<PAGE> 1
HARBOR FUND
[HARBOR FUND LOGO]
July 13, 1998
Dear Shareholder:
Harbor Fund encountered problems during production of the April 30, 1998
semi-annual report which require revision of several items in the Financial
Highlights table. Attached are revised pages 38 through 41 for insertion in the
report recently mailed to you.
The revised numbers are for the six month period ended April 30, 1998
(unaudited), and can be found in the Financial Highlights table under the
captions "Net Realized and Unrealized Gains/ (Losses)", "Total from Investment
Operations"; for Harbor International Fund II only, "Net Investment
Income/(Loss)"; and for Harbor Bond Fund only, "Distributions from Net Realized
Capital Gains" and "Total Distributions".
Information about share prices, net assets, expense ratios, total returns
and all other financial data were not affected.
We are sorry for any inconvenience this may have caused.
Sincerely,
Ronald C. Boller
Ronald C. Boller
President
- --------------------------------------------------------------------------------
Distributed by HCA Securities, Inc., One SeaGate, Toledo, Ohio
43666 1-800-422-1050
<PAGE> 2
SUPPLEMENT TO THE HARBOR FUND SEMI-ANNUAL REPORT OF APRIL 30, 1998
THESE PAGES SHOULD BE SUBSTITUTED FOR PAGES 38 THROUGH 41.
JULY 10, 1998
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)
ON INVESTMENTS, FUTURES,
NET ASSET VALUE OPTIONS, SWAP AGREEMENTS TOTAL FROM
BEGINNING OF NET INVESTMENT AND FOREIGN CURRENCY INVESTMENT
YEAR/PERIOD ENDED PERIOD INCOME/(LOSS) CONTRACTS OPERATIONS
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HARBOR GROWTH FUND (1)
April 30, 1998 (Unaudited)...... $14.20 $(.02) $ 1.36 $ 1.34
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
April 30, 1998 (Unaudited)...... $16.15 $ .05 $ 3.80 $ 3.85
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)
April 30, 1998 (Unaudited)...... $34.01 $ .05 $ 5.88 $ 5.93
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
April 30, 1998 (Unaudited)...... $12.14 $ .03* $ 1.46 $ 1.49
October 31, 1997................ 10.47 .10* 1.63 1.73
October 31, 1996(4)............. 10.00 .01* .46 .47
- ----------------------------------------------------------------------------------------------------------
HARBOR INTERNATIONAL FUND(5)
April 30, 1998 (Unaudited)...... $35.84 $ .19* $ 6.91 $ 7.10
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
- ----------------------------------------------------------------------------------------------------------
<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)
April 30, 1998 (Unaudited)...... $-- $ (2.28) $--
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
April 30, 1998 (Unaudited)...... $(.12) $ (.59) $--
October 31, 1997................ (.08) (.36) --
October 31, 1996................ (.11) -- --
October 31, 1995................ (.08) -- --
October 31, 1994(2)............. (.01) -- --
- -----------------------------------------------------------------------------------------
HARBOR CAPITAL APPRECIATION FUND
April 30, 1998 (Unaudited)...... $(.07) $ (4.85) $--
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
April 30, 1998 (Unaudited)...... $(.10) $ (.53) $--
October 31, 1997................ (.02) (.04) --
October 31, 1996(4)............. -- -- --
- -----------------------------------------------------------------------------------------
HARBOR INTERNATIONAL FUND(5)
April 30, 1998 (Unaudited)...... $(.40) $ (.90) $--
October 31, 1997................ (.42) (.80) --
October 31, 1996................ (.41) (.13) --
October 31, 1995................ (.24) (.94) --
October 31, 1994................ (.22) -- --
October 31, 1993................ (.22) (.18) --
- -----------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
38
<PAGE> 3
HARBOR FUND FINANCIAL HIGHLIGHTS--CONTINUED
SELECTED DATA FOR A SHARE OUTSTANDING FOR THE PERIODS PRESENTED
<TABLE>
<CAPTION>
TAX RATIO OF ADVISER OR RATIO OF
RETURN NET ASSET NET ASSETS OPERATING EXPENSES SUBADVISER FEES INTEREST EXPENSE
OF TOTAL VALUE END TOTAL END OF PERIOD TO AVERAGE NOT IMPOSED TO AVERAGE
CAPITAL DISTRIBUTIONS OF PERIOD RETURN ($ THOUSANDS) NET ASSETS (%) (PER SHARE) NET ASSETS (%)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$-- $(2.28) $13.26 11.95%++ $ 119,419 .99%+ $-- -- %
-- (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 -- --
- --------------------------------------------------------------------------------------------------------------------------
$-- $ (.71) $19.29 24.86%++ $1,186,407 .98%+ $-- -- %
-- (.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 --
- --------------------------------------------------------------------------------------------------------------------------
$-- $(4.92) $35.02 20.94%++ $3,793,256 .68%+ $-- -- %
-- (.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 -- --
- --------------------------------------------------------------------------------------------------------------------------
$-- $ (.63) $13.00 13.16%++ $ 156,149 1.18%*+ $ .01 -- %
-- (.06) 12.14 16.64 134,957 .98* .02 --
-- -- 10.47 4.70++ 12,573 1.44*+ .01 --
- --------------------------------------------------------------------------------------------------------------------------
$-- $(1.30) $41.64 20.48%++ $6,060,068 .94%*+ $ .06 -- %
-- (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* -- +++ --
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
RATIO OF NET
INVESTMENT INCOME
TO AVERAGE PORTFOLIO
NET ASSETS (%) TURNOVER (%)
- --------------------------------------------------
<S> <C> <C>
(.32)%+ 25.72%+
(.47) 147.37
(.50) 87.97
(.30) 87.94
-- 115.89
.11 170.85
- --------------------------------------------------
.56%+ 97.12%+
.91 76.19
.99 55.17
1.31* 74.86
.87* 41.80
- --------------------------------------------------
.33%+ 53.71%+
.23 72.80
.11 73.69
.23 51.65
.24 72.89
.24 93.24
- --------------------------------------------------
.45%*+ 76.41%+
1.33* 57.61
.40*+ 2.61+
- --------------------------------------------------
1.03%*+ 7.85%+
1.20* 6.39
1.42* 9.73
1.53* 14.01
1.09* 28.70
1.28* 15.70
- --------------------------------------------------
</TABLE>
39
<PAGE> 4
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 VALUE FUND (6)
April 30, 1998
(Unaudited)....... $18.17 $.14 $ 2.50 $2.64
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
- ----------------------------------------------------------------------------------------------
HARBOR BOND FUND
April 30, 1998
(Unaudited)....... $11.57 $.30* $ .09 $ .39
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
April 30, 1998
(Unaudited)....... $ 8.66 $.24* $ -- $ .24
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
April 30, 1998
(Unaudited)....... $ 1.00 $.03* $ -- $ .03
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 VALUE FUND (6
April 30, 1998
(Unaudited)....... $ (.15) $(3.74) $ --
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) --
- --------------------
HARBOR BOND FUND
April 30, 1998
(Unaudited)....... $ (.31) $ (.23) $ --
October 31, 1997.... (.69) -- --
October 31, 1996.... (.74) -- --
October 31, 1995.... (.67) -- --
October 31, 1994.... (.67) (.50) --
October 31, 1993.... (.68) (.25) --
- --------------------
HARBOR SHORT DURATIO
April 30, 1998
(Unaudited)....... $ (.30) $ -- $ --
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
April 30, 1998
(Unaudited)....... $ (.03) $ -- $ --
October 31, 1997.... (.02) -- --
October 31, 1996.... (.05) -- --
October 31, 1995.... (.06) -- --
October 31, 1994.... (.03) -- --
October 31, 1993.... (.03) -- --
- --------------------
</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 LLC 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.
The accompanying notes are an integral part of the financial statements.
40
<PAGE> 5
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> <C>
$-- $(3.89) $16.92 17.63%++ $194,996 .77%+ $ -- -- %
-- (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 -- --
- --------------------------------------------------------------------------------------------------------------------------
$-- $ (.54) $11.42 3.48%++ $398,367 .65%*+ $.02 -- %
-- (.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 --
- --------------------------------------------------------------------------------------------------------------------------
$-- $ (.30) $ 8.60 2.81%++ $179,688 .34%*+ $.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
- --------------------------------------------------------------------------------------------------------------------------
$-- $ (.03) $ 1.00 2.56%++ $ 74,777 .58%*+ $.01 -- %
-- (.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
TO AVERAGE PORTFOLIO
NET ASSETS (%) TURNOVER (%)
- ---
<S> <C> <C>
1.61%+ 106.03%+
1.98 145.85
2.65 132.39
3.00 135.93
2.66 150.94
2.48 50.20
- ---
5.34%*+ 299.40%+
6.04* 252.37
6.40* 192.64
7.11* 88.69
6.29* 150.99
6.19* 119.92
- ---
5.64%*+ 910.24%+
5.14* 1,518.68
6.84* 1,277.82
6.19* 725.96
4.61* 895.76
4.19* 1,212.20
- ---
5.11%*+ N/A
4.97* N/A
4.85* N/A
5.42* N/A
3.38* N/A
2.58* N/A
- ---
</TABLE>
(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
++ Unannualized
+++ 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.
41
<PAGE> 6
SEMI-ANNUAL REPORT
[HARBOR FUND LOGO]
APRIL 30, 1998
---------------------------------------------------------------------------
HARBOR FUND
2
<PAGE> 7
HARBOR FUND
SEMI-ANNUAL REPORT OVERVIEW
The first half of Harbor Fund's fiscal year ended April 30, 1998.
Performance for this six-month period is shown below for each of the nine
portfolios. All performance figures included in this report are total returns
and assume the reinvestment of dividends. The Long-Term Historic Returns
represent unmanaged indices and are included as an indication of longer-term
potential associated with taking different levels of market risk.
<TABLE>
<CAPTION>
UNANNUALIZED
6 MONTHS
HARBOR FUNDS IN ORDER OF MARKET RISK ENDED 4/30/98
- ------------------------------------ -------------
<S> <C>
Growth...................................................... 11.95%
International Growth........................................ 24.86%
Capital Appreciation........................................ 20.94%
International II............................................ 13.16%
International............................................... 20.48%
Value....................................................... 17.63%
Bond........................................................ 3.48%
Short Duration.............................................. 2.81%
Money Market................................................ 2.57%
</TABLE>
<TABLE>
<CAPTION>
COMMONLY USED MARKET INDICES
- ----------------------------
<S> <C>
Morgan Stanley Capital International Europe, Australia, and
Far East (EAFE); international equity..................... 15.44%
Standard & Poor's 500
(S&P 500); domestic equity................................ 22.47%
Lehman Brothers Aggregate
(LB AGG); domestic bonds.................................. 3.59%
One-Year Government Bonds
(1-YR GVT)................................................ 2.61%
90-Day U.S. Treasury Bills
(T-Bills); domestic short-term............................ 2.61%
</TABLE>
<TABLE>
<CAPTION>
30 YEARS
1968-1997
LONG-TERM HISTORIC RETURNS ANNUAL RATES
- -------------------------- ------------
<S> <C>
EAFE(1)..................................................... 12.06%
S&P 500..................................................... 12.12%
Domestic Bonds (intermediate and long)(2)................... 8.62%
1-YR GVT(3)................................................. 7.86%
T-Bills(4).................................................. 6.77%
Consumer Price Index........................................ 5.34%
</TABLE>
<TABLE>
<CAPTION>
6 MONTHS LIPPER
HARBOR FUND EXPENSE RATIOS 1994 1995 1996 1997 1998+ MEDIAN**
- -------------------------- ---- ---- ---- ---- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Growth............................ 0.93% 0.93% 0.92% 1.12% 0.99% 0.99%
International Growth.............. 1.32%* 1.21%* 1.10% 1.02% 0.98% 0.96%
Capital Appreciation.............. 0.81% 0.75% 0.75% 0.70% 0.68% 0.69%
International II.................. NA% NA% 1.44%+* 0.98%* 1.18%* 1.33%
International..................... 1.10%++ 1.04%++ 0.99%++ 0.97%++ 0.94%++ 1.02%
Value............................. 1.04% 0.90% 0.83% 0.83% 0.77% 0.90%
Bond.............................. 0.77%* 0.70%* 0.70%* 0.67%* 0.65%* 0.63%
Short Duration***................. 0.38%* 0.38%* 0.33%* 0.36%* 0.34%* 0.46%
Money Market...................... 0.67%* 0.61%* 0.64%* 0.62%* 0.58%* 0.71%
</TABLE>
------------------
(1) EAFE date of inception is January 1970; 1968 and 1969 are
replications of the index as calculated by InterSec Research.
(2) LB AGG not available for 30 year period; blended historic data used
to approximate total Bond Market Return.
(3) Historic data used to approximate total One-Year Government Bonds
Return. Source: Ibbotson Associates
(4) A one bill portfolio of the bill having the shortest maturity not
less than one month. Source: Ibbotson Associates
* Reflects the Adviser's agreement not to impose all or a portion of its
advisory fees.
** Includes all funds in the 3/31/98 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 1.64% for 1994, 1.84% for
1995, 1.59% for 1996, 1.00% for 1997, and 0.34% for the six-month
period ending April 30, 1998. Harbor Short Duration Fund commenced
operations 1/1/92.
+ Annualized figure.
++ Reflects the Adviser's and Subadviser's agreement not to impose a
portion of the advisory fee.
<PAGE> 8
DEAR SHAREHOLDER:
An extremely wide angle lens would be needed by any investor wanting a
picture of the really significant financial and economic developments over the
first six months of Harbor Fund's fiscal year.
Consider the scope of global events in the period:
- "Euro euphoria" broke out in the wake of outstanding returns by many
stock markets in Europe.
- Creation of the historic European Economic Union, involving 11 nations
and a common currency--the Euro, appeared to be a certainty by
year-end.
- With mergers and acquisitions accelerated at a rapid pace, agreement
was reached on the largest-ever merger, uniting Chrysler and
Daimler-Benz to form a giant multinational, a step toward making the
world truly one large marketplace.
- Corporate restructuring gained momentum across Europe.
- A financial crisis in Southeast Asia--where the total financial
markets are dwarfed by those in the world's major markets--got the
attention of investors, bankers, and governments worldwide.
- The crisis--which crippled American exports to that area and sent
Asian imports soaring--was blamed for a troubling increase in the U.S.
balance of payments.
- The Asian economic situation also was credited with having a dampening
effect on U.S. inflation and reining in domestic economic growth which
might otherwise have been overheating.
- Powerful new global economic forces--including growing production
capacity and the Asian situation--appear to be stemming inflation
worldwide.
What does all this mean?
Each of these developments seems to give credence to "economic
globalization," the notion that one world economy is drawing ever closer.
Among those who take that view is Bill Gross of Pacific Investment
Management Co. (PIMCO) and portfolio manager of the Harbor Bond Fund, who says a
cyclical worldwide production "glut" will hold down inflation and produce
slower-than-average worldwide economic growth over the next several years.
While less than an exciting prospect for equity investors, this should be
good news for bond investors, he notes.
That scenario provides a sharp contrast to the dynamic performance of
equities in Europe during the first half of our fiscal year. On balance,
Harbor's three international equity funds, had standout performances during the
half in the face of the serious problems in Southeast Asia.
While equity investors would be well advised to take a realistic view of
prospects for prolonged continuation of the off-the-chart equity returns in the
current long-standing bull market, this also might be a good time to consider
international equities.
Comparison of the performance of the S&P 500 index and the EAFE
index--created in 1970 to provide a benchmark for international (non-U.S.)
equity market performance--provides interesting insight as illustrated in the
chart below.
While there were periods when one index significantly outperformed the
other, equally strong total returns were recorded by both indexes between 1970
and the end of 1997. The EAFE index outperformed the S&P 500 throughout most of
the decade of the 1980s. For the last 10 years, however, the S&P gains have been
stronger and have moved ahead sharply in the last 18 months.
2
<PAGE> 9
DEAR SHAREHOLDER--CONTINUED
The point here is that plotting of relative performance of domestic and
international equities for even the last 25 years and more shows that over
longer periods of time both have produced about the same result. And since
diversification is one of the cornerstones of sensible investing, international
equities offer an important avenue to further diversity.
We continue to believe that the outlook for both domestic and international
equities remains positive with subdued inflation at home and abroad.
As always we suggest investors choose an asset allocation mix of equities
and fixed income investments with a level of risk appropriate for individual
goals and to stay with it rather than attempting to time the market.
On balance, performance of the Harbor funds in the first half of the fiscal
year was very strong. The Harbor Capital Appreciation Fund posted an outstanding
gain, as did the Harbor Value Fund. Harbor Growth Fund has achieved an
exceptional gain for the 12-month period since a change in the subadviser on May
2 last year.
As mentioned, the Harbor international equity funds--with a portfolio focus
on Europe--did exceptionally well. The Fund portfolio managers believe the
outlook for continued strong gains in Europe is particularly good.
Once again, we urge your careful review of the detailed performance of the
Harbor funds on the pages which follow this letter and because expenses are an
important element of your investment program we also invite your attention to
the expense ratios of the Harbor funds on page 1.
Thank you again for investing with us.
Sincerely,
Ronald C. Boller
Ronald C. Boller
President
[GRAPH]
<TABLE>
<CAPTION>
EAFE IN U.S. $ VS S&P 500*
(12/31/1969 TP 12/31/97)
1969 1970 1971 1972 1973 1974 1975 1976 1977 1978
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
S&P 500 1 1.04007 1.18 1.41454 1.20715 0.887644 1.21787 1.50825 1.3999 1.49174
EAFE 1 0.883392 1 1.56092 1.32799 1.02037 1.3815 1.41657 1.67236 2.21792
<CAPTION>
1979 1980 1981 1982 1983 1984 1985 1986 1987 1988
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
S&P 500 1.76681 2.3396 2.22475 2.70105 3.30916 3.51653 4.64737 5.50576 5.79376 6.76765
EAFE 2.32329 2.84786 2.78298 2.73128 3.37836 3.62775 5.66526 9.59921 11.9637 15.3457
<CAPTION>
1989 1990 1991 1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
S&P 500 8.89884 8.6165 11.2488 12.1116 13.3215 13.4957 18.5471 22.8266 30.4422
EAFE 16.9626 12.9854 14.5601 12.7878 16.9515 18.27 20.3177 21.5463 21.9294
</TABLE>
*Source: Harbor Capital Advisors, Inc.
3
<PAGE> 10
HARBOR FUND
The following performance figures are annualized for each Fund except for
the six-month total return calculations. The date of inception for Harbor Growth
Fund was November 19, 1986; Harbor International Growth Fund was November 1,
1993; Harbor International Fund II was June 1, 1996; Harbor Short Duration Fund
was January 1, 1992; and all other Funds started December 29, 1987. Unless
otherwise stated, all comments pertain to the fiscal half ended April 30, 1998.
HARBOR GROWTH FUND 4/30/98 $13.26
NET ASSET VALUE: 10/31/97 $14.20
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
Total Return for Periods Ended 4/30/98
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fund/Index 6 months 12 months 5 years 10 years
-------------------------------------------------------------------------
Harbor Growth 11.95% 41.06% 16.24% 13.03%
-------------------------------------------------------------------------
S&P 500 22.47% 41.21% 23.33% 18.93%
=========================================================================
Total Return for Periods Ended 3/31/98
-------------------------------------------------------------------------
Harbor Growth 11.05% 44.23% 16.21% 13.26%
-------------------------------------------------------------------------
</TABLE>
GRAPH
<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
HARBOR GROWTH AND S&P 500
4/30/88 4/30/89 4/30/90 4/30/91 4/30/92 4/30/93 4/30/94 4/30/95 4/30/96 4/30/97
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GROWTH 10000 11088.4 11631.7 15191.1 15740 16033.2 17505.7 18277.8 25903 24118.2
S&P 500 10000 12276 13552.2 15935.8 18162.4 19840.2 20919.7 24575.5 32044.1 40094.1
PERIODS ENDING APRIL 30
</TABLE>
Performance of small company growth
stocks lagged that of mid- and
large-cap equities in the first six
months of Harbor's fiscal year and
while Harbor Growth Fund outperformed
its peer group, it trailed the S&P 500
Index. Strongest returns in the six
months came from the consumer
non-durables sector--mainly in health
care and retail industries--which
accounted for about 27% of the
portfolio. Technology holdings--which
made up slightly more than 50% of the
portfolio--underperformed the market
even though computer services and
equipment did very well. In the 12
months since a change in the
subadviser, the Fund has returned
41.06%, nearly matching the S&P 500
gain. Over the 12 months ended April
30, the Fund's portfolio holdings were
reduced from 137 to 44, with focus on
smaller market capitalization.
