<PAGE> 1
ANNUAL REPORT
--------------------------------------------
[HARBOR FUND LOGO]
OCTOBER 31, 1998
--------------------------------------------
HARBOR FUND
<PAGE> 2
HARBOR FUND
ANNUAL REPORT OVERVIEW
Harbor Fund completed its most recent fiscal year on October 31, 1998.
Total annual return is shown below for each one of the nine portfolios. All
performance figures included in this report are total returns and assume the
reinvestment of dividends. The long-term historic returns represent unmanaged
indices and are included as an indication of longer-term potential associated
with taking different levels of market risk.
<TABLE>
<CAPTION>
TOTAL RETURN FOR
YEAR ENDED
HARBOR FUNDS IN DESCENDING ORDER OF MARKET RISK 10/31/1998
- ----------------------------------------------- ----------------
<S> <C>
Growth...................................................... -8.73%
International Growth........................................ 16.96%
Capital Appreciation........................................ 15.72%
International II............................................ -1.98%
International............................................... 6.97%
Value....................................................... 6.69%
Bond........................................................ 10.33%
Short Duration.............................................. 6.81%
Money Market................................................ 5.20%
</TABLE>
<TABLE>
<CAPTION>
COMMONLY USED MARKET INDICES
- ----------------------------
<S> <C>
Morgan Stanley Capital International Europe, Australia, and
Far East
(EAFE); international equity.............................. 9.65%
Standard & Poor's 500 (S&P 500); domestic equity............ 22.09%
Lehman Brothers Aggregate (LB AGG); domestic bonds.......... 9.34%
One-Year Government Bonds (1-YR GVT)........................ 6.32%
90-Day U.S. Treasury Bills (T-Bills); domestic short-term... 5.15%
</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..................................................... 6.77%
Consumer Price Index........................................ 5.34%
</TABLE>
<TABLE>
<CAPTION>
HARBOR FUND EXPENSE LIPPER
RATIOS 1994 1995(a) 1996(a) 1997(a) 1998(a) MEDIAN**
- ------------------- ---- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Growth........................... 0.93% 0.93% 0.93% 1.12% 1.00% 1.20%
International Growth............. 1.32%* 1.21%* 1.11% 1.02% 0.96% 0.98%
Capital Appreciation............. 0.81% 0.75% 0.75% 0.70% 0.68% 0.68%
International II................. NA% NA% 1.46%+* 0.99%* 1.15%* 1.42%
International.................... 1.10%++ 1.04%++ 0.99%++ 0.97%++ 0.94%++ 0.98%
Value............................ 1.04% 0.90% 0.83% 0.83% 0.79% 0.88%
Bond............................. 0.77%* 0.70%* 0.70%* 0.67%* 0.65%* 0.58%
Short Duration***................ 0.38%* 0.39%* 0.35%* 0.38%* 0.36%* 0.49%
Money Market..................... 0.67%* 0.61%* 0.64%* 0.63%* 0.57%* 0.52%
</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.
(a) Percentage does not reflect reduction for credit balance
arrangements which would have amounted to the following:
Year Ended October 31, 1997 -- International II .01%, Short
Duration .02%, Money Market .01%
Year Ended October 31, 1996 -- Growth .01%, International Growth
.01%, International II .02%, Short Duration .02%
Year Ended October 31, 1995 -- Short Duration .01%
* Reflects the Adviser's agreement not to impose all or a portion of its
advisory fees.
** Includes all funds in the 9/30/98 Lipper Universe with the same
investment objective as the comparable Harbor Fund portfolio and with
similar net 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 0.00% for the year ended
10/31/98. 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> 3
DEAR SHAREHOLDER:
America's economy rolled ahead within the speed limit and seemingly on
cruise control for most of Harbor Fund's fiscal year.
In an eventful final quarter, however, nervous investors sensed that in the
eighth year of uninterrupted expansion we might be running out of gas and sent
the equity market into an August swoon.
Along came the Federal Reserve Board--satisfied that inflation was no
threat--with fine tuning moves to stimulate more growth by lowering short term
interest rates in September, October, and November.
Before these cuts, the last previous change by the Fed open market
committee was a quarter-point increase in March 1997. The cuts of 25 basis
points each, reduced the federal funds rate to 4.75%. Each of the cuts seemed to
assuage investors and put new steam into the equity markets.
Significant economic developments at home and abroad late in Harbor's
fiscal year ended October 31, played important roles in the foregoing events:
- Prospects for continued robust consumer spending dimmed as consumer
confidence sagged late in the year.
- Profits of U.S. companies fell in the second and third quarters.
- Rising labor costs in a tight U.S. labor market were not being fully
offset by productivity gains.
- By mid-year, the U.S. trade deficit had soared to an all-time high.
- Japan's economy was mired in recession and the Asian financial crisis
spread to Latin and South America with Russia acting as the catalyst.
- For the world's major equity markets, the third quarter was easily the
worst of any quarter in the past eight years and the emerging markets
continued to decline.
- After a Russian debt default and ruble devaluation in August,
investors fled from all but the safest securities. Issuance of junk
bonds in the U.S. just about halted and domestic equity financing
tightened perceptibly.
Easing the looming credit crunch was cited by Federal Reserve Chairman Alan
Greenspan as a major objective of the actions to lower short-term rates. Not all
the domestic and world economic news in fiscal year 1998 was discouraging for
investors. Consider that:
- Inflation in the U.S. as measured by the GDP deflator matched its
lowest reading in almost 35 years, rising at an annual rate of just
0.8% in the calendar year third quarter.
- Amid global turbulence, Europe was a beacon of relative stability,
with growing success in corporate restructuring, cost cutting, and
profit increases.
- European Monetary Union and the Euro common currency appeared set for
launch at year end with governmental actions to meet rigorous demands
for membership giving the 11 member nations a stronger worldwide
image.
- Thailand and Korea were bright spots in Asia as both moved ahead with
financial system restructuring plans through forced closings or
mergers of local banks.
- Throughout 1998, the growing U.S. federal budget surplus was a strong
positive for the economy and--because of the Treasury's reduced need
to borrow--for the bond market.
- With interest rates falling near year end, the robust domestic housing
market--the most interest sensitive segment of the economy--was
expected to continue strong and mortgage refinancing added purchasing
power to the economy.
Bond market performance during Harbor's fiscal year was stellar, both at
home and in much of Europe. As reported by Bill Gross of Pacific Investment
Management Co. (PIMCO) and portfolio manager of Harbor Bond
2
<PAGE> 4
DEAR SHAREHOLDER--CONTINUED
Fund, the annual PIMCO secular forum near mid-year came up with what appears to
us to be a good call on the continued outlook for bonds.
With low inflation and real interest rates dropping to 3.25%, PIMCO remains
bullish on the outlook for bond prices and forecast perhaps the last leg
downward of this 17-year bull market, Mr. Gross reported. Long term treasury
yields over the next several years, the forum concluded, should range between
4.5 and 6.5%, with most activity occurring near 5%.
With bond prices rising and yields falling during most of the fiscal year,
Harbor Bond Fund had excellent performance, in no small part due to astute
portfolio strategy in the face of a flattening yield curve which was virtually
level by fiscal year end. Also, both Harbor Short Duration and Harbor Money
Market funds had nice returns.
Harbor's equity funds had mixed performance, largely attributable to the
increasingly narrow market caused by the so-called "flight to quality," with
worried investors seeking to reduce risk by focusing on a handful of companies
in industries perceived to have more dependable earnings growth prospects. In
general, growth stocks were favored over value stocks and larger capitalization
stocks were favored over smaller ones.
Valuations and earnings growth prospects for small stocks grew stronger
compared to larger capitalization stocks during the year. Small-cap valuations
also appeared more attractive in European markets where economies were improving
and governments are encouraging development of small-cap markets and
entrepreneurial companies.
Harbor International Growth Fund led the Harbor equity group with strong
returns in a year when Fund holdings in Europe were increased sharply and those
in Southeast Asia were virtually eliminated. Of the domestic equity funds,
Harbor Capital Appreciation was the leader, maintaining its record of strong
annual returns since inception almost 11 years ago.
A transition in the management of Harbor Fund and Harbor Capital Advisors
is in the offing because of my intent to retire as president and trustee. I
expect this process to be completed before the end of 1999. The quality of
Harbor's service is in no way expected to be affected by this planned change in
management. It has been a thrilling experience to be a part of the firm's
growth; I shall miss it.
As always, we invite your review of the performance of the Harbor funds on
the pages which follow and since expenses are a very important element in the
performance of your investments, we also direct your attention to the expense
ratios on page one of this report.
At Harbor, we have a single focus--adding value to your money. Thank you
for investing in the Harbor funds.
As always, we welcome your thoughts.
December 11, 1998 Sincerely,
Ronald C. Boller
Ronald C. Boller
President
3
<PAGE> 5
HARBOR FUND
The following performance figures are annualized for each Fund. The date of
inception for Harbor 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.
<TABLE>
<S> <C> <C> <C>
HARBOR GROWTH FUND NET ASSET VALUE: 10/31/98 $10.81
10/31/97 $14.20
</TABLE>
[LINE GRAPH]
<TABLE>
<CAPTION>
HARBOR GROWTH FUND S&P 500
------------------ -------
<S> <C> <C>
10/31/88 10000.00 10000.00
10/31/89 11856.00 12612.00
10/31/90 9789.00 11669.00
10/31/91 16515.00 15572.00
10/31/92 15281.00 17125.00
10/31/93 19279.00 19674.00
10/31/94 17681.00 20471.00
10/31/95 22264.00 25880.00
10/31/96 25568.00 32153.00
10/31/97 30333.00 42516.00
10/31/98 27685.00 51910.00
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------
Total Return for Periods Ended 10/31/98
------------------------------------------------------------------------
<S> <C> <C> <C>
Fund/Index 12 months 5 years 10 years
------------------------------------------------------------------------
Harbor Growth -8.73% 7.51% 10.72%
------------------------------------------------------------------------
S&P 500 22.09% 21.42% 17.90%
------------------------------------------------------------------------
Total Return for Periods Ended 9/30/98
------------------------------------------------------------------------
Harbor Growth -12.15% 7.35% 10.39%
------------------------------------------------------------------------
</TABLE>
Performance of small company growth
stocks lagged that of mid- and
large-capitalization equities during
Harbor's fiscal year. While the Harbor
Growth Fund again substantially
outperformed its peer group in the
period, returns fell well below those
of the S&P 500 index, which was
dominated by a small group of
large-cap stocks. Strong returns from
leisure, retail foods, auto equipment
and computer equipment stocks were
offset by overall performance in the
technology, consumer non-durables and
capital goods (machinery) sectors,
which trailed the market.
<TABLE>
<S> <C> <C> <C>
HARBOR INTERNATIONAL GROWTH FUND NET ASSET VALUE: 10/31/98 $18.07
10/31/97 $16.15
</TABLE>
[LINE GRAPH]
<TABLE>
<CAPTION>
HARBOR INTERNATIONAL GROWTH FUND EAFA
-------------------------------- ----
<S> <C> <C>
10/31/93 10000.00 10000.00
10/31/94 11536.00 11009.00
10/31/95 12208.00 10968.00
10/31/96 15609.00 12117.00
10/31/97 16878.00 12678.00
10/31/98 19741.00 13901.00
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------
Total Return for Periods Ended 10/31/98
------------------------------------------------------------------------
Fund/Index 12 months 5 years Since
Inception
------------------------------------------------------------------------
<S> <C> <C> <C>
Harbor International Growth 16.96% 14.57% 14.57%
------------------------------------------------------------------------
EAFE 9.65% 6.81% 6.81%
------------------------------------------------------------------------
Total Return for Periods Ended 9/30/98
------------------------------------------------------------------------
Harbor International Growth -4.95% N/A 12.37%
------------------------------------------------------------------------
</TABLE>
With another exceptional performance
in fiscal year 1998, Harbor
International Growth Fund has
outperformed the EAFE index by a
substantial margin in each of the five
years since the Fund's founding.
Strong gains came from holdings in
Italy and France, which were increased
during the year. Returns from holdings
in the UK, largest in the portfolio at
24%, were excellent. These were offset
somewhat by negative returns from
holdings in Mexico, Germany, Hong
Kong, Australia, and Malaysia. The
latter four were the only countries
where fund holdings did not outperform
the index. The Fund may be subject to
greater risks, such as changes in
currency rates, foreign taxation,
differences in foreign auditing, and
other financial standards, as well as
higher brokerage and custodian fees
than funds invested only in the U.S.
4
<PAGE> 6
HARBOR FUND--CONTINUED
Performance data quoted represents past performance and is not predictive
of future performance. Actual return and principal value on an investment will
fluctuate, and the shares, when redeemed, may be worth more or less than their
original cost.
<TABLE>
<S> <C> <C> <C>
10/31/98 $33.51
HARBOR CAPITAL APPRECIATION FUND NET ASSET VALUE: 10/31/97 $34.01
</TABLE>
[LINE GRAPH]
<TABLE>
<CAPTION>
CAPITAL APPRECIATION S&P 500
-------------------- -------
<S> <C> <C>
10/31/88 10000.00 10000.00
10/31/89 12091.00 12612.00
10/31/90 10698.00 11669.00
10/31/91 16619.00 15572.00
10/31/92 19015.00 17125.00
10/31/93 22848.00 19674.00
10/31/94 24505.00 20471.00
10/31/95 33259.00 25880.00
10/31/96 37657.00 32153.00
10/31/97 51111.00 42516.00
10/31/98 59147.00 51910.00
</TABLE>
<TABLE>
<S> <C> <C> <C>
---------------------------------------------------------------------
Total Return for Periods Ended 10/31/98
---------------------------------------------------------------------
Fund/Index 12 months 5 years 10 years
---------------------------------------------------------------------
Harbor Capital Appreciation 15.72% 20.95% 19.45%
---------------------------------------------------------------------
S&P 500 22.09% 21.42% 17.90%
---------------------------------------------------------------------
Total Return for Periods Ended 9/30/98
---------------------------------------------------------------------
Harbor Capital Appreciation 2.19% 19.91% 18.79%
---------------------------------------------------------------------
</TABLE>
Good results were achieved by Harbor
Capital Appreciation Fund in a fiscal
year in which the market progressively
narrowed as investors focused on a
small number of large capitalization
stocks. As a result, Fund performance
fell short of that of the S&P 500,
which was dominated by the favored
large-cap stocks. Technology and
financial stocks, the two largest
segments of the Fund portfolio had
good returns even though both modestly
underperformed the index. Good returns
by holdings in telecommunications and
computers were partly offset by
negative results from electronic
instruments and high tech equipment.
Consumer non-durables and health care
holdings outperformed the market,
particularly drugs and retail stocks.
Small holdings in oil services and
transportation stocks had negative
results.
<TABLE>
<S> <C> <C> <C>
10/31/98 $11.26
HARBOR INTERNATIONAL FUND II NET ASSET VALUE: 10/31/97 $12.14
</TABLE>
[LINE GRAPH]
<TABLE>
<CAPTION>
HARBOR INTERNATIONAL FUND II EAFE
---------------------------- ----
<S> <C> <C>
10/31/96 10470.00 9941.00
10/31/97 12212.00 10401.00
10/31/98 11970.00 11404.00
</TABLE>
<TABLE>
<S> <C> <C> <C>
---------------------------------------------------------------------
Total Return for Periods Ended 10/31/98
---------------------------------------------------------------------
Fund/Index 12 months 5 years Since
Inception
---------------------------------------------------------------------
Harbor International II -1.98% N/A 7.73%
---------------------------------------------------------------------
EAFE 9.65% 6.81% 5.59%
---------------------------------------------------------------------
Total Return for Periods Ended 9/30/98
---------------------------------------------------------------------
Harbor International II -22.49% N/A 2.13%
---------------------------------------------------------------------
</TABLE>
Despite a strong turnaround in the
final month of the fiscal year, Harbor
International Fund II had slightly
negative returns for the year and
substantially underperformed the EAFE
index. Exceptionally strong returns
from sizeable holdings in France and
Italy could not offset negative
returns from investments in Hong Kong
and Singapore. In addition, returns
from holdings in Switzerland and the
UK, were below gains in the index in
those countries. Results also were
hurt by negative performance of
smaller holdings in Malaysia, Russia,
Canada, and Norway, all of which were
reduced or eliminated by fiscal year
end. The Fund may be subject to
greater risks, such as changes in
currency rates, foreign taxation,
differences in foreign auditing, and
other financial standards, as well as
higher brokerage and custodian fees
than funds invested only in the U.S.
5
<PAGE> 7
HARBOR FUND--CONTINUED
<TABLE>
<S> <C> <C> <C>
10/31/98 $36.97
HARBOR INTERNATIONAL FUND NET ASSET VALUE: 10/31/97 $35.84
</TABLE>
[LINE GRAPH]
<TABLE>
<CAPTION>
HARBOR INTERNATIONAL FUND EAFE
------------------------- ----
<S> <C> <C>
10/31/88 10000.00 10000.00
10/31/89 13130.00 10814.00
10/31/90 13631.00 9428.00
10/31/91 16049.00 10083.00
10/31/92 15403.00 8751.00
10/31/93 21488.00 12028.00
10/31/94 25478.00 13242.00
10/31/95 26769.00 13193.00
10/31/96 31633.00 14575.00
10/31/97 37726.00 15249.00
10/31/98 40357.00 16720.00
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------
Total Return for Periods Ended 10/31/98
-------------------------------------------------------------------
Fund/Index 12 months 5 years 10 years
-------------------------------------------------------------------
<S> <C> <C> <C>
Harbor International 6.97% 13.43% 14.97%
-------------------------------------------------------------------
EAFE 9.65% 6.81% 5.27%
-------------------------------------------------------------------
Total Return for Periods Ended 9/30/98
-------------------------------------------------------------------
Harbor International -11.35% 12.51% 14.81%
-------------------------------------------------------------------
</TABLE>
Downturns in many international
markets hurt performance of the Harbor
International Fund in the fiscal year.
For the first time in 11 years since
inception, returns of the Fund trailed
those of the EAFE index. A strong gain
in October did not offset declines
during market selloffs in August and
September. Exceptional returns came
from holdings in Italy, which
increased to almost 5% of the
portfolio, and Portugal. Good returns
were earned from substantial holdings
in Spain, France, and Switzerland, but
fell short of the index in those
countries. Holdings in the UK, which
represent almost a quarter of the
portfolio, were strong and topped the
index. Returns were hurt by holdings
in Asia, South Africa and Russia.
Holdings in Russia were eliminated
before the end of the period. The Fund
may be subject to greater risks, such
as changes in currency rates, foreign
taxation, differences in foreign
auditing, and other financial
standards, as well as higher brokerage
and custodian fees than funds invested
only in the U.S.
<TABLE>
<S> <C> <C> <C>
10/31/98 $15.21
HARBOR VALUE FUND NET ASSET VALUE: 10/31/97 $18.17
</TABLE>
[LINE GRAPH]
<TABLE>
<CAPTION>
HARBOR VALUE FUND S&P 500
----------------- -------
<S> <C> <C>
10/31/88 10000.00 10000.00
10/31/89 12664.00 12612.00
10/31/90 11018.00 11669.00
10/31/91 14343.00 15572.00
10/31/92 15355.00 17125.00
10/31/93 17195.00 19674.00
10/31/94 18020.00 20471.00
10/31/95 21808.00 25880.00
10/31/96 26842.00 32153.00
10/31/97 35184.00 42516.00
10/31/98 37538.00 51910.00
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------
Total Return for Periods Ended 10/31/98
-------------------------------------------------------------------
<S> <C> <C> <C>
Fund/Index 12 months 5 years 10 years
-------------------------------------------------------------------
Harbor Value 6.69% 16.90% 14.14%
-------------------------------------------------------------------
S&P 500 22.09% 21.42% 17.90%
-------------------------------------------------------------------
Total Return for Periods Ended 9/30/98
-------------------------------------------------------------------
Harbor Value -5.81% 15.12% 13.59%
-------------------------------------------------------------------
</TABLE>
Narrowing of the equity market during
and immediately following downturns in
June and August--when investor focus
turned to a small number of large
capitalization stocks--hurt Harbor
Value Fund performance in the fiscal
year and returns fell well short of
the S&P 500 index. Returns from Fund
holdings in retail food, health care,
drugs, pollution control, banks and
telephones were exceptional and
outperformed their market segments.
These were offset by overall
performance in the basic materials and
technology sectors which trailed the
market. Passive management of 25% of
fund assets added broad
diversification.
