<PAGE> 1
---------------------------------------
HARBOR FUND
ANNUAL REPORT
HARBOR FUND LOGO
OCTOBER 31, 2000
<PAGE> 2
HARBOR FUND
ANNUAL REPORT OVERVIEW
Harbor Fund completed its most recent fiscal year on October 31, 2000. The total
annual return is shown below for each of the nine portfolios. All performance
figures included in this report are total returns and assume the reinvestment of
dividends and capital gains. 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 10/31/2000
----------------------------------------------- ----------------
<S> <C>
Harbor Growth Fund.......................................... 45.92%
Harbor International Growth Fund............................ -1.58
Harbor Capital Appreciation Fund............................ 12.26
Harbor International Fund II................................ 8.81
Harbor International Fund................................... 3.74
Harbor Value Fund........................................... 3.07
Harbor Bond Fund............................................ 6.95
Harbor Short Duration Fund.................................. 6.21
Harbor Money Market Fund.................................... 5.99
</TABLE>
<TABLE>
<CAPTION>
COMMONLY USED MARKET INDICES
----------------------------
<S> <C>
Morgan Stanley Capital International Europe, Australasia,
and Far East (EAFE); international equity................. -2.90%
Standard & Poor's 500 (S&P 500); domestic equity............ 6.41
Lehman Brothers Aggregate (LB AGG); domestic bonds.......... 7.30
One-Year Government Bonds (1-YR GVT)........................ 5.70
90-Day U.S. Treasury Bills (T-Bills); domestic short-term... 5.93
</TABLE>
<TABLE>
<CAPTION>
30 YEARS
1970-1999
LONG-TERM HISTORIC RETURNS ANNUAL RATES
-------------------------- ------------
<S> <C>
EAFE........................................................ 12.41%
S&P 500..................................................... 13.72
Domestic Bonds (intermediate and long)(1)................... 8.88
1-YR GVT(2)................................................. 7.78
T-Bills(3).................................................. 6.69
Consumer Price Index........................................ 5.11
</TABLE>
<TABLE>
<CAPTION>
MORNINGSTAR
HARBOR FUND EXPENSE RATIOS(A) 1996 1997 1998 1999 2000 MEDIAN(4)
----------------------------- ---- ---- ---- ---- ---- -----------
<S> <C> <C> <C> <C> <C> <C>
Harbor Growth Fund.............................. 0.92% 1.12% 1.00% 0.90% 0.87% 1.20%
Harbor International Growth Fund................ 1.10 1.02 0.96 0.91 0.89 1.25
Harbor Capital Appreciation Fund................ 0.75 0.70 0.68 0.66 0.64 0.94
Harbor International Fund II.................... 1.44(b) 0.98 1.15 0.92 0.92 1.08
Harbor International Fund....................... 0.99 0.97 0.94 0.92 0.92 1.08
Harbor Value Fund............................... 0.83 0.83 0.79 0.76 0.80 0.87
Harbor Bond Fund................................ 0.70 0.67 0.65 0.60 0.60 0.64
Harbor Short Duration Fund...................... 0.33 0.36 0.36 0.28 0.28 0.54
Harbor Money Market Fund........................ 0.64 0.62 0.57 0.46 0.47 0.75
</TABLE>
------------------
1 LB AGG not available for 30 year period; blended historic data used to
approximate total Bond Market Return.
2 Historic data used to approximate total One-Year Government Securities
Return. Source: Ibbotson Associates
3 A one bill portfolio of the treasury bill having the shortest maturity
not less than one month. Source: Ibbotson Associates
4 Includes all no-load funds with at least five years of performance
history for the year ending 9/30/2000 Morningstar Universe with the
same investment style as the comparable Harbor Fund portfolio.
a Harbor Fund expense ratios are for operating expenses only and are
shown net of all expense offsets (see Financial Highlights pgs. 40-43).
b Annualized figure.
<PAGE> 3
DEAR SHAREHOLDER:
Domestic and international equity markets turned in their weakest
performance in several years in the fiscal year ended October 31, 2000,
reflecting the impact of a variety of factors. These factors included interest
rate increases by the Federal Reserve, sharply higher oil prices, a steep
decline in the value of the euro and investor disenchantment with certain
technology and other stocks.
In this market environment, the Standard & Poor's 500-stock index had a
total return of 6.41% for the fiscal year ended October 31, 2000, its smallest
increase since 1994. Among international equities, the total return of the
Morgan Stanley Capital International Europe, Australasia, and Far East (EAFE)
Index, was a negative 2.90% for the fiscal year, its worst performance since
1992. Major indices of fixed income investments showed improved total returns on
a year-over-year basis.
Under these very challenging market conditions, five of Harbor Fund's six
equity funds outperformed their respective indices. Harbor Growth Fund led our
domestic equity funds with a total return of 45.92%, more than seven times that
of the S&P 500. The best performance among our international equity funds was
achieved by Harbor International Fund II, which delivered a total return of
8.81%, almost 12 percentage points better than the EAFE index. The Harbor Value
Fund, which did not outperform the S&P 500 index for the fiscal year,
significantly outperformed the S&P 500 index during the last eight months of the
fiscal year as concerns over high valuations in some growth sectors resulted in
a rotation to more value-oriented investments.
The three Harbor fixed income funds all achieved good performances in the
fiscal year. Total returns of the Harbor Short Duration Fund and Harbor Money
Market Fund exceeded those of their respective indices, while the Harbor Bond
Fund was only slightly below the Lehman Brothers Aggregate index.
While we are pleased with the overall performance of the Harbor Fund family
for the 2000 fiscal year, we continue to emphasize long-term performance.
Regardless of market conditions, certain basic principles apply for successful
long-term investing.
We believe that the Harbor Fund is best suited for investors who follow the
fundamental principles outlined below.
- MAINTAIN A LONG-TERM PERSPECTIVE. Almost all of Harbor's equity and bond
funds have outperformed their respective indices either for the latest
five-year and 10-year periods or since inception. We believe that this
pattern of superior results reflects the proven ability of our
experienced portfolio managers, applying their investment strategies
consistently through a variety of market conditions, to add value over
time. (For information on individual fund performance, see pages 4-8.)
- DIVERSIFY AMONG A VARIETY OF INVESTMENTS. To facilitate diversification,
Harbor now offers 11 actively managed mutual funds, each providing
investors with a different combination of risk and potential return
characteristics. These include two new domestic equity funds, described
below, which were introduced on November 1, 2000.
- ADD TO YOUR INVESTMENTS REGULARLY. Automatic investment is available
through Harbor's Automatic Investment Plan, which enables investors to
make regular additions to their investments on a monthly or quarterly
basis.
- AVOID COSTS THAT CAN REDUCE YOUR RETURNS. Cost control is a fundamental
element of the Harbor approach. Harbor does not charge investors sales
commissions of any kind to invest in Harbor's no-load mutual funds, nor
do the funds charge 12b-1 fees. (However, there are other fees and
expenses that you may pay if you buy and hold shares of the fund.) In
addition, the cost of managing the funds is carefully controlled,
resulting in expense ratios that are typically below the averages of
similar fund types. (For information on expense ratios on a fund-by-fund
basis, see the table at the bottom of page 1.)
Adhering to each of these principles can yield significant advantages over
the long term. Compounded over time, even small advantages can add up to
remarkable differences in returns for long-term investors.
NEW FUNDS
Two new equity funds, Harbor Mid Cap Growth Fund and Harbor Small Cap
Growth Fund, were launched on November 1, 2000. The new funds complement
Harbor's existing family of mutual funds and demonstrate one of Harbor's
fundamental strengths--the ability to provide investors with access to the
services of outstanding portfolio managers.
2
<PAGE> 4
DEAR SHAREHOLDER--CONTINUED
INVESTOR SERVICES
Harbor initiated several improvements during the past year as part of its
ongoing commitment to minimize expenses and improve shareholder services.
Daily account information is now available to shareholders by using the
AccessHarbor service on the Harbor Fund web site, www.harborfund.com. This
service was announced earlier in 2000 and complements the existing Harbor
Navigator service, which provides account information by toll-free telephone.
Watch the Harbor Fund web site for additional services in the future, including
the ability to purchase, exchange and redeem shares.
Harbor also has expanded its telephone transaction services, making it
possible for shareholders to add to existing accounts, make exchanges among
funds or redeem shares by calling Harbor Transfer at 1-800-422-1050.
Shareholders may select this feature when completing the new account
application. Those with existing accounts may obtain an authorization form at
the Harbor web site or by calling Harbor Transfer.
Also available to all shareholders on the Harbor Fund web site this year
are recorded audio interviews with Harbor Fund portfolio managers. In these
quarterly interviews, managers comment on worldwide economic developments and
market conditions, discuss changes in their portfolios and offer insights into
their investment strategies.
Harbor has lowered the minimum investment to open a new account to $1,000.
It is designed to accommodate the requests of individual investors, many of whom
prefer to start with a modest initial investment and then build their accounts
steadily over time by using an automatic investment plan.
MANAGEMENT CHANGES
As previously announced, Ronald C. Boller retired as chairman of the board
of trustees and president of Harbor Fund in 2000. David G. Van Hooser has been
elected chairman of the Harbor Fund board of trustees and James M. Williams has
been elected president of Harbor Fund. Mr. Van Hooser is chairman of the board
of Harbor Capital Advisors, Inc., the investment adviser to Harbor Fund, and is
senior vice president and chief financial officer of Owens-Illinois, Inc., the
parent company of Harbor Capital Advisors. Mr. Williams is president of Harbor
Capital Advisors in addition to his duties as president of Harbor Fund.
Harbor Fund began offering shares to the public in 1987. Due in large part
to Mr. Boller's vision and investment philosophies, Harbor Fund has become
widely recognized as a family of mutual funds with emphasis on long-term
performance and low expenses--ideal for long-term investing. Under his
direction, Harbor Fund grew from a single domestic equity fund to a
comprehensive family of funds with total assets of approximately $16.7 billion
as of October 31, 2000 and more than 120,000 shareholders. The emphasis on
long-term performance and low expenses continue to be core principles for Harbor
Fund.
Net subscriptions resulting from shareholder investments increased by more
than $1 million, despite difficult equity market conditions in the fiscal year
ended October 31, 2000. We appreciate your investment in Harbor Fund and will
continue to provide shareholders with products that we believe have the
potential to be attractive long-term investment alternatives with low expense
levels.
December 2000
<TABLE>
<S> <C>
/s/ David G. Van Hooser /s/ James M. Williams
David G. Van Hooser James M. Williams
Chairman President
</TABLE>
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: 10/31/2000 $24.23
10/31/1999 $17.52
</TABLE>
<TABLE>
<S> <C> <C> <C>
---------------------------------------------------------------------------
Total Return for Periods Ended 10/31/2000
---------------------------------------------------------------------------
Fund/Index 1 Year 5 Years 10 Years
---------------------------------------------------------------------------
Harbor Growth Fund 45.92% 26.21% 21.97%
---------------------------------------------------------------------------
S&P 500 6.41% 21.83% 19.53%
---------------------------------------------------------------------------
</TABLE>
The Harbor Growth Fund recorded another year of outstanding performance. Its
total return of 45.92% for the year ended October 31, 2000, follows a return of
76.51% for the preceding fiscal year.
- Strong gains in the first five months of the 2000 fiscal year were partly
offset by a decline in the broader market for technology stocks in the latter
part of the year.
- Although technology stocks represent a significant portion of the Fund's
portfolio, its selection criteria focus on investments in companies that are
already profitable or have prospective near-term profitability. As a result,
the Fund significantly outperformed the index during the downturn with little
exposure to dot-com stocks.
- The Fund was closed to new investors in March 2000 during a period of
unusually high valuations in technology and other growth stock sectors. It
was reopened to new investors in August after valuations had sharply
corrected.
- Since the current portfolio manager assumed responsibility for the Harbor
Growth Fund in May 1997, the Fund has achieved average annual returns of
36.4% compared with 19.8% for the S&P 500 index.
[GRAPH]
<TABLE>
<CAPTION>
GROWTH S&P 500
------ -------
<S> <C> <C>
1990 10000.00 10000.00
1991 16872.00 13345.00
1992 15610.00 14676.00
1993 19695.00 16860.00
1994 18062.00 17543.00
1995 22745.00 22179.00
1996 26120.00 27555.00
1997 30987.00 36436.00
1998 28282.00 44487.00
1999 49919.00 55931.00
2000 72844.00 59518.00
</TABLE>
<TABLE>
<S> <C> <C> <C>
HARBOR INTERNATIONAL GROWTH FUND NET ASSET VALUE: 10/31/2000 $17.56
10/31/1999 $19.13
</TABLE>
<TABLE>
<S> <C> <C> <C>
---------------------------------------------------------------------------
Total Return for Periods Ended 10/31/2000
---------------------------------------------------------------------------
Fund/Index 1 Year 5 Years Since
Inception
---------------------------------------------------------------------------
Harbor International Growth Fund -1.58% 11.41% 11.15%
---------------------------------------------------------------------------
EAFE -2.90% 8.65% 7.52%
---------------------------------------------------------------------------
</TABLE>
Although its total return was down slightly for the fiscal year, the Harbor
International Growth Fund nonetheless outperformed the EAFE index for the 2000
fiscal year. The Fund has outperformed the EAFE index in five of the seven
fiscal years since its inception.
- The Fund's holdings in telecommunications companies exerted a downward
influence on its performance for the year ended October 31, 2000. Prices of a
number of telecommunications stocks fell earlier in the year in response to
unexpectedly high prices established in auctions for wireless bandwidth
licenses, held in the United Kingdom and Germany.
- As with the other Harbor international equity funds, the performance of the
Harbor International Growth Fund benefited from the underweighting of its
holdings in Japan (only about 3% of the Fund's portfolio) compared with about
25% for the index.
- Conversely, the Fund's relative overweighting in Europe increased its
exposure to the sharp decline in the euro compared with the U.S. dollar
during the fiscal year.
[GRAPH]
<TABLE>
<CAPTION>
INTERNATIONAL GROWTH EAFE
-------------------- ----
<S> <C> <C>
1993 10000.00 10000.00
1994 11536.00 11009.00
1995 12208.00 10968.00
1996 15609.00 12117.00
1997 16878.00 12678.00
1998 19741.00 13901.00
1999 21296.00 17103.00
2000 20958.00 16607.00
</TABLE>
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. For information on the risks associated with these funds, please
refer to the Harbor Fund prospectus.
<TABLE>
<S> <C> <C> <C>
HARBOR CAPITAL APPRECIATION FUND NET ASSET VALUE: 10/31/2000 $48.16
10/31/1999 $46.92
</TABLE>
<TABLE>
<S> <C> <C> <C>
---------------------------------------------------------------------------
Total Return for Periods Ended 10/31/2000
---------------------------------------------------------------------------
Fund/Index 1 Year 5 Years 10 Years
---------------------------------------------------------------------------
Harbor Capital Appreciation Fund 12.26% 24.29% 24.88%
---------------------------------------------------------------------------
S&P 500 6.41% 21.83% 19.53%
---------------------------------------------------------------------------
</TABLE>
The Harbor Capital Appreciation Fund's focus on careful selection of large and
mid cap growth stocks resulted in its outperforming the S&P 500 index for the
eighth time in the last 10 years. For the trailing 5-year and 10-year periods,
the Fund maintained solid margins over the S&P 500 index.
- Favorable selections among technology stocks combined with overweighting the
technology sector, resulted in the largest gains relative to the S&P 500
index.
- The Fund's holdings in the drug and financial sectors, representing about 25%
of its portfolio, were major contributors to its positive returns for the
latest fiscal year.
- Gains were offset in part by fiscal year end declines in the
telecommunications and media sectors.
[GRAPH]
<TABLE>
<CAPTION>
CAPITAL APPRECIATION S&P 500
-------------------- -------
<S> <C> <C>
1990 10000.00 10000.00
1991 15535.00 13345.00
1992 17774.00 14676.00
1993 21358.00 16860.00
1994 22906.00 17543.00
1995 31090.00 22179.00
1996 35201.00 27555.00
1997 47777.00 36436.00
1998 55288.00 44487.00
1999 82152.00 55931.00
2000 92220.00 59518.00
</TABLE>
<TABLE>
<S> <C> <C> <C>
HARBOR INTERNATIONAL FUND II NET ASSET VALUE: 10/31/2000 $14.28
10/31/1999 $13.83
</TABLE>
<TABLE>
<S> <C> <C> <C>
---------------------------------------------------------------------------
Total Return for Periods Ended 10/31/2000
---------------------------------------------------------------------------
Fund/Index 1 Year 5 Years Since
Inception
---------------------------------------------------------------------------
Harbor International Fund II 8.81% N/A 11.54%
---------------------------------------------------------------------------
EAFE -2.90% 8.65% 7.25%
---------------------------------------------------------------------------
</TABLE>
Despite adverse foreign exchange effects, the Harbor International Fund II
delivered a solid return of 8.81% for the 2000 fiscal year end. The Fund
outperformed the EAFE index by almost 12 percentage points for the period and
has outperformed the index by an average of 4 percentage points since its
inception.
- The Fund's performance benefited from the underweighting of its holdings in
Japan compared with the index. Holdings in Japan accounted for about 5% of
the Fund's portfolio during the period compared to about 25% of the EAFE
index.
- The Fund's value-oriented investment style contributed to its performance
during the period as equity markets experienced a shift in interest from
growth to value stocks.
- The declining value of the euro compared with the U.S. dollar adversely
affected fiscal year end total return of the Fund. The value of the euro
declined to $0.85 as of October 31, 2000 compared with $1.05 at the end of
the previous fiscal year.
GRAPH
<TABLE>
<CAPTION>
INTERNATIONAL II EAFE
---------------- ----
<S> <C> <C>
1996 10470.00 9941.00
1997 12212.00 10401.00
1998 11970.00 11404.00
1999 14887.00 14031.00
2000 16199.00 13625.00
</TABLE>
5
<PAGE> 7
HARBOR FUND--CONTINUED
<TABLE>
<S> <C> <C> <C>
HARBOR INTERNATIONAL FUND NET ASSET VALUE: 10/31/2000 $38.85
10/31/1999 $40.66
</TABLE>
<TABLE>
<S> <C> <C> <C>
---------------------------------------------------------------------------
Total Return for Periods Ended 10/31/2000
---------------------------------------------------------------------------
Fund/Index 1 Year 5 Years 10 Years
---------------------------------------------------------------------------
Harbor International Fund 3.74% 13.16% 13.80%
---------------------------------------------------------------------------
EAFE -2.90% 8.65% 7.80%
---------------------------------------------------------------------------
</TABLE>
The Harbor International Fund outperformed the EAFE index by more than six
percentage points in the fiscal year ended October 31, 2000. The Fund has
outperformed the EAFE index in 10 of the 12 years since its inception.
- The Fund's performance benefited from the underweighting of its holdings in
Japan, which accounted for about 7% of its portfolio during the period
compared to about 25% of the EAFE index.
- The Fund also benefited from its focus on value oriented international stocks
as investor interest shifted from growth to value equity securities during
the period.
- The Fund was reopened to new investors in May 2000 after having been closed
since 1993.
- Fiscal year total return comparisons of both the Fund and the EAFE index were
adversely affected by the declining value of the euro compared with the U.S.
dollar. During the fiscal year, the value of the euro declined from $1.05 to
$0.85.
[GRAPH]
<TABLE>
<CAPTION>
INTERNATIONAL EAFE
------------- ----
<S> <C> <C>
1990 10000.00 10000.00
1991 11774.00 10695.00
1992 11300.00 9282.00
1993 15765.00 12758.00
1994 18692.00 14046.00
1995 19638.00 13994.00
1996 23207.00 15459.00
1997 27677.00 16175.00
1998 29607.00 17735.00
1999 35129.00 21820.00
2000 36442.00 21188.00
</TABLE>
<TABLE>
<S> <C> <C> <C>
HARBOR VALUE FUND NET ASSET VALUE: 10/31/2000 $13.88
10/31/1999 $15.40
</TABLE>
<TABLE>
<S> <C> <C> <C>
---------------------------------------------------------------------------
Total Return for Periods Ended 10/31/2000
---------------------------------------------------------------------------
Fund/Index 1 Year 5 Years 10 Years
---------------------------------------------------------------------------
Harbor Value Fund 3.07% 15.25% 14.94%
---------------------------------------------------------------------------
S&P 500 6.41% 21.83% 19.53%
---------------------------------------------------------------------------
</TABLE>
The Harbor Value Fund underperformed the S&P 500 index for the year ended
October 31, 2000, reflecting investors' continued preference for growth stocks
over value stocks in domestic equities.
- During the first four months of the 2000 fiscal year, growth stocks continued
their strong outperformance over value stocks as they have for the last
several years.
- During the last eight months of the 2000 fiscal year, however, the Fund
outperformed the S&P 500 index as concerns over high valuations in some
growth sectors resulted in value stocks outperforming growth stocks.
- The Fund outperformed the index in the financial sector due primarily to
overweightings and individual stock selection among life insurance and
property and casualty insurance companies.
- Selected investments in domestic and international oil companies also
resulted in solid returns and superior performance in the energy sector,
relative to the index.
GRAPH
<TABLE>
<CAPTION>
VALUE S&P 500
----- -------
<S> <C> <C>
1990 10000.00 10000.00
1991 13018.00 13345.00
1992 13936.00 14676.00
1993 15607.00 16860.00
1994 16356.00 17543.00
1995 19794.00 22179.00
1996 24362.00 27555.00
1997 31934.00 36436.00
1998 34071.00 44487.00
1999 39045.00 55931.00
2000 40244.00 59518.00
</TABLE>
6
<PAGE> 8
HARBOR FUND--CONTINUED
<TABLE>
<S> <C> <C> <C>
HARBOR BOND FUND NET ASSET VALUE: 10/31/2000 $11.00
10/31/1999 $10.85
</TABLE>
<TABLE>
<S> <C> <C> <C>
---------------------------------------------------------------------------
Total Return for Periods Ended 10/31/2000
---------------------------------------------------------------------------
Fund/Index 1 Year 5 Years 10 Years
---------------------------------------------------------------------------
Harbor Bond Fund 6.95% 6.88% 9.03%
---------------------------------------------------------------------------
LB AGG 7.30% 6.33% 7.98%
---------------------------------------------------------------------------
</TABLE>
The Harbor Bond Fund posted a total return of 6.95% for fiscal year 2000,
slightly below that of the Lehman Brothers Aggregate Index. From a longer-term
perspective, the Fund continued to outperform the index for the 5-year and
10-year periods ended October 31, 2000.
- Interest rates rose in the first half of the fiscal year as the Federal
Reserve continued to tighten monetary policy in an effort to moderate the
pace of economic growth. Rates declined marginally in the second half in
response to expectations of slowing growth.
- In this changing environment, the Fund maintained a defensive position, with
relatively short maturities and an underweighting in the corporate and
emerging market sectors. This added value as the federal government surplus
and U.S. Treasury buyback program drove Treasury rates lower, while leveraged
balance sheets and an increase in defaults resulted in wider spreads between
U.S. government and corporate debt securities.