HARBOR INTERNATIONAL GROWTH FUND 4/30/98 $19.29
NET ASSET VALUE: 10/31/97 $16.15
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
Total Return for Periods Ended 4/30/98
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fund/Index 6 months 12 months 5 years Since
Inception
-------------------------------------------------------------------------
Harbor Int'l Growth 24.86% 27.95% -- 18.02%
-------------------------------------------------------------------------
EAFE 15.44% 18.91% 10.09% 8.83%
=========================================================================
Total Return for Periods Ended 3/31/98
-------------------------------------------------------------------------
Harbor Int'l Growth 12.49% 25.41% -- 18.29%
-------------------------------------------------------------------------
</TABLE>
GRAPH
<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
INTERNATIONAL GROWTH AND EAFE
4/30/93 4/30/94 4/30/95 4/30/96 4/30/97
<S> <C> <C> <C> <C> <C>
INTERNATIONAL GROWTH 10000 10405.6 10643.5 14592.6 16470.9
EAFE 10000 10556.6 11146.4 12417.6 12307.2
PERIODS ENDING APRIL 30
</TABLE>
Led by outstanding returns from
holdings in Spain and Italy, Harbor
International Growth Fund recorded
exceptional returns in the first six
months of the fiscal year,
substantially outperforming strong
gains in the EAFE index. During the
period, holdings in both Spain and
Italy were doubled to a total of more
than 27% of the portfolio, and
holdings in Europe were increased by
more than 10% to 88.5%. The largest
portfolio holdings in the U.K.
produced excellent returns of 30.13%.
Holdings in Southeast Asia, which
represented about 25% of the portfolio
in the first half of 1997, were nearly
eliminated by April 30 with the only
remaining Asian holding of 3.5% in
Hong Kong. The exceptional European
returns came despite a moderating
effect from currency translations.
4
<PAGE> 11
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.
4/30/98 $35.02
HARBOR CAPITAL APPRECIATION FUND NET ASSET VALUE: 10/31/97 $34.01
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
Total Return for Periods Ended 4/30/98
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fund/Index 6 months 12 months 5 years 10 years
-------------------------------------------------------------------------
Harbor Capital 20.94% 48.49% 25.37% 20.71%
Appreciation
-------------------------------------------------------------------------
S&P 500 22.47% 41.21% 23.33% 18.93%
=========================================================================
Total Return for Periods Ended 3/31/98
-------------------------------------------------------------------------
Harbor Capital 11.95% 53.75% 23.69% 20.49%
Appreciation
-------------------------------------------------------------------------
</TABLE>
GRAPH
<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
HARBOR CAPITAL APPRECIATION AND S&P 500
4/30/88 4/30/89 4/30/90 4/30/91 4/30/92 4/30/93 4/30/94 4/30/95 4/30/96 4/30/97
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CAPITAL APPRECIATION 10000 11854.6 12565.8 15650.3 19019.2 21209.6 23772.6 29010.9 38183.1 24118.2
S&P 500 10000 12276 13552.2 15935.8 18162.4 19840.2 20919.7 24575.5 32044.1 40094.1
PERIODS ENDING APRIL 30
</TABLE>
Strong gains in the fiscal second
quarter significantly boosted Harbor
Capital Appreciation Fund returns for
the first fiscal half in which the
fund narrowly trailed the returns of
the S&P 500 index. The best
contributions to the strong
performance came from the two largest
sectors--technology (33%), primarily
telecommunications and computer
services, where the portfolio slightly
outperformed the market, and in
consumer non-durables (34%), such as
retail and drug and medicine, where it
slightly underperformed the market.
Returns from the third largest
sector--financials, representing
almost 18% of the portfolio, were
below the return in that market, even
though credit oriented companies did
very well.
4/30/98 $13.00
HARBOR INTERNATIONAL FUND II NET ASSET VALUE: 10/31/97 $12.14
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
Total Return for Periods Ended 4/30/98
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fund/Index 6 months 12 months 5 years Since
Inception
---------------------------------------------------------------------------
Harbor International II 13.16% 19.36% -- 18.39%
---------------------------------------------------------------------------
EAFE 15.44% 18.91% 10.09% 10.01%
===========================================================================
Total Return for Periods Ended 3/31/98
---------------------------------------------------------------------------
Harbor International II 1.83% 16.74% -- 19.20%
---------------------------------------------------------------------------
</TABLE>
GRAPH
<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
HARBOR INTERNATIONAL II AND EAFE
4/30/96 4/30/97
<S> <C> <C>
INTERNATIONAL II 10000 11578.6
EAFE 10000 10096.9
PERIODS ENDING APRIL 30
</TABLE>
Despite an overweighting in Europe
which produced good returns, Harbor
International Fund II underperformed
the EAFE index in the fiscal first
half. Returns from holdings in most
European countries fell short of the
gains in the index in those countries.
Returns from the Fund's largest
holdings in France (15% of the
portfolio) were excellent and those
from holdings in the UK (almost 14%)
were good. Exceptional gains came from
smaller holdings in Denmark and
Finland. Returns from holdings in
Singapore, Hong Kong and Japan were
negative.
5
<PAGE> 12
HARBOR FUND--CONTINUED
The following performance figures are annualized for each Fund except for
the six-month total return calculations. The date of inception for Harbor Growth
Fund was November 19, 1986; Harbor International Growth Fund was November 1,
1993; Harbor International Fund II was June 1, 1996; Harbor Short Duration Fund
was January 1, 1992; and all other Funds started December 29, 1987. Unless
otherwise stated, all comments pertain to the fiscal half ended April 30, 1998.
4/30/98 $41.64
HARBOR INTERNATIONAL FUND NET ASSET VALUE: 10/31/97 $35.84
<TABLE>
<CAPTION>
----------------------------------------------------------------------
Total Return for Periods Ended 4/30/98
--------- ---------
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fund/Index 6 months 12 months 5 years 10 years
----------------------------------------------------------------------
Harbor International 20.48% 28.17% 20.34% 17.62%
----------------------------------------------------------------------
EAFE 15.44% 18.91% 10.09% 6.13%
======================================================================
Total Return for Periods Ended 3/31/98
--------- ---------
----------------------------------------------------------------------
Harbor International 7.99% 24.95% 20.63% 17.64%
----------------------------------------------------------------------
</TABLE>
GRAPH
<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENTS IN
HARBOR INTERNATIONAL AND EAFE
4/30/88 4/30/89 4/30/90 4/30/91 4/30/92 4/30/93 4/30/94 4/30/95 4/30/96 4/30/97
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTERNATIONAL 10000 11103.3 9651.79 10071.7 9217.09 11209.6 13074.7 13805.2 15379.6 15242.9
EAFE 10000 13732.8 15631.9 16952.4 19139.4 20080.3 25573.2 28248.4 33573.5 39538.6
PERIODS ENDING APRIL 30
</TABLE>
Exceptional returns from holdings in
Europe, representing 73% of the
portfolio, led Harbor International
Fund to another strong performance in
the first half of the fiscal year.
Once again, the Fund significantly
outperformed the EAFE index.
Outstanding gains were recorded by
relatively small positions in
Portugal, Italy and Denmark, although
holdings in Italy were increased
during the six months. The effect of
currency translations for the period
reduced investment returns from most
countries. In the period, holdings
were reduced in Japan, in Hong Kong,
and in Russia, where profits in Lukoil
were taken.
4/30/98 $16.92
HARBOR VALUE FUND NET ASSET VALUE: 10/31/97 $18.17
<TABLE>
<CAPTION>
----------------------------------------------------------------------
Total Return for Periods Ended 4/30/98
--------- ---------
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fund/Index 6 months 12 months 5 years 10 years
----------------------------------------------------------------------
Harbor Value 17.63% 38.37% 20.61% 16.93%
----------------------------------------------------------------------
S&P 500 22.47% 41.21% 23.33% 18.93%
======================================================================
Total Return for Periods Ended 3/31/98
--------- ---------
----------------------------------------------------------------------
Harbor Value 13.79% 43.65% 19.60% 17.07%
----------------------------------------------------------------------
</TABLE>
GRAPH
<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENTS IN
HARBOR VALUE AND S&P 500
4/30/88 4/30/89 4/30/90 4/30/91 4/30/92 4/30/93 4/30/94 4/30/95 4/30/96 4/30/97
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
VALUE 10000 13198.4 14270.3 16160.3 17699.7 18713.3 19485.2 22722.9 29145.1 34521.4
S&P 500 10000 12276 13552.2 15935.8 18162.4 19840.2 20919.7 24575.5 32044.1 40094.1
PERIODS ENDING APRIL 30
</TABLE>
Good returns from holdings in many
sectors of the portfolio contributed
to Harbor Value Fund performance in
the first half of the fiscal year but
the Fund lagged the outstanding gain
in the S&P 500 index for the period.
Fund holdings in telephone companies,
consumer durables, and energy
outperformed their market segments.
Returns from several other segments of
the portfolio--principally basic
materials--were responsible for
pulling overall performance below that
of the market. Passive management of
25% of Fund assets--aimed at reducing
volatility--added broad
diversification.
6
<PAGE> 13
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.
4/30/98 $11.42
HARBOR BOND FUND NET ASSET VALUE: 10/31/97 $11.57
<TABLE>
<CAPTION>
----------------------------------------------------------------------
Total Return for Periods Ended 4/30/98
--------- ---------
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fund/Index 6 months 12 months 5 years 10 years
----------------------------------------------------------------------
Harbor Bond 3.48% 10.59% 7.29% 9.83%
----------------------------------------------------------------------
LB AGG 3.59% 10.91% 6.91% 9.06%
======================================================================
Total Return for Periods Ended 3/31/98
--------- ---------
----------------------------------------------------------------------
Harbor Bond 4.20% 11.81% 7.49% 9.72%
----------------------------------------------------------------------
</TABLE>
GRAPH
<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENTS IN
HARBOR BOND AND LB AGG
4/30/88 4/30/89 4/30/90 4/30/91 4/30/92 4/30/93 4/30/94 4/30/95 4/30/96 4/30/97
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BOND 10000 10794.3 11768.8 13556.6 15047.8 17043.3 17188.5 18445.5 20040.1 21459.8
LB AGG 10000 10939.5 11734.2 13494.3 15479.4 17966.2 18301 19482.3 21368.2 23095.9
PERIODS ENDING APRIL 30
</TABLE>
Harbor Bond Fund returns after fees
fell narrowly below those of the
Lehman Brothers Aggregate index for
the fiscal first half. The Fund
benefited from the gradual decline in
interest rates and the stable yield
curve over the six months. Positive
effects of overweighting in mortgage
backed securities and underweighting
investment grade corporate securities
offset difficulties resulting from the
increasing emerging market risk
premium.
4/30/98 $8.60
HARBOR SHORT DURATION FUND NET ASSET VALUE: 10/31/97 $8.66
<TABLE>
<Cation>
----------------------------------------------------------------------
Total Return for Periods Ended 4/30/98
--------- ---------
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fund/Index 6 months 12 months 5 years Since
Inception
----------------------------------------------------------------------
Harbor Short Duration 2.81% 6.16% 5.46% 5.33%
----------------------------------------------------------------------
1-Yr Gvt 2.61% 6.12% 5.20% 5.09%
----------------------------------------------------------------------
Total Return for Periods Ended 3/31/98
--------- ---------
----------------------------------------------------------------------
Harbor Short Duration 2.79% 6.08% 5.48% 5.32%
----------------------------------------------------------------------
</TABLE>
GRAPH
<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENTS IN
HARBOR SHORT DURATION AND 1 YR GVT
4/30/92 4/30/93 4/30/94 4/30/95 4/30/96 4/30/97
<S> <C> <C> <C> <C> <C> <C>
SHORT DURATION 10065.2 10650.3 10914.4 11530.1 12175.2 13089
1 YR GVT 10131.3 10631.5 10891 11614.9 12220.4 12906.4
PERIODS ENDING APRIL 30
</TABLE>
Performance of the Harbor Short
Duration Fund exceeded that of both
one-year treasury bills and 90-day
treasury bills in the first half of
the fiscal year. Three strategies were
pursued to add value. Sector
allocation--in which holdings of
treasuries were cut back and holdings
of asset and mortgage backed
securities were increased--and yield
curve exposure--which involved
addition of longer dated securities
and paring of shorter term
securities--both added value. The
third strategy of maintaining a longer
term interest rate duration during
much of the six month period had a
negligible effect.
7
<PAGE> 14
HARBOR FUND--CONTINUED
The following performance figures are annualized for each Fund except for
the six-month total return calculations. The date of inception for Harbor Growth
Fund was November 19, 1986; Harbor International Growth Fund was November 1,
1993; Harbor International Fund II was June 1, 1996; Harbor Short Duration Fund
was January 1, 1992; and all other Funds started December 29, 1987. Unless
otherwise stated, all comments pertain to the fiscal half ended April 30, 1998.
4/30/98 $1.00
HARBOR MONEY MARKET FUND NET ASSET VALUE: 10/31/97 $1.00
<TABLE>
<CAPTION>
----------------------------------------------------------------------
Total Return for Periods Ended 4/30/98
----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fund/Index 6 months 12 months 5 years 10 years
----------------------------------------------------------------------
Harbor Money Market 2.57% 5.23% 4.67% 5.55%
----------------------------------------------------------------------
T-Bills 2.61% 5.30% 4.89% 5.65%
======================================================================
Current Yield for Periods Ended 3/31/98
----------------------------------------------------------------------
Harbor Money Market 7 days: 4.90% 30 days: 5.03%
----------------------------------------------------------------------
</TABLE>
GRAPH
<TABLE>
<CAPTION>
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
HARBOR MONEY MARKET AND T-BILLS
4/30/88 4/30/89 4/30/90 4/30/91 4/30/92 4/30/93 4/30/94 4/30/95 4/30/96 4/30/97
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MONEY MARKET 10000 10819.4 11766 12662.9 13263.1 13659 14041.9 14729.1 15524.3 16303.9
T-BILLS 10000 10804.7 11719.1 12588.2 13218.4 13651.5 14084.1 14805.1 15627.2 16457
PERIODS ENDING APRIL 30
</TABLE>
Returns of Harbor Money Market Fund
were slightly below those of 90-day
treasury bills but again outperformed
the IBC's average for all taxable
money market funds in the first half
of the fiscal year. Short term
interest rates, as measured by 90-day
treasury bills, declined in the second
quarter of the fiscal year after
having risen in the first quarter as a
result of liquidations by foreign
central banks forced by the Asian
financial crisis. Average maturity was
maintained at the longer end of the
Fund's range, which is limited to 90
days in money market funds, in
anticipation of falling short term
rates. The portfolio remained heavily
weighted toward very high quality
short term money market instruments
such as commercial paper and
certificates of deposit. 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.
8
<PAGE> 15
HARBOR GROWTH FUND
PORTFOLIO OF INVESTMENTS--APRIL 30, 1998 (UNAUDITED)
Common Stock Holdings (%)
(Excludes net cash, convertible bonds and short-term investments of 9.3%)
<TABLE>
<S> <C>
Domestic Oil
1.0
Machinery
1.2
Pollution Control
1.5
Services
1.8
Manufacturing Diversified
1.9
Automobile Equipment
2.3
Leisure & Luxury
2.3
Apparel & Textiles
2.6
Electric Power
2.6
Retail-All Other
2.9
Computers & Business Equipment
3.0
Media
3.0
Drugs & Medicine
4.6
Semiconductors
4.9
Miscellaneous Hi Tech
5.1
Health Care-Hospital Management
7.4
Electronic Instruments
9.9
Telecommunications
13.6
Computer Services
19.1
</TABLE>
<TABLE>
<CAPTION>
COMMON STOCKS--90.7%
VALUE
SHARES (000S)
--------- --------
<S> <C> <C>
APPAREL & TEXTILES--2.6%
TJX Companies Inc. New.................. 70,000 $ 3,098
--------
AUTOMOBILE EQUIPMENT--2.3%
Tower Automotive, Inc.*................. 51,200 2,730
--------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000S)
--------- --------
<S> <C> <C>
COMPUTER SERVICES--19.1%
AXENT Technologies, Inc.*............... 75,840 $ 1,991
BMC Software Inc.*...................... 28,600 2,676
DataWorks Corp.*........................ 200,000 4,425
Legato Systems Inc.*.................... 200,000 6,325
Network Appliance Inc.*................. 100,000 3,606
Project Software & Development Inc.*.... 110,000 2,915
Zitel Corp.*............................ 100,000 894
--------
22,832
--------
COMPUTERS & BUSINESS EQUIPMENT--3.0%
E M C Corp. Mass*....................... 76,200 3,515
--------
DOMESTIC OIL--1.0%
Valero Energy Corp...................... 36,200 1,172
--------
DRUGS & MEDICINE--4.6%
Dura Pharmaceuticals Inc.*.............. 41,700 1,105
Elan Corp. PLC*......................... 45,200 2,808
Molecular Devices Corp.*................ 95,000 1,603
--------
5,516
--------
ELECTRIC POWER--2.6%
AES Corp.*.............................. 55,400 3,057
--------
ELECTRONIC INSTRUMENTS--9.9%
Checkpoint Systems Inc.*................ 160,000 2,990
Genrad, Inc.*........................... 100,000 2,006
Lo Jack Corp.*.......................... 280,000 3,815
Tellabs Inc.*........................... 42,000 2,977
--------
11,788
--------
HEALTH CARE-HOSPITAL MANAGEMENT--7.4%
Health Management Association*.......... 104,100 3,279
Healthsouth Corp.*...................... 73,700 2,225
Safeskin Corp.*......................... 85,000 3,028
UroCor Inc.*............................ 37,500 295
--------
8,827
--------
LEISURE & LUXURY--2.3%
Carnival Corp........................... 40,000 2,782
--------
MACHINERY--1.2%
Hirsch International Corp.*............. 140,000 1,382
--------
MANUFACTURING DIVERSIFIED--1.9%
Brunswick Technologies, Inc.*........... 165,000 2,310
--------
MEDIA--3.0%
Chancellor Media Corp.*................. 74,200 3,520
--------
MISCELLANEOUS HI TECH--5.1%
Planar Systems Inc.*.................... 203,500 2,493
Sawtec Inc.*............................ 75,000 2,278
The JPM Company*........................ 105,000 1,352
--------
6,123
--------
</TABLE>
9
<PAGE> 16
HARBOR GROWTH FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
<TABLE>
<CAPTION>
COMMON STOCKS--CONTINUED
VALUE
SHARES (000S)
--------- --------
<S> <C> <C>
POLLUTION CONTROL--1.5%
USA Waste Services Inc.*................ 36,120 $ 1,772
--------
RETAIL-ALL OTHER--2.9%
Consolidated Stores Corp.*.............. 40,000 1,600
Dollar Tree Stores Inc.*................ 35,000 1,899
--------
3,499
--------
SEMICONDUCTORS--4.9%
Advanced Technology Materials Inc.*..... 107,500 2,997
Dallas Semiconductor Corp............... 75,000 2,892
--------
5,889
--------
SERVICES--1.8%
Robert Half International Inc.*......... 40,000 2,165
--------
TELECOMMUNICATIONS--13.6%
Aspect Telecommunications Corp.*........ 135,000 3,881
Comverse Technology, Inc.*.............. 75,000 3,553
Nextel Communications Inc.*............. 100,000 2,869
P-Com Inc.*............................. 150,000 2,953
Teleport Communications Group, Inc.*.... 25,000 1,347
Transcrypt International Inc.*.......... 237,500 1,659
--------
16,262
--------
TOTAL COMMON STOCKS
(Cost $81,071)..................................... 108,239
--------
CONVERTIBLE BONDS--2.0%
(Cost $2,000)
<CAPTION>
PRINCIPAL
AMOUNT
(000S)
---------
<S> <C> <C>
Mansur Industries, Inc.