6
<PAGE> 8
HARBOR FUND--CONTINUED
<TABLE>
<S> <C> <C> <C>
10/31/98 $11.82
HARBOR BOND FUND NET ASSET VALUE: 10/31/97 $11.57
</TABLE>
<TABLE>
<CAPTION>
HARBOR BOND LB AGG
----------- ------
<S> <C> <C>
10/31/88 10000.00 10000.00
10/31/89 11166.00 11190.00
10/31/90 11616.00 11896.00
10/31/91 13940.00 13777.00
10/31/92 15632.00 15132.00
10/31/93 17818.00 16928.00
10/31/94 17258.00 16307.00
10/31/95 19771.00 18859.00
10/31/96 21265.00 19961.00
10/31/97 23171.00 21736.00
10/31/98 25566.00 23766.00
</TABLE>
<TABLE>
<S> <C> <C> <C>
-------------------------------------------------------------------
Total Return for Periods Ended 10/31/98
-------------------------------------------------------------------
Fund/Index 12 months 5 years 10 years
-------------------------------------------------------------------
Harbor Bond 10.33% 7.49% 9.84%
-------------------------------------------------------------------
LB AGG 9.34% 7.02% 9.04%
-------------------------------------------------------------------
Total Return for Periods Ended 9/30/98
-------------------------------------------------------------------
-------------------------------------------------------------------
Harbor Bond 12.06% 7.71% 10.09%
-------------------------------------------------------------------
</TABLE>
With a double-digit return for the
fiscal year, Harbor Bond Fund
outperformed the Lehman Brothers
Aggregate index by almost 100 basis
points. Interest rates fell
dramatically during the period as many
investors sought the safe haven of
treasuries over other asset classes. A
longer-than-index duration was
maintained in the Fund throughout the
period, strongly benefiting
performance. Also, as short- and
intermediate-term interest rates fell
faster than those at other points
along the yield curve, the Fund's
focus on intermediate maturity issues
helped performance. Sector
strategies--including overweighting of
high-quality mortgage-backed
securities--also made positive
contributions. Underweighting of
investment grade corporates was
helpful since fears over a slowing
economy hurt this sector's
performance. Limited exposure to lower
rated credits slightly curtailed
performance in the short term but it
has added value over longer periods of
time.
<TABLE>
<S> <C> <C> <C>
10/31/98 $8.69
HARBOR SHORT DURATION FUND NET ASSET VALUE: 10/31/97 $8.66
</TABLE>
<TABLE>
<CAPTION>
HARBOR SHORT DURATION 1 YR GVT
--------------------- --------
<S> <C> <C>
10/31/91 10000.00 10000.00
10/31/92 10372.00 10421.00
10/31/93 10909.00 10830.00
10/31/94 11185.00 11147.00
10/31/95 11949.00 11950.00
10/31/96 12814.00 12669.00
10/31/97 13516.00 13414.00
10/31/98 14436.00 14262.00
</TABLE>
<TABLE>
<S> <C> <C> <C>
-------------------------------------------------------------------
Total Return for Periods Ended 10/31/98
-------------------------------------------------------------------
Fund/Index 12 months 5 years Since
Inception
-------------------------------------------------------------------
Harbor Short Duration 6.81% 5.76% 5.52%
-------------------------------------------------------------------
1-Yr GVT 6.32% 5.66% 5.33%
-------------------------------------------------------------------
Total Return for Periods Ended 9/30/98
-------------------------------------------------------------------
-------------------------------------------------------------------
Harbor Short Duration 6.75% 5.78% 5.51%
-------------------------------------------------------------------
</TABLE>
Posting a strong return of 6.81%,
Harbor Short Duration Fund
significantly bettered returns of both
one-year treasury and 90-day treasury
bills in the fiscal year. Average
annual returns of the Fund over the
previous 5-year period continued well
above those of both the one-year and
90-day bills. During the year,
holdings of treasuries were trimmed to
about 11% of the portfolio and at year
end AAA rated agencies, mortgages, and
asset-backed securities made up most
of the portfolio. Most holdings were
in the short and intermediate maturity
portions of the yield curve, which
benefited return as the yield curve
steepened in September. Average
interest rate duration generally was
maintained in the 18-month to 2-year
range, which also added to performance
as interest rates fell.
7
<PAGE> 9
HARBOR FUND--CONTINUED
<TABLE>
<S> <C> <C> <C>
10/31/98 $1.00
HARBOR MONEY MARKET FUND NET ASSET VALUE: 10/31/97 $1.00
</TABLE>
GRAPH
<TABLE>
<CAPTION>
HARBOR MONEY MARKET T-BILLS
------------------- -------
<S> <C> <C>
10/31/88 10000.00 10000.00
10/31/89 10944.00 10876.00
10/31/90 11821.00 11759.00
10/31/91 12561.00 12491.00
10/31/92 13022.00 12975.00
10/31/93 13371.00 13375.00
10/31/94 13843.00 13895.00
10/31/95 14627.00 14698.00
10/31/96 15370.00 15478.00
10/31/97 16155.00 16297.00
10/31/98 16995.00 17136.00
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
-------------------------------------------------------------------
Total Return for Periods Ended 10/31/98
-------------------------------------------------------------------
Fund/Index 12 months 5 years 10 years
-------------------------------------------------------------------
Harbor Money Market 5.20% 4.91% 5.45%
-------------------------------------------------------------------
T-Bills 5.15% 5.08% 5.53%
-------------------------------------------------------------------
Current Yield for Periods Ended 9/30/98
------------------------------------------------------------------
Harbor Money Market 7 days: 5.08% 30 Days: 5.11%
------------------------------------------------------------------
</TABLE>
Returns of Harbor Money Market Fund
bettered those of the 90-day treasury
bill and continued to significantly
outperform the IBC's average for all
taxable money market funds for the
fiscal year. Short-term interest
rates, after having risen in the
fiscal first quarter because of
liquidations by foreign banks forced
by the Asian financial crisis,
declined over the following 9 months.
The Fund was invested in high quality,
short-term instruments--about 40%
commercial paper and 50% certificates
of deposit. The spread between the
90-day treasury bill and these higher
yielding securities added to Fund
performance, as did aggressive
management of duration to capture the
decline in interest rates. Maintenance
of a bulleted exposure at the middle
of the yield curve also benefited
results. An investment in the Fund is
not insured or guaranteed by the FDIC
or any other government agency.
Although the Fund seeks to preserve
the value of your investment at $1.00
per share, it is possible to lose
money by investing in the Fund.
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND
BOARD OF TRUSTEES OF HARBOR FUND
In our opinion, the accompanying statements of assets and liabilities,
including the portfolios of investments, and the related statements of
operations, of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of each of the nine
Funds constituting the Harbor Fund, (hereafter referred to as the "Trust") at
October 31, 1998, and the results of each of their operations, the changes in
each of their net assets and the financial highlights for the periods indicated,
in conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Trust's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of investments at
October 31, 1998 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 11, 1998
8
<PAGE> 10
HARBOR GROWTH FUND
PORTFOLIO OF INVESTMENTS--OCTOBER 31, 1998
Common Stock Holdings (% of net assets)
(Excludes net cash, convertible bonds and short-term investments of 3.8%)
<TABLE>
<S> <C>
Machinery
0.7
Domestic Oil
1.0
Services
1.8
Pollution Control
1.9
Retail-All Other
2.0
Leisure & Luxury
2.2
Automobile Equipment
2.3
Electric Power
2.6
Media
2.6
Apparel & Textiles
3.0
Manufacturing Diversified
4.2
Miscellaneous High Tech
4.6
Drugs & Medicine
5.6
Semiconductors
5.8
Health Care-Hospital Management
6.4
Electronic Instruments
7.7
Telecommunications
8.6
Computers & Business Equipment
15.1
Computer Services
18.1
</TABLE>
<TABLE>
<CAPTION>
COMMON STOCKS--96.2%
VALUE
SHARES (000S)
--------- -------
<S> <C> <C>
APPAREL & TEXTILES--3.0%
TJX Companies Inc. New................... 140,000 $ 2,651
-------
AUTOMOBILE EQUIPMENT--2.3%
Tower Automotive Inc.*................... 92,000 2,047
-------
VALUE
SHARES (000S)
--------- -------
COMPUTER SERVICES--18.1%
AXENT Technologies Inc.*................. 75,840 $ 1,905
BMC Software Inc.*....................... 50,000 2,403
DataWorks Corp.*......................... 200,000 1,363
Legato Systems Inc.*..................... 200,000 7,825
Project Software & Development Inc.*..... 110,000 1,994
Zitel Corp.*............................. 100,000 428
-------
15,918
-------
COMPUTERS & BUSINESS EQUIPMENT--15.1%
Comverse Technology Inc.................. 85,000 3,910
EMC Corp.*............................... 60,000 3,863
Network Appliance Inc.*.................. 100,000 5,475
-------
13,248
-------
DOMESTIC OIL--1.0%
Valero Energy Corp....................... 36,200 905
-------
DRUGS & MEDICINE--5.6%
Dura Pharmaceuticals Inc.*............... 41,700 503
Elan Corp. plc* ADR(1)................... 30,000 2,102
Molecular Devices Corp.*................. 120,000 2,280
-------
4,885
-------
ELECTRIC POWER--2.6%
The AES Corp.*........................... 55,400 2,268
-------
ELECTRONIC INSTRUMENTS--7.7%
Checkpoint Systems Inc.*................. 160,000 1,900
GenRad Inc.*............................. 112,500 1,828
LoJack Corp.*............................ 280,000 3,080
-------
6,808
-------
HEALTH CARE-HOSPITAL MANAGEMENT--6.4%
Health Management Association*........... 135,000 2,405
HEALTHSOUTH Corp.*....................... 73,700 894
Safeskin Corp.*.......................... 95,000 2,102
UroCor Inc.*............................. 37,500 253
-------
5,654
-------
LEISURE & LUXURY--2.2%
Carnival Corp. .......................... 60,000 1,942
-------
MACHINERY--0.7%
Hirsch International Corp.*.............. 170,000 637
-------
MANUFACTURING DIVERSIFIED--4.2%
AFC Cable Systems Inc.*.................. 100,000 2,463
Brunswick Technologies Inc.*............. 165,000 1,217
-------
3,680
-------
MEDIA--2.6%
Chancellor Media Corp.*.................. 60,000 2,302
-------
MISCELLANEOUS HIGH TECH--4.6%
JPM Co.*................................. 105,000 735
Planar Systems Inc.*..................... 203,500 1,832
Sawtek Inc.*............................. 75,000 1,514
-------
4,081
-------
</TABLE>
9
<PAGE> 11
HARBOR GROWTH FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
<TABLE>
<CAPTION>
COMMON STOCKS--CONTINUED
VALUE
SHARES (000S)
--------- -------
<S> <C> <C>
POLLUTION CONTROL--1.9%
Waste Management Inc..................... 36,120 $ 1,630
-------
RETAIL-ALL OTHER--2.0%
Dollar Tree Stores Inc.*................. 45,000 1,735
-------
SEMICONDUCTORS--5.8%
Advanced Technology Materials Inc.*...... 107,500 1,478
Dallas Semiconductor Corp. .............. 75,000 2,775
Summit Design Inc.*...................... 100,000 838
-------
5,091
-------
SERVICES--1.8%
Robert Half International Inc.*.......... 40,000 1,605
-------
TELECOMMUNICATIONS--8.6%
Aspect Telecommunications Corp.*......... 150,000 2,269
Nextel Communications Inc.*.............. 90,000 1,631
P-Com Inc.*.............................. 150,000 478
Transcrypt International Inc.*........... 237,500 772
Uniphase Corp.*.......................... 50,000 2,475
-------
7,625
-------
TOTAL COMMON STOCKS
(Cost $82,922)...................................... 84,712
-------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
--------- -------
CONVERTIBLE BOND--2.4%
(Cost $2,138)
<S> <C> <C>
Mansur Industries Inc.
8.250%--02/23/2003 PIK(2).............. $2,129 $ 2,129
-------
SHORT-TERM INVESTMENT--6.7%
(Cost $5,901)
REPURCHASE AGREEMENT
Repurchase Agreement with State Street
Bank & Trust dated October 30, 1998 due
November 2, 1998 at 4.25%,
collateralized by a U.S. Treasury Note,
13.750% August 15, 2004, par value of
$4,025 (repurchase proceeds of $5,903
when closed on November 2, 1998)....... 5,901 5,901
-------
TOTAL INVESTMENTS--105.3%
(Cost $90,961)...................................... 92,742
CASH AND OTHER ASSETS,
LESS LIABILITIES--(5.3%)............................ (4,712)
-------
TOTAL NET ASSETS--100.0%.............................. $88,030
=======
</TABLE>
- ------------
(1) ADR after the name of a foreign holding stands for American Depositary
Receipts representing ownership of foreign securities. ADRs are issued by
U.S. banking organizations.
(2) PIK -- Payment in-kind security.
* Non-income producing security.
The accompanying notes are an integral part of the financial statements.
10
<PAGE> 12
HARBOR INTERNATIONAL GROWTH FUND
PORTFOLIO OF INVESTMENTS--OCTOBER 31, 1998
Investment Holdings By Country (% of net assets)
(Excludes net cash and short-term investments of 3.9%)
<TABLE>
<S> <C>
Hong Kong (HK)
0.6
Mexico (MEX)
2.3
Switzerland (SWS)
4.2
Portugal (PORT)
4.4
Netherlands (NET)
4.7
Denmark (DEN)
4.8
Germany (GER)
6.5
Spain (SP)
9.6
France (FR)
14.9
Italy (IT)
20.1
United Kingdom (UK)
24.0
</TABLE>
<TABLE>
<CAPTION>
COMMON STOCKS--96.1%
VALUE
SHARES (000S)
---------- ----------
<S> <C> <C>
BANKS--19.4%
Banco Bilbao Vizcaya (SP)........... 3,961,225 $ 53,431
Banco Commercial
Portugues--Registered (PORT)...... 1,656,603 51,858
Bayerische Hypotheken und
Vereinsbank AG (GER).............. 603,901 47,940
Unicredito Italiano S.P.A. (IT)..... 14,050,150 75,412
----------
228,641
----------
BUSINESS SERVICES--4.3%
Rentokil Initial plc (UK)........... 8,164,655 51,108
----------
CHEMICALS--2.5%
SGL Carbon AG (GER)................. 368,787 29,164
----------
ELECTRICAL EQUIPMENT--5.0%
Siebe plc (UK)...................... 14,255,690 58,456
----------
HOUSEHOLD PRODUCTS--2.3%
Kimberly-Clark De Mexico S.A.
(MEX)............................. 9,373,700 27,450
----------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000S)
---------- ----------
<S> <C> <C>
INDUSTRIAL MACHINERY--4.6%
Valeo S.A. (FR)..................... 616,302 $ 53,356
Valeo Wts. (FR) Expire 08/03/2001... 58,896 318
----------
53,674
----------
INSURANCE--9.1%
Assicurazioni Generali (IT)......... 1,571,198 56,253
AXA UAP (FR)........................ 451,556 51,041
----------
107,294
----------
LEISURE--5.9%
Granada Group plc (UK).............. 4,709,236 69,545
----------
MEDIA--12.8%
British Sky Broadcasting plc (UK)... 4,214,885 34,355
Pearson plc (UK).................... 3,505,169 61,130
Verenigde Nederlandse
Uitgeversbedrijven N.V. (NET)..... 1,598,936 55,282
----------
150,767
----------
PHARMACEUTICALS--10.9%
Glaxo Wellcome plc (UK)............. 250,200 7,772
Novartis AG (SWS)................... 21,261 38,277
Roche Holdings AG (SWS)............. 1,001 11,670
Sanofi S.A. (FR).................... 74,935 11,734
Synthelabo (FR)..................... 309,658 59,079
----------
128,532
----------
TELECOMMUNICATIONS--19.3%
China Telecom (Hong Kong) (HK)...... 3,628,000 6,816
Tele Danmark A/S-B (DEN)............ 522,925 56,959
Telecom Italia MOB (IT)............. 8,901,510 51,659
Telecom Italia SPA-RNC (IT)......... 10,535,900 53,080
Telefonica S.A. (SP)................ 1,312,089 59,242
----------
227,756
----------
TOTAL COMMON STOCKS
(Cost $955,778)................................. 1,132,387
----------
SHORT-TERM INVESTMENT--3.4%
(Cost $39,995)
PRINCIPAL
AMOUNT
(000S)
----------
COMMERCIAL PAPER
Ford Motor Credit Co.
5.510%--11/02/1998................ $39,995 39,995
----------
TOTAL INVESTMENTS--99.5%
(Cost $995,773)................................. 1,172,382
CASH AND OTHER ASSETS,
LESS LIABILITIES--0.5%.......................... 5,870
----------
TOTAL NET ASSETS--100%............................ $1,178,252
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE> 13
HARBOR CAPITAL APPRECIATION FUND
PORTFOLIO OF INVESTMENTS--OCTOBER 31, 1998
Common Stock Holdings (% of net assets)
(Excludes net cash and short-term investments of 1.5%)
<TABLE>
<S> <C>
Financial Services
1.0
Hotel-Motel
1.0
Savings & Loans
1.1
Aerospace/Defense
1.4
Insurance-Life
1.4
Miscellaneous High Tech
1.4
Oil Well Equipment & Services
1.4
Chemicals-Fertilizers
1.5
Health Care-Hospital Management
1.6
Restaurants
2.2
Banks-Money Centers
2.9
Electrical Equipment
3.0
Electronic Instruments
3.4
Insurance-Other
3.5
Telecommunications
3.5
Semiconductors
4.0
Media
5.2
Computer Services
8.5
Credit & Miscellaneous Financial
8.7
Retail-All Other
9.2
Drugs & Medicine
15.4
Computers & Business Equipment
17.2
</TABLE>
<TABLE>
<CAPTION>
COMMON STOCKS--98.5%
VALUE
SHARES (000S)
--------- ----------
<S> <C> <C>
AEROSPACE/DEFENSE--1.4%
Raytheon Co. Cl. A................... 461,800 $ 25,861
Raytheon Co. Cl. B................... 484,100 28,108
----------
53,969
----------
BANKS-MONEY CENTERS--2.9%
Chase Manhattan Corp. New............ 1,968,800 111,852
----------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000S)
--------- ----------
<S> <C> <C>
CHEMICALS-FERTILIZERS--1.5%
Monsanto Co.......................... 1,392,800 $ 56,582
----------
COMPUTER SERVICES--8.5%
Cadence Design System Inc............ 1,799,800 38,471
Microsoft Corp....................... 1,258,200 133,212
Oracle Corp.......................... 2,654,500 78,474
Qwest Communications International
Inc................................ 1,232,100 48,206
SAP Aktiengesellschaft ADR(1)........ 637,500 26,895
----------
325,258
----------
COMPUTERS & BUSINESS EQUIPMENT--17.2%
3Com Corp.*.......................... 1,355,600 48,886
Ascend Communications Inc............ 1,209,200 58,344
Cisco Systems Inc.*.................. 1,619,500 102,029
Compaq Computer Corp................. 1,472,600 46,571
Dell Computer Corp.*................. 1,235,400 80,919
International Business Machines
Corp............................... 581,200 86,272
MCI WorldCom Inc..................... 3,285,100 181,502
Xerox Corp........................... 580,600 56,246
----------
660,769
----------
CREDIT & MISCELLANEOUS FINANCIAL--8.7%
Associates First Capital Corp........ 1,034,300 72,918
Citigroup Inc........................ 1,980,500 93,207
MBNA Corp............................ 3,037,962 69,304
Morgan, Stanley, Dean Witter & Co.
Inc................................ 1,514,320 98,052
----------
333,481
----------
DRUGS & MEDICINE--15.4%
American Home Products Corp.......... 1,613,900 78,678
Eli Lilly & Co....................... 1,187,600 96,121
Merck & Co. Inc...................... 783,800 106,009
Pfizer Inc........................... 698,000 74,904
Pharmacia & Upjohn Inc............... 690,600 36,559
Schering Plough Corp................. 1,099,300 113,090
Warner-Lambert Co.................... 1,097,600 86,024
----------
591,385
----------
ELECTRICAL EQUIPMENT--3.0%
General Electric Co.................. 1,305,300 114,214
----------
ELECTRONIC INSTRUMENTS--3.4%
Hewlett Packard Co................... 916,100 55,138
Tellabs Inc.*........................ 1,368,000 75,240
----------
130,378
----------
FINANCIAL SERVICES--1.0%
Charles Schwab Corp.................. 778,000 37,295
----------
HEALTH CARE-HOSPITAL MANAGEMENT--1.6%
HBO & Co............................. 2,333,200 61,246
----------
HOTEL-MOTEL--1.0%
Promus Hotel Corp. New............... 1,188,600 37,887
----------
</TABLE>
12
<PAGE> 14
HARBOR CAPITAL APPRECIATION FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
<TABLE>
<CAPTION>
COMMON STOCKS--CONTINUED
VALUE
SHARES (000S)
--------- ----------
<S> <C> <C>
INSURANCE-LIFE--1.4%
Provident Companies Inc.............. 545,000 $ 15,839
UNUM Corp............................ 820,500 36,461
----------
52,300
----------
INSURANCE-OTHER--3.5%
Ace Ltd.............................. 1,771,200 59,999
American International Group Inc..... 873,600 74,474
----------
134,473
----------
MEDIA--5.2%
CBS Corp............................. 2,680,900 74,898
Clear Channel Communication*......... 1,383,900 63,054
Omnicom Group........................ 1,276,800 63,122
----------
201,074
----------
MISCELLANEOUS HIGH TECH--1.4%
Applied Materials Inc................ 1,584,500 54,962
----------
OIL WELL EQUIPMENT & SERVICES--1.4%
Schlumberger Ltd..................... 1,024,900 53,807
----------
RESTAURANTS--2.2%
McDonalds Corp....................... 1,241,800 83,045
----------
RETAIL-ALL OTHER--9.2%
Dollar General Corp.................. 1,554,300 37,109
Gap Inc.............................. 1,055,350 63,453
Home Depot Inc....................... 2,347,400 102,112
Kohl's Corp.*........................ 1,331,900 63,681
Staples Inc.......................... 1,887,700 61,586
Wal-Mart Stores Inc.................. 370,700 25,578
----------
353,519
----------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000S)
--------- ----------
<S> <C> <C>
SAVINGS & LOANS--1.1%
Washington Mutual Inc................ 1,089,550 $ 40,790
----------
SEMICONDUCTORS--4.0%
Intel Corp........................... 786,200 70,119
Texas Instruments Inc................ 1,310,700 83,803
----------
153,922
----------
TELECOMMUNICATIONS--3.5%
Airtouch Communications Inc.......... 1,187,800 66,517
Nokia Corp. ADR(1)................... 722,800 67,266
----------
133,783
----------
TOTAL COMMON STOCKS
(Cost $3,051,073)............................... 3,775,991
----------
SHORT-TERM INVESTMENT--1.7%
(Cost $64,487)
PRINCIPAL
AMOUNT
(000S)
---------
COMMERCIAL PAPER
Ford Motor Credit Co.
