Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-CSR
CERTIFIED SHAREHOLDER REPORT OF
REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-4676
Harbor Funds
(Exact name of Registrant as specified in charter)
111 South Wacker Drive, 34th Floor
Chicago, Illinois 60606-4302
Chicago, Illinois 60606-4302
(Address of principal executive offices) (Zip code)
Charles F. McCain, Esq. HARBOR FUNDS 111 South Wacker Drive, 34th Floor Chicago, Illinois 60606-4302 | Christopher P. Harvey, Esq. DECHERT LLP One International Place – 40th Floor 100 Oliver Street Boston, MA 02110-2605 |
(Name and address of agent for service)
Registrant’s telephone number, including area code: (312) 443-4400
Date of fiscal year end: October 31
Date of reporting period: October 31, 2019
ITEM 1 – REPORTS TO STOCKHOLDERS
The following are copies of reports transmitted to shareholders pursuant to Rule 30e-1 under the Investment Company Act of 1940, as amended (the “1940 Act”) (17 CFR 270.30e-1):
Table of Contents
Annual Report
October 31, 2019
Domestic Equity Funds
Retirement Class | Institutional Class | Administrative Class | Investor Class | |
Harbor Capital Appreciation Fund | HNACX | HACAX | HRCAX | HCAIX |
Harbor Large Cap Value Fund | HNLVX | HAVLX | HRLVX | HILVX |
Harbor Mid Cap Growth Fund | HNMGX | HAMGX | HRMGX | HIMGX |
Harbor Mid Cap Value Fund | HNMVX | HAMVX | HRMVX | HIMVX |
Harbor Small Cap Growth Fund | HNSGX | HASGX | HRSGX | HISGX |
Harbor Small Cap Growth Opportunities Fund | HNSOX | HASOX | HRSOX | HISOX |
Harbor Small Cap Value Fund | HNVRX | HASCX | HSVRX | HISVX |
Harbor Small Cap Value Opportunities Fund | HSRVX | HSOVX | HSAVX | HSIVX |
Harbor Strategic Growth Fund | HNGSX | MVSGX | HSRGX | HISWX |
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Funds’ annual and semi-annual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on the Funds’ website (harborfunds.com), and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from a Fund electronically anytime by contacting your financial intermediary (such as a broker-dealer or bank) or, if you invest directly with Harbor Funds, by calling 800-422-1050.
You may elect to receive all future reports in paper free of charge. If you invest through a financial intermediary (such as a broker-dealer or bank), you can contact your financial intermediary to request that you continue to receive paper copies of the Funds’ shareholder reports. If you invest directly, you can call 800-422-1050 to request that you continue to receive paper copies of the Funds’ shareholder reports. Your election to receive reports in paper will apply to all Harbor Funds held in your account.
Table of Contents
This document must be preceded or accompanied by a Prospectus.
Letter from the Chairman
Charles F. McCain Chairman |
Dear Fellow Shareholder:
After a challenging start early in the fiscal year, the equity markets recovered and performed well for much of the remainder of the year ending October 31, 2019. U.S. equity markets performed well compared to most other markets around the globe, lead by the strong performance of global technology and internet related stocks. Overseas, there were minimal differences between the returns of developed markets and emerging markets, though within regions there was greater dispersion. Concerns about the impact of rising geopolitical tensions and trade wars weighed on equity and fixed income markets. Steady though modest economic growth in the U.S. more than offset these concerns, leading to solid investment results across asset classes. The U.S. bond markets performed well, with the actions of an accommodative Federal Reserve leading to lower interest rates and higher returns for Government bonds as well as most corporate bonds that were supported by solid earnings.
Within the U.S. equity markets and across most overseas markets, larger cap stocks significantly outperformed smaller cap stocks, continuing a pattern observed in prior years. Also persisting was the dominance of growth over value. Outside of a few brief periods when value stocks rallied relative to growth stocks, it was a year generally dominated by larger cap growth stocks.
Comments from the portfolio managers of each Harbor fund are included in the following pages. You will notice that their market and performance comments and outlooks reflect their distinctive investment approaches. We believe shareholders benefit from reading these different perspectives, particularly as they look ahead to the future.
One thing that should stand out as you read the comments of our portfolio managers is their strong commitment to active management. We believe that actively managed portfolios, led by skilled practitioners of the art and science of investing, are well positioned to take advantage of the various opportunities that arise over time to deliver attractive long-term investment results.
Since the launch of the first Harbor funds in 1986, we have served as a gateway for shareholders to access talented, institutional caliber asset management through active, cost-aware investments. We identify specialists in each asset class to manage portfolios, and apply a comprehensive oversight program to monitor their performance and ensure their decisions are in the best interest of shareholders. We offer our shareholders the benefit of institutional caliber portfolio managers, in addition to serving as professional adviser to maintain portfolio manager accountability.
The ending of a calendar year always marks a good time to evaluate your financial goals and investments. We encourage shareholders to take a long-term prospective with their investments. While past performance is never a guarantee of future results, over the long-term, the returns of equities and fixed income securities have historically helped investors achieve their financial objectives. We believe investors should maintain a diversified portfolio of equities, fixed income and cash in an allocation consistent with their long-term financial goas and comfort with risk.
Harbor Funds is proud to offer a variety of equity and fixed income funds to help you achieve your financial goals.
Thank you for your confidence in Harbor Funds. We will do our best to continue to earn your trust in 2020 and the years ahead.
December 23, 2019
Charles F. McCain |
Chairman |
1
Harbor Capital Appreciation Fund
Manager’s Commentary (Unaudited)
Manager’s Commentary (Unaudited)
Subadviser
Jennison Associates LLC
466 Lexington Avenue
New York, NY 10017
New York, NY 10017
Portfolio Managers
Spiros “Sig” Segalas
Since 1990
Since 1990
Kathleen A. McCarragher
Since 2013
Since 2013
Blair A. Boyer
Since 2019
Since 2019
Natasha Kuhlkin, CFA
Since 2019
Since 2019
Jennison has subadvised the Fund since 1990.
Investment Objective
The Fund seeks long-term growth of capital.
Spiros “Sig” Segalas
Kathleen A. McCarragher
Blair A. Boyer
Natasha Kuhlkin, CFA
Management’s Discussion of
Fund Performance
Fund Performance
MARKET REVIEW
U.S. equities markets were highly volatile, unsettled by U.S.-China trade discord, softening economic growth in the U.S., Europe, China, and geopolitical uncertainty.
Affected by tariffs, industrial, agricultural, and transportation sector activity deteriorated. New threats and escalating rhetoric caused growing concern, and companies across sectors cited trade tensions as the source of heightened caution in planning and investing. The U.S. political landscape was likewise unsettled, as investigations of interference in the 2016 presidential election unfolded, impeachment proceedings against President Trump began, and the 2020 election cycle ramped up.
U.S. economic activity showed signs of tempering, with job growth and business activity moderating. Modest wage gains and positive consumption indicated a still-healthy consumer, although consumer confidence showed signs of weakening.
Markets responded favorably as the U.S. Federal Reserve (Fed) pivoted on monetary policy, lowering the federal funds rate three times in the period to 1.50%-1.75% at the end of October.
Economic growth in Europe softened. The United Kingdom’s ongoing Brexit negotiations saw little headway toward resolution. Germany, Europe’s largest economy, stood on the brink of recession. China’s gross domestic product (GDP) grew close to the country’s 6% target but not without months of stimulating measures designed to mitigate the impact of the trade war with the U.S.
PERFORMANCE
Harbor Capital Appreciation Fund advanced 13.73% (Retirement Class), 13.63% (Institutional Class), 13.35% (Administrative Class), and 13.21% (Investor Class) in the fiscal year, while the Russell 1000® Growth Index rose 17.10%, and the broader market, as represented by the S&P 500 Index, climbed 14.33%.
In the growth benchmark, the Real Estate and Materials sectors made the biggest gains. Energy posted a double-digit decline. Among the benchmark’s major sectors, Information Technology outperformed the overall index, while Health Care, Industrials, Communication Services, and Consumer Discretionary underperformed.
Consumer Staples positions were solid positive contributors to Fund performance. Estée Lauder has enhanced its strong brand portfolio in the fast-growing luxury beauty care market with complementary acquisitions and subsequent brand development. Emerging markets, especially China, are key drivers of the company’s growth. Costco Wholesale’s consistent stream of membership fee income allows for low prices and broad product selection, which lead to high inventory turnover.
In Consumer Discretionary, fast casual restaurant company Chipotle’s new management team is improving sales through new products, better marketing, mobile/digital efforts, and delivery. Lululemon Athletica’s new products, integrated marketing, and online sales momentum combined with a high-end customer base and athleisure fashion trends are driving strong customer traffic, sales conversion, and comparable store sales. The company also has strong brand positioning, international prospects, margin-expansion opportunities, and attractive return on invested capital.
Communication Services positions advanced but lagged the benchmark sector. Despite ongoing concern about data privacy, Facebook is showing resilience, with solid engagement metrics and strong revenue growth, as advertisers continue to seek to use the platform to reach customers. Netflix continues to enhance its long-term competitive position with the industry’s largest commitment of investment dollars in exclusive and original content. The company’s domestic subscriber base decreased marginally in 2019’s second quarter, and international net subscriber additions reverted to 2016 levels. We attribute this downturn to the traditional seasonal weakness of the second quarter, the effect of the company’s highest-ever price increase in the first quarter,
2
Harbor Capital Appreciation Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
CHANGE IN A $50,000 INVESTMENT
For the period 11/01/2009 through 10/31/2019
The graph compares a $50,000 investment in the Institutional Class shares of the Fund with the performance of the Russell 1000® Growth Index and the S&P 500 Index. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
TOTAL RETURNS
For the periods ended 10/31/2019
1 Year | Annualized | |||||||
5 Years | 10 Years | |||||||
Harbor Capital Appreciation Fund | ||||||||
Retirement Class1 | 13.73% | 12.85% | 14.59% | |||||
Institutional Class | 13.63 | 12.79 | 14.56 | |||||
Administrative Class | 13.35 | 12.51 | 14.28 | |||||
Investor Class | 13.21 | 12.38 | 14.14 | |||||
Comparative Indices | ||||||||
Russell 1000® Growth | 17.10% | 13.43% | 15.41% | |||||
S&P 500 | 14.33 | 10.78 | 13.70 |
As stated in the Fund’s prospectus dated March 1, 2019, the expense ratios were 0.58% (Net) and 0.63% (Gross) (Retirement Class); 0.66% (Net) and 0.71% (Gross) (Institutional Class); 0.91% (Net) and 0.96% (Gross) (Administrative Class); and 1.03% (Net) and 1.08% (Gross) (Investor Class). The net expense ratios reflect a contractual management fee waiver effective through 02/29/2020. The expense ratios in the prospectus may differ from the actual expense ratios for the period disclosed within this report. The expense ratios shown in the prospectus are based on the prior fiscal year, adjusted to reflect changes, if any, in contractual arrangements that occurred prior to the date of the prospectus (or supplement thereto, if applicable).
Performance data shown represents past performance and is no guarantee of future results. Past performance is net of management fees and expenses and reflects reinvested dividends and distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or upon the redemption of Fund shares. Past performance reflects the beneficial effect of any expense waivers or reimbursements, without which returns would have been lower. Investment returns and principal value will fluctuate so that Fund shares, when redeemed, may be worth more or less than their original cost. Returns for periods less than one year are not annualized. Current performance may be higher or lower and is available through the most recent month end atharborfunds.com or by calling 800-422-1050.
and a content slate lacking in exciting new titles. Given its still-low global penetration and the accelerating shift from linear TV, we believe Netflix still has significant room for growth. The Fund’s position in video game publisher Activision Blizzard was eliminated on slowing revenue growth.
Information Technology holdings in the aggregate posted a double-digit advance but underperformed the benchmark sector. Payments companies continue to benefit from the long-term shift from cash to electronic transactions. MasterCard and Visa have, in our view, strong market positions with high barriers to entry, pricing power, and solid operating leverage potential. FleetCor provides specific-purpose charge cards and payment-processing services for commercial and government trucking fleets and has a rapidly growing mobile payments business in Brazil. Digital payments platform provider Square fell on disappointing financial results.
Digital transformation of the enterprise has become a strategic imperative across many industries and companies. Cloud holdings Microsoft and Workday offer mission-critical applications and services that are changing fundamentally the way businesses operate.
After strong performance through much of 2017 and 2018, Nvidia fell on gaming graphics microchip inventory issues exacerbated by a slowdown in the cryptocurrency mining boom. The company was also hurt by worries that U.S.-China trade discord could disrupt technology product markets, depressing chip demand. Trade and demand concerns affected Xilinx and Taiwan Semiconductor, as well.
Twilio’s cloud communications platform enables software developers to build, scale, and operate communications functions such as phone calls, text messages, video, and e-mail within their mobile applications through Twilio’s web-service application programming interfaces. Despite strong revenue, customer growth, and expansion rates, the stock lost ground as investor positive sentiment toward high-growth, and therefore higher valuation, software as a service companies weakened, affected by a highly uncertain macroeconomic backdrop.
OUTLOOK & STRATEGY
Driven by powerful secular trends, we expect the growing revenue streams of Fund companies in industries such as e-commerce, software as a service, and payments to be durable against the uncertain backdrop.
We continue to focus on companies that we believe have unique business models that build sustainable competitive advantages, catalysts that drive above-average growth rates, superior financial characteristics, and appropriate long-term valuations. Against this backdrop, in our view the Fund is well positioned with companies whose growth prospects remain robust and well above average.
1 | Retirement Class shares commenced operations on March 1, 2016. The performance attributed to the Retirement Class shares prior to that date is that of the Institutional Class shares. Performance prior to March 1, 2016 has not been adjusted to reflect the lower expenses of Retirement Class shares. During this period, Retirement Class shares would have had returns similar to, but potentially higher than, Institutional Class shares due to the fact that Retirement Class shares represent interests in the same portfolio as Institutional Class shares but are subject to lower expenses. |
This report contains the current opinions of Jennison Associates LLC as of the date of this report and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Such opinions are subject to change without notice and securities described herein may no longer be included in, or may at any time be removed from, the Fund’s portfolio. This report is distributed for informational purposes only. Information contained herein has been obtained from sources believed reliable, but not guaranteed.
Equity securities, such as common stocks, are affected by company specific events and by movements in the overall stock markets in which those securities principally trade, among other factors. An adverse company specific event, or downturn in those stock markets, can depress the value of a particular company’s equity securities. For information on the different share classes and the risks associated with an investment in the Fund, please refer to the current prospectus.