8.250%--02/03/2023.................... $2,000 2,420
--------
SHORT-TERM INVESTMENT--7.4%
(Cost $8,836)
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
--------- --------
<S> <C> <C>
REPURCHASE AGREEMENTS
Repurchase Agreement with State Street
Bank & Trust dated April 30, 1998 due
May 1, 1998 at 4.50%, collateralized
by a U.S. Treasury Note, 10.625%
August 15, 2015, par value of $5,980
(repurchase proceeds of $9,020 when
closed on May 1, 1998)................ $8,836 $ 8,836
--------
TOTAL INVESTMENTS--100.1%
(Cost $91,907)..................................... 119,495
CASH AND OTHER ASSETS,
LESS LIABILITIES--(0.1%)........................... (76)
--------
TOTAL NET ASSETS--100.0%............................. $119,419
========
</TABLE>
- ------------
* Non-income producing security.
The accompanying notes are an integral part of the financial statements.
10
<PAGE> 17
HARBOR INTERNATIONAL GROWTH
PORTFOLIO OF INVESTMENTS--APRIL 30, 1998 (UNAUDITED)
Investment Holdings By Country (%)
(Excludes net cash and short-term investments of 1.2%)
<TABLE>
<S> <C>
Belgium (BEL) 2.2
Sweden (SW) 2.7
Denmark (DEN) 2.9
Australia (AUS) 3.4
Mexico (MEX) 3.4
Hong Kong (HK) 3.5
Portugal (PORT) 3.6
Netherlands (NET) 4.8
Germany (GER) 5.8
Spain (SP) 8.1
France (FR) 10.9
Italy (IT) 19.0
United Kingdom (UK) 28.5
</TABLE>
<TABLE>
<CAPTION>
COMMON STOCKS--98.8%
VALUE
SHARES (000S)
---------- ----------
<S> <C> <C>
APPAREL & TEXTILES--2.9%
Adidas Salomon AG (GER)............. 209,935 $ 34,803
----------
BANKS--17.6%
Banco Bilbao Vizcaya (SP)........... 886,100 45,614
Banco Commercial
Portugues--Registered (PORT)...... 952,016 33,376
Credito Italiano SPA (IT)........... 14,491,400 76,165
HSBC Holdings PLC (UK).............. 1,887,000 53,838
----------
208,993
----------
BUSINESS SERVICES--4.9%
Rentokil Initial PLC (UK)........... 8,961,600 57,749
----------
CHEMICALS--2.8%
SGL Carbon (GER).................... 319,895 33,709
----------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000S)
---------- ----------
<S> <C> <C>
ELECTRICAL EQUIPMENT--8.2%
ABB AB Series A (SW)................ 1,983,700 $ 32,156
Siebe PLC (UK)...................... 2,897,400 64,749
----------
96,905
----------
HOUSEHOLD PRODUCTS--3.4%
Kimberly-Clark De Mexico SA (MEX)... 8,148,800 40,023
----------
INDUSTRIAL MACHINERY--3.6%
Valeo (FR).......................... 426,017 42,382
----------
INSURANCE--7.6%
Assicurazioni Generali (IT)......... 1,421,968 42,787
AXA UAP (FR)........................ 408,599 47,990
----------
90,777
----------
LEISURE--5.6%
Granada Group PLC (UK).............. 3,840,736 66,171
----------
MEDIA--9.6%
British Sky Broadcast PLC (UK)...... 2,470,500 17,976
Pearson PLC (UK).................... 2,519,000 39,481
Vereniging Neder Uittevers (NET).... 1,741,376 56,376
----------
113,833
----------
PETROLEUM--3.4%
Santos Limited (AUS)................ 4,401,100 15,875
Woodside Petroleum (AUS)............ 3,720,918 24,343
----------
40,218
----------
PHARMACEUTICALS--6.6%
SmithKline Beecham PLC (UK)......... 3,222,275 38,430
Synthelabo (FR)..................... 262,785 39,564
----------
77,994
----------
REAL ESTATE--3.5%
Cheung Kong Holdings (HK)........... 1,731,000 11,509
Sun Hung Kai Properties (HK)........ 4,970,500 29,518
----------
41,027
----------
RETAILING--2.2%
Delhaize Le Lion (BEL).............. 401,112 26,562
----------
TELECOMMUNICATIONS--16.9%
Portugal Telecom (PORT)............. 182,422 9,803
Tele Danmark A/S-B (DEN)............ 403,768 33,927
Telecom Italia MOB (IT)............. 7,224,800 41,195
Telecom Italia SPA (IT)............. 4,297,700 32,148
Telecom Italia SPA-RNC (IT)......... 6,300,900 33,223
Telefonica de Espana (SP)........... 1,128,600 47,130
Telefonica de Espana New (SP)....... 75,609 3,157
----------
200,583
----------
TOTAL COMMON STOCKS
(Cost $924,692)................................. 1,171,729
----------
</TABLE>
11
<PAGE> 18
HARBOR INTERNATIONAL GROWTH
PORTFOLIO OF INVESTMENTS--CONTINUED
SHORT-TERM INVESTMENT--2.0%
(Cost $24,471)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
---------- ----------
<S> <C> <C>
COMMERCIAL PAPER
Ford Motor Credit Co.
5.430%--05/01/1998................ $24,471 $ 24,471
----------
TOTAL INVESTMENTS--100.8%
(Cost $949,163)................................. 1,196,200
CASH AND OTHER ASSETS,
LESS LIABILITIES--(0.8%)........................ (9,793)
----------
TOTAL NET ASSETS--100%............................ $1,186,407
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE> 19
HARBOR CAPITAL APPRECIATION FUND
PORTFOLIO OF INVESTMENTS--APRIL 30, 1998 (UNAUDITED)
Common Stock Holdings (%)
(Excludes net cash and short-term investments of 2.2%)
<TABLE>
<CAPTION>
<S> <C>
Air Freight 0.7
Health Care-Hospital Management 1.0
Machinery 1.0
Banks-Regional 1.3
Business Services 1.5
Cosmetics 1.6
Insurance-Life 1.6
Aerospace/Defense 1.8
Financial Services 1.8
Oil Well Equipment & Services 1.9
Chemicals-Fertilizers 2.0
Savings & Loans 2.0
Leisure & Luxury 2.2
Miscellaneous Hi Tech 2.2
Insurance-Other 2.3
Electrical Equipment 2.6
Media 2.8
Hotel-Motel 3.2
Semiconductors 4.6
Electronic Instruments 5.1
Credit & Miscellaneous Financial 5.2
Banks-Money Center 5.5
Computer Services 7.2
Retail-All Other 8.1
Telecommunications 8.3
Computers & Business Equipment 9.0
Drugs & Medicine 11.3
</TABLE>
<TABLE>
<CAPTION>
COMMON STOCKS--97.8%
VALUE
SHARES (000S)
--------- ----------
<S> <C> <C>
AEROSPACE/DEFENSE--1.8%
Boeing Co............................ 1,398,200 $ 69,997
----------
AIR FREIGHT--0.7%
Federal Express Corp.*............... 366,200 24,902
----------
BANKS-MONEY CENTER--5.5%
Chase Manhattan Corp. New............ 831,400 115,201
Citicorp............................. 617,900 92,994
----------
208,195
----------
BANKS-REGIONAL--1.3%
Fleet Financial Group Inc............ 563,200 48,646
----------
BUSINESS SERVICES--1.5%
Omnicom Group........................ 1,225,000 58,034
Reuters Holdings PLC ADR Cl. B(1).... 1 0
----------
58,034
----------
CHEMICALS-FERTILIZERS--2.0%
Monsanto Co.......................... 1,400,300 74,041
----------
COMPUTER SERVICES--7.2%
Gartner Group Inc. New*.............. 979,300 32,439
HBO & Co............................. 999,200 59,765
Microsoft Corp....................... 903,700 81,446
Parametric Technology Corp........... 1,385,300 44,286
SAP Aktiengesellschaft ADR(1)........ 335,100 55,654
----------
273,590
----------
COMPUTERS & BUSINESS
EQUIPMENT--9.0%
3Com Corp.*.......................... 1,057,200 36,209
Cisco Systems Inc.*.................. 1,340,600 98,199
Dell Computer Corp.*................. 1,076,600 86,935
International Business Machines...... 544,300 63,071
Xerox Corp........................... 504,700 57,283
----------
341,697
----------
COSMETICS--1.6%
Gillette Co.......................... 538,800 62,198
----------
CREDIT & MISCELLANEOUS
FINANCIAL--5.2%
Associates First Capital Corp........ 760,000 56,810
MBNA Corp............................ 1,211,475 41,039
Morgan Stanley Dean Witter Discover,
Inc................................ 1,270,920 100,244
----------
198,093
----------
DRUGS & MEDICINE--11.3%
American Home Products Corp.......... 733,500 68,307
Eli Lilly & Co. ..................... 1,089,600 75,795
Pfizer Inc. ......................... 1,069,800 121,757
Schering Plough Corp................. 861,100 68,996
SmithKline Beecham PLC ADR(1)........ 660,200 39,282
Warner-Lambert Co.................... 298,300 56,435
----------
430,572
----------
ELECTRICAL EQUIPMENT--2.6%
General Electric Co.................. 1,172,300 99,792
----------
</TABLE>
13
<PAGE> 20
HARBOR CAPITAL APPRECIATION FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
<TABLE>
<CAPTION>
COMMON STOCKS--CONTINUED
VALUE
SHARES (000S)
--------- ----------
<S> <C> <C>
ELECTRONIC INSTRUMENTS--5.1%
Hewlett Packard Co................... 1,005,600 $ 75,734
KLA Tencor Corp.*.................... 862,700 34,778
Tellabs Inc.*........................ 1,150,800 81,563
----------
192,075
----------
FINANCIAL SERVICES--1.8%
Charles Schwab Corp. New............. 729,800 25,543
Merrill Lynch & Co. Inc.............. 477,900 41,936
----------
67,479
----------
HEALTH CARE-HOSPITAL MANAGEMENT--1.0%
Healthsouth Corp..................... 1,319,900 39,844
----------
HOTEL-MOTEL--3.2%
Hilton Hotels Corp................... 2,218,600 70,857
Promus Hotel Corp. New............... 1,159,900 52,413
----------
123,270
----------
INSURANCE-LIFE--1.6%
UNUM Corp............................ 1,151,000 61,866
----------
INSURANCE-OTHER--2.3%
Ace Ltd.............................. 1,469,900 55,672
MGIC Investment Corp. Wis............ 488,300 30,763
----------
86,435
----------
LEISURE & LUXURY--2.2%
Walt Disney Co....................... 656,100 81,561
----------
MACHINERY--1.0%
Case Corp............................ 614,100 39,034
----------
MEDIA--2.8%
CBS Corp............................. 1,492,100 53,156
Clear Channel Communication*......... 547,900 51,640
----------
104,796
----------
MISCELLANEOUS HI TECH--2.2%
Applied Materials Inc................ 1,318,200 47,620
Diebold Inc.......................... 842,100 34,526
----------
82,146
----------
OIL WELL EQUIPMENT & SERVICES--1.9%
Schlumberger Ltd..................... 878,300 72,789
----------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000S)
--------- ----------
<S> <C> <C>
RETAIL-ALL OTHER--8.1%
Autozone Inc.*....................... 859,300 $ 25,940
Dollar General Corp.................. 1,312,690 49,718
Gap Inc.............................. 1,261,950 64,912
Home Depot Inc....................... 897,200 62,467
Kohl's Corp.*........................ 1,216,800 50,269
Sears, Roebuck & Co.................. 921,200 54,639
----------
307,945
----------
SAVINGS & LOANS--2.0%
Washington Mutual Inc................ 1,074,000 75,247
----------
SEMICONDUCTORS--4.6%
Intel Corp........................... 906,500 73,257
International Rectifier Corp......... 1,503,500 17,666
Texas Instruments Inc................ 1,294,300 82,916
----------
173,839
----------
TELECOMMUNICATIONS--8.3%
Airtouch Communications, Inc......... 1,062,900 56,467
Ciena Corp........................... 1,225,500 68,322
Nokia Corp. ADR(1)................... 864,900 57,840
Vodafone Group PLC ADR(1)............ 349,700 38,445
WorldCom Inc......................... 2,162,100 92,497
----------
313,571
----------
TOTAL COMMON STOCKS
(Cost $2,731,209)............................... 3,711,654
----------
SHORT-TERM INVESTMENT--1.5%
(Cost $56,482)
PRINCIPAL
AMOUNT
(000S)
---------
COMMERCIAL PAPER
Ford Motor Credit Company
5.430%--05/01/1998................... $56,482 56,482
----------
TOTAL INVESTMENTS--99.3%
(Cost $2,787,691)...............................
3,768,136
CASH AND OTHER ASSETS, LESS LIABILITIES--0.7%.....
25,120
----------
TOTAL NET ASSETS--100%............................
$3,793,256
==========
</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.
14
<PAGE> 21
HARBOR INTERNATIONAL FUND II
PORTFOLIO OF INVESTMENTS--APRIL 30, 1998 (UNAUDITED)
Investment Holdings By Country (%)
(Excludes net cash and short-term investments of 5.5%)
<TABLE>
<S> <C>
Canada (CAN)
0.5
Norway (NOR)
0.6
Malaysia (MAL)
0.9
South Africa (S.AFR)
1.5
Finland (FIN)
1.9
Netherlands (NET)
1.9
Poland (POL)
1.9
Portugal (PORT)
2.0
Denmark (DEN)
2.2
Russia (RUS)
2.7
Argentina (ARG)
2.8
Italy (IT)
3.4
Japan (JP)
5.7
Sweden (SW)
6.2
Singapore (SGP)
6.5
Hong Kong (HK)
7.0
Brazil (BR)
7.3
Switzerland (SWS)
10.7
United Kingdom (UK)
13.9
France (FR)
14.9
</TABLE>
<TABLE>
<CAPTION>
COMMON STOCKS--92.9%
VALUE
SHARES (000S)
------------- --------
<S> <C> <C>
APPAREL & TEXTILES--0.0%
Texpar SA (BR)..................... 126,000,000 $ 1
AUTOMOTIVE--0.3%
Jardine International Motor (HK)... 848,000 $ 449
--------
BANKS--13.0%
Bank Slaski (POL).................. 35,000 2,999
Banca Commercial Italiana (IT)..... 425,000 2,150
Banque National Paris (FR)......... 36,646 3,091
Barclays Bank PLC (UK)............. 78,000 2,251
Cie Fin Paribas Cl. A (FR)......... 19,000 2,023
Schweiz Bankverein (SWS)*.......... 1,100 1,771
Societe Generale (FR).............. 9,000 1,875
United Overseas Bank (SGP)......... 875,052 4,147
--------
20,307
--------
BEVERAGES--0.6%
Fraser & Neave (SGP)............... 190,000 852
--------
CONGLOMERATES--6.4%
Jardine Matheson (SGP)............. 465,777 1,966
Keppel Corp. (SGP)................. 1,179,400 3,175
Sime Darby Berhad (MAL)............ 1,600,000 1,416
Swire Pacific Ltd. Cl. A (HK)...... 500,000 2,498
Swire Pacific Ltd. Cl. B (HK)...... 1,025,000 873
--------
9,928
--------
CONSUMER GOODS--2.3%
Hunter Douglas NV (NET)............ 60,686 2,959
Salomon & Taylor (JP).............. 243,000 659
--------
3,618
--------
ELECTRIC UTILITIES--4.2%
Cataguazes Leopold, Pfd. A (BR).... 2,740,000,000 5,031
Unified Energy Systems Pfd (RUS)*.. 4,600,000 1,515
--------
6,546
--------
ELECTRONICS--2.6%
Matsushita Electrical Industries
(JP)............................. 80,000 1,282
Sony Corp. (JP).................... 33,000 2,745
--------
4,027
--------
ENGINEERING--0.7%
Sulzer AG (SWS).................... 1,500 1,075
--------
FOOD--1.3%
Cresud (ARG)....................... 1,050,000 2,100
--------
INDUSTRIAL MACHINERY--0.6%
Komatsu (JP)....................... 225,000 1,020
--------
INSURANCE--6.7%
Assic Generali (IT)................ 102,800 3,093
AXA UAP (FR)....................... 25,000 2,936
Richemont (Cie Fin) (SWS).......... 1,800 2,579
Zurich Vericherun (SWS)............ 3,000 1,828
--------
10,436
--------
LIQUOR--1.8%
Diageo (UK)........................ 233,280 2,778
--------
</TABLE>
15
<PAGE> 22
HARBOR INTERNATIONAL FUND II
PORTFOLIO OF INVESTMENTS--CONTINUED
<TABLE>
<CAPTION>
COMMON STOCKS--CONTINUED
VALUE
SHARES (000S)
------------- --------
<S> <C> <C>
MINING & METALS--5.2%
Anglo American Corp. South Africa
Ltd. (S. AFR.)................... 28,000 $ 1,657
Billiton (UK)...................... 770,000 2,202
Gencor Ltd. (S. AFR)............... 300,000 715
Pechiney (FR)...................... 40,000 1,790
Rio Tinto (UK)..................... 61,341 881
Sedna Geotech Inc. Wts. (CAN)*..... 600,000 0
Sedna Geotech Inc. (CAN)........... 1,036,448 848
--------
8,093
--------
OIL & GAS PRODUCTION--11.4%
British Petroleum (UK)............. 191,512 3,027
Elf Aquitaine (FR)................. 18,500 2,428
LASMO (UK)......................... 475,000 2,088
Oil Co. Lukoil ADR (RUS)(1)........ 42,000 2,783
Petrol Brasileiros, Pfd. (BR)...... 12,000,000 3,043
Total Cl. B (FR)................... 18,500 2,201
YPF Sociedad Anonima ADR
(ARG)(1)......................... 65,000 2,267
--------
17,837
--------
PAPER PRODUCTS--3.0%
Mo Och Domsjo Ab (SW).............. 55,000 1,705
UPM Kymmene Oy (FIN)............... 100,000 3,002
--------
4,707
--------
PHARMACEUTICALS--12.0%
Nobel Biocare (SW)................. 200,000 2,609
Novartis AG (SWS).................. 1,900 3,140
Novo Nordisk AS (DEN).............. 21,000 3,406
Rhone Poulenc SA (FR).............. 60,548 2,962
Roche Holdings AG (SWS)............ 300 3,040
SmithKline Beecham PLC (UK)........ 304,058 3,626
--------
18,783
--------
PHOTOGRAPHY--1.3%
Canon Inc. (JP).................... 42,000 993
Fuji Photo Film Co. (JP)........... 30,000 1,068
--------
2,061
--------
PUBLISHING--2.0%
Investec Consulting (PORT)......... 75,400 3,115
--------
REAL ESTATE--4.5%
Cheung Kong Holdings (HK).......... 575,000 3,823
Sun Hung Kai Properties (HK)....... 550,000 3,266
--------
7,089
--------
TELECOMMUNICATION--4.3%
Ericsson (LM) Tel Co.