5.510%--11/02/1998................... $64,487 64,487
----------
TOTAL INVESTMENTS--100.2%
(Cost $3,115,560)...............................
3,840,478
CASH AND OTHER ASSETS, LESS LIABILITIES--(0.2%)...
(6,880)
----------
TOTAL NET ASSETS--100%............................
$3,833,598
==========
</TABLE>
- ------------
(1) ADR after the name of a foreign holding stands for American Depositary
Receipts representing ownership of foreign securities. ADRs are issued by
U.S. banking institutions.
* Non-income producing security.
The accompanying notes are an integral part of the financial statements.
13
<PAGE> 15
HARBOR INTERNATIONAL FUND II
PORTFOLIO OF INVESTMENTS--OCTOBER 31, 1998
Investment Holdings By Country (% of net assets)
(Excludes net cash and short-term investments of 0.3%)
<TABLE>
<S> <C>
Canada (CAN)
0.1
Hong Kong (HK)
0.3
Malaysia (MAL)
0.9
Argentina (ARG)
1.3
Denmark (DEN)
1.7
Poland (POL)
1.9
Portugal (PORT)
2.6
Brazil (BR)
4.1
Netherlands (NET)
4.6
Japan (JP)
5.4
Sweden (SW)
5.5
Singapore (SGP)
5.5
Finland (FIN)
6.2
Italy (IT)
8.7
United Kingdom (UK)
14.7
Switzerland (SWS)
17.1
France (FR)
19.1
</TABLE>
<TABLE>
<CAPTION>
COMMON STOCKS--97.6%
VALUE
SHARES (000S)
------------- --------
<S> <C> <C>
APPAREL & TEXTILES--0.0%
Texpar S.A. (BR)................... 126,000,000 $ 1
--------
AUTOMOTIVE--0.3%
Jardine International Motor (HK)... 848,000 331
--------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000S)
------------- --------
<S> <C> <C>
BANKS--24.9%
Banca Commercial Italiana (IT)..... 565,000 $ 3,491
Banca Naz Del Lavoro (IT).......... 1,000,000 2,656
Bank Slaski (POL).................. 43,500 2,172
Banque National Paris (FR)......... 49,123 3,111
Barclays Bank plc (UK)............. 125,000 2,693
Credit Suisse Group--
Registered (SWS)................. 17,000 2,612
Paribas (FR)....................... 36,000 2,646
Societe Generale (FR).............. 20,000 2,646
UBS AG--Registered (SWS)........... 10,500 2,878
United Overseas Bank (Alien Market)
(SGP)............................ 675,052 3,173
--------
28,078
--------
CONGLOMERATES--3.6%
Keppel Corp. (SGP)................. 1,529,400 3,064
+
Sime Darby Berhad (MAL)-........... 1,600,000 988
--------
4,052
--------
CONSUMER GOODS--3.0%
Hunter Douglas NV (NET)............ 76,591 2,746
Salomon & Taylor (JP).............. 243,000 615
--------
3,361
--------
CONTAINERS & GLASS--2.1%
UPM Kymmene Oy (FIN)............... 100,000 2,392
--------
ELECTRICAL EQUIPMENT--1.4%
Nokia (AB) Oy Series A(FIN)........ 17,000 1,547
--------
ELECTRONICS--2.9%
Matsushita Electrical Industries
(JP)............................. 80,000 1,174
Sony Corp. (JP).................... 33,000 2,095
--------
3,269
--------
FINANCIAL SERVICES--4.1%
ING Groep NV (NET)................. 50,000 2,419
Julius Baer Holdings AG B (SWS).... 725 2,220
--------
4,639
--------
FOOD--1.3%
Cresud (ARG)....................... 1,050,000 1,439
--------
INDUSTRIAL MACHINERY--3.2%
Kone Oy B Shares (FIN)............. 24,000 3,001
Saurer AG Arbon--
Registered (SWS)................. 1,000 590
--------
3,591
--------
INSURANCE--8.7%
Allied Zurich (UK)................. 125,000 1,485
Assicurazioni Generali (IT)........ 102,800 3,680
AXA UAP (FR)....................... 25,000 2,826
Zurich Allied (SWS)................ 3,000 1,822
--------
9,813
--------
LIQUOR--2.7%
Diageo plc (UK).................... 283,280 3,058
--------
</TABLE>
14
<PAGE> 16
HARBOR INTERNATIONAL FUND II
PORTFOLIO OF INVESTMENTS--CONTINUED
<TABLE>
<CAPTION>
COMMON STOCKS--CONTINUED
VALUE
SHARES (000S)
------------- --------
<S> <C> <C>
MEDIA--4.1%
Investec Consulting (PORT)......... 75,400 $ 2,973
Reed International (UK)............ 200,000 1,692
--------
4,665
--------
MINING & METALS--3.5%
Billiton plc (UK).................. 980,000 2,403
Pechiney S.A. (FR)................. 40,000 1,374
Sedna Geotech Inc. Wts. (CAN)
Expire 10/26/1999................ 600,000 0
Sedna Geotech Inc. Wts. (CAN)
Expire 03/23/2001................ 234,000 0
Sedna Geotech Inc. (CAN)........... 1,458,048 161
--------
3,938
--------
OIL & GAS PRODUCTION--1.7%
Petrol Brasileiro Pfd. (BR)........ 15,000,000 1,886
--------
PHARMACEUTICALS--16.3%
Nobel Biocare (SW)................. 220,000 2,677
Novartis AG--Registered (SWS)...... 1,900 3,421
Novo Nordisk AS Series B (DEN)..... 16,500 1,926
Rhone Poulenc S.A. Series A (FR)... 60,548 2,768
Roche Holdings AG (SWS)............ 300 3,497
SmithKline Beecham plc (UK)........ 326,304 4,080
--------
18,369
--------
PHOTOGRAPHY--1.0%
Fuji Photo Film Co. (JP)........... 30,000 1,099
--------
TELECOMMUNICATIONS--5.5%
Ericsson (LM) Tel Co Series B
(SW)............................. 155,000 3,495
Telesp Tel Sao Paulo (BR).......... 16,100,000 2,699
--------
6,194
--------
TIRES & RUBBER--3.0%
Bridgestone Corp. (JP)............. 50,000 1,100
Cie Fin Michel Bas (SWS)........... 5,200 2,245
--------
3,345
--------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000S)
------------- --------
<S> <C> <C>
TOBACCO--4.3%
British American Tobacco plc
(UK)............................. 125,000 $ 1,113
Seita (FR)......................... 63,000 3,742
--------
4,855
--------
TRANSPORTATION--0.0%
London & Oversea Freighters Wts.
(NOR)
Expire 05/12/2001................ 57,060 0
--------
TOTAL COMMON STOCKS
(Cost $111,526)................................... 109,922
--------
UNITS--2.1%
(Cost $995)
Eurotunnel (FR)*................... 2,065,588 2,361
--------
SHORT-TERM INVESTMENT--0.6%
(Cost $721)
PRINCIPAL
AMOUNT
(000S)
-------------
COMMERCIAL PAPER
Chevron USA Inc. Yrs 1+2
5.430%--11/02/1998................. $721 721
--------
TOTAL INVESTMENTS--100.3%
(Cost $113,242)................................... 113,004
CASH AND OTHER ASSETS,
LESS LIABILITIES--(0.3)%.......................... (335)
--------
TOTAL NET ASSETS--100.0%............................ $112,669
========
</TABLE>
- ------------
* Non-income producing security.
+
-Fair Valued (See Note 2 to the Financial Statements.)
The accompanying notes are an integral part of the financial statements.
15
<PAGE> 17
HARBOR INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS--OCTOBER 31, 1998
Investment Holdings By Country (% of net assets)
(Excludes net cash and short-term investments of 3.7%)
<TABLE>
<S> <C>
Norway (NOR)
0.4
Finland (FIN)
1.1
Hong Kong (HK)
1.3
Singapore (SGP)
1.4
Malaysia (MAL)
1.6
Australia (AUS)
1.7
Denmark (DEN)
2.1
Portugal (PORT)
2.2
Argentina (ARG)
2.6
South Africa (S. AFR)
2.6
Brazil (BR)
2.7
Spain (SP)
3.1
Italy (IT)
4.6
Netherlands (NET)
5.9
Japan (JP)
6.0
Sweden (SW)
6.5
Switzerland (SWS)
12.9
France (FR)
13.6
United Kingdom (UK)
24.0
</TABLE>
<TABLE>
<CAPTION>
COMMON STOCKS--94.9%
VALUE
SHARES (000S)
----------- ----------
<S> <C> <C>
AUTOMOTIVE --1.6%
Volvo AB, Series B (SW)............ 3,661,250 $ 79,031
----------
BANKS--22.1%
ABN Amro Holdings NV (NET)......... 4,376,478 81,981
Banca Commercial Italiana (IT)..... 15,650,000 96,694
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000S)
----------- ----------
<S> <C> <C>
Banco Bilbao Vizcaya (SP).......... 8,401,350 $ 113,322
Banco Commercial Portugues--
Registered (PORT)................ 3,069,383 96,084
Banco Commercial Portugues ADR
(PORT)(1)........................ 503,062 15,658
Bankinter Sa--Registered (SP)...... 1,380,000 42,225
Barclays Bank plc (UK)............. 4,182,950 90,103
Credit Suisse Group--Registered
(SWS)............................ 176,600 27,136
Istituto Bancario San Paolo di
Torino (IT)...................... 3,306,400 48,601
+
Malayan Bank Berhad (MAL)-......... 30,314,000 31,196
National Westminster Bank (UK)..... 5,826,367 98,393
Overseas Chinese Bank (Alien
Market) (SGP).................... 8,500,000 37,081
Paribas (FR)....................... 772,120 56,757
Royal Bank of Scotland Group
(UK)............................. 6,458,176 85,608
Societe Generale (FR).............. 303,000 40,084
Standard Chartered plc (UK)........ 5,691,100 61,199
UBS AG--Registered (SWS)........... 248,538 68,127
United Overseas Bank (Alien Market)
(SGP)............................ 7,540,570 35,444
----------
1,125,693
----------
BEVERAGES--3.3%
Cadbury Schweppes (UK)............. 5,449,290 83,452
South African Breweries Ltd. ADR
(S. AFR)(1)...................... 2,166,639 42,021
Whitbread (UK)..................... 3,050,000 41,196
----------
166,669
----------
CONGLOMERATES--1.8%
+
Sime Darby Berhad (MAL)-........... 42,297,000 26,116
Swire Pacific Ltd. Cl. A (HK)...... 12,036,000 63,871
----------
89,987
----------
CONSUMER GOODS--1.5%
BIC (FR)........................... 722,406 44,469
Hunter Douglas NV (NET)............ 879,254 31,529
----------
75,998
----------
CONTAINERS & GLASS--1.8%
Cie De St Gobain (FR).............. 264,000 39,059
UPM Kymmene Oy (FIN)............... 2,100,000 50,228
----------
89,287
----------
ELECTRONICS--1.8%
Matsushita Electrical
Industries (JP).................. 2,500,000 36,692
Sony Corp. (JP).................... 871,000 55,287
----------
91,979
----------
FINANCIAL SERVICES--2.0%
ING Groep NV (NET)................. 2,072,795 100,287
----------
</TABLE>
16
<PAGE> 18
HARBOR INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
<TABLE>
<CAPTION>
COMMON STOCKS--CONTINUED
VALUE
SHARES (000S)
----------- ----------
<S> <C> <C>
FOOD--2.1%
Nestle S.A.--Registered (SWS)...... 50,300 $ 106,887
----------
INSURANCE--9.0%
Allied Zurich (UK)................. 5,187,347 61,643
Assicurazioni Generali (IT)........ 2,552,000 91,368
AXA UAP (FR)....................... 600,000 67,820
Richemont (Cie Fin)
Units A (SWS).................... 59,000 78,359
Schweiz Ruckversicher--Registered
(SWS)............................ 71,500 159,112
----------
458,302
----------
LIQUOR--1.6%
Diageo plc (UK).................... 7,750,000 83,664
----------
MEDIA--1.3%
News Corp. Ltd. ADR (AUS)(1)....... 2,500,000 68,281
----------
MINING & METALS--4.2%
Anglo American Corp.
South Africa Ltd. ADR (S.
AFR)(1)........................ 1,286,000 42,438
Billiton plc ADR (UK)(1)........... 26,950,000 66,081
Gencor Ltd. ADR (S. AFR)(1)........ 5,390,000 8,927
Pechiney S.A. (FR)................. 1,488,000 51,127
Rio Tinto--Registered (UK)......... 2,113,036 25,658
WMC Ltd. (AUS)..................... 5,016,369 17,033
----------
211,264
----------
OIL & GAS EXPLORATION--0.1%
LASMO (UK)......................... 2,645,469 7,527
----------
OIL & GAS PRODUCTION--9.7%
BG (UK)............................ 13,676,470 89,616
British Petroleum (UK)............. 7,138,238 104,777
Petrol Brasileiros (BR)............ 505,900,001 63,614
Royal Dutch Petroleum Co. ADR
(NET)(1)......................... 1,800,000 88,650
Saga Petroleum AS
Series A (NOR)................... 1,493,896 18,868
Total Cl. B (FR)................... 671,444 77,466
YPF Sociedad Anonima ADR Cl. D
(ARG)(1)......................... 1,710,000 49,483
----------
492,474
----------
PAPER PRODUCTS--0.8%
Enso Oy (R Shares) (FIN)........... 750,000 5,821
Mo Och Domsjo Ab Series B (SW)..... 1,500,000 34,973
----------
40,794
----------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000S)
----------- ----------
<S> <C> <C>
PHARMACEUTICALS--9.0%
Novartis AG--Registered (SWS)...... 69,561 $ 125,233
Novo Nordisk AS Series B (DEN)..... 933,000 108,885
Rhone Poulenc Series A (FR)........ 1,357,133 62,044
SmithKline Beecham plc ADR Cl. A
(UK)(1).......................... 2,540,000 161,925
----------
458,087
----------
PHOTOGRAPHY--3.1%
Canon Inc. (JP).................... 3,557,000 67,277
Fuji Photo Film Co. (JP)........... 2,470,000 90,469
----------
157,746
----------
TELECOMMUNICATIONS--6.4%
Ericsson (LM) Tel Co Series B
(SW)............................. 5,280,000 119,047
Ericsson (LM) Tel Co ADR Series B
(SW)(1).......................... 1,292,000 29,232
Telecom Argentina Cl. B (ARG)...... 6,600,000 42,584
Telefonica De Argentina Cl. B
(ARG)............................ 12,000,000 40,153
+
Telekom Malaysia (MAL)-............ 14,400,000 21,745
Telesp Participaco (BR)............ 296,600,000 7,583
Telesp Tel Sao Paulo (BR).......... 397,200,038 66,594
----------
326,938
----------
TIRES & RUBBER--2.8%
Bridgestone Corp. (JP)............. 2,545,000 55,995
Cie Fin Michel Bas
(Bearer) (SWS)................... 88,700 38,286
Michelin Cl. B (FR)................ 1,127,645 46,479
----------
140,760
----------
TOBACCO--6.0%
British American Tobacco plc
(UK)............................. 5,187,347 46,189
Imperial Tobacco (UK).............. 10,725,000 109,318
Seita (FR)......................... 1,407,150 83,579
Swedish Match (SW)................. 18,818,974 66,298
----------
305,384
----------
TOYS & AMUSEMENTS--1.1%
Swatch Group AG--Registered
(SWS)............................ 400,000 54,674
----------
WATER DISTRIBUTION--1.8%
Suez Lyonn Eaux (FR)............... 520,487 93,213
----------
TOTAL COMMON STOCKS
(Cost $2,991,083)............................... 4,824,926
----------
</TABLE>
17
<PAGE> 19
HARBOR INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
<TABLE>
<CAPTION>
COMMON STOCKS--CONTINUED
VALUE
SHARES (000S)
----------- ----------
<S> <C> <C>
UNITS--0.7%
(Cost $69,918)
VALUE
SHARES (000S)
----------- ----------
Eurotunnel (FR)*..................... 23,691,799 $ 27,078
Eurotunnel (UK)* (2)................. 6,000,000 6,929
Eurotunnel Wts. (FR)
Expire 12/31/2001 - 10/31/2003..... 20,000,000 2,520
----------
36,527
----------
CONVERTIBLE BOND--0.7%
(Cost $39,600)
PRINCIPAL
AMOUNT
(000S)
-----------
LibLife International BV (S. AFR)
6.500%--09/30/2004............... $40,000 36,500
----------
SHORT-TERM INVESTMENTS--3.6%
COMMERCIAL PAPER
Chevron USA Inc.
5.050%--11/06/1998............... 17,196 17,196
5.050%--11/09/1998............... 18,000 18,000
----------
35,196
----------
Citicorp Inc.
5.480%--11/16/1998............... 7,163 7,163
----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
----------- ----------
<S> <C> <C>
General Electric Capital Corp.
5.090%--11/10/1998............... $19,252 $ 19,252
5.150%--11/12/1998............... 12,859 12,859
----------
32,111
----------
General Electric Financial
Assurance Holdings
5.100%--11/02/1998............... 25,504 25,504
5.110%--11/04/1998............... 24,321 24,321
5.250%--11/17/1998............... 12,064 12,064
----------
61,889
----------
Prudential Funding Corp.
5.100%--11/03/1998............... 16,301 16,301
5.070%--11/05/1998............... 17,142 17,142
5.100%--11/13/1998............... 13,768 13,768
----------
47,211
----------
TOTAL SHORT-TERM INVESTMENTS
(Cost $183,570)................................. 183,570
----------
TOTAL INVESTMENTS--99.9%
(Cost $3,284,171)............................... 5,081,523
CASH AND OTHER ASSETS,
LESS LIABILITIES--0.1%.......................... 6,878
----------
TOTAL NET ASSETS--100.0%.......................... $5,088,401
==========
</TABLE>
- ------------
(1) ADR after the name of a foreign holding stands for American Depositary
Receipts representing ownership of foreign securities. ADRs are issued by
U.S. banking organizations.
(2) Security purchased on a delayed delivery or when-issued basis. (See Note 2
to the Financial Statements).
* Non-income producing security.
+
- Fair Valued (See Note 2 to the Financial Statements.)
The accompanying notes are an integral part of the financial statements.
18
<PAGE> 20
HARBOR VALUE FUND
PORTFOLIO OF INVESTMENTS--OCTOBER 31, 1998
Common Stock Holdings (% of net assets)
(Excludes 14.4% of holdings, of which 1.3% represents net cash and short-term
investments and 13.1% represents industry classifications less than 1.5%.)