- The Fund's allocation to mortgage-backed securities, which has been
overweighted relative to the index, was a positive as these securities
benefited from their attractive yield premiums.
[GRAPH]
<TABLE>
<CAPTION>
BOND LB AGG
---- ------
<S> <C> <C>
1990 10000.00 10000.00
1991 12001.00 11581.00
1992 13458.00 12720.00
1993 15340.00 14230.00
1994 14857.00 13708.00
1995 17021.00 15853.00
1996 18308.00 16780.00
1997 19949.00 18272.00
1998 22010.00 19978.00
1999 22198.00 20084.00
2000 23741.00 21551.00
</TABLE>
<TABLE>
<S> <C> <C> <C>
HARBOR SHORT DURATION FUND NET ASSET VALUE: 10/31/2000 $8.51
10/31/1999 $8.56
</TABLE>
<TABLE>
<S> <C> <C> <C>
---------------------------------------------------------------------------
Total Return for Periods Ended 10/31/2000
---------------------------------------------------------------------------
Fund/Index 1 Year 5 Years Since
Inception
---------------------------------------------------------------------------
Harbor Short Duration Fund 6.21% 5.88% 5.39%
---------------------------------------------------------------------------
1-YR GVT 5.70% 5.59% 5.23%
---------------------------------------------------------------------------
</TABLE>
Total return of the Harbor Short Duration Fund exceeded that of one-year
government securities for fiscal year 2000.
- During the period, the Federal Reserve continued to tighten monetary policy
in an effort to moderate economic growth to a pace more sustainable over
time. Consequently, short-term interest rates rose by more than one
percentage point before declining marginally during the second half of the
year.
- The Fund outperformed the average of its peer group, the Morningstar universe
of taxable high-quality, short duration fixed-income funds, by nearly 0.50%,
principally by holding selected higher yielding, AAA-rated asset-backed
securities and collateralized mortgage obligations.
GRAPH
<TABLE>
<CAPTION>
SHORT DURATION 1 YR GVT
-------------- --------
<S> <C> <C>
1992 10372.00 10421.00
1993 10909.00 10830.00
1994 11185.00 11147.00
1995 11949.00 11950.00
1996 12814.00 12669.00
1997 13516.00 13414.00
1998 14436.00 14262.00
1999 14967.00 14836.00
2000 15897.00 15682.00
</TABLE>
7
<PAGE> 9
HARBOR FUND--CONTINUED
<TABLE>
<S> <C> <C> <C>
HARBOR MONEY MARKET FUND NET ASSET VALUE: 10/31/2000 $1.00
10/31/1999 $1.00
</TABLE>
<TABLE>
<S> <C> <C> <C>
-----------------------------------------------------------------------------
Total Return for Periods Ended 10/31/2000
-----------------------------------------------------------------------------
Fund/Index 1 Year 5 Years 10 Years
-----------------------------------------------------------------------------
Harbor Money Market Fund 5.99% 5.24% 4.79%
-----------------------------------------------------------------------------
T-Bills 5.93% 5.27% 4.92%
-----------------------------------------------------------------------------
Current Yield for Periods Ended 09/30/2000
</TABLE>
<TABLE>
<S> <C> <C>
----------------------------------------------------------------------------
Harbor Money Market Fund* 7 Days: 6.13% 30 Days: 6.13%
----------------------------------------------------------------------------
</TABLE>
Returns of the Harbor Money Market Fund slightly outperformed those of the
90-day Treasury bill for the 2000 fiscal year.
- Yields generally rose during the period as the Federal Reserve continued to
tighten monetary policy in an effort to slow economic growth to a more
sustainable pace. These rate increases benefited the Fund's return as its
yield increased in concert with the Federal funds rate.
- Compared to the average of its peer group, the Morningstar universe of
taxable money market funds, the Fund returned an additional 0.65%, largely
due to its lower expense ratio and holdings of higher-yielding bank
obligations and commercial paper.
An investment in the Harbor Money Market 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.
[GRAPH]
<TABLE>
<CAPTION>
MONEY MARKET T-BILLS
------------ -------
<S> <C> <C>
1990 10000.00 10000.00
1991 10625.00 10623.00
1992 11015.00 11034.00
1993 11311.00 11375.00
1994 11710.00 11817.00
1995 12373.00 12499.00
1996 13002.00 13163.00
1997 13666.00 13859.00
1998 14377.00 14573.00
1999 15070.00 15255.00
2000 15972.00 16160.00
</TABLE>
------------
* Reflects the Adviser's agreement not to
impose all or a portion of its advisory
fees. Without such waivers the current
7-day and 30-day yields would have been
6.01% and 6.01%, respectively. The
current yield more closely reflects the
current earnings of the Harbor Money
Market Fund than the total return.
8
<PAGE> 10
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Trustees of
Harbor Fund
We have audited the accompanying statement of assets and liabilities, including
the portfolios of investments, of the Harbor Fund (the Trust) (comprising,
respectively, 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) as of October 31, 2000, and the related statements of
operations, changes in net assets, and financial highlights for the year then
ended. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audit. The statement of changes in net assets for the year ended October 31,
1999 and the financial highlights for the four years in the period then ended
were audited by other auditors, whose report dated December 14, 1999, expressed
an unqualified opinion on those statements.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of October 31, 2000 by correspondence with the custodian and brokers,
or by other appropriate auditing procedures where replies from brokers were not
received. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective portfolios constituting Harbor Fund at October 31, 2000, the
results of their operations, the changes in their net assets, and the financial
highlights for the year then ended, in conformity with accounting principles
generally accepted in the United States.
[ERNST & YOUNG LLP]
Boston, Massachusetts
December 8, 2000
9
<PAGE> 11
HARBOR GROWTH FUND
PORTFOLIO OF INVESTMENTS--OCTOBER 31, 2000
COMMON STOCK HOLDINGS (% OF NET ASSETS)
(Excludes net cash, convertible bond and short-term investments of 10.8%)
<TABLE>
<S> <C>
Automobile Equipment
0.3
Leisure & Luxury
0.5
Manufacturing Diversified
0.9
Retail-All Other
1.9
Health Care-Hospital Management
2.2
Electric Power
2.3
Semiconductors
3.7
Telecommunications-Equipment
3.8
Electronic Instruments
4.0
Drugs & Medicine
7.8
Services
7.8
Electronic Components
9.0
Computer Services
9.7
Telecommunications-Service
13.2
Computers & Business Equipment
22.1
</TABLE>
<TABLE>
<CAPTION>
COMMON STOCKS--89.2%
VALUE
SHARES (000S)
-----------------------------------------------------------------
<C> <S> <C>
AUTOMOBILE EQUIPMENT--0.3%
70,000 Tower Automotive Inc.*..................... $ 770
--------
COMPUTER SERVICES--9.7%
200,000 Accrue Software Inc.*...................... 925
100,000 AXENT Technologies Inc.*................... 1,919
110,000 Documentum Inc.*........................... 9,350
158,800 Epicor Software Corp.*..................... 313
700,000 FORTEL Inc.*............................... 656
500,000 Legato Systems Inc.*....................... 4,453
270,000 Project Software & Development Inc.*....... 3,510
110,000 SERENA Software Inc.*...................... 5,596
--------
26,722
--------
</TABLE>
<TABLE>
VALUE
SHARES (000S)
-----------------------------------------------------------------
<CAPTION>
COMMON STOCKS--CONTINUED
<C> <S> <C>
COMPUTERS & BUSINESS EQUIPMENT--22.1%
200,000 EMC Corp.*................................. $ 17,812
300,000 Network Appliance Inc.*.................... 35,700
120,000 Proxim Inc.*............................... 7,275
--------
60,787
--------
DRUGS & MEDICINE--7.8%
38,000 Dura Pharmaceuticals Inc.*................. 1,309
60,000 Elan Corp. plc ADR(1)*..................... 3,116
250,000 Kensey Nash Corp.*......................... 2,875
130,000 K-V Pharmaceutical Co.*.................... 5,062
134,000 Molecular Devices Corp.*................... 9,162
--------
21,524
--------
ELECTRIC POWER--2.3%
110,800 The AES Corp.*............................. 6,260
--------
ELECTRONIC COMPONENTS--9.0%
165,000 JDS Uniphase Corp.*........................ 13,427
203,500 Planar Systems Inc.*....................... 3,460
150,000 Sawtek Inc.*............................... 7,631
110,000 The JPM Co.*............................... 419
--------
24,937
--------
ELECTRONIC INSTRUMENTS--4.0%
280,000 Checkpoint Systems Inc.*................... 2,222
131,000 GenRad Inc.*............................... 1,195
280,000 LoJack Corp.*.............................. 2,240
415,000 Pinnacle Systems Inc.*..................... 5,239
--------
10,896
--------
HEALTH CARE-HOSPITAL MANAGEMENT--2.2%
130,000 Health Management Associates Inc.*......... 2,576
105,000 Orthodontic Centers of America Inc.*....... 3,504
--------
6,080
--------
LEISURE & LUXURY--0.5%
60,000 Carnival Corp. ............................ 1,489
--------
MANUFACTURING DIVERSIFIED--0.9%
200,000 Flow International Corp.*.................. 2,500
--------
RETAIL-ALL OTHER--1.9%
67,500 Dollar Tree Stores Inc.*................... 2,641
100,000 The TJX Companies Inc. .................... 2,725
--------
5,366
--------
SEMICONDUCTORS--3.7%
200,000 ATMI Inc.*................................. 3,775
150,000 Dallas Semiconductor Corp. ................ 5,944
150,000 Innoveda Inc.*............................. 450
--------
10,169
--------
SERVICES--7.8%
350,000 Advantage Learning Systems Inc.*........... 10,391
450,000 ProsoftTraining.com*....................... 3,150
200,000 QRS Corp.*................................. 1,688
150,000 Wind River Systems Inc.*................... 6,159
--------
21,388
--------
</TABLE>
10
<PAGE> 12
HARBOR GROWTH FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
<TABLE>
<CAPTION>
COMMON STOCKS--CONTINUED
VALUE
SHARES (000S)
-----------------------------------------------------------------
<C> <S> <C>
TELECOMMUNICATIONS-EQUIPMENT--3.8%
150,000 P-Com Inc.*................................ $ 844
600,000 Symmetricom Inc.*.......................... 7,650
237,500 Transcrypt International Inc.*............. 238
350,000 Verilink Corp.*............................ 1,838
--------
10,570
--------
TELECOMMUNICATIONS-SERVICE--13.2%
290,000 Aspect Communications Corp.*............... 4,780
220,000 Comverse Technology Inc.*.................. 24,585
180,000 Nextel Communications Inc.*................ 6,919
--------
36,284
--------
TOTAL COMMON STOCKS
(Cost $151,543)...................................... 245,742
--------
<CAPTION>
CONVERTIBLE BOND--0.8%
(Cost $2,512)
PRINCIPAL
AMOUNT
(000S)
-----------------------------------------------------------------
<C> <S> <C>
SystemOne Technologies Inc.
$2,503 8.250%--02/23/2003 PIK(2)................ 2,178
--------
<CAPTION>
SHORT-TERM INVESTMENTS--9.5%
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
-----------------------------------------------------------------
<C> <S> <C>
COMMERCIAL PAPER
Ford Motor Credit Co.
$5,801 6.450%--11/01/2000......................... $ 5,801
GE Financial Assurance Holdings
4,812 6.520%--11/03/2000......................... 4,812
General Motors Acceptance Corp.
7,681 6.580%--11/06/2000......................... 7,681
Prudential Funding Corp.
4,450 6.520%--11/02/2000......................... 4,450
3,486 6.480%--11/07/2000......................... 3,486
--------
7,936
--------
TOTAL SHORT-TERM INVESTMENTS
(Cost $26,230)....................................... 26,230
--------
TOTAL INVESTMENTS--99.5%
(Cost $180,285)...................................... 274,150
CASH AND OTHER ASSETS, LESS LIABILITIES--0.5%.......... 1,449
--------
TOTAL NET ASSETS--100.0%............................... $275,599
========
</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.
2 PIK -- Payment-in-kind security.
* Non-income producing security.
The accompanying notes are an integral part of the financial statements.
11
<PAGE> 13
HARBOR INTERNATIONAL GROWTH FUND
PORTFOLIO OF INVESTMENTS--OCTOBER 31, 2000
INVESTMENT HOLDINGS BY COUNTRY (% OF NET ASSETS)
(Excludes net cash and short-term investment of 1.5%)
<TABLE>
<S> <C>
Switzerland (SWS)
1.7
Australia (AUS)
2.6
Spain (SP)
2.6
Sweden (SW)
2.8
Japan (JP)
2.9
South Africa (S. AFR)
3.2
Germany (GER)
3.7
Singapore (SGP)
4.1
Mexico (MEX)
4.5
Hong Kong (HK)
5.9
Finland (FIN)
7.6
France (FR)
13.2
Netherlands (NET)
16.4
United Kingdom (UK)
27.3
</TABLE>
<TABLE>
<CAPTION>
COMMON STOCKS--98.5%
VALUE
SHARES (000S)
------------------------------------------------------------------
<C> <S> <C>
AUTOMOBILE EQUIPMENT--0.0%
Valeo SA Warrants (FR) Expire
58,896 08/03/2001.............................. $ 11
----------
BANKS--6.7%
2,425,499 Banco Bilbao Vizcaya (SP)............... 32,315
4,355,055 Development Bank of Singapore (SGP)..... 51,329
----------
83,644
----------
CHEMICALS-FERTILIZERS--0.5%
91,300 SGL Carbon AG (GER)..................... 5,579
----------
COMPUTER SERVICES--13.8%
264,234 Cap Gemini Group (FR)................... 42,155
4,546,750 Dimension Data Holdings Ltd. (S. AFR)... 39,847
</TABLE>
<TABLE>
VALUE
SHARES (000S)
------------------------------------------------------------------
<CAPTION>
COMMON STOCKS--CONTINUED
<C> <S> <C>
1,532,140 Logica plc (UK)......................... $ 44,617
Logica plc--Rights (UK) Expire
179,442 11/16/2000.............................. 5,155
245,684 SAP AG (GER)............................ 40,217
----------
171,991
----------
CONSUMER GOODS--2.7%
18,291,000 Li & Fung Ltd. (HK)..................... 34,007
----------
DRUGS & MEDICINE--7.7%
526,634 Aventis SA (FR)......................... 37,987
687,441 Sanofi Synthelabo (FR).................. 36,168
24,180 Serono SA (SWS)......................... 21,751
----------
95,906
----------
ELECTRIC POWER--5.1%
1,608,637 Koninklijke Philips Electric (NET)...... 63,217
----------
ELECTRICAL EQUIPMENT--1.3%
8,176,400 Johnson Electric Holdings Ltd. (HK)..... 16,460
----------
HOUSEHOLD PRODUCTS--1.6%
7,708,200 Kimberly-Clark De Mexico SA (MEX)....... 19,709
----------
LEISURE & LUXURY--1.2%
2,640,450 Granada Compass plc (UK)................ 15,469
----------
MEDIA--13.9%
670,580 Grupo Televisa SA ADR (MEX)(1).......... 36,295
2,773,049 Pearson plc (UK)........................ 74,396
Verenigde Nederlandse Uitgeversbedrijven
1,318,714 NV (NET)................................ 62,108
----------
172,799
----------
MISCELLANEOUS TRANSPORT--2.6%
1,251,890 Brambles Industries Ltd. (AUS).......... 32,458
----------
SEMICONDUCTORS--6.3%
1,188,450 ASM Lithography Holding NV (NET)........ 32,484
26,505 STMicroelectronics NV ADR (NET)(1)...... 1,377
894,094 STMicroelectronics NV (NET)............. 45,106
----------
78,967
----------
TELECOMMUNICATIONS-EQUIPMENT--15.3%
794,101 Alcatel (FR)............................ 48,452
2,609,810 Ericsson (LM) Tel Co. Series B (SW)..... 34,737
3,154,938 Marconi plc (UK)........................ 39,826
1,635,690 Nokia Oyj Series A (FIN)................ 67,306
----------
190,321
----------
TELECOMMUNICATIONS-SERVICE--19.8%
Cable & Wireless Communications plc
3,529,018 (UK).................................... 49,924
3,704,000 China Mobile (Hong Kong) Ltd. (HK)...... 22,797
1,125,404 Colt Telecom Group plc (UK)............. 35,924
1,442 NTT Docomo Inc. (JP).................... 35,549
1,250,120 Sonera Technologies Oyj (FIN)........... 27,540
18,148,824 Vodafone Group plc (UK)................. 75,510
----------
247,244
----------
TOTAL COMMON STOCKS
(Cost $1,212,711)................................... 1,227,782
----------
</TABLE>
12
<PAGE> 14
HARBOR INTERNATIONAL GROWTH FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
<TABLE>
<CAPTION>
COMMON STOCKS--CONTINUED
VALUE
SHARES (000S)
------------------------------------------------------------------
<C> <S> <C>
<CAPTION>
SHORT-TERM INVESTMENT--2.9%
(Cost $36,026)
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------------------------------------------------------------------
<C> <S> <C>
COMMERCIAL PAPER
American Express Credit Corp.
$ 36,026 6.580%--11/01/2000...................... $ 36,026
----------
TOTAL INVESTMENTS--101.4%
(Cost $1,248,737)................................... 1,263,808
CASH AND OTHER ASSETS, LESS LIABILITIES--(1.4%)....... (16,726)
----------
TOTAL NET ASSETS--100.0%.............................. $1,247,082
==========
</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.
The accompanying notes are an integral part of the financial statements.
13
<PAGE> 15
HARBOR CAPITAL APPRECIATION FUND
PORTFOLIO OF INVESTMENTS--OCTOBER 31, 2000
COMMON STOCK HOLDINGS (% OF NET ASSETS)
(Excludes net cash and short-term investments of 1.6%)
<TABLE>
<S> <C>
Aerospace/Defense
0.6
Miscellaneous High Tech
0.7
Automobiles
1.0
Conglomerates
1.1
Electronic Components
1.2
Insurance-Other
1.7
Telephones
1.7
Electronic Instruments
1.9
Oil Well Equipment & Services
2.7
Electrical Equipment
3.4
Credit & Miscellaneous Financial
5.0
Telecommunications-Equipment
5.3
Semiconductors
5.9
Computer Services
6.4
Telecommunications-Service
7.7
Media
8.3
Retail-All Other
8.6
Financial Services
10.0
Computers & Business Equipment
10.4
Drugs & Medicine
14.8
</TABLE>
<TABLE>
<CAPTION>
COMMON STOCKS--98.4%
VALUE
SHARES (000S)
------------------------------------------------------------------
<C> <S> <C>
AEROSPACE/DEFENSE--0.6%
751,500 Boeing Co. .............................. $ 50,961
----------
AUTOMOBILES--1.0%
2,878,200 General Motors Corp. Cl. H............... 93,254
----------
</TABLE>
<TABLE>
VALUE
SHARES (000S)
------------------------------------------------------------------
<CAPTION>
COMMON STOCKS--CONTINUED
<C> <S> <C>
COMPUTER SERVICES--6.4%
714,600 Level 3 Communications Inc.*............. $ 34,077
2,805,000 Microsoft Corp.*......................... 193,194
Qwest Communications International
5,030,500 Inc.*.................................... 244,608
373,600 VeriSign Inc. ........................... 49,315
401,350 Veritas Software Corp. .................. 56,597
----------
577,791
----------
COMPUTERS & BUSINESS EQUIPMENT--10.4%
6,096,100 Cisco Systems Inc.*...................... 328,427
5,003,700 Compaq Computer Corp. ................... 152,163
2,089,700 Dell Computer Corp.*..................... 61,646
1,535,800 EMC Corp.*............................... 136,782
1,073,600 International Business Machines Corp. ... 105,750
290,100 Network Appliance Inc. .................. 34,522
1,174,200 Sun Microsystems Inc.* .................. 130,189
----------
949,479
----------
CONGLOMERATES--1.1%
1,279,500 Corning Inc. ............................ 97,882
----------
CREDIT & MISCELLANEOUS FINANCIAL--5.0%
3,940,200 American Express Co. .................... 236,412
2,721,740 Morgan, Stanley, Dean Witter & Co. ...... 218,590
----------
455,002
----------
DRUGS & MEDICINE--14.8%
4,446,600 American Home Products Corp. ............ 282,359
2,337,900 Amgen Inc.*.............................. 135,452
2,003,900 Eli Lilly & Co. ......................... 179,099
1,326,000 Genetech Inc. ........................... 109,395
6,819,550 Pfizer Inc. ............................. 294,519
3,191,278 Pharmacia Corp. ......................... 175,520
2,166,400 Schering Plough Corp. ................... 111,976
2,713,100 Serono SA ADR(1)......................... 61,384
----------
1,349,704
----------
ELECTRICAL EQUIPMENT--3.4%
5,679,400 General Electric Co. .................... 311,302
----------
ELECTRONIC COMPONENTS--1.2%
1,365,700 JDS Uniphase Corp.*...................... 111,134
----------
ELECTRONIC INSTRUMENTS--1.9%
3,710,000 Hewlett Packard Co. ..................... 172,283
----------
FINANCIAL SERVICES--10.0%
7,051,066 Citigroup Inc. .......................... 371,062
1,518,400 Goldman Sachs Group Inc. ................ 151,555
1,264,200 J.P. Morgan & Co. Inc. .................. 209,225
2,519,400 Merrill Lynch & Co. Inc. ................ 176,358
----------
908,200
----------
INSURANCE-OTHER--1.7%
1,556,925 American International Group Inc......... 152,579
----------
MEDIA--8.3%
299,600 Juniper Networks Inc.*................... 58,422
1,403,000 Omnicom Group............................ 129,427
2,234,900 Time Warner Inc. ........................ 169,651
2,449,600 Univision Communications Inc. CI. A...... 93,697
5,323,340 Viacom Inc. CI. B........................ 302,765
----------
753,962
----------
</TABLE>
14
<PAGE> 16
HARBOR CAPITAL APPRECIATION FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
<TABLE>
<CAPTION>
COMMON STOCKS--CONTINUED
VALUE
SHARES (000S)
------------------------------------------------------------------
<C> <S> <C>
MISCELLANEOUS HIGH TECH--0.7%
1,212,700 Applied Materials Inc.*.................. $ 64,425
----------
OIL WELL EQUIPMENT & SERVICES--2.7%
1,876,900 Halliburton Co. ......................... 69,563
2,303,000 Schlumberger Ltd. ....................... 175,316
----------
244,879
----------
RETAIL--ALL OTHER--8.6%
1,881,800 Costco Wholesale Corp.................... 68,921
7,921,750 Home Depot Inc. ......................... 340,635
3,443,400 Kohl's Corp.*............................ 186,589
3,031,500 Tiffany & Co............................. 129,407
1,281,500 Wal-Mart Stores Inc. .................... 58,148
----------
783,700
----------
SEMICONDUCTORS--5.9%
696,400 Applied Micro Circuits Corp. ............ 53,188
1,709,100 ASM Lithography Holding NV ADR(1)........ 47,534
200,800 Broadcom Corp. CI. A..................... 44,653
2,590,400 Intel Corp. ............................. 116,568
4,877,100 Motorola Inc. ........................... 121,623
3,176,500 Texas Instruments Inc. .................. 155,847
----------
539,413
----------
TELECOMMUNICATIONS-EQUIPMENT--5.3%
2,502,200 Metromedia Fiber Network Inc. CI. A...... 47,542
8,057,900 Nokia Oyj ADR(1)......................... 344,475
2,023,300 Nortel Networks Corp. ................... 92,060
----------
484,077
----------
TELECOMMUNICATIONS-SERVICE--7.7%
5,633,200 Global Crossing Ltd. .................... 133,084
2,617,600 Nextel Communications Inc. CI. A*........ 100,614
2,047,643 NTL Inc.*................................ 89,968
6,899,372 Vodafone Group plc ADR(1)................ 293,655
2,370,700 XO Communications Inc. CI. A............. 79,974
----------
697,295
----------
TELEPHONES--1.7%
8,665,800 AT&T Corp.--Liberty Media CI. A*......... 155,985
----------
TOTAL COMMON STOCKS
(Cost $7,614,437)................................... 8,953,307
----------
<CAPTION>
SHORT-TERM INVESTMENTS--4.3%
<C> <S> <C>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------------------------------------------------------------------
<C> <S> <C>
COMMERCIAL PAPER--4.3%
American Express Co.