3
Harbor Capital Appreciation Fund
Portfolio of Investments—October 31, 2019
Portfolio of Investments—October 31, 2019
SECTOR ALLOCATION(% of investments) – Unaudited
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—99.4% | |||
Shares | Value | ||
AEROSPACE & DEFENSE—5.1% | |||
2,582,917 | Airbus SE (France) | $370,541 | |
2,078,618 | Boeing Co. | 706,543 | |
2,718,729 | Safran SA (France) | 430,619 | |
1,507,703 | |||
AUTOMOBILES—1.6% | |||
1,481,083 | Tesla Inc.* | 466,423 | |
BANKS—0.9% | |||
2,124,373 | JPMorgan Chase & Co. | 265,377 | |
BEVERAGES—0.6% | |||
890,171 | Constellation Brands Inc. | 169,426 | |
BIOTECHNOLOGY—2.7% | |||
2,171,707 | BioMarin Pharmaceutical Inc.* | 158,991 | |
1,518,332 | Exact Sciences Corp.* | 132,095 | |
844,896 | Sage Therapeutics Inc.* | 114,610 | |
2,007,221 | Vertex Pharmaceuticals Inc.* | 392,371 | |
798,067 | |||
CAPITAL MARKETS—1.2% | |||
1,422,164 | S&P Global Inc. | 366,904 | |
ENTERTAINMENT—4.0% | |||
2,632,877 | Netflix Inc.* | 756,715 | |
3,465,634 | Walt Disney Co. | 450,255 | |
1,206,970 | |||
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—1.3% | |||
1,353,842 | American Tower Corp. | 295,246 | |
607,533 | Crown Castle International Corp. | 84,319 | |
379,565 | |||
FOOD & STAPLES RETAILING—2.2% | |||
2,183,142 | Costco Wholesale Corp. | 648,633 | |
HEALTH CARE EQUIPMENT & SUPPLIES—4.1% | |||
2,077,396 | Danaher Corp. | 286,307 | |
1,104,986 | DexCom Inc.* | 170,433 | |
1,614,016 | Edwards Lifesciences Corp.* | 384,749 | |
677,820 | Intuitive Surgical Inc.* | 374,801 | |
1,216,290 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
HEALTH CARE PROVIDERS & SERVICES—0.2% | |||
968,778 | Guardant Health Inc.* | $67,330 | |
HOTELS, RESTAURANTS & LEISURE—2.0% | |||
407,330 | Chipotle Mexican Grill Inc.* | 316,968 | |
2,110,792 | Marriott International Inc. | 267,121 | |
584,089 | |||
INTERACTIVE MEDIA & SERVICES—9.3% | |||
671,543 | Alphabet Inc. Class A* | 845,338 | |
672,119 | Alphabet Inc. Class C* | 846,944 | |
5,542,655 | Facebook Inc.* | 1,062,250 | |
2,754,532 | |||
INTERNET & DIRECT MARKETING RETAIL—8.7% | |||
5,105,374 | Alibaba Group Holding Ltd. ADR (China)*,1 | 901,966 | |
953,959 | Amazon.com Inc.* | 1,694,861 | |
2,596,827 | |||
IT SERVICES—13.6% | |||
523,139 | Adyen NV (Netherlands)*,2 | 368,298 | |
1,794,876 | FleetCor Technologies Inc.* | 528,089 | |
4,481,772 | Mastercard Inc. | 1,240,599 | |
2,371,417 | PayPal Holdings Inc.* | 246,865 | |
699,979 | Shopify Inc. (Canada)* | 219,492 | |
3,018,141 | Square Inc.* | 185,404 | |
1,549,309 | Twilio Inc.* | 149,601 | |
6,166,545 | Visa Inc. | 1,102,948 | |
4,041,296 | |||
LEISURE PRODUCTS—0.2% | |||
2,335,932 | Peloton Interactive Inc.* | 55,759 | |
LIFE SCIENCES TOOLS & SERVICES—1.6% | |||
1,647,212 | Illumina Inc.* | 486,784 | |
PERSONAL PRODUCTS—1.8% | |||
2,870,527 | Estée Lauder Companies Inc. | 534,693 | |
PHARMACEUTICALS—1.9% | |||
11,637,034 | AstraZeneca plc ADR (United Kingdom)1 | 570,564 | |
ROAD & RAIL—1.1% | |||
1,995,619 | Union Pacific Corp. | 330,195 | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—5.9% | |||
1,171,565 | Broadcom Inc. | 343,093 |
4
Harbor Capital Appreciation Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—Continued | |||
Shares | Value | ||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—Continued | |||
3,610,774 | NVIDIA Corp. | $725,838 | |
5,609,721 | QUALCOMM Inc. | 451,246 | |
315,895 | Universal Display Corp. | 63,236 | |
1,848,029 | Xilinx Inc. | 167,690 | |
1,751,103 | |||
SOFTWARE—16.0% | |||
3,220,196 | Adobe Inc.* | 894,989 | |
1,114,592 | Coupa Software Inc.* | 153,245 | |
10,739,615 | Microsoft Corp. | 1,539,739 | |
7,766,166 | salesforce.com Inc.* | 1,215,327 | |
1,300,512 | ServiceNow Inc.* | 321,565 | |
2,652,230 | Splunk Inc.* | 318,161 | |
1,865,329 | Workday Inc.* | 302,482 | |
4,745,508 | |||
SPECIALTY RETAIL—1.4% | |||
1,816,398 | Home Depot Inc. | 426,091 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS—5.0% | |||
5,932,378 | Apple Inc. | $1,475,738 | |
TEXTILES, APPAREL & LUXURY GOODS—7.0% | |||
1,132,235 | adidas AG (Germany) | 350,004 | |
853,050 | Kering SA (France) | 485,383 | |
2,755,378 | Lululemon Athletica Inc. (Canada)* | 562,841 | |
7,601,029 | NIKE Inc. | 680,672 | |
2,078,900 | |||
TOTAL COMMON STOCKS | |||
(Cost $16,981,823) | 29,524,767 | ||
TOTAL INVESTMENTS—99.4% | |||
(Cost $16,981,823) | 29,524,767 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—0.6% | 186,883 | ||
TOTAL NET ASSETS—100.0% | $29,711,650 |
FAIR VALUE MEASUREMENTS
At October 31, 2019, the investments in Airbus SE, Safran SA, Ayden NV, adidas AG, and Kering SA (as disclosed in the preceding Portfolio of Investments) were classified as Level 2 and all other investments were classified as Level 1. There were no Level 3 investments at October 31, 2019 or 2018.
For more information on valuation inputs and their aggregation into the levels identified above, please refer to the Fair Value Measurements and Disclosures in Note 2 of the accompanying Notes to Financial Statements.
* | Non-income producing security |
1 | ADR after the name of a security stands for American Depositary Receipts representing ownership of foreign securities. ADRs are issued by U.S. banking institutions. |
2 | Securities purchased in a transaction 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. The Fund has no right to demand registration of these securities. At October 31, 2019, the aggregate value of these securities was $368,298 or 1% of net assets. |
The accompanying notes are an integral part of the Financial Statements.
5
Harbor Large Cap Value Fund
Manager’s Commentary (Unaudited)
Manager’s Commentary (Unaudited)
Subadviser
Aristotle Capital Management, LLC
11100 Santa
Monica Boulevard
Suite 1700
Suite 1700
Los Angeles, CA 90025
Portfolio Manager
Howard Gleicher, CFA
Since 2012
Since 2012
Gregory D. Padilla, CFA
Since 2018
Aristotle has subadvised the Fund since 2012.
Investment Objective
The Fund seeks long-term total return.
Howard Gleicher, CFA
Gregory D. Padilla, CFA
Management’s Discussion of
Fund Performance
Fund Performance
Market Review
U.S. equity markets ended 2018 suffering their worst quarterly performance in over seven years as concerns over the pace of interest rate increases, continuing trade tensions and slowing global growth weighed heavily on investor sentiment and tested the strength of the nearly ten-year-old U.S. bull market. In the final weeks of the year, a partial shutdown of the U.S. government over the funding of a Mexico-U.S. border wall, and concerns surrounding the U.S. Federal Reserve’s (Fed) independence following comments from President Trump, intensified the selloff with the S&P 500 Index falling over 9% in the month of December alone.
In many ways, the weakness in the fourth quarter set the stage for the recovery in equity markets in 2019. The new year brought with it a new wave of optimism, with performance for most equity and credit indices resembling annual figures through the first half of the year. A more dovish Fed and optimism over the potential for a U.S.-China trade deal helped offset concerns of slowing economic growth. It was not until August 2019 that volatility returned, with the CBOE Volatility Index averaging 19, compared to 13 in July 2019. The third quarter was littered with various types of events, from geopolitical conflict (i.e., U.S.-Iran after attacks on Saudi oil facilities), to fiscal policy decisions (i.e., debt ceiling and federal spending increase), to a brief spike in repurchase agreement rates. Nevertheless, investors’ attention once again seemed to be fixated on the Fed and the trade war between the U.S. and China. During the third quarter, the Fed announced two 0.25% rate cuts. These cuts were largely in line with expectations, although Fed Chairman Jerome Powell chose to remain vague when asked about future cuts. Regarding the U.S.-China trade war, progress was halted in the middle of the quarter when the U.S. government announced a 10% tariff on $300 billion of Chinese exports. After a month of back and forth, the two sides relaxed their stances and announced that they would meet in early October to discuss trade and a potential interim agreement.
Markets continued higher in October 2019 as investors digested earnings season and awaited an impending announcement from the Fed late in the month. As was expected, the Fed delivered its third 0.25% rate cut in four months and dropped a previous reference in its policy statement that it “will act as appropriate” to sustain the economic expansion - language that was considered a sign for future rate cuts. Instead it stated it will monitor the implications of incoming information for the economic outlook as it assesses the appropriate path of its target interest rate. Chairman Powell also stated that the central bank would need to see a “significant” rise in inflation before the Fed thought about increasing the interest rate. Equity markets responded positively to the announcement with the S&P 500 Index closing the month just off all-time highs.
Performance
For the year ended October 31, 2019, Harbor Large Cap Value Fund posted returns of 16.92% (Retirement Class), 16.83% (Institutional Class), 16.60% (Administrative Class), and 16.39% (Investor Class) outperforming the 11.21% return of the Russell 1000® Value Index.
The vast majority of the portfolio’s outperformance relative to the Russell 1000® Value Index during the year can be attributed to security selection, while sector allocation also contributed modestly. Security selection was positive in all but four sectors, with Industrials, Heath Care, Information Technology and Materials being the largest contributors to relative return. Conversely, security selection in Communication Services, Financials and Consumer Staples coupled with an underweight position in Utilities detracted from relative return.
ANSYS, a leader in engineering simulation software, was a primary contributor to relative return. The company reported strong results throughout the year consistent with its 2020 objective of achieving sustained, double-digit revenue growth at industry-leading margins.
6
Harbor Large Cap Value Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
CHANGE IN A $50,000 INVESTMENT
For the period 11/01/2009 through 10/31/2019
The graph compares a $50,000 investment in the Institutional Class shares of the Fund with the performance of the Russell 1000® Value Index. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
TOTAL RETURNS
For the periods ended 10/31/2019
1 Year | Annualized | |||||||
5 Years | 10 Years | |||||||
Harbor Large Cap Value Fund | ||||||||
Retirement Class1 | 16.92% | 11.17% | 13.01% | |||||
Institutional Class | 16.83 | 11.12 | 12.98 | |||||
Administrative Class | 16.60 | 10.83 | 12.70 | |||||
Investor Class | 16.39 | 10.71 | 12.55 | |||||
Comparative Index | ||||||||
Russell 1000® Value | 11.21% | 7.61% | 11.96% |
As stated in the Fund’s prospectus dated March 1, 2019, the expense ratios were 0.61% (Net) and 0.65% (Gross) (Retirement Class); 0.69% (Net) and 0.73% (Gross) (Institutional Class); 0.94% (Net) and 0.98% (Gross) (Administrative Class); and 1.06% (Net) and 1.10% (Gross) (Investor Class). The net expense ratios reflect an expense limitation agreement (excluding interest expense, if any) effective through 02/29/2020. The expense ratios in the prospectus may differ from the actual expense ratios for the period disclosed within this report. The expense ratios shown in the prospectus are based on the prior fiscal year, adjusted to reflect changes, if any, in contractual arrangements that occurred prior to the date of the prospectus (or supplement thereto, if applicable).
Performance data shown represents past performance and is no guarantee of future results. Past performance is net of management fees and expenses and reflects reinvested dividends and distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or upon the redemption of Fund shares. Past performance reflects the beneficial effect of any expense waivers or reimbursements, without which returns would have been lower. Investment returns and principal value will fluctuate so that Fund shares, when redeemed, may be worth more or less than their original cost. Returns for periods less than one year are not annualized. Current performance may be higher or lower and is available through the most recent month end atharborfunds.com or by calling 800-422-1050.
In January, ANSYS acquired Granta Design, a company that enables customers to explore the impact different materials will have on the behavior of their products (e.g., metals, plastics, composites and additives). This acquisition brings ANSYS into the adjacent vertical of materials simulation, an area that we believe will be increasingly important in manufacturing as products become more complex. We believe adding Granta technology to the ANSYS portfolio is a good example of a company enhancing its core technology while investing in next-generation innovation, which we view as a unique characteristic of ANSYS.
Shares of oil field services company Halliburton were a primary detractor during the year. Shares of Halliburton declined due mainly to external, short-term cyclical events. Weakening oil prices in the second quarter of 2019 coupled with transportation disruptions in the Permian Oil basin of West Texas caused many exploration and production companies to rethink production schedules. Halliburton was certainly affected, in the short term, by decreased production schedules in an area as important as West Texas; however, we consider the disruptions as temporary in nature, not affecting the long-term business value of the firm.
Outlook & Strategy
While headlines on trade, politics, monetary policy and other short-term news continue to sway markets, we at Aristotle Capital utilize a long-term approach to portfolio construction that, we believe, results in a diversified portfolio. As bottom up, fundamental “business analysts” we make no attempt to invest based on the current political or economic environment but rather we seek to own a collection (35-45) of what we believe to be high quality businesses that are trading at a discount to our estimate of their intrinsic worth and possess catalysts for appreciation that are within management’s control. It is our belief that, over the long-term (3-5 years) stock prices will track business fundamentals.
1 | Retirement Class shares commenced operations on March 1, 2016. The performance attributed to the Retirement Class shares prior to that date is that of the Institutional Class shares. Performance prior to March 1, 2016 has not been adjusted to reflect the lower expenses of Retirement Class shares. During this period, Retirement Class shares would have had returns similar to, but potentially higher than, Institutional Class shares due to the fact that Retirement Class shares represent interests in the same portfolio as Institutional Class shares but are subject to lower expenses. |
This report contains the current opinions of Aristotle Capital Management, LLC as of the date of this report and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Such opinions are subject to change without notice and securities described herein may no longer be included in, or may at any time be removed from, the Fund’s portfolio. This report is distributed for informational purposes only. Information contained herein has been obtained from sources believed reliable, but not guaranteed.
Equity securities, such as common stocks, are affected by company specific events and by movements in the overall stock markets in which those securities principally trade, among other factors. An adverse company specific event, or downturn in those stock markets, can depress the value of a particular company’s equity securities. For information on the different share classes and the risks associated with an investment in the Fund, please refer to the current prospectus.
