,480
<PER-SHARE-NAV-BEGIN> 11.28
<PER-SHARE-NII> 0.67
<PER-SHARE-GAIN-APPREC> 0.31
<PER-SHARE-DIVIDEND> (0.69)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 11.57
<EXPENSE-RATIO> 0.67
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM HARBOR
FUND'S ANNUAL REPORT TO SHAREHOLDERS FILED ON FORM N-30D ON DEC. 22, 1997 (FILE
NO. 811-04676) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 8
<NAME> HARBOR SHORT DURATION FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 165,011
<INVESTMENTS-AT-VALUE> 165,436
<RECEIVABLES> 5,076
<ASSETS-OTHER> 28
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 0
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7,874
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 12
<SHARES-COMMON-PRIOR> 903
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 187,347
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (26,211)
<NET-ASSETS> 162,476
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 10,032
<OTHER-INCOME> 0
<EXPENSES-NET> 597
<NET-INVESTMENT-INCOME> 8,389
<REALIZED-GAINS-CURRENT> 1,197
<APPREC-INCREASE-CURRENT> (691)
<NET-CHANGE-FROM-OPS> 8,936
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (11,444)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 26,849
<NUMBER-OF-SHARES-REDEEMED> (30,149)
<SHARES-REINVESTED> 1,323
<NET-CHANGE-IN-ASSETS> (19,822)
<ACCUMULATED-NII-PRIOR> 636
<ACCUMULATED-GAINS-PRIOR> (22,870)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 651
<INTEREST-EXPENSE> 1,045
<GROSS-EXPENSE> 948
<AVERAGE-NET-ASSETS> 163,316
<PER-SHARE-NAV-BEGIN> 8.79
<PER-SHARE-NII> 0.43
<PER-SHARE-GAIN-APPREC> 0.03
<PER-SHARE-DIVIDEND> (0.59)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 8.66
<EXPENSE-RATIO> 0.36
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM HARBOR
FUND'S ANNUAL REPORT TO SHAREHOLDERS FILED ON FORM N-30D ON DEC. 22, 1997 (FILE
NO. 811-04676) AND IS QUALIFIIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 9
<NAME> HARBOR MONEY MARKET FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 76,218
<INVESTMENTS-AT-VALUE> 76,218
<RECEIVABLES> 896
<ASSETS-OTHER> 1
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 0
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,013
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 73,540
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 73,540
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,716
<OTHER-INCOME> 0
<EXPENSES-NET> 411
<NET-INVESTMENT-INCOME> 3,305
<REALIZED-GAINS-CURRENT> 13
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 3,318
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3,305)
<DISTRIBUTIONS-OF-GAINS> (13)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 138,417
<NUMBER-OF-SHARES-REDEEMED> (134,030)
<SHARES-REINVESTED> 3,162
<NET-CHANGE-IN-ASSETS> 7,549
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 199
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 503
<AVERAGE-NET-ASSETS> 66,486
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.02
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> (0.02)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.62
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