$175,000 6.580%--11/01/2000....................... $ 175,000
Ford Motor Credit Co.
100,000 6.510%--11/01/2000....................... 100,000
IBM Credit Corp.
52,171 6.500%--11/01/2000....................... 52,171
Texaco Inc.
65,000 6.530%--11/01/2000....................... 65,000
----------
TOTAL SHORT-TERM INVESTMENTS
(Cost $392,171)..................................... 392,171
----------
TOTAL INVESTMENTS--102.7%
(Cost $8,006,608)................................... 9,345,478
CASH AND OTHER ASSETS, LESS LIABILITIES--(2.7%)....... (245,161)
----------
TOTAL NET ASSETS--100.0%.............................. $9,100,317
==========
</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.
15
<PAGE> 17
HARBOR INTERNATIONAL FUND II
PORTFOLIO OF INVESTMENTS--OCTOBER 31, 2000
INVESTMENT HOLDINGS BY COUNTRY (% OF NET ASSETS)
(Excludes net cash and short-term investment of 2.8%)
<TABLE>
<S> <C>
Portugal (PORT)
1.5
Israel (IL)
1.6
Australia (AUS)
1.7
Spain (SP)
2.1
Poland (POL)
2.3
Singapore (SGP)
2.5
Finland (FIN)
4.0
Japan (JP)
4.6
Brazil (BR)
4.7
Italy (IT)
5.6
Germany (GER)
6.1
Netherlands (NET)
6.8
Sweden (SW)
8.4
Hong Kong (HK)
8.7
Switzerland (SWS)
9.6
United Kingdom (UK)
10.2
France (FR)
16.8
</TABLE>
<TABLE>
<CAPTION>
COMMON STOCKS--96.0%
VALUE
SHARES (000S)
-----------------------------------------------------------------
<C> <S> <C>
AUTOMOBILES--1.5%
10,300 PSA Peugeot Citroen (FR)................... $ 1,897
--------
BANKS--20.2%
110,000 ABN AMRO Holding NV (NET).................. 2,548
850,000 Banca Naz Del Lavoro (IT)*................. 2,755
43,500 Bank Slaski (POL).......................... 1,737
64,373 BNP Paribas (FR)........................... 5,550
31,000 Deutsche Bank AG--Registered (GER)......... 2,538
50,000 Dresdner Bank AG--Registered (GER)......... 2,083
140,000 San Paolo IMI SpA (IT)..................... 2,269
145,000 Standard Chartered plc (UK)................ 2,091
</TABLE>
<TABLE>
VALUE
SHARES (000S)
-----------------------------------------------------------------
<CAPTION>
COMMON STOCKS--CONTINUED
<C> <S> <C>
15,000 UBS AG--Registered (SWS)................... $ 2,078
United Overseas Bank Ltd. (Alien Market)
265,000 (SGP)...................................... 1,962
--------
25,611
--------
BUILDING MATERIALS-CONSTRUCTION--2.7%
50,000 JM Ab Series B (SW)........................ 1,141
30,507 Lafarge SA--Bearer (FR)*................... 2,252
--------
3,393
--------
CHEMICALS-FERTILIZERS--1.1%
32,500 Bayer AG (GER)............................. 1,411
--------
CONGLOMERATES--3.6%
585,000 Keppel Corp. Ltd. (SGP).................... 1,166
550,000 Swire Pacific Ltd. Cl. A (HK).............. 3,392
--------
4,558
--------
CONSUMER GOODS--4.2%
91,044 Hunter Douglas NV (NET).................... 2,611
243,000 Salomon & Taylor (JP)...................... 1,203
1,185 Swatch Group--Bearer (SWS)................. 1,569
--------
5,383
--------
CONTAINERS--0.8%
8,000 Cie De St Gobain (FR)...................... 1,058
--------
COSMETICS--0.0%
5 Givaduan AG (SWS)*......................... 1
--------
DRUGS & MEDICINE--5.1%
19,048 Aventis SA (FR)............................ 1,374
1,700 Novartis AG--Registered (SWS).............. 2,579
5 Roche Holdings AG (SWS).................... 46
188,767 SmithKline Beecham plc (UK)................ 2,438
--------
6,437
--------
FINANCIAL SERVICES--2.7%
50,435 ING Groep NV (NET)......................... 3,463
--------
FOREST PRODUCTS--2.2%
100,000 UPM-Kymmene Oyj (FIN)...................... 2,830
--------
HOTEL-MOTEL--1.6%
48,500 Accor (FR)................................. 1,963
--------
INSURANCE--4.7%
65,000 Assicurazioni Generali SpA (IT)............ 2,137
13,500 AXA UAP (FR)............................... 1,787
4,077 Zurich Financial Services Group (SWS)...... 1,973
--------
5,897
--------
MACHINERY--4.4%
33,344 Heidelberger Druckmaschinen AG (GER)....... 1,761
39,000 Kone Oyj Series B (FIN).................... 2,284
3,550 Saurer AG--Registered (SWS)................ 1,550
--------
5,595
--------
MEDIA--1.9%
50,000 News Corp. Ltd. ADR (AUS)(1)............... 2,150
1,000,000 Phoenix Satellite Television (HK)*......... 233
--------
2,383
--------
MISCELLANEOUS HIGH TECH--3.5%
56,000 Sony Corp. (JP)............................ 4,475
--------
</TABLE>
16
<PAGE> 18
HARBOR INTERNATIONAL FUND II
PORTFOLIO OF INVESTMENTS--CONTINUED
<TABLE>
<CAPTION>
COMMON STOCKS--CONTINUED
VALUE
SHARES (000S)
-----------------------------------------------------------------
<C> <S> <C>
NON-FERROUS METALS--2.1%
700,000 Billiton plc (UK).......................... $ 2,674
--------
PAPER--1.6%
100,000 Svenska Cellulosa Ab Series B (SW)......... 2,052
--------
PETROLEUM--6.5%
255,445 BP Amoco plc (UK).......................... 2,166
625,000 Lasmo plc (UK)............................. 1,329
102,000 Petrol Brasileiro SA Pfd. (BR)............. 2,704
14,000 Total Fina Elf Cl. B (FR).................. 2,003
--------
8,202
--------
REAL ESTATE--3.5%
225,000 Cheung Kong Holdings Ltd. (HK)............. 2,488
455,000 Henderson Land Development Co. Ltd. (HK)... 1,960
--------
4,448
--------
STEEL--0.7%
1,000,000 Corus Group plc (UK)....................... 907
--------
TELECOMMUNICATIONS-EQUIPMENT--9.0%
32,500 Alcatel (FR)............................... 1,983
560,000 Ericsson (LM) Tel Co. Series B (SW)........ 7,454
41,700 NICE Systems Ltd. ADR (IL)(1)*............. 1,950
--------
11,387
--------
TELECOMMUNICATIONS-SERVICE--10.5%
China Mobile (Hong Kong) Ltd. ADR
97,000 (HK)(1).................................... 2,971
5 NTT Docomo Inc. (JP)....................... 123
170,000 Telecel-Comunicacoes Pessoais SA (PORT).... 1,864
Telecomunicacoes De Sao Paulo ADR
101,000 (BR)(1).................................... 3,194
140,000 Telefonica SA (SP)*........................ 2,670
250,000 Telekomunikacja Polska SA (POL)............ 1,232
30,000 Vodafone Group plc ADR (UK)(1)............. 1,277
--------
13,331
--------
TOBACCO--1.9%
850 Cie Financiere Richemont AG (SWS).......... 2,364
--------
TOTAL COMMON STOCKS
(Cost $113,927)...................................... 121,720
--------
<CAPTION>
UNITS--1.2%
(Cost $1,140)
VALUE
UNITS (000S)
-----------------------------------------------------------------
<C> <S> <C>
1,639,531 Eurotunnel (FR)*........................... $ 1,489
--------
<CAPTION>
SHORT-TERM INVESTMENT--0.4%
<C> <S> <C>
(Cost $545)
<CAPTION>
PRINCIPAL
AMOUNT
(000S)
-----------------------------------------------------------------
<C> <S> <C>
COMMERCIAL PAPER--0.4%
American Express Credit Corp.
$ 545 6.580%--11/01/2000......................... 545
--------
TOTAL INVESTMENTS--97.6%
(Cost $115,612)...................................... 123,754
CASH AND OTHER ASSETS, LESS LIABILITIES--2.4%.......... 3,072
--------
TOTAL NET ASSETS--100.0%............................... $126,826
========
</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.
17
<PAGE> 19
HARBOR INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS--OCTOBER 31, 2000
INVESTMENT HOLDINGS BY COUNTRY (% OF NET ASSETS)
(Excludes net cash, convertible bond and short-term investments of 3.1%)
<TABLE>
<S> <C>
South Africa (S. AFR)
0.4
Finland (FIN)
1.4
Hong Kong (HK)
1.6
Portugal (PORT)
1.8
Denmark (DEN)
2.1
Australia (AUS)
2.2
Singapore (SGP)
2.4
Germany (GER)
2.9
Brazil (BR)
4.0
Spain (SP)
4.0
Malaysia (MAL)
4.5
Italy (IT)
5.7
Japan (JP)
6.6
Netherlands (NET)
8.0
Sweden (SW)
9.8
Switzerland (SWS)
11.6
France (FR)
12.6
United Kingdom (UK)
15.3
</TABLE>
<TABLE>
<CAPTION>
COMMON STOCKS--96.2%
VALUE
SHARES (000S)
------------------------------------------------------------------
<C> <S> <C>
ALUMINUM--1.2%
1,488,000 Pechiney SA Series A (FR)................ $ 55,560
----------
AUTOMOBILES--1.2%
316,000 PSA Peugeot Citroen (FR)................. 58,190
----------
BANKS--20.6%
4,592,430 ABN Amro Holdings NV (NET)............... 106,392
3,257,173 Banca Commercial Italiana (IT)........... 19,155
21,178,456 Banca Intesa SpA (IT).................... 87,883
Banco Commercial Portugues ADR
503,062 (PORT)(1)................................ 12,482
</TABLE>
<TABLE>
VALUE
SHARES (000S)
------------------------------------------------------------------
<CAPTION>
COMMON STOCKS--CONTINUED
<C> <S> <C>
Banco Commercial Portugues--Registered
15,346,915 (PORT)................................... $ 76,708
730,000 Bankinter SA--Registered (SP)............ 26,018
670,000 BNP Paribas (FR)......................... 57,766
176,600 Credit Suisse Group--Registered (SWS).... 33,108
800,000 Deutsche Bank AG--Registered (GER)....... 65,498
850,000 Dresdner Bank AG--Registered (GER)....... 35,416
30,314,000 Malayan Banking Berhad (MAL)............. 121,256
8,925,000 Overseas Chinese Banking Corp. (SGP)..... 56,915
5,306,400 San Paolo IMI SpA (IT)................... 86,008
5,896,055 Standard Chartered plc (UK).............. 85,036
497,076 UBS AG--Registered (SWS)................. 68,854
United Overseas Bank Ltd. (Alien Market)
7,962,842 (SGP).................................... 58,940
----------
997,435
----------
BUILDING MATERIALS-CONSTRUCTION--0.8%
1,003,000 Skanska Ab Series B (SW)................. 39,749
----------
CHEMICALS-FERTILIZERS--0.8%
885,000 Bayer AG (GER)........................... 38,414
----------
CONGLOMERATES--1.8%
42,297,000 Sime Darby Berhad (MAL).................. 52,983
5,250,000 Swire Pacific Ltd. Cl. A (HK)............ 32,379
----------
85,362
----------
CONSUMER GOODS--1.1%
722,406 BIC (FR)................................. 25,043
935,341 Hunter Douglas NV (NET).................. 26,828
----------
51,871
----------
CONTAINERS--0.7%
264,000 Cie De St Gobain (FR).................... 34,926
----------
DRUGS & MEDICINE--6.1%
1,257,133 Aventis SA (FR).......................... 90,678
69,561 Novartis AG--Registered (SWS)............ 105,526
475,000 Novo Nordisk A/S Series B (DEN).......... 100,747
----------
296,951
----------
FINANCIAL SERVICES--3.0%
2,101,356 ING Groep NV (NET)....................... 144,297
----------
FOREST PRODUCTS--1.4%
2,400,000 UPM-Kymmene Oyj (FIN).................... 67,922
----------
GOLD-PRECIOUS METALS--1.4%
1,266,710 Anglo American plc ADR (UK)(1)........... 69,352
----------
GROCERY PRODUCTS--2.1%
47,800 Nestle SA--Registered (SWS).............. 99,052
----------
HOTEL-MOTEL--1.0%
1,175,000 Accor (FR)............................... 47,562
----------
INSURANCE--4.6%
2,552,000 Assicurazioni Generali SpA (IT).......... 83,918
600,000 AXA UAP (FR)............................. 79,429
120,838 Zurich Financial Services Group (SWS).... 58,483
----------
221,830
----------
LIQUOR--2.1%
8,115,770 Diageo plc (UK).......................... 76,600
3,050,000 Whitbread plc (UK)....................... 22,459
----------
99,059
----------
MACHINERY--0.4%
5,390,000 Gencor Ltd. ADR (S. AFR)(1).............. 18,229
----------
</TABLE>
18
<PAGE> 20
HARBOR INTERNATIONAL FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
<TABLE>
<CAPTION>
COMMON STOCKS--CONTINUED
VALUE
SHARES (000S)
------------------------------------------------------------------
<C> <S> <C>
MEDIA--2.2%
2,500,000 News Corp. Ltd. ADR (AUS)(1)............. $ 107,500
----------
MISCELLANEOUS HIGH TECH--2.8%
1,692,000 Sony Corp. (JP).......................... 135,217
----------
NATURAL GAS & PIPELINES--1.6%
12,156,862 BG Group plc (UK)........................ 48,684
2,969,000 Hong Kong & China Gas Co. Ltd. (HK)...... 3,750
12,156,862 Lattice Group (UK)....................... 25,929
----------
78,363
----------
NON-FERROUS METALS--2.8%
26,950,000 Billiton plc ADR (UK)(1)................. 102,130
2,204,676 Rio Tinto--Registered (UK)............... 35,667
----------
137,797
----------
PAPER--1.3%
1,500,000 Holmen Ab Series B (SW).................. 38,279
1,300,000 Svenska Cellulosa Ab Series B (SW)....... 26,671
----------
64,950
----------
PETROLEUM--9.6%
14,981,454 BP Amoco plc (UK)........................ 127,055
5,059,000 Petrol Brasileiro SA Pfd. (BR)........... 134,120
1,800,000 Royal Dutch Petroleum Co. ADR (NET)(1)... 106,875
671,444 Total Fina Elf Cl. B (FR)................ 96,066
----------
464,116
----------
PHOTOGRAPHIC-OPTICAL--3.8%
3,457,000 Canon Inc. (JP).......................... 137,184
1,235,000 Fuji Photo Film Co. (JP)................. 45,839
----------
183,023
----------
TELECOMMUNICATIONS-EQUIPMENT--6.3%
Ericsson (LM) Tel Co. Cl. B ADR
2,584,000 (SW)(1).................................. 35,853
20,240,000 Ericsson (LM) Tel Co. Series B (SW)...... 269,399
----------
305,252
----------
TELECOMMUNICATIONS-SERVICE--5.0%
6,325,000 China Mobile (Hong Kong) Ltd. (HK)*...... 40,550
3,176,240 Telefonica SA (SP)*...................... 60,565
666,666 Telefonica SA ADR (SP)(1)*............... 38,625
14,400,000 Telekom Malaysia Berhad (MAL)............ 44,337
Telesp Celular Participacoes SA ADR
1,870,000 (BR)(1).................................. 59,139
----------
243,216
----------
TIRES & RUBBER--1.3%
88,700 Cie Fin Michel Bas--Bearer (SWS)......... 29,804
1,127,645 Michelin Cl. B--Registered (FR).......... 32,631
----------
62,435
----------
TOBACCO--9.2%
4,455,975 Altadis SA Series A--Registered (SP)..... 66,173
5,187,347 British American Tobacco plc (UK)........ 36,353
Cie Financiere Richemont AG Units Cl. A--
59,000 Bearer (SWS)........................... 164,108
11,352,148 Imperial Tobacco Group plc (UK).......... 111,347
18,818,974 Swedish Match (SW)....................... 64,599
----------
442,580
----------
TOTAL COMMON STOCKS
(Cost $2,733,730)................................... 4,650,210
----------
<CAPTION>
UNITS--0.7%
VALUE
UNITS (000S)
------------------------------------------------------------------
<C> <S> <C>
33,740,680 Eurotunnel (FR)*......................... $ 30,637
Eurotunnel SA Warrants (FR)*
20,000,000 Expire 12/31/2001...................... 339
Eurotunnel SA Warrants (FR)*
20,000,000 Expire 10/31/2003...................... 1,018
----------
TOTAL UNITS
(Cost $74,178)...................................... 31,994
----------
<CAPTION>
CONVERTIBLE BOND--0.8%
(Cost $39,105)
PRINCIPAL
AMOUNT
(000S)
------------------------------------------------------------------
<C> <S> <C>
Liberty Group Ltd. (S. AFR)
$ 39,500 6.500%--09/30/2004..................... 37,551
----------
<CAPTION>
SHORT-TERM INVESTMENTS--1.8%
<C> <S> <C>
COMMERCIAL PAPER
American Express Credit Corp. Yrs 1&2
20,000 6.570%--11/03/2000..................... 20,000
Exxon Project Investment Yrs 3&4
18,072 6.520%--11/02/2000..................... 18,072
General Motors Acceptance Corp.
8,890 6.450%--11/01/2000..................... 8,890
Prudential Funding Corp.
20,000 6.490%--11/06/2000..................... 20,000
18,585 6.520%--11/07/2000..................... 18,585
----------
38,585
----------
TOTAL SHORT-TERM INVESTMENTS
(Cost $85,547)...................................... 85,547
----------
TOTAL INVESTMENTS--99.5%
(Cost $2,932,560)................................... 4,805,302
CASH AND OTHER ASSETS, LESS LIABILITIES--0.5%......... 24,973
----------
TOTAL NET ASSETS--100.0%.............................. $4,830,275
==========
</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.