7
Harbor Large Cap Value Fund
Portfolio of Investments—October 31, 2019
Portfolio of Investments—October 31, 2019
SECTOR ALLOCATION(% of investments) – Unaudited
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—97.8% | |||
Shares | Value | ||
AEROSPACE & DEFENSE—2.1% | |||
150,000 | General Dynamics Corp. | $26,520 | |
BANKS—13.8% | |||
3,600,000 | Banco Bilbao Vizcaya Argentaria SA ADR (Spain)1 | 18,828 | |
1,330,000 | Bank of America Corp. | 41,589 | |
205,000 | BOK Financial Corp. | 15,816 | |
310,000 | Commerce Bancshares Inc. | 19,952 | |
190,000 | Cullen/Frost Bankers Inc. | 17,115 | |
450,000 | East West Bancorp Inc. | 19,314 | |
220,000 | JPMorgan Chase & Co. | 27,482 | |
2,900,000 | Mitsubishi UFJ Financial Group Inc. ADR (Japan)1 | 15,022 | |
175,118 | |||
BEVERAGES—2.8% | |||
640,000 | Coca-Cola Co. | 34,835 | |
BIOTECHNOLOGY—2.8% | |||
167,000 | Amgen Inc. | 35,613 | |
BUILDING PRODUCTS—5.1% | |||
305,000 | Allegion plc (Ireland) | 35,392 | |
685,000 | Johnson Controls International plc | 29,681 | |
65,073 | |||
CAPITAL MARKETS—2.7% | |||
225,000 | Ameriprise Financial Inc. | 33,950 | |
CHEMICALS—2.6% | |||
265,000 | PPG Industries Inc. | 33,157 | |
CONSTRUCTION MATERIALS—2.6% | |||
128,000 | Martin Marietta Materials Inc. | 33,525 | |
CONSUMER FINANCE—2.1% | |||
290,000 | Capital One Financial Corp. | 27,043 | |
ENERGY EQUIPMENT & SERVICES—1.1% | |||
720,000 | Halliburton Co. | 13,860 | |
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—3.4% | |||
290,000 | Equity Lifestyle Properties Inc. | 20,283 | |
140,000 | Sun Communities Inc. | 22,771 | |
43,054 | |||
FOOD & STAPLES RETAILING—1.5% | |||
355,000 | Walgreens Boots Alliance Inc. | 19,447 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
FOOD PRODUCTS—2.4% | |||
365,000 | Tyson Foods Inc. | $30,218 | |
HEALTH CARE EQUIPMENT & SUPPLIES—8.1% | |||
400,000 | Alcon Inc. (Switzerland)* | 23,708 | |
319,000 | Danaher Corp. | 43,965 | |
319,000 | Medtronic plc (Ireland) | 34,739 | |
102,412 | |||
HOUSEHOLD DURABLES—5.1% | |||
510,000 | Lennar Corp. Class A | 30,396 | |
7,120 | Lennar Corp. Class B | 335 | |
550,000 | Sony Corp. ADR (Japan)1 | 33,456 | |
64,187 | |||
INSURANCE—2.0% | |||
163,000 | Chubb Ltd. (Switzerland) | 24,844 | |
INTERACTIVE MEDIA & SERVICES—1.7% | |||
705,000 | Twitter Inc.* | 21,129 | |
IT SERVICES—3.0% | |||
370,000 | PayPal Holdings Inc.* | 38,517 | |
MACHINERY—5.1% | |||
400,000 | Oshkosh Corp. | 34,152 | |
164,000 | Parker-Hannifin Corp. | 30,092 | |
64,244 | |||
OIL, GAS & CONSUMABLE FUELS—6.6% | |||
1,608,000 | Cabot Oil & Gas Corp. | 29,973 | |
305,000 | Phillips 66 | 35,630 | |
145,000 | Pioneer Natural Resources Co. | 17,838 | |
83,441 | |||
PERSONAL PRODUCTS—2.1% | |||
450,000 | Unilever NV NY Registry Shares (United Kingdom) | 26,658 | |
PHARMACEUTICALS—2.1% | |||
300,000 | Novartis AG ADR (Switzerland)1 | 26,232 | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—2.8% | |||
380,000 | Microchip Technology Inc. | 35,830 | |
SOFTWARE—11.7% | |||
195,000 | Adobe Inc.* | 54,196 |
8
Harbor Large Cap Value Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—Continued | |||
Shares | Value | ||
SOFTWARE—Continued | |||
174,000 | ANSYS Inc.* | $38,306 | |
385,000 | Microsoft Corp. | 55,198 | |
147,700 | |||
SPECIALTY RETAIL—2.5% | |||
137,000 | Home Depot Inc. | 32,137 | |
TOTAL COMMON STOCKS | |||
(Cost $968,343) | 1,238,744 | ||
TOTAL INVESTMENTS—97.8% | |||
(Cost $968,343) | 1,238,744 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—2.2% | 28,243 | ||
TOTAL NET ASSETS—100.0% | $1,266,987 |
FAIR VALUE MEASUREMENTS
All investments at October 31, 2019 (as disclosed in the preceding Portfolio of Investments) were classified as Level 1. There were no Level 3 investments at October 31, 2019 or 2018.
For more information on valuation inputs and their aggregation into the levels identified above, please refer to the Fair Value Measurements and Disclosures in Note 2 of the accompanying Notes to Financial Statements.
* | Non-income producing security |
1 | ADR after the name of a security 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.
9
Harbor Mid Cap Growth Fund
Manager’s Commentary (Unaudited)
Manager’s Commentary (Unaudited)
Subadviser
Wellington Management Company LLP
280 Congress Street
Boston, MA 02210
Boston, MA 02210
Portfolio Managers
Stephen C. Mortimer
Since 2010
Since 2010
Michael T. Carmen, CFA
Since 2005
Mario E. Abularach, CFA, CMT
Since 2006
Since 2006
Wellington Management has subadvised the Fund since 2005.
Investment Objective
The Fund seeks long-term growth of capital.
Stephen C. Mortimer
Michael T. Carmen,
CFA
CFA
Mario E. Abularach,
CFA, CMT
CFA, CMT
Management’s Discussion of
Fund Performance
Fund Performance
MARKET REVIEW
U.S. equities, as measured by the S&P 500 Index, posted positive results over the year ended October 31, 2019. Mid-cap growth equities outperformed the broader market during this period. Towards the end of 2018, volatility was elevated as markets contended with a confluence of moderating growth, tighter liquidity and monetary policy, trade uncertainty, swelling fiscal deficits, and political turmoil. The U.S. Federal Reserve (Fed) raised its benchmark interest rate by 0.25% in December 2018. In contrast, there was a dovish shift in Fed policy and guidance during the first quarter of 2019 and U.S. equities rallied to their largest quarterly gain since 2009, buoyed also by optimism for a U.S.-China trade deal, relatively strong fourth-quarter earnings, and corporate buybacks. The Fed left its benchmark interest rate unchanged during the quarter, signaling a more patient approach toward future policy-rate adjustments in response to slowing economic growth and muted inflation. By the summer of 2019, unresolved U.S. trade frictions with China, Mexico, Japan, and the European Union unsettled markets and raised concerns about the potential risks to U.S. economic growth from increasing cost pressures, supply chain disruptions, and waning business confidence and investment plans. In the third quarter of 2019, U.S. equities rose for the third consecutive quarter with the U.S. economy remaining resilient despite elevated geopolitical uncertainties and slowing global growth. U.S.-China trade relations were particularly volatile in the absence of meaningful compromises on key structural issues, and expectations for a protracted trade war and the potential for a longer-term decoupling of the world’s two largest economies has eroded consumer and business confidence and curtailed capital spending. The Fed lowered its benchmark interest rate in July and September by a combined 0.50% in effort to sustain economic expansion and mitigate the risks of moderating growth and trade frictions. In October, the Fed lowered interest rates for a third time by 0.25% and signaled its intention to pause further changes in policy, while U.S. and China made progress towards finalizing sections of a “phase one” trade agreement.
Performance
For the year ended October 31, 2019, Harbor Mid Cap Growth Fund outperformed the Russell Midcap® Growth Index. The Fund returned 21.38% (Retirement Class), 21.32% (Institutional Class), 21.04% (Administrative Class), 20.83% (Investor Class) for the year while the Russell Midcap® Growth Index finished up 18.93%.
Relative outperformance was driven by positive security selection, most notably within the Health Care, Consumer Discretionary, and Industrials sectors. Unfavorable security selection within Communication Services, Energy, and Consumer Staples partially offset positive returns. Sector allocation, a residual of the bottom-up stock selection process, detracted from results. Our overweights to Health Care and Communication Services sectors and lack of exposure to the Real Estate sector hurt performance the most. An underweight allocation to Energy and an overweight allocation to Consumer Staples partially offset the negative results.
Advanced Micro Devices (AMD), a semiconductor company, was the largest contributor to relative performance for the period. The share price rose due to continued strong results as well as the announcement of a multiyear partnership with Samsung Electronics in ultralow-power, high-performance mobile graphics chips based on AMD Radeon technologies. Additionally, Microsoft unveiled several new Surface laptops using AMD CPU chips. Investors viewed these moves as a positive for AMD’s latest CPUs and its competitive positioning against Intel. We increased our position in AMD during the year.
10
Harbor Mid Cap Growth Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
CHANGE IN A $50,000 INVESTMENT
For the period 11/01/2009 through 10/31/2019
The graph compares a $50,000 investment in the Institutional Class shares of the Fund with the performance of the Russell Midcap® Growth Index. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
TOTAL RETURNS
For the periods ended 10/31/2019
1 Year | Annualized | |||||||
5 Years | 10 Years | |||||||
Harbor Mid Cap Growth Fund | ||||||||
Retirement Class1 | 21.38% | 11.65% | 14.41% | |||||
Institutional Class | 21.32 | 11.61 | 14.39 | |||||
Administrative Class | 21.04 | 11.32 | 14.09 | |||||
Investor Class | 20.83 | 11.19 | 13.97 | |||||
Comparative Index | ||||||||
Russell Midcap® Growth | 18.93% | 10.92% | 14.76% |
As stated in the July 2, 2019 supplement to the Fund’s prospectus dated March 1, 2019, the expense ratios were 0.78% (Net) and 0.81% (Gross) (Retirement Class); 0.86% (Net) and 0.89% Gross) (Institutional Class); 1.11% (Net) and 1.14% (Gross) (Administrative Class); and 1.23% (Net) and 1.26% (Gross) (Investor Class). The net expense ratios reflect a contractual management fee waiver effective through 06/30/2020. The expense ratios in the prospectus may differ from the actual expense ratios for the period disclosed within this report. The expense ratios shown in the prospectus are based on the prior fiscal year, adjusted to reflect changes, if any, in contractual arrangements that occurred prior to the date of the prospectus (or supplement thereto, if applicable).
Performance data shown represents past performance and is no guarantee of future results. Past performance is net of management fees and expenses and reflects reinvested dividends and distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or upon the redemption of Fund shares. Past performance reflects the beneficial effect of any expense waivers or reimbursements, without which returns would have been lower. Investment returns and principal value will fluctuate so that Fund shares, when redeemed, may be worth more or less than their original cost. Returns for periods less than one year are not annualized. Current performance may be higher or lower and is available through the most recent month end atharborfunds.com or by calling 800-422-1050.
2U, a provider of cloud-based software solutions enabling online education programs, was the top relative and absolute detractor for the period. Shares declined as the company lowered guidance for the full year due to a slowdown in its core graduate degree segment. Management highlighted lower admission rates by university partners as the main culprit for this slowdown. We reduced our position in this name and are monitoring the situation closely.
OUTLOOK & STRATEGY
In our opinion, there is still much uncertainty surrounding geopolitics globally and the upcoming U.S. presidential election. During the escalating U.S. and China trade tensions, we have been avoiding U.S. companies with notable exposure to China and are focused on idiosyncratic opportunities that we believe are more insulated from geopolitical issues and macro uncertainty. The growth outlook has marginally come down over the past year as a result of trade tensions, but we believe recessions fears are just fears and not a certainty.
In the last few months of the period, we saw a sharp rotation out of high-growth names and into other areas of the market. Many of the best-performing stocks from the first half of 2019 sold off significantly during September. While we are not surprised by the reversal in high momentum stocks where valuations had become extended, we were taken aback by the extent to which it has spread to stocks whose valuations were not as extended. During sharp market reversals over the past decade, we have stuck to the mantra of “be greedy when others are fearful, and fearful when others are greedy,” and intend to follow that during this most recent market move. Our goal is to keep a steady hand until we see significant fundamental change, and not be overly reactive to negative market sentiment. Accordingly, we have not made any wholesale changes to the portfolio.
Fundamentally attractive growth stocks with valuations that once were extended in our view are now becoming more compelling, presenting potential opportunities. We are finding the most attractive growth opportunities in Health Care and Consumer Discretionary, and at the end of the period our largest overweights were in these sectors. We own names in the health care equipment and services industry with product offerings that we believe will continue to be secular growth drivers. Additionally, we have added exposure to the retailing industry where we have identified some unique situations for growth in a sector that has lacked growth opportunities given constant e-commerce headwinds for this space. The Fund was most underweight to Industrials and Financials at the end of the period.
1 | Retirement Class shares commenced operations on March 1, 2016. The performance attributed to the Retirement Class shares prior to that date is that of the Institutional Class shares. Performance prior to March 1, 2016 has not been adjusted to reflect the lower expenses of Retirement Class shares. During this period, Retirement Class shares would have had returns similar to, but potentially higher than, Institutional Class shares due to the fact that Retirement Class shares represent interests in the same portfolio as Institutional Class shares but are subject to lower expenses. |
This report contains the current opinions of Wellington Management Company LLP as of the date of this report and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Such opinions are subject to change without notice and securities described herein may no longer be included in, or may at any time be removed from, the Fund’s portfolio. This report is distributed for informational purposes only. Information contained herein has been obtained from sources believed reliable, but not guaranteed.
Stocks of mid cap companies pose special risks, including possible illiquidity and greater price volatility than stocks of larger, more established companies. Equity securities, such as common stocks, are affected by company specific events and by movements in the overall stock markets in which those securities principally trade, among other factors. An adverse company specific event, or downturn in those stock markets, can depress the value of a particular company’s equity securities. For information on the different share classes and the risks associated with an investment in the Fund, please refer to the current prospectus.