<TABLE>
<S> <C>
Air Transportation
1.5
Electronic Instruments
1.5
Services
1.5
Tires & Rubber
1.6
Aerospace/Defense
1.7
Crude Producers
1.9
Conglomerates
2.1
Financial Services
2.2
Computers & Business Equipment
2.4
Containers
2.4
Drugs & Medicine
2.5
Insurance-Other
2.5
International Oil
2.5
Machinery
2.5
Automobile Equipment
2.6
Electric Power
2.7
Natural Gas & Pipelines
2.8
Retail-All Other
3.6
Electrical Equipment
4.3
Domestic Oil
4.5
Grocery Products
5.0
Telephones
5.0
Banks-Money Center
5.8
Chemicals-Fertilizers
6.7
Banks-Regional
6.9
Paper
6.9
</TABLE>
<TABLE>
<CAPTION>
COMMON STOCKS--98.7%
VALUE
SHARES (000S)
--------- --------
<S> <C> <C>
AEROSPACE/DEFENSE--1.7%
Boeing Co. ............................. 1,000 $ 37
Lockheed Martin Corp. .................. 1,100 122
Raytheon Co. Cl. B ..................... 1,900 110
Rockwell International Corp. New ....... 62,900 2,583
--------
2,852
--------
AIR TRANSPORTATION--1.5%
Alaska Air Group Inc. .................. 7,100 255
AMR Corp.*.............................. 9,000 603
Delta Air Lines Inc. ................... 3,800 401
US Airways Group Inc.* ................. 22,600 1,278
--------
2,537
--------
ALUMINUM--1.2%
Aluminum Company of America ............ 1,000 79
Reynolds Metal Co. ..................... 33,800 2,026
--------
2,105
--------
AUTOMOBILE EQUIPMENT--2.6%
Genuine Parts Co. ...................... 62,000 1,953
Navistar International Corp.* .......... 3,000 63
TRW Inc. ............................... 42,600 2,425
--------
4,441
--------
AUTOMOBILES--0.4%
Chrysler Corp. ......................... 3,700 178
Ford Motor Co. ......................... 4,600 250
General Motors Corp. ................... 5,100 322
--------
750
--------
BANKS-MONEY CENTER--5.8%
Bank New York Inc. ..................... 2,000 63
BankAmerica Corp. ...................... 96,740 5,557
Chase Manhattan Corp. New .............. 48,600 2,761
State Street Corp. ..................... 1,000 63
Wells Fargo & Co. New .................. 7,900 294
Wells Fargo & Co. ...................... 3,100 1,147
--------
9,885
--------
BANKS-REGIONAL--6.9%
Banc One Corp. ......................... 69,059 3,375
Dime Bancorp Inc. New .................. 1,000 24
First Union Corp. ...................... 5,626 326
First Virginia Banks Inc. Rts. ......... 27,600 1,259
Fleet Financial Group Inc. ............. 3,400 136
Hibernia Corp., Cl. A .................. 44,800 748
Huntington Bancshares Inc. ............. 10,317 297
KeyCorp New ............................ 2,000 61
National City Corp. .................... 1,560 100
PNC Bank Corp. ......................... 50,700 2,535
Summit Bancorp ......................... 65,300 2,477
Suntrust Banks Inc. .................... 1,100 77
US Bancorp Inc. ........................ 9,600 178
Wachovia Corp. New ..................... 1,000 91
--------
11,684
--------
</TABLE>
19
<PAGE> 21
HARBOR VALUE FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
<TABLE>
<CAPTION>
COMMON STOCKS--CONTINUED
VALUE
SHARES (000S)
--------- --------
<S> <C> <C>
BUILDING MATERIAL-CONSTRUCTION--1.4%
Armstrong World Industries Inc. ........ 38,600 $ 2,393
--------
CHEMICALS-FERTILIZERS--6.7%
Air Products & Chemical Inc. ........... 36,000 1,359
Dow Chemical Co. ....................... 1,400 131
E.l. Du Pont De Nemours & Co. .......... 4,700 270
Eastman Chemical Co. ................... 23,000 1,351
Hercules Inc. .......................... 76,500 2,548
Millenium Chemicals Inc. ............... 56,500 1,377
Morton International Inc. New .......... 87,500 2,177
R.P.M. Inc. ............................ 63,200 1,063
Rohm & Haas Company .................... 32,000 1,080
--------
11,356
--------
COMPUTERS & BUSINESS EQUIPMENT--2.4%
Compaq Computer Corp. .................. 23,385 740
International Business Machines
Corp. ................................ 6,300 935
MCI WorldCom Inc. ...................... 38,800 2,144
NCR Corp. New* ......................... 1,693 57
Xerox Corp. ............................ 2,000 194
--------
4,070
--------
CONGLOMERATES--2.1%
Fortune Brands Inc. .................... 58,400 1,931
Loews Corp. ............................ 1,300 122
Minnesota Mining & Manufacturing Co. ... 1,000 80
National Service Industries Inc. ....... 39,800 1,428
--------
3,561
--------
CONTAINERS--2.4%
Crown Cork & Seal Company Inc. ......... 81,700 2,604
Tenneco Inc. New ....................... 48,300 1,467
--------
4,071
--------
CREDIT & MISCELLANEOUS FINANCIAL--0.9%
American Express Co. ................... 2,000 177
Associates First Capital Corp. ......... 1,205 85
Countrywide Credit Industries Inc. ..... 700 30
Federal National Mortgage
Association .......................... 6,000 425
Morgan, Stanley, Dean Witter & Co.
Inc. ................................. 11,200 725
--------
1,442
--------
CRUDE PRODUCERS--1.9%
Burlington Resources Inc. .............. 1,767 73
Mitchell Energy & Dev. Corp. Cl. A ..... 68,500 955
Mitchell Energy & Dev. Corp. Cl. B ..... 67,600 951
Ultramar Diamond Shamrock .............. 49,100 1,323
--------
3,302
--------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000S)
--------- --------
<S> <C> <C>
DOMESTIC OIL--4.5%
Amerada Hess Corp. ..................... 1,400 $ 77
Amoco Corp. ............................ 5,800 325
Atlantic Richfield Co. ................. 30,800 2,121
Kerr McGee Corp. ....................... 58,200 2,321
Murphy Oil Corp. ....................... 32,200 1,330
Penzoil Co. ............................ 40,200 1,442
Phillips Petroleum Co. ................. 1,500 65
Tosco Corp. ............................ 500 14
--------
7,695
--------
DRUGS & MEDICINE--2.5%
Baxter International Inc. .............. 46,800 2,805
Bristol Myers Squibb Co. ............... 800 88
Pharmacia & Upjohn Inc. ................ 27,400 1,450
--------
4,343
--------
ELECTRIC POWER--2.7%
American Electric Power Inc. ........... 1,500 73
Cinergy Corp. .......................... 26,400 911
Consolidated Edison Inc. ............... 2,000 100
Duke Energy Co. ........................ 1,500 97
Edison International ................... 4,000 106
Entergy Corp. .......................... 1,500 43
Firstenergy Corp. ...................... 400 12
FPL Group Inc. ......................... 1,000 63
Houston Industries Inc. ................ 2,000 62
Niagara Mohawk Power Corp.* ............ 34,000 497
Northeast Utilities .................... 28,600 447
OGE Energy Corp. ....................... 28,300 752
PG & E Corp. ........................... 7,000 213
PP & L Resources Inc. .................. 1,500 41
Pacificorp ............................. 24,200 461
Peco Energy Co. ........................ 1,700 66
Pinnacle West Cap Corp. ................ 1,300 57
Public Service Enterprise Group ........ 800 30
Southern Co. ........................... 7,000 197
Texas Utilities Co. .................... 1,700 74
Unicom Corp. ........................... 3,600 136
Unisource Energy Corp. ................. 5,800 90
--------
4,528
--------
ELECTRICAL EQUIPMENT--4.3%
Emerson Electric Co. ................... 40,800 2,693
General Electric Co. ................... 2,500 219
Hubbell Inc., Cl. B .................... 54,500 2,173
Thomas & Betts Corp. ................... 51,900 2,319
--------
7,404
--------
ELECTRONIC INSTRUMENTS--1.5%
Harris Corp. ........................... 72,100 2,528
Micron Technology Inc.* ................ 1,000 38
--------
2,566
--------
</TABLE>
20
<PAGE> 22
HARBOR VALUE FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
<TABLE>
<CAPTION>
COMMON STOCKS--CONTINUED
VALUE
SHARES (000S)
--------- --------
<S> <C> <C>
FINANCIAL SERVICES--2.2%
Capital One Financial Corp. ............ 1,700 $ 173
Chubb Corp. ............................ 1,500 92
Citigroup Inc. ......................... 61,456 2,892
Lehman Brothers Holdings Inc. .......... 4,000 152
Merrill Lynch & Company Inc. ........... 6,000 356
Paine Webber Group Inc. ................ 3,200 107
--------
3,772
--------
FOREST PRODUCTS--0.5%
Champion International Corp. ........... 500 16
Georgia Pacific Corp. Timberlands
(TPG) ................................ 37,100 823
--------
839
--------
FURNISHINGS & APPLIANCES--0.0%
Sherwin Williams Co. ................... 1,600 40
--------
GROCERY PRODUCTS--5.0%
Archer Daniels Midland Co. ............. 3,307 55
Conagra Inc. ........................... 79,800 2,429
Dean Foods Co. ......................... 54,500 2,555
Flowers Industries Inc. ................ 49,900 1,023
General Mills Inc. ..................... 34,300 2,521
--------
8,583
--------
HEALTH CARE-HOSPITAL MANAGEMENT--0.1%
Columbia/HCA Healthcare Corp. .......... 3,000 63
United Healthcare Corp. ................ 1,900 83
--------
146
--------
INSURANCE-LIFE--1.2%
Conseco Inc. ........................... 700 24
Equitable Companies Inc. ............... 40,500 1,985
--------
2,009
--------
INSURANCE-OTHER--2.5%
Allstate Corp. ......................... 11,136 480
American International Group Inc. ...... 8,812 751
CNA Financial Group Inc.* .............. 6,400 266
St. Paul Companies Inc. ................ 1,128 37
Transamerica Corp. ..................... 25,500 2,652
--------
4,186
--------
INTERNATIONAL OIL--2.5%
Chevron Corp. .......................... 1,900 155
Exxon Corp. ............................ 14,800 1,055
Mobil Corp. ............................ 21,900 1,658
Texaco Inc. ............................ 24,100 1,429
--------
4,297
--------
LEISURE & LUXURY--0.7%
Brunswick Corp. ........................ 59,300 1,153
--------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000S)
--------- --------
<S> <C> <C>
MACHINERY--2.5%
Caterpillar Inc. ....................... 2,400 $ 108
Cooper Industries Inc. ................. 57,500 2,537
Deere & Co. ............................ 1,900 67
Flowserve Corp. ........................ 83,800 1,508
--------
4,220
--------
MANUFACTURING DIVERSIFIED--1.0%
Olin Corp. ............................. 34,000 941
Parker Hannifin Corp. .................. 22,450 803
--------
1,744
--------
MEDIA--1.3%
CBS Corp.* ............................. 5,200 145
MediaOne Group Inc.* ................... 18,900 800
Tele Communications Inc. New Com TCI
Group Series A* ...................... 22,600 952
Tele Communications Inc. New Com Liberty
Media Group Series A* ................ 4,000 152
Time Warner Inc. ....................... 2,000 186
--------
2,235
--------
NATURAL GAS & PIPELINES--2.8%
AGL Resources Inc. ..................... 30,300 634
Columbia Energy Group .................. 500 29
MCN Energy Group Inc. .................. 19,600 379
National Fuel Gas Co. .................. 16,600 784
Nicor Inc. ............................. 13,200 559
Peoples Energy Corp. ................... 28,400 1,047
Sonat Inc. ............................. 45,800 1,388
--------
4,820
--------
PAPER--6.9%
Boise Cascade Corp. .................... 91,800 2,570
Consolidated Papers Inc. ............... 32,500 782
Kimberly Clark Corp. ................... 56,300 2,716
Rayonier Inc. .......................... 24,600 964
Temple Inland Inc. ..................... 30,600 1,486
Union Camp Corp. ....................... 29,500 1,269
Westvaco Corp. ......................... 24,400 601
Willamette Industries Inc. ............. 45,700 1,417
--------
11,805
--------
PHOTOGRAPHIC-OPTICAL--1.3%
Bausch & Lomb Inc....................... 53,100 2,214
--------
PUBLISHING--0.1%
Gannett Inc............................. 2,000 124
--------
RAILROADS--0.2%
Burlington Northern Santa Fe............ 8,000 247
CSX Corp................................ 700 27
Norfolk Southern Corp. ................. 1,100 36
--------
310
--------
</TABLE>
21
<PAGE> 23
HARBOR VALUE FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
<TABLE>
<CAPTION>
COMMON STOCKS--CONTINUED
VALUE
SHARES (000S)
--------- --------
<S> <C> <C>
REAL ESTATE INVESTMENT TRUSTS--1.1%
Developers Diversified Realty........... 34,100 $ 644
Equity Residential Properties Trust..... 14,200 596
Felcor Suite Hotels..................... 28,100 662
--------
1,902
--------
RETAIL-ALL OTHER--3.6%
Best Buy Co. Inc.*...................... 24,400 1,171
Dayton Hudson Corp. .................... 3,400 144
Federated Department Stores Inc.*....... 12,500 480
J.C. Penney Inc. ....................... 41,000 1,948
Kmart Corp.*............................ 6,500 92
May Department Stores Co. .............. 23,500 1,434
Sears, Roebuck & Co. ................... 1,400 63
Wal-Mart Stores Inc. ................... 12,500 863
--------
6,195
--------
SAVINGS & LOANS--0.2%
Washington Mutual Inc. ................. 8,736 327
--------
SERVICES--1.5%
H & R Block Inc. ....................... 55,400 2,483
--------
STEEL--1.1%
Allegheny Teledyne Inc. ................ 89,800 1,846
Bethlehem Steel Corp. .................. 10,000 90
--------
1,936
--------
TELECOMMUNICATIONS--0.3%
Sprint Corp. ........................... 6,800 522
--------
TELEPHONES--5.0%
Alltel Corp. ........................... 41,600 1,947
Ameritech Corp. ........................ 7,500 405
AT&T Corp. ............................. 19,300 1,201
Bell Atlantic Corp. .................... 5,900 314
Bellsouth Corp. ........................ 12,100 966
Frontier Corp. ......................... 53,200 1,599
GTE Corp. .............................. 33,800 1,984
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (000S)
--------- --------
<S> <C> <C>
SBC Communications Inc. ................ 3,800 $ 176
U.S. West Inc. New...................... 81 5
--------
8,597
--------
TIRES & RUBBER--1.6%
BF Goodrich Co. ........................ 32,200 1,159
Cooper Tire & Rubber Co. ............... 92,000 1,529
--------
2,688
--------
TOYS--0.1%
Toys "R" Us Inc.*....................... 4,300 84
--------
TOTAL COMMON STOCKS
(Cost $168,780).................................... 168,216
--------
SHORT-TERM INVESTMENT--1.0%
(Cost $1,690)
PRINCIPAL
AMOUNT
(000S)
---------
REPURCHASE AGREEMENT
Repurchase Agreement with State Street
Bank & Trust dated October 30, 1998
due on November 2, 1998 at 4.00%,
collateralized by a U.S. Treasury
Note, 10.625% August 15, 2015, par
value of $1,060 (repurchase proceeds
of $1,691 when closed on November 2,
1998)................................. $1,690 1,690
--------
TOTAL INVESTMENTS--99.7%
(Cost $170,470).................................... 169,906
CASH AND OTHER ASSETS,
LESS LIABILITIES--0.3%............................. 562
--------
TOTAL NET ASSETS--100%............................... $170,468
========
</TABLE>
- ------------
* Non-income producing security.
The accompanying notes are an integral part of the financial statements.
22
<PAGE> 24
HARBOR BOND FUND
PORTFOLIO OF INVESTMENTS--OCTOBER 31, 1998
Total Investments (% of net assets)
(Excludes net cash and short-term investments of -34.5%)
<TABLE>
<S> <C>
Options 0.6
Asset Backed Securities 2.1
Foreign Government Obligations 4.4
U.S. Government Obligations 10.5
Corporate Bonds & Notes 43.7
Mortgage Related Securities 73.2
</TABLE>
<TABLE>
<CAPTION>
ASSET BACKED SECURITIES--2.1%
(Cost $9,995)
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
---------- --------
<S> <C> <C>
Student Loan Marketing Association
5.684%--06/30/2000 MTN (1)+.......... $ 5,000 $ 4,991
Series 1995 Cl. A-2
4.920%--10/25/2007+................ 5,000 4,945
--------
9,936
--------
<CAPTION>
CORPORATE BONDS & NOTES--43.7%
<S> <C> <C>
Associates Corp. North America
5.787%--08/27/2001++................. 5,000 4,976
AT&T Capital Corp. MTN(1)
5.950%--02/16/1999................... 10,000 9,984
Banesto Del Inc.
8.250%--07/28/2002................... 3,000 3,174
Beneficial Corp. MTN (1)
5.522%--04/01/2002++................. 10,000 9,934
Calpine Corp.
8.750%--07/15/2007................... 3,000 3,090
Cemex SA MTN(1)
8.500%--08/31/2000................... 1,000 975
Central Maine Power MTN (1)
6.673%--10/25/1999++................. 10,000 9,983
6.380%--02/24/2000................... 10,000 10,075
--------
20,058
--------
Chrysler Financial Corp. MTN(1)
5.263%--07/05/2000++................. 10,000 9,971
5.363%--08/08/2002++................. 8,000 7,955
--------
17,926
--------
Cincinnati Financial Corp.
6.900%--05/15/2028................... 5,000 5,141
Cleveland Electric Illuminating Co.
9.500%--05/15/2005................... 2,000 2,171
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
---------- --------
(Cost $9,995)
<S> <C> <C>
Commonwealth Edison Co.
Series 26
8.000%--10/15/2003................... $ 3,000 $ 3,041
Morgan, Stanley, Dean Witter & Co. Inc.
5.687%--10/05/2002++................. 9,000 9,067
First Chicago Corp. MTN(1)
Series 178
5.580%--03/11/2002++................. 10,000 9,969
5.537%--06/26/2002++................. 10,000 9,977
--------
19,946
--------
First Securities Corp.
7.875%--10/15/1999................... 12,325 12,627
General Motors Acceptance Corp. MTN(1)
4.620%--03/16/1999++................. 8,000 7,984
5.550%--09/15/2003................... 3,000 3,017
--------
11,001
--------
General Motors Acceptance Corp.
5.347%--04/29/2002++................. 10,000 9,927
Goldman Sachs Group LP MTN (1)(2)
5.551%--01/09/2001++................. 10,000 9,961
Gulf STS Utilities Co.
8.210%--01/01/2002................... 400 412
Hydro Quebec Yankee Bonds Debenture
9.500%--11/15/2030................... 775 1,043
Long Island Lighting Co.
6.250%--07/15/2001................... 5,000 5,201
Merrill Lynch & Co. Inc.
5.362%--09/30/2000+.................. 10,000 9,926
Meyer, Fred Inc. New
7.150%--03/01/2003................... 5,000 5,003
Occidental Petroleum Corp.
6.400%--04/01/2003+.................. 5,000 5,042
Orion Network Sys. Inc.
0.000%--01/15/2007+++................ 2,500 1,488
Prudential Funding Corp. MTN Tranche
20(1)++
5.890%--08/01/2000................... 5,000 5,011
Saferco Products Inc. MTN(1)(9)
9.630%--05/31/2000................... 500 538
Salomon Inc. CPI Bond(4)
3.650%--02/14/2002................... 5,151 5,011
TCI Communications Inc.
6.375%--09/15/1999................... 2,000 2,021
5.165%--09/11/2000 MTN(1)++.......... 5,000 4,946
--------
6,967
--------
Tenet Healthcare Corp.
8.625%--12/01/2003................... 4,443 4,676
Time Warner Inc.
7.975%--08/15/2004................... 450 499
</TABLE>
23
<PAGE> 25
HARBOR BOND FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
<TABLE>
<CAPTION>
CORPORATE BONDS & NOTES--CONTINUED
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
---------- --------
<S> <C> <C>
United Mexican States
6.780%--06/27/2002++................. $ 3,000 $ 2,670
Xerox Credit Corp.
10.000%--04/01/1999.................. 50 51
--------
TOTAL CORPORATE BONDS AND NOTES
(Cost $217,029).................................. 206,537
--------
FOREIGN GOVERNMENT OBLIGATIONS--4.4%
New Zealand
10.000%--03/15/2002(8)............... NZ$6,400 3,875
8.000%--04/15/2004................... NZ$7,000 4,169
--------
8,044
--------
Republic of Argentina
5.312%--04/01/2000++................. $ 732 691
9.164%--04/10/2005++................. 6,000 5,235
--------
5,926
--------
Republic of Korea Loan Earls
8.281%--04/08/2000+.................. 5,000 4,650
Republic of Korea Loan Earls II
8.281%--04/08/2000+.................. 2,630 2,446
--------
TOTAL FOREIGN BONDS
(Cost $22,666)................................... 21,066
--------
MORTGAGE RELATED SECURITIES--73.2%
COLLATERALIZED MORTGAGE OBLIGATIONS:
Capstead Securities Corp. IV
Series 92 Cl. E
8.500%--02/25/2022................... 750 758
Collateralized Mortgage Securities
Corp. Series F-4
11.450%--11/01/2015.................. 207 209
Collateralized Mortgage Securities
Corp. REMIC(3)
Series 1988 B-4
8.750%--04/20/2019................... 243 259
Drexel Burnham Lambert REMIC(3)
Series H-4
8.500%--04/01/2017................... 9,208 9,746
Federal Home Loan Mortgage Corp.
6.291%--08/15/2032+.................. 17,346 17,414
Federal Home Loan Mortgage Corp.
REMIC(3)
6.000%--08/15/2026................... 10,000 9,423
Federal National Mortgage Association
REMIC(3)
Series 1993
6.500%--02/25/2007 IO(5)............. 1,700 145
Cl. PN
6.000%--07/25/2017 IO(5)............. 2,865 196
Cl. E
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
---------- --------
<S> <C> <C>
6.000%--04/25/2019................... $ 1,759 $ 1,769
Cl. B
6.500%--12/25/2020................... 2,000 2,026
Cl. 2A
7.000%--04/18/2027................... 6,622 6,594
--------
10,730
--------
GE Capital Mortgage Services Inc.
REMIC(3)
6.750%--10/25/2028................... 10,000 9,998
Kidder Peabody Acceptance Corp.
I Series 1994 A-1
8.131%--09/25/2024+.................. 3,000 3,021
MDC Mortgage Funding Corp.
Cl. Q-6
9.000%--03/20/2018................... 14 14
Norwest Asset Securities Corp.
REMIC(3) Cl. A-9
6.750%--06/25/2028................... 5,000 5,027
Norwest Mortgage Insd 1 Inc.
12.375%--01/01/2014.................. 95 95
Prudential Home Mortgage Securities Co.
Series 1993 Cl. A-8 REMIC(3)
6.750%--08/25/2008................... 5,970 6,044
Prudential Home Mortgage Securities Co.
Series 1993 Cl. A-1
8.126%--12/26/2023++................. 2,453 2,507
Residential Asset Securitization Trust
REMIC(3) Series 1998 A-13
6.500%--12/25/2028................... 6,931 6,777
Resolution Trust Corporation Mortgage
Pass Thru Series 1991 L-1
8.694%--08/25/2021++................. 3,000 3,112
Sears Mortgage Securities Corp.