19
<PAGE> 21
HARBOR VALUE FUND
PORTFOLIO OF INVESTMENTS--OCTOBER 31, 2000
COMMON STOCK HOLDINGS (% OF NET ASSETS)
(Excludes 21.9% of holdings of which 2.6% represent net cash and short-term
investments, and 19.3% represents industry classifications less than 1.6%)
<TABLE>
<S> <C>
Conglomerates
1.6
Electric Power
1.9
Consumer Goods
2.0
Domestic Oil
2.0
Credit & Miscellaneous
Financial 2.3
Insurance-Life
2.3
Retail-All Other
2.8
Chemicals-Fertilizers
2.9
Computers & Business
Equipment 2.9
Grocery Products
3.0
Drugs & Medicine
3.3
Telecommunications-Service
3.4
Insurance-Other
3.5
Electrical Equipment
4.1
Paper
4.8
Banks-Money Center
5.0
Banks-Regional
5.4
Manufacturing Diversified
5.5
Financial Services
5.6
International Oil
6.4
Telephones
7.4
</TABLE>
<TABLE>
<CAPTION>
COMMON STOCKS--97.4%
VALUE
SHARES (000S)
----------------------------------------------------------------
<C> <S> <C>
AEROSPACE/DEFENSE--1.0%
39,000 Rockwell International Corp. ............... $ 1,533
--------
AIR TRANSPORTATION--0.3%
700 Alaska Air Group Inc.*...................... 18
2,700 AMR Corp.*.................................. 88
1,600 Delta Air Lines Inc. ....................... 76
6,600 Southwest Airlines Co. ..................... 188
1,300 US Airways Group Inc.*...................... 49
--------
419
--------
ALUMINUM--1.4%
70,468 Alcoa Inc. ................................. 2,021
--------
</TABLE>
<TABLE>
VALUE
SHARES (000S)
----------------------------------------------------------------
<CAPTION>
COMMON STOCKS--CONTINUED
<C> <S> <C>
AUTOMOBILE EQUIPMENT--1.3%
1,500 Navistar International Corp.*............... $ 50
44,000 TRW Inc. ................................... 1,848
1,965 Visteon Corp. .............................. 35
--------
1,933
--------
AUTOMOBILES--0.6%
17,672 Ford Motor Co. ............................. 462
4,700 General Motors Corp. ....................... 292
2,700 General Motors Corp. Cl. H.................. 87
--------
841
--------
BANKS-MONEY CENTER--5.0%
51,835 BankAmerica Corp.(1)........................ 2,491
60,414 Chase Manhattan Corp.(1).................... 2,748
2,100 Northern Trust Corp. ....................... 179
1,000 State Street Corp. ......................... 125
39,235 Wells Fargo & Co.(1)........................ 1,817
--------
7,360
--------
BANKS-REGIONAL--5.4%
1,871 Amsouth Bancorporation...................... 26
18,443 Bank One Corp.(1)........................... 673
1,000 Dime Bancorp Inc. .......................... 24
1,300 Fifth Third Bancorp......................... 67
13,678 First Union Corp. .......................... 415
22,600 First Virginia Banks Inc. .................. 935
35,600 Firstar Corp. .............................. 701
1,800 Golden West Financial Corp. ................ 101
1,000 Hibernia Corp. Cl. A........................ 12
1,713 Huntington Bancshares Inc. ................. 25
8,130 KeyCorp..................................... 201
5,420 National City Corp. ........................ 116
24,000 North Fork Bancorporation Inc. ............. 484
17,906 PNC Financial Services Group Inc. .......... 1,198
61,700 Summit Bancorp.............................. 2,314
2,300 Suntrust Banks Inc. ........................ 112
19,400 US Bancorp.................................. 469
765 Wachovia Corp. ............................. 41
--------
7,914
--------
BUILDING MATERIALS-CONSTRUCTION--0.2%
7,900 Vulcan Materials Co. ....................... 332
--------
CHEMICALS-FERTILIZERS--2.9%
2,700 Coastal Corp. .............................. 204
5,399 E.l. Du Pont De Nemours & Co. .............. 245
45,000 Praxair Inc. ............................... 1,676
125,000 R.P.M. Inc. ................................ 1,117
34,300 Rohm & Haas Co. ............................ 1,031
1,700 Union Carbide Corp. ........................ 73
--------
4,346
--------
COMPUTER SERVICES--1.2%
1,900 Cabletron Systems Inc. ..................... 51
1,600 CMGI Inc. .................................. 27
3,100 Electronic Data Systems Corp. .............. 145
1,500 Level 3 Communications Inc.*................ 72
23,800 NSTAR....................................... 921
12,800 Qwest Communications International Inc. .... 622
--------
1,838
--------
COMPUTERS & BUSINESS EQUIPMENT--2.9%
3,600 3Com Corp. ................................. 64
3,500 Apple Computer Inc. ........................ 68
8,400 Compaq Computer Corp. ...................... 255
</TABLE>
20
<PAGE> 22
HARBOR VALUE FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
<TABLE>
<CAPTION>
COMMON STOCKS--CONTINUED
VALUE
SHARES (000S)
----------------------------------------------------------------
<C> <S> <C>
6,900 International Business Machines Corp.(1).... $ 680
1,693 NCR Corp.*.................................. 73
5,339 Palm Inc. .................................. 286
57,500 Pitney Bowes Inc. .......................... 1,707
1,700 Seagate Technology Inc. .................... 119
45,000 WorldCom Inc. New(1)........................ 1,069
--------
4,321
--------
CONGLOMERATES--1.6%
5,400 First Data Corp. ........................... 271
22,293 Minnesota Mining & Manufacturing Co. ....... 2,154
--------
2,425
--------
CONSUMER GOODS--2.0%
27,600 Gillette Co. ............................... 963
84,100 Newell Rubbermaid Inc. ..................... 1,614
5,000 Procter & Gamble Co. ....................... 357
--------
2,934
--------
CONTAINERS--0.8%
59,400 Sonoco Products Co. ........................ 1,147
--------
COSMETICS--0.6%
51,500 International Flavors & Fragrances.......... 863
--------
CREDIT & MISCELLANEOUS FINANCIAL--2.3%
10,800 American Express Co. ....................... 648
14,000 Federal National Mortgage Association(1).... 1,078
20,800 Morgan, Stanley, Dean Witter & Co. Inc. .... 1,670
--------
3,396
--------
DOMESTIC OIL--2.0%
1,100 Amerada Hess Corp. ......................... 68
13,100 Kerr McGee Corp. ........................... 856
67,200 Sunoco Inc. ................................ 2,012
2,000 Tosco Corp. ................................ 57
--------
2,993
--------
DRUGS & MEDICINE--3.3%
22,200 Abbott Laboratories......................... 1,173
16,700 American Home Products Corp. ............... 1,060
2,800 Bristol-Myers Squibb Co. ................... 171
3,000 Genetech Inc................................ 247
5,000 Merck & Co Inc. ............................ 450
1,300 Pharmacia Corp. ............................ 72
34,200 Schering-Plough Corp. ...................... 1,768
--------
4,941
--------
ELECTRIC POWER--1.9%
1,500 American Electric Power Inc. ............... 62
830 Consolidated Edison Inc. ................... 29
2,948 Duke Energy Co. ............................ 255
1,760 Edison International........................ 42
6,400 Entergy Corp. .............................. 245
9,225 Exelon Corp. ............................... 555
1,600 Firstenergy Corp. .......................... 41
765 FPL Group Inc. ............................. 50
14,100 Niagara Mohawk Holdings Corp.*.............. 226
22,097 OGE Energy Corp. ........................... 454
2,600 PG & E Corp. ............................... 70
612 Public Service Enterprise Group............. 25
22,800 SCANA Corp. New............................. 604
4,890 Southern Co. ............................... 144
300 Unisource Energy Corp.*..................... 4
--------
2,806
--------
</TABLE>
<TABLE>
VALUE
SHARES (000S)
----------------------------------------------------------------
<CAPTION>
COMMON STOCKS--CONTINUED
<C> <S> <C>
ELECTRICAL EQUIPMENT--4.1%
33,500 Emerson Electric Co. ....................... $ 2,460
11,300 General Electric Co.(1)..................... 619
5,500 Grainger (W.W.) Inc. ....................... 175
73,100 Hubbell Inc. Cl. B.......................... 1,750
64,700 Thomas & Betts Corp. ....................... 979
--------
5,983
--------
ELECTRONIC INSTRUMENTS--0.5%
2,200 Advanced Micro Devices Inc. ................ 50
915 Aglient Technologies Inc. .................. 42
9,200 Hewlett Packard Co. ........................ 427
5,300 Teradyne Inc. .............................. 166
2,700 Thermo Electron Corp. ...................... 78
--------
763
--------
FINANCIAL SERVICES--5.6%
25,300 A.G. Edwards Inc. .......................... 1,284
14,765 Chubb Corp. ................................ 1,247
75,512 Citigroup Inc.(1)........................... 3,974
12,201 FleetBoston Financial Corp. ................ 464
2,000 Goldman Sachs Group Inc. ................... 200
8,600 Lehman Brothers Holdings Inc. .............. 555
1,900 Marsh & McLennan Cos. Inc. ................. 248
1,968 Merrill Lynch & Co. Inc. ................... 138
1,200 Paine Webber Group Inc. .................... 86
--------
8,196
--------
GROCERY PRODUCTS--3.0%
82,700 Flowers Industries Inc. .................... 1,272
49,800 H.J. Heinz Co. ............................. 2,088
35,800 McCormick & Co. Inc. ....................... 1,134
--------
4,494
--------
HEALTH CARE-HOSPITAL MANAGEMENT--0.9%
7,400 HCA-The Healthcare Co. ..................... 296
7,100 Johnson & Johnson........................... 654
4,000 Tenet Healthcare Corp. ..................... 157
1,900 United Healthcare Corp. .................... 208
--------
1,315
--------
HOTEL-MOTEL--0.0%
1,700 Marriott International Inc. Cl. A........... 69
--------
HOUSEHOLD PRODUCTS--0.8%
26,900 Clorox Co. ................................. 1,200
--------
INSURANCE-LIFE--2.3%
3,000 AXA Financial Inc. ......................... 162
2,700 Conseco Inc. ............................... 19
19,300 Jefferson--Pilot Corp. ..................... 1,327
57,700 Torchmark Inc. ............................. 1,922
--------
3,430
--------
INSURANCE-OTHER--3.5%
1,200 Aetna Inc. ................................. 69
2,900 AFLAC Inc. ................................. 212
38,436 Allstate Corp.(1)........................... 1,547
30,735 American International Group Inc.(1)........ 3,012
1,600 Cigna Corp. ................................ 195
1,700 CNA Financial Group Inc.*................... 62
1,300 Hartford Financial Services Group Inc. ..... 97
--------
5,194
--------
INTERNATIONAL OIL--6.4%
42,200 BP Amoco plc ADR(2)......................... 2,150
12,954 Chevron Corp. .............................. 1,063
</TABLE>
21
<PAGE> 23
HARBOR VALUE FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
<TABLE>
<CAPTION>
COMMON STOCKS--CONTINUED
VALUE
SHARES (000S)
----------------------------------------------------------------
<C> <S> <C>
34,900 Conoco Inc. ................................ $ 901
49,271 Exxon Mobil Corp.(1)........................ 4,394
15,200 Texaco Inc. ................................ 898
--------
9,406
--------
LEISURE & LUXURY--0.4%
903 Sabre Holdings Corp. Cl. A*................. 30
14,500 Walt Disney Co. ............................ 519
--------
549
--------
MACHINE TOOLS--0.2%
25,400 Timken Co. ................................. 357
--------
MANUFACTURING DIVERSIFIED--5.5%
78,600 Bemis Co. Inc. ............................. 2,034
2,400 Dover Corp. ................................ 102
49,900 ITT Industries Inc. ........................ 1,625
62,500 Pall Corp. ................................. 1,348
49,900 Parker Hannifin Corp. ...................... 2,065
32,200 The Stanley Works........................... 857
--------
8,031
--------
MEDIA--1.1%
4,700 Clear Channel Communications Inc. .......... 282
5,300 Cox Communications Inc. Cl. A............... 234
6,000 Time Warner Inc. ........................... 455
12,289 Viacom Inc. Cl.(1)*......................... 699
--------
1,670
--------
MISCELLANEOUS HIGH TECH--1.3%
34,400 Honeywell International Inc. ............... 1,851
--------
MISCELLANEOUS TRANSPORT--0.2%
4,500 Fedex Corp.*................................ 211
--------
NATURAL GAS & PIPELINES--0.7%
5,300 Enron Corp. ................................ 435
2,600 Kinder Morgan Inc. New...................... 100
8,600 National Fuel Gas Co. ...................... 461
2,000 Peoples Energy Corp. ....................... 69
--------
1,065
--------
NON-FERROUS METALS--0.5%
16,000 Phelps Dodge Corp. ......................... 748
--------
OIL WELL EQUIPMENT & SERVICES--0.0%
1,500 Halliburton Co. ............................ 56
--------
PAPER--4.8%
72,000 Boise Cascade Corp. ........................ 2,066
28,000 Bowater Inc. ............................... 1,516
52,253 International Paper......................... 1,914
1,900 Kimberly-Clark Corp. ....................... 125
30,600 Temple Inland Inc. ......................... 1,369
--------
6,990
--------
PHOTOGRAPHIC-OPTICAL--1.1%
37,226 Eastman Kodak Co. .......................... 1,671
--------
POLLUTION CONTROL--0.1%
4,300 Waste Management Inc. ...................... 86
--------
PUBLISHING--0.1%
2,900 Tribune Co.................................. 107
--------
RESTAURANTS--0.3%
14,100 McDonalds Corp. ............................ 437
--------
</TABLE>
<TABLE>
VALUE
SHARES (000S)
----------------------------------------------------------------
<CAPTION>
COMMON STOCKS--CONTINUED
<C> <S> <C>
RETAIL-ALL OTHER--2.8%
400 Best Buy Co. Inc.*.......................... $ 20
2,800 Costco Wholesale Corp....................... 103
3,200 Federated Department Stores Inc.*........... 104
107,400 J.C. Penney Co. Inc. ....................... 1,255
14,949 Kmart Corp.*................................ 89
39,619 May Department Stores Co. .................. 1,040
66,400 Nordstrom Inc. ............................. 1,091
4,200 Target Corp. ............................... 116
7,700 Wal-Mart Stores Inc. ....................... 349
--------
4,167
--------
RETAIL-DRUG STORES--0.1%
1,500 CVS Corp. .................................. 79
--------
RETAIL-FOOD STORES--1.2%
2,700 Kroger Co. ................................. 61
1,600 Safeway Inc. ............................... 88
109,200 Supervalu Inc. ............................. 1,679
--------
1,828
--------
SEMICONDUCTORS--0.3%
900 LSI Logic Corp. ............................ 30
15,500 Motorola Inc. .............................. 387
1,700 National Semiconductor Corp. ............... 44
--------
461
--------
SERVICES--0.7%
5,900 Cendant Corp. .............................. 71
25,700 H & R Block Inc. ........................... 917
--------
988
--------
SOFT DRINKS--1.1%
33,700 Pepsico Inc. ............................... 1,632
--------
STEEL--0.0%
8,800 Bethlehem Steel Corp.(1)*................... 25
--------
TELECOMMUNICATIONS-EQUIPMENT--0.1%
2,500 Ditech Communications Corp. ................ 86
--------
TELECOMMUNICATIONS-SERVICE--3.4%
1,900 CenturyTel Inc. ............................ 73
15,200 Comcast Corp. CI. A ........................ 619
20,400 McLeodUSA Inc. ............................. 393
1,900 Telephone & Data Systems Inc. .............. 200
1,400 United States Cellular Corp. ............... 90
59,453 Verizon Communications Inc. ................ 3,437
3,700 XO Communications Inc. ..................... 125
--------
4,937
--------
TELEPHONES--7.4%
40,000 ALLTEL Corp. ............................... 2,578
138,510 AT&T Corp.(1)............................... 3,212
18,396 Bellsouth Corp.(1).......................... 889
66,213 SBC Communications Inc.(1).................. 3,820
17,600 Sprint Corp.(1)............................. 449
--------
10,948
--------
TOBACCO--0.2%
7,900 Philip Morris Cos. Inc. .................... 289
--------
TOYS--0.0%
3,300 Toys "R" Us Inc.*........................... 57
--------
TOTAL COMMON STOCKS
(Cost $141,193)..................................... 143,739
--------
</TABLE>
22
<PAGE> 24
HARBOR VALUE FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
<TABLE>
<CAPTION>
COMMON STOCKS--CONTINUED
VALUE
SHARES (000S)
----------------------------------------------------------------
<C> <S> <C>
<CAPTION>
SHORT-TERM INVESTMENTS--0.7%
<C> <S> <C>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------------------------------------------------------------------
<C> <S> <C>
REPURCHASE AGREEMENT
Repurchase Agreement with State Street Bank
& Trust dated October 31, 2000 due
November 1, 2000 at 4.00% collateralized
by a U.S. Treasury Bill 7.625%
due February 15, 2007, par value of $145
(repurchase proceeds of $150 when closed
on
$ 146 November 1, 2000)......................... $ 146
--------
U.S. TREASURY BILLS
U.S. Treasury Bills(1)
848 6.060%--11/16/2000........................ 848
--------
</TABLE>
<TABLE>
<C> <S> <C>
<CAPTION>
VALUE
(000S)
----------------------------------------------------------------
<C> <S> <C>
TOTAL SHORT-TERM INVESTMENTS
(Cost $994)........................................... $ 994
--------
TOTAL INVESTMENTS--98.1%
(Cost $142,187)..................................... 144,733
CASH AND OTHER ASSETS, LESS LIABILITIES--1.9%......... 2,882
--------
TOTAL NET ASSETS--100.0%.............................. $147,615
========
</TABLE>
------------------------------------------------------------
FUTURES CONTRACTS WHICH WERE OPEN AT OCTOBER 31, 2000 ARE AS FOLLOWS:
<TABLE>
<CAPTION>
AGGREGATE UNREALIZED
NUMBER OF FACE VALUE (DEPRECIATION)
DESCRIPTION CONTRACTS (000S) EXPIRATION DATE (000S)
----------- --------- ---------- --------------- --------------
<S> <C> <C> <C> <C>
S&P 500 Index Futures (Buy)........................... 37 $9 Dec-00 $(693)
</TABLE>
23
<PAGE> 25
HARBOR VALUE FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
COMMON STOCK INVESTMENTS SOLD SHORT AT OCTOBER 31, 2000 ARE AS FOLLOWS:
<TABLE>
<CAPTION>
VALUE
SHARES SECURITY (000S)
------ -------- ------
<C> <S> <C>
4,500 Abitibi-Consolidated Inc.............. $ 39
1,500 Air Products and Chemicals Inc........ 56
3,200 Albertson's Inc....................... 76
4,900 Alcan Aluminum Ltd.................... 155
3,100 Allegheny Technologies Inc............ 63
1,100 America Online Inc.................... 55
700 American General Corp................. 56
1,100 Amgen Inc............................. 64
7,875 Archer Daniels Midland Co............. 87
3,400 Autolive.............................. 75
216 Avaya Inc............................. 3
1,200 Avery Dennison Corp................... 61
6,000 Avon Products Inc..................... 291
6,100 Baker Hughes Inc...................... 210
1,200 Bausch & Lomb Inc..................... 46
1,500 Becton, Dickinson & Co................ 50
3,000 Belo (A.H.) Corp...................... 57
4,400 Burlington Resources Inc.............. 158
1,000 Canadian Imperial Bank, Toronto....... 32
6,000 Carnival Corp......................... 149
1,700 Charles Schwab & Co................... 60
2,100 Charter One Financial Inc............. 48
2,700 Cisco Systems Inc..................... 145
1,600 Colgate-Palmolive Co.................. 94
6,100 ConAgra Inc........................... 131
2,900 Conoco Inc............................ 79
1,600 Cooper Industries Inc................. 61
3,500 Crown Cork & Seal Co. Inc............. 32
2,500 CSX Corp.............................. 63
2,000 Dell Computer Corp.................... 59
2,800 Diamond Offshore Drilling Inc......... 97
1,500 Diebold Inc........................... 39
2,100 Dow Jones & Co. Inc................... 124
1,400 Dun & Bradstreet Corp................. 30
1,100 Eastman Chemical Co................... 47
1,000 El Paso Energy Corp................... 63
3,500 Eli Lilly & Co........................ 313
1,600 EMC Corp.............................. 142
1,300 Fluor Corp............................ 45
2,500 Fortune Brands Inc.................... 74
1,200 Gannett Co. Inc....................... 70
1,700 Gap Inc............................... 44
1,600 GATX Corp............................. 67
1,600 General Dynamics Corp................. 114
4,000 General Mills Inc..................... 167
1,200 Harcourt General Inc.................. 67
4,100 Hercules Inc.......................... 75
2,900 Hershey Foods Corp.................... 158
1,400 Hillenbrand Industries Inc............ 65
3,200 Hormel Foods Corp..................... 54
1,900 Household International Inc........... 96
1,300 Illinois Tool Works Inc............... 72
3,000 Intel Corp............................ 135
3,800 Intimate Brands Inc................... 91
8,300 Kellogg Co............................ 211
1,500 Knight-Ridder Inc..................... 75
6,700 Leggett & Platt Inc................... 110
3,500 Limited Inc........................... 88
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES SECURITY (000S)
------ -------- ------
<C> <S> <C>
1,500 Lincoln National Corp................. $ 73
5,500 Lockheed Martin Corp.................. 197
3,100 Magna International Inc............... 139
2,200 Masco Corp............................ 41
17,900 Mattel Inc............................ 232
3,900 McGraw-Hill Companies Inc............. 250
1,400 Medtronic Inc......................... 76
2,500 Mellon Financial Corp................. 121
2,400 Microsoft Corp........................ 165
1,500 Millipore Corp........................ 79
2,800 Moody's Corp.......................... 74
1,200 New York Times Co..................... 44
2,600 Nike Inc.............................. 104
4,900 Norfolk Southern Corp................. 69
1,500 Nortel Networks Corp.................. 68
2,000 Nova Chemicals Corp................... 41
4,300 Occidental Petroleum Corp............. 85
4,400 Oracle Corp........................... 145
1,200 PartnerRe Ltd......................... 65
15,250 Pfizer Inc............................ 659
2,300 Phillips Petroleum Co................. 142
2,400 Potash Corp. of Saskatchewan Inc...... 142
1,000 PPG Industries Inc.................... 45
3,200 R. R. Donnelley & Sons Co............. 69
6,500 Ralston Purina Co..................... 158
3,000 Raytheon Co........................... 103
1,300 Reliant Energy Inc.................... 54
Royal Caribbean Cruises
5,200 International......................... 117
4,600 Royal Dutch Petroleum Co. ADR(2)...... 273
14,100 Sara Lee Corp......................... 304
1,800 Schlumberger Ltd...................... 137
7,900 Sempra Energy......................... 163
1,000 Sun Microsystems Inc.................. 111
6,600 Sysco Corp............................ 344
1,600 T. Rowe Price & Associates Inc........ 75
1,400 Texas Instruments Inc................. 69
3,400 Textron Inc........................... 171
13,100 TransCanada Pipelines Ltd............. 124
3,225 Tribune Co............................ 119
5,000 Trizec Hahn Corp...................... 75
1,200 True North Communications Inc......... 45
2,232 Tyco International Ltd................ 126
2,600 Union Pacific Corp.................... 122
900 United Technologies Corp.............. 63
2,300 Unocal Corp........................... 78
2,700 USA Education Inc..................... 151
4,200 UST Inc............................... 106
2,500 USX-Marathon Group.................... 68
1,900 V. F. Corp............................ 52
2,400 Washington Mutual Inc................. 106
1,200 Weyerhaeuser Co....................... 56
1,000 Williams Companies Inc................ 42
4,600 Winn-Dixie Stores Inc................. 89
2,500 Wrigley (Wm) Jr. Co................... 198
-------
TOTAL COMMON STOCK INVESTMENTS SOLD SHORT
(proceeds $11,737).............................. $12,112
=======
</TABLE>
------------
1 At October 31, 2000, securities held by the Fund were pledged to cover margin
requirements for open futures contracts and investments sold short. (See Note
2 to the Financial Statements.) The securities pledged had an aggregate
market value of $25,732.
2 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.
24
<PAGE> 26
HARBOR BOND FUND
PORTFOLIO OF INVESTMENTS--OCTOBER 31, 2000
TOTAL INVESTMENTS (% OF NET ASSETS)
(Excludes excess of liabilities over other assets and short-term investments of
-45.3%)
<TABLE>
<S> <C>
Foreign Government Obligations
3.1
Asset-Backed Securities
3.6
U.S. Government Obligations
16.8
Corporate Bonds & Notes
42.2
Mortgage-Backed Securities
79.6
</TABLE>
<TABLE>
<CAPTION>
ASSET-BACKED SECURITIES--3.6%
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------------------------------------------------------------------
<C> <S> <C>
Bayview Financial Revolving Mortgage Loan
Series 1999-1 Cl. M2
$10,000 7.920%--08/25/2029(2,8,10)............. $ 9,834
Firstplus Home Loan Owner Trust
Series 1998-2 Cl. A3
665 6.320%--11/10/2013(9,10)............... 664
Marlin Water Trust/Capital
7,400 7.090%--12/15/2001(2).................. 7,358
SLM Student Loan Marketing Association
Trust
Series 1995-1 Cl. A2
5,000 6.988%--10/25/2007(8,10)............... 4,975
Washington Mutual
Series 2000-1R Cl. A
2,786 6.780%--07/26/2003(2).................. 2,785
----------
TOTAL ASSET-BACKED SECURITIES
(Cost $25,653)...................................... 25,616
----------
<CAPTION>
CORPORATE BONDS & NOTES--42.2%
<C> <S> <C>
Allete
1,500 7.610%--10/20/2003(8).................... 1,500
Associates Corp. North America
5,000 6.780%--08/27/2001(8,10)............... 5,014
Banesto Del Inc.
3,000 8.250%--07/28/2002(10)................. 3,050
Bank One Corp. MTN(1)
Series B
6,600 6.895%--09/26/2003(8).................. 6,597
Banponce Corp.
2,000 6.750%--12/15/2005(10)................. 1,900
Cincinnati Financial Corp.