Ser. B (SW)...................... 65,000 3,425
Telecomunicacoes Brasil
ADR (BR)(1)...................... 27,000 3,289
--------
6,714
--------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000S)
------------- --------
<S> <C> <C>
TIRES & RUBBER--2.8%
Bridgestone Corp. (JP)............. 50,000 $ 1,141
Cie Fin Michel Bas (SWS)........... 5,200 3,223
--------
4,364
--------
TOBACCO--5.3%
BAT Industries (UK)................ 250,000 2,359
Seita (FR)......................... 88,000 3,953
Swedish Match (SW)................. 550,000 1,904
--------
8,216
--------
TRANSPORTATION--0.6%
Frontline Ltd. (NOR)............... 300,000 925
--------
TOTAL COMMON STOCKS
(Cost $135,422)................................... 145,041
--------
UNITS--1.6%
(Cost $1,445)
UNITS
(000S)
-------------
Eurotunnel (UK)*................... 3,021 2,425
--------
SHORT-TERM INVESTMENT--5.1%
(Cost $8,035)
PRINCIPAL
AMOUNT
(000S)
-------------
COMMERCIAL PAPER
American Express Credit Corp.
5.530%--05/01/1998................. $8,035 8,035
--------
TOTAL INVESTMENTS--99.6%
(Cost $144,902)................................... 155,501
CASH AND OTHER ASSETS,
LESS LIABILITIES--0.4%............................ 648
--------
TOTAL NET ASSETS--100.0%............................ $156,149
========
</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.
16
<PAGE> 23
HARBOR INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS--APRIL 30, 1998 (UNAUDITED)
Investment Holdings By Country (%)
(Excludes net cash, convertible bonds and short-term investments of 6.4%)
<TABLE>
<S> <C>
Finland (FIN)
1.0
Malaysia (MAL)
1.0
Singapore (SGP)
1.1
Australia (AUS)
1.4
Russia (RUS)
1.7
Portugal (PORT)
2.1
Hong Kong (HK)
2.2
Norway (NOR)
2.2
Argentina (ARG)
2.4
Denmark (DEN)
2.5
Italy (IT)
2.6
Spain (SP)
3.1
Brazil (BR)
3.6
South Africa (S. AFR)
3.9
Japan (JP)
5.9
Netherlands (NET)
6.3
Sweden (SW)
8.2
France (FR)
11.2
Switzerland (SWS)
12.8
United Kingdom (UK)
18.4
</TABLE>
<TABLE>
<CAPTION>
COMMON STOCKS--93.1%
VALUE
SHARES (000S)
----------- ----------
<S> <C> <C>
AUTOMOTIVE--1.8%
Volvo AB, Series B (SW)............ 3,661,250 $ 106,877
----------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000S)
----------- ----------
<S> <C> <C>
BANKS--19.4%
ABN Amro Holdings NV (NET)......... 4,261,187 $ 103,782
Banca Commercial Italiana (IT)..... 15,650,000 79,162
Banco Commercial Portugues ADR
(PORT)(1)........................ 503,062 17,230
Banco Bilbao Vizcaya (SP).......... 2,800,450 144,160
Banco Commercial Portugues
(PORT)........................... 3,069,383 107,608
Bankinter Sa (SP).................. 590,000 46,529
Barclays Bank PLC (UK) 4,182,950 120,695
Cie Fin Paribas Cl. A (FR)......... 772,120 82,209
Credit Suisse Group (SWS).......... 426,600 93,821
Malayan Bank Berhad (MAL).......... 8,407,000 24,793
National Westminster Bank (UK)..... 5,826,367 116,657
Royal Bank of Scotland Group
(UK)............................. 6,413,139 99,012
Schweiz Bankverein (SWS)*.......... 230,786 80,133
Societe Generale (FR).............. 184,000 38,324
United Overseas Bank (SGP)......... 4,140,570 19,623
----------
1,173,738
----------
BEVERAGES--3.3%
Cadbury Schweppes (UK)............. 5,379,061 78,459
South African Breweries Ltd. ADR
(S. AFR)(1)...................... 2,121,602 71,160
Whitbread (UK)..................... 3,050,000 52,701
----------
202,320
----------
CONGLOMERATES--4.0%
Keppel Corp. (SGP)................. 17,350,000 46,705
Kvaerner ASA, Series A (NOR)....... 1,042,050 46,257
Sime Darby Berhad (MAL)............ 17,530,000 15,509
Suez Lyonn Eaux (FR)............... 520,487 88,321
Swire Pacific Ltd. Cl. A (HK)...... 9,036,000 45,145
----------
241,937
----------
CONSUMER GOODS--1.5%
BIC (FR)........................... 722,406 49,731
Hunter Douglas NV (NET)............ 866,324 42,242
----------
91,973
----------
ELECTRIC UTILITIES--0.6%
China Light & Power (HK)........... 7,500,000 36,019
----------
ELECTRONICS--2.4%
Ericsson L M Tel Co. ADR
Cl. B (SW)(1).................... 646,000 33,229
Matsushita Electrical Industries
(JP)............................. 2,500,000 40,048
Sony Corp. (JP).................... 871,000 72,463
----------
145,740
----------
ENGINEERING--0.5%
Sulzer AG (SWS).................... 41,250 29,553
----------
FINANCIAL SERVICES--2.2%
ING Groep NV (NET)................. 2,032,547 132,109
----------
</TABLE>
17
<PAGE> 24
HARBOR INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
<TABLE>
<CAPTION>
COMMON STOCKS--CONTINUED
VALUE
SHARES (000S)
----------- ----------
<S> <C> <C>
FOOD--1.6%
Nestle SA (SWS).................... 50,300 $ 97,549
----------
GAS & PIPELINE UTILITIES--1.2%
BG (UK)............................ 13,676,470 73,091
----------
INDUSTRIAL MACHINERY--0.2%
Komatsu (JP)....................... 3,051,000 13,833
----------
INSURANCE--7.2%
Assicurazioni Generali (IT)........ 2,552,000 76,790
AXA UAP (FR)....................... 1,000,000 117,451
Richemont (Cie Fin) (SWS).......... 59,000 84,538
Schweiz Ruckversicher (SWS)........ 71,500 157,724
----------
436,503
----------
INVESTMENT COMPANIES--0.4%
Kinnevik Investment Ser. B (SW).... 925,510 26,359
----------
LIQUOR--1.5%
Diageo (UK)........................ 7,750,000 92,300
----------
MINING & METALS--4.2%
Anglo American Corp.
South Africa Ltd. ADR
(S. AFR)(1).................... 1,286,000 74,427
Billiton PLC ADR (S. AFR)(1)....... 26,950,000 77,086
Gencor Ltd. ADR (S. AFR)(1)........ 5,390,000 12,380
Rio Tinto (UK)..................... 2,113,036 30,343
Trelleborg AB Cl. B (SW)........... 3,312,220 44,494
WMC Ltd. (AUS)..................... 5,016,369 17,865
----------
256,595
----------
NEWSPAPERS--1.1%
News Corp. Ltd. ADR (AUS)(1)....... 2,500,000 68,281
----------
OIL & GAS EXPLORATION--1.2%
LASMO (UK)......................... 15,934,352 70,032
----------
OIL & GAS PRODUCTION--10.8%
British Petroleum (UK)............. 7,080,629 111,924
Norsk Hydro AS (NOR)............... 699,997 34,922
Oil Co. Lukoil ADR (RUS)(1)(2)..... 1,544,870 102,348
Petrol Brasileiros (BR)............ 435,000,001 110,305
Royal Dutch Petroleum Co. ADR
(NET)(1)......................... 1,800,000 101,812
Saga Petroleum AS (NOR)............ 2,809,000 55,754
Total Cl. B (FR)................... 671,444 79,867
YPF Sociedad Anonima ADR Cl. D
(ARG)(1)......................... 1,600,000 55,800
----------
652,732
----------
PAPER PRODUCTS--2.4%
Mo Och Domsjo Ab (SW).............. 1,500,000 46,500
Stora Kopparbergs Series A (SW).... 1,950,000 33,373
UPM Kymmene Oy (FIN)............... 2,100,000 63,039
----------
142,912
----------
PHARMACEUTICALS--8.0%
Novartis AG (SWS).................. 69,561 114,969
Novo Nordisk AS (DEN).............. 933,000 151,338
Rhone Poulenc SA (FR).............. 1,357,133 66,400
SmithKline Beecham PLC ADR Cl. A
(UK)(1).......................... 2,540,000 151,130
----------
483,837
----------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000S)
----------- ----------
<S> <C> <C>
PHOTOGRAPHY--2.8%
Canon Inc. (JP).................... 3,557,000 $ 84,127
Fuji Photo Film Co (JP)............ 2,470,000 87,908
----------
172,035
----------
TELECOMMUNICATION--6.8%
Ericsson (LM) Tel Co.
Series B (SW)...................... 2,640,000 139,127
Hong Kong Telecom (HK)............. 26,349,624 49,325
Telebras, Pfd. (BR)................ 865,000,000 105,586
Telecom Argentina Cl. B (ARG)...... 6,600,000 47,527
Telefonica De Argentina
Cl. B (ARG)...................... 12,000,000 46,207
Telekom Malaysia (MAL)............. 7,650,000 22,970
----------
410,742
----------
TIRES & RUBBER--3.0%
Bridgestone Corp. (JP)............. 2,545,000 58,077
CIE Fin Michel Bas (SWS)........... 88,700 54,976
Michelin Cl. B (FR)................ 1,116,748 70,394
----------
183,447
----------
TOBACCO--4.0%
BAT Industries (UK)................ 10,374,694 97,875
Imperial Tobacco (UK).............. 2,227,400 16,058
Seita (FR)......................... 1,407,150 63,206
Swedish Match (SW)................. 18,818,974 65,144
----------
242,283
----------
TOYS & AMUSEMENTS--1.0%
SMH AG Neuenburg (SWS)............. 400,000 59,980
----------
TOTAL COMMON STOCKS
(Cost $2,942,510)............................... 5,642,777
----------
UNITS--0.5%
(Cost $69,813)
UNITS
(000S)
-----------
Eurotunnel Wt. (FR)*................. 20,000 2,662
Eurotunnel Wt. (FR)*................. 20,000 18,133
Eurotunnel (UK)*..................... 9,692 7,782
----------
28,577
----------
CONVERTIBLE BONDS--1.0%
(Cost $39,600)
PRINCIPAL
AMOUNT
(000S)
-----------
LibLife International BV
6.500%--09/30/2004 (S. AFR)...... $40,000 59,228
----------
</TABLE>
18
<PAGE> 25
HARBOR INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000S)
-----------
SHORT-TERM INVESTMENTS--4.9%
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
----------- ----------
<S> <C> <C>
COMMERCIAL PAPER
American Express Credit Corp.
5.510%--05/04/1998............... $13,000 $ 13,000
5.510%--05/05/1998............... 13,228 13,228
5.510%--05/06/1998............... 15,240 15,240
5.549%--05/08/1998............... 9,199 9,199
5.510%--05/27/1998............... 18,000 18,000
5.510%--05/28/1998............... 18,860 18,860
----------
87,527
----------
Chevron Oil Finance Co.
5.500%--05/07/1998............... 14,470 14,470
5.470%--05/11/1998............... 17,392 17,392
5.490%--05/12/1998............... 16,604 16,604
----------
48,466
----------
Exxon Asset Management Co.
5.400%--05/14/1998............... 18,218 18,218
----------
General Electric Capital Corp.
5.510%--05/01/1998............... 18,000 18,000
5.520%--05/19/1998............... 12,800 12,800
5.520%--05/20/1998............... 13,000 13,000
----------
43,800
----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
----------- ----------
<S> <C> <C>
Prudential Funding Corp.
5.490%--05/13/1998............... $13,730 $ 13,730
5.490%--05/15/1998............... 19,022 19,022
5.490%--05/18/1998............... 17,879 17,879
5.500%--05/21/1998............... 14,000 14,000
5.500%--05/22/1998............... 14,598 14,598
5.520%--05/26/1998............... 20,874 20,874
----------
100,103
----------
TOTAL SHORT-TERM INVESTMENTS
(Cost $298,114)................................. 298,114
----------
TOTAL INVESTMENTS--99.5%
(Cost $3,350,037)............................... 6,028,696
CASH AND OTHER ASSETS,
LESS LIABILITIES--0.5%.......................... 31,372
----------
TOTAL NET ASSETS--100.0%.......................... $6,060,068
==========
</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 April 30, 1998,
these securities were valued at $102,348 or 1.7% of net assets.
* Non-income producing security.
The accompanying notes are an integral part of the financial statements.
19
<PAGE> 26
HARBOR VALUE FUND
PORTFOLIO OF INVESTMENTS--APRIL 30, 1998 (UNAUDITED)
Common Stock Holdings (%)
(Excludes 12.2% of holdings of which 1% represents net cash and short-term
investments and 11.2% represents industry classifications less than 1.5%)
<TABLE>
<S> <C>
Furnishings & Appliances
1.5
Liquor
1.5
Health Care-Hospital Management
1.6
Real Estate Investment Trusts
1.6
Services
1.6
Building Material-Construction
1.8
Containers
2.1
Crude Producers
2.1
Drugs & Medicine
2.3
Forest Products
2.3
Pollution Control
2.3
Retail-Food Stores
2.4
Computer-Business Equipment
2.7
Electrical Equipment
2.7
Steel
2.8
Grocery Products
3.2
Natural Gas & Pipelines
3.3
Electronic Instruments
3.4
Retail-All Other
3.4
Domestic Oil
3.6
Insurance-Other
3.6
Electric Power
3.7
International Oil
3.7
Chemicals-Fertilizers
4.0
Automobile Equipment
4.1
Telephones
4.1
Banks-Regional
4.3
Paper
5.1
Banks-Money Center
7.0
</TABLE>
<TABLE>
<CAPTION>
COMMON STOCKS--99.0%
VALUE
SHARES (000S)
--------- --------
<S> <C> <C>
AEROSPACE/DEFENSE--0.2%
Boeing Co............................... 1,000 $ 50
Lockheed Martin Corp.................... 1,100 122
Raytheon Co. Cl.A....................... 675 37
Raytheon Co. Cl.B....................... 1,900 108
United Technologies Corp................ 1,300 128
--------
445
--------
AIR TRANSPORTATION--1.0%
AMR Corp. Del.*......................... 4,500 686
Delta Air Lines Inc. Del................ 3,800 442
UAL Corp.*.............................. 400 35
US Airways Group Inc.*.................. 10,000 711
--------
1,874
--------
ALUMINUM--0.8%
Aluminum Company of America............. 1,000 78
Reynolds Metal Co....................... 22,900 1,511
--------
1,589
--------
APPAREL & TEXTILES--0.9%
Unifi Inc............................... 45,300 1,736
--------
AUTOMOBILE EQUIPMENT--4.1%
Baxter International Inc................ 61,300 3,398
Genuine Parts Co........................ 40,500 1,458
Navistar International Corp.*........... 5,500 164
TRW Inc................................. 57,100 3,016
--------
8,036
--------
AUTOMOBILES--0.5%
Chrysler Corp........................... 6,200 249
Ford Motor Co. Del...................... 4,600 211
General Motors Corp..................... 7,600 512
--------
972
--------
BANKS-MONEY CENTER--7.0%
Bank New York Inc....................... 7,500 443
BankAmerica Corp........................ 25,800 2,193
BankBoston Corp......................... 6,900 745
Chase Manhattan Corp. New............... 9,500 1,316
Citicorp................................ 13,000 1,956
First Chicago NBD Corp.................. 6,500 604
J. P. Morgan & Company Inc.............. 3,500 459
Mellon Bank Corp........................ 3,800 274
Northern Trust Corp..................... 1,400 102
Republic NY Corp........................ 2,600 348
State Street Corp....................... 8,700 622
Wells Fargo & Co........................ 12,200 4,496
--------
13,558
--------
BANKS-REGIONAL--4.3%
Albank Final............................ 1,500 79
Banc One Corp........................... 1,863 110
Crestar Financial Corp.................. 30,500 1,824
Dime Bancorp Inc. New................... 10,200 313
First American Corp. TN................. 6,100 301
First Union Corp........................ 18,526 1,118
Firstar Corp. New....................... 1,200 45
Fleet Financial Group Inc............... 3,000 259
Golden State Bancorp Inc.*.............. 6,000 234
</TABLE>
20
<PAGE> 27
HARBOR VALUE FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
<TABLE>
<CAPTION>
COMMON STOCKS--CONTINUED
VALUE
SHARES (000S)
--------- --------
<S> <C> <C>
Greenpoint Financial Corp............... 4,600 $ 183
H F Ahmanson & Co....................... 5,200 396
Huntington Bancshares Inc............... 3,470 123
KeyCorp New............................. 5,000 198
Keystone Financial Inc.................. 500 20
MAF Bancorp Inc......................... 100 4
National City Corp...................... 5,130 357
NationsBank Corp........................ 16,300 1,235
Norwest Corp............................ 10,000 397
Ocean Financial Corp.................... 2,000 79
PNC Bank Corp........................... 4,000 242
SunTrust Banks Inc...................... 3,200 261
Union Planters Corp..................... 5,000 307
US Bancorp Inc.......................... 4,000 328
Wachovia Corp. New...................... 1,000 85
--------
8,498
--------
BUILDING MATERIAL-CONSTRUCTION--1.8%
Armstrong World Industries Inc.......... 24,600 2,109
Tecumseh Products Co.................... 26,800 1,350
--------
3,459
--------
CHEMICALS-FERTILIZERS--4.0%
Dow Chemical Co......................... 1,400 135
E.I. Du Pont De Nemours & Co............ 8,200 597
Eastman Chemical Co..................... 30,500 2,097
Hercules Inc............................ 65,700 3,141
Mallinckrodt Inc. New................... 33,800 1,090
R.P.M. Inc.............................. 45,300 781
--------
7,841
--------
COMPUTER-BUSINESS EQUIPMENT--2.7%
Apple Computer*......................... 600 16
Compaq Computer Corp.................... 28,600 803
Digital Equipment Corp.*................ 13,000 723
International Business Machines Corp.... 10,800 1,251
NCR Corp. New*.......................... 1,693 62
Wallace Computer Service Inc............ 61,600 2,221
Xerox Corp.............................. 2,000 227
--------
5,303
--------
CONGLOMERATES--0.3%
Loews Corp.............................. 4,300 430
Minnesota Mining & Manufacturing Co..... 1,000 94
--------
524
--------
CONTAINERS--2.1%
Crown Cork & Seal Company Inc........... 53,200 2,770
Tenneco Inc. New........................ 30,200 1,300
--------
4,070
--------
CREDIT & MISCELLANEOUS FINANCIAL--1.3%
American Express Co..................... 2,000 204
Associates First Capital Corp........... 1,205 90
<CAPTION>
VALUE
SHARES (000S)
--------- --------
<S> <C> <C>
Countrywide Credit Industries Inc....... 8,500 $ 411
Morgan Stanley Dean Witter Discover
Inc................................... 1,200 95
Travelers Group Inc..................... 28,956 1,772
--------
2,572
--------
CRUDE PRODUCERS--2.1%
Burlington Resources Inc................ 1,767 83
Mitchell Energy & Dev. Corp. Cl. A...... 66,000 1,650
Mitchell Energy & Dev. Corp. Cl. B...... 30,700 775
Noble Affiliates Inc.................... 1,200 52
Ultramar Diamond Shamrock............... 45,600 1,473
--------
4,033
--------
DOMESTIC OIL--3.6%
Amerada Hess Corp....................... 1,400 81
Amoco Corp.............................. 8,600 381
Atlantic Richfield Co................... 22,900 1,786
Kerr McGee Corp......................... 48,300 3,188
Murphy Oil Corp......................... 28,100 1,445