Series 92 Cl. A(2)
7.512%--10/25/2022++................. 717 725
SLM Student Loan Trust
Cl. A-1
5.292%--10/25/2005++................. 3,538 3,509
Cl. A-1
5.352%--04/25/2006++................. 8,184 8,154
--------
11,663
--------
Structured Asset Mortgage Investments
Inc.
6.250%--11/25/2028................... 5,000 4,982
--------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS...................................... 102,504
--------
OTHER MORTGAGE RELATED SECURITIES:
Federal Home Loan Mortgage Corp.
Forward Gold 30 Year, TBA(6)
January Delivery
6.000%--12/01/1999................... 6,400 6,330
6.500%--12/01/1999................... 23,850 24,029
</TABLE>
24
<PAGE> 26
HARBOR BOND FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
<TABLE>
<CAPTION>
MORTGAGE RELATED SECURITIES--CONTINUED
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
---------- --------
<S> <C> <C>
November Delivery
6.50%--12/01/1999.................... $ 39,000 $ 39,305
6.00%--12/01/1999.................... 7,900 7,811
December Delivery
6.000%--12/01/1999................... 1,500 1,484
6.500%--12/01/1999................... 7,250 7,309
--------
86,268
--------
Federal Home Loan Mortgage Corp.
Pass Thru Certificates
10.500%--09/01/2000.................. 14 14
7.500%--03/01/2002................... 5 5
8.000%--06/01/2011................... 66 68
8.500%--02/01/2017................... 93 97
7.759%--08/01/2024+.................. 1,291 1,341
--------
1,525
--------
Federal Home Loan Mortgage Corp.
Pass Thru Certificates-REMIC(3)
7.000%--09/15/2005................... 91 91
9.000%--12/15/2020................... 2,130 2,227
8.700%--02/15/2020................... 1,274 1,286
7.000%--10/15/2022................... 87 87
--------
3,691
--------
Federal Housing Authority Project
Banco-221D
7.400%--02/01/2021................... 806 848
Banco-15
7.450%--05/01/2021................... 308 321
Reilly-52
5.150%--06/01/2018................... 304 281
--------
1,450
--------
Federal National Mortgage Association
Pass Thru Certificates
9.000%--03/01/2005................... 159 166
9.000%--11/01/2009................... 1,401 1,477
8.500%--12/01/2009................... 16 17
9.500%--04/01/2011................... 59 64
6.132%--10/01/2032+.................. 1,715 1,731
--------
3,455
--------
Federal National Mortgage Association
TBA(6)
January Delivery
6.500%--12/01/1999................... 25,000 25,181
November Delivery
6.500%--12/01/1999................... 25,000 25,187
--------
50,368
--------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
---------- --------
<S> <C> <C>
Government National Mortgage
Association+
6.750%--08/15/2017................... $ 408 $ 415
Government National Mortgage
Association II+
7.000%--01/20/1999................... 4,805 4,930
6.875%--03/20/2017................... 1,301 1,335
7.000%--08/20/2022................... 3,256 3,343
7.000%--09/20/2023................... 2,279 2,339
6.875%--05/20/2024................... 897 918
7.000%--07/20/2024................... 67 69
7.000%--12/20/2024................... 703 721
6.875%--01/20/2025................... 1,922 1,968
6.875%--02/20/2025................... 2,020 2,068
7.000%--10/20/2025................... 1,488 1,526
7.000%--11/20/2025................... 3,953 4,054
7.000%--12/20/2026................... 1,219 1,245
6.500%--07/20/2027................... 11,672 11,837
--------
36,353
--------
Government National Mortgage
Association TBA(6)
November Delivery
6.500%--12/15/1999................... 41,000 41,462
January Delivery
6.500%--12/15/1999................... 15,000 15,164
--------
56,626
--------
United Airlines Pass Thru Certificate
Series 1993 C-2
9.060%--06/17/2015+.................. 3,000 3,388
--------
TOTAL OTHER MORTGAGE RELATED
SECURITIES....................................... 243,539
--------
TOTAL MORTGAGE RELATED SECURITIES
(Cost $334,745).................................. 346,043
--------
U.S. GOVERNMENT OBLIGATIONS--10.5%
U.S. Treasury Bonds
6.500%--11/15/2026................... 20,000 23,275
U.S. Treasury Bonds PO(7)
0.000%--08/15/2019................... 19,100 5,975
U.S. Treasury Notes(4)
3.625%--07/15/2002................... 20,404 20,404
--------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $48,220)................................... 49,654
--------
</TABLE>
25
<PAGE> 27
HARBOR BOND FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
<TABLE>
<CAPTION>
U.S. GOVERNMENT OBLIGATIONS--10.5%
<S> <C> <C>
OPTIONS--0.6%
NO. OF VALUE
CONTRACTS (000S)
---------- --------
U.S. Treasury Bonds Call Options
Strike Price @ 92.99
Expiration, 11/23/1998............. 20,000,000 $ 2,275
Strike Price @ 99.96
Expiration, 02/19/1999............. 10,000,000 197
Strike Price @ 99.29
Expiration, 08/20/1999............. 10,000,000 543
--------
3,015
--------
U.S. Treasury Notes Put Options
Strike Price @ 106.00
Expiration, 11/21/1998............. 20,000,000 3
--------
TOTAL OPTIONS(Cost $1,739)......................... 3,018
--------
SHORT-TERM INVESTMENTS--11.7%
PRINCIPAL
AMOUNT
(000S)
----------
REPURCHASE AGREEMENT
Repurchase Agreement with State Street
Bank & Trust dated October 30, 1998
due November 2, 1998 at 4.250%,
collateralized by a U.S. Treasury
Note, 11.250% February 15, 2015, par
value of $5,030 (repurchase proceeds
of $8,373 when closed on November 2,
1998)................................ $ 8,370 8,370
--------
U.S. TREASURY BILLS
3.450%--12/03/1998#.................. 2,875 2,866
4.290%--02/04/1999#.................. 2,865 2,832
4.240%--03/04/1999#.................. 145 143
--------
5,841
--------
COMMERCIAL PAPER
American Express Co.
5.170%--11/13/1998................... 1,000 998
Bellsouth Telecomm Inc.
5.420%--11/10/1998................... 1,200 1,198
Central Illinois Public Service Co.
5.080%--11/13/1998................... 2,000 1,997
E I DuPont De Nemours & Co.
5.430%--12/04/1998................... 4,800 4,776
Ford Motor Credit Co.
5.290%--12/02/1998................... 5,500 5,475
5.470%--12/04/1998................... 1,900 1,890
--------
7,365
--------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
---------- --------
<S> <C> <C>
General Electric Capital Corp.
5.500%--11/13/1998................... $ 1,900 $ 1,897
5.480%--11/17/1998................... 700 698
5.490%--11/17/1998................... 700 698
--------
3,293
--------
International Business Machines Corp.
5.090%--11/20/1998................... 2,300 2,294
5.490%--11/24/1998................... 500 498
--------
2,792
--------
KFW International Finance Inc.
5.500%--11/02/1998................... 400 400
5.490%--11/03/1998................... 1,200 1,200
--------
1,600
--------
Minnesota Mining & Manufacturing Co.
5.340%--12/22/1998................... 2,500 2,481
National Rural Utilities Cooperative
Finance Corp.
5.500%--11/09/1998................... 1,000 999
5.490%--11/13/1998................... 300 299
5.500%--11/20/1998................... 900 897
5.320%--12/14/1998................... 2,900 2,882
--------
5,077
--------
New Center Asset Trust
5.470%--11/02/1998................... 1,300 1,300
Procter & Gamble Co.
5.370%--12/16/1998................... 2,600 2,583
SBC Communications Inc. Yrs 1+2
5.450%--11/06/1998................... 1,100 1,099
Shell Oil Co.
5.240%--11/19/1998................... 4,400 4,388
--------
TOTAL COMMERCIAL PAPER............................. 40,947
--------
TOTAL SHORT-TERM INVESTMENTS
(Cost $55,156)................................... 55,158
--------
TOTAL INVESTMENTS--146.2%
(Cost $689,550).................................. 691,412
CASH AND OTHER ASSETS
LESS LIABILITIES--(46.2)%........................ (218,391)
--------
TOTAL NET ASSETS--100.0%........................... $473,021
========
</TABLE>
26
<PAGE> 28
HARBOR BOND FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
(All dollar values are represented in thousands)
SWAP AGREEMENTS AT OCTOBER 31, 1998 ARE AS FOLLOWS:
<TABLE>
<CAPTION>
NOTIONAL UNREALIZED
AMOUNTS (DEPRECIATION)
(000S) DESCRIPTION COUNTERPARTY (000S)
- -------- ----------- ------------ --------------
<C> <S> <C> <C>
580,000 To make or receive semi-annual payments through 4/14/2008 Deutsche Bank AG- $(467)
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.
377,000 To make or receive semi-annual payments through 4/15/2008 Deutsche Bank AG- (306)
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.
-----
$(773)
=====
</TABLE>
- ------------
(1) MTN after the name of a security stands for Medium Term Note.
(2) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At October 31,
1998, these securities were valued at $10,686 or 2.3% 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) Inflation-protected securities 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 amount
represents the notional amount on which current interest is calculated.
(6) TBA's are mortgage-backed securities traded under delayed delivery
commitments, settling after October 31, 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 1% from the principal amount. Income on TBA's is not earned until
settlement date. (See Note 2 to the Financial Statements).
(7) Principal only (PO) securities represent the right to receive periodic
principal payments on an underlying pool of mortgage loans.
(8) Security purchased on a delayed delivery or when-issued basis. (See Note 2
to the Financial Statements).
(9) Private placement security whose initial acquisition cost was $500 on July
12, 1990. At October 31, 1998, this security was valued at $538 and
represented 0.1% of net assets. Saferco Products, Inc. has no outstanding
publicly offered securities of the same class as the private placement
security held by the Fund. The Fund will bear the costs, if any, relating
to the disposition of the private placement security, including costs
associated with registering the security under the Securities Act of 1933,
if necessary.
+ Variable rate security. The stated rate represents the rate in effect at
October 31, 1998.
++ Floating rate security. The stated rate represents the rate in effect at
October 31, 1998.
+++ Step coupon security. The rate will be 0.0% until January 1, 2002. The rate
becomes 12.5% after the stated date.
# At October 31, 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 $5,841.
NZ$ New Zealand Dollar
Y Japanese Yen
The accompanying notes are an integral part of the financial statements.
27
<PAGE> 29
HARBOR BOND FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
(All dollar values are represented in thousands)
FUTURES CONTRACTS WHICH WERE OPEN AT OCTOBER 31, 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>
Euro Dollar (Buy)....................... 11 E$ 2,750 September, 2000 $ 29
Euro Dollar (Buy)....................... 11 E$ 2,750 December, 2000 24
Euro Dollar (Buy)....................... 11 E$ 2,750 March, 2001 24
Euro Dollar (Buy)....................... 11 E$ 2,750 June, 2001 22
Euro Dollar (Buy)....................... 33 E$ 8,250 September, 2001 61
Euro Dollar (Buy)....................... 33 E$ 8,250 December, 2001 54
Euro Dollar (Buy)....................... 33 E$ 8,250 March, 2002 53
Euro Dollar (Buy)....................... 33 E$ 8,250 June, 2002 51
Municipal Bond Index (Buy).............. 100 $ 100 December, 1998 (119)
U.S. Treasury Note-5 Yr. (Buy).......... 69 $ 6,900 December, 1998 307
U.S. Treasury Note-10 Yr. (Buy)......... 785 $78,500 December, 1998 703
U.S. Treasury Bond-30 Yr. (Buy)......... 368 $36,800 December, 1998 (29)
-------
$ 1,180
=======
</TABLE>
WRITTEN OPTIONS WHICH WERE OPEN AT OCTOBER 31, 1998 ARE AS FOLLOWS:
<TABLE>
<CAPTION>
NUMBER OF EXPIRATION DATE/ VALUE
DESCRIPTION SHARES/CONTRACTS STRIKE PRICE (000S)
----------- ---------------- ---------------- ------
<S> <C> <C> <C>
U.S. Treasury Bond Futures(Call)................ 500 November, 1998/128 $ (898)
U.S. Treasury Bond (Call)....................... 10,000,000 February, 1999/100.51 (145)
U.S. Treasury Bond (Call)....................... 10,000,000 August, 1999/101.25 (383)
U.S. Treasury Bond Futures (Put)................ 500 November, 1998/114 (8)
U.S. Treasury Bond (Put)........................ 20,000,000 February, 1999/99.62 --
U.S. Treasury Bond (Put)........................ 20,000,000 August, 1999/97.97 (17)
-------
Written options outstanding, at value (premiums
received of $667)............................. $(1,451)
=======
</TABLE>
FORWARD CURRENCY CONTRACTS WHICH WERE OPEN AT OCTOBER 31, 1998 ARE AS
FOLLOWS:
<TABLE>
<CAPTION>
AGGREGATE
MARKET FACE UNREALIZED
VALUE VALUE DELIVERY DATE (DEPRECIATION)
CURRENCY COUNTRY (000S) (000S) OF CONTRACT (000S)
-------- ------- ------ --------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Dollar (Sell)........................ New Zealand $3,977 $4,168 December 21, 1998 $(191)
=====
</TABLE>
TBA SALE COMMITMENTS WHICH WERE OPEN AT OCTOBER 31, 1998 ARE AS FOLLOWS:
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT DELIVERY COUPON VALUE
(000S) MONTH RATE (000S)
--------- -------- ------ ------
<S> <C> <C> <C> <C>
Federal Home Loan Mortgage Corp. Gold........... $39,000 November 6.50% $39,305
Federal Home Loan Mortgage Corp. Gold........... 7,900 November 6.50% 7,811
Federal National Mortgage Assoc................. 25,000 November 6.50% 25,187
Government National Mortgage Assoc. I, 30
Yr. .......................................... 15,000 November 6.50% 15,162
-------
$87,465
=======
</TABLE>
28
<PAGE> 30
HARBOR SHORT DURATION FUND
PORTFOLIO OF INVESTMENTS--OCTOBER 31, 1998
Total Investments (% of net assets)
(Excludes net cash and short-term investments of 7.8%)
<TABLE>
<S> <C>
Corporate Notes & Bonds 4.6
U.S. Government Obligations 16.6
Mortgage Related Securities 31.3
Asset Backed Securities 39.7
</TABLE>
<TABLE>
<CAPTION>
ASSET BACKED SECURITIES--39.7%
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
--------- --------
<S> <C> <C>
Beneficial Home Equity Loan Trust
5.707%--04/28/2026+.................... $ 2,915 $ 2,910
Chase Manhattan Owner Trust
6.100%--01/17/2000..................... 1,455 1,459
5.950%--11/15/2000..................... 3,694 3,718
--------
5,177
--------
CIT RV Trust
6.200%--10/15/2006..................... 3,750 3,813
Discover Card Trust
7.850%--11/21/2000..................... 5,100 5,090
5.758%--10/16/2004+.................... 5,000 5,019
--------
10,109
--------
First Chicago Master Trust
5.478%--07/15/2001+.................... 5,000 4,999
Ford Credit Auto Owner Trust
5.950%--01/15/2000..................... 2,913 2,921
5.810%--03/15/2002..................... 3,000 3,042
--------
5,963
--------
Green Tree Financial Corp.
6.040%--06/15/2029+.................... 3,000 3,026
Metris Master Trust
6.039%--08/20/2005+(1)................. 4,000 3,952
ML Home Equity Loan Trust
6.087%--07/15/2022+.................... 2,390 2,389
Nationsbank Auto Owners Trust
6.375%--07/15/2000..................... 2,274 2,284
Newcourt Equipment Trust Securities Cl. A
5.17%--09/20/2000...................... 4,000 4,000
Premier Auto Trust
5.560%--04/08/2001..................... 4,000 4,032
5.070%--04/09/2001..................... 5,000 4,993
--------
9,025
--------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
--------- --------
<S> <C> <C>
Saxon Asset Securities Trust
6.200%--04/25/2018..................... $ 4,000 $ 4,029
Standard Credit Card Master Trust I
7.875%--11/07/1998..................... 6,865 6,873
Student Loan Marketing Association
MTN(2)
5.570%--03/17/2000..................... 13,500 13,625
Toyota Auto Lease Trust
5.350%--07/25/2002..................... 4,000 4,020
--------
TOTAL ASSET BACKED SECURITIES
(Cost $85,928).................................... 86,194
--------
CORPORATE NOTES & BONDS--4.6%
Key Bank N A
5.469%--10/27/2000+.................... 5,000 5,000
Salomon Inc. (Series D & E)
6.800%--02/14/2000+.................... 5,000 5,067
--------
TOTAL CORPORATE NOTES & BONDS
(Cost $10,061).................................... 10,067
--------
MORTGAGE RELATED SECURITIES--31.3%
GOVERNMENT AGENCY PASS-THROUGHS
Federal National Mortgage Association
MTN(2)
5.820%--08/25/1999..................... 16,000 16,141
5.650%--04/28/2000..................... 4,000 4,047
--------
20,188
--------
COLLATERALIZED MORTGAGE OBLIGATIONS
Aames Mortgage Trust
6.037%--06/15/2020+.................... 5,000 4,988
Allied Capital Commercial Mortgage Trust
MTN(1)(2)
6.310%--05/25/2003..................... 2,629 2,625
Case Equipment Loan Trust
5.592%--07/15/2001..................... 3,143 3,153
Champion Home Equity Loan Trust
6.590%--11/25/2010..................... 2,095 2,099
CRIIMI MAE CMBS Corp.
5.697%--10/20/2001(1).................. 3,420 3,396
EQCC Home Equity Loan Trust
6.260%--11/15/2006..................... 1,304 1,307
6.140%--04/15/2009..................... 2,000 2,010
--------
3,317
--------
Federal Home Loan Mortgage Multiclass
Mortgage Cl. A MTN REMIC(2)(3)
6.900%--04/15/2026..................... 14,553 14,594
Federal Home Loan Mortgage Pass Thru
Certificates MTN REMIC(2)(3)
5.500%--07/15/2004..................... 178 178
</TABLE>
29
<PAGE> 31
HARBOR SHORT DURATION FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
<TABLE>
<CAPTION>
MORTGAGE RELATED SECURITIES--CONTINUED
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
--------- --------
<S> <C> <C>
Federal National Mortgage Association MTN
REMIC Series 1993 Cl. Z(2)(3)
5.750%--10/25/2006..................... $ 6,152 $ 6,177
GE Cap Mortgage Services
6.530%--12/25/2010..................... 750 749
Signet Helco Trust
5.860%--06/20/2004+.................... 2,545 2,536
WFS Financial Owner Trust
5.777%--01/20/2001..................... 4,000 4,006
--------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS...........
47,818
--------
TOTAL MORTGAGE RELATED SECURITIES
(Cost $67,694).................................... 68,006
--------
U.S. GOVERNMENT OBLIGATIONS--16.6%
Federal Home Loan Banks
5.525%--08/28/2000..................... 10,000 10,144
U.S. Treasury Bonds
6.500%--11/15/2026..................... 480 559
U.S. Treasury Notes
5.625%--12/31/1999..................... 2,500 2,534
4.500%--09/30/2000..................... 7,500 7,540
4.000%--10/31/2000..................... 7,500 7,485
5.500%--05/31/2003..................... 7,300 7,651
--------
25,210
--------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $35,792).................................... 35,913
--------
SHORT TERM INVESTMENTS--15.4%
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
--------- --------
REPURCHASE AGREEMENT
Repurchase Agreement with State Street
Bank & Trust dated October 30, 1998
due November 2, 1998 at 5.375%,
collateralized by a U.S. Treasury
Note, 6.375% August 15, 2027, par
value of $5,905 (repurchase proceeds
of $6,786 when closed on November 2,
1998)................................ $ 6,783 $ 6,783
--------
BANK OBLIGATION
Societe Generale
5.850%--12/17/1998..................... 5,000 5,000
--------
U.S. GOVERNMENT OBLIGATIONS-SHORT TERM
U.S. Treasury Bills
5.100%--12/10/1998#.................... 1,000 996
4.953%--07/22/1999..................... 3,500 3,394
4.997%--07/22/1999..................... 1,000 970
4.655%--08/19/1999..................... 9,000 8,661
4.705%--08/19/1999..................... 8,000 7,696
--------
21,717
--------
TOTAL SHORT TERM INVESTMENTS
(Cost $33,471).................................... 33,500
--------
TOTAL INVESTMENTS--107.6%
(Cost $232,946)................................... 233,680
CASH AND OTHER ASSETS
LESS LIABILITIES--(7.6)%.......................... (16,436)
--------
TOTAL NET ASSETS--100.0%............................ $217,244
========
</TABLE>
FUTURES CONTRACTS WHICH WERE OPEN AT OCTOBER 31, 1998 ARE AS FOLLOWS:
<TABLE>
<CAPTION>
AGGREGATE
FACE VALUE OF UNREALIZED
NUMBER OF CONTRACTS EXPIRATION DATE APPRECIATION
DESCRIPTION CONTRACTS (000S) OF CONTRACTS (000S)
----------- --------- ------------- --------------- ------------
<S> <C> <C> <C> <C>
U.S. Treasury Note--2 Yr. (Buy)............................. 41 $8,200 December, 1998 $108
====
</TABLE>
- ------------
(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 October 31,
1998, these securities were valued at $9,973 or 4.6% of net assets.
(2) MTN after the name of a security stands for Medium Term Note.
(3) REMICs are CMOs which can hold mortgages secured by any type of real
property and issue multiple-class securities backed by those mortgages.