5,000 6.900%--05/15/2028(10)................. 4,377
Citicorp
10,625 7.125%--03/15/2004(10)................. 10,681
Cleveland Electric Illuminating Co.
Series B
2,000 9.500%--05/15/2005(10)................. 2,042
</TABLE>
<TABLE>
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------------------------------------------------------------------
<CAPTION>
CORPORATE BONDS & NOTES--CONTINUED
<C> <S> <C>
Credit Suisse First Boston
$10,000 6.500%--05/01/2008(2,10)............... $ 9,290
DaimlerChrysler North America Holding
10,000 6.899%--01/18/2002(8,10)............... 10,001
DaimlerChrysler North America Holding
MTN(1)
5,000 7.750%--05/27/2003(8,10)............... 5,069
DDTE Capital Corp.
10,000 7.110%--11/15/2003(2,7,10)............. 9,797
Enron Corp.
12,900 7.110%--09/10/2001(2,8)................ 12,904
First Chicago Corp. MTN(1)
10,000 6.740%--03/11/2002(8,10)............... 10,023
10,000 6.760%--06/26/2002(8,10)............... 9,996
----------
20,019
----------
Ford Motor Credit MTN(1)
20,000 6.950%--06/20/2003(8,10)............... 19,958
General Motors Acceptance Corp.
10,000 6.884%--04/29/2002(8,10)............... 10,003
5,000 5.750%--11/10/2003(10)................. 4,817
----------
14,820
----------
General Motors Acceptance Corp. MTN(1)
8,000 7.035%--12/17/2001(8,10)............... 8,029
3,000 5.550%--09/15/2003(10)................. 2,881
----------
10,910
----------
GMACCM Mortgage Trust I
Series 1999-D Cl. A
14,128 7.348%--09/20/2004(2,10)............... 14,115
Goldman Sachs Group LP MTN(1)
10,000 6.920%--02/20/2001(2,8,10)............. 10,007
Gulf STS Utilities Co.
400 8.210%--01/01/2002..................... 401
HMH Properties, Inc.
3,000 7.875%--08/01/2005..................... 2,865
International Game Technology
6,500 7.875%--05/15/2004(10)................. 6,370
Koninklijke KPN NV
E 1,100 5.163%--06/13/2002(8).................. 931
Korea Development Bank
10,000 4.796%--05/14/2001(8).................. 4,304
Lehman Brothers Holdings Inc. MTN(1)
$ 6,200 7.715%--04/02/2002(8,10)............... 6,252
Mexico Credit Link
5,000 12.282%--02/22/2002(8)................. 5,185
Meyer Fred Inc. New
5,000 7.150%--03/01/2003(10)................. 4,971
Nabors Industries Inc.
10,000 6.800%--04/15/2004(10)................. 9,892
Occidental Petroleum Corp.
5,000 6.400%--04/01/2003(7).................. 4,871
Old Kent Financial Corp.
10,000 7.750%--08/15/2010..................... 9,956
Providian Gateway Master Trust
6,700 6.900%--03/16/2009(8).................. 6,700
</TABLE>
25
<PAGE> 27
HARBOR BOND FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
<TABLE>
<CAPTION>
CORPORATE BONDS & NOTES--CONTINUED
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------------------------------------------------------------------
<C> <S> <C>
Salomon Brothers Mortgage Services VII
Inc.
$ 8,054 7.040%--11/15/2029(8).................. $ 8,078
Salomon Inc. CPI Bond(4)
5,346 3.650%--02/14/2002..................... 5,302
Sasco Floating Rate Mortgage
Series 1993-C3 Cl. D
8,775 7.220%--11/20/2001(2,8)................ 8,796
Tenet Healthcare Corp.
4,443 8.625%--12/01/2003..................... 4,477
Time Warner Inc.
450 7.975%--08/15/2004(10)................. 461
Toledo Edison Co.
2,000 8.700%--09/01/2002..................... 2,033
TRW Inc.
3,500 6.625%--06/01/2004(2).................. 3,349
Wells Fargo Bank NA
10,000 7.259%--05/02/2005(8).................. 9,988
Westdeutsche Landesbank Giroz
13,200 6.050%--01/15/2009(10)................. 12,056
WorldCom Inc.
13,250 8.875%--01/15/2006..................... 13,664
----------
TOTAL CORPORATE BONDS & NOTES
(Cost $308,390)..................................... 302,953
----------
<CAPTION>
FOREIGN GOVERNMENT OBLIGATIONS--3.1%
<C> <S> <C>
Federal Republic of Brazil
3,665 7.875%--01/01/2001(8).................. 3,662
13,376 7.625%--04/15/2006(8).................. 12,148
----------
15,810
----------
Federal Republic of Germany
E 510 6.250%--01/04/2024..................... 464
2,990 6.250%--01/04/2030..................... 2,806
----------
3,270
----------
United Mexican States
$ 1,430 7.570%--03/25/2005(8).................. 1,428
1,900 8.500%--02/01/2006..................... 1,869
----------
3,297
----------
TOTAL FOREIGN GOVERNMENT OBLIGATIONS
(Cost $22,748)...................................... 22,377
----------
<CAPTION>
MORTGAGE-BACKED SECURITIES--79.6%
<C> <S> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS
Chase Mortgage Financial Corp. REMIC(3)
Series 1993-N Cl. A9
3,000 6.750%--11/25/2024(10)................. 2,741
Collateralized Mortgage Securities Corp.
Series F Cl. 4
107 11.450%--11/01/2015.................... 107
Collateralized Mortgage Securities Corp.
REMIC(3)
Series 1988-4 Cl. B
121 8.750%--04/20/2019(10)................. 124
Countrywide Home Loan
Series 1997-6 Cl. A10
10,000 7.250%--11/25/2027(8,10)............... 9,638
</TABLE>
<TABLE>
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------------------------------------------------------------------
<CAPTION>
MORTGAGE-BACKED SECURITIES--CONTINUED
<C> <S> <C>
Drexel Burnham Lambert REMIC(3)
Series H Cl. 4
$ 5,292 8.500%--04/01/2017(10)................. $ 5,303
Federal Home Loan Mortgage Corp.
17,300 7.070%--11/15/2030..................... 17,293
Federal Home Loan Mortgage Corp.
Pass Thru Certificates
11,248 6.644%--08/01/2032(7,10)............... 10,891
Federal Home Loan Mortgage Corp. REMIC(3)
995 9.000%--12/15/2020(10)................. 1,025
2,877 8.000%--08/15/2022..................... 2,915
5,872 6.500%--02/15/2023(5).................. 779
10,000 6.000%--08/15/2026(10)................. 9,358
----------
14,077
----------
Federal National Mortgage Association
REMIC(3)
551 6.500%--02/25/2007(5,10)............... 27
576 6.000%--07/25/2017(5).................. 6
2,000 6.500%--12/25/2020(10)................. 1,966
7,658 7.000%--04/18/2027(10)................. 7,080
----------
9,079
----------
GE Capital Mortgage Services Inc.
Series 1994-6 Cl. A3
3,620 6.500%--12/25/2022..................... 3,262
Series 1998-17 Cl. A3
9,791 6.750%--10/25/2028(10)................. 9,147
----------
12,409
----------
Kidder Peabody Acceptance Corp. I
REMIC(3)
Series 1994-2 Cl. 1A2
1,032 8.911%--03/25/2024(7,10)............... 1,037
Norwest Asset Securities Corp. REMIC(3)
Series 1997-19 Cl. A8
6,200 7.250%--12/25/2027(10)................. 6,016
Series 1998-12 Cl. A9
5,000 6.750%--06/25/2028(10)................. 4,655
----------
10,671
----------
PNC Mortgage Securities Corp. REMIC(3)
Series 1998-14 Cl. 3A3
17,633 6.500%--02/25/2029..................... 16,140
Series 1999-4 Cl. 1A8
9,800 6.200%--06/25/2029..................... 9,562
----------
25,702
----------
PP & L Transition Bond Co. LLC
Series 1999-1 Cl. A4
10,000 6.720%--12/26/2005..................... 9,971
Prudential Home Mortgage Securities Co.
REMIC(3)
Series 1993-29 Cl. A8
5,639 6.750%--08/25/2008(10)................. 5,551
Residential Asset Securitization Trust
Series 1998-A13 Cl. 1A3
6,931 6.500%--12/25/2028(10)................. 6,285
Series 2000-A2 Cl. NB1
4,099 8.000%--04/25/2030(10)................. 4,136
----------
10,421
----------
</TABLE>
26
<PAGE> 28
HARBOR BOND FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
<TABLE>
<CAPTION>
MORTGAGE-BACKED SECURITIES--CONTINUED
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------------------------------------------------------------------
<C> <S> <C>
Residential Funding Mortgage Securities I
Inc.
Series 1997-S8 Cl. A9
$ 9,500 7.500%--06/25/2027(10)................. $ 9,428
Resolution Trust Corporation Mortgage
REMIC(3)
Pass Thru Certificate
Series 1991-3 Cl. 1L
2,436 8.690%--08/25/2021(8,10)............... 2,426
Sears Mortgage Securities Corp.
Series 92 Cl. A
363 7.431%--10/25/2022(2,8)................ 367
SLM Student Loan Trust
Series 1997-3 Cl. A1
4,542 6.838%--04/25/2006(8,10)............... 4,529
Series 1997-2 Cl. A1
1,719 6.778%--10/25/2005(2,8,10)............. 1,709
----------
6,238
----------
Small Business Administration
Pass Thru Certificate
2,000 7.449%--08/01/2010..................... 2,043
Structured Asset Mortgage Investments
Inc. REMIC(3)
Series 1998-9 Cl. 1A3
5,000 6.250%--11/25/2028..................... 4,481
2,700 7.398%--01/28/2030..................... 2,703
----------
7,184
----------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS............. 172,701
----------
OTHER MORTGAGE-BACKED SECURITIES
Asset Backed Securities Corp.
Series 1999
6,609 6.990%--06/21/2029(8,10)............... 6,632
EQCC Home Equity Loan Trust
Series 1999-2 Cl. A1F
1,817 6.050%--01/25/2010(10)................. 1,804
Federal Home Loan Mortgage Corp.
Pass Thru Certificates
39 8.000%--06/01/2011..................... 40
36 8.500%--02/01/2017(10)................. 36
640 7.431%--06/01/2024(7,10)............... 655
----------
731
----------
Federal Home Loan Mortgage Corp. TBA(6)
November Delivery
5,000 6.000%--12/13/2030..................... 4,903
9,000 7.000%--12/13/2030..................... 9,127
December Delivery
5,000 6.000%--12/13/2030..................... 4,692
15,000 7.000%--12/13/2030..................... 14,695
----------
33,417
----------
Federal Housing Authority Project
221 Grey 98-4
7,686 7.450%--05/01/2021(10)................. 7,668
221D4 Banco-5
688 7.400%--02/01/2021..................... 687
221D4 Banco-15
244 7.450%--05/01/2021..................... 244
223C Reilly-52
285 5.150%--06/01/2018..................... 258
----------
8,857
----------
</TABLE>
<TABLE>
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------------------------------------------------------------------
<CAPTION>
MORTGAGE-BACKED SECURITIES--CONTINUED
<C> <S> <C>
Federal National Mortgage Association
$20,800 5.560%--10/01/2040..................... $ 20,826
Federal National Mortgage Association
Pass Thru Certificates
69 9.000%--03/01/2005(10)................. 72
867 9.000%--11/01/2009(10)................. 894
6 8.500%--12/01/2009..................... 7
52 9.500%--04/01/2011..................... 54
----------
1,027
----------
Federal National Mortgage Association
TBA(6)
November Delivery
29,000 6.000%--11/13/2030..................... 27,197
3,000 7.000%--11/13/2030..................... 2,941
12,000 8.000%--11/13/2030..................... 12,147
10,000 8.500%--11/13/2030..................... 10,216
----------
52,501
----------
Government National Mortgage Association
I TBA(6)
November Delivery
30,400 6.000%--11/20/2030..................... 28,652
54,000 7.000%--11/20/2030..................... 53,258
57,000 7.500%--11/20/2030..................... 57,214
20,100 8.000%--11/20/2030..................... 20,428
57,000 6.500%--11/23/2030..................... 55,041
----------
214,593
----------
Government National Mortgage Association
II(7)
913 6.375%--03/20/2017(10)................. 921
385 6.750%--08/15/2017..................... 377
2,153 6.750%--08/20/2022(10)................. 2,177
1,398 6.750%--09/20/2023(10)................. 1,414
420 7.375%--05/20/2024(10)................. 424
44 6.750%--07/20/2024..................... 44
3,038 6.750%--09/20/2024(10)................. 3,073
254 7.125%--12/20/2024(10)................. 256
1,088 7.375%--01/20/2025(10)................. 1,098
847 7.375%--02/20/2025(10)................. 856
728 7.125%--10/20/2025..................... 734
1,981 7.125%--11/20/2025(10)................. 1,998
580 7.125%--12/20/2026(10)................. 585
4,667 6.750%--07/20/2027..................... 4,702
----------
18,659
----------
Government National Mortgage Association
II TBA(6)
November Delivery
15,000 7.000%--11/20/2030..................... 14,719
1,000 7.500%--11/20/2030..................... 998
20,000 8.000%--11/20/2030..................... 20,244
----------
35,961
----------
United Airlines
Pass Thru Certificate
Series 1993 Cl. C2
3,000 9.060%--06/17/2015(10)................. 3,014
----------
TOTAL OTHER MORTGAGE-BACKED SECURITIES................ 398,022
----------
TOTAL MORTGAGE-BACKED SECURITIES
(Cost $576,942)..................................... 570,723
----------
</TABLE>
27
<PAGE> 29
HARBOR BOND FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
<TABLE>
<CAPTION>
MORTGAGE-BACKED SECURITIES--CONTINUED
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------------------------------------------------------------------
<C> <S> <C>
<CAPTION>
U.S. GOVERNMENT OBLIGATIONS--16.8%
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------------------------------------------------------------------
<C> <S> <C>
U.S. Treasury Bond STRIPS(12)
$ 6,100 0.010%--02/15/2019..................... $ 2,058
68,100 0.010%--11/15/2021..................... 19,514
24,500 0.010%--11/15/2024..................... 5,929
----------
27,501
----------
U.S. Treasury Bonds
2,800 11.250%--02/15/2015.................... 4,200
6,000 9.125%--05/15/2018..................... 8,008
4,200 8.750%--08/15/2020..................... 5,520
8,000 8.125%--08/15/2021..................... 9,997
3,900 6.000%--02/15/2026..................... 3,910
1,700 6.500%--11/15/2026..................... 1,818
2,028 3.625%--04/15/2028(4).................. 1,950
12,800 5.500%--08/15/2028..................... 12,050
15,648 3.875%--04/15/2029(4).................. 15,717
----------
63,170
----------
U.S. Treasury Notes
23,293 3.625%--07/15/2002(4,10)............... 23,344
2,600 6.000%--08/15/2004..................... 2,611
763 3.375%--01/15/2007(4).................. 743
748 3.625%--01/15/2008(4).................. 736
1,053 3.875%--01/15/2009..................... 1,053
----------
28,487
----------
U.S. Treasury Security STRIPS(12)
2,900 0.000%--02/15/2015(11)................. 1,243
----------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $120,505)..................................... 120,401
----------
<CAPTION>
OPTIONS--0.0%
(Cost $15)
NUMBER OF
CONTRACTS
------------------------------------------------------------------
<C> <S> <C>
U.S. Treasury Notes 10 Yr. Futures
Contracts
700 Expire 11/2000......................... 11
----------
<CAPTION>
SHORT-TERM INVESTMENTS--8.4%
<C> <S> <C>
<CAPTION>
PRINCIPAL
AMOUNT
(000S)
------------------------------------------------------------------
<C> <S> <C>
COMMERCIAL PAPER
Abbey National
$ 1,200 6.580%--01/19/2001..................... 1,183
Alcoa Inc.
1,800 6.490%--12/12/2000..................... 1,787
</TABLE>
<TABLE>
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
------------------------------------------------------------------
<CAPTION>
SHORT-TERM INVESTMENTS--CONTINUED
AMOUNT
(000S)
------------------------------------------------------------------
<C> <S> <C>
American Express Credit Corp. Yrs 1&2
$ 1,800 6.530%--11/15/2000..................... $ 1,795
ANZ Delaware Inc.
1,400 6.530%--11/03/2000..................... 1,400
Associates Corp. NA
8,100 6.530%--01/10/2001..................... 7,997
Bank One Corp.
1,000 6.540%--12/19/2000..................... 991
9,000 6.590%--01/10/2001..................... 8,886
----------
9,877
----------
DaimlerChrysler AG
1,200 6.530%--11/22/2000..................... 1,195
Gannett Co. Inc.
1,100 6.550%--11/08/2000..................... 1,099
1,100 6.550%--11/21/2000..................... 1,096
----------
2,195
----------
General Electric Capital Corp.
1,000 6.530%--11/29/2000..................... 995
900 6.530%--12/20/2000..................... 892
700 6.550%--01/10/2001..................... 691
----------
2,578
----------
National Rural Utilities
1,100 6.600%--01/09/2001..................... 1,086
Verizon Communications Inc.
1,300 6.480%--11/09/2000..................... 1,298
200 6.510%--12/19/2000..................... 198
600 6.560%--01/19/2001..................... 591
----------
2,087
----------
TOTAL COMMERCIAL PAPER................................ 33,180
----------
REPURCHASE AGREEMENT
Repurchase Agreement with State Street
Bank & Trust dated October 31, 2000 due
November 1, 2000 at 6.00%
collateralized by a U.S. Treasury Bill
10.375% due November 15, 2012, par
value of $20,535 (repurchase proceeds
of $26,596 when
26,071 closed on November 1, 2000).............. 26,071
----------
U.S. TREASURY BILLS
U.S. Treasury Bills
950 6.190%--02/01/2001..................... 933
----------
TOTAL SHORT-TERM INVESTMENTS
(Cost $60,184)...................................... 60,184
----------
TOTAL INVESTMENTS--153.7%
(Cost $1,114,437)................................... 1,102,265
CASH AND OTHER ASSETS, LESS LIABILITIES--(53.7%)...... (385,010)
----------
TOTAL NET ASSETS--100.0%.............................. $ 717,255
==========
</TABLE>
28
<PAGE> 30
HARBOR BOND FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
SWAP AGREEMENTS WHICH WERE OPEN AT OCTOBER 31, 2000 ARE AS FOLLOWS:
<TABLE>
<CAPTION>
UNREALIZED
PAR VALUE (DEPRECIATION)
(000S) DESCRIPTION COUNTERPARTY (000S)
--------- ----------- ------------------------ --------------
<C> <S> <C> <C>
Y580,000 To make or receive semi-annual payments through 04/14/2008 Goldman Sachs Capital
based on the difference between (A) the 10 year fixed Markets New York
interest rate of 2.295% over (B) the 10 year floating rate
adjusted every six months based upon the JPY-LIBOR-BBA. $(222)
377,000 To make or receive semi-annual payments through 04/15/2008 Goldman Sachs Capital
based on the difference between (A) the 10 year fixed Markets New York
interest rate of 2.305% over (B) the 10 year floating rate
adjusted every six months based upon the JPY-LIBOR-BBA. (146)
E 510 To make or receive semi-annual payments through 01/04/2024 J.P. Morgan Securities
based on the difference between (A) the 10 year fixed
interest rate of 6.250% over (B) the 10 year floating rate
adjusted every six months based upon the EUR-LIBOR-BBA. (83)
2,380 To make or receive semi-annual payments through 01/04/2009 J.P. Morgan Securities
based on the difference between (A) the 10 year fixed
interest rate of 6.000% over (B) the 10 year floating rate
adjusted every six months based upon the EUR-LIBOR-BBA. (31)
1,790 To make or receive semi-annual payments through 05/22/2030 Goldman Sachs Capital
based on the difference between (A) the 10 year fixed Markets New York
interest rate of 6.175% over (B) the 10 year floating rate
adjusted every six months based upon the EUR-LIBOR-BBA. (17)
$ 1,570 To make or receive semi-annual payments through 11/15/2021 Lehman Brothers
based on the difference between (A) the 10 year fixed
interest rate of 5.961% over (B) the 10 year floating rate
adjusted every three months based upon the EUR-LIBOR-BBA. (29)
9,980 To make or receive semi-annual payments through 11/15/2021 Bank of America
based on the difference between (A) the 10 year fixed Securities
interest rate of 6.680% over (B) the 10 year floating rate
adjusted every three months based upon the EUR-LIBOR-BBA. (141)
1,330 To make or receive semi-annual payments through 11/15/2021 Lehman Brothers
based on the difference between (A) the 10 years fixed
interest rate of 5.980% over (B) the 10 year floating rate
adjusted every three months based upon the EUR-LIBOR-BBA. (35)
3,170 To make or receive semi-annual payments through 11/15/2021 Lehman Brothers
based on the difference between (A) the 10 year fixed
interest rate of 6.690% over (B) the 10 year floating rate
adjusted every three months based upon the EUR-LIBOR-BBA. (81)
-----
$(785)
=====
</TABLE>
FUTURES CONTRACTS WHICH WERE OPEN AT OCTOBER 31, 2000 ARE AS FOLLOWS:
<TABLE>
<CAPTION>
AGGREGATE UNREALIZED
NUMBER OF FACE VALUE APPRECIATION
DESCRIPTION CONTRACTS (000S) EXPIRATION DATE (000S)
----------- --------- ---------- --------------- ------------
<S> <C> <C> <C> <C>
U.S. Treasury Bond--20 Yr. (Buy)........................ 57 $ 5,700 Dec-00 $ 42
U.S. Treasury Note--10 Yr. (Buy)........................ 390 39,000 Dec-00 234
Municipal Bond Index Futures (Buy)...................... 68 6,770 Dec-00 106
Federal Republic of Germany Bonds--10 Yr. (Sell)........ 83 E 8,300 Dec-00 29
Federal Republic of Germany Bonds--10 Yr. (Buy)......... 722 72,200 Dec-00 120
United Kingdom Treasury Bonds--3 Mo. (Sell)............. 54 L 5,400 Dec-00 6
-----
$ 537
=====
</TABLE>
WRITTEN OPTIONS WHICH WERE OPEN AT OCTOBER 31, 2000 ARE AS FOLLOWS:
<TABLE>
<CAPTION>
NUMBER OF
SHARES/ STRIKE VALUE
DESCRIPTION CONTRACTS PRICE EXPIRATION DATE (000S)
----------- --------- ------ --------------- ------------
<S> <C> <C> <C> <C>
U.S. Treasury Notes--10 Yr. Futures (Put)............. 114 $ 98.00 Nov-00 $ (4)
U.S. Treasury Notes--10 Yr. Futures (Put)............. 55 97.00 Nov-00 (1)
U.S. Treasury Notes--10 Yr. Futures (Call)............ 192........ 103.00... Nov-00.... (6)
U.S. Treasury Notes--10 Yr. Futures (Call)............ 152 102.00 Nov-00 (19)
Japanese Government Bonds--10 Yr. Futures (Call)...... 8 134.00 Nov-00 (10)
Swap Options--6 Mo. Libor (Put)....................... 200,000,000 2.31 Nov-00 (15)
Swap Options--6 Mo. Libor (Put)....................... 200,000,000 2.32 Nov-00 (15)
Eurodollar Futures (Put).............................. 55 92.25 Dec-00 --
Eurodollar Futures (Put).............................. 168 92.25 Mar-01 (2)
Eurodollar Futures (Call)............................. 351 93.25 Mar-01 (246)
-----
Written options outstanding, at value (premiums
received of $346)................................... $(318)
=====
</TABLE>
29
<PAGE> 31
HARBOR BOND FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
TBA SALE COMMITMENTS WHICH WERE OPEN AT OCTOBER 31, 2000 ARE AS FOLLOWS:
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT COUPON MARKET VALUE
DESCRIPTION (000S) RATE DELIVERY DATE (000S)
----------- --------- ------ ------------- --------------
<S> <C> <C> <C> <C>
Federal National Mortgage Assoc. ................... $ 2,500 8.00% Nov-00 $ 3,039
Federal Home Loan Mortgage Corp. ................... 20,400 6.00% Nov-00 4,903
Federal Home Loan Mortgage Corp. ................... 2,400 7.00% Nov-00 8,113
Government National Mortgage Assoc. I............... 41,000 8.00% Nov-00 5,184
Government National Mortgage Assoc. I............... 12,200 7.50% Nov-00 502
-------
TBA Sale Commitments at Value (proceeds receivable
$21,345).......................................... $21,741
=======
</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,
2000, these securities were valued at $90,311 or 12.59% of net assets.