11
Harbor Mid Cap Growth Fund
Portfolio of Investments—October 31, 2019
Portfolio of Investments—October 31, 2019
SECTOR ALLOCATION(% of investments) – Unaudited
(Excludes short-term investments)
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—98.9% | |||
Shares | Value | ||
AEROSPACE & DEFENSE—2.9% | |||
35,189 | L3Harris Technologies Inc. | $7,260 | |
BEVERAGES—1.0% | |||
43,618 | Monster Beverage Corp.* | 2,448 | |
BIOTECHNOLOGY—7.5% | |||
18,148 | Ascendis Pharma A/S ADR (Denmark)*,1 | 2,007 | |
4,344 | Bluebird Bio Inc.* | 352 | |
35,787 | CareDx Inc.* | 938 | |
35,831 | Exact Sciences Corp.* | 3,117 | |
23,917 | Galapagos NV (Belgium)* | 4,396 | |
2,791 | Galapagos NV ADR (Belgium)*,1 | 514 | |
50,203 | Ionis Pharmaceuticals Inc.* | 2,797 | |
18,460 | Sage Therapeutics Inc.* | 2,504 | |
22,946 | Seattle Genetics Inc.* | 2,464 | |
19,089 | |||
CAPITAL MARKETS—1.2% | |||
58,660 | Blackstone Group Inc. | 3,118 | |
COMMERCIAL SERVICES & SUPPLIES—2.7% | |||
31,723 | Brink's Co. | 2,695 | |
51,205 | Copart Inc.* | 4,232 | |
6,927 | |||
DIVERSIFIED CONSUMER SERVICES—1.3% | |||
34,442 | Grand Canyon Education Inc.* | 3,167 | |
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—3.2% | |||
33,534 | Zebra Technologies Corp.* | 7,977 | |
ENTERTAINMENT—6.0% | |||
20,574 | Roku Inc.* | 3,028 | |
68,211 | Spotify Technology SA (Sweden)* | 9,843 | |
18,543 | Take-Two Interactive Software Inc.* | 2,232 | |
15,103 | |||
FOOD PRODUCTS—2.8% | |||
90,604 | Lamb Weston Holdings Inc. | 7,071 | |
HEALTH CARE EQUIPMENT & SUPPLIES—12.9% | |||
19,246 | Abiomed Inc.* | 3,995 | |
18,787 | DexCom Inc.* | 2,898 | |
72,527 | Haemonetics Corp.* | 8,756 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
HEALTH CARE EQUIPMENT & SUPPLIES—Continued | |||
53,418 | Insulet Corp.* | $7,763 | |
38,496 | Penumbra Inc.* | 6,004 | |
55,029 | Tandem Diabetes Care Inc.* | 3,389 | |
32,805 | |||
HOTELS, RESTAURANTS & LEISURE—6.5% | |||
36,684 | Marriott Vacations Worldwide Corp. | 4,033 | |
74,918 | Norwegian Cruise Line Holdings Ltd. (Bermuda)* | 3,803 | |
62,858 | Planet Fitness Inc.* | 4,001 | |
19,845 | Vail Resorts Inc. | 4,611 | |
16,448 | |||
HOUSEHOLD DURABLES—1.9% | |||
78,722 | Lennar Corp. | 4,692 | |
INTERACTIVE MEDIA & SERVICES—3.9% | |||
290,133 | Pinterest Inc.* | 7,294 | |
64,048 | TripAdvisor Inc.* | 2,587 | |
9,881 | |||
INTERNET & DIRECT MARKETING RETAIL—0.7% | |||
20,017 | Wayfair Inc.* | 1,646 | |
IT SERVICES—1.7% | |||
67,958 | GoDaddy Inc.* | 4,419 | |
LEISURE PRODUCTS—1.9% | |||
67,189 | BRP Inc. (Canada) | 3,014 | |
73,500 | Peloton Interactive Inc.* | 1,755 | |
4,769 | |||
LIFE SCIENCES TOOLS & SERVICES—1.0% | |||
35,011 | Agilent Technologies Inc. | 2,652 | |
MACHINERY—3.8% | |||
27,173 | Dover Corp. | 2,823 | |
54,165 | Ingersoll-Rand Plc (Ireland) | 6,873 | |
9,696 | |||
PHARMACEUTICALS—1.6% | |||
148,402 | Elanco Animal Health Inc.* | 4,010 |
12
Harbor Mid Cap Growth Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—Continued | |||
Shares | Value | ||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—6.2% | |||
351,734 | Advanced Micro Devices Inc.* | $11,934 | |
158,126 | Marvell Technology Group Ltd. (Bermuda) | 3,857 | |
15,791 | |||
SOFTWARE—18.5% | |||
45,547 | 2U Inc.* | 816 | |
13,900 | DocuSign Inc.* | 920 | |
14,451 | Fair Isaac Corp.* | 4,394 | |
81,939 | Guidewire Software Inc.* | 9,238 | |
28,683 | ServiceNow Inc.* | 7,092 | |
120,528 | Slack Technologies Inc.* | 2,652 | |
82,099 | Splunk Inc.* | 9,849 | |
17,241 | Trade Desk Inc.* | 3,462 | |
39,528 | Workday Inc.* | 6,410 | |
29,010 | Zoom Video Communications Inc.* | 2,027 | |
46,860 | |||
SPECIALTY RETAIL—5.5% | |||
32,879 | Burlington Stores Inc.* | 6,319 | |
24,475 | Five Below Inc.* | 3,062 | |
98,715 | Floor & Decor Holdings Inc.* | 4,524 | |
13,905 | |||
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS—2.2% | |||
158,968 | Pure Storage Inc.* | 3,094 | |
49,411 | Western Digital Corp. | 2,552 | |
5,646 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
TEXTILES, APPAREL & LUXURY GOODS—2.0% | |||
19,149 | Carter's Inc. | $1,920 | |
33,241 | Under Armour Inc. Class A* | 686 | |
138,561 | Under Armour Inc. Class C* | 2,563 | |
5,169 | |||
TOTAL COMMON STOCKS | |||
(Cost $202,051) | 250,549 | ||
SHORT-TERM INVESTMENTS—1.4% | |||
(Cost $3,615) | |||
Principal Amount | |||
REPURCHASE AGREEMENTS | |||
$ | 3,615 | Repurchase agreement with Bank of America dated October 31, 2019 due November 01, 2019 at 1.720% collateralized by U.S. Treasury Bonds (value $4,204) | 3,615 |
TOTAL INVESTMENTS—100.3% | |||
(Cost $205,666) | 254,164 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—(0.3)% | (777) | ||
TOTAL NET ASSETS—100.0% | $253,387 |
FAIR VALUE MEASUREMENTS
At October 31, 2019, the investments in BRP Inc. and the repurchase agreement (as disclosed in the preceding Portfolio of Investments) were classified as Level 2 and all other investments were classified as Level 1. There were no Level 3 investments at October 31, 2019 or 2018.
For more information on valuation inputs and their aggregation into the levels identified above, please refer to the Fair Value Measurements and Disclosures in Note 2 of the accompanying Notes to Financial Statements.
* | Non-income producing security |
1 | ADR after the name of a security 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
Harbor Mid Cap Value Fund
Manager’s Commentary (Unaudited)
Manager’s Commentary (Unaudited)
Subadviser
LSV Asset Management
155 North Wacker Dr.
Suite 4600
Suite 4600
Chicago, IL 60606
Portfolio Managers
Josef Lakonishok, Ph.D.
Since 2004
Since 2004
Menno Vermeulen, CFA
Since 2004
Since 2004
Puneet Mansharamani, CFA
Since 2006
Greg Sleight
Since 2014
Since 2014
Guy Lakonishok, CFA
Since 2014
Since 2014
LSV has subadvised the Fund since 2004.
Investment Objective
The Fund seeks long-term total return.
Josef Lakonishok, Ph.D.
Menno Vermeulen, CFA
Puneet Mansharamani, CFA
Greg Sleight
Guy Lakonishok, CFA
Management’s Discussion of
Fund Performance
Fund Performance
Market Review
The broad U.S. equity market as measured by the S&P 500 Index finished up 14.33% for the year ended October 31, 2019. Large cap stocks as measured by the Russell 1000® Index, which was up 14.15%, significantly outperformed small caps which gained just 4.91% as measured by the Russell 2000® Index. The Russell Midcap® Index finished up 13.72% for the period. While value stocks staged a comeback late in the period, growth significantly outperformed value across all market capitalization segments for the full twelve months. The Russell Midcap® Growth Index gained 18.93% in the period while the Russell Midcap® Value Index was up 10.08%.
While equity markets posted steep declines in late 2018, markets quickly reversed course in early 2019 aided by accommodative monetary policies across the globe. The U.S. Federal Reserve (Fed) raised rates on four occasions in 2018 after three rate hikes in 2017 and had signaled additional rate hikes for 2019. However, the Fed reversed course and cut rates three times thus far in 2019. Trade tensions continued to impact markets throughout the period. Equities, and value stocks in particular, tended to struggle when the trade rhetoric between the U.S. and China intensified (May and August) and markets rallied on news of progress in trade negotiations. Economic data were mixed but generally supportive for the markets. Unemployment remained at historically low levels and wage growth was strong. GDP growth slowed in late 2018 but picked up in early 2019. However, consumer confidence indicators deteriorated and manufacturing data softened in part due to the ongoing trade tensions.
From a sector perspective, defensive sectors, particularly Real Estate and Utilities led the market. Technology and Industrials also posted strong double digit returns. Energy stocks struggled, particularly oil & gas exploration and production companies. Communication Services and Consumer Staples stocks also lagged in the period among mid cap stocks.
Performance
Harbor Mid Cap Value Fund advanced 5.53% (Retirement Class), 5.48% (Institutional Class), 5.19% (Administrative Class), and 5.08% (Investor Class) compared to 10.08% for the Russell Midcap® Value Index for the fiscal year ended October 31, 2019. The most significant contributor to the underperformance in the period was the difficult environment for traditional deep value stocks combined with the strong performance of defensive low volatility stocks which we generally find expensive. While value stocks staged a recovery over the last two months of the fiscal year, the improvement was not enough to overcome the significant underperformance over the first ten months of the period. In fact, stocks that we define as value – stocks that are cheap on measures of cash flow and earnings – have struggled the most. In addition, defensive and low volatility stocks posted strong returns in the period as the Russell Midcap® Defensive Index returned 24.02% compared to 13.72% for the Russell Midcap® Index. It is highly unusual for low volatility stocks to outperform significantly in periods when the overall market rallies as has been the case over the last twelve months.
The performance of the Fund’s holdings in the Consumer Discretionary and Industrials sectors negatively impacted results in the period. Our holdings in the auto parts industry struggled, including Cooper Standard and Tenneco. In addition, department store holdings Macy’s and Kohl’s also detracted in the Consumer Discretionary sector. Industrials have been negatively impacted by the tariff concerns and holdings Atlas Air Worldwide, Spirit Aerosystems and Briggs & Stratton have struggled over the last 12 months.
14
Harbor Mid Cap Value Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
CHANGE IN A $50,000 INVESTMENT
For the period 11/01/2009 through 10/31/2019
The graph compares a $50,000 investment in the Institutional Class shares of the Fund with the performance of the Russell Midcap® Value Index. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
TOTAL RETURNS
For the periods ended 10/31/2019
1 Year | Annualized | |||||||
5 Years | 10 Years | |||||||
Harbor Mid Cap Value Fund | ||||||||
Retirement Class1 | 5.53% | 4.54% | 11.63% | |||||
Institutional Class | 5.48 | 4.49 | 11.60 | |||||
Administrative Class | 5.19 | 4.22 | 11.33 | |||||
Investor Class | 5.08 | 4.11 | 11.19 | |||||
Comparative Index | ||||||||
Russell Midcap® Value | 10.08% | 6.95% | 12.90% |
As stated in the Fund’s prospectus dated March 1, 2019, the expense ratios were 0.76% (Net) and 0.80% (Gross) (Retirement Class); 0.84% (Net) and 0.88% (Gross) (Institutional Class); 1.09% (Net) and 1.13% (Gross) (Administrative Class); and 1.21% (Net) and 1.25% (Gross) (Investor Class). The net expense ratios reflect a contractual management fee waiver effective through 02/29/2020. The expense ratios in the prospectus may differ from the actual expense ratios for the period disclosed within this report. The expense ratios shown in the prospectus are based on the prior fiscal year, adjusted to reflect changes, if any, in contractual arrangements that occurred prior to the date of the prospectus (or supplement thereto, if applicable).
Performance data shown represents past performance and is no guarantee of future results. Past performance is net of management fees and expenses and reflects reinvested dividends and distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or upon the redemption of Fund shares. Past performance reflects the beneficial effect of any expense waivers or reimbursements, without which returns would have been lower. Investment returns and principal value will fluctuate so that Fund shares, when redeemed, may be worth more or less than their original cost. Returns for periods less than one year are not annualized. Current performance may be higher or lower and is available through the most recent month end atharborfunds.com or by calling 800-422-1050.
Fund holdings that did well in the period included Technology stocks Lam Research, Applied Materials and Seagate Technology. Refiners Valero Energy and Marathon Petroleum continued to do well and also contributed positively. While the Fund is underweight Utilities, stock selection in the sector added value particularly the Fund’s exposure to Entergy and FirstEnergy Corp. Other contributors included homebuilders Meritage Homes and PulteGroup and auto retailer Group 1 Automotive.
Outlook & Strategy
LSV’s portfolio decision making process is quantitative and driven by a proprietary model which ranks securities on fundamental measures of value and indicators of near-term appreciation potential and a portfolio construction process that controls for risk while maximizing the expected return of the portfolio. The objective of the model is to pick undervalued stocks with high near-term appreciation potential. The process is purely bottom-up with no emphasis placed on macro-economic analysis.
Sector weightings are a residual of our bottom-up stock selection process subject to minimum and maximum exposures to sectors and industries. The Fund’s most significant sector exposures on an absolute basis are to Financials, Industrials and Consumer Discretionary stocks. Relative to the Fund’s benchmark, the Fund is overweight the Financial, Industrials, Consumer Discretionary and Technology sectors. The Fund is underweight Utilities, Real Estate and Communication Services.
The most significant changes in sector weights over the last 12 months were an increase in the relative exposure to Industrial stocks and decreases to Financials and Consumer Discretionary stocks. Within Industrials, the manager initiated positions in Regal Beloit Corp and Textron and added to current holding Huntington Ingalls. Among the Fund’s Consumer Discretionary holdings, the manager sold Murphy USA, Autonation and Dillards. While the Fund remains overweight to Financials, the overweight was reduced due to an increase in the weight of Financials in the benchmark in addition to a reduction in our insurance holdings.
In our view, the Fund’s portfolio continues to trade at attractive valuations relative to its benchmark index and relative to history. The Fund’s portfolio is trading at 10.4x forward earnings compared to 15.8x for the value benchmark and 6.9x cash flow compared to 10.6x for the Russell Midcap® Value Index.
While value stocks staged a comeback in September and October 2019, the environment for deep value investors has been challenging over the last 12 months. We continue to find many attractively priced stocks that are generating strong cash flow and earnings that the market seems to have ignored. We find the discounts at which many of the Fund holdings are trading to be unwarranted. We believe that long term investors will be rewarded for holding a diversified portfolio of stocks that, in our view, are cheap but healthy in terms of their ability to generate strong cash flows and earnings going forward.
1 | Retirement Class shares commenced operations on March 1, 2016. The performance attributed to the Retirement Class shares prior to that date is that of the Institutional Class shares. Performance prior to March 1, 2016 has not been adjusted to reflect the lower expenses of Retirement Class shares. During this period, Retirement Class shares would have had returns similar to, but potentially higher than, Institutional Class shares due to the fact that Retirement Class shares represent interests in the same portfolio as Institutional Class shares but are subject to lower expenses. |
This report contains the current opinions of LSV Asset Management as of the date of this report and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Such opinions are subject to change without notice and securities described herein may no longer be included in, or may at any time be removed from, the Fund’s portfolio. This report is distributed for informational purposes only. Information contained herein has been obtained from sources believed reliable, but not guaranteed.
Stocks of mid cap companies pose special risks, including possible illiquidity and greater price volatility than stocks of larger, more established companies. Equity securities, such as common stocks, are affected by company specific events and by movements in the overall stock markets in which those securities principally trade, among other factors. An adverse company specific event, or downturn in those stock markets, can depress the value of a particular company’s equity securities. For information on the different share classes and the risks associated with an investment in the Fund, please refer to the current prospectus.