+ Floating rate security. The stated rate represents the rate in effect at
October 31, 1998
# At October 31, 1998, U.S. Treasury Bills held by the Fund were pledged to
cover margin requirements for open futures contracts. (See Note 2 to the
Financial Statements.) The securities pledged had an aggregate market value
of $996.
The accompanying notes are an integral part of the financial statements.
30
<PAGE> 32
HARBOR MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS--OCTOBER 31, 1998
Total Investments (% of net assets)
(Excludes net cash of -2.6%)
<TABLE>
<S> <C>
Asset Backed Securities 0.8
Repurchase Agreement 2.3
Commercial Paper 41.1
Bank Obligations 58.4
</TABLE>
<TABLE>
<CAPTION>
ASSET BACKED SECURITIES--0.8%
(Cost $840)
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
--------- --------
<S> <C> <C>
Ford Credit Auto Owner Trust
5.615%--05/15/1999................... $ 840 $ 840
--------
BANK OBLIGATIONS--58.4%
Abby National Treasury Services plc
Corp.
5.570%--11/24/1998................... 3,500 3,500
Bank Austria Aktiengesel NY
5.700%--03/30/1999................... 4,000 4,004
Bank of Nova Scotia
5.580%--02/25/1999................... 3,000 2,999
Banque Nationale De Paris
5.600%--11/23/1998................... 3,000 3,000
Barclays Bank Euro CD
5.570%--11/30/1998................... 3,500 3,500
Canadian Imperial Bank
5.550%--02/10/1999................... 3,500 3,503
Deutsche Bank Euro CD
5.550%--11/27/1998................... 3,500 3,500
Dresdner Bank AG NY BRH
5.330%--03/11/1999................... 4,000 4,000
Halifax plc
5.590%--12/21/1998................... 3,000 3,000
ING Bank Amsterdam
5.090%--01/22/1999................... 4,000 4,000
Mellon Bank N A
5.500%--12/09/1998................... 3,000 3,000
Morgan Guaranty Trust Co. NY
5.550%--02/02/1999................... 4,000 4,000
National Westminster Bank plc
5.737%--05/07/1999................... 3,000 3,000
Rabobank Nederland Euro CD
5.140%--03/02/1999................... 3,000 3,000
Societe Generale Instl CTF Dep
5.750%--04/06/1999................... 3,000 3,007
</TABLE>
<TABLE>
<CAPTION>
(Cost $840)
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
--------- --------
<S> <C> <C>
Sudwest Deutsche Landesbank
5.090%--01/22/1999................... $4,000 $ 4,000
Toronto Dominion Bank
5.620%--02/08/1999................... 3,500 3,500
--------
TOTAL BANK OBLIGATIONS
(Cost $58,513).................................... 58,513
--------
COMMERCIAL PAPER--41.1%
Bank Et Caisse D Epargne
5.495%--11/23/1998................... 3,500 3,488
Commerzbank U S Finance
5.490%--11/18/1998................... 3,500 3,491
E I DuPont de Nemours & Co.
4.930%--01/29/1999................... 3,500 3,457
Ford Motor Credit Disc. CP Yrs. 1+2
5.000%--01/14/1999................... 5,000 4,949
General Motors Acceptance Corp.
5.520%--01/20/1999................... 3,000 2,963
IMI Funding Corp. USA
5.500%--12/30/1998................... 3,000 2,973
KFW International Finance Inc.
5.470%--12/22/1998................... 3,000 2,977
Repsol International Financial Yrs. 1+2
5.490%--12/03/1998................... 3,750 3,732
Shell Finance
5.070%--03/29/1999................... 3,000 2,938
Sigma Finance Corp.
5.520%--11/23/1998................... 3,000 2,990
Suntrust Banks Inc.
5.470%--11/10/1998................... 3,500 3,495
Vattenfall Treasury Inc.
5.500%--11/16/1998................... 3,750 3,741
--------
TOTAL COMMERCIAL PAPER
(Cost $41,194).................................... 41,194
--------
REPURCHASE AGREEMENT--2.3%
(Cost $2,336)
Repurchase Agreement with State Street
Bank & Trust dated October 30, 1998
due on November 2, 1998 at 5.375%,
collateralized by a U.S. Treasury
Note, 6.375% August 15, 2027, par
value of $2,035 (repurchase proceeds
of $2,337 when closed on November 2,
1998)................................ 2,336 2,336
--------
TOTAL INVESTMENTS--102.6%
(Cost $102,883)(1)................................ 102,883
CASH AND OTHER ASSETS,
LESS LIABILITIES--(2.6)%.......................... (2,607)
--------
TOTAL NET ASSETS--100.0%............................ $100,276
========
</TABLE>
- ------------
(1) The aggregate identified cost on a tax basis is the same.
The accompanying notes are an integral part of the financial statements.
31
<PAGE> 33
HARBOR FUND
STATEMENT OF ASSETS AND LIABILITIES--OCTOBER 31, 1998
(All amounts in Thousands, except per share amount)
<TABLE>
<CAPTION>
HARBOR
HARBOR INTERNATIONAL
GROWTH GROWTH
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
INVESTMENTS, AT IDENTIFIED COST*............................ $90,961 $ 995,773
- -----------------------------------------------------------------------------------------
Investments, at value....................................... $86,841 $1,172,382
Repurchase agreements....................................... 5,901 --
Cash........................................................ -- --
Foreign currency, at value (cost: $0; $170; $0; $66; $0; $0;
$150; $14; $0)............................................ -- 170
Receivables for:
Investments sold.......................................... 631 7,424
Capital shares sold....................................... 147 1,787
Dividends................................................. -- 992
Interest.................................................. 35 12
Open forward currency contracts........................... -- --
Deferred organization costs................................. -- --
Withholding tax receivable.................................. -- 896
Other assets................................................ 3 6
- -----------------------------------------------------------------------------------------
TOTAL ASSETS.......................................... 93,558 1,183,669
LIABILITIES
Payables for:
Investments purchased..................................... 222 3,827
Capital shares reacquired................................. 5,143 527
Dividends to shareholders................................. -- --
Written options, at value (premiums received $0; $0; $0;
$0; $0; $0; $667; $0; $0)............................... -- --
Swap agreements........................................... -- --
Interest on swap agreements............................... -- --
Open forward currency contracts........................... -- --
Variation margin on futures contracts..................... -- --
Accrued expenses:
Adviser's fees............................................ 129 656
Trustees' fees............................................ -- 4
Transfer agent's fees..................................... 7 51
Other..................................................... 27 352
TBA sale commitments, at value (proceeds receivable $0;
$0; $0; $0; $0; $0; $87,429; $0; $0).................... -- --
- -----------------------------------------------------------------------------------------
TOTAL LIABILITIES..................................... 5,528 5,417
NET ASSETS
NET ASSETS.................................................. $88,030 $1,178,252
- -----------------------------------------------------------------------------------------
Net assets consist of:
Paid-in capital........................................... $78,013 $ 977,678
Undistributed/(overdistributed) net investment income..... -- 6,861
Accumulated net realized gain/(loss)...................... 8,236 17,038
Unrealized appreciation/(depreciation) of investments,
swap agreements, written options, foreign currency, and
translation of assets and liabilities in foreign
currencies.............................................. 1,781 176,675
Unrealized appreciation of futures and forward
contracts............................................... -- --
- -----------------------------------------------------------------------------------------
$88,030 $1,178,252
- -----------------------------------------------------------------------------------------
Shares of beneficial interest............................... 8,147 65,190
Net asset value, offering and redemption price per share.... $ 10.81 $ 18.07
</TABLE>
- ------------
* Including repurchase agreements and short term investments.
The accompanying notes are an integral part of the financial statements.
32
<PAGE> 34
HARBOR FUND
STATEMENT OF ASSETS AND LIABILITIES--CONTINUED
<TABLE>
<CAPTION>
HARBOR
CAPITAL HARBOR HARBOR HARBOR HARBOR HARBOR HARBOR
APPRECIATION INTERNATIONAL II INTERNATIONAL VALUE BOND SHORT DURATION MONEY MARKET
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$3,115,560 $113,242 $3,284,171 $170,470 $689,550 $232,946 $102,883
=======================================================================================================
$3,840,478 $113,004 $5,081,523 $168,216 $683,042 $226,897 $100,547
-- -- -- 1,690 8,370 6,783 2,336
-- 1 1 -- 4 -- 1
-- 66 -- -- 149 13 --
1,641 4,275 5,773 1,861 87,429 17,959 --
5,528 3 6,072 158 598 223 684
1,581 93 7,565 187 -- -- --
20 -- 478 -- 3,964 1,770 1,081
-- -- -- -- 3,785 -- --
-- 12 -- -- -- -- --
28 256 8,759 4 -- -- --
10 5 12 3 4 8 5
- -------------------------------------------------------------------------------------------------------
3,849,286 117,715 5,110,183 172,119 787,345 253,653 104,654
11,401 4,724 11,547 1,154 215,183 35,737 --
2,279 212 5,120 170 4,101 588 4,305
-- -- -- -- -- 6 22
-- -- -- -- 1,451 -- --
-- -- -- -- 773 -- --
-- -- -- -- 9 -- --
-- -- -- -- 3,976 -- --
-- -- -- -- 1,106 19 --
1,735 57 3,338 82 191 34 13
12 -- 20 1 1 1 --
134 11 189 9 27 1 13
127 42 1,568 235 41 23 25
-- -- -- -- 87,465 -- --
- -------------------------------------------------------------------------------------------------------
15,688 5,046 21,782 1,651 314,324 36,409 4,378
3,833,598 $112,669 $5,088,401 $170,468 $473,021 $217,244 $100,276
=======================================================================================================
2,843,775 $119,943 $2,912,313 $154,556 $451,623 $238,787 $100,276
7,559 1,295 65,545 250 1,380 -- --
257,346 (8,352) 312,608 16,226 18,980 (22,384) --
724,918 (217) 1,797,935 (564) 49 733 --
-- -- -- -- 989 108 --
- -------------------------------------------------------------------------------------------------------
$3,833,598 $112,669 $5,088,401 $170,468 $473,021 $217,244 $100,276
=======================================================================================================
114,401 10,005 137,651 11,210 40,033 25,002 100,276
$ 33.51 $ 11.26 $ 36.97 $ 15.21 $ 11.82 $ 8.69 $ 1.00
</TABLE>
33
<PAGE> 35
HARBOR FUND
STATEMENT OF OPERATIONS--YEAR ENDED OCTOBER 31, 1998
(All Amounts in Thousands)
<TABLE>
<CAPTION>
HARBOR
HARBOR INTERNATIONAL
GROWTH GROWTH
- -------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends................................................. $ 75 $ 16,724
Interest.................................................. 681 2,597
Foreign taxes withheld.................................... (7) (2,009)
- -------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME................................... 749 17,312
OPERATING EXPENSES:
Investment advisory fees.................................. 810 8,194
Shareholder communications................................ 12 142
Custodian fees............................................ 62 1,315
Transfer agent fees....................................... 78 570
Professional fees......................................... 55 59
Trustees' fees and expenses............................... 2 16
Registration fees......................................... 47 207
Amortization of organization costs........................ -- --
Insurance expense......................................... 2 6
Miscellaneous............................................. 9 29
- -------------------------------------------------------------------------------------------
Total operating expenses............................... 1,077 10,538
Advisory fee waived....................................... -- --
Other expense reimbursements and reductions............... (2) (12)
- -------------------------------------------------------------------------------------------
Net operating expenses................................. 1,075 10,526
- -------------------------------------------------------------------------------------------
NET INVESTMENT INCOME/(LOSS)................................ (326) 6,786
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENT
TRANSACTIONS:
Net realized gain/(loss) on:
Investments............................................ 8,582 20,378
Foreign currency transactions.......................... -- 607
Swap agreements........................................ -- --
Futures contracts...................................... -- --
Written options........................................ -- --
Change in net unrealized appreciation/depreciation on:
Investments and written options........................ (17,161) 119,379
Swap agreements........................................ -- --
Futures contracts...................................... -- --
Forward currency contracts............................. -- --
Translation of assets and liabilities in foreign
currencies............................................ -- 83
- -------------------------------------------------------------------------------------------
Net gain/(loss) on investment transactions................ (8,579) 140,447
- -------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS............................................. $(8,905) $147,233
===========================================================================================
</TABLE>
The accompanying notes are an integral part of the financial statements.
34
<PAGE> 36
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>
$ 25,320 $ 2,779 $119,248 $ 4,253 $ -- $ -- $ --
6,691 240 16,309 150 25,196 10,482 4,616
(203) (312) (14,203) (12) -- -- --
- ----------------------------------------------------------------------------------------------------
31,808 2,707 121,354 4,391 25,196 10,482 4,616
20,875 1,006 46,490 1,065 2,905 713 245
363 28 566 16 66 3 25
376 363 5,238 117 153 90 40
1,531 132 2,308 105 319 15 165
91 53 157 44 73 121 33
52 2 84 2 6 3 1
235 85 224 48 73 41 48
-- 5 -- -- -- -- --
9 2 14 1 4 4 2
51 6 96 7 12 6 6
- ----------------------------------------------------------------------------------------------------
23,583 1,682 55,177 1,405 3,611 996 565
-- (131) (3,381) -- (911) (356) (98)
(46) (3) (34) (2) (7) (5) (5)
- ----------------------------------------------------------------------------------------------------
23,537 1,548 51,762 1,403 2,693 635 462
- ----------------------------------------------------------------------------------------------------
8,271 1,159 69,592 2,988 22,503 9,847 4,154
261,400 (8,394) 308,102 16,485 4,342 1,436 3
-- 153 3,286 -- 1,815 -- --
-- -- -- -- 435 174 --
-- -- -- -- 16,040 -- --
-- -- -- -- 814 73 --
168,339 4,367 (33,005) (8,661) (1,109) 308 --
-- -- -- -- (983) -- --
-- -- -- -- (2,375) 96 --
-- -- -- -- (174) -- --
-- 17 505 -- (348) -- --
- ----------------------------------------------------------------------------------------------------
429,739 (3,857) 278,888 7,824 18,457 2,087 3
- ----------------------------------------------------------------------------------------------------
$438,010 $(2,698) $348,480 $10,812 $40,960 $11,934 $4,157
====================================================================================================
</TABLE>
35
<PAGE> 37
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
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1998 1997 1998 1997 1998 1997
===============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS:
Operations:
Net investment income/(loss)............. $ (326) $ (481) $ 6,786 $ 7,476 $ 8,271 $ 5,427
Net realized gain/(loss) on investments,
foreign currency transactions, futures,
swap agreements and written options.... 8,582 19,531 20,985 30,050 261,400 406,504
Net unrealized
appreciation/(depreciation) of
investments, swap agreements, written
options, futures, forward foreign
currency contracts and translation of
assets and liabilities in foreign
currencies............................. (17,161) (2,456) 119,462 3,171 168,339 245,411
- -------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS................ (8,905) 16,594 147,233 40,697 438,010 657,342
- -------------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
Net investment income.................... -- -- (6,885) (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) (40,169) (16,714) (411,106) (54,776)
- -------------------------------------------------------------------------------------------------------------------------------
Capital share transactions
Net proceeds from sale of shares......... 31,571 25,126 346,315 683,701 1,292,926 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 31,697 13,051 368,493 47,557
Cost of shares reacquired................ (38,585) (49,156) (231,778) (283,449) (658,086) (504,471)
- -------------------------------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) DERIVED FROM
CAPITAL TRANSACTIONS................... 9,378 2,944 152,238 415,998 1,008,290 612,623
- -------------------------------------------------------------------------------------------------------------------------------
Net increase/(decrease) in net assets.... (16,538) (8,943) 259,302 439,981 1,035,194 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*............................. $ 88,030 $104,568 $1,178,252 $918,950 $3,833,598 $2,798,404
- -------------------------------------------------------------------------------------------------------------------------------
NUMBER OF CAPITAL SHARES:
Sold....................................... 2,581 1,875 19,055 41,977 39,019 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................................. (3,223) (3,821) (13,172) (17,259) (20,159) (16,869)
- -------------------------------------------------------------------------------------------------------------------------------
Net increase/(decrease) in shares
outstanding.............................. 786 269 8,274 25,705 32,112 21,115
Outstanding:
Beginning of period...................... 7,361 7,092 56,916 31,211 82,289 61,174
- -------------------------------------------------------------------------------------------------------------------------------
End of period............................ 8,147 7,361 65,190 56,916 114,401 82,289
- -------------------------------------------------------------------------------------------------------------------------------
* Includes undistributed/(over-distributed)
net investment income of:................. $ -- $ -- $ 6,861 $ 7,075 $ 7,559 $ 4,876
<CAPTION>
HARBOR
INTERNATIONAL II
-------------------------
NOVEMBER 1, NOVEMBER 1,
1997 1996
THROUGH THROUGH
OCTOBER 31, OCTOBER 31,
1998 1997
========================================================================
<S> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS:
Operations:
Net investment income/(loss)............. $ 1,159 $ 1,079
Net realized gain/(loss) on investments,
foreign currency transactions, futures,
swap agreements and written options.... (8,241) 5,750
Net unrealized
appreciation/(depreciation) of
investments, swap agreements, written
options, futures, forward foreign
currency contracts and translation of
assets and liabilities in foreign
currencies............................. 4,384 (4,810)
- --------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS................ (2,698) 2,019
- --------------------------------------------
Distributions to shareholders:
Net investment income.................... (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......... 51,753 143,553
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................ (70,969) (23,184)
- --------------------------------------------
NET INCREASE/(DECREASE) DERIVED FROM
CAPITAL TRANSACTIONS................... (12,777) 120,451
- --------------------------------------------
Net increase/(decrease) in net assets.... (22,288) 122,384
NET ASSETS:
Beginning of period........................ 134,957 12,573
- --------------------------------------------
END OF PERIOD*............................. $112,669 $134,957
- ------------------------------------------------------------------------
NUMBER OF CAPITAL SHARES:
Sold....................................... 4,305 11,761
Reinvested in payment of investment income
dividends................................ 88 3
Reinvested in payment of capital gain
distributions............................ 490 5
Reacquired................................. (5,998) (1,850)
- --------------------------------------------
Net increase/(decrease) in shares
outstanding.............................. (1,115) 9,919
Outstanding:
Beginning of period...................... 11,120 1,201
- --------------------------------------------
End of period............................ 10,005 11,120
- ------------------------------------------------------------------------
* Includes undistributed/(over-distributed)
net investment income of:................. $ 1,295 $ 1,069
</TABLE>
The accompanying notes are an integral part of the financial statements.