3 REMICs are CMOs which can hold mortgages secured by any type of real
property and issue multiple-class securities backed by those mortgages.
4 Treasury inflation-protected securities (TIPS) are securities in which the
principal amount is adjusted for inflation and interest payments are applied
to the inflation-adjusted principal.
5 Interest only (IO) securities represent the right to receive the monthly
interest payments on an underlying pool of mortgage loans. These are subject
to the risk of accelerated principal paydowns. The 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, 2000. Although the unit price for
the trades has been established, the principal value has not been finalized.
However, the amount of the commitments will not fluctuate more than 2% from
the principal amount. Income on TBA's is not earned until settlement date.
(See Note 2 to the Financial Statements.)
7 Variable rate security. The stated rate represents the rate in effect at
October 31, 2000.
8 Floating rate security. The stated rate represents the rate in effect at
October 31, 2000.
9 Step Coupon security. The rate will step 1.07% per month until the coupon
reaches 15%.
10 At October 31, 2000, securities held by the Fund were pledged to cover
margin requirements for open future contracts and written options on futures
contracts. (See Note 2 to the Financial Statements.) The securities pledged
had an aggregate market value of $367,011.
11 Zero coupon bond.
12 Separate trading of registered interest and principal of securities (STRIPS)
is a prestripped zero-coupon bond that is a direct obligation of the U.S.
Treasury.
E Euro.
Y Japanese Yen.
L British Pound.
The accompanying notes are an integral part of the financial statements.
30
<PAGE> 32
HARBOR SHORT DURATION FUND
PORTFOLIO OF INVESTMENTS--OCTOBER 31, 2000
TOTAL INVESTMENTS (% OF NET ASSETS)
(Excludes net cash and short-term investments of 15.8%)
<TABLE>
<S> <C>
Options
0.1
Corporate Bonds & Notes
3.2
Mortgage-Backed Securities
3.9
U.S. Government Obligation
5.6
Asset-Backed Securities
71.4
</TABLE>
<TABLE>
<CAPTION>
ASSET-BACKED SECURITIES--71.4%
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
-----------------------------------------------------------------
<C> <S> <C>
Arcadia Automobile Receivables Trust
Series 1998-B Cl. A5
$ 5,500 6.060%--06/15/2006(4).................... $ 5,440
Beneficial Home Equity Loan Trust
Series 1996-1 Cl. A
1,532 6.800%--04/28/2026(3,4).................. 1,533
BMW Vehicle Owner Trust
Series 1999-A Cl. A2
1,955 6.160%--12/25/2001(4).................... 1,953
Bombardier Receivables Master Trust I
Series 1997-1 Cl. A
6,000 6.740%--04/15/2004(3,4).................. 6,009
Campobello Master Trust
Series 1999-1A Cl. B
3,000 7.170%--12/15/2006(1,3,4)................ 2,998
Capital Auto Receivables Asset Trust
Series 2000-1 Cl. A2
5,000 6.810%--02/17/2003(4).................... 5,003
CIT Marine Trust
Series 1999-A Cl. A
2,000 5.800%--04/15/2010(4).................... 1,962
CIT RV Trust
Series 1999-A Cl. A3
3,300 5.960%--04/15/2011....................... 3,255
CNH Equipment Trust
Series 2000-B Cl. A2
5,000 6.870%--02/15/2004(4).................... 4,995
Citibank Credit Card Master Trust
Series 1996-1 Cl. A
4,000 1.522%--02/07/2003(4).................... 3,931
Felco Funding II LLC
Series 2000-1 Cl. A3
4,000 7.585%--06/15/2004(1,4).................. 4,046
Green Tree Financial Corp.
Pass Thru Certificates
Series 1996-10 Cl. A4
1,704 6.420%--11/15/2028....................... 1,699
</TABLE>
<TABLE>
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
-----------------------------------------------------------------
<CAPTION>
ASSET-BACKED SECURITIES--CONTINUED
<C> <S> <C>
Green Tree Home Equity Loan Trust
Series 1998-A Cl. A2
$ 344 6.040%--06/15/2029....................... $ 344
Honda Auto Lease Trust
Series 1999-A Cl. A5
6,000 6.650%--07/15/2005(4).................... 5,981
Household Automotive Trust
Series 2000-3 Cl. A2
5,000 6.960%--10/17/2003....................... 5,009
Ikon Receivables LLC
Series 1999-1 Cl. A4
2,975 6.230%--05/15/2005....................... 2,930
Lakeshore Commercial Loan Master Trust
Series 1998-AA Cl. B1
4,000 7.068%--07/25/2007(1).................... 3,959
Leaf Master Trust I
Series 1999-1 Cl. A1
5,000 6.980%--11/15/2004(1,3,4)................ 5,002
Metris Master Trust
Series 1998-1A Cl. B
4,000 7.074%--08/20/2005(1,3,4)................ 3,994
Navistar Financial Owner Trust
Series 2000 Cl. A2
4,000 6.660%--10/15/2003....................... 4,000
Norwest Asset Securities Corp.
Pass Thru Certificates
Series 1999-16 Cl. A1
6,000 6.000%--06/25/2029(4).................... 5,927
Premier Auto Trust
Series 1999-3 Cl. A2
1,280 5.820%--02/08/2002....................... 1,279
Rental Car Finance Corp.
Series 1997-1 Cl. A1
2,963 6.250%--06/25/2003(1,4).................. 2,955
Signet Helco Trust
Series 1995-A Cl. A
1,111 6.894%--06/20/2004(3).................... 1,113
Toyota Auto Receivables Owner Trust
Series 2000-A Cl. A2
4,000 7.120%--12/15/2002(4).................... 4,011
--------
TOTAL ASSET-BACKED SECURITIES
(Cost $89,115)....................................... 89,328
--------
<CAPTION>
CORPORATE BONDS & NOTES--3.2%
(Cost $4,000)
<C> <S> <C>
AERCO Ltd. Cl. A
4,000 7.080%--07/15/2025(1).................... 4,004
--------
</TABLE>
31
<PAGE> 33
HARBOR SHORT DURATION FUND
PORTFOLIO OF INVESTMENTS--CONTINUED
<TABLE>
<CAPTION>
CORPORATE BONDS & NOTES--CONTINUED
AMOUNT VALUE
(000S) (000S)
-----------------------------------------------------------------
<C> <S> <C>
<CAPTION>
MORTGAGE-BACKED SECURITIES--3.9%
<C> <S> <C>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
-----------------------------------------------------------------
<C> <S> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS
Contimortgage Home Equity Loan Trust
Pass Thru Certificates
Series 1998-3 Cl. A10
$ 1,842 5.840%--05/15/2016(4).................... $ 1,823
Federal National Mortgage Association
REMIC(2)
Series 1996-70 Cl. PD
2,000 6.250%--07/25/2018....................... 1,983
GT Manufactured Housing
Pass Thru Certificates
Series 1999-1 Cl. A2
1,107 5.430%--11/01/2006....................... 1,106
--------
TOTAL MORTGAGE-BACKED SECURITIES
(Cost $4,936)........................................ 4,912
--------
<CAPTION>
U.S. GOVERNMENT OBLIGATION--5.6%
<C> <S> <C>
(Cost $6,982)
U.S. Treasury Notes
7,000 5.750%--10/31/2002....................... 6,979
--------
<CAPTION>
OPTIONS--0.1%
<C> <S> <C>
(Cost $110)
<CAPTION>
NO. OF
CONTRACTS
-----------------------------------------------------------------
<C> <S> <C>
Eurodollar Futures Contracts
375 Expire 12/2000........................... 113
--------
<CAPTION>
SHORT-TERM INVESTMENTS--23.1%
<C> <S> <C>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
-----------------------------------------------------------------
<C> <S> <C>
COMMERCIAL PAPER
Rabobank Nederland
$ 4,000 6.825%--08/28/2001....................... $ 3,999
--------
REPURCHASE AGREEMENT
Repurchase Agreement with State Street Bank
& Trust dated October 31, 2000 due
November 1, 2000 at 6.43% collateralized
by a U.S. Treasury Bill 10.75% due
February 15, 2003, par value of $22,100
(repurchase proceeds of $24,800 when
closed on
24,309 November 1, 2000)........................ 24,309
--------
U.S. TREASURY BILLS
U.S. Treasury Bills
500 6.161%--11/02/2000(4).................... 500
--------
TOTAL SHORT-TERM INVESTMENTS
(Cost $28,808)....................................... 28,808
--------
TOTAL INVESTMENTS--107.3%
(Cost $133,951)...................................... 134,144
CASH AND OTHER ASSETS, LESS LIABILITIES--(7.3%)........ (9,112)
--------
TOTAL NET ASSETS--100.0%............................... $125,032
========
</TABLE>
------------------------------------------------------------
FUTURES CONTRACTS WHICH WERE OPEN AT OCTOBER 31, 2000 ARE AS FOLLOWS:
<TABLE>
<CAPTION>
NUMBER OF AGGREGATE FACE VALUE UNREALIZED APPRECIATION/
DESCRIPTION CONTRACTS (000S) EXPIRATION DATE (DEPRECIATION) (000S)
----------- --------- -------------------- --------------- ------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Note--5 Yr.
(Buy)......................... 10 1,$000 Dec-00 $ 4
U.S. Treasury Note--2 Yr.
(Buy)......................... 58 11,600 Dec-00 16
Eurodollar Futures (Buy)........ 78 19,500 Dec-00 (229)
Eurodollar Futures (Sell)....... 78 19,500 Dec-00 203
Libor One Month (Buy)........... 100 25,000 Dec-00 2
Libor One Month (Sell).......... 100 25,000 Dec-00 (96)
-----
$(100)
=====
</TABLE>
WRITTEN OPTIONS WHICH WERE OPEN AT OCTOBER 31, 2000 ARE AS FOLLOWS:
<TABLE>
<CAPTION>
NUMBER OF VALUE
DESCRIPTION SHARES/CONTRACTS STRIKE PRICE EXPIRATION DATE (000S)
----------- ---------------- ------------ --------------- ------------------------
<S> <C> <C> <C> <C>
Eurodollar Futures (Call)....... 75 93$.25 Dec-00 $ (12)
Eurodollar Futures (Call)....... 150 93.00 Dec-00 (111)
Eurodollar Futures (Put)........ 225 93.00 Dec-00 (3)
-----
Written options outstanding, at
value (premiums received of
$147) $(126)
=====
</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,
2000, these securities were valued at $26,958 or 21.56% of net assets.
2 REMICs are CMOs which can hold mortgages secured by any type of real property
and issue multiple-class securities backed by those mortgages.
3 Floating rate security. The stated rate represents the rate in effect at
October 31, 2000.
4 At October 31, 2000, securities held by the Fund were pledged to cover margin
requirements for open futures and written options contracts. (See Note 2 to
the Financial Statements.) The securities pledged had an aggregate market
value of $63,823.
The accompanying notes are an integral part of the financial statements.
32
<PAGE> 34
HARBOR MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS--OCTOBER 31, 2000
INVESTMENT HOLDINGS BY COUNTRY (% OF NET ASSETS)
(Excludes net cash of 0.2%)
<TABLE>
<S> <C>
Repurchase Agreement
0.9
Bank Obligations
25.5
Commercial Paper
73.4
</TABLE>
<TABLE>
<CAPTION>
BANK OBLIGATIONS--25.5%
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
-----------------------------------------------------------------
<C> <S> <C>
Bank Austria AG NY
$4,000 6.650%--02/02/2001......................... $ 4,000
Bayerische Hypoveren Bank
4,000 6.550%--12/11/2000......................... 4,000
4,000 7.250%--05/14/2001......................... 4,000
--------
8,000
--------
CommerzBank AG
3,000 6.880%--04/30/2001......................... 3,000
Dresdner Bank AG
4,000 7.030%--11/30/2000......................... 4,000
LandesBank Baden
4,000 6.670%--04/03/2001......................... 4,000
Morgan Guaranty Trust Co. NY
4,000 6.830%--01/05/2001......................... 4,000
--------
TOTAL BANK OBLIGATIONS
(Cost $27,000)....................................... 27,000
--------
<CAPTION>
COMMERCIAL PAPER--73.4%
<C> <S> <C>
ABN Amro North America
3,000 6.582%--04/18/2001......................... 2,911
Bank of America Corp.
4,000 6.800%--02/05/2001......................... 4,000
Banque Et Caisse D'Epargne
4,000 6.700%--01/25/2001......................... 3,939
Banque Generale Du Luxembourg
2,000 6.811%--01/10/2001......................... 1,975
British Telecommunications plc
4,000 6.664%--02/12/2001......................... 3,925
Den Danske Bank
4,000 6.594%--11/01/2000......................... 4,000
Deutsche Bank AG
4,000 6.621%--02/12/2001......................... 3,926
Fairway Financial Corp. Yrs 1&2
2,500 6.852%--01/24/2001......................... 2,462
</TABLE>
<TABLE>
PRINCIPAL
AMOUNT VALUE
(000S) (000S)
-----------------------------------------------------------------
<CAPTION>
COMMERCIAL PAPER--CONTINUED
<C> <S> <C>
Guardian Industries Corp.
$4,196 6.695%--11/27/2000......................... $ 4,176
Honeywell International Inc.
4,000 6.612%--12/11/2000......................... 3,971
ING America Insurance
3,800 6.657%--01/17/2001......................... 3,747
International Lease Finance Corp.
4,000 6.550%--11/09/2000......................... 3,994
J.P. Morgan & Co. Inc.
4,000 6.631%--11/01/2000......................... 4,000
Lloyds TSB Group plc
4,000 6.727%--12/13/2000......................... 3,970
National Bank of Canada
2,500 6.710%--03/12/2001......................... 2,500
National Rural Utilities
3,500 6.665%--03/28/2001......................... 3,408
Paccar Financial Corp.
4,000 6.588%--11/15/2000......................... 3,990
Province De Quebec
4,000 6.967%--11/22/2000......................... 3,984
San Paolo U.S. Finance Co.
4,000 6.628%--01/24/2001......................... 3,939
Svenska Handelsbanken Inc.
3,500 6.913%--12/11/2000......................... 3,474
Swedbank Forenings
3,500 6.976%--03/09/2001......................... 3,417
Woolwich plc
2,000 6.863%--01/18/2001......................... 1,971
--------
TOTAL COMMERCIAL PAPER
(Cost $77,679)....................................... 77,679
--------
<CAPTION>
REPURCHASE AGREEMENT--0.9%
(Cost $967)
<C> <S> <C>
Repurchase Agreement with State Street Bank
& Trust dated October 31, 2000 due
November 1, 2000 at 6.43% collateralized
by a U.S. Treasury Bill 10.75% due
February 15, 2003, par value of $880
(repurchase proceeds of $988 when closed
967 on November 1, 2000)..................... 967
--------
TOTAL INVESTMENTS--99.8%
(Cost $105,646) (1).................................. 105,646
CASH AND OTHER ASSETS, LESS LIABILITIES--0.2%.......... 247
--------
TOTAL NET ASSETS--100.0%............................... $105,893
========
</TABLE>
------------
1 The aggregate identified cost on a tax basis is the same.
The accompanying notes are an integral part of the financial statements.
33
<PAGE> 35
HARBOR FUND
STATEMENT OF ASSETS AND LIABILITIES--OCTOBER 31, 2000
(All amounts in Thousands, except per share amount)
<TABLE>
<CAPTION>
HARBOR
HARBOR INTERNATIONAL
GROWTH GROWTH
------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
INVESTMENTS, AT IDENTIFIED COST*............................ $180,285 $1,248,737
------------------------------------------------------------------------------------------
Investments, at value....................................... $274,150 $1,263,808
Repurchase agreements....................................... -- --
Cash........................................................ 1 --
Cash on deposit with broker for investments sold short...... -- --
Foreign currency, at value (cost: $0; $0; $0; $105; $2,973;
$0; $16; $0; $0).......................................... -- --
Receivables for:
Investments sold.......................................... -- 8,381
Capital shares sold....................................... 1,787 11,339
Dividends................................................. -- 591
Interest.................................................. 59 7
Variation margin on futures contracts..................... -- --
Written options........................................... -- --
Deferred organization costs................................. -- --
Withholding tax receivable.................................. -- 817
Other assets................................................ 2 5
------------------------------------------------------------------------------------------
TOTAL ASSETS.......................................... 275,999 1,284,948
LIABILITIES
Payables for:
Investments purchased..................................... -- 31,922
Capital shares reacquired................................. 140 4,786
Dividends to shareholders................................. -- --
Investments sold short, at value (proceeds $0; $0; $0; $0;
$0; $11,737; $0; $0; $0)................................ -- --
Written options, at value (premiums received $0; $0; $0;
$0; $0; $0; $346; $147; $0)............................. -- --
Swap agreements........................................... -- --
Interest on swap agreements............................... -- --
Variation margin on futures contracts..................... -- --
Dividends payable on investments sold short............... -- --
Accrued expenses:
Adviser's fees............................................ 239 729
Trustees' fees............................................ 1 4
Transfer agent's fees..................................... 18 38
Other..................................................... 2 387
TBA sale commitments at value (proceeds receivable $0; $0;
$0; $0; $0; $0; $21,345; $0; $0)........................ -- --
------------------------------------------------------------------------------------------
TOTAL LIABILITIES..................................... 400 37,866
NET ASSETS.................................................. $275,599 $1,247,082
------------------------------------------------------------------------------------------
Net assets consist of:
Paid-in capital........................................... $164,277 $1,131,424
Undistributed/(overdistributed) net investment income..... 39 218
Accumulated net realized gain/(loss)...................... 17,418 100,502
Unrealized appreciation/(depreciation) of investments,
swap agreements, written options, foreign currency,
investments sold short and translation of assets and
liabilities in foreign currencies....................... 93,865 14,938
Unrealized appreciation/(depreciation) of futures and
foreign forward currency contracts...................... -- --
------------------------------------------------------------------------------------------
$275,599 $1,247,082
------------------------------------------------------------------------------------------
Shares of beneficial interest............................... 11,373 71,013
Net asset value, offering and redemption price per share.... $ 24.23 $ 17.56
</TABLE>
------------
* Including repurchase agreements and short-term investments.
The accompanying notes are an integral part of the financial statements.