15
Harbor Mid Cap Value Fund
Portfolio of Investments—October 31, 2019
Portfolio of Investments—October 31, 2019
SECTOR ALLOCATION(% of investments) – Unaudited
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—99.6% | |||
Shares | Value | ||
AEROSPACE & DEFENSE—2.0% | |||
13,000 | Huntington Ingalls Industries Inc. | $2,934 | |
71,900 | Spirit AeroSystems Holdings Inc. | 5,883 | |
114,800 | Textron Inc. | 5,291 | |
14,108 | |||
AIR FREIGHT & LOGISTICS—0.2% | |||
74,217 | Atlas Air Worldwide Holdings Inc.* | 1,628 | |
AIRLINES—3.2% | |||
49,700 | Alaska Air Group Inc. | 3,451 | |
113,600 | American Airlines Group Inc. | 3,415 | |
332,900 | JetBlue Airways Corp.* | 6,425 | |
101,600 | United Airlines Holdings Inc.* | 9,229 | |
22,520 | |||
AUTO COMPONENTS—1.9% | |||
118,200 | American Axle & Manufacturing Holdings Inc.* | 988 | |
76,500 | BorgWarner Inc. | 3,189 | |
32,900 | Cooper-Standard Holdings Inc.* | 1,048 | |
231,338 | Goodyear Tire & Rubber Co. | 3,671 | |
38,200 | Lear Corp. | 4,499 | |
13,395 | |||
AUTOMOBILES—0.6% | |||
105,600 | Harley-Davidson Inc. | 4,109 | |
BANKS—7.1% | |||
134,800 | CIT Group Inc. | 5,781 | |
267,800 | Citizens Financial Group Inc. | 9,416 | |
297,500 | Fifth Third Bancorp | 8,651 | |
187,100 | KeyCorp | 3,362 | |
437,800 | Regions Financial Corp. | 7,049 | |
111,600 | SunTrust Banks Inc. | 7,627 | |
164,900 | Zions Bancorporation | 7,993 | |
49,879 | |||
BEVERAGES—0.8% | |||
110,500 | Molson Coors Brewing Co. | 5,826 | |
BUILDING PRODUCTS—0.5% | |||
61,200 | Owens Corning | 3,750 | |
CAPITAL MARKETS—3.0% | |||
57,200 | Ameriprise Financial Inc. | 8,631 | |
141,500 | Ares Capital Corp. | 2,589 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
CAPITAL MARKETS—Continued | |||
80,700 | Lazard Ltd. (Bermuda) | $3,013 | |
51,500 | Legg Mason Inc. | 1,919 | |
329,374 | Prospect Capital Corp. | 2,121 | |
33,900 | Raymond James Financial Inc. | 2,830 | |
21,103 | |||
CHEMICALS—4.3% | |||
9,746 | A. Schulman Inc.(Contingent Value Rights)* | 4x | |
69,000 | Cabot Corp. | 3,008 | |
75,300 | Celanese Corp. | 9,123 | |
112,122 | Chemours Co. | 1,840 | |
106,500 | Eastman Chemical Co. | 8,098 | |
226,000 | Huntsman Corp. | 5,001 | |
70,400 | Trinseo SA (Luxembourg) | 2,992 | |
30,066 | |||
COMMERCIAL SERVICES & SUPPLIES—0.2% | |||
304,900 | Pitney Bowes Inc. | 1,342 | |
CONSUMER FINANCE—2.4% | |||
136,700 | Ally Financial Inc. | 4,187 | |
81,700 | Discover Financial Services | 6,557 | |
225,200 | Navient Corp. | 3,101 | |
44,107 | Nelnet Inc. | 2,703 | |
16,548 | |||
CONTAINERS & PACKAGING—1.8% | |||
96,100 | International Paper Co. | 4,198 | |
260,946 | Owens-Illinois Inc. | 2,218 | |
80,500 | Silgan Holdings Inc. | 2,477 | |
95,900 | WestRock Co. | 3,584 | |
12,477 | |||
DIVERSIFIED FINANCIAL SERVICES—1.2% | |||
79,987 | Banco Latinoamericano de Comercio Exterior SA (Panama) | 1,650 | |
120,200 | Voya Financial Inc. | 6,486 | |
8,136 | |||
ELECTRIC UTILITIES—3.2% | |||
65,200 | Edison International | 4,101 | |
160,300 | FirstEnergy Corp. | 7,746 | |
317,200 | PPL Corp. | 10,623 | |
22,470 |
16
Harbor Mid Cap Value Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—Continued | |||
Shares | Value | ||
ELECTRICAL EQUIPMENT—0.5% | |||
44,200 | Regal Beloit Corp. | $3,273 | |
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—2.9% | |||
72,100 | Avnet Inc. | 2,852 | |
77,100 | Corning Inc. | 2,284 | |
79,185 | Methode Electronics Inc. | 2,724 | |
13,988 | SYNNEX Corp. | 1,647 | |
41,800 | Tech Data Corp.* | 5,079 | |
196,236 | TTM Technologies Inc.* | 2,298 | |
154,200 | Vishay Intertechnology Inc. | 3,107 | |
19,991 | |||
ENTERTAINMENT—0.3% | |||
108,800 | Viacom Inc. | 2,346 | |
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—11.1% | |||
213,903 | Brandywine Realty Trust | 3,268 | |
205,100 | Brixmor Property Group Inc. | 4,516 | |
464,916 | Franklin Street Properties Corp. | 3,998 | |
117,200 | Gaming and Leisure Properties Inc. | 4,730 | |
188,700 | Hersha Hospitality Trust | 2,604 | |
187,800 | Host Hotels & Resorts Inc. | 3,078 | |
125,500 | Industrial Logistics Properties Trust | 2,666 | |
528,000 | Lexington Realty Trust | 5,745 | |
52,750 | Office Properties Income Trust | 1,682 | |
175,100 | Omega Healthcare Investors Inc. | 7,711 | |
166,038 | Outfront Media Inc. | 4,369 | |
276,700 | Piedmont Office Realty Trust Inc. | 6,209 | |
29,388 | Retail Value Inc. | 1,076 | |
173,123 | RLJ Lodging Trust | 2,841 | |
138,200 | Sabra Health Care REIT Inc. | 3,400 | |
124,400 | Service Properties Trust | 3,147 | |
216,500 | SITE Centers Corp. | 3,362 | |
277,300 | Summit Hotel Properties Inc. | 3,400 | |
692,900 | VEREIT Inc. | 6,818 | |
151,200 | Xenia Hotels & Resorts Inc. | 3,183 | |
77,803 | |||
FOOD & STAPLES RETAILING—1.6% | |||
62,200 | Ingles Markets Inc. | 2,452 | |
353,200 | Kroger Co. | 8,703 | |
11,155 | |||
FOOD PRODUCTS—2.2% | |||
39,000 | Ingredion Inc. | 3,081 | |
54,500 | JM Smucker Co. | 5,760 | |
83,700 | Tyson Foods Inc. | 6,929 | |
15,770 | |||
GAS UTILITIES—0.8% | |||
130,000 | National Fuel Gas Co. | 5,890 | |
HEALTH CARE PROVIDERS & SERVICES—3.8% | |||
69,200 | Cardinal Health Inc. | 3,422 | |
65,900 | Davita Inc.* | 3,862 | |
42,200 | HCA Healthcare Inc. | 5,635 | |
18,200 | Laboratory Corp. of America Holdings* | 2,999 | |
35,743 | McKesson Corp. | 4,754 | |
43,500 | Universal Health Services Inc. | 5,979 | |
26,651 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
HOTELS, RESTAURANTS & LEISURE—0.7% | |||
88,300 | Brinker International Inc. | $3,925 | |
15,250 | Wyndham Destinations Inc. | 708 | |
4,633 | |||
HOUSEHOLD DURABLES—3.6% | |||
101,478 | Ethan Allen Interiors Inc. | 2,000 | |
46,500 | Meritage Homes Corp.* | 3,352 | |
158,300 | PulteGroup Inc. | 6,212 | |
133,500 | Toll Brothers Inc. | 5,309 | |
54,500 | Whirlpool Corp. | 8,291 | |
25,164 | |||
INDEPENDENT POWER & RENEWABLE ELECTRICITY PRODUCERS—1.4% | |||
355,464 | Vistra Energy Corp. | 9,608 | |
INSURANCE—6.3% | |||
62,000 | Aflac Inc. | 3,296 | |
70,800 | Allstate Corp. | 7,535 | |
27,500 | American Financial Group Inc. | 2,861 | |
88,400 | Assured Guaranty Ltd. (Bermuda) | 4,148 | |
97,100 | Hartford Financial Services Group Inc. | 5,542 | |
161,700 | Lincoln National Corp. | 9,133 | |
129,100 | Old Republic International Corp. | 2,884 | |
58,400 | Principal Financial Group Inc. | 3,117 | |
75,200 | Universal Insurance Holdings Inc. | 2,039 | |
139,000 | Unum Group | 3,828 | |
44,383 | |||
IT SERVICES—1.2% | |||
98,200 | DXC Technology Co. | 2,717 | |
228,100 | Western Union Co. | 5,716 | |
8,433 | |||
LEISURE PRODUCTS—0.3% | |||
40,300 | Brunswick Corp. | 2,347 | |
MACHINERY—5.2% | |||
42,500 | AGCO Corp. | 3,259 | |
100,600 | Allison Transmission Holdings Inc. | 4,387 | |
62,000 | Cummins Inc. | 10,694 | |
161,900 | Meritor Inc.* | 3,567 | |
47,700 | Oshkosh Corp. | 4,073 | |
20,600 | Snap-on Inc. | 3,351 | |
64,700 | Timken Co. | 3,170 | |
263,800 | Wabash National Corp. | 3,762 | |
36,263 | |||
MEDIA—1.1% | |||
102,700 | AMC Networks Inc.* | 4,472 | |
96,652 | Gannett Co. Inc. | 1,049 | |
144,100 | TEGNA Inc. | 2,166 | |
7,687 | |||
METALS & MINING—1.1% | |||
65,600 | Reliance Steel & Aluminum Co. | 7,612 | |
MORTGAGE REAL ESTATE INVESTMENT TRUSTS (REITs)—1.6% | |||
372,800 | Annaly Capital Management Inc. | 3,348 | |
171,000 | Invesco Mortgage Capital Inc. | 2,691 | |
298,300 | MFA Financial Inc. | 2,264 | |
140,800 | PennyMac Mortgage Investment Trust | 3,223 | |
11,526 |
17
Harbor Mid Cap Value Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—Continued | |||
Shares | Value | ||
MULTILINE RETAIL—1.3% | |||
91,600 | Big Lots Inc. | $1,985 | |
94,400 | Kohl's Corp. | 4,839 | |
150,600 | Macy's Inc. | 2,283 | |
9,107 | |||
MULTI-UTILITIES—1.0% | |||
108,700 | Public Service Enterprise Group Inc. | 6,882 | |
OIL, GAS & CONSUMABLE FUELS—4.0% | |||
180,700 | Carrizo Oil & Gas Inc.* | 1,330 | |
142,300 | Devon Energy Corp. | 2,886 | |
355,616 | Gulfport Energy Corp.* | 990 | |
99,000 | HollyFrontier Corp. | 5,439 | |
357,559 | Laredo Petroleum Inc.* | 844 | |
71,900 | Marathon Petroleum Corp. | 4,598 | |
76,500 | PBF Energy Inc. | 2,470 | |
474,000 | SRC Energy Inc.* | 1,479 | |
79,400 | Valero Energy Corp. | 7,700 | |
27,736 | |||
PAPER & FOREST PRODUCTS—0.5% | |||
86,900 | Domtar Corp. | 3,162 | |
PHARMACEUTICALS—1.6% | |||
141,803 | Corcept Therapeutics Inc.* | 2,069 | |
49,900 | Jazz Pharmaceuticals plc (Ireland)* | 6,269 | |
110,150 | Lannett Co. Inc.* | 1,310 | |
93,493 | Mylan NV (Netherlands)* | 1,790 | |
11,438 | |||
PROFESSIONAL SERVICES—0.9% | |||
71,100 | ManpowerGroup Inc. | 6,464 | |
ROAD & RAIL—0.4% | |||
62,800 | Ryder System Inc. | 3,054 | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—3.2% | |||
56,700 | Applied Materials Inc. | 3,077 | |
60,943 | Cirrus Logic Inc.* | 4,142 | |
66,761 | Diodes Inc.* | 3,114 | |
17,400 | Lam Research Corp. | 4,716 | |
352,600 | ON Semiconductor Corp.* | 7,193 | |
22,242 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
SPECIALTY RETAIL—3.8% | |||
92,800 | Bed Bath & Beyond Inc. | $1,271 | |
85,300 | Best Buy Co. Inc. | 6,127 | |
87,900 | Dick's Sporting Goods Inc. | 3,422 | |
111,200 | Foot Locker Inc. | 4,838 | |
166,100 | Gap Inc. | 2,701 | |
46,400 | Group 1 Automotive Inc. | 4,614 | |
677,800 | Office Depot Inc. | 1,396 | |
52,000 | Penske Automotive Group Inc. | 2,534 | |
26,903 | |||
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS—2.9% | |||
242,314 | HP Inc. | 4,209 | |
97,200 | NCR Corp.* | 2,839 | |
117,600 | Seagate Technology plc (Ireland) | 6,825 | |
189,900 | Xerox Holdings Corp. | 6,443 | |
20,316 | |||
TEXTILES, APPAREL & LUXURY GOODS—0.3% | |||
60,900 | Capri Holdings Ltd. (Virgin Islands)* | 1,892 | |
THRIFTS & MORTGAGE FINANCE—0.8% | |||
169,600 | MGIC Investment Corp. | 2,325 | |
136,700 | Radian Group Inc. | 3,431 | |
5,756 | |||
TRADING COMPANIES & DISTRIBUTORS—0.8% | |||
113,600 | Aircastle Ltd. (Bermuda) | 3,092 | |
65,642 | Triton International Ltd. (Bermuda) | 2,409 | |
5,501 | |||
TOTAL COMMON STOCKS | |||
(Cost $673,320) | 698,345 | ||
TOTAL INVESTMENTS—99.6% | |||
(Cost $673,320) | 698,345 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—0.4% | 2,665 | ||
TOTAL NET ASSETS—100.0% | $701,010 |
18
Harbor Mid Cap Value Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
FAIR VALUE MEASUREMENTS
At October 31, 2019, the investments in A. Schulman (Contingent Value Rights) (as disclosed in the preceeding Portfolio of Investments) were classified as Level 3 and all other investments were classified as Level 1.
For more information on valuation inputs and their aggregation into the levels identified above, please refer to the Fair Value Measurements and Disclosures in Note 2 of the accompanying Notes to Financial Statements.
The following is a rollforward of the Fund’s Level 3 investments during the year ended October 31, 2019.
Valuation Description | Beginning Balance as of 11/01/2018 (000s) | Purchases (000s) | Sales (000s) | Discount/ (Premium) (000s) | Total Realized Gain/(Loss)W (000s) | Change in Unrealized Appreciation/ (Depreciation)W (000s) | Transfers Into Level 3 (000s) | Transfers Out of Level 3 (000s) | Ending Balance as of 10/31/2019w (000s) | |||||||||
Common Stocks | ||||||||||||||||||
Chemicals | $19 | $— | $(15) | $— | $— | $— | $— | $— | $4 |
The following is a summary of significant unobservable inputs used in the fair valuations of assets and liabilities categorized within Level 3 of the fair value hierarchy.
Valuation Descriptions | Ending Balance as of 10/31/2019 (000s) | Valuation Technique | Unobservable Input(s) | Input Value(s) | ||||
Investments in Securities | ||||||||
Common Stocks | ||||||||
Chemicals | ||||||||
A. Schulman Inc.(Contingent Value Rights)* | $4 | Market Approach | Estimated Recovery Value | $ 0.43 |
* | Non-income producing security | ||
w | Amounts in this category are included in the “Realized and Change in Net Unrealized Gain/(Loss) on Investment Transactions” section of the Statement of Operations. The net unrealized appreciation/(depreciation) per investment type is below: | ||
Valuation Description | Unrealized Gain/(Loss) as of 10/31/2019 (000s) | ||
Common Stocks | $– | ||
x | Fair valued in accordance with Harbor Funds Valuation Procedures. |
The accompanying notes are an integral part of the Financial Statements.