36
<PAGE> 38
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
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1998 1997 1998 1997 1998 1997 1998 1997
==================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 69,592 $ 58,550 $ 2,988 $ 2,732 $ 22,503 $ 18,806 $ 9,847 $ 8,389
311,388 126,747 16,485 33,809 23,446 11,422 1,683 1,238
(32,500) 588,192 (8,661) (625) (4,989) (3,011) 404 (691)
- ------------------------------------------------------------------------------------------------------------------
348,480 773,489 10,812 35,916 40,960 27,217 11,934 8,936
- ------------------------------------------------------------------------------------------------------------------
(57,053) (54,226) (3,026) (2,696) (23,922) (18,878) (11,059) (11,444)
(127,358) (103,297) (33,943) (13,934) (7,601) -- -- --
- ------------------------------------------------------------------------------------------------------------------
(184,411) (157,523) (36,969) (16,630) (31,523) (18,878) (11,059) (11,444)
- ------------------------------------------------------------------------------------------------------------------
569,168 809,204 41,274 33,555 213,780 130,443 141,646 233,482
48,178 46,590 2,862 2,560 20,005 15,418 11,017 11,420
114,139 93,381 32,344 13,178 6,756 -- -- --
(897,201) (505,220) (41,214) (19,329) (139,551) (71,455) (98,770) (262,216)
- ------------------------------------------------------------------------------------------------------------------
(165,716) 443,955 35,266 29,964 100,990 74,406 53,893 (17,314)
- ------------------------------------------------------------------------------------------------------------------
(1,647) 1,059,921 9,109 49,250 110,427 82,745 54,768 (19,822)
5,090,048 4,030,127 161,359 112,109 362,594 279,849 162,476 182,298
- ------------------------------------------------------------------------------------------------------------------
$5,088,401 $5,090,048 $170,468 $161,359 $ 473,021 $362,594 $217,244 $ 162,476
- ------------------------------------------------------------------------------------------------------------------
14,930 22,725 2,565 2,007 18,415 11,476 16,395 26,849
1,372 1,479 186 156 1,737 1,366 1,279 1,323
3,252 2,963 2,187 886 594 -- -- --
(23,939) (14,257) (2,608) (1,158) (12,047) (6,307) (11,438) (30,149)
- ------------------------------------------------------------------------------------------------------------------
(4,385) 12,910 2,330 1,891 8,699 6,535 6,236 (1,977)
142,036 129,126 8,880 6,989 31,334 24,799 18,766 20,743
- ------------------------------------------------------------------------------------------------------------------
137,651 142,036 11,210 8,880 40,033 31,334 25,002 18,766
- ------------------------------------------------------------------------------------------------------------------
$ 65,545 $ 54,083 $ 250 $ 288 $ 1,380 $ 1,923 $ -- $ 903
<CAPTION>
HARBOR
MONEY MARKET
-------------------------
NOVEMBER 1, NOVEMBER 1,
1997 1996
THROUGH THROUGH
OCTOBER 31, OCTOBER 31,
1998 1997
==============================
<S> <C> <C>
$ 4,154 $ 3,305
3 13
-- --
- ---
4,157 3,318
- ---
(4,154) (3,305)
(3) (13)
- ---
(4,157) (3,318)
- ---
149,784 138,417
3,927 3,162
-- --
(126,975) (134,030)
- ---
26,736 7,549
- ---
26,736 7,549
73,540 65,991
- ---
$ 100,276 $ 73,540
- ------------------------------
149,784 138,417
3,927 3,162
-- --
(126,975) (134,030)
- ---
26,736 7,549
73,540 65,991
- ---
100,276 73,540
- ------------------------------
$ -- $ --
</TABLE>
37
<PAGE> 39
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)
October 31, 1998................ $14.20 $(.04) $(1.07) $(1.11)
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)
- ----------------------------------------------------------------------------------------------------------
HARBOR INTERNATIONAL GROWTH FUND
October 31, 1998................ $16.15 $ .11 $ 2.52 $ 2.63
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................ 10.00 .07* 1.47 1.54
- ----------------------------------------------------------------------------------------------------------
HARBOR CAPITAL APPRECIATION FUND
October 31, 1998................ $34.01 $ .07 $ 4.35 $ 4.42
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
- ----------------------------------------------------------------------------------------------------------
HARBOR INTERNATIONAL FUND II
October 31, 1998................ $12.14 $ .12* $ (.37) $ (.25)
October 31, 1997................ 10.47 .10* 1.63 1.73
October 31, 1996(2)............. 10.00 .01* .46 .47
- ----------------------------------------------------------------------------------------------------------
HARBOR INTERNATIONAL FUND
October 31, 1998................ $35.84 $ .51* $ 1.92 $ 2.43
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
- ----------------------------------------------------------------------------------------------------------
HARBOR VALUE FUND(3)
October 31, 1998................ $18.17 $ .27 $ .79 $ 1.06
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
- ----------------------------------------------------------------------------------------------------------
<CAPTION>
LESS DISTRIBUTIONS
-----------------------------------
DIVIDENDS FROM DISTRIBUTIONS FROM IN EXCESS OF
NET INVESTMENT NET REALIZED NET INVESTMENT
YEAR/PERIOD ENDED INCOME CAPITAL GAINS** INCOME
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
HARBOR GROWTH FUND(1)
October 31, 1998................ $ -- $(2.28) $--
October 31, 1997................ -- (4.10) --
October 31, 1996................ -- (1.85) --
October 31, 1995................ -- (.32) --
October 31, 1994................ -- (.02) --
- ---------------------------------------------------------------------------------------
HARBOR INTERNATIONAL GROWTH FUND
October 31, 1998................ $(.12) $ (.59) $--
October 31, 1997................ (.08) (.36) --
October 31, 1996................ (.11) -- --
October 31, 1995................ (.08) -- --
October 31, 1994................ (.01) -- --
- ---------------------------------------------------------------------------------------
HARBOR CAPITAL APPRECIATION FUND
October 31, 1998................ $(.07) $(4.85) $--
October 31, 1997................ (.02) (.86) --
October 31, 1996................ (.03) (.31) --
October 31, 1995................ (.04) (.17) --
October 31, 1994................ (.03) (1.13) --
- ---------------------------------------------------------------------------------------
HARBOR INTERNATIONAL FUND II
October 31, 1998................ $(.10) $ (.53) $--
October 31, 1997................ (.02) (.04) --
October 31, 1996(2)............. -- -- --
- ---------------------------------------------------------------------------------------
HARBOR INTERNATIONAL FUND
October 31, 1998................ $(.40) $ (.90) $--
October 31, 1997................ (.42) (.80) --
October 31, 1996................ (.41) (.13) --
October 31, 1995................ (.24) (.94) --
October 31, 1994................ (.22) -- --
- ---------------------------------------------------------------------------------------
HARBOR VALUE FUND(3)
October 31, 1998................ $(.28) $(3.74) $--
October 31, 1997................ (.34) (2.00) --
October 31, 1996................ (.40) (1.27) --
October 31, 1995................ (.39) (1.07) --
October 31, 1994................ (.34) (1.10) --
- ---------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
38
<PAGE> 40
HARBOR FUND FINANCIAL HIGHLIGHTS--CONTINUED
SELECTED DATA FOR A SHARE OUTSTANDING FOR THE PERIODS PRESENTED
<TABLE>
<CAPTION>
TAX RATIO OF ADVISER OR RATIO OF
RETURN NET ASSET NET ASSETS OPERATING EXPENSES SUBADVISER FEES INTEREST EXPENSE
OF TOTAL VALUE END TOTAL END OF PERIOD TO AVERAGE NOT IMPOSED TO AVERAGE
CAPITAL DISTRIBUTIONS OF PERIOD RETURN ($ THOUSANDS) NET ASSETS (%)*** (PER SHARE) NET ASSETS (%)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$-- $(2.28) $10.81 (8.73)% $ 88,030 1.00% $ -- -- %
-- (4.10) 14.20 18.64 104,568 1.12 -- --
-- (1.85) 16.00 14.84 113,511 .93 -- --
-- (.32) 15.73 25.93 137,524 .93 -- --
-- (.02) 12.83 (8.29) 141,330 .93 -- --
- --------------------------------------------------------------------------------------------------------------------------
$-- $ (.71) $18.07 16.96% $1,178,252 .96% $ -- -- %
-- (.44) 16.15 8.13 918,950 1.02 -- --
-- (.11) 15.35 27.86 478,969 1.11 -- --
-- (.08) 12.10 5.83' 122,415 1.21* .01 --
-- (.01) 11.53 15.36' 74,734 1.32* .02 --
- --------------------------------------------------------------------------------------------------------------------------
$-- $(4.92) $33.51 15.72% $3,833,598 .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 -- --
- --------------------------------------------------------------------------------------------------------------------------
$-- $ (.63) $11.26 (1.98)%' $ 112,669 1.15%* $ .01 -- %
-- (.06) 12.14 16.64' 134,957 .99* .02 --
-- -- 10.47 4.70++' 12,573 1.46*+ .01 --
- --------------------------------------------------------------------------------------------------------------------------
$-- $(1.30) $36.97 6.97%' $5,088,401 .94%* $ .02 -- %
-- (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 --
- --------------------------------------------------------------------------------------------------------------------------
$-- $(4.02) $15.21 6.69% $ 170,468 .79% $ -- -- %
-- (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 -- --
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
RATIO OF NET
INVESTMENT INCOME
TO AVERAGE PORTFOLIO
NET ASSETS (%) TURNOVER (%)
- --------------------------------------
<S> <C> <C>
(.30)% 23.40%
(.47) 147.37
(.50) 87.97
(.30) 87.94
-- 115.89
- --------------------------------------
.62% 85.15%
.91 76.19
.99 55.17
1.31* 74.86
.87* 41.80
- --------------------------------------
.24% 69.56%
.23 72.80
.11 73.69
.23 51.65
.24 72.89
- --------------------------------------
.86%* 70.34%
1.33* 57.61
.40*+ 2.61+
- --------------------------------------
1.27%* 13.66%
1.20* 6.39
1.42* 9.73
1.53* 14.01
1.09* 28.70
- --------------------------------------
1.67% 113.55%
1.98 145.85
2.65 132.39
3.00 135.93
2.66 150.94
- --------------------------------------
</TABLE>
See page 41 for notes to the Financial Highlights.
39
<PAGE> 41
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/(LOSS) CONTRACTS OPERATIONS
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HARBOR BOND FUND
October 31, 1998.... $11.57 $.61* $ .53 $1.14
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)
- ----------------------------------------------------------------------------------------------
HARBOR SHORT DURATION FUND
October 31, 1998.... $ 8.66 $.48* $ .09 $ .57
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
- ----------------------------------------------------------------------------------------------
HARBOR MONEY MARKET FUND
October 31, 1998.... $ 1.00 $.05* $ -- $ .05
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
- ----------------------------------------------------------------------------------------------
<CAPTION>
LESS DISTRIBUTIONS
-----------------------------------
DIVIDENDS FROM DISTRIBUTIONS FROM IN EXCESS OF
NET INVESTMENT NET REALIZED NET INVESTMENT
YEAR/PERIOD ENDED INCOME CAPITAL GAINS** INCOME
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
HARBOR BOND FUND
October 31, 1998............ $ (.66) $ (.23) $--
October 31, 1997............ (.69) -- --
October 31, 1996............ (.74) -- --
October 31, 1995............ (.67) -- --
October 31, 1994............ (.67) (.50) --
- --------------------------------------------------------------------------------
HARBOR SHORT DURATION FUND
October 31, 1998............ $ (.54) $ -- $--
October 31, 1997............ (.59) -- --
October 31, 1996............ (.60) -- (.04)
October 31, 1995............ (.52) -- (.01)
October 31, 1994............ (1.08) -- --
- --------------------------------------------------------------------------------
HARBOR MONEY MARKET FUND
October 31, 1998............ $ (.05) $ -- $--
October 31, 1997............ (.02) -- --
October 31, 1996............ (.05) -- --
October 31, 1995............ (.06) -- --
October 31, 1994............ (.03) -- --
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
40
<PAGE> 42
HARBOR FUND FINANCIAL HIGHLIGHTS--CONTINUED
SELECTED DATA FOR A SHARE OUTSTANDING FOR THE PERIODS PRESENTED
<TABLE>
<CAPTION>
TAX RATIO OF ADVISER OR RATIO OF
RETURN NET ASSET NET ASSETS OPERATING EXPENSES SUBADVISER FEES INTEREST EXPENSE
OF TOTAL VALUE END TOTAL END OF PERIOD TO AVERAGE NOT IMPOSED TO AVERAGE
CAPITAL DISTRIBUTIONS OF PERIOD RETURN ($ THOUSANDS) NET ASSETS (%)*** (PER SHARE) NET ASSETS (%)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$-- $ (.89) $11.82 10.33%' $473,021 .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 --
- --------------------------------------------------------------------------------------------------------------------------
$-- $ (.54) $ 8.69 6.81%' $217,244 .36%* $ .02 -- %
-- (.59) 8.66 5.48' 162,476 .38* .02 .64
-- (.64) 8.79 7.24' 182,292 .35* .02 1.26
-- (.53) 8.82 6.82' 105,007 .39* .02 1.46
(.05) (1.13) 8.77 2.53' 115,891 .38* -- +++ 1.26
- --------------------------------------------------------------------------------------------------------------------------
$-- $ (.05) $ 1.00 5.20%' $100,276 .57%* $ -- +++ -- %
-- (.02) 1.00 5.11' 73,540 .63* -- +++ --
-- (.05) 1.00 5.08' 65,991 .64* -- +++ --
-- (.06) 1.00 5.66' 64,492 .61* -- +++ --
-- (.03) 1.00 3.53' 60,024 .67* -- +++ --
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
RATIO OF NET
INVESTMENT INCOME
TO AVERAGE PORTFOLIO
NET ASSETS (%) TURNOVER (%)
- ---------------------------------------
<S> <C> <C>
5.41%* 278.06%
6.04* 252.37
6.40* 192.64
7.11* 88.69
6.29* 150.99
- ---------------------------------------
5.51%* 726.92%
5.14* 1,518.68
6.84* 1,277.82
6.19* 725.96
4.61* 895.76
- ---------------------------------------
5.08%* N/A
4.97* N/A
4.85* N/A
5.42* N/A
3.38* N/A
- ---------------------------------------
</TABLE>
(1) Effective May 2, 1997, Harbor Growth Fund appointed Emerging Growth
Advisors, Inc. as its Subadviser.
(2) For the period June 1, 1996 (commencement of operations) through October 31,
1996.
(3) 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 $.01 per share.
* Reflects the Adviser's or Subadviser's agreement not to impose all or a
portion of its advisory fees.
** Includes both short-term and long-term capital gains.
*** Percentage does not reflect reduction for credit balance arrangements which
would have amounted to the following:
Year ended October 31, 1997--International II .01%, Short Duration .02%,
Money Market .01%
Year ended October 31, 1996--Growth .01%, International Growth .01%,
International II .02%, Short Duration .02%
Year ended October 31, 1995--Short Duration .01%
(a) Based on monthly average of shares outstanding during the fiscal year.
' Total return would have been lower had certain expenses not been waived
during the period shown.
41
<PAGE> 43
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--OCTOBER 31, 1998
($ 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 October 31, 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 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,
42
<PAGE> 44
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
($ in Thousands)
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
the fund records a realized gain or loss equal to the difference between the
value of the contract at the time it was opened and the value at the time it was
closed.
Consistent with its investment policies, each Fund (excluding the Money
Market Fund) may use futures contracts to manage its exposure to the stock and
bond markets and to fluctuations in currency values. 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 October 31, 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 they
are principally traded. If the purchased option expires, the Fund realizes a
loss in the amount of the premium. If the Fund enters into a closing sale
transaction, it realizes a gain or loss, depending on whether the proceeds from
the sale are greater or less than the cost of the option. If the Fund exercises
a call option, the cost of the securities acquired by exercising the call is
increased by the premium paid to buy the call. If the Fund exercises a put
option, it realizes a gain or loss from the sale of the underlying security and
the proceeds from such sale are decreased by the premium originally paid. The
risk associated with purchasing options is limited to the premium originally
paid.
When a Fund writes an option, the premium received by the Fund is presented
in the Fund's Statement of Assets and Liabilities as an asset and an equivalent
liability. The amount of the liability is subsequently "marked-to-market" to
reflect the current market value of the option written. Written options are
valued at the last sale price or, in the absence of a sale, the last offering
price on the market on which they are 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 option is that the Fund relinquishes the
opportunity to profit if the market price of the underlying security increases
and the option is exercised. In writing a put option, the Fund assumes the risk
of incurring a loss if the market price of the underlying security decreases and
the option is exercised. In addition, there is a risk the Fund may not be able
to enter into a closing transaction because of an illiquid secondary market, or
if the counterparties do not perform under the contracts' terms. See Note 3 for
all outstanding written options as of October 31, 1998.
43
<PAGE> 45
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
loss or gain when such a payment is paid or received.
Entering into swap agreements involves, to varying degrees, elements of
credit risk, market risk, and interest rate risk in excess of the amount
recognized in the Statement of Assets and Liabilities. Such risks involve the
possibility that there is not a liquid market for these agreements, that the
counterparty to the agreements may default on its obligation to perform and that
there may be unfavorable changes in market conditions or interest rates.
TBA/WHEN-ISSUED PURCHASE COMMITMENTS
Harbor Bond Fund, Harbor Short Duration Fund and Harbor International Fund
may enter into TBA (to be announced) and when-issued purchase commitments to
purchase securities for a fixed unit price at a future date beyond customary
settlement time. Although the unit price for a TBA has been established, the
principal value has not been finalized. However, the amount of the TBA
commitment will not fluctuate more than 1.0% from the principal amount. The
price of a when-issued security and the date when the security will be delivered
and paid for are fixed at the time the transaction is negotiated.
Each Fund holds, and maintains until the settlement date, cash or liquid
securities in an amount sufficient to meet the purchase price. TBA and
when-issued 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 and when-issued 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 and when-issued purchase
commitments with the intention of acquiring securities for its portfolio, a Fund
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 may enter into TBA sale
commitments to hedge portfolio positions or to sell mortgage-backed securities
owned under delayed delivery arrangements. Proceeds of TBA sale commitments are
not received until the contractual settlement date.
Unsettled TBA sale commitments are valued at the current market value of
the underlying securities, generally according to the procedures described under
"Security Valuation" above. The contract is "marked-to-market" daily and the
change in market value is recorded by the Fund as an unrealized gain and loss.
If the TBA sale commitment is closed through the acquisition of an offsetting
purchase commitment, the Fund realizes a gain or loss on the commitment without
regard to any unrealized gain or loss on the underlying
44
<PAGE> 46
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 tax reclaims
receivable 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.
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
45
<PAGE> 47
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
($ in Thousands)
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
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.
DISTRIBUTIONS 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.
NOTE 3--INVESTMENT PORTFOLIO TRANSACTIONS
Purchases and sales of investments, other than short-term securities, for
each Fund for the year ended October 31, 1998 were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
-------------------------- --------------------------
U.S. U.S.
FUND GOVERNMENT OTHER GOVERNMENT OTHER
---- ---------- ----- ---------- -----
<S> <C> <C> <C> <C>
Harbor Growth................................... $ -- $ 24,622 $ -- $ 24,520
Harbor International Growth..................... -- 1,035,489 -- 895,261
Harbor Capital Appreciation..................... -- 3,000,241 -- 2,315,355
Harbor International II......................... -- 93,024 -- 111,602
Harbor International............................ -- 787,903 -- 1,095,241
Harbor Value.................................... 393 201,929 68 198,411
Harbor Bond..................................... 1,317,377 155,120 1,256,707 64,700
Harbor Short Duration........................... 1,330,830 126,420 1,144,872 59,359
</TABLE>
Harbor Money Market's purchases and sales (including maturities) of
investment securities (all short term obligations) aggregated $2,015,318 and
$1,985,267, respectively.
Harbor Bond Fund and Harbor Short Duration Fund may engage in short-selling
which obligates the Fund to replace the security borrowed by purchasing it at
the market price at the time of replacement. Until the security is replaced, the
Fund is required to pay to the lender any accrued interest and may be required
to pay a premium. The Fund would realize a gain if the security declines in
price between the date of the short sale and the date on which the Fund replaces
the borrowed security. The Fund would incur a loss as a result of the short sale
if the price of the security increases between those dates. Until the Fund
replaces the borrowed security, it will maintain a segregated account of cash or
liquid securities with its custodian sufficient to cover its short position.
46
<PAGE> 48
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
($ in Thousands)
NOTE 3--INVESTMENT PORTFOLIO TRANSACTIONS--CONTINUED
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.
FUTURES CONTRACTS
Transactions in futures contracts for the year ended October 31, 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 INTERNATIONAL FUND II
Contracts outstanding at beginning of year............... -- -- -- --
Contracts opened......................................... -- -- 1 281
Contracts closed......................................... -- -- (1) (281)
------ --------- ---- ------
Open at 10/31/98......................................... -- -- -- --
====== ========= ==== ======
HARBOR BOND FUND
Contracts outstanding at beginning of year............... 1,282 $ 117,409 -- $ --
Contracts opened......................................... 7,459 736,000 -- --
Contracts closed......................................... (7,419) (731,109) -- --
------ --------- ---- ------
Open at 10/31/98......................................... 1,322 $ 122,300 -- --
====== ========= ==== ======
HARBOR SHORT DURATION FUND
Contracts outstanding at beginning of year............... -- $ -- -- $ --
Contracts opened......................................... 215 43,000 17 3,400
Contracts closed......................................... (174) (34,800) (17) (3,400)
====== ========= ==== ======
Open at 10/31/98......................................... 41 $ 8,200 -- $ --
====== ========= ==== ======
</TABLE>
<TABLE>
<CAPTION>
PURCHASES OF SALES OF
FUTURES CONTRACTS FUTURES CONTRACTS
----------------------- -----------------------
FOREIGN BONDS FOREIGN BONDS
----------------------- -----------------------
CURRENCY CURRENCY
NUMBER OF AMOUNT* NUMBER OF AMOUNT*
CONTRACTS (000S) CONTRACTS (000S)
--------- -------- --------- --------
<S> <C> <C> <C> <C>
HARBOR BOND FUND
Contracts outstanding at beginning of year............... -- E$ -- -- E$ --
Contracts opened......................................... 176 44,000 -- --
Contracts closed......................................... -- -- -- --
------ --------- ---- ------
Open at 10/31/98......................................... 176 E$ 44,000 -- E$ --
====== ========= ==== ======
HARBOR SHORT DURATION FUND
Contracts outstanding at beginning of year............... 29 E$ 7,250 -- E$ --
Contracts opened......................................... 293 25,490 270 314
Contracts closed......................................... (322) (32,740) (270) (314)
------ --------- ---- ------
Open at 10/31/98......................................... -- E$ -- -- E$ --
====== ========= ==== ======
</TABLE>
- -------------------------
* Amounts disclosed represent Euro Dollars, Deutsch Marks, Canadian Dollars, and
Japanese Yen, throughout the year, with Euro Dollars outstanding at year end.