34
<PAGE> 36
<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>
$8,006,608 $115,612 $2,932,560 $142,187 $1,114,437 $133,951 $105,646
--------------------------------------------------------------------------------------------------------
$9,345,478 $123,754 $4,805,302 $144,587 $1,076,194 $109,835 $104,679
-- -- -- 146 26,071 24,309 967
1 2,743 1 -- 3,565 -- 1
-- -- -- 12,933 -- -- --
-- 106 3,011 -- 16 -- --
114,293 1,037 68 4,019 68,757 -- --
19,217 2,421 16,715 390 4,071 47 300
926 12 7,643 184 -- -- --
71 -- 258 -- 7,163 373 804
-- -- -- 268 6 3 --
-- -- -- -- 4 -- --
-- 3 -- -- -- -- --
-- 231 8,236 -- -- -- --
10 5 10 67 50 9 2
--------------------------------------------------------------------------------------------------------
9,479,996 130,312 4,841,244 162,594 1,185,897 134,576 106,753
365,675 2,424 69 1,661 443,740 4,000 --
9,353 951 5,200 780 1,220 5,385 793
-- -- -- -- -- 7 40
-- -- -- 12,112 -- -- --
-- -- -- -- 318 126 --
-- -- -- -- 785 -- --
-- -- -- -- 298 -- --
-- -- -- -- 193 -- --
-- -- -- 24 -- -- --
4,289 66 3,371 63 285 22 13
22 -- 13 -- 2 -- --
198 9 146 7 27 1 14
142 36 2,170 332 33 3 --
-- -- -- -- 21,741 -- --
--------------------------------------------------------------------------------------------------------
379,679 3,486 10,969 14,979 468,642 9,544 860
9,100,317
$ $126,826 $4,830,275 $147,615 $ 717,255 $125,032 $105,893
--------------------------------------------------------------------------------------------------------
$6,666,382 $112,349 $2,445,343 $146,159 $ 731,994 $150,642 $105,895
-- 13 50,361 47 2,316 61 --
1,095,064 6,350 462,897 (69) (3,621) (25,905) (2)
1,338,871 8,114 1,871,674 2,171 (13,971) 214 --
-- -- -- (693) 537 20 --
--------------------------------------------------------------------------------------------------------
$9,100,317 $126,826 $4,830,275 $147,615 $ 717,255 $125,032 $105,893
--------------------------------------------------------------------------------------------------------
188,957 8,880 124,320 10,632 65,199 14,694 105,893
$ 48.16 $ 14.28 $ 38.85 $ 13.88 $ 11.00 $ 8.51 $ 1.00
</TABLE>
35
<PAGE> 37
HARBOR FUND
STATEMENT OF OPERATIONS--YEAR ENDED OCTOBER 31, 2000
(All Amounts in Thousands)
<TABLE>
<CAPTION>
HARBOR
HARBOR INTERNATIONAL
GROWTH GROWTH
-------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends................................................. $ 59 $ 14,096
Interest.................................................. 2,239 2,751
Foreign taxes withheld.................................... -- (1,955)
-------------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME................................... 2,298 14,892
OPERATING EXPENSES:
Investment advisory fees.................................. 1,926 11,241
Shareholder communications................................ 29 81
Custodian fees............................................ 45 1,453
Transfer agent fees....................................... 180 473
Professional fees......................................... 39 59
Trustees' fees and expenses............................... 2 16
Registration fees......................................... 25 77
Amortization of organization costs........................ -- --
Insurance................................................. 3 6
Miscellaneous............................................. 12 23
-------------------------------------------------------------------------------------------
Total operating expenses............................... 2,261 13,429
Advisory fee waived....................................... -- --
Other expense reimbursements and reductions............... (9) (48)
-------------------------------------------------------------------------------------------
Net operating expenses................................. 2,252 13,381
Dividend expense on investments sold short................ -- --
-------------------------------------------------------------------------------------------
NET INVESTMENT INCOME/(LOSS)................................ 46 1,511
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENT
TRANSACTIONS:
Net realized gain/(loss) on:
Investments............................................ 20,777 147,960
Foreign currency transactions.......................... -- (1,000)
Investments sold short................................. -- --
Swap agreements........................................ -- --
Futures contracts...................................... -- --
Written options........................................ -- --
Change in net unrealized appreciation/(depreciation) on:
Investments, foreign currency, written options and
investments sold short................................ 40,500 (142,082)
Swap agreements........................................ -- --
Futures contracts...................................... -- --
Foreign forward currency contracts..................... -- --
Translation of assets and liabilities in foreign
currencies............................................ -- (131)
-------------------------------------------------------------------------------------------
Net gain/(loss) on investment transactions................ 61,277 4,747
-------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS...... $61,323 $ 6,258
-------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
36
<PAGE> 38
<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>
$ 31,187 $ 2,468 $ 129,316 $3,457 $ -- $ -- $ --
20,363 138 11,159 928 42,851 11,367 6,269
(450) (354) (17,228) -- (3) -- --
---------------------------------------------------------------------------------------------
51,100 2,252 123,247 4,385 42,848 11,367 6,269
53,081 955 45,279 881 4,441 725 299
408 14 313 12 62 3 23
742 151 4,580 104 145 40 28
2,254 97 1,843 93 328 17 170
135 46 97 38 62 57 26
93 1 53 1 6 2 --
257 27 16 26 73 34 35
-- 4 -- -- -- -- --
11 3 13 3 5 3 2
70 11 52 12 16 12 11
---------------------------------------------------------------------------------------------
57,051 1,309 52,246 1,170 5,138 893 594
-- (129) (3,396) -- (1,334) (361) (120)
(187) (7) (61) (3) (17) (28) (9)
---------------------------------------------------------------------------------------------
56,864 1,173 48,789 1,167 3,787 504 465
-- -- -- 236 -- -- --
---------------------------------------------------------------------------------------------
(5,764) 1,079 74,458 2,982 39,061 10,863 5,804
1,254,783 9,289 528,844 1,585 5,480 (943) 7
-- 229 (4,180) -- (5,164) -- --
-- -- -- 437 1,864 -- --
-- -- -- -- 368 -- --
-- 75 -- 706 (10) (566) --
-- -- -- -- 1,045 (43) --
(601,183) (2,057) (368,787) (837) 1,040 888 --
-- -- -- -- (595) -- --
-- -- -- (915) 440 88 --
-- -- -- -- (207) -- --
-- 21 424 -- (691) -- --
---------------------------------------------------------------------------------------------
653,600 7,557 156,301 976 3,570 (576) 7
---------------------------------------------------------------------------------------------
$ 647,836 $ 8,636 $ 230,759 $3,958 $42,631 $10,287 $5,811
---------------------------------------------------------------------------------------------
</TABLE>
37
<PAGE> 39
HARBOR FUND
STATEMENT OF CHANGES IN NET ASSETS
(All amounts in Thousands)
<TABLE>
<CAPTION>
HARBOR HARBOR
GROWTH INTERNATIONAL GROWTH
------------------------- -------------------------
NOVEMBER 1, NOVEMBER 1, NOVEMBER 1, NOVEMBER 1,
1999 1998 1999 1998
THROUGH THROUGH THROUGH THROUGH
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
2000 1999 2000 1999
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS:
Operations:
Net investment income/(loss)..................... $ 46 $ (572) $ 1,511 $ 10,391
Net realized gain/(loss) on investments, foreign
currency transactions, investments sold short,
swap agreements, futures contracts and written
options........................................ 20,777 11,014 146,960 99,609
Net unrealized appreciation/(depreciation) of
investments, written options, investments sold
short, swap agreements, futures contracts,
forward foreign currency contracts and
translation of assets and liabilities in
foreign currencies............................. 40,500 51,584 (142,213) (19,524)
-----------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS....................................... 61,323 62,026 6,258 90,476
-----------------------------------------------------------------------------------------------------------
Distributions to shareholders:
Net investment income............................ -- -- (9,899) (7,338)
Net realized gain on investments................. (10,441) (8,237) (98,795) (18,126)
-----------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS.............. (10,441) (8,237) (108,694) (25,464)
-----------------------------------------------------------------------------------------------------------
Capital share transactions:
Net proceeds from sale of shares................. 153,456 30,066 597,417 480,682
Net asset value of shares issued in connection
with reinvestment of:
Dividends from net investment income........... -- -- 8,659 6,331
Distributions from net realized gain on
investments.................................. 10,293 7,785 94,385 17,189
Cost of shares reacquired........................ (84,281) (34,421) (733,456) (364,953)
-----------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) DERIVED FROM CAPITAL
TRANSACTIONS................................... 79,468 3,430 (32,995) 139,249
-----------------------------------------------------------------------------------------------------------
Net increase/(decrease) in net assets............ 130,350 57,219 (135,431) 204,261
NET ASSETS:
Beginning of period................................ 145,249 88,030 1,382,513 1,178,252
-----------------------------------------------------------------------------------------------------------
END OF PERIOD *.................................... $275,599 $145,249 $1,247,082 $1,382,513
-----------------------------------------------------------------------------------------------------------
NUMBER OF CAPITAL SHARES:
Sold............................................... 6,092 2,152 29,877 25,299
Reinvested in payment of investment income
dividends........................................ -- -- 409 322
Reinvested in payment of capital gain
distributions.................................... 475 648 4,459 876
Reacquired......................................... (3,484) (2,657) (36,012) (19,407)
-----------------------------------------------------------------------------------------------------------
Net increase/(decrease) in shares outstanding...... 3,083 143 (1,267) 7,090
Outstanding:
Beginning of period.............................. 8,290 8,147 72,280 65,190
-----------------------------------------------------------------------------------------------------------
End of period.................................... 11,373 8,290 71,013 72,280
-----------------------------------------------------------------------------------------------------------
*Includes undistributed/(over-distributed) net
investment income of: $ 39 $ -- $ 218 $ 9,896
<CAPTION>
HARBOR HARBOR
CAPITAL APPRECIATION INTERNATIONAL II
------------------------- -------------------------
NOVEMBER 1, NOVEMBER 1, NOVEMBER 1, NOVEMBER 1,
1999 1998 1999 1998
THROUGH THROUGH THROUGH THROUGH
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
2000 1999 2000 1999
---------------------------------------------------- -----------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS:
Operations:
Net investment income/(loss)..................... $ (5,764) $ (2,903) $ 1,079 $ 1,587
Net realized gain/(loss) on investments, foreign
currency transactions, investments sold short,
swap agreements, futures contracts and written
options........................................ 1,254,783 742,363 9,593 13,307
Net unrealized appreciation/(depreciation) of
investments, written options, investments sold
short, swap agreements, futures contracts,
forward foreign currency contracts and
translation of assets and liabilities in
foreign currencies............................. (601,183) 1,215,136 (2,036) 10,367
----------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS....................................... 647,836 1,954,596 8,636 25,261
----------------------------------------------------
Distributions to shareholders:
Net investment income............................ -- (7,562) (1,349) (1,621)
Net realized gain on investments................. (660,216) (264,694) (4,991) --
----------------------------------------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS.............. (660,216) (272,256) (6,340) (1,621)
----------------------------------------------------
Capital share transactions:
Net proceeds from sale of shares................. 3,522,668 2,000,011 102,142 63,196
Net asset value of shares issued in connection
with reinvestment of:
Dividends from net investment income........... -- 6,770 1,258 1,537
Distributions from net realized gain on
investments.................................. 619,790 242,192 4,739 --
Cost of shares reacquired........................ (1,514,562) (1,280,110) (98,400) (86,251)
----------------------------------------------------
NET INCREASE/(DECREASE) DERIVED FROM CAPITAL
TRANSACTIONS................................... 2,627,896 968,863 9,739 (21,518)
----------------------------------------------------
Net increase/(decrease) in net assets............ 2,615,516 2,651,203 12,035 2,122
NET ASSETS:
Beginning of period................................ 6,484,801 3,833,598 114,791 112,669
----------------------------------------------------
END OF PERIOD *.................................... $9,100,317 $6,484,801 $126,826 $114,791
-----------------------------------------------------------------------------------------------------------
NUMBER OF CAPITAL SHARES:
Sold............................................... 67,564 47,912 6,768 4,982
Reinvested in payment of investment income
dividends........................................ -- 177 87 126
Reinvested in payment of capital gain
distributions.................................... 12,613 6,332 326 --
Reacquired......................................... (29,438) (30,604) (6,598) (6,816)
----------------------------------------------------
Net increase/(decrease) in shares outstanding...... 50,739 23,817 583 (1,708)
Outstanding:
Beginning of period.............................. 138,218 114,401 8,297 10,005
----------------------------------------------------
End of period.................................... 188,957 138,218 8,880 8,297
-----------------------------------------------------------------------------------------------------------
*Includes undistributed/(over-distributed) net
investment income of: $ -- $ -- $ 13 $ 1,330
</TABLE>
The accompanying notes are an integral part of the financial statements.
38
<PAGE> 40
<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,
1999 1998 1999 1998 1999 1998 1999 1998
THROUGH THROUGH THROUGH THROUGH THROUGH THROUGH THROUGH THROUGH
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
2000 1999 2000 1999 2000 1999 2000 1999
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 74,458 $ 88,209 $ 2,982 $ 2,856 $ 39,061 $ 30,440 $ 10,863 $ 11,151
524,664 370,001 2,728 17,727 3,583 (11,903) (1,552) (1,844)
(368,363) 442,102 (1,752) 3,794 (13) (14,459) 976 (1,583)
------------------------------------------------------------------------------------------------------------------
230,759 900,312 3,958 24,377 42,631 4,078 10,287 7,724
------------------------------------------------------------------------------------------------------------------
(84,210) (78,627) (3,157) (2,716) (33,143) (28,478) (11,343) (10,735)
(371,384) (312,498) (15,960) (17,840) -- (21,226) -- --
------------------------------------------------------------------------------------------------------------------
(455,594) (391,125) (19,117) (20,556) (33,143) (49,704) (11,343) (10,735)
------------------------------------------------------------------------------------------------------------------
487,519 401,642 38,950 35,686 255,323 326,113 311,299 219,523
71,586 65,949 3,063 2,561 28,899 24,008 11,254 10,652
344,123 279,571 15,544 16,912 -- 18,749 -- --
(1,209,142) (983,726) (52,165) (72,066) (203,635) (169,085) (447,907) (192,966)
------------------------------------------------------------------------------------------------------------------
(305,914) (236,564) 5,392 (16,907) 80,587 199,785 (125,354) 37,209
------------------------------------------------------------------------------------------------------------------
(530,749) 272,623 (9,767) (13,086) 90,075 154,159 (126,410) 34,198
5,361,024 5,088,401 157,382 170,468 627,180 473,021 251,442 217,244
------------------------------------------------------------------------------------------------------------------
$4,830,275 $5,361,024 $147,615 $157,382 $ 717,255 $ 627,180 $ 125,032 $ 251,442
------------------------------------------------------------------------------------------------------------------
12,029 10,432 2,919 2,299 23,549 29,142 36,609 25,518
1,770 1,781 231 172 2,682 2,189 1,326 1,240
8,510 7,552 1,179 1,182 -- 1,667 -- --
(29,830) (25,575) (3,916) (4,644) (18,861) (15,202) (52,625) (22,376)
------------------------------------------------------------------------------------------------------------------
(7,521) (5,810) 413 (991) 7,370 17,796 (14,690) 4,382
131,841 137,651 10,219 11,210 57,829 40,033 29,384 25,002
------------------------------------------------------------------------------------------------------------------
124,320 131,841 10,632 10,219 65,199 57,829 14,694 29,384
------------------------------------------------------------------------------------------------------------------
$ 50,361 $ 75,231 $ 47 $ 372 $ 2,316 $ 2,285 $ 61 $ 541
<CAPTION>
HARBOR
MONEY MARKET
-------------------------
NOVEMBER 1, NOVEMBER 1,
1999 1998
THROUGH THROUGH
OCTOBER 31, OCTOBER 31,
2000 1999
--- -------------------------
<S> <C> <C>
$ 5,804 $ 4,494
7 (9)
-- --
---
5,811 4,485
---
(5,811) (4,485)
-- --
---
(5,811) (4,485)
---
126,557 124,631
5,577 4,247
-- --
(123,506) (131,889)
---
8,628 (3,011)
---
8,628 (3,011)
97,265 100,276
---
$ 105,893 $ 97,265
------------------------------------------------------------------------------------------------------------------
126,557 124,631
5,577 4,247
-- --
(123,506) (131,889)
---
8,628 (3,011)
97,265 100,276
---
105,893 97,265
------------------------------------------------------------------------------------------------------------------
$ -- $ 56
</TABLE>
39
<PAGE> 41
HARBOR FUND FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING FOR THE PERIODS PRESENTED
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
----------------------------------------------
NET REALIZED AND
UNREALIZED GAINS/(LOSSES)
ON INVESTMENTS,
FUTURES CONTRACTS, WRITTEN
NET ASSET OPTIONS, SWAP AGREEMENTS,
VALUE NET INVESTMENTS SOLD SHORT TOTAL FROM
BEGINNING INVESTMENT AND FOREIGN CURRENCY INVESTMENT
YEAR/PERIOD ENDED OF PERIOD INCOME/(LOSS) CONTRACTS OPERATIONS
<S> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------------
HARBOR GROWTH FUND(1)
October 31, 2000........................... $17.52 $ -- $ 7.90 $ 7.90
October 31, 1999........................... 10.81 (.07) 7.85 7.78
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)(e) 2.20 2.12
------------------------------------------------------------------------------------------------------------------------
HARBOR INTERNATIONAL GROWTH FUND
October 31, 2000........................... $19.13 $ .01 $ (.06) $ (.05)
October 31, 1999........................... 18.07 .14 1.30 1.44
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(e) 3.22 3.36
------------------------------------------------------------------------------------------------------------------------
HARBOR CAPITAL APPRECIATION FUND
October 31, 2000........................... $46.92 $ -- $ 5.84 $ 5.84
October 31, 1999........................... 33.51 (.02) 15.78 15.76
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
------------------------------------------------------------------------------------------------------------------------
HARBOR INTERNATIONAL FUND II
October 31, 2000........................... $13.83 $ .01(c) $ 1.23 $ 1.24
October 31, 1999........................... 11.26 .18(c) 2.54 2.72
October 31, 1998........................... 12.14 .12(c) (.37) (.25)
October 31, 1997........................... 10.47 .10(c) 1.63 1.73
October 31, 1996(2)........................ 10.00 .01(c) .46 .47
------------------------------------------------------------------------------------------------------------------------
HARBOR INTERNATIONAL FUND
October 31, 2000........................... $40.66 $ .48(c) $ 1.22 $ 1.70
October 31, 1999........................... 36.97 .67(c) 5.90 6.57
October 31, 1998........................... 35.84 .51(c) 1.92 2.43
October 31, 1997........................... 31.21 .41(c) 5.44 5.85
October 31, 1996........................... 26.93 .41(c) 4.41 4.82
------------------------------------------------------------------------------------------------------------------------
HARBOR VALUE FUND
October 31, 2000........................... $15.40 $ .27 $ .08 $ .35
October 31, 1999........................... 15.21 .27 1.80 2.07
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
------------------------------------------------------------------------------------------------------------------------
<CAPTION>
LESS DISTRIBUTIONS
--------------------------------------------
DIVIDENDS DISTRIBUTIONS IN EXCESS
FROM NET FROM NET OF NET
INVESTMENT REALIZED INVESTMENT
YEAR/PERIOD ENDED INCOME CAPITAL GAINS(D) INCOME
<S> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------------
HARBOR GROWTH FUND(1)
October 31, 2000........................... $ -- $(1.19) $ --
October 31, 1999........................... -- (1.07) --
October 31, 1998........................... -- (2.28) --
October 31, 1997........................... -- (4.10) --
October 31, 1996........................... -- (1.85) --
------------------------------------------------------------------------------------------------------------------------
HARBOR INTERNATIONAL GROWTH FUND
October 31, 2000........................... $(.14) $(1.38) $ --
October 31, 1999........................... (.11) (.27) --
October 31, 1998........................... (.12) (.59) --
October 31, 1997........................... (.08) (.36) --
October 31, 1996........................... (.11) -- --
------------------------------------------------------------------------------------------------------------------------
HARBOR CAPITAL APPRECIATION FUND
October 31, 2000........................... $ -- $(4.60) $ --
October 31, 1999........................... (.07) (2.28) --
October 31, 1998........................... (.07) (4.85) --
October 31, 1997........................... (.02) (.86) --
October 31, 1996........................... (.03) (.31) --
------------------------------------------------------------------------------------------------------------------------
HARBOR INTERNATIONAL FUND II
October 31, 2000........................... $(.17) $ (.62) $ --
October 31, 1999........................... (.15) -- --
October 31, 1998........................... (.10) (.53) --
October 31, 1997........................... (.02) (.04) --
October 31, 1996(2)........................ -- -- --
------------------------------------------------------------------------------------------------------------------------
HARBOR INTERNATIONAL FUND
October 31, 2000........................... $(.65) $(2.86) $ --
October 31, 1999........................... (.58) (2.30) --
October 31, 1998........................... (.40) (.90) --
October 31, 1997........................... (.42) (.80) --
October 31, 1996........................... (.41) (.13) --
------------------------------------------------------------------------------------------------------------------------
HARBOR VALUE FUND
October 31, 2000........................... $(.30) $(1.57) $ --
October 31, 1999........................... (.25) (1.63) --
October 31, 1998........................... (.28) (3.74) --
October 31, 1997........................... (.34) (2.00) --
October 31, 1996........................... (.40) (1.27) --
------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
40
<PAGE> 42
<TABLE>
<CAPTION>
RATIO OF RATIO OF
RATIO OF ADVISER OR OPERATING RATIO OF
NET ASSET OPERATING SUBADVISER FEES EXPENSES NET OF INTEREST/DIVIDEND
VALUE NET ASSETS EXPENSES NOT IMPOSED ALL OFFSETS TO EXPENSE
TOTAL END TOTAL END OF PERIOD TO AVERAGE TO AVERAGE AVERAGE TO AVERAGE
DISTRIBUTIONS OF PERIOD RETURN (000S) NET ASSETS (%)(3) NET ASSETS (%) NET ASSETS (%) NET ASSETS (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------------------------------------------
$(1.19) $24.23 45.92% $ 275,599 .88% --% .87% --%
(1.07) 17.52 76.51 145,249 .90 -- .90 --
(2.28) 10.81 (8.73) 88,030 1.00 -- 1.00 --
(4.10) 14.20 18.64 104,568 1.12 -- 1.12 --
(1.85) 16.00 14.84 113,511 .93 -- .92 --
----------------------------------------------------------------------------------------------------------------------------------
$(1.52) $17.56 (1.58)% $1,247,082 .89% --% .89% --%
(.38) 19.13 7.87 1,382,513 .91 -- .91 --
(.71) 18.07 16.96 1,178,252 .96 -- .96 --
(.44) 16.15 8.13 918,950 1.02 -- 1.02 --
(.11) 15.35 27.86 478,969 1.11 -- 1.10 --
----------------------------------------------------------------------------------------------------------------------------------
$(4.60) $48.16 12.26% $9,100,317 .64% --% .64% --%
(2.35) 46.92 48.59 6,484,801 .66 -- .66 --
(4.92) 33.51 15.72 3,833,598 .68 -- .68 --
(.88) 34.01 35.73 2,798,404 .70 -- .70 --
(.34) 25.88 13.22 1,583,215 .75 -- .75 --
----------------------------------------------------------------------------------------------------------------------------------
$ (.79) $14.28 8.81%(f) $ 126,826 .93%(c) .10% .92% --%
(.15) 13.83 24.37(f) 114,791 .92(c) .10 .92 --
(.63) 11.26 (1.98)(f) 112,669 1.15(c) .10 1.15 --
(.06) 12.14 16.64(f) 134,957 .99(c) .20 .98 --
-- 10.47 4.70(b,f) 12,573 1.46(a,c) .26(a) 1.44(a) --
----------------------------------------------------------------------------------------------------------------------------------
$(3.51) $38.85 3.74%(f) $4,830,275 .92%(c) .06% .92% --%
(2.88) 40.66 18.54(f) 5,361,024 .92(c) .06 .92 --
(1.30) 36.97 6.97(f) 5,088,401 .94(c) .06 .94 --
(1.22) 35.84 19.26(f) 5,090,048 .97(c) .05 .97 --
(.54) 31.21 18.17(f) 4,030,127 .99(c) .05 .99 --
----------------------------------------------------------------------------------------------------------------------------------
$(1.87) $13.88 3.07% $ 147,615 .80% --% .80% .16%(g)
(1.88) 15.40 14.60 157,382 .76 -- .76 --
(4.02) 15.21 6.69 170,468 .79 -- .79 --
(2.34) 18.17 31.08 161,359 .83 -- .83 --
(1.67) 16.04 23.08 112,109 .83 -- .83 --
----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
RATIO OF
NET INVESTMENT
INCOME
TO AVERAGE PORTFOLIO
NET ASSETS (%) TURNOVER (%)
<S> <C> <C>
----------------------------------------------------------------------------------------------------------------------------------
.02% 12.64%
(.54) 13.05
(.30) 23.40
(.47) 147.37
(.50) 87.97
----------------------------------------------------------------------------------------------------------------------------------
.10% 102.56%
.78 48.34
.62 85.15
.91 76.19
.99 55.17
----------------------------------------------------------------------------------------------------------------------------------
(.07)% 85.66%
(.05) 68.14
.24 69.56
.23 72.80
.11 73.69
----------------------------------------------------------------------------------------------------------------------------------
.85%(c) 64.93%
1.36(c) 51.84
.86(c) 70.34
1.33(c) 57.61
.40(a,c) 2.61(a)
----------------------------------------------------------------------------------------------------------------------------------
1.40%(c) 10.33%
1.65(c) 4.01
1.27(c) 13.66
1.20(c) 6.39
1.42(c) 9.73
----------------------------------------------------------------------------------------------------------------------------------
2.05% 105.92%
1.65 110.21
1.67 113.55
1.98 145.85
2.65 132.39
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See page 43 for notes to the Financial Highlights.