19
Harbor Small Cap Growth Fund
Manager’s Commentary (Unaudited)
Manager’s Commentary (Unaudited)
Subadviser
Westfield Capital Management Company, L.P.
One Financial Center
23rd Floor
23rd Floor
Boston, MA 02111
Portfolio Managers
William A. Muggia
Lead Portfolio Manager
Since 2000
Since 2000
Richard D. Lee, CFA
Since 2018
Since 2018
Ethan J. Meyers, CFA
Since 2000
Since 2000
John M. Montgomery
Since 2011
Since 2011
Westfield has subadvised the Fund since 2000.
Investment Objective
The Fund seeks long-term growth of capital.
William A. Muggia
Richard D. Lee, CFA
Ethan J. Meyers, CFA
John M. Montgomery
Management’s Discussion of
Fund Performance
Fund Performance
Market Review
The year ended October 31, 2019 has broadly been characterized by market extremes. The fourth quarter of 2018 marked the largest quarterly decline in most of the Russell Growth Indices in a decade and dragged the full year market returns into negative territory. However, following these negative sentiment extremes, equity markets climbed higher over 2019 despite skepticism of the advance. The key issues have been constants, namely ongoing trade uncertainty as a driver of slowing global growth and a fixation on the U.S. Federal Reserve (Fed) actions. Meanwhile, a “soft patch” in the second quarter of 2019 accelerated to reveal an industrial and manufacturing recession. Despite this weakness, the underlying U.S. consumer remains healthy and provided support to the broader economy. Equity markets finished the most recent period with mixed results as investors weighed softening global economic data and ongoing trade tension with accommodative monetary policy. A notable change during the third quarter was a significant factor rotation, as momentum and growth strength reversed and gave way to a rally in value and beaten down cyclicals. It’s too early to say with any certainty that this shift is the beginning of a sustainable change in leadership, but it bears monitoring over the coming months.
Performance
Harbor Small Cap Growth Fund rose 16.23% (Retirement Class), 16.18% (Institutional Class), 15.87% (Administrative Class), and 15.81% (Investor Class) in the year ending October 31, 2019, outperforming the Russell 2000® Growth Index, which advanced 6.40%. The outperformance was broad based with eight sectors adding to relative returns. Most notable were the Fund’s investments in Health Care and Information Technology, which each added over 4.00% to relative results. These strengths offset relative weakness in Energy.
Health Care was the top source of relative strength, adding 4.26% to relative returns. The portfolio’s positioning was balanced with exposure to secular growers in industries like health care equipment & supplies and life sciences tools & services complemented by exposure to innovative industries like biotechnology and pharmaceuticals. Medicines Company, a late-stage drug developer focused on cholesterol management therapies for cardiovascular disease, was a strong relative contributor during the period. The stock climbed on the back of positive Phase 3 data, which further confirmed the efficacy and safety profile of Medicines’ lead cholesterol treatment therapy Inclisiran. The results revealed a high treatment success rate and strong safety data relative to the leading competitor. In our view, Medicines remains a high conviction name, as we believe the company could see meaningful growth with a de-risked profile. Ascendis Pharma, a development-stage orphan drug company, was another strong relative performer. The company reported success in a key Phase 3 trial for a children’s human growth hormone treatment in the first quarter, which sent the stock soaring. The trial demonstrated that the company’s offering was comparable in experience to the current market offering with a superior outcome. We continue to maintain conviction in this name, as the company generates strong cash flow, offers lower-risk exposure to the space following their last trial success, and could continue to grow organically or find itself an attractive M&A target.
Information Technology was another strong contributor, adding 4.01% to relative results. Within this sector we seek to identify companies that are aiding the digital transformation of businesses with exposure to growth areas through unique product pipelines, large addressable markets, or advantaged competitive positions. For the period, the Fund’s software and communications equipment investments were notably strong. Tableau Software, Inc., which provides analytics and data visualization software, contributed meaningfully to relative results
20
Harbor Small Cap Growth Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
CHANGE IN A $50,000 INVESTMENT
For the period 11/01/2009 through 10/31/2019
The graph compares a $50,000 investment in the Institutional Class shares of the Fund with the performance of the Russell 2000® Growth Index. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
TOTAL RETURNS
For the periods ended 10/31/2019
1 Year | Annualized | |||||||
5 Years | 10 Years | |||||||
Harbor Small Cap Growth Fund | ||||||||
Retirement Class1 | 16.23% | 9.66% | 14.19% | |||||
Institutional Class | 16.18 | 9.60 | 14.16 | |||||
Administrative Class | 15.87 | 9.26 | 13.87 | |||||
Investor Class | 15.81 | 9.20 | 13.75 | |||||
Comparative Index | ||||||||
Russell 2000® Growth | 6.40% | 8.38% | 13.38% |
As stated in the Fund’s prospectus dated March 1, 2019, the expense ratios were 0.80% (Retirement Class); 0.88% (Institutional Class); 1.13% (Administrative Class); and 1.25% (Investor Class). The expense ratios in the prospectus may differ from the actual expense ratios for the period disclosed within this report. The expense ratios shown in the prospectus are based on the prior fiscal year, adjusted to reflect changes, if any, in contractual arrangements that occurred prior to the date of the prospectus (or supplement thereto, if applicable).
Performance data shown represents past performance and is no guarantee of future results. Past performance is net of management fees and expenses and reflects reinvested dividends and distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or upon the redemption of Fund shares. Past performance reflects the beneficial effect of any expense waivers or reimbursements, without which returns would have been lower. Investment returns and principal value will fluctuate so that Fund shares, when redeemed, may be worth more or less than their original cost. Returns for periods less than one year are not annualized. Current performance may be higher or lower and is available through the most recent month end atharborfunds.com or by calling 800-422-1050.
following the announcement that Salesforce, Inc. would acquire the business at a premium. The deal validated our notion that Tableau would continue to take share from legacy vendors and that secular tailwinds supported a runway for growth. We exited our position in August following the announcement. Acacia Communications Inc., a supplier of high-speed fiber optic networking products, also contributed meaningfully to relative results. The stock climbed higher after news that Cisco Systems, Inc. was acquiring the company at a premium, validating its competitive position. We exited the position in July following the announcement.
Energy was the largest source of relative weakness, costing 1.42% of relative returns. The group lagged broad indices as short-term demand concerns, exacerbated by trade wars and a weakening global macroeconomic environment, kept investors away. The Fund’s two holdings in the exploration & production sub-industry were notably weak. WPX Energy Inc. fell as negative macroeconomic sentiment weighed on the stock despite attractive free cash flow, strong production and earnings growth, and disciplined spending, and returning capital to shareholders. We continue to believe that the fundamental set-up for WPX is strong and that their advantaged acreage in the Bakkan oil field and Permian basin could drive long- term growth. In June, we exited our position in Centennial Resource Development, Inc., the Fund’s other exploration & production holding, over concerns around the long-term viability of our thesis.
Outlook & Strategy
Despite evidence of slowing growth, we believe there are reasons for optimism in the U.S. and global economy. Importantly, both the U.S. consumer and services economy remain strong, with consumer confidence remaining steady at elevated levels, retail sales reaccelerating after softness last year, and a tight labor market driving up wages. The housing market is also a bright spot for the U.S. economy, supported by falling rates and demographic tailwinds. Housing permits and starts jumped at the end of the quarter and opportunities for refinancing can further strengthen consumer balance sheets, effectively increasing household income by lowering monthly payments. Despite parts of the yield curve remaining inverted, we believe that most traditional recession indicators are not showing signs of stress, namely healthy credit and lending markets, and global central banks generally remain accommodative. Early signs indicate that some of these policy actions may be taking hold, such as the turnaround in China’s manufacturing sector. Further improvement would ultimately be supportive for Europe’s economy and global growth more broadly, in our view. Taking the economic crosscurrents into consideration, we expect to see sustained volatility in equity markets which we believe should provide a fertile backdrop for active stock picking.
1 | Retirement Class shares commenced operations on March 1, 2016. The performance attributed to the Retirement Class shares prior to that date is that of the Institutional Class shares. Performance prior to March 1, 2016 has not been adjusted to reflect the lower expenses of Retirement Class shares. During this period, Retirement Class shares would have had returns similar to, but potentially higher than, Institutional Class shares due to the fact that Retirement Class shares represent interests in the same portfolio as Institutional Class shares but are subject to lower expenses. |
This report contains the current opinions of Westfield Capital Management Company, L.P. as of the date of this report and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Such opinions are subject to change without notice and securities described herein may no longer be included in, or may at any time be removed from, the Fund’s portfolio. This report is distributed for informational purposes only. Information contained herein has been obtained from sources believed reliable, but not guaranteed.
Stocks of small cap companies pose special risks, including possible illiquidity and greater price volatility than stocks of larger, more established companies. Equity securities, such as common stocks, are affected by company specific events and by movements in the overall stock markets in which those securities principally trade, among other factors. An adverse company specific event, or downturn in those stock markets, can depress the value of a particular company’s equity securities. For information on the different share classes and the risks associated with an investment in the Fund, please refer to the current prospectus.
21
Harbor Small Cap Growth Fund
Portfolio of Investments—October 31, 2019
Portfolio of Investments—October 31, 2019
SECTOR ALLOCATION(% of investments) – Unaudited
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—99.0% | |||
Shares | Value | ||
AEROSPACE & DEFENSE—2.9% | |||
71,407 | HEICO Corp. | $6,803 | |
44,239 | Teledyne Technologies Inc.* | 14,581 | |
21,384 | |||
BANKS—1.0% | |||
277,500 | First Hawaiian Inc. | 7,584 | |
BIOTECHNOLOGY—12.3% | |||
205,772 | Acceleron Pharma Inc.* | 9,233 | |
161,701 | Apellis Pharmaceuticals Inc.* | 4,752 | |
126,910 | Ascendis Pharma A/S ADR (Denmark)*,1 | 14,034 | |
165,016 | Blueprint Medicines Corp.* | 11,360 | |
346,670 | Fate Therapeutics Inc.* | 5,183 | |
129,330 | Fibrogen Inc.* | 5,063 | |
984,119 | Ironwood Pharmaceuticals Inc.* | 9,880 | |
425,790 | Medicines Co.* | 22,350 | |
279,330 | Momenta Pharmaceuticals Inc.* | 4,324 | |
309,150 | Orchard Therapeutics plc ADR (United Kingdom)*,1 | 3,728 | |
89,907 | |||
BUILDING PRODUCTS—2.3% | |||
189,530 | Trex Co. Inc.* | 16,658 | |
CAPITAL MARKETS—2.6% | |||
122,933 | Hamilton Lane Inc. | 7,329 | |
145,132 | LPL Financial Holdings Inc. | 11,733 | |
19,062 | |||
CHEMICALS—0.8% | |||
64,946 | Ingevity Corp.* | 5,469 | |
COMMERCIAL SERVICES & SUPPLIES—1.3% | |||
80,190 | MSA Safety Inc. | 9,628 | |
COMMUNICATIONS EQUIPMENT—1.3% | |||
604,055 | Viavi Solutions Inc.* | 9,641 | |
CONSTRUCTION MATERIALS—1.1% | |||
340,637 | Summit Materials Inc.* | 7,811 | |
CONSUMER FINANCE—1.1% | |||
97,090 | FirstCash Inc. | 8,193 | |
CONTAINERS & PACKAGING—1.3% | |||
225,420 | Berry Global Group Inc.* | 9,357 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
DIVERSIFIED CONSUMER SERVICES—1.6% | |||
46,225 | Bright Horizons Family Solutions Inc.* | $6,865 | |
41,420 | Strategic Education Inc. | 5,096 | |
11,961 | |||
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—2.3% | |||
448,570 | Knowles Corp.* | 9,680 | |
51,690 | Rogers Corp.* | 7,003 | |
16,683 | |||
ENTERTAINMENT—3.1% | |||
41,358 | Madison Square Garden Co.* | 11,039 | |
1,826,850 | Zynga Inc.* | 11,272 | |
22,311 | |||
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—3.7% | |||
515,460 | Brixmor Property Group Inc. | 11,351 | |
313,130 | Spirit Realty Capital Inc. | 15,606 | |
26,957 | |||
FOOD & STAPLES RETAILING—0.5% | |||
103,950 | Grocery Outlet Holding Corp.* | 3,316 | |
HEALTH CARE EQUIPMENT & SUPPLIES—4.9% | |||
112,330 | Haemonetics Corp.* | 13,562 | |
151,100 | Integra LifeSciences Holdings Corp.* | 8,773 | |
90,791 | Masimo Corp.* | 13,236 | |
35,571 | |||
HEALTH CARE TECHNOLOGY—1.2% | |||
110,010 | Teladoc Health Inc.* | 8,427 | |
HOTELS, RESTAURANTS & LEISURE—2.7% | |||
255,041 | Eldorado Resorts Inc.* | 11,418 | |
144,470 | Papa John's International Inc. | 8,459 | |
19,877 | |||
HOUSEHOLD DURABLES—3.8% | |||
250,290 | KB Home | 8,933 | |
178,780 | Topbuild Corp.* | 18,580 | |
27,513 |
22
Harbor Small Cap Growth Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—Continued | |||
Shares | Value | ||
INSURANCE—1.6% | |||
70,577 | Kemper Corp. | $5,073 | |
153,125 | Palomar Holdings Inc.* | 6,914 | |
11,987 | |||
IT SERVICES—5.0% | |||
96,738 | InterXion Holding NV (Netherlands)* | 8,534 | |
284,945 | Repay Holdings Corp.* | 3,827 | |
71,072 | WEX Inc.* | 13,445 | |
167,665 | WNS Holdings Ltd. ADR (Jersey)*,1 | 10,369 | |
36,175 | |||
LIFE SCIENCES TOOLS & SERVICES—5.2% | |||
58,150 | BIO-RAD Laboratories Inc.* | 19,284 | |
127,074 | ICON plc (Ireland)* | 18,667 | |
37,951 | |||
MACHINERY—6.6% | |||
194,840 | Flowserve Corp. | �� 9,516 | |
149,770 | Lincoln Electric Holdings Inc. | 13,415 | |
296,560 | Timken Co. | 14,531 | |
98,740 | Woodward Inc. | 10,532 | |
47,994 | |||
MARINE—0.5% | |||
98,740 | Matson Inc. | 3,770 | |
OIL, GAS & CONSUMABLE FUELS—2.8% | |||
339,970 | PBF Energy Inc. | 10,974 | |
925,800 | WPX Energy Inc.* | 9,240 | |
20,214 | |||
PHARMACEUTICALS—4.2% | |||
200,471 | Catalent Inc.* | 9,753 | |
1,823,778 | Correvio Pharma Corp. (Canada)* | 3,648 | |
311,675 | Intersect ENT Inc.* | 5,554 | |
285,930 | Pacira BioSciences Inc.* | 11,577 | |
30,532 | |||
PROFESSIONAL SERVICES—1.3% | |||
87,490 | Insperity Inc. | 9,242 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
REAL ESTATE MANAGEMENT & DEVELOPMENT—1.0% | |||
156,943 | RMR Group Inc. | $7,596 | |
ROAD & RAIL—1.0% | |||
148,450 | Ryder System Inc. | 7,219 | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—1.8% | |||
19,501 | Advanced Energy Industries Inc.* | 1,153 | |
80,850 | Cabot Microelectronics Corp. | 12,218 | |
13,371 | |||
SOFTWARE—10.3% | |||
557,410 | 8x8 Inc.* | 10,769 | |
37,048 | Fair Isaac Corp.* | 11,264 | |
364,214 | Mimecast Ltd. (Jersey)* | 14,463 | |
83,665 | NICE Ltd. ADR (Israel)*,1 | 13,202 | |
591,800 | Nuance Communications Inc.* | 9,658 | |
61,299 | Paylocity Holding Corp.* | 6,289 | |
84,330 | Proofpoint Inc.* | 9,729 | |
75,374 | |||
SPECIALTY RETAIL—2.3% | |||
336,340 | American Eagle Outfitters Inc. | 5,173 | |
95,100 | Five Below Inc.* | 11,898 | |
17,071 | |||
THRIFTS & MORTGAGE FINANCE—1.7% | |||
234,270 | Essent Group Ltd. (Bermuda) | 12,203 | |
TRADING COMPANIES & DISTRIBUTORS—1.9% | |||
313,466 | Rush Enterprises Inc. | 13,695 | |
TOTAL COMMON STOCKS | |||
(Cost $620,698) | 721,704 | ||
TOTAL INVESTMENTS—99.0% | |||
(Cost $620,698) | 721,704 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—1.0% | 7,517 | ||
TOTAL NET ASSETS—100.0% | $729,221 |
23
Harbor Small Cap Growth Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
FAIR VALUE MEASUREMENTS
All investments at October 31, 2019 (as disclosed in the preceding Portfolio of Investments) were classified as Level 1. There were no Level 3 investments at October 31, 2019 or 2018.