Phillips Petroleum Co................... 1,500 74
Tosco Corp.............................. 500 18
USX Marathon Group New.................. 2,300 82
--------
7,055
--------
DRUGS & MEDICINE--2.3%
American Home Product Corp.............. 20,200 1,881
Bristol Myers Squibb Co................. 3,000 318
Pharmacia & Upjohn Inc.................. 53,800 2,263
--------
4,462
--------
ELECTRIC POWER--3.7%
American Electric Power Inc............. 1,500 72
Dominion Resources Inc. VA.............. 2,700 107
Duke Energy Co.......................... 3,000 174
Edison International.................... 4,000 119
Entergy Corp............................ 4,000 99
Firstenergy Corp........................ 2,500 76
FPL Group Inc........................... 1,000 62
GPU Inc................................. 36,300 1,438
Houston Industries Inc.................. 2,000 58
KU Energy Corp.......................... 9,000 398
LG & E Energy Corp...................... 30,000 795
Midamerican Energy Holdings Co.......... 1,400 30
Niagara Mohawk Power Corp.*............. 3,000 37
OGE Energy Corp......................... 27,300 1,500
P P & L Resources Inc................... 1,500 35
Pacificorp.............................. 2,200 51
Peco Energy Co.......................... 1,700 40
PG&E Corp............................... 3,000 97
Pinnacle West Cap Corp.................. 1,300 58
Potomac Electric Power Co............... 68,700 1,683
Public Service Enterprise Group......... 2,000 67
Southern Co............................. 7,000 185
TECO Energy Inc......................... 1,900 51
Texas Utilities Co...................... 1,700 68
--------
7,300
--------
</TABLE>
21
<PAGE> 28
HARBOR VALUE FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
<TABLE>
<CAPTION>
COMMON STOCKS--CONTINUED
VALUE
SHARES (000S)
--------- --------
<S> <C> <C>
ELECTRICAL EQUIPMENT--2.7%
Emerson Electric Co..................... 2,000 $ 127
General Electric Co..................... 2,500 213
Hubbell Inc. Cl. B...................... 51,100 2,520
Thomas & Betts Corp..................... 41,300 2,411
--------
5,271
--------
ELECTRONIC INSTRUMENTS--3.4%
General Signal Corp..................... 70,300 3,093
Harris Corp.--Delaware.................. 59,900 2,898
Micron Technology Inc.*................. 14,000 435
Teradyne Inc.*.......................... 4,000 146
--------
6,572
--------
FINANCIAL SERVICES--1.0%
A.G. Edwards Inc........................ 6,400 288
Federal Home Loan Mortgage Co........... 1,500 69
Lehman Brothers Holdings Inc............ 10,500 746
Merrill Lynch & Company Inc............. 7,200 632
Paine Webber Group Inc.................. 3,200 143
--------
1,878
--------
FOREST PRODUCTS--2.3%
Boise Cascade Corp...................... 61,400 2,306
Champion International Corp............. 500 27
Georgia Pacific Corp.................... 35,000 897
Louisiana Pacific Corp.................. 1,500 33
Rayonier Inc............................ 23,900 1,198
--------
4,461
--------
FURNISHINGS & APPLIANCES--1.5%
Rubbermaid Inc.......................... 98,300 2,814
Sherwin Williams Co..................... 1,600 57
--------
2,871
--------
GROCERY PRODUCTS--3.2%
Archer Daniels Midland Co............... 3,150 68
Conagra Inc............................. 92,900 2,712
Dean Foods Co........................... 55,200 2,588
Flowers Industries Inc.................. 37,700 806
Sara Lee Corp........................... 500 30
--------
6,204
--------
HEALTH CARE-HOSPITAL MANAGEMENT--1.6%
Columbia/HCA Healthcare Corp............ 3,000 99
C. R. Bard Inc.......................... 65,300 2,339
United Healthcare Corp.................. 10,000 703
--------
3,141
--------
INSURANCE-LIFE--0.5%
Conseco Inc............................. 9,000 447
Equitable Companies Inc................. 10,000 614
--------
1,061
--------
INSURANCE-OTHER--3.6%
Allstate Corp........................... 7,968 767
American International Group Inc........ 3,675 483
CNA Financial Group Inc.*............... 6,000 888
Consolidated Edison Inc................. 2,000 91
Progressive Corp. Ohio.................. 2,000 271
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000S)
--------- --------
<S> <C> <C>
TIG Holdings Inc........................ 52,500 $ 1,263
Transamerica Corp....................... 28,400 3,280
St. Paul Companies Inc.................. 564 48
--------
7,091
--------
INTERNATIONAL OIL--3.7%
Chevron Corp............................ 4,800 397
Exxon Corp.............................. 14,800 1,079
Mobil Corp.............................. 41,700 3,294
Texaco Inc.............................. 39,100 2,405
--------
7,175
--------
LEISURE & LUXURY--0.8%
Brunswick Corp.......................... 48,100 1,563
--------
LIQUOR--1.5%
Brown Forman Corp. Cl. B................ 14,100 798
Seagram Ltd............................. 49,900 2,130
--------
2,928
--------
MACHINERY--1.2%
Caterpillar Inc......................... 2,400 137
Deere & Co.............................. 1,900 111
Flowserve Corp.......................... 70,400 2,103
--------
2,351
--------
MANUFACTURING DIVERSIFIED--0.5%
Johnson Controls, Inc................... 14,900 885
Parker Hannifin Corp.................... 750 33
--------
918
--------
MEDIA--0.0%
CBS Corp................................ 1,000 36
--------
NATURAL GAS & PIPELINES--3.3%
AGL Resources Inc....................... 45,900 955
Columbia Energy Group................... 2,000 163
Enron Corp.............................. 3,900 192
National Fuel Gas Co. NJ................ 21,600 994
Nicor Inc............................... 25,200 1,032
People Energy Corp...................... 37,000 1,341
Sonat Inc............................... 42,200 1,873
--------
6,550
--------
OFFSHORE DRILLING--0.1%
Rowan Cos Inc.*......................... 6,000 177
--------
PAPER--5.1%
Consolidated Papers Inc................. 15,500 1,026
International Paper Co.................. 1,900 99
Kimberly Clark Corp..................... 62,700 3,182
Temple Inland Inc....................... 25,500 1,646
Union Camp Corp......................... 22,800 1,377
Westvaco Corp........................... 26,900 815
Williamette Industries Inc.............. 44,600 1,731
--------
9,876
--------
POLLUTION CONTROL--2.3%
BetzDearborn Inc........................ 33,900 1,818
Pall Corp............................... 138,300 2,714
--------
4,532
--------
</TABLE>
22
<PAGE> 29
HARBOR VALUE FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
<TABLE>
<CAPTION>
COMMON STOCKS--CONTINUED
VALUE
SHARES (000S)
--------- --------
<S> <C> <C>
PUBLISHING--0.1%
Gannett Inc............................. 2,000 $ 136
--------
RAILROADS--0.3%
Burlington Northern Santa Fe............ 500 50
CSX Corp................................ 4,500 236
Norfolk Southern Corp................... 7,500 251
--------
537
--------
REAL ESTATE INVESTMENT TRUSTS--1.6%
Developers Diversified Realty........... 19,300 766
Equity Residential Properties Trust..... 15,300 752
Felcor Suite Hotels..................... 44,200 1,547
--------
3,065
--------
RETAIL-ALL OTHER--3.4%
Borders Group Inc.*..................... 9,000 289
Dayton Hudson Corp...................... 1,700 148
Federated Department Stores Inc.*....... 12,500 615
Kmart Corp.*............................ 21,500 375
Limited Inc............................. 3,761 126
May Department Stores Co................ 29,300 1,807
Mercantile Stores Inc................... 39,200 2,864
Ross Stores Inc......................... 5,000 232
Sears, Roebuck & Co..................... 1,400 83
Wal Mart Stores Inc..................... 2,000 101
--------
6,640
--------
RETAIL-DRUG STORES--0.0%
CVS Corp................................ 600 44
--------
RETAIL-FOOD STORES--2.4%
American Stores Co...................... 78,700 1,889
Giant Foods Inc. Cl. A.................. 74,400 2,771
Kroger Co.*............................. 1,000 42
--------
4,702
--------
SEMICONDUCTORS--0.1%
Western Digital Corp.................... 14,400 284
--------
SERVICES--1.6%
H & R Block Inc......................... 69,000 3,105
--------
SOFT DRINKS--0.0%
Coca Cola Enterprises Inc............... 2,100 79
--------
STEEL--2.8%
Allegheny Teldyne Inc................... 92,800 2,355
British Steel PLC ADR(1)................ 54,700 1,487
Harsco Corp............................. 28,700 1,320
Inland Steel Industry Inc............... 4,000 117
LTV Corp. New........................... 7,400 96
--------
5,375
--------
TELECOMMUNICATION--0.3%
Lucent Technologies Inc................. 5,194 395
Worldcom Inc. GA*....................... 3,000 128
--------
523
--------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000S)
--------- --------
<S> <C> <C>
TELEPHONES--4.1%
Alltel Corp............................. 50,400 $ 2,155
Ameritech Corp.......................... 2,800 119
AT&T Corp............................... 19,300 1,159
Bell Atlantic Corp...................... 1,200 112
Bellsouth Corp.......................... 3,900 250
Frontier Corp........................... 44,800 1,341
GTE Corp................................ 39,800 2,326
SBC Communications Inc.................. 3,800 157
Sprint Corp............................. 6,800 465
--------
8,084
--------
TIRES & RUBBER--1.2%
B.F. Goodrich Co........................ 40,300 $ 2,169
Goodyear Tire and Rubber Co............. 2,700 189
--------
2,358
--------
TOYS--0.1%
Toys R Us Inc.*......................... 4,300 119
--------
TOTAL COMMON STOCKS
(Cost $167,929).................................... 193,034
--------
SHORT-TERM INVESTMENTS--0.6%
PRINCIPAL
AMOUNT
(000S)
---------
REPURCHASE AGREEMENTS
Repurchase Agreement with State Street
Bank & Trust dated April 30, 1998 due
on May 1, 1998 at 4.50%,
collateralized by a U.S. Treasury
Note, 10.625% August 15, 2015, par
value of $245 (repurchase proceeds of
$370 when closed on May 1, 1998)...... $357 357
Repurchase Agreement with State Street
Bank & Trust dated April 30, 1998 due
on May 1, 1998 at 4.50%,
collateralized by a U.S. Treasury
Note, 10.625% August 15, 2015 par
value of $560 (repurchase proceeds of
$845 when closed on May 1, 1998)...... 821 821
--------
TOTAL SHORT-TERM INVESTMENTS
(Cost $1,178)...................................... 1,178
--------
TOTAL INVESTMENTS--99.6%
(Cost $169,107).................................... 194,212
CASH AND OTHER ASSETS,
LESS LIABILITIES--0.4%............................. 784
--------
TOTAL NET ASSETS--100%............................... $194,996
========
</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.
23
<PAGE> 30
HARBOR BOND FUND
PORTFOLIO OF INVESTMENTS--APRIL 30, 1998 (UNAUDITED)
Total Investments (%)
(Excludes net cash and short-term investments of -32.6%)
<TABLE>
<S> <C>
U.S. Government Obligations
2.5
Asset Backed Securities
4.6
Foreign Government Obligations
4.8
Corporate Bonds & Notes
48.5
Mortgage Related Securities
72.2
</TABLE>
<TABLE>
<CAPTION>
ASSET BACKED SECURITIES--4.6%
(Cost $18,125)
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
--------- --------
<S> <C> <C>
Student Loan Marketing Association
5.727%--10/25/2005+.................... $ 4,084 $ 4,082
5.673%--04/25/2006+.................... 9,070 9,039
Series 1995 Cl. A-2
5.823%--10/25/2007+.................... 5,000 5,004
--------
18,125
--------
<CAPTION>
CORPORATE BONDS & NOTES--48.5%
<S> <C> <C>
AT&T Capital Corp. MTN(1)
5.950%--02/16/1999..................... 10,000 9,988
Banco Nacional De Obras Y Serv(2)
6.875%--10/01/1998..................... 3,000 2,975
Bancomer SA(2)
8.000%--07/07/1998..................... 4,000 4,030
Banesto Del Inc.
8.250%--07/28/2002+.................... 3,000 3,158
Beneficial Corp. MTN(1)
5.901%--04/02/2002+.................... 10,000 10,007
Calpine Corp.
8.750%--07/15/2007..................... 3,000 3,098
Cemex SA MTN Euro(1)
8.500%--08/31/2000..................... 1,000 1,010
Central Maine Power MTN(1)
6.380%--02/24/2000..................... 10,000 9,957
Chrysler Financial Corp. MTN(1)
5.696%--07/05/2000+.................... 10,000 10,007
5.796%--08/08/2002+.................... 8,000 8,012
--------
18,019
--------
Comerica Inc.
10.125%--06/01/1998.................... 50 50
Commonwealth Edison Co.
Series 26
8.000%--10/15/2003..................... 3,000 3,078
Dean Witter Discover & Co. MTN(1)
6.062%--10/05/2002+.................... 9,000 9,055
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
--------- --------
<S> <C> <C>
First Chicago Corp. MTN(1)
5.767%--03/11/2002+.................... $ 10,000 $ 10,002
5.787%--06/26/2002+.................... 10,000 10,026
--------
20,028
--------
General Motors Acceptance Corp. MTN(1)
5.400%--03/16/1999+.................... 8,000 7,986
General Motors Acceptance Corp.
5.812%--04/29/2002+.................... 10,000 9,989
Goldman Sachs Group LP MTN(1)(2)
5.844%--01/09/2001+.................... 10,000 9,996
Harris Chemical North America Inc.
10.250%--07/15/2001.................... 11,336 11,874
Hydro Quebec Yankee Bonds
9.500%--11/15/2030 Deb................. 775 1,039
Long Island Lighting Co. REMIC(3)
6.250%--07/15/2001..................... 5,000 5,035
Merrill Lynch & Company Inc. MTN(1)
5.768%--09/30/2000++................... 10,000 9,986
Meyer, Fred Inc. New
7.150%--03/01/2003..................... 5,000 4,979
Orion Network Sys. Inc.
12.500%--01/15/2007.................... 2,500 1,938
PDV America Inc. Sr. Note
7.250%--08/01/1998..................... 5,000 5,014
Prudential Funding Corp. MTN(1)
5.890%--08/01/2000+.................... 5,000 4,940
Saferco Products Inc. MTN(1)
9.630%--05/31/2000..................... 500 535
Salomon Inc.
CPI Bond(4)
3.648%--02/14/2002..................... 5,089 4,914
Student Loan Marketing Association MTN(1)
6.080%--06/30/2000++................... 5,000 5,011
TCI Communications Inc. Sr. Notes
6.375%--09/15/1999..................... 2,000 2,005
5.945%--09/11/2000 MTN(1)+............. 5,000 4,968
--------
6,973
--------
Tenet Healthcare Corp.
8.625%--12/01/2003..................... 4,443 4,725
Time Warner Inc.
7.975%--08/15/2004..................... 450 480
United Airlines Pass Thru Certificate
Series 1993 C-2
9.060%--06/17/2015+.................... 3,000 3,287
Xerox Credit Corp.
10.000%--04/01/1999.................... 50 52
TOTAL CORPORATE BONDS AND NOTES
(Cost $192,531)................................... 193,206
--------
</TABLE>
24
<PAGE> 31
HARBOR BOND FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
<TABLE>
<CAPTION>
FOREIGN GOVERNMENT OBLIGATIONS--4.8%
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
--------- --------
<S> <C> <C>
New Zealand
10.000%--03/15/2002.................... $ 6,400 $ 3,860
8.000%--04/15/2004..................... 7,000 4,049
--------
7,909
--------
Republic of Argentina
5.906%--04/01/2000+.................... 964 949
6.025%--03/31/2005+.................... 4,750 4,347
8.726%--04/10/2005+.................... 6,000 6,045
--------
11,341
--------
TOTAL FOREIGN BONDS
(Cost $19,731).................................... 19,250
--------
MORTGAGE RELATED SECURITIES--72.2%
COLLATERALIZED MORTGAGE OBLIGATIONS:
Capstead Securities Corp. IV
Series 91 Class VII
8.500%--02/25/2022..................... 750 764
Collateralized Mortgage Securities Corp.
Series F-4
11.450%--11/01/2015.................... 247 249
Series 1988 B-4
8.750%--04/20/2019 REMIC(3)............ 290 308
--------
557
--------
Drexel Burnham Lambert
Series H-4
8.500%--04/01/2017..................... 8,828 9,236
Federal Home Loan Mortgage Corp. REMIC(3)
Cl. 78
8.700%--02/15/2020..................... 2,067 2,103
Cl. 1029
9.000%--12/15/2020..................... 2,673 2,800
6.342%--08/15/2032++................... 19,344 19,395
--------
24,298
--------
Federal National Mortgage Association
MTN(1)
5.840%--06/19/1998..................... 15,000 15,002
Federal National Mortgage Association
REMIC(3)
Series 1993
6.500%--02/25/2007 IO(5)............... 2,291 217
Cl. PN
6.000%--07/25/2017 IO(5)............... 2,865 279
Cl. E
6.000%--04/25/2019..................... 2,000 1,995
Cl. B
6.500%--12/25/2020..................... 2,000 2,006
--------
4,497
--------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
--------- --------
<S> <C> <C>
Kidder Peabody Acceptance Corp.
I Series 1994 A1
8.193%--09/25/2024++................... $ 3,000 $ 3,062
L & N Funding Corp. GNMA Coll., Series
A-4
12.000%--03/17/2014.................... 678 830
MDC Mortgage Funding Corp.
Cl. Q-6
9.000%--03/20/2018..................... 14 17
Nomura Asset Securities Corp.
6.750%--08/25/2027..................... 5,000 4,803
Norwest Mortgage Insurance Corp.
GNMA Coll.
Cl. 1-Z
12.375%--01/01/2014++.................. 108 108
Prudential Home Mortgage Securities Co.
Series 1993
Cl. A-8
6.750%--08/25/2008..................... 6,015 5,927
8.210%--12/26/2023+.................... 3,305 3,393
--------
9,320
--------
Resolution Trust Corporation
Mortgage Pass Thru
Series 1991 L-1
8.780%--08/25/2021+.................... 3,000 3,079
Sears Mortgage Securities Corp.
Series 92 Cl. A(2)
7.566%--10/25/2022+.................... 943 953
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS....................................... 76,526
--------
OTHER MORTGAGE RELATED SECURITIES:
Federal Home Loan Mortgage Corp.
Forward Gold 30 year, TBA(6)
6.500%--05/13/2028..................... 24,750 24,576
6.500%--06/10/2028..................... 48,500 48,005
--------
72,581
--------
Federal Home Loan Mortgage Corp.