41
<PAGE> 43
HARBOR FUND FINANCIAL HIGHLIGHTS--CONTINUED
SELECTED DATA FOR A SHARE OUTSTANDING FOR THE PERIODS PRESENTED
<TABLE>
<CAPTION>
INCOME FROM INVESTMENT OPERATIONS
--------------------------------------------
NET REALIZED AND
UNREALIZED GAINS/(LOSSES)
ON INVESTMENTS,
FUTURES CONTRACTS, WRITTEN
NET ASSET OPTIONS, SWAP AGREEMENTS,
VALUE NET INVESTMENTS SOLD SHORT TOTAL FROM
BEGINNING INVESTMENT AND FOREIGN CURRENCY INVESTMENT
YEAR/PERIOD ENDED OF PERIOD INCOME/(LOSS) CONTRACTS OPERATIONS
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
HARBOR BOND FUND
October 31, 2000............... $10.85 $.57(c) $ .15 $ .72
October 31, 1999............... 11.82 .58(c) (.49) .09
October 31, 1998............... 11.57 .61(c) .53 1.14
October 31, 1997............... 11.28 .68(c) .30 .98
October 31, 1996............... 11.21 .72(c) .09 .81
----------------------------------------------------------------------------------------------------------
HARBOR SHORT DURATION FUND
October 31, 2000............... $ 8.56 $.55(c) $(.04) $ .51
October 31, 1999............... 8.69 .46(c) (.15) .31
October 31, 1998............... 8.66 .48(c) .09 .57
October 31, 1997............... 8.79 .45(c,e) .01 .46
October 31, 1996............... 8.82 .63(c) (.02) .61
----------------------------------------------------------------------------------------------------------
HARBOR MONEY MARKET FUND
October 31, 2000............... $ 1.00 $.06(c) $ -- $ .06
October 31, 1999............... 1.00 .05(c) -- .05
October 31, 1998............... 1.00 .05(c) -- .05
October 31, 1997............... 1.00 .02(c) -- .02
October 31, 1996............... 1.00 .05(c) -- .05
----------------------------------------------------------------------------------------------------------
<CAPTION>
LESS DISTRIBUTIONS
--------------------------------------------
DIVIDENDS DISTRIBUTIONS IN EXCESS
FROM NET FROM NET OF NET
INVESTMENT REALIZED INVESTMENT
YEAR/PERIOD ENDED INCOME CAPITAL GAINS(D) INCOME
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
HARBOR BOND FUND
October 31, 2000............... $(.57) $ -- $ --
October 31, 1999............... (.55) (.51) --
October 31, 1998............... (.66) (.23) --
October 31, 1997............... (.69) -- --
October 31, 1996............... (.74) -- --
----------------------------------------------------------------------------------------------------------
HARBOR SHORT DURATION FUND
October 31, 2000............... $(.56) $ -- $ --
October 31, 1999............... (.44) -- --
October 31, 1998............... (.54) -- --
October 31, 1997............... (.59) -- --
October 31, 1996............... (.60) -- (.04)
----------------------------------------------------------------------------------------------------------
HARBOR MONEY MARKET FUND
October 31, 2000............... $(.06) $ -- $ --
October 31, 1999............... (.05) -- --
October 31, 1998............... (.05) -- --
October 31, 1997............... (.02) -- --
October 31, 1996............... (.05) -- --
----------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
42
<PAGE> 44
<TABLE>
<CAPTION>
RATIO OF RATIO OF
RATIO OF ADVISER OR OPERATING
NET ASSET OPERATING SUBADVISER FEES EXPENSES NET OF
VALUE NET ASSETS EXPENSES NOT IMPOSED ALL OFFSETS TO
TOTAL END TOTAL END OF PERIOD TO AVERAGE TO AVERAGE AVERAGE
DISTRIBUTIONS OF PERIOD RETURN (000S) NET ASSETS (%)(3) NET ASSETS(%) NET ASSETS(%)
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ (.57) $11.00 6.95%(f) $717,255 .60%(c) .21% .60%
(1.06) 10.85 0.85(f) 627,180 .61(c) .21 .60
(.89) 11.82 10.33(f) 473,021 .65(c) .22 .65
(.69) 11.57 8.96(f) 362,594 .67(c) .23 .67
(.74) 11.28 7.56(f) 279,849 .70(c) .24 .70
------------------------------------------------------------------------------------------------------------------
$ (.56) $ 8.51 6.21%(f) $125,032 .29%(c) .20% .28%
(.44) 8.56 3.68(f) 251,442 .28(c) .20 .28
(.54) 8.69 6.81(f) 217,244 .36(c) .20 .36
(.59) 8.66 5.48(f) 162,476 .38(c) .20 .36
(.64) 8.79 7.24(f) 182,292 .35(c) .20 .33
------------------------------------------------------------------------------------------------------------------
$ (.06) $ 1.00 5.99%(f) $105,893 .48%(c) .12% .47%
(.05) 1.00 4.82(f) 97,265 .46(c) .12 .46
(.05) 1.00 5.20(f) 100,276 .57(c) .12 .57
(.02) 1.00 5.11(f) 73,540 .63(c) .12 .62
(.05) 1.00 5.08(f) 65,991 .64(c) .12 .64
------------------------------------------------------------------------------------------------------------------
<CAPTION>
RATIO OF RATIO OF
INTEREST/DIVIDEND NET INVESTMENT
EXPENSE INCOME
TO AVERAGE TO AVERAGE PORTFOLIO
NET ASSETS (%) NET ASSETS (%) TURNOVER (%)
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
--% 6.16%(c) 494.12%
-- 5.35(c) 271.14
-- 5.41(c) 278.06
-- 6.04(c) 252.37
-- 6.40(c) 192.64
------------------------------------------------------------------------------------------------------------------
--% 6.00%(c) 477.75%
-- 5.36(c) 577.88
-- 5.51(c) 726.92
.64(h) 5.14(c) 1,518.68
1.26(h) 6.84(c) 1,277.82
------------------------------------------------------------------------------------------------------------------
--% 5.88%(c) N/A
-- 4.73(c) N/A
-- 5.08(c) N/A
-- 4.97(c) N/A
-- 4.85(c) 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 Percentage does not reflect reduction for credit balance arrangements.
a Annualized.
b Unannualized.
c Reflects the Adviser's or Subadviser's agreement not to impose all or a
portion of its management fees.
d Includes both short-term and long-term capital gains.
e Based on monthly average of shares outstanding during the fiscal year.
f The total returns would have been lower had certain expenses not been waived
during the periods shown.
g Dividend expense from investments sold short.
h Interest expense from investments sold short.
43
<PAGE> 45
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--OCTOBER 31, 2000
NOTE 1--ORGANIZATIONAL MATTERS
Harbor Fund (the "Trust") is registered under the Investment Company Act of
1940, as amended, as an open-ended investment company, consisting of a series of
nine diversified investment portfolios (each series a "Fund", collectively, 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, 2000, 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, 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.
44
<PAGE> 46
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
Consistent with its investment policies, each Fund (excluding the Money
Market Fund) may use futures contracts to manage its exposure to the stock and
bond markets and to fluctuations in currency values. Futures contracts tend to
increase or decrease the Fund's exposure to the underlying instrument or hedge
other fund investments. Losses may arise from changes in the value of the
underlying instruments, if there is an illiquid secondary market for the
contracts or if the counterparties do not perform under the contracts' terms.
The maximum potential loss on a long futures contract is the U.S. dollar value
of the notional amount at the time the contract is opened. The potential loss on
a short futures contract is unlimited. See Portfolio of Investments for open
futures contracts held as of October 31, 2000.
OPTIONS
Consistent with its investment policies, each Fund (excluding the Money
Market Fund) may use option contracts to manage its exposure to the stock and
bond markets and to fluctuations in interest rates and currency values. Option
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 it is principally traded. If an option expires on
its stipulated expiration date, or if the Fund enters into a closing purchase
transaction, the Fund realizes a gain (or loss if the cost of a closing purchase
transaction exceeds the premium received when the option was written) without
regard to any unrealized gain or loss on the underlying security, and the
liability related to such option is extinguished. If a written call option is
exercised, the Fund realizes a gain or loss from the sale of the underlying
security and the proceeds of the sale are increased by the premium originally
received. If a written put option is exercised, the amount of the premium
originally received reduces the cost of the security which the Fund purchases
upon exercise of the option.
The risk in writing a call 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, 2000.
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
45
<PAGE> 47
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
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 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 commitment will not fluctuate more than 2.0% 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.
The 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 Fund 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 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 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 on
which the commitment was entered.
SHORT SALES
Harbor Value Fund, 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 or dividends 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
46
<PAGE> 48
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
securities with its custodian sufficient to cover its short position. Short
sales involve the risk of an unlimited increase in the market price of a
security.
FOREIGN 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 foreign 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 contract's 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 foreign 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 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 and premiums on fixed income securities purchased are
amortized over the life of the respective securities using the effective yield
method.
47
<PAGE> 49
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(Currency in Thousands)
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
DISTRIBUTION TO SHAREHOLDERS
Distributions are recorded on the ex-dividend date.
EXPENSES
Expenses incurred by the Trust with respect to any two or more Funds are
allocated in proportion to the net assets of each Fund, except where allocations
of direct expense to each Fund can be otherwise fairly made.
DEFERRED ORGANIZATION COSTS
Certain costs incurred by Harbor International Fund II in connection with
its organization and its registration with the Securities and Exchange
Commission and with various states aggregated approximately $21. These costs are
being amortized on a straight-line basis over a five-year period from the
commencement of operations of the Fund.
FEDERAL TAXES
Each Fund is treated as a separate entity for federal tax purposes. Each
Fund's policy is to meet the requirements of Subchapter M 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, 2000 were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
------------------------ ------------------------
U.S. U.S.
FUND GOVERNMENT OTHER GOVERNMENT OTHER
---- ---------- ----- ---------- -----
<S> <C> <C> <C> <C>
Harbor Growth Fund.......................................... $ -- $ 79,001 $ -- $ 28,543
Harbor International Growth Fund............................ -- 1,481,824 -- 1,607,416
Harbor Capital Appreciation Fund............................ -- 9,302,111 -- 7,258,709
Harbor International Fund II................................ -- 84,949 -- 79,115
Harbor International Fund................................... -- 577,835 -- 1,066,039
Harbor Value Fund........................................... -- 138,728 -- 144,124
Harbor Bond Fund............................................ 4,025,025 213,873 3,720,957 196,638
Harbor Short Duration Fund.................................. 679,353 106,788 733,083 109,595
</TABLE>
The Funds may be subject to taxes imposed by countries in which it invests.
Such taxes are generally based on income and/or capital gains earned or
repatriated. Taxes are accrued and applied to net investment income, net
realized gains and unrealized appreciation as such income and/or gains are
earned.
48
<PAGE> 50
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(Currency in Thousands)
NOTE 3--INVESTMENT PORTFOLIO TRANSACTIONS--CONTINUED
REDEMPTION IN-KIND TRANSACTIONS
For the year ended October 31, 2000, Harbor Capital Appreciation Fund
realized gains of $42,036 from in-kind redemptions of Fund shares.
WRITTEN OPTIONS
Transactions in written options for the year ended October 31, 2000 are
summarized as follows:
<TABLE>
<CAPTION>
OPTIONS WRITTEN OPTIONS WRITTEN OPTIONS WRITTEN
----------------------- ------------------------ ------------------------
EURODOLLAR FUTURES EURO FUTURES U.S. DOLLAR
----------------------- ------------------------ ------------------------
NUMBER OF AGGREGATE NUMBER OF AGGREGATE NUMBER OF AGGREGATE
CONTRACTS FACE VALUE CONTRACTS FACE VALUE CONTRACTS FACE VALUE
--------- ---------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
HARBOR BOND FUND
Options outstanding at beginning of year...... 293 E$ 733 -- E -- -- $ --
Options opened................................ 1,135 2,838 6,400,000 6,400 6,400,000 6,400
Options closed/expired........................ (854) (2,135) (6,400,000) (6,400) (6,400,000) (6,400)
----- -------- ---------- ------- ---------- -------
Open at 10/31/2000............................ 574 E$ 1,436 -- E -- -- $ --
===== ======== ========== ======= ========== =======
</TABLE>
<TABLE>
<CAPTION>
OPTIONS WRITTEN
----------------------- OPTIONS WRITTEN
FEDERAL HOME LOAN -----------------------
MORTGAGE CORP. U.S. TREASURY FUTURES
----------------------- -----------------------
NUMBER OF AGGREGATE NUMBER OF AGGREGATE
CONTRACTS FACE VALUE CONTRACTS FACE VALUE
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
HARBOR BOND FUND
Options outstanding at beginning of year.................. 180 $ 18,000 773 $ 773
Options opened............................................ -- -- 3,193 3,193
Options closed/expired.................................... (180) (18,000) (3,453) (3,453)
---- -------- ------ -------
Open at 10/31/2000........................................ -- $ -- 513 $ 513
==== ======== ====== =======
</TABLE>
<TABLE>
<CAPTION>
OPTIONS WRITTEN OPTIONS WRITTEN
----------------------- -------------------------
JAPANESE YEN FUTURES SWAP OPTIONS*
----------------------- -------------------------
NUMBER OF AGGREGATE NUMBER OF AGGREGATE
CONTRACTS FACE VALUE CONTRACTS FACE VALUE
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
HARBOR BOND FUND
Options outstanding at beginning of year.................. -- Y -- -- Y --
Options opened............................................ 1,808 188,000 424,400,263 450,700
Options closed/expired.................................... (1,800) (180,000) (24,400,263) (50,700)
------ --------- ----------- --------
Open at 10/31/2000........................................ 8 Y 8,000 400,000,000 Y400,000
====== ========= =========== ========
</TABLE>
<TABLE>
<CAPTION>
OPTIONS WRITTEN
-----------------------
EURODOLLAR FUTURES
-----------------------
NUMBER OF AGGREGATE
CONTRACTS FACE VALUE
--------- ----------
<S> <C> <C>
HARBOR SHORT DURATION FUND
Options outstanding at beginning of year.................. -- E$ --
Options opened............................................ 675 1,688
Options closed/expired.................................... (225) (563)
---- -------
Open at 10/31/2000........................................ 450 E$1,125
==== =======
</TABLE>
------------
* Swap Option transactions were in U.S.$ and Japanese Yen (Y) with Japanese Yen
outstanding at year end.
49
<PAGE> 51
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(Currency in Thousands)
NOTE 4--FEES AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISER
Harbor Capital Advisors, Inc. ("Harbor Capital"), 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, 2000.
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 Fund.......................................... 0.75% $ 1,926
Harbor International Growth Fund............................ 0.75 11,241
Harbor Capital Appreciation Fund............................ 0.60 53,081
Harbor International Fund II................................ 0.75 955
Harbor International Fund................................... 0.85 45,279
Harbor Value Fund........................................... 0.60 881
Harbor Bond Fund............................................ 0.70 4,441
Harbor Short Duration Fund.................................. 0.40 725
Harbor Money Market Fund.................................... 0.30 299
</TABLE>
Harbor Capital 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, 2000, Harbor Capital agreed not to impose advisory fees of
$129, $3,396, $1,334, $361 and $120 relating to Harbor International Fund II,
Harbor International Fund, Harbor Bond Fund, Harbor Short Duration Fund and
Harbor Money Market Fund, respectively.
The Trust reimburses Harbor Capital for certain legal expenses incurred by
Harbor Capital with respect to the Trust. Such amounts aggregated $44 for the
year ended October 31, 2000.
DISTRIBUTOR
HCA Securities, Inc., a wholly-owned subsidiary of Harbor Capital Advisors,
Inc., is the distributor for Harbor Fund shares. Harbor Fund does not reimburse
the distributor for expenses.
SHAREHOLDERS
On October 31, 2000, Harbor Capital Advisors, Inc., 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 CAPITAL,
HCA SECURITIES AND BENEFIT PLANS OF
FUND HARBOR TRANSFER OWENS-ILLINOIS, INC.
---- ------------------ --------------------
<S> <C> <C>
Harbor Growth Fund.......................................... 36,440 3,749,573
Harbor International Growth Fund............................ 40,354 1,057,028
Harbor Capital Appreciation Fund............................ 1,275 2,816,633
Harbor International Fund II................................ 228,101 212,170
Harbor International Fund................................... 472 1,500,613
Harbor Value Fund........................................... 6,748 3,466,078
Harbor Bond Fund............................................ 11,242 2,643,275
Harbor Short Duration Fund.................................. 313,268 11,866,889
Harbor Money Market Fund.................................... 39,326 26,770,427
</TABLE>
50
<PAGE> 52
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(Currency in Thousands)
NOTE 4--FEES AND OTHER TRANSACTIONS WITH AFFILIATES--CONTINUED
TRANSFER AGENT
Harbor Transfer, Inc., a wholly-owned subsidiary of Harbor Capital
Advisors, Inc., is the shareholder servicing agent for the Funds. Fees incurred
for these transfer agent services for the year ended October 31, 2000 totaled
$5,455.
"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 $174 for the year ended October 31, 2000.
CUSTODIAN
Payments to the custodian have been reduced by balance credits applied to
each portfolio for the year ended October 31, 2000. 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 $9, $48, $187, $7, $61, $3, $17, $28 and $9, respectively. The Funds
could have invested a portion of the assets utilized in connection with balance
credit arrangements in an income producing asset if the Funds had not entered
into such arrangements.
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. The calculation of net investment income or loss per
share in the Financial Highlights exclude the following amounts reclassified for
the year ended October 31, 2000:
<TABLE>
<CAPTION>
UNDISTRIBUTED ACCUMULATED
NET INVESTMENT NET REALIZED
FUND INCOME/(LOSS) GAIN/(LOSS) PAID-IN CAPITAL
---- -------------- ------------ ---------------
<S> <C> <C> <C>
Harbor Growth Fund.......................................... $ (7) $ (3,359) $ 3,366
Harbor International Growth Fund............................ (1,290) (46,190) 47,480
Harbor Capital Appreciation Fund............................ 5,764 (150,812) 145,048
Harbor International Fund II................................ (1,047) (3,142) 4,189
Harbor International Fund................................... (15,118) (60,390) 75,508
Harbor Value Fund........................................... (150) (102) 252
Harbor Bond Fund............................................ (5,887) 5,887 --
Harbor Short Duration Fund.................................. -- -- --
Harbor Money Market Fund.................................... (56) 16 40
</TABLE>
At October 31, 2000 Harbor Short Duration Fund had capital loss
carryforwards of approximately $24,750, which may be available to offset future
realized capital gains, if any; $3,937, $13,538, $1,182, $2,216, $2,223 and
$1,654 will expire on October 31, 2001, October 31, 2002, October 31, 2004,
October 31, 2005, October 31, 2007 and October 31, 2008, respectively.
At October 31, 2000 Harbor Money Market Fund had a capital loss
carryforward of approximately $2, which may be available to offset future
realized capital gains, if any, and will expire on October 31, 2007.
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
51
<PAGE> 53
HARBOR FUND
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(Currency in Thousands)
NOTE 5--TAX INFORMATION--CONTINUED
October 31, 2000, along with long-term capital gains and the amount of long-term
capital gains per share paid on December 31, 1999 were as follows:
<TABLE>
<CAPTION>
LONG-TERM
GROSS UNREALIZED NET UNREALIZED CAPITAL GAINS
------------------------------ APPRECIATION/ -------------------------
FUND IDENTIFIED COST APPRECIATION (DEPRECIATION) (DEPRECIATION) ($000S) ($ PER SHARE)
---- --------------- ------------ -------------- -------------- ------- -------------
<S> <C> <C> <C> <C> <C> <C>
Harbor Growth Fund........... $ 180,285 $ 142,729 $ (48,864) $ 93,865 $ 13,414 $1.534
Harbor International Growth
Fund....................... 1,269,472 112,085 (117,749) (5,664) 114,403 1.595
Harbor Capital Appreciation
Fund....................... 8,060,173 1,673,654 (388,349) 1,285,305 752,301 5.244
Harbor International Fund
II......................... 115,612 16,827 (8,685) 8,142 6,419 .792
Harbor International Fund.... 2,932,605 2,046,801 (174,104) 1,872,697 407,516 3.138
Harbor Value Fund............ 144,990 13,405 (13,662) (257) 2,155 .212
Harbor Bond Fund............. 1,121,934 2,896 (22,565) (19,669) -- --
Harbor Short Duration Fund... 133,951 362 (169) 193 -- --
</TABLE>
NOTE 6--CHANGE IN INDEPENDENT AUDITORS
On August 30, 2000, PricewaterhouseCoopers LLP resigned as independent
accountants of the Trust. The reports of PricewaterhouseCoopers LLP on the
financial statement of the Trust for the prior fiscal years contained no adverse
opinion or disclaimer of opinion and were not qualified or modified as to
uncertainty, audit scope or accounting principle. In connection with its audit
for the most recent fiscal year and through August 30, 2000, there have been no
disagreements with PricewaterhouseCoopers LLP on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure, which disagreements, if not resolved to the satisfaction of
PricewaterhouseCoopers LLP, would have caused them to make reference thereto in
their report on the financial statements for such years. The Trust, with the
approval of its Board of Trustees, engaged Ernst & Young LLP as independent
accountants, effective September 1, 2000.
52
<PAGE> 54
HARBOR FUND
ADDITIONAL INFORMATION--(UNAUDITED)
Harbor Value Fund designates 30.14% 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, 2001 for each of the Funds will show
the tax status of all distributions paid to your account in calendar year 2000.
(This document must be preceded or accompanied by a Prospectus.)
53
<PAGE> 55
<TABLE>
<S> <C> <C>
TRUSTEES AND OFFICERS SHAREHOLDER SERVICING AGENT
Chairman and Trustee
DAVID G. VAN HOOSER Trustee HARBOR TRANSFER, INC.
HOWARD P. COLHOUN Trustee P.O. Box 10048
JOHN P. GOULD Trustee Toledo, Ohio 43699-0048
RODGER F. SMITH President 1-800-422-1050
JAMES M. WILLIAMS Vice President and Treasurer
CONSTANCE L. SOUDERS Secretary CUSTODIAN
KAREN B. WASIL
STATE STREET BANK AND TRUST
INVESTMENT ADVISER COMPANY
P.O. Box 1713
HARBOR CAPITAL ADVISORS, INC. Boston, MA 02105
One SeaGate
Toledo, OH 43666 INDEPENDENT AUDITORS
DISTRIBUTOR AND PRINCIPAL UNDERWRITER
ERNST & YOUNG LLP
HCA SECURITIES, INC. 200 Clarendon Street
One SeaGate Boston, MA 02116
Toledo, OH 43666
(419) 247-2477 LEGAL COUNSEL
HALE AND DORR LLP
60 State Street
Boston, MA 02109
</TABLE>
[HARBOR FUND LOGO]
One SeaGate
Toledo, Ohio 43666
1-800-422-1050
www.harborfund.com
12/2000/305,500 [RECYCLED PAPER LOGO]
recycled paper