For more information on valuation inputs and their aggregation into the levels identified above, please refer to the Fair Value Measurements and Disclosures in Note 2 of the accompanying Notes to Financial Statements.
AFFILIATED TRANSACTIONS
Certain of the Fund’s investments are in companies that are considered to be affiliated companies of the Fund because the Fund owned more than 5% of the outstanding voting securities of the company during the period November 1, 2018 through October 31, 2019. Transactions during the period in securities of these companies were as follows:
Security Name | Beginning Balance as of 11/01/2018 (000s) | Purchases (000s) | Sales (000s) | Net Realized Gain/(Loss) (000s) | Change in Unrealized Appreciation/ (Depreciation) (000s) | Net Dividend Income (000s) | Ending Balance as of 10/31/2019 (000s) | |||||||
Correvio Pharma Corp. (Canada) | $6,237 | $512 | $(491) | $(1,383) | $(1,227) | $— | $3,648 |
* | Non-income producing security |
1 | ADR after the name of a security 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.
24
Harbor Small Cap Growth Opportunities Fund
Manager’s Commentary (Unaudited)
Manager’s Commentary (Unaudited)
Subadviser
Elk Creek Partners, LLC
44 Cook Street
Suite 705
Suite 705
Denver, CO 80206
Portfolio Managers
Cam Philpott, CFA
Since 2014
Since 2014
David Hand, CFA
Since 2014
Since 2014
Hiren Patel, Ph.D.
Since 2014
Since 2014
Sean McGinnis, CFA
Since 2014
Since 2014
Elk Creek has subadvised the Fund since 2014.
Investment Objective
The Fund seeks long-term growth of capital.
Cam Philpott, CFA
David Hand, CFA
Hiren Patel, Ph.D.
Sean McGinnis, CFA
Management’s Discussion of
Fund Performance
Fund Performance
Market REVIEW
Domestic equities had a difficult end to 2018 and broadly posted significantly negative returns for the final few months of the period, wiping out positive year-to-date absolute returns as of the end of September 2018.
Equities started 2019 with a powerful rally out of the gate that surprised many of the market’s participants. Investors’ economic concerns receded, and sentiment improved significantly. With favorable domestic macroeconomic data, stock prices regained much of the ground that they lost in the fourth quarter of 2018.
In the second calendar quarter of 2019, the domestic equity markets experienced wild swings, and at period’s end, the indices posted solid gains with larger stocks performing better than smaller stocks. Choppiness continued in the late summer, with small cap equities on a downtrend going into the fall and stabilizing in October.
Performance
For the year ended October 31, 2019, Harbor Small Cap Growth Opportunities Fund returned -4.17% (Retirement Class), -4.27% (Institutional Class), -4.50% (Administrative Class), and -4.58% (Investor Class) underperforming its primary benchmark, the Russell 2000® Growth Index which was up 6.40% for the same period.
Small cap stocks have significantly underperformed large cap stocks over the last twelve months, as represented by the Russell 1000® Index return of 14.15% and the Russell 2000® Index return of 4.91%. Within small cap stocks, growth has outperformed value with the Russell 2000® Growth posting a return of 6.40% vs. the Russell 2000® Value return of 3.22%, in the same period.
Performance of the Fund has been driven primarily by stock selection, which is consistent with our team’s investment process and reflected in our longer-term track record. The sector in which stock selection most helped the Fund was Communication Services. Stock selection in the Health Care and Consumer Discretionary sectors detracted from performance over the last fiscal year. Sector allocation is not a primary focus of our investment strategy.
Tesaro, Inc., a biopharmaceutical company focused on oncology, was a good stock this past fiscal year. The company’s lead drug, Zejula, performed slightly better than expectations. Additionally, the company agreed to merge with Glaxo SmithKline near the end of 2018. We sold this position as the acquisition date approached.
Data center service company, Interxion Holding NV, was another positive contributor for the Fund as the company is benefitting from strong outsourcing trends for data centers and cloud services to operators.
Inphi Corp., an analog and mixed signal semiconductor company, was also a strong contributor. Its telecom segment is growing rapidly from continued robust data demand, which is in turn contributing to higher capital spending by the networks operators to meet that growing demand.
Evolent Health, Inc., a leading provider of healthcare solutions to hospitals and health systems, was a weak stock despite reporting operating results slightly better than anticipated. The company made an immediately accretive acquisition in late May that investors disapproved of and many of the shares were sold. We think the transaction rationale is logical, and we believe that this rather small acquisition has overly influenced investors’ valuation of the company. We added to our position on price weakness as we continue to believe that the company’s fundamentals are intact.
Clovis Oncology, Inc., a cancer focused, biotechnology company, was a disappointing stock despite posting revenues consistent with investors’ expectations. The company’s lead drug, Rubraca, treats ovarian cancer and is in clinical trials for prostate cancer. Investors have
25
Harbor Small Cap Growth Opportunities Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
CHANGE IN A $50,000 INVESTMENT
For the period 02/01/2014 through 10/31/2019
The graph compares a $50,000 investment in the Institutional Class shares of the Fund with the performance of the Russell 2000® Growth Index. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
TOTAL RETURNS
For the periods ended 10/31/2019
1 Year | Annualized | |||||||
5 Years | Life of Fund | |||||||
Harbor Small Cap Growth Opportunities Fund | ||||||||
Retirement Class1,2 | -4.17% | 5.21% | 5.88% | |||||
Institutional Class1 | -4.27 | 5.16 | 5.83 | |||||
Administrative Class1 | -4.50 | 5.01 | 5.67 | |||||
Investor Class1 | -4.58 | 4.77 | 5.44 | |||||
Comparative Index | ||||||||
Russell 2000® Growth1 | 6.40% | 8.38% | 7.93% |
As stated in the Fund’s prospectus dated March 1, 2019, the expense ratios were 0.81% (Retirement Class); 0.89% (Institutional Class); 1.14% (Administrative Class); and 1.26% (Investor Class). The expense ratios in the prospectus may differ from the actual expense ratios for the period disclosed within this report. The expense ratios shown in the prospectus are based on the prior fiscal year, adjusted to reflect changes, if any, in contractual arrangements that occurred prior to the date of the prospectus (or supplement thereto, if applicable).
Performance data shown represents past performance and is no guarantee of future results. Past performance is net of management fees and expenses and reflects reinvested dividends and distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or upon the redemption of Fund shares. Past performance reflects the beneficial effect of any expense waivers or reimbursements, without which returns would have been lower. Investment returns and principal value will fluctuate so that Fund shares, when redeemed, may be worth more or less than their original cost. Returns for periods less than one year are not annualized. Current performance may be higher or lower and is available through the most recent month end atharborfunds.com or by calling 800-422-1050.
become overly concerned, in our opinion, that the salvage treatment options for both cancers are becoming too competitive. In our experience, Rubraca is in a class of drugs that are effective and will continue to be used as other therapies fail, and patients turn to compounds, like Rubraca, to treat their progressive disease. We added to the shares over the period on price weakness.
Leading digital coupon provider for retail and grocery stores, Quotient Technology, Inc., was another weak stock as revenues disappointed investors. A large consumer package goods (CPG) company cut back promotional efforts, and that move has temporarily impacted Quotient’s operating results. We believe this customer’s promotional cadence will return to prior levels. Additionally, Quotient’s leading position in digital coupons provides the company with consumer behavioral data that is extremely valuable. We do not believe that the shares’ existing valuation reflects the company’s strong position in either digital coupons or consumer data. We added to these shares on the price weakness.
Outlook & StRategy
September volatility was rather remarkable for how violently sectors traded, and it isn’t clear what precisely unleashed a rotation that the financial media referred to as one from growth to value. From our perspective, broad labels on these groups tend to be inaccurate. We think that the two buckets are more accurately described as “price momentum” instead of growth and “non-price momentum” instead of value.
Our portfolio outperformed in September, relative to the benchmark index, and the interesting aspect of this outperformance is that the bulk of it occurred during the rotation. Having been associated with this investment style and process for a very long time, we have a hard time recalling this magnitude of relative outperformance in such a short period of time, on essentially no fundamental news that would explain the price volatility.
Over time, we believe that fundamental factors rather than technical factors are the most important attributes that drive investment returns, and we believe that September’s volatility was an important development. We believe in our longstanding investment style and process, and while the last several months have been frustrating, we are encouraged that the market’s recent behavior represents an important change. We look forward to the rest of the year and the upcoming earnings reports in the portfolios’ holdings.
1 | The “Life of Fund” return as shown reflects the period 02/01/2014 through 10/31/2019. |
2 | Retirement Class shares commenced operations on March 1, 2016. The performance attributed to the Retirement Class shares prior to that date is that of the Institutional Class shares. Performance prior to March 1, 2016 has not been adjusted to reflect the lower expenses of Retirement Class shares. During this period, Retirement Class shares would have had returns similar to, but potentially higher than, Institutional Class shares due to the fact that Retirement Class shares represent interests in the same portfolio as Institutional Class shares but are subject to lower expenses. |
This report contains the current opinions of Elk Creek Partners, LLC as of the date of this report and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Such opinions are subject to change without notice and securities described herein may no longer be included in, or may at any time be removed from, the Fund’s portfolio. This report is distributed for informational purposes only. Information contained herein has been obtained from sources believed reliable, but not guaranteed.
Stocks of small cap companies pose special risks, including possible illiquidity and greater price volatility than stocks of larger, more established companies. Equity securities, such as common stocks, are affected by company specific events and by movements in the overall stock markets in which those securities principally trade, among other factors. An adverse company specific event, or downturn in those stock markets, can depress the value of a particular company’s equity securities. For information on the different share classes and the risks associated with an investment in the Fund, please refer to the current prospectus.