Pass Thru Certificates
10.500%--09/01/2000.................... 17 18
7.500%--03/01/2002..................... 11 11
7.000%--09/15/2005..................... 1,057 1,060
8.000%--06/01/2011..................... 79 82
8.500%--02/01/2017..................... 95 100
7.000%--10/15/2022..................... 393 394
7.849%--08/01/2024++................... 1,797 1,877
--------
3,542
--------
Federal Home Loan Mortgage Corp. Deb
5.950%--06/19/1998..................... 10,000 10,003
</TABLE>
25
<PAGE> 32
HARBOR BOND FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
<TABLE>
<CAPTION>
MORTGAGE RELATED SECURITIES--CONTINUED
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
--------- --------
<S> <C> <C>
Federal Housing Authority
Project Banco-221D
7.400%--02/01/2021..................... $ 839 $ 862
Project Banco-15
7.450%--05/01/2021..................... 344 356
Project Reilly #52
5.150%--06/01/2018..................... 308 273
--------
1,491
--------
Federal National Mortgage
Association(6)
TBA May 15 6.500%--05/18/2013.......... 15,000 14,873
TBA May 30 6.500%--05/13/2028.......... 10,000 9,950
TBA June 30 6.500%--06/10/2028......... 25,000 24,750
--------
49,573
--------
Federal National Mortgage Association
Pass Thru Certificates
9.000%--03/01/2005..................... 198 208
9.000%--11/01/2009..................... 1,571 1,663
8.500%--12/01/2009..................... 17 18
9.500%--04/01/2011..................... 60 65
6.237%--10/01/2032++................... 1,916 1,928
--------
3,882
--------
Government National Mortgage
Association+
6.750%--08/15/2017..................... 413 414
Government National Mortgage
Association II++
7.000%--01/20/1999..................... 5,612 5,754
6.875%--03/20/2017..................... 1,470 1,510
6.500%--07/20/2027..................... 13,646 13,904
7.000%--08/20/2022..................... 3,662 3,758
7.000%--09/20/2023..................... 2,686 2,755
7.375%--05/20/2024..................... 1,166 1,201
7.000%--07/20/2024..................... 77 79
7.000%--12/20/2024..................... 707 725
6.875%--01/20/2025..................... 2,392 2,451
6.875%--02/20/2025..................... 994 1,018
6.875%--02/20/2025..................... 1,312 1,344
7.000%--10/20/2025..................... 1,570 1,609
7.000%--10/20/2025..................... 578 592
7.000%--11/20/2025..................... 5,384 5,518
7.000%--12/20/2026..................... 1,593 1,627
--------
43,845
--------
Government National Mortgage
Association TBA(6)
6.500%--05/20/2028..................... 26,000 25,789
TOTAL OTHER MORTGAGE RELATED
SECURITIES........................................ 211,120
--------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
--------- --------
<S> <C> <C>
TOTAL MORTGAGE RELATED SECURITIES
(Cost $286,360)................................... $287,646
--------
U.S. GOVERNMENT OBLIGATION--2.5%
(Cost $10,120)
U.S. Treasury Notes(4)
3.625%--07/15/2002..................... $ 10,018 9,907
--------
SHORT-TERM INVESTMENTS--6.7%
REPURCHASE AGREEMENTS
Repurchase Agreement with State Street
Bank & Trust dated April 30, 1998 due
May 1, 1998 at 4.500%, collateralized by
a U.S. Treasury Note, 8.375%
August 15, 2015, par value of $1,845
(repurchase proceeds of $1,882 when
closed on May 1, 1998)................. 1,845 1,845
U.S. TREASURY BILLS
5.07%--06/25/1998(7)................... 985 978
5.03%--07/23/1998(7)................... 1,375 1,360
--------
2,338
--------
COMMERCIAL PAPER
Bank of America NT & SA
6.050%--06/10/1998..................... 10,000 9,999
E.I. DuPont De Nemours & Co.
5.500%--07/08/1998..................... 1,400 1,385
Kingdom of Sweden
5.480%--06/11/1998..................... 1,200 1,193
Sanwa Bank LTD NY
6.160%--05/11/1998..................... 10,000 10,000
TOTAL COMMERCIAL PAPER.............................. 22,577
--------
TOTAL SHORT-TERM INVESTMENTS
(Cost $26,759).................................... 26,760
--------
TOTAL INVESTMENTS--139.3%
(Cost $553,626)................................... 554,894
CASH AND OTHER ASSETS,
LESS LIABILITIES--(39.3)%......................... (156,527)
--------
TOTAL NET ASSETS--100.0%............................ $398,367
========
</TABLE>
26
<PAGE> 33
HARBOR BOND FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
SWAP AGREEMENTS AT APRIL 30, 1998 ARE AS FOLLOWS:
(All dollar values are represented in thousands)
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION/
PAR VALUE (DEPRECIATION)
(000S) DESCRIPTION COUNTERPARTY (000S)
- --------- ----------- ------------ --------------
<S> <C> <C> <C>
$5,000 To make or receive quarterly payments through 4/11/2002 Merrill Lynch Capital $ 24
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 35
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 32
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 19
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 & 42
on the difference between (A) the excess of the 10 year Co, Ltd.
interest rate swap rate over (B) the 10 year U.S. Treasury
Note rate plus 36.50 basis points.
Y 580,000 To make or receive semi-annual payments through 4/14/2008 Deutsche Bank AG- (81)
based on the difference between (A) the 10 year fixed New York Branch
interest rate of 2.295% over (B) the 10 year floating rate
adjusted every six months based upon the JPY-LIBOR-BBA.
Y 377,000 To make or receive semi-annual payments through 4/15/2008 Deutsche Bank AG- (55)
based on the difference between (A) the 10 year fixed New York Branch
interest rate of 2.305% over (B) the 10 year floating rate
adjusted every six months based upon the JPY-LIBOR-BBA.
----
$ 16
====
</TABLE>
- ------------
+ Floating rate security. The stated rate represents the rate in effect at
April 30, 1998.
++ Variable rate security. The stated rate represents the rate in effect at
April 30, 1998.
(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 April 30,
1998, these securities were valued at $17,954 or 4.5% of net assets.
(3) REMICs are CMOs which can hold mortgages secured by any type of real
property and issue multiple-class securities backed by those mortgages.
(4) Treasury inflation-protected securities (TIPS) are securities in which the
principal amount is adjusted for inflation and interest payments are
applied to the inflation-adjusted principal.
(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) TBAs are mortgage backed securities traded under delayed delivery
commitments, settling after April 30, 1998. Although the unit price for the
trades has been established, the principal value has not been finalized.
However, the amount of the commitments will not fluctuate more than 2% from
the principal amount. Income on TBAs is not earned until settlement date.
(See Note 2 to the Financial Statements).
(7) At April 30, 1998, 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 $2,338.
Y -- Japanese Yen
27
<PAGE> 34
HARBOR BOND FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
FUTURES CONTRACTS WHICH WERE OPEN AT APRIL 30, 1998 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).......... 743 $74,300 June, 1998 $ 284
U.S. Treasury Note--10 Yr. (Buy).......... 680 68,000 June, 1998 (107)
-----
$ 177
=====
</TABLE>
FORWARD CURRENCY CONTRACTS WHICH WERE OPEN AT APRIL 30, 1998 ARE AS
FOLLOWS:
<TABLE>
<CAPTION>
AGGREGATE
MARKET FACE UNREALIZED
VALUE VALUE DELIVERY DATE APPRECIATION
CURRENCY COUNTRY (000s) (000s) OF CONTRACT (000s)
-------- ------- ------ --------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Dollar (Sell)............................. New Zealand $4,164 $3,927 May 5, 1998 $237
</TABLE>
TBA SALE COMMITMENTS WHICH WERE OPEN AT APRIL 30, 1998 ARE AS FOLLOWS:
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT DELIVERY COUPON VALUE
DESCRIPTION (000s) MONTH RATE (000s)
----------- --------- -------- ------ ------
<S> <C> <C> <C> <C>
Federal Home Loan Mortgage Corp. Gold...... $24,250 May 6.50% $23,967
Federal National Mortgage Assoc., 30 Yr. .. 10,000 May 6.50% 9,950
Federal National Mortgage Assoc., 30 Yr. .. 15,000 May 6.50% 14,873
-------
$48,790
=======
</TABLE>
The accompanying notes are an integral part of the financial statements.
28
<PAGE> 35
HARBOR SHORT DURATION FUND
PORTFOLIO OF INVESTMENTS--APRIL 30, 1998 (UNAUDITED)
Total Investments (%)
(Excludes net cash and short-term investments of 9.4%)
<TABLE>
<S> <C>
Corporate Notes & Bonds
3.7
U.S. Government Obligations
14.5
Mortgage Related Securities
24.5
Asset Backed Securities
47.9
</TABLE>
<TABLE>
<CAPTION>
ASSET BACKED SECURITIES--47.9%
PRINCIPAL
AMOUNT VALUE
(000s) (000s)
--------- --------
<S> <C> <C>
Advanta Leasing Receivables
5.820%--12/15/2006..................... $ 5,000 $ 4,996
Allied Capital Commercial Mortgage
Trust(1)
6.310%--05/25/2003..................... 3,568 3,560
Beneficial Home Equity Loan Trust
5.836%--04/28/2026+.................... 3,966 3,970
Case Equipment Loan Trust
5.592%--07/15/2001..................... 3,750 3,751
Chase Manhattan Owner Trust
6.100%--01/17/2000..................... 3,923 3,932
5.950%--11/15/2000..................... 5,000 5,006
--------
8,938
--------
CIT RV Trust
6.200%--10/15/2006..................... 3,750 3,760
Contimortgage Home Equity Loan
6.220%--11/15/2013..................... 4,000 3,994
Discover Card Master Trust 1
6.006%--04/15/2002..................... 5,000 5,039
Discover Card Trust
7.850%--11/20/1998+.................... 5,100 5,137
EQCC Home Equity Loan Trust
6.260%--11/15/2006..................... 4,000 4,011
6.140%--04/15/2009..................... 2,000 1,997
--------
6,008
--------
First Chicago Master Trust
5.726%--07/15/2001+.................... 5,000 5,003
Ford Credit Auto Owner Trust
5.950%--01/15/2000..................... 5,000 5,006
ML Home Equity Loan Trust
6.087%--07/15/2022+.................... 3,802 3,809
Nationsbank Auto Owners Trust
6.375%--07/15/2000..................... 4,964 4,982
Signet Credit Card Master Trust IO(2)
5.200%--10/15/1998..................... 5,000 4,992
Signet Home Equity Loan Trust
5.927%--06/20/2004+.................... 3,166 3,177
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000s) (000s)
--------- ------
<S> <C> <C>
Standard Credit Card Master Trust I
7.875%--11/07/1998..................... $ 6,865 $ 6,940
9.250%--09/07/1999..................... 3,000 3,047
--------
9,987
--------
TOTAL ASSET BACKED SECURITIES
(Cost $86,053)................................... 86,109
--------
CORPORATE NOTES & BONDS--3.7%
Arkaig Finance FRN
5.743%--03/19/1999+.................... 1,500 1,498
Salomon Inc. (Series D &E)
6.906%--02/14/2000+.................... 5,000 5,098
--------
TOTAL CORPORATE NOTES & BONDS
(Cost $6,584).................................... 6,596
--------
MORTGAGE RELATED SECURITIES--24.5%
GOVERNMENT AGENCY PASS-THROUGHS
Federal National Mortgage Association
5.820%--08/25/1999..................... 16,000 16,040
Government National Mortgage
Association Project Construction Loan
TBA(3)
7.500%--05/01/1998..................... 2 2
Student Loan Marketing Association
MTN(4)
5.570%--03/17/2000..................... 13,500 13,463
--------
TOTAL GOVERNMENT AGENCY PASS-THROUGHS.............. 29,505
--------
COLLATERALIZED MORTGAGE OBLIGATIONS
Aames Mortgage Trust
5.807%--05/15/2012+.................... 3,763 3,764
Champion Home Equity Loan Trust
6.590%--11/25/2010..................... 3,852 3,856
Federal Home Loan Mortgage Pass Thru
Certificates
5.500%--07/15/2004..................... 2,838 2,835
Federal National Mortgage Association
REMIC Series 1994 Cl. PC(5)
7.000%--05/25/2013 PAC................. 1,151 1,149
GE Cap Mortgage Services
6.530%--12/25/2010..................... 2,992 2,992
--------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS............................ 14,596
--------
TOTAL MORTGAGE RELATED SECURITIES
(Cost $43,996)................................... 44,101
--------
</TABLE>
29
<PAGE> 36
HARBOR SHORT DURATION FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
(All dollar values are represented in thousands)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
--------- --------
<S> <C> <C>
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
--------- --------
U.S. GOVERNMENT OBLIGATIONS--14.5%
U.S. Treasury Bonds
6.125%--11/15/2027..................... $ 4,500 $ 4,610
U.S. Treasury Notes
5.625%--12/31/1999..................... 6,500 6,504
5.375%--01/31/2000..................... 2,500 2,491
5.500%--03/31/2000..................... 5,000 4,993
5.375%--02/15/2001..................... 3,500 3,478
5.500%--03/31/2003..................... 4,000 3,974
--------
21,440
--------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $26,028).................................... 26,050
--------
SHORT TERM INVESTMENTS--10.6%
REPURCHASE AGREEMENTS
Repurchase Agreement with State Street
Bank & Trust dated April 30, 1998 due
May 1, 1998 at 5.300%, collateralized
by a U.S. Treasury Note, 8.375%
August 15, 1998, par value of $4,050
(repurchase proceeds of $4,592 when
closed on May 1, 1998)............... $ 4,497 $ 4,497
BANK OBLIGATIONS
Societe Generale
5.850%--12/17/1998..................... 5,000 4,997
U.S. GOVERNMENT OBLIGATIONS-SHORT TERM
U.S. Treasury Bills
5.080%--06/04/1998..................... 1,000 996
5.080%--04/29/1999..................... 9,000 8,536
--------
9,532
--------
TOTAL SHORT TERM INVESTMENTS
(Cost $19,029).................................... 19,026
--------
TOTAL INVESTMENTS--101.2%
(Cost $181,690)................................... 181,882
CASH AND OTHER ASSETS,
LESS LIABILITIES--(1.2)%.......................... (2,194)
--------
TOTAL NET ASSETS--100.0%............................ $179,688
========
</TABLE>
FUTURES CONTRACTS WHICH WERE OPEN AT APRIL 30, 1998 ARE AS FOLLOWS:
<TABLE>
<CAPTION>
AGGREGATE
FACE VALUE OF UNREALIZED
NUMBER OF CONTRACTS EXPIRATION DATE (DEPRECIATION)
DESCRIPTION CONTRACTS (000S) OF CONTRACTS (000S)
----------- --------- ------------- --------------- --------------
<S> <C> <C> <C> <C>
U.S. Treasury Note--2 Yr. (Buy)............................. 58 $11,600 June, 1998 $(26)
Euro Dollar (Buy)........................................... 16 E$4,000 December, 1998 (3)
----
$(29)
====
</TABLE>
WRITTEN OPTIONS WHICH WERE OPEN AT APRIL 30, 1998 ARE AS FOLLOWS:
<TABLE>
<CAPTION>
NUMBER OF EXPIRATION DATE/ VALUE
DESCRIPTION CONTRACTS STRIKE PRICE (000S)
----------- --------- ---------------- ------
<S> <C> <C> <C>
U.S. Treasury Note (Call)................................... 58 August, 1998/114 $(33)
U.S. Treasury Note (Put).................................... 58 August, 1998/111 $(22)
----
Written options outstanding, at value (premiums received of
$71)...................................................... $(55)
====
</TABLE>
- ------------
+ Floating rate security. The stated rate represents the rate in effect at
April 30, 1998
(1) 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 April 30, 1998,
these securities were valued at $4,992 or 2.8% of net assets.
(2) Interest only (IO) securities represent the right to receive the monthly
interest payments on an underlying pool of mortgage loans. These are subject
to the risk of accelerated principal paydowns. The principal amount
represents the notional amount on which current interest is calculated.
(3) TBA's are mortgage-backed securities traded under delayed delivery
commitments, settling after April 30, 1998. Although the unit price for the
trades has been established, the principal value has not been finalized.
However, the amount of the commitments will not fluctuate more than 2% from
the principal amount. Income on TBA's is not earned until settlement date.
(4) MTN after the name of a security stands for Medium Term Note.
(5) REMICs are CMOs which can hold mortgages secured by any type of real
property and issue multiple-class securities backed by those mortgages.
The accompanying notes are an integral part of the financial statements.
30
<PAGE> 37
HARBOR MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS--APRIL 30, 1998 (UNAUDITED)
Total Investments (%)
(Excludes net cash of--3.8%)
<TABLE>
<S> <C>
Mortgage Related Securities
4.0
Repurchase Agreement
8.4
Bank Obligations
44.1
Commercial Paper
47.3
</TABLE>
<TABLE>
<CAPTION>
MORTGAGE RELATED SECURITIES--4.0%
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
--------- --------
<S> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATION
(Cost $3,000)
Triangle Fund
5.656%--11/15/1998+(1)............... $ 3,000 $ 3,000
--------
BANK OBLIGATIONS--44.1%
Bank of Nova Scotia Yankee CD
5,580%--02/25/1999................... 3,000 2,998
Bank of Scotland Euro CD
5.585%--09/14/1998................... 3,000 2,999
Barclays Bank Euro CD
5.710%--05/12/1998................... 3,000 3,000
Bayerische Landesbank Yankee CD
5.560%--09/16/1998................... 3,000 3,000
Bayerische Vereinsbank Yankee CD
5.700%--10/06/1998................... 3,000 3,000
CIBC Yankee CD
5.820%--09/30/1998................... 3,000 3,001
Credit Agricole Yankee CD
5.570%--07/28/1998................... 3,000 3,000
Deutsche Bank Yankee CD
5.580%--07/09/1998................... 3,000 3,000
Lloyds Bank PLC
5.550%--06/29/1998................... 3,000 3,000
Rabo Bank Yankee CD
5.560%--07/28/1998................... 3,000 3,000
Westdeutsche Landesbank Yankee CD
5.540%--06/17/1998................... 3,000 3,000
--------
TOTAL BANK OBLIGATIONS
(Cost $32,998).................................... 32,998
--------
COMMERCIAL PAPER--47.3%
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
--------- --------
Allianz of America Finance
5.520%--05/07/1998................... $ 3,000 $ 2,997
Assoc. Corp. of North America
5.460%--05/19/1998................... 3,250 3,241
BTR Dunlop Finance Inc.
5.490%--06/09/1998................... 3,000 2,982
Commerzbank U S Finance
5.450%--05/18/1998................... 3,000 2,992
Ford Motor Credit Co.
5.490%--07/24/1998 2,000 1,974
General Electric Cap Corp. Disc.
5.450%--05/13/1998................... 3,250 3,244
NationsBank Corp.
5.527%--05/22/1998................... 3,000 2,990
Rubbermaid Inc.
5.430%--05/05/1998................... 3,000 2,998
Suntrust Banks Inc.
5.430%--05/08/1998................... 3,000 2,997
Swiss Re Financial Products Corp. YR
5.450%--05/15/1998................... 3,000 2,994
Telstra Corporation Limited
5.500%--06/19/1998................... 3,000 2,978
Woolwich Building Society
5.650%--06/05/1998................... 3,000 2,984
--------
TOTAL COMMERCIAL PAPER
(Cost $35,371).................................... 35,371
--------
REPURCHASE AGREEMENT--8.4%
(Cost $6,248)
Repurchase Agreement with State Street
Bank & Trust dated April 30, 1998 due
on May 1, 1998 at 5.30%, collateralized
by a U.S. Treasury Note, 8.375%
August 15, 1998, par value of $5,625
(repurchase proceeds of $6,378 when
closed on May 1, 1998)............... 6,248 6,248
--------
TOTAL INVESTMENTS--103.8%
(Cost $77,617)(2)................................. 77,617
CASH AND OTHER ASSETS,
LESS LIABILITIES--(3.8%).......................... (2,840)
--------
TOTAL NET ASSETS--100.0%............................ $ 74,777
========
</TABLE>
- ------------
+ Floating rate security. The stated rate represents the rate in effect at
April 30, 1998.
(1) 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 April 30, 1998,
these securities were valued at $3,000 or 4.0% of net assets.
(2) The aggregate identified cost on a tax basis is the same.
The accompanying notes are an integral part of the financial statements.