47
<PAGE> 49
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
($ in Thousands)
NOTE 3--INVESTMENT PORTFOLIO TRANSACTIONS--CONTINUED
WRITTEN OPTIONS
Transactions in written options for the year ended October 31, 1998 are
summarized as follows:
<TABLE>
<CAPTION>
OPTIONS WRITTEN
--------------------------
FOREIGN FUTURES
--------------------------
AGGREGATE
NUMBER OF FACE VALUE
CONTRACTS (000S)
--------- ----------
<S> <C> <C>
HARBOR BOND FUND
Options outstanding at beginning of year.................. 200 E$ 200
Options opened............................................ -- --
Options closed/expired.................................... (200) (200)
---------- -------
Open at 10/31/98.......................................... -- E$ --
========== =======
</TABLE>
<TABLE>
<CAPTION>
OPTIONS WRITTEN
--------------------------
U.S. TREASURY FUTURES
--------------------------
NUMBER OF AGGREGATE
CONTRACTS FACE VALUE
--------- ----------
<S> <C> <C>
HARBOR BOND FUND
Options outstanding at beginning of year.................. 300 $ 300
Options opened............................................ 60,001,000 61,000
Options closed/expired.................................... (300) (300)
---------- -------
Open at 10/31/98.......................................... 60,001,000 $61,000
========== =======
HARBOR SHORT DURATION FUND
Options outstanding at beginning of year.................. -- $ --
Options opened............................................ 308 308
Options closed/expired.................................... (308) (308)
---------- -------
Open at 10/31/98.......................................... -- $ --
========== =======
</TABLE>
48
<PAGE> 50
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
($ in Thousands)
NOTE 4--FEES AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISER
Harbor Capital Advisors, Inc. ("Harbor"), an indirect wholly-owned
subsidiary of Owens-Illinois, Inc., is the Trust's Investment Adviser and is
also responsible for administrative and other services. Separate advisory
agreements for each Fund were in effect during the year ended October 31, 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% $ 810
Harbor International Growth................................. 0.75% 8,194
Harbor Capital Appreciation................................. 0.60% 20,875
Harbor International II..................................... 0.75% 1,006
Harbor International........................................ 0.85% 46,490
Harbor Value................................................ 0.60% 1,065
Harbor Bond................................................. 0.70% 2,905
Harbor Short Duration....................................... 0.40% 713
Harbor Money Market......................................... 0.30% 245
</TABLE>
Harbor has from time to time agreed not to impose all or a portion of its
advisory fees and bear a portion of the expenses incurred in the operation of
certain Funds in order to limit Fund expenses. During the year ended October 31,
1998, Harbor agreed not to impose advisory fees of $131, $911, $356 and $98
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 $3,381 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 $61 for the year ended
October 31, 1998.
DISTRIBUTOR
HCA Securities, Inc., a wholly-owned subsidiary of Harbor Capital Advisors,
Inc., is the distributor for Harbor Fund shares. Harbor Fund does not reimburse
the distributor for expenses.
49
<PAGE> 51
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
($ in Thousands)
NOTE 4--FEES AND OTHER TRANSACTIONS WITH AFFILIATES--CONTINUED
SHAREHOLDERS
On October 31, 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 3,430,538
Harbor International Growth................................. 35,106 825,597
Harbor Capital Appreciation................................. 7 2,539,092
Harbor International II..................................... 212,616 108,619
Harbor International........................................ 5 1,596,427
Harbor Value................................................ 10 3,232,061
Harbor Bond................................................. 9 2,528,390
Harbor Short Duration....................................... 5,145,479 17,538,218
Harbor Money Market......................................... 37,377 20,201,899
</TABLE>
TRANSFER AGENT
Harbor Transfer, Inc., a wholly-owned subsidiary of Harbor Capital
Advisors, Inc., is the shareholder servicing agent for the Funds. Fees incurred
for these transfer agent services for the year ended October 31, 1998 totaled
$5,223.
"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 $168 for the year ended October 31, 1998.
CUSTODIAN
Payments to the custodian have been reduced by balance credits applied to
each portfolio for the year ended October 31, 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, $12, $46, $3, $34, $2, $7, $5 and $5, respectively. The Funds
could have invested a portion of the assets utilized in connection with the
balance credit arrangements in an income producing asset if the Funds had not
entered into such arrangements. The credits approximate the earnings the Funds
could have received.
50
<PAGE> 52
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
($ in Thousands)
NOTE 5--TAX INFORMATION
The amount and character of income and net realized gains to be distributed
are determined in accordance with income tax rules and regulations, which may
differ from generally accepted accounting principles. These differences are
attributable to permanent book and tax accounting differences. Reclassifications
are made to the Funds' capital accounts to reflect income and net realized gains
available for distribution (or available capital loss carryovers) under income
tax rules and regulations. For the year ended October 31, 1998, the Funds
reclassified the following amounts:
<TABLE>
<CAPTION>
UNDISTRIBUTED ACCUMULATED
NET INVESTMENT NET REALIZED PAID-IN
INCOME/(LOSS) GAIN/(LOSS) CAPITAL
-------------- ------------ -------
<S> <C> <C> <C>
Harbor Growth Fund.......................................... $ 326 $ 326 $ --
Harbor International Growth Fund............................ (115) 130 (15)
Harbor Capital Appreciation Fund............................ -- 39 (39)
Harbor International Fund II................................ 113 (109) (4)
Harbor International Fund................................... (1,077) 1,218 (141)
Harbor Value Fund........................................... -- -- --
Harbor Bond Fund............................................ 876 (877) 1
Harbor Short Duration Fund.................................. 309 2,144 (2,453)
</TABLE>
At October 31, 1998 Harbor International Fund II had a capital loss
carryforward of approximately $8,073, which may be available to offset future
realized capital gains, if any, and will expire on October 31, 2006.
At October 31, 1998 Harbor Short Duration Fund had capital loss
carryforwards of approximately $20,872, which may be available to offset future
realized capital gains, if any; $3,936, $13,538, $1,182, and $2,216 will expire
on October 31, 2001, October 31, 2002, October 31, 2004 and October 31, 2005,
respectively.
The identified cost for federal income tax purposes of investments owned by
each Fund (including earned discount on corporate short-term notes and
commercial paper) and their respective gross unrealized appreciation and
depreciation at October 31, 1998 are described below:
<TABLE>
<CAPTION>
GROSS UNREALIZED NET UNREALIZED
----------------------------- APPRECIATION/
NAME OF FUND IDENTIFIED COST APPRECIATION (DEPRECIATION) DEPRECIATION
- ------------ --------------- ------------ -------------- --------------
<S> <C> <C> <C> <C>
Harbor Growth Fund................................... $ 90,961 $ 23,587 $ (21,806) $ 1,781
Harbor International Growth Fund..................... 996,862 209,274 (33,754) 175,520
Harbor Capital Appreciation Fund..................... 3,122,908 767,402 (49,832) 717,570
Harbor International Fund II......................... 113,543 15,592 (16,131) (539)
Harbor International Fund............................ 3,285,595 1,975,578 (179,650) 1,795,928
Harbor Value Fund.................................... 172,082 11,487 (13,663) (2,176)
Harbor Bond Fund..................................... 690,121 5,796 (4,505) 1,291
Harbor Short Duration Fund........................... 234,350 968 (1,638) (670)
</TABLE>
51
<PAGE> 53
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(All amounts in Thousands, except per share amount)
NOTE 5--TAX INFORMATION--CONTINUED
The Funds have designated the following amounts as long-term 28% capital
gain distributions and long-term 20% capital gain distributions paid on December
31, 1997:
<TABLE>
<CAPTION>
LONG TERM CAPITAL GAINS
-----------------------------------------------
($000S) $ PER SHARE
----------------------- -----------------
NAME OF FUND 28% 20% 28% 20%
------------ --- --- --- ---
<S> <C> <C> <C> <C>
Harbor Growth Fund..................................... $14,824 $ 2,186 $1.99 $ .29
Harbor International Growth Fund....................... 12,834 20,450 .23 .36
Harbor Capital Appreciation Fund....................... 160,169 173,584 1.92 2.08
Harbor International Fund II........................... 199 395 .02 .04
Harbor International Fund.............................. 81,719 44,759 .58 .32
Harbor Value Fund...................................... 9,496 3,644 1.05 .40
Harbor Bond Fund....................................... -- 4,636 -- .14
Harbor Short Duration Fund............................. -- -- -- --
</TABLE>
HARBOR FUND
ADDITIONAL INFORMATION
ADDITIONAL FEDERAL TAX INFORMATION -- (UNAUDITED)
Harbor Value Fund designates 17.16% of its distributions from investment
company taxable income for the fiscal year as qualifying for the dividends
received deduction for corporate shareholders.
The Form 1099 you receive in January, 1999 for each of the Funds will show
the tax status of all distributions paid to your account in calendar year 1998.
(This document must be preceded or accompanied by a Prospectus.)
52
<PAGE> 54
<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 PricewaterhouseCoopers 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
244,500/12/98 (LOGO)
recycled paper
<PAGE> 55
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION
- ----------- -----------
27.1 FDS
27.2 FDS
27.3 FDS
27.4 FDS
27.5 FDS
27.6 FDS
27.7 FDS
27.8 FDS
27.9 FDS
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> HARBOR GROWTH FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 90,961
<INVESTMENTS-AT-VALUE> 92,742
<RECEIVABLES> 813
<ASSETS-OTHER> 3
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 93,558
<PAYABLE-FOR-SECURITIES> 222
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,306
<TOTAL-LIABILITIES> 5,528
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 78,013
<SHARES-COMMON-STOCK> 8,147
<SHARES-COMMON-PRIOR> 7,361
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 8,236
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,781
<NET-ASSETS> 88,030
<DIVIDEND-INCOME> 75
<INTEREST-INCOME> 681
<OTHER-INCOME> (7)
<EXPENSES-NET> 1,075
<NET-INVESTMENT-INCOME> (326)
<REALIZED-GAINS-CURRENT> 8,582
<APPREC-INCREASE-CURRENT> (17,161)
<NET-CHANGE-FROM-OPS> (8,905)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (17,011)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,581
<NUMBER-OF-SHARES-REDEEMED> (3,223)
<SHARES-REINVESTED> 1,428
<NET-CHANGE-IN-ASSETS> (16,538)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 19,531
<OVERDISTRIB-NII-PRIOR> (481)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 810
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,077
<AVERAGE-NET-ASSETS> 107,917
<PER-SHARE-NAV-BEGIN> 14.2
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> (1.11)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (2.28)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.81
<EXPENSE-RATIO> 1
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> HARBOR INTERNATIONAL GROWTH FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 995,773
<INVESTMENTS-AT-VALUE> 1,172,382
<RECEIVABLES> 11,111
<ASSETS-OTHER> 176
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,183,669
<PAYABLE-FOR-SECURITIES> 3,827
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,590
<TOTAL-LIABILITIES> 5,417
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 977,678
<SHARES-COMMON-STOCK> 65,190
<SHARES-COMMON-PRIOR> 56,916
<ACCUMULATED-NII-CURRENT> 6,861
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 17,038
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 176,675
<NET-ASSETS> 1,178,252
<DIVIDEND-INCOME> 16,724
<INTEREST-INCOME> 2,597
<OTHER-INCOME> (2,009)
<EXPENSES-NET> 10,526
<NET-INVESTMENT-INCOME> 6,786
<REALIZED-GAINS-CURRENT> 20,985
<APPREC-INCREASE-CURRENT> 119,462
<NET-CHANGE-FROM-OPS> 147,233
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (6,885)
<DISTRIBUTIONS-OF-GAINS> (33,284)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 19,055
<NUMBER-OF-SHARES-REDEEMED> (13,172)
<SHARES-REINVESTED> 2,391
<NET-CHANGE-IN-ASSETS> 259,302
<ACCUMULATED-NII-PRIOR> 7,476
<ACCUMULATED-GAINS-PRIOR> 30,050
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 8,194
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 10,538
<AVERAGE-NET-ASSETS> 1,093,556
<PER-SHARE-NAV-BEGIN> 16.15
<PER-SHARE-NII> 0.1
<PER-SHARE-GAIN-APPREC> 2.52
<PER-SHARE-DIVIDEND> (0.12)
<PER-SHARE-DISTRIBUTIONS> (0.59)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 18.07
<EXPENSE-RATIO> 0.96
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> HARBOR CAPITAL APPRECIATION FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 3,115,560
<INVESTMENTS-AT-VALUE> 3,840,478
<RECEIVABLES> 8,798
<ASSETS-OTHER> 10
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,849,286
<PAYABLE-FOR-SECURITIES> 11,401
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,287
<TOTAL-LIABILITIES> 15,688
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,843,775
<SHARES-COMMON-STOCK> 114,401
<SHARES-COMMON-PRIOR> 82,289
<ACCUMULATED-NII-CURRENT> 7,559
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 257,346
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 724,918
<NET-ASSETS> 3,833,598
<DIVIDEND-INCOME> 25,320
<INTEREST-INCOME> 6,691
<OTHER-INCOME> (203)
<EXPENSES-NET> 23,537
<NET-INVESTMENT-INCOME> 8,271
<REALIZED-GAINS-CURRENT> 261,400
<APPREC-INCREASE-CURRENT> 168,339
<NET-CHANGE-FROM-OPS> 438,010
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (5,588)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 39,019
<NUMBER-OF-SHARES-REDEEMED> (20,159)
<SHARES-REINVESTED> 13,252
<NET-CHANGE-IN-ASSETS> 1,035,194
<ACCUMULATED-NII-PRIOR> 5,427
<ACCUMULATED-GAINS-PRIOR> 406,504
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 20,875
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 23,583
<AVERAGE-NET-ASSETS> 3,482,409
<PER-SHARE-NAV-BEGIN> 34.01
<PER-SHARE-NII> 0.07
<PER-SHARE-GAIN-APPREC> 4.35
<PER-SHARE-DIVIDEND> (0.07)
<PER-SHARE-DISTRIBUTIONS> (4.85)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 33.51
<EXPENSE-RATIO> 0.68
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> HARBOR INTERNATIONAL FUND II
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1998
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 113,242
<INVESTMENTS-AT-VALUE> 113,004
<RECEIVABLES> 4,627
<ASSETS-OTHER> 84
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 117,715
<PAYABLE-FOR-SECURITIES> 4,724
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 322
<TOTAL-LIABILITIES> 5,046
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 119,943
<SHARES-COMMON-STOCK> 10,005
<SHARES-COMMON-PRIOR> 11,120
<ACCUMULATED-NII-CURRENT> 1,295
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (8,352)
<ACCUM-APPREC-OR-DEPREC> (217)
<NET-ASSETS> 112,669
<DIVIDEND-INCOME> 2,779
<INTEREST-INCOME> 240
<OTHER-INCOME> (312)
<EXPENSES-NET> 1,548
<NET-INVESTMENT-INCOME> 1,159
<REALIZED-GAINS-CURRENT> (8,241)
<APPREC-INCREASE-CURRENT> 4,384
<NET-CHANGE-FROM-OPS> (2,698)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,046)
<DISTRIBUTIONS-OF-GAINS> (5,767)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,305
<NUMBER-OF-SHARES-REDEEMED> (5,998)
<SHARES-REINVESTED> 578
<NET-CHANGE-IN-ASSETS> (22,288)
<ACCUMULATED-NII-PRIOR> 1,079
<ACCUMULATED-GAINS-PRIOR> 5,750
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,006
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,682
<AVERAGE-NET-ASSETS> 134,476
<PER-SHARE-NAV-BEGIN> 12.14
<PER-SHARE-NII> 0.13
<PER-SHARE-GAIN-APPREC> (0.38)
<PER-SHARE-DIVIDEND> (0.1)
<PER-SHARE-DISTRIBUTIONS> (0.53)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.26
<EXPENSE-RATIO> 1.15
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> HARBOR INTERNATIONAL FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 3,284,171
<INVESTMENTS-AT-VALUE> 5,081,523
<RECEIVABLES> 28,647
<ASSETS-OTHER> 13
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 5,110,183
<PAYABLE-FOR-SECURITIES> 11,547
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 10,235
<TOTAL-LIABILITIES> 21,782
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,912,313
<SHARES-COMMON-STOCK> 137,651
<SHARES-COMMON-PRIOR> 142,036
<ACCUMULATED-NII-CURRENT> 65,545
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 312,608
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,797,935
<NET-ASSETS> 5,088,401
<DIVIDEND-INCOME> 119,248
<INTEREST-INCOME> 16,309
<OTHER-INCOME> (14,203)
<EXPENSES-NET> 51,762
<NET-INVESTMENT-INCOME> 69,592
<REALIZED-GAINS-CURRENT> 311,388
<APPREC-INCREASE-CURRENT> (32,500)
<NET-CHANGE-FROM-OPS> 348,480
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (57,053)
<DISTRIBUTIONS-OF-GAINS> (127,358)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 14,930
<NUMBER-OF-SHARES-REDEEMED> (23,939)
<SHARES-REINVESTED> 4,624
<NET-CHANGE-IN-ASSETS> (1,647)
<ACCUMULATED-NII-PRIOR> 58,550
<ACCUMULATED-GAINS-PRIOR> 126,747
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 46,490
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 55,177
<AVERAGE-NET-ASSETS> 5,484,413
<PER-SHARE-NAV-BEGIN> 35.84
<PER-SHARE-NII> 0.5
<PER-SHARE-GAIN-APPREC> 1.93
<PER-SHARE-DIVIDEND> (0.4)
<PER-SHARE-DISTRIBUTIONS> (0.9)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 36.97
<EXPENSE-RATIO> 0.94
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 6
<NAME> HARBOR VALUE FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 170,470
<INVESTMENTS-AT-VALUE> 169,906
<RECEIVABLES> 2,210
<ASSETS-OTHER> 3
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 172,119
<PAYABLE-FOR-SECURITIES> 1,154
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 497
<TOTAL-LIABILITIES> 1,651
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 154,556
<SHARES-COMMON-STOCK> 11,210
<SHARES-COMMON-PRIOR> 8,880
<ACCUMULATED-NII-CURRENT> 250
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 16,226
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (564)
<NET-ASSETS> 170,468
<DIVIDEND-INCOME> 4,253
<INTEREST-INCOME> 150
<OTHER-INCOME> (12)
<EXPENSES-NET> 1,403
<NET-INVESTMENT-INCOME> 2,988
<REALIZED-GAINS-CURRENT> 16,485
<APPREC-INCREASE-CURRENT> (8,661)
<NET-CHANGE-FROM-OPS> 10,812
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3,026)
<DISTRIBUTIONS-OF-GAINS> (33,943)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,565
<NUMBER-OF-SHARES-REDEEMED> (2,608)
<SHARES-REINVESTED> 2,373
<NET-CHANGE-IN-ASSETS> 9,109
<ACCUMULATED-NII-PRIOR> 2,732
<ACCUMULATED-GAINS-PRIOR> 33,809
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,065
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,405
<AVERAGE-NET-ASSETS> 178,751
<PER-SHARE-NAV-BEGIN> 18.17
<PER-SHARE-NII> 0.27
<PER-SHARE-GAIN-APPREC> 0.79
<PER-SHARE-DIVIDEND> (0.28)
<PER-SHARE-DISTRIBUTIONS> (3.74)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.21
<EXPENSE-RATIO> 0.79
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 7
<NAME> HARBOR BOND FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 689,550
<INVESTMENTS-AT-VALUE> 691,412
<RECEIVABLES> 91,991
<ASSETS-OTHER> 157
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 787,345
<PAYABLE-FOR-SECURITIES> 215,183
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 99,141
<TOTAL-LIABILITIES> 314,324
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 451,623
<SHARES-COMMON-STOCK> 40,033
<SHARES-COMMON-PRIOR> 31,334
<ACCUMULATED-NII-CURRENT> 1,380
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 18,980
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,038
<NET-ASSETS> 473,021
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 25,196
<OTHER-INCOME> 0
<EXPENSES-NET> 2,693
<NET-INVESTMENT-INCOME> 22,503
<REALIZED-GAINS-CURRENT> 23,446
<APPREC-INCREASE-CURRENT> (4,989)
<NET-CHANGE-FROM-OPS> 40,960
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (23,922)
<DISTRIBUTIONS-OF-GAINS> (7,601)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 18,415
<NUMBER-OF-SHARES-REDEEMED> (12,047)
<SHARES-REINVESTED> 2,331
<NET-CHANGE-IN-ASSETS> 110,427
<ACCUMULATED-NII-PRIOR> 18,806
<ACCUMULATED-GAINS-PRIOR> 11,422
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,905
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,611
<AVERAGE-NET-ASSETS> 416,095
<PER-SHARE-NAV-BEGIN> 11.57
<PER-SHARE-NII> 0.63
<PER-SHARE-GAIN-APPREC> 0.51
<PER-SHARE-DIVIDEND> (0.66)
<PER-SHARE-DISTRIBUTIONS> (0.23)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.82
<EXPENSE-RATIO> 0.65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 8
<NAME> HARBOR SHORT DURATION FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 232,946
<INVESTMENTS-AT-VALUE> 233,680
<RECEIVABLES> 19,952
<ASSETS-OTHER> 21
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 253,653
<PAYABLE-FOR-SECURITIES> 35,737
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 672
<TOTAL-LIABILITIES> 36,409
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 238,787
<SHARES-COMMON-STOCK> 25,002
<SHARES-COMMON-PRIOR> 18,766
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (22,384)
<ACCUM-APPREC-OR-DEPREC> 841
<NET-ASSETS> 217,244
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 10,482
<OTHER-INCOME> 0
<EXPENSES-NET> 635
<NET-INVESTMENT-INCOME> 9,847
<REALIZED-GAINS-CURRENT> 1,683
<APPREC-INCREASE-CURRENT> 404
<NET-CHANGE-FROM-OPS> 11,934
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (11,059)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 16,395
<NUMBER-OF-SHARES-REDEEMED> (11,438)
<SHARES-REINVESTED> 1,279
<NET-CHANGE-IN-ASSETS> 54,768
<ACCUMULATED-NII-PRIOR> 8,389
<ACCUMULATED-GAINS-PRIOR> 1,238
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 713
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 996
<AVERAGE-NET-ASSETS> 178,715
<PER-SHARE-NAV-BEGIN> 8.66
<PER-SHARE-NII> 0.49
<PER-SHARE-GAIN-APPREC> 0.08
<PER-SHARE-DIVIDEND> (0.54)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.69
<EXPENSE-RATIO> 0.36
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 9
<NAME> HARBOR MONEY MARKET FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 102,883
<INVESTMENTS-AT-VALUE> 102,883
<RECEIVABLES> 1,765
<ASSETS-OTHER> 6
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 104,654
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,378
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</TABLE>