31
<PAGE> 38
HARBOR FUND
STATEMENT OF ASSETS AND LIABILITIES--APRIL 30, 1998 (UNAUDITED)
(All amounts in Thousands, except per share amount)
<TABLE>
<CAPTION>
HARBOR HARBOR
HARBOR INTERNATIONAL CAPITAL
GROWTH GROWTH APPRECIATION
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
INVESTMENTS, AT IDENTIFIED COST*............................ $ 91,907 $ 949,163 $2,787,691
- ---------------------------------------------------------------------------------------------------------
Investments, at value....................................... $110,659 $1,196,200 $3,768,136
Repurchase agreements....................................... 8,836 -- --
Cash........................................................ 1 -- 1
Foreign currency, at value
(cost: $0; $360; $0; $120; $0; $0; $155; $14; $0)......... -- 357 --
Receivables for:
Investments sold.......................................... -- 28,302 36,025
Capital shares sold....................................... 80 1,988 9,180
Dividends................................................. -- 3,885 1,574
Interest.................................................. 32 4 9
Open forward currency contracts........................... -- -- --
Swap agreements........................................... -- -- --
Variation margin on futures contracts..................... -- -- --
Written options........................................... -- -- --
Deferred organization costs................................. -- -- --
Withholding tax receivable.................................. -- 961 --
Other assets................................................ 6 6 6
- ---------------------------------------------------------------------------------------------------------
TOTAL ASSETS.......................................... 119,614 1,231,703 3,814,931
LIABILITIES
Payables for:
Investments purchased..................................... -- 43,272 16,907
Capital shares reacquired................................. 38 583 2,852
Dividends to shareholders................................. -- -- --
Written options, at value
(premiums received $0; $0; $0; $0; $0; $0; $0; $71;
$0)..................................................... -- -- --
Interest on reverse repurchase agreements and short
sales................................................... -- -- --
Accrued expenses:
Adviser's fees............................................ 146 712 1,783
Trustees' fees............................................ 1 6 13
Transfer agent's fees..................................... 10 194 104
Other..................................................... -- 529 16
TBA sale commitments at value (proceeds receivable $0; $0;
$0; $0; $0; $0; $48,497; $0; $0).......................... -- -- --
- ---------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES..................................... 195 45,296 21,675
NET ASSETS
NET ASSETS.................................................. $119,419 $1,186,407 $3,793,256
=========================================================================================================
Net assets consist of:
Paid-in capital........................................... $ 87,414 $ 906,086 $2,621,859
Undistributed/(overdistributed) net investment income..... (180) 3,024 4,469
Accumulated net realized gain/(loss)...................... 4,597 30,300 186,483
Unrealized appreciation/(depreciation) of investments,
swap agreements, written options, foreign currency,
investments sold short and translation of assets and
liabilities in foreign currencies....................... 27,588 246,997 980,445
Unrealized appreciation/(depreciation) of futures and
forward contracts....................................... -- -- --
- ---------------------------------------------------------------------------------------------------------
$119,419 $1,186,407 $3,793,256
=========================================================================================================
Shares of beneficial interest............................... 9,003 61,511 108,311
Net asset value, offering and redemption price per share.... $ 13.26 $ 19.29 $ 35.02
</TABLE>
- ------------
* Including repurchase agreements and short term investments
The accompanying notes are an integral part of the financial statements.
32
<PAGE> 39
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>
$144,902 $3,350,037 $169,107 $553,626 $181,690 $77,617
========================================================================================
$155,501 $6,028,696 $193,034 $553,049 $177,385 $71,369
-- -- 1,178 1,845 4,497 $ 6,248
-- -- 1 1 -- --
121 -- -- 156 14 --
-- 40,482 3,561 72,551 880 --
72 7,680 199 681 18 51
472 24,223 231 -- -- --
1 648 -- 4,238 1,599 443
-- -- -- 237 -- --
-- -- -- 16 -- --
-- -- -- 1,690 35 --
-- -- -- -- 71 --
15 -- -- -- -- --
141 5,548 5 -- -- --
6 29 2 4 35 5
- ----------------------------------------------------------------------------------------
156,329 6,107,306 198,211 634,468 184,534 78,116
2 28,285 2,667 187,003 4,388 3,001
76 11,876 416 115 374 294
-- -- -- -- -- 16
-- -- -- -- 55 --
-- -- -- 8 -- --
81 4,061 103 159 26 7
2 30 1 2 1 --
19 211 9 23 2 15
-- 2,775 19 1 -- 6
-- -- -- 48,790 -- --
- ----------------------------------------------------------------------------------------
180 47,238 3,215 236,101 4,846 3,339
$156,149 $6,060,068 $194,996 $398,367 $179,688 $74,777
========================================================================================
$142,836 $3,198,916 $159,016 $391,527 $205,751 $74,777
338 25,039 261 1,586 (259) --
2,380 157,663 10,613 3,699 (25,982) --
10,595 2,678,450 25,106 1,141 207 --
-- -- -- 414 (29) --
- ----------------------------------------------------------------------------------------
$156,149 $6,060,068 $194,996 $398,367 $179,688 $74,777
========================================================================================
12,016 145,522 11,524 34,874 20,898 74,777
$ 13.00 $ 41.64 $ 16.92 $ 11.42 $ 8.60 $ 1.00
</TABLE>
33
<PAGE> 40
HARBOR FUND
STATEMENT OF OPERATIONS--SIX MONTHS ENDED APRIL 30, 1998 (UNAUDITED)
(All Amounts in Thousands)
<TABLE>
<CAPTION>
HARBOR
HARBOR INTERNATIONAL
GROWTH GROWTH
- -------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends................................................. $ 45 $ 7,770
Interest.................................................. 332 981
Foreign taxes withheld.................................... (7) (897)
- -------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME................................... 370 7,854
EXPENSES:
Investment adviser's fees................................. 418 3,776
Shareholder communications................................ 4 59
Custodian fees............................................ 38 612
Transfer agent fees....................................... 39 420
Professional fees......................................... 25 39
Trustees' fees and expenses............................... 1 6
Registration fees......................................... 23 103
Amortization of organization costs........................ -- --
Insurance expense......................................... 1 3
Miscellaneous............................................. 3 13
- -------------------------------------------------------------------------------------
Total expenses......................................... 552 5,031
Advisory fee waived....................................... -- --
Other expense reimbursements and reduction................ (2) (10)
- -------------------------------------------------------------------------------------
Total operating expenses............................... 550 5,021
- -------------------------------------------------------------------------------------
NET INVESTMENT INCOME/(LOSS)................................ (180) 2,833
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENT
TRANSACTIONS:
Net realized gain/(loss) on:
Investments............................................ 4,617 34,390
Foreign currency transactions.......................... -- (13)
Short sales............................................ -- --
Futures contracts...................................... -- --
Change in net unrealized appreciation/depreciation on:
Investments and written options........................ 8,646 189,801
Futures contracts...................................... -- --
Forward currency contracts............................. -- --
Translation of assets and liabilities in foreign
currencies............................................ -- (17)
- -------------------------------------------------------------------------------------
Net gain/(loss) on investment transactions................ 13,263 224,161
- -------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS...... $13,083 $226,994
=====================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
34
<PAGE> 41
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>
$ 13,120 $ 1,143 $ 53,566 $ 2,069 $ -- $-- $--
2,881 93 6,259 87 11,782 4,967 2,150
(168) (102) (6,201) (9) -- -- --
- ----------------------------------------------------------------------------------------------------
15,833 1,134 53,624 2,147 11,782 4,967 2,150
9,424 521 23,058 535 1,372 331 113
152 13 166 9 29 1 11
194 205 2,699 56 82 44 15
708 73 1,191 50 157 8 84
60 26 116 22 35 41 15
15 2 31 1 2 1 --
114 43 106 27 36 20 24
-- 2 -- -- -- -- --
5 1 7 1 2 2 1
17 5 32 4 5 4 3
- ----------------------------------------------------------------------------------------------------
10,689 891 27,406 705 1,720 452 266
-- (69) (1,764) -- (431) (165) (45)
(37) (3) (27) (2) (6) (3) (4)
- ----------------------------------------------------------------------------------------------------
10,652 819 25,615 703 1,283 284 217
- ----------------------------------------------------------------------------------------------------
5,181 315 28,009 1,444 10,499 4,683 1,933
190,576 2,390 157,922 10,873 2,849 318 6
-- (8) (261) -- (11) -- --
-- -- -- -- 1 -- --
-- -- -- -- 4,449 (89) --
423,867 15,204 848,051 17,009 (1,929) (218) --
-- -- -- -- (3,141) (41) --
-- -- -- -- 17 -- --
(1) (8) (36) -- 581 -- --
- ----------------------------------------------------------------------------------------------------
614,442 17,578 1,005,676 27,882 2,816 (30) 6
- ----------------------------------------------------------------------------------------------------
$619,623 $17,893 $1,033,685 $29,326 $13,315 $4,653 $1,939
====================================================================================================
</TABLE>
35
<PAGE> 42
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,
1997 1996 1997 1996 1997 1996
THROUGH through THROUGH through THROUGH through
APRIL 30, October 31, APRIL 30, October 31, APRIL 30, October 31,
1998 1997 1998 1997 1998 1997
- -------------------------------------------------------------------------------------------------------------------------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS:
Operations:
Net investment income/(loss)............. $ (180) $ (481) $ 2,833 $ 7,476 $ 5,181 $ 5,427
Net realized gain/(loss) on investments,
foreign currency transactions,
investments sold short, futures, swap
agreements, and written options........ 4,617 19,531 34,377 30,050 190,576 406,504
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...... 8,646 (2,456) 189,784 3,171 423,866 245,411
- -------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS................ 13,083 16,594 226,994 40,697 619,623 657,342
- -------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
Net investment income/(loss)............. -- -- (6,884) (3,010) (5,588) (1,310)
Net realized gain on investments......... (17,011) (28,481) (33,284) (13,704) (405,518) (53,466)
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS...... (17,011) (28,481) (40,168) (16,714) (411,106) (54,776)
- -------------------------------------------------------------------------------------------------------------------------------
Capital share transactions:
Net proceeds from sale of shares......... 19,485 25,126 178,489 683,701 668,479 1,068,440
Net asset value of shares issued in
connection with reinvestment of:
Dividends from net investment income... -- -- 6,004 2,695 4,957 1,097
Distributions from net realized gain... 16,392 26,974 31,698 13,051 368,493 47,557
Cost of shares reacquired................ (17,098) (49,156) (135,560) (283,449) (255,594) (504,471)
- -------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) DERIVED FROM
CAPITAL TRANSACTIONS................... 18,779 2,944 80,631 415,998 786,335 612,623
- -------------------------------------------------------------------------------------------------------------------------------
Net increase/(decrease) in net assets.... 14,851 (8,943) 267,457 439,981 994,852 1,215,189
NET ASSETS:
Beginning of period........................ 104,568 113,511 918,950 478,969 2,798,404 1,583,215
- -------------------------------------------------------------------------------------------------------------------------------
END OF PERIOD*............................. $119,419 $104,568 $1,186,407 $918,950 $3,793,256 $2,798,404
===============================================================================================================================
NUMBER OF CAPITAL SHARES:
Sold....................................... 1,547 1,875 9,990 41,977 20,688 36,171
Reinvested in payment of investment income
dividends................................ -- -- 381 169 176 41
Reinvested in payment of capital gain
distributions............................ 1,428 2,215 2,010 818 13,076 1,772
Reacquired................................. (1,333) (3,821) (7,786) (17,259) (7,918) (16,869)
- -------------------------------------------------------------------------------------------------------------------------------
Net increase/(decrease) in shares
outstanding.............................. 1,642 269 4,595 25,705 26,022 21,115
Outstanding:
Beginning of period...................... 7,361 7,092 56,916 31,211 82,289 61,174
- -------------------------------------------------------------------------------------------------------------------------------
End of period............................ 9,003 7,361 61,511 56,916 108,311 82,289
===============================================================================================================================
* Includes undistributed/(over-distributed)
net investment income of:................. $ (180) $ 0 $ 3,024 $ 7,075 $ 4,469 $ 4,876
<CAPTION>
HARBOR
INTERNATIONAL II
-------------------------
NOVEMBER 1, November 1,
1997 1996
THROUGH through
APRIL 30, October 31,
1998 1997
- --------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS:
Operations:
Net investment income/(loss)............. $ 315 $ 1,079
Net realized gain/(loss) on investments,
foreign currency transactions,
investments sold short, futures, swap
agreements, and written options........ 2,382 5,750
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...... 15,196 (4,810)
- --------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS................ 17,893 2,019
- --------------------------------------------------------------------------
Distributions to shareholders:
Net investment income/(loss)............. (1,046) (31)
Net realized gain on investments......... (5,767) (55)
- --------------------------------------------------------------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS...... (6,813) (86)
- --------------------------------------------------------------------------
Capital share transactions:
Net proceeds from sale of shares......... 36,148 143,553
Net asset value of shares issued in
connection with reinvestment of:
Dividends from net investment income... 984 30
Distributions from net realized gain... 5,455 52
Cost of shares reacquired................ (32,475) (23,184)
- --------------------------------------------------------------------------
NET INCREASE/(DECREASE) DERIVED FROM
CAPITAL TRANSACTIONS................... 10,112 120,451
- --------------------------------------------------------------------------
Net increase/(decrease) in net assets.... 21,192 122,384
NET ASSETS:
Beginning of period........................ 134,957 12,573
- --------------------------------------------------------------------------
END OF PERIOD*............................. $156,149 $134,957
==========================================================================
NUMBER OF CAPITAL SHARES:
Sold....................................... 2,998 11,761
Reinvested in payment of investment income
dividends................................ 88 3
Reinvested in payment of capital gain
distributions............................ 490 5
Reacquired................................. (2,680) (1,850)
- --------------------------------------------------------------------------
Net increase/(decrease) in shares
outstanding.............................. 896 9,919
Outstanding:
Beginning of period...................... 11,120 1,201
- --------------------------------------------------------------------------
End of period............................ 12,016 11,120
==========================================================================
* Includes undistributed/(over-distributed)
net investment income of:................. $ 338 $ 1,069
</TABLE>
The accompanying notes are an integral part of the financial statements.
36
<PAGE> 43
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,
1997 1996 1997 1996 1997 1996 1997 1996
THROUGH through THROUGH through THROUGH through THROUGH through
APRIL 30, October 31, APRIL 30, October 31, APRIL 30, October 31, APRIL 30, October 31,
1998 1997 1998 1997 1998 1997 1998 1997
- ------------------------------------------------------------------------------------------------------------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 28,009 $ 58,550 $ 1,444 $ 2,732 $ 10,499 $ 18,806 $ 4,683 $ 8,389
157,661 126,747 10,873 33,809 7,288 11,422 229 1,238
848,015 588,192 17,009 (625) (4,472) (3,011) (259) (691)
- ------------------------------------------------------------------------------------------------------------------
1,033,685 773,489 29,326 35,916 13,315 27,217 4,653 8,936
- ------------------------------------------------------------------------------------------------------------------
(57,053) (54,226) (1,471) (2,696) (10,836) (18,878) (5,845) (11,444)
(127,358) (103,297) (33,944) (13,934) (7,601) -- -- --
- ------------------------------------------------------------------------------------------------------------------
(184,411) (157,523) (35,415) (16,630) (18,437) (18,878) (5,845) (11,444)
- ------------------------------------------------------------------------------------------------------------------
334,477 809,204 25,239 33,555 101,002 130,443 59,468 233,482
48,178 46,590 1,399 2,560 9,080 15,418 5,826 11,420
114,139 93,381 32,344 13,178 6,756 -- -- --
(376,048) (505,220) (19,256) (19,329) (75,943) (71,455) (46,890) (262,216)
- ------------------------------------------------------------------------------------------------------------------
120,746 443,955 39,726 29,964 40,895 74,406 18,404 (17,314)
- ------------------------------------------------------------------------------------------------------------------
970,020 1,059,921 33,637 49,250 35,773 82,745 17,212 (19,822)
5,090,048 4,030,127 161,359 112,109 362,594 279,849 162,476 182,298
- ------------------------------------------------------------------------------------------------------------------
$6,060,068 $5,090,048 $194,996 $161,359 $398,367 $362,594 $ 179,688 $ 162,476
==================================================================================================================
8,839 22,725 1,544 2,007 8,757 11,476 6,885 26,849
1,372 1,479 89 156 798 1,366 678 1,323
3,252 2,963 2,187 886 594 -- -- --
(9,977) (14,257) (1,176) (1,158) (6,609) (6,307) (5,431) (30,149)
- ------------------------------------------------------------------------------------------------------------------
3,486 12,910 2,644 1,891 3,540 6,535 2,132 (1,977)
142,036 129,126 8,880 6,989 31,334 24,799 18,766 20,743
- ------------------------------------------------------------------------------------------------------------------
145,522 142,036 11,524 8,880 34,874 31,334 20,898 18,766
==================================================================================================================
$ 25,039 $ 54,083 $ 261 $ 288 $ 1,586 $ 1,923 $ (259) $ 903
<CAPTION>
HARBOR
MONEY MARKET
-------------------------
NOVEMBER 1, November 1,
1997 1996
THROUGH through
APRIL 30, October 31,
1998 1997
-------------------------
(UNAUDITED)
<S> <C>
$ 1,933 $ 3,305
6 13
-- --
----------------------
1,939 3,318
----------------------
(1,933) (3,305)
(6) (13)
----------------------
(1,939) (3,318)
----------------------
55,379 138,417
1,828 3,162
-- --
(55,970) (134,030)
----------------------
1,237 7,549
----------------------
1,237 7,549
73,540 65,991
----------------------
$ 74,777 $ 73,540
======================
55,379 138,417
1,828 3,162
-- --
(55,970) (134,030)
----------------------
1,237 7,549
73,540 65,991
----------------------
74,777 73,540
======================
$ 0 $ 0
</TABLE>
37
<PAGE> 44
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)
ON INVESTMENTS, FUTURES,
NET ASSET VALUE OPTIONS, SWAP AGREEMENTS TOTAL FROM
BEGINNING OF NET INVESTMENT AND FOREIGN CURRENCY INVESTMENT
YEAR/PERIOD ENDED PERIOD INCOME/(LOSS) CONTRACTS OPERATIONS
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HARBOR GROWTH FUND (1)
April 30, 1998 (Unaudited)...... $14.20 $(.02) $ (.44) $ (.46)
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
April 30, 1998 (Unaudited)...... $16.15 $ .05 $ 4.61 $ 4.66
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)
April 30, 1998 (Unaudited)...... $34.01 $ .05 $14.01 $14.06
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
April 30, 1998 (Unaudited)...... $12.14 $ .13* $ 3.04 $ 3.17
October 31, 1997................ 10.47 .10* 1.63 1.73
October 31, 1996(4)............. 10.00 .01* .46 .47
- ----------------------------------------------------------------------------------------------------------
HARBOR INTERNATIONAL FUND(5)
April 30, 1998 (Unaudited)...... $35.84 $ .19* $11.55 $11.74
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
- ----------------------------------------------------------------------------------------------------------
<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)
April 30, 1998 (Unaudited)...... $-- $(2.28) $--
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
April 30, 1998 (Unaudited)...... $(.12) $ (.59) $--
October 31, 1997................ (.08) (.36) --
October 31, 1996................ (.11) -- --
October 31, 1995................ (.08) -- --
October 31, 1994(2)............. (.01) -- --
- ----------------------------------------------------------------------------------------------------------
HARBOR CAPITAL APPRECIATION FUND
April 30, 1998 (Unaudited)...... $(.07) $(4.85) $--
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
April 30, 1998 (Unaudited)...... $(.10) $ (.53) $--
October 31, 1997................ (.02) (.04) --
October 31, 1996(4)............. -- -- --
- ----------------------------------------------------------------------------------------------------------
HARBOR INTERNATIONAL FUND(5)
April 30, 1998 (Unaudited)...... $(.40) $ (.90) $--
October 31, 1997................ (.42) (.80) --
October 31, 1996................ (.41) (.13) --
October 31, 1995................ (.24) (.94) --
October 31, 1994................ (.22) -- --
October 31, 1993................ (.22) (.18) --
- ----------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
38
<PAGE> 45
HARBOR FUND FINANCIAL HIGHLIGHTS--CONTINUED
SELECTED DATA FOR A SHARE OUTSTANDING FOR THE PERIODS PRESENTED
<TABLE>
<CAPTION>
TAX RATIO OF ADVISER OR RATIO OF
RETURN NET ASSET NET ASSETS OPERATING EXPENSES SUBADVISER FEES INTEREST EXPENSE
OF TOTAL VALUE END TOTAL END OF PERIOD TO AVERAGE NOT IMPOSED TO AVERAGE
CAPITAL DISTRIBUTIONS OF PERIOD RETURN ($ THOUSANDS) NET ASSETS (%) (PER SHARE) NET ASSETS (%)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$-- $(2.28) $13.26 11.95%++ $ 119,419 .99%+ $-- -- %
-- (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 -- --
- --------------------------------------------------------------------------------------------------------------------------
$-- $ (.71) $19.29 24.86%++ $1,186,407 .98%+ $ -- -- %
-- (.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 --
- --------------------------------------------------------------------------------------------------------------------------
$-- $(4.92) $35.02 20.94%++ $3,793,256 .68%+ $ -- -- %
-- (.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 -- --
- --------------------------------------------------------------------------------------------------------------------------
$-- $ (.63) $13.00 13.16%++ $ 156,149 1.18%*+ $ .01 -- %
-- (.06) 12.14 16.64 134,957 .98* .02 --
-- -- 10.47 4.70++ 12,573 1.44*+ .01 --
- --------------------------------------------------------------------------------------------------------------------------
$-- $(1.30) $41.64 20.48%++ $6,060,068 .94%*+ $ .06 -- %
-- (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* -- +++ --
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
RATIO OF NET
INVESTMENT INCOME
TO AVERAGE PORTFOLIO
NET ASSETS (%) TURNOVER (%)
- ----------------------------------------------------
<S> <C> <C>
(.32)%+ 25.72%+
(.47) 147.37
(.50) 87.97
(.30) 87.94
-- 115.89
.11 170.85
- ----------------------------------------------------
.56%+ 97.12%+
.91 76.19
.99 55.17
1.31* 74.86
.87* 41.80
- ----------------------------------------------------
.33%+ 53.71%+
.23 72.80
.11 73.69
.23 51.65
.24 72.89
.24 93.24
- ----------------------------------------------------
.45%*+ 76.41%+
1.33* 57.61
.40*+ 2.61+
- ----------------------------------------------------
1.03%*+ 7.85%+
1.20* 6.39
1.42* 9.73
1.53* 14.01
1.09* 28.70
1.28* 15.70
- ----------------------------------------------------
</TABLE>
39
<PAGE> 46
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 VALUE FUND (6)
April 30, 1998
(Unaudited)....... $18.17 $.14 $ 4.64 $4.78
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
- ----------------------------------------------------------------------------------------------
HARBOR BOND FUND
April 30, 1998
(Unaudited)....... $11.57 $.30* $ .39 $ .69
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
April 30, 1998
(Unaudited)....... $ 8.66 $.24* $ (.13) $ .11
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
April 30, 1998
(Unaudited)....... $ 1.00 $.03* $ -- $ .03
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 VALUE FUND (6
April 30, 1998
(Unaudited)....... $ (.15) $(3.74) $ --
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) --
- -----------------------------------------------------------------------------
HARBOR BOND FUND
April 30, 1998
(Unaudited)....... $ (.31) $ -- $ --
October 31, 1997.... (.69) -- --
October 31, 1996.... (.74) -- --
October 31, 1995.... (.67) -- --
October 31, 1994.... (.67) (.50) --
October 31, 1993.... (.68) (.25) --
- -----------------------------------------------------------------------------
HARBOR SHORT DURATIO
April 30, 1998
(Unaudited)....... $ (.30) $ -- $ --
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
April 30, 1998
(Unaudited)....... $ (.03) $ -- $ --
October 31, 1997.... (.02) -- --
October 31, 1996.... (.05) -- --
October 31, 1995.... (.06) -- --
October 31, 1994.... (.03) -- --
October 31, 1993.... (.03) -- --
- -----------------------------------------------------------------------------
</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 LLC 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.
The accompanying notes are an integral part of the financial statements.
40
<PAGE> 47
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> <C>
$-- $(3.89) $16.92 17.63%++ $194,996 .77%+ $ -- -- %
-- (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 -- --
- --------------------------------------------------------------------------------------------------------------------------
$-- $ (.31) $11.42 3.48%++ $398,367 .65%*+ $.02 -- %
-- (.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 --
- --------------------------------------------------------------------------------------------------------------------------
$-- $ (.30) $ 8.60 2.81%++ $179,688 .34%*+ $.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
- --------------------------------------------------------------------------------------------------------------------------
$-- $ (.03) $ 1.00 2.56%++ $ 74,777 .58%*+ $.01 -- %
-- (.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
TO AVERAGE PORTFOLIO
NET ASSETS (%) TURNOVER (%)
- ---
<S> <C> <C>
1.61%+ 106.03%+
1.98 145.85
2.65 132.39
3.00 135.93
2.66 150.94
2.48 50.20
- ---
5.34%*+ 299.40%+
6.04* 252.37
6.40* 192.64
7.11* 88.69
6.29* 150.99
6.19* 119.92
- ---
5.64%*+ 910.24%+
5.14* 1,518.68
6.84* 1,277.82
6.19* 725.96
4.61* 895.76
4.19* 1,212.20
- ---
5.11%*+ N/A
4.97* N/A
4.85* N/A
5.42* N/A
3.38* N/A
2.58* N/A
- ---
</TABLE>
(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
++ Unannualized
+++ 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.
41
<PAGE> 48
HARBOR SHORT DURATION FUND
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED
APRIL 30, 1998
--------------------
AMOUNTS IN
THOUSANDS
<S> <C>
Cash flows provided by operating activities:
Investment income received (excluding net amortization of
$23).................................................... $ 4,563
Payment of operating expenses............................. (289)
Purchase of investments................................... (770,186)
Proceeds from sales and maturities of investments......... 757,130
Net purchase of short-term investments.................... (3,889)
Cash used for futures contracts........................... (84)
Cash used for written options............................. (52)
Cash used for forward currency contracts.................. (1)
Cash used for other assets................................ (7)
---------
CASH USED FOR OPERATING ACTIVITIES...................... (12,815)
=========
Cash flows provided by financing activities:
Capital stock proceeds.................................... 59,518
Payment to repurchase capital stock....................... (46,698)
Cash dividends paid....................................... (19)
---------
NET CASH PROVIDED BY FINANCING ACTIVITIES............... 12,801
---------
Net decrease in cash........................................ (14)
Cash at beginning of period................................. 14
Foreign currency at beginning of period, at cost............ 14
---------
Total cash at beginning of period........................... 28
Cash at end of period....................................... 0
Foreign currency at end of period, at cost.................. 14
---------
Total cash at end of period............................. $ 14
=========
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........ $ 4,653
---------
Increase in investments................................... (16,679)
Change in unrealized depreciation -- net.................. 218
Increase in receivables for futures....................... (35)
Increase in receivables for written options............... (71)
Increase in payables for written options.................. 71
Decrease in receivables for securities sold............... 2,956
Increase in interest receivable........................... (428)
Decrease in payables for futures.......................... (1)
Increase in other assets.................................. (8)
Decrease in payable for securities purchased.............. (3,486)
Decrease in accrued expense and other liabilities......... (5)
---------
Total adjustments......................................... (17,468)
---------
Cash used for operating activities.......................... ($ 12,815)
=========
</TABLE>
The accompanying notes are an integral part of the financial statements
42
<PAGE> 49
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--APRIL 30, 1998
($ 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 April 30, 1998 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 Foreign Exchange).
Except for Harbor Money Market Fund, debt securities, other than short-term
securities with a remaining maturity of less than sixty days, are valued at
prices furnished by a pricing service, or as otherwise described below, selected
by the Adviser, which determines valuation for normal institutional-size trading
units of such securities using market information, transactions for comparable
securities and various relationships between securities which are generally
recognized by institutional traders. Short-term securities with a remaining
maturity of less than sixty days are stated at the amortized cost which
approximates value. Open futures contracts are valued based on the last sale
price on the exchange on which such futures are principally traded.
Securities for which there are no such prices or for which prices are
deemed by the Adviser or Subadviser not to be representative of market values,
are valued at their fair value as determined in good faith under consistently
applied procedures established by and under the supervision of the Board of
Trustees. The actual calculation of fair market value may be done by others
including the Adviser and Subadviser.
Securities of the Harbor Money Market Fund are valued utilizing the
amortized cost method as set forth in Rule 2a-7 under the Investment Company Act
of 1940, as amended 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 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.
43
<PAGE> 50
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
($ in Thousands)
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
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. Futures contracts tend to
increase or decrease the Fund's exposure to the underlying instrument or hedge
other fund investments. Losses may arise from changes in the value of the
underlying instruments, if there is an illiquid secondary market for the
contracts or if the counterparties do not perform under the contracts' terms.
The maximum potential loss on a long futures contract is the U.S. 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 April 30, 1998.
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 underlying the 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.
When a Fund writes an option, the premium received by the Fund is presented
in the Fund's Statement of Assets and Liabilities as an equivalent liability.
The amount of the liability is subsequently "marked-to-market" to reflect the
current market value of the option written. Written options are valued at the
last sale price or, in the absence of a sale, the last offering price on the
market on which it is principally traded. If an option expires on its stipulated
expiration date, or if the Fund enters into a closing purchase transaction, the
Fund realizes a gain (or loss if the cost of a closing purchase transaction
exceeds the premium received when the option was written) without regard to any
unrealized gain or loss on the underlying security, and the liability related to
such option is extinguished. If a written call option is exercised, the Fund
realizes a gain or loss from the sale of the 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 April 30, 1998.
44
<PAGE> 51
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
($ in Thousands)
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
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 investment 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
gain or loss 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.
TBA PURCHASE COMMITMENTS
Harbor Bond Fund and Harbor Short Duration Fund may 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 than 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 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
45
<PAGE> 52
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
($ in Thousands)
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
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 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.
46
<PAGE> 53
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
($ in Thousands)
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
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 April 30, 1998.
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 expense to each Fund can be otherwise fairly made.
DEFERRED ORGANIZATION COSTS
Certain costs incurred by Harbor International Fund II in connection with
its organization and its registration with the Securities and Exchange
Commission and with various states aggregated approximately $21. These costs are
being amortized on a straight-line basis over a five-year period from the
commencement of operations of the Fund.
FEDERAL TAXES
Each Fund is treated as a separate entity for federal tax purposes. Each
Fund's policy is to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute to its
shareholders all of its taxable income within the prescribed time. It is also
the intention of each Fund to distribute an amount sufficient to avoid
imposition of any excise tax under Section 4982 of the Internal Revenue Code.
Therefore, no provision has been made for federal taxes on income, capital gains
or unrealized appreciation of securities held or excise tax on income and
capital gains.
47
<PAGE> 54
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
($ in Thousands)
NOTE 3--INVESTMENT PORTFOLIO TRANSACTIONS
Purchases and sales of investments, other than short-term securities, for
each Fund for the six-month period ended April 30, 1998 were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
-------------------------- ------------------------
U.S. U.S.
GOVERNMENT OTHER GOVERNMENT OTHER
---------- ----- ---------- -----
<S> <C> <C> <C> <C>
Harbor Growth...................................... $ -- $ 17,098 $ -- $ 15,014
Harbor International Growth........................ -- 572,365 -- 476,572
Harbor Capital Appreciation........................ -- 1,260,922 -- 825,208
Habor International II............................. -- 52,438 -- 57,279
Harbor International............................... -- 234,973 -- 436,374
Harbor Value....................................... 43 101,237 -- 92,695
Harbor Bond........................................ 620,751 126,231 570,025 77,808
Harbor Short Duration.............................. 684,394 82,307 702,935 33,140
</TABLE>
Harbor Money Market's purchases and sales (including maturities) of
investment securities (all short term obligations) aggregated $755,998 and
$752,631, respectively.
Harbor Short Duration Fund engages in short-selling which obligates the
Fund to replace the security borrowed by purchasing it at the market price at
the time of replacement. Until the security is replaced, the Fund is required to
pay to the lender any accrued interest and may be required to pay a premium. The
Fund would realize a gain if the security declines in price between the date of
the short sale and the date on which the Fund replaces the borrowed security.
The Fund would incur a loss as a result of the short sale if the price of the
security increases between those dates. Until the Fund replaces the borrowed
security, it will maintain a segregated account of cash or liquid securities
with its custodian sufficient to cover its short position.
Harbor Bond Fund enters into forward sale commitments to sell a specified
security at a specified price on a specified future date. The forward sales that
create short positions are accounted for as short sells as described above.
48
<PAGE> 55
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
($ in Thousands)
NOTE 3--INVESTMENT PORTFOLIO TRANSACTIONS--CONTINUED
FUTURES CONTRACTS
Transactions in future contracts for the six-month period ended April 30, 1998
are summarized as follows:
<TABLE>
<CAPTION>
PURCHASES OF SALES OF
FUTURES CONTRACTS FUTURES CONTRACTS
----------------------- -----------------------
U.S. BONDS U.S. BONDS
----------------------- -----------------------
NUMBER OF AGGREGATE NUMBER OF AGGREGATE
CONTRACTS FACE VALUE CONTRACTS FACE VALUE
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
HARBOR BOND FUND
Contracts outstanding at beginning of period........... 1,282 $ 117,409 -- $ --
Contracts opened....................................... 3,076 307,600 -- --
Contracts closed....................................... (2,935) (282,709) -- --
------ ---------- ---- ---------
Open at 4/30/98........................................ 1,423 $ 142,300 -- $ --
====== ========== ==== =========
HARBOR SHORT DURATION FUND
Contracts outstanding at beginning of period........... -- $ -- -- $ --
Contracts opened....................................... 133 26,600 -- --
Contracts closed....................................... (75) (15,000) -- --
------ ---------- ---- ---------
Open at 4/30/98........................................ 58 $ 11,600 -- $ --
====== ========== ==== =========
</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 period............ 29 E$ 7,250 -- E$ --
Contracts opened........................................ 101 25,250 95 95,000
Contracts closed........................................ (114) (28,500) (95) (95,000)
------ ----------- ---- ---------
Open at 4/30/98......................................... 16 E$ 4,000 -- E$ --
====== =========== ==== =========
</TABLE>
* Amounts disclosed represent Euro Dollars, throughout the period, with Euro
Dollars outstanding at the end of the period.
49
<PAGE> 56
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
($ in Thousands)
NOTE 3--INVESTMENT PORTFOLIO TRANSACTIONS--CONTINUED
WRITTEN OPTIONS
Transactions in written options for the six-month period ended April 30,
1998 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 period................ 200 $ 200,000
Options opened............................................ -- --
Options closed/expired.................................... (200) (200,000)
---- ---------
Open at 4/30/98........................................... -- $ --
==== =========
</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 period................ 300 $ 300,000
Options opened............................................ -- --
Options closed/expired.................................... (300) (300,000)
---- ---------
Open at 4/30/98........................................... -- $ --
==== =========
</TABLE>
<TABLE>
<CAPTION>
OPTIONS WRITTEN
-------------------------
U.S. TREASURY FUTURES
-------------------------
NUMBER OF AGGREGATE
CONTRACTS FACE VALUE
--------- ----------
<S> <C> <C>
HARBOR SHORT DURATION FUND
Options outstanding at beginning of period................ -- $ --
Options opened............................................ 308 308,000
Options closed/expired.................................... (192) (192,000)
---- ---------
Open at 4/30/98........................................... 116 $ 116,000
==== =========
</TABLE>
50
<PAGE> 57
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 six-month period ended April
30, 1998. 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% $ 418
Harbor International Growth................................. 0.75% 3,776
Harbor Capital Appreciation................................. 0.60% 9,424
Harbor International II..................................... 0.75% 521
Harbor International........................................ 0.85% 23,058
Harbor Value................................................ 0.60% 535
Harbor Bond................................................. 0.70% 1,372
Harbor Short Duration....................................... 0.40% 331
Harbor Money Market......................................... 0.30% 113
</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 six-month period ended
April 30, 1998, Harbor agreed not to impose advisory fees of $69, $431, $165 and
$45 relating to Harbor International Fund II, Harbor Bond Fund, Harbor Short
Duration Fund and Harbor Money Market Fund, respectively; and Harbor and
Northern Cross Investments Limited agreed not to impose $1,764 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 $28 for the six-month period
ended April 30, 1998.
DISTRIBUTOR
HCA Securities, Inc., a wholly-owned subsidiary of Harbor Capital Advisors,
Inc., is the distributor for Harbor Fund shares. Harbor Fund does not reimburse
the distributor for expenses.
51
<PAGE> 58
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
($ in Thousands)
NOTE 4--FEES AND OTHER TRANSACTIONS WITH AFFILIATES--CONTINUED
SHAREHOLDERS
On April 30, 1998, 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............................................. 30,888 3,566,178
Harbor International Growth............................... 35,106 774,064
Harbor Capital Appreciation............................... 7 2,537,286
Harbor International II................................... 212,616 90,155
Harbor International...................................... 5 1,636,357
Harbor Value.............................................. 10 3,204,017
Harbor Bond............................................... 9 2,342,309
Harbor Short Duration..................................... 3,309,755 15,731,225
Harbor Money Market....................................... 36,443 19,647,950
</TABLE>
TRANSFER AGENT
Harbor Transfer, Inc., a wholly-owned subsidiary of Harbor Capital
Advisors, Inc., is the shareholder servicing agent for the Funds. Fees incurred
for these transfer agent services for the six-month period ended April 30, 1998
totaled $2,730.
"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 $59 for the six-month period ended April 30, 1998.
CUSTODIAN
Payments to the custodian have been reduced by balance credits applied to
each portfolio for the six-month period ended April 30, 1998. 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 $2, $10, $37, $3, $27, $2, $6, $3 and $4, respectively.
NOTE 5--COMMITMENTS AND CONTINGENCIES
In connection with its former fidelity bond and directors and officers
errors and omissions liability insurance policy, the Trust, on behalf of each
Fund, must maintain a "reserve premium" for five years representing
approximately 100% of its allocated annual premium for each Fund. Such amounts
are included in "Other Assets" in each Fund's Statement of Assets and
Liabilities.
52
<PAGE> 59
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
($ in Thousands)
NOTE 6--TAX INFORMATION
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 April 30, 1998 were as follows:
<TABLE>
<CAPTION>
GROSS UNREALIZED
------------------------------ NET UNREALIZED
NAME OF FUND IDENTIFIED COST APPRECIATION (DEPRECIATION) APPRECIATION
- ------------ --------------- ------------ -------------- --------------
<S> <C> <C> <C> <C>
Harbor Growth Fund.............................. $ 91,908 $ 33,088 $ (5,500) $ 27,588
Harbor International Growth Fund................ 949,524 274,495 (27,462) 247,033
Harbor Capital Appreciation Fund................ 2,787,692 998,724 (18,279) 980,445
Harbor International Fund II.................... 145,023 21,084 (10,485) 10,599
Harbor International Fund....................... 3,350,038 2,784,404 (105,746) 2,678,658
Harbor Value Fund............................... 169,108 26,917 (1,811) 25,106
Harbor Bond Fund................................ 507,286 3,683 (2,709) 974
Harbor Short Duration Fund...................... 181,633 323 (115) 208
</TABLE>
(This document must be preceded or accompanied by a Prospectus.)
53
<PAGE> 60
<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
236,000/6/98 (LOGO)
recycled paper