26
Harbor Small Cap Growth Opportunities Fund
Portfolio of Investments—October 31, 2019
Portfolio of Investments—October 31, 2019
SECTOR ALLOCATION(% of investments) – Unaudited
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—97.1% | |||
Shares | Value | ||
AEROSPACE & DEFENSE—1.1% | |||
256,360 | Maxar Technologies Inc. | $2,176 | |
AIR FREIGHT & LOGISTICS—0.9% | |||
35,699 | Atlas Air Worldwide Holdings Inc.* | 783 | |
50,197 | Echo Global Logistics Inc.* | 999 | |
1,782 | |||
BANKS—2.4% | |||
42,065 | FB Financial Corp. | 1,585 | |
43,624 | TCF Financial Corp. | 1,727 | |
57,325 | TriState Capital Holdings Inc.* | 1,325 | |
4,637 | |||
BEVERAGES—0.9% | |||
150,174 | Primo Water Corp.* | 1,816 | |
BIOTECHNOLOGY—13.3% | |||
158,942 | Amarin Corp. plc ADR (United Kingdom)*,1 | 2,610 | |
179,767 | Amicus Therapeutics Inc.* | 1,515 | |
487,856 | Clovis Oncology Inc.* | 1,547 | |
121,651 | Halozyme Therapeutics Inc.* | 1,864 | |
112,531 | Heron Therapeutics Inc.* | 2,391 | |
25,682 | Intercept Pharmaceuticals Inc.* | 1,869 | |
234,141 | Karyopharm Therapeutics Inc.* | 2,739 | |
54,226 | Ligand Pharmaceuticals Inc.* | 5,900 | |
97,253 | Portola Pharmaceuticals Inc.* | 2,812 | |
63,477 | PTC Therapeutics Inc.* | 2,596 | |
25,843 | |||
COMMERCIAL SERVICES & SUPPLIES—2.0% | |||
37,683 | Advanced Disposal Services Inc.* | 1,235 | |
108,573 | Healthcare Services Group Inc. | 2,645 | |
3,880 | |||
COMMUNICATIONS EQUIPMENT—3.3% | |||
249,676 | Casa Systems Inc.* | 1,678 | |
650,794 | Infinera Corp.* | 3,638 | |
18,960 | Lumentum Holdings Inc.* | 1,188 | |
6,504 | |||
CONSTRUCTION & ENGINEERING—0.5% | |||
16,798 | MasTec Inc.* | 1,057 | |
CONSUMER FINANCE—0.6% | |||
38,543 | Green Dot Corp.* | 1,112 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
DIVERSIFIED CONSUMER SERVICES—1.1% | |||
72,155 | Adtalem Global Education Inc.* | $2,149 | |
DIVERSIFIED TELECOMMUNICATION SERVICES—1.6% | |||
130,251 | Iridium Communications Inc.* | 3,187 | |
ELECTRICAL EQUIPMENT—1.8% | |||
28,889 | EnerSys | 1,932 | |
96,576 | Power Solutions International Inc.* | 579 | |
43,744 | TPI Composites Inc.* | 898 | |
3,409 | |||
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—1.5% | |||
46,594 | Methode Electronics Inc. | 1,603 | |
24,798 | MTS Systems Corp. | 1,400 | |
3,003 | |||
FOOD & STAPLES RETAILING—0.4% | |||
26,239 | Grocery Outlet Holding Corp.* | 837 | |
FOOD PRODUCTS—1.0% | |||
36,998 | Freshpet Inc.* | 1,934 | |
HEALTH CARE EQUIPMENT & SUPPLIES—7.1% | |||
1,162,449 | Cerus Corp.* | 5,057 | |
72,456 | CryoLife Inc.* | 1,627 | |
495,136 | Invacare Corp. | 3,822 | |
394,803 | ViewRay Inc.* | 1,026 | |
108,138 | Wright Medical Group NV (Netherlands)* | 2,249 | |
13,781 | |||
HEALTH CARE PROVIDERS & SERVICES—4.4% | |||
60,946 | Acadia Healthcare Co. Inc.* | 1,828 | |
51,672 | PetIQ Inc.* | 1,277 | |
308,575 | Surgery Partners Inc.* | 2,453 | |
188,011 | Tivity Health Inc.* | 3,048 | |
8,606 | |||
HEALTH CARE TECHNOLOGY—4.8% | |||
136,795 | Allscripts Healthcare Solutions Inc.* | 1,497 | |
366,344 | Evolent Health Inc.* | 2,792 | |
124,666 | NextGen Healthcare Inc.* | 2,107 | |
16,948 | Teladoc Health Inc.* | 1,298 | |
85,838 | Vocera Communications Inc.* | 1,710 | |
9,404 |
27
Harbor Small Cap Growth Opportunities Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—Continued | |||
Shares | Value | ||
HOTELS, RESTAURANTS & LEISURE—4.7% | |||
19,985 | Churchill Downs Inc. | $2,598 | |
32,745 | Eldorado Resorts Inc.* | 1,466 | |
318,611 | Noodles & Co.* | 1,698 | |
413,358 | Playa Hotels & Resorts NV (Netherlands)* | 3,447 | |
9,209 | |||
INSURANCE—2.3% | |||
18,936 | Kinsale Capital Group Inc. | 2,002 | |
113,882 | National General Holdings Corp. | 2,428 | |
4,430 | |||
INTERNET & DIRECT MARKETING RETAIL—4.8% | |||
803,165 | Quotient Technology Inc.* | 6,915 | |
28,977 | Stamps.com Inc.* | 2,447 | |
9,362 | |||
IT SERVICES—7.6% | |||
129,408 | Carbonite Inc.* | 2,222 | |
40,917 | Cardtronics plc (United Kingdom)* | 1,402 | |
52,319 | EVO Payments Inc.* | 1,488 | |
76,053 | InterXion Holding NV (Netherlands)* | 6,709 | |
107,541 | Verra Mobility Corp.* | 1,543 | |
24,457 | WNS Holdings Ltd. ADR (India)*,1 | 1,512 | |
14,876 | |||
LEISURE PRODUCTS—0.9% | |||
54,633 | Yeti Holdings Inc.* | 1,820 | |
LIFE SCIENCES TOOLS & SERVICES—1.2% | |||
111,618 | Luminex Corp. | 2,288 | |
MACHINERY—5.7% | |||
74,491 | Actuant Corp. | 1,845 | |
26,949 | CIRCOR International Inc.* | 1,032 | |
100,636 | Meritor Inc.* | 2,217 | |
301,771 | NN Inc. | 2,179 | |
121,360 | REV Group Inc. | 1,510 | |
81,248 | Rexnord Corp.* | 2,298 | |
11,081 | |||
OIL, GAS & CONSUMABLE FUELS—2.1% | |||
243,152 | Callon Petroleum Co.* | 924 | |
89,750 | Matador Resources Co.* | 1,248 | |
37,960 | Scorpio Tankers Inc. (Marshall Islands) | 1,207 | |
206,585 | SRC Energy Inc.* | 645 | |
4,024 | |||
PERSONAL PRODUCTS—1.0% | |||
18,341 | Medifast Inc. | 2,035 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
PHARMACEUTICALS—1.4% | |||
69,558 | Pacira BioSciences Inc.* | $2,816 | |
ROAD & RAIL—0.9% | |||
218,382 | Daseke Inc.* | 587 | |
12,371 | Saia Inc.* | 1,104 | |
1,691 | |||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—2.1% | |||
19,706 | Inphi Corp.* | 1,416 | |
136,742 | MaxLinear Inc.* | 2,593 | |
4,009 | |||
SOFTWARE—4.9% | |||
218,969 | OneSpan Inc.* | 4,097 | |
913,132 | Synchronoss Technologies Inc.* | 5,479 | |
9,576 | |||
SPECIALTY RETAIL—3.3% | |||
43,641 | Boot Barn Holdings Inc.* | 1,530 | |
18,035 | Children's Place Inc. | 1,477 | |
39,405 | Guess? Inc. | 660 | |
71,287 | National Vision Holdings Inc.* | 1,697 | |
190,777 | Party City Holdco Inc.* | 1,072 | |
6,436 | |||
THRIFTS & MORTGAGE FINANCE—2.4% | |||
49,949 | Essent Group Ltd. (Bermuda) | 2,602 | |
64,945 | Meta Financial Group Inc. | 2,056 | |
4,658 | |||
WATER UTILITIES—1.4% | |||
134,400 | AquaVenture Holdings Ltd. (Virgin Islands)* | 2,637 | |
WIRELESS TELECOMMUNICATION SERVICES—1.7% | |||
522,237 | Gogo Inc.* | 3,212 | |
TOTAL COMMON STOCKS | |||
(Cost $200,065) | 189,277 | ||
TOTAL INVESTMENTS—97.1% | |||
(Cost $200,065) | 189,277 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—2.9% | 5,599 | ||
TOTAL NET ASSETS—100.0% | $194,876 |
FAIR VALUE MEASUREMENTS
All investments at October 31, 2019 (as disclosed in the preceding Portfolio of Investments) were classified as Level 1. There were no Level 3 investments at October 31, 2019 or 2018.
For more information on valuation inputs and their aggregation into the levels identified above, please refer to the Fair Value Measurements and Disclosures in Note 2 of the accompanying Notes to Financial Statements.
28
Harbor Small Cap Growth Opportunities Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
* | Non-income producing security |
1 | ADR after the name of a security 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.
29
Harbor Small Cap Value Fund
Manager’s Commentary (Unaudited)
Manager’s Commentary (Unaudited)
Subadviser
EARNEST Partners LLC
1180 Peachtree St. NE
Suite 2300
Suite 2300
Atlanta, GA 30309
Portfolio Manager
Paul E. Viera
Since 2001
Since 2001
EARNEST Partners has subadvised the Fund since 2001.
Investment Objective
The Fund seeks long-term total return.
Paul E. Viera
Management’s Discussion of
Fund Performance
Fund Performance
Market Review
The U.S. equity markets, represented by the S&P 500 Index were positive during the 12-months ending October 31, 2019. However, the U.S. small cap market, represented by the Russell 2000® Value Index, ended the period modestly positive, up 3.22% for the period. Investors continued to monitor the U.S. Federal Reserve (Fed) during the period in anticipation of rate changes and the central bank’s posture under new Chairman Jerome Powell. Most recently, in October, the Fed again voted to cut short-term interest rates by another 0.25% to the range of 1.50% to 1.75%, the third rate cut in 2019. Fed Chairman Jerome Powell explained that this action was taken as “insurance” rather than as a direct reaction to near-term threats to the economy. In the Fed’s statement, it noted that the overall economy remains strong with near record-low unemployment, and strong job growth, but cautioned that inflation has been running below the Fed’s 2% annual target and that business fixed investment and exports have “weakened.” Fed officials continued to maintain a generally optimistic stance on the U.S. economy, but cautioned that growth may be slowing, and noted that they expect U.S. GDP to expand by 2.1% this year, and 2.0% next year. Additionally, the Fed is calling for unemployment to be to 3.6% this year and expects it to be below 4.2% through 2022. Second-quarter 2019 gross domestic product (GDP) growth was revised down to 2.0% from 2.1%, and the unemployment rate ticked up to 3.7% in August from 3.6% in May, as the U.S. jobless rate continued to hold near a 50-year low.
Performance
Harbor Small Cap Value Fund posted positive results, up 10.98% (Retirement Class), 10.91% (Institutional Class), 10.59% (Administrative Class), and 10.48% (Investor Class) for the year ended October 31, 2019 while the Russell 2000® Value Index returned 3.22%. The Fund outperformed the benchmark as investors began to refocus on company fundamentals after the sharp market downturn in December 2018. Stock selection continued to drive relative returns in the period. Stock selection was strongest in Consumer Discretionary, Industrials, and Materials. Sector positioning also contributed to the strong results, as an overweight to Information Technology and an underweight to Energy boosted relative returns.
Contributing to performance, Teledyne produces electronic components and systems for commercial and military aircraft as well as sensors and interconnect systems used in marine and environmental surveys for defense electronics and satellite communication subsystems. Over the past several years, Teledyne has decreased its exposure to U.S. government expenditures by finding commercial outlets for its intellectual property while aligning residual exposure to government’s long-term strategic priorities. For the most recent period, the company posted revenue growth and earnings per share growth ahead of consensus expectations. As a result, the stock was up 48% for the trailing 12-month period. We believe that the company can continue to grow earnings by improving its cost structure across the commercial and defense lines of business. Additionally, Teledyne works in a regulated business with high barriers to entry, little threat from foreign competition and in many cases no commercial alternatives which should provide for strong revenue growth.
Detracting from performance, American Equity Investment Life (AEL) is a life insurance company and one of the top providers of Fixed Index and Fixed Rate Annuity products across all fifty states and the District of Columbia. Although the company reported its third consecutive quarter of year-over-year accelerating annuity sales growth, shares ended the period down 20% largely due to the company no longer looking to divest all or a portion of its business and lower market interest rates having a negative effect on its spread-based businesses. AEL’s product design gives the company an ability to adapt to the market environment and change the rates it pays its customers, giving it significant protection against lower interest rates while also giving it the ability to improve investment spread if interest rates rise. We believe
30
Harbor Small Cap Value Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
CHANGE IN A $50,000 INVESTMENT
For the period 11/01/2009 through 10/31/2019
The graph compares a $50,000 investment in the Institutional Class shares of the Fund with the performance of the Russell 2000® Value Index. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
TOTAL RETURNS
For the periods ended 10/31/2019
1 Year | Annualized | |||||||
5 Years | 10 Years | |||||||
Harbor Small Cap Value Fund | ||||||||
Retirement Class1 | 10.98% | 8.68% | 12.94% | |||||
Institutional Class | 10.91 | 8.62 | 12.91 | |||||
Administrative Class | 10.59 | 8.34 | 12.63 | |||||
Investor Class | 10.48 | 8.21 | 12.49 | |||||
Comparative Index | ||||||||
Russell 2000® Value | 3.22% | 6.24% | 11.08% |
As stated in the Fund’s prospectus dated March 1, 2019, the expense ratios were 0.80% (Retirement Class); 0.88% (Institutional Class); 1.13% (Administrative Class); and 1.25% (Investor Class). The expense ratios in the prospectus may differ from the actual expense ratios for the period disclosed within this report. The expense ratios shown in the prospectus are based on the prior fiscal year, adjusted to reflect changes, if any, in contractual arrangements that occurred prior to the date of the prospectus (or supplement thereto, if applicable).
Performance data shown represents past performance and is no guarantee of future results. Past performance is net of management fees and expenses and reflects reinvested dividends and distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or upon the redemption of Fund shares. Past performance reflects the beneficial effect of any expense waivers or reimbursements, without which returns would have been lower. Investment returns and principal value will fluctuate so that Fund shares, when redeemed, may be worth more or less than their original cost. Returns for periods less than one year are not annualized. Current performance may be higher or lower and is available through the most recent month end atharborfunds.com or by calling 800-422-1050.
that this positioning against interest rates gives the company a unique and attractive risk-reward balance. We continue to believe in management’s ability to lower cost of funds and remain operating cost leader in the industry over the long-term.
Outlook & Strategy
As of October 31, 2019, the Fund had an overweight in the Industrials and Information Technology sectors and an underweight in Financials, Real Estate, Consumer Discretionary, and Utilities. The Fund’s relative overweight and underweight positions are an outgrowth of where we find good individual investment opportunities.
In managing the Fund, we seek companies with share prices that we believe do not fully reflect their earnings growth outlook. Going forward, we will continue to employ our three-step investment methodology: screen the broad universe to identify stocks that are best positioned to outperform, measure and manage downside risk to the benchmark, and perform in-depth, thorough, fundamental research to find what we believe are the best stocks to include in the Fund.
1 | Retirement Class shares commenced operations on March 1, 2016. The performance attributed to the Retirement Class shares prior to that date is that of the Institutional Class shares. Performance prior to March 1, 2016 has not been adjusted to reflect the lower expenses of Retirement Class shares. During this period, Retirement Class shares would have had returns similar to, but potentially higher than, Institutional Class shares due to the fact that Retirement Class shares represent interests in the same portfolio as Institutional Class shares but are subject to lower expenses. |
This report contains the current opinions of EARNEST Partners LLC as of the date of this report and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Such opinions are subject to change without notice and securities described herein may no longer be included in, or may at any time be removed from, the Fund’s portfolio. This report is distributed for informational purposes only. Information contained herein has been obtained from sources believed reliable, but not guaranteed.
Stocks of small cap companies pose special risks, including possible illiquidity and greater price volatility than stocks of larger, more established companies. Equity securities, such as common stocks, are affected by company specific events and by movements in the overall stock markets in which those securities principally trade, among other factors. An adverse company specific event, or downturn in those stock markets, can depress the value of a particular company’s equity securities. For information on the different share classes and the risks associated with an investment in the Fund, please refer to the current prospectus.
31
Harbor Small Cap Value Fund
Portfolio of Investments—October 31, 2019
Portfolio of Investments—October 31, 2019
SECTOR ALLOCATION(% of investments) – Unaudited
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—96.3% | |||
Shares | Value | ||
AEROSPACE & DEFENSE—9.4% | |||
723,858 | Hexcel Corp. | $54,014 | |
254,756 | Moog Inc. | 21,326 | |
176,059 | Teledyne Technologies Inc.* | 58,029 | |
986,813 | Triumph Group Inc. | 20,496 | |
153,865 | |||
BANKS—10.4% | |||
1,134,395 | Cadence Bancorp | 17,447 | |
543,479 | Enterprise Financial Services Corp. | 23,804 | |
829,860 | First Merchants Corp. | 32,821 | |
436,306 | Heartland Financial USA Inc. | 20,410 | |
340,260 | South State Corp. | 26,833 | |
700,432 | Trustmark Corp. | 24,039 | |
654,166 | United Bankshares Inc. | 25,866 | |
171,220 | |||
BIOTECHNOLOGY—4.0% | |||
467,345 | Emergent BioSolutions Inc.* | 26,713 | |
1,136,738 | Myriad Genetics Inc.* | 38,274 | |
64,987 | |||
CAPITAL MARKETS—4.3% | |||
418,477 | Eaton Vance Corp. | 19,083 | |
309,583 | Raymond James Financial Inc. | 25,847 | |
447,741 | Stifel Financial Corp. | 25,065 | |
69,995 | |||
CHEMICALS—3.5% | |||
608,486 | Cabot Corp. | 26,524 | |
303,365 | Scotts Miracle-Gro Co. | 30,455 | |
56,979 | |||
COMMERCIAL SERVICES & SUPPLIES—4.4% | |||
763,682 | Casella Waste Systems Inc.* | 33,289 | |
2,234,237 | Steelcase Inc. | 39,032 | |
72,321 | |||
CONSUMER FINANCE—2.7% | |||
517,125 | FirstCash Inc. | 43,640 | |
ELECTRICAL EQUIPMENT—1.8% | |||
450,362 | EnerSys | 30,111 | |
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—8.1% | |||
259,921 | Anixter International Inc.* | 21,509 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—Continued | |||
153,440 | Coherent Inc.* | $22,850 | |
563,977 | FLIR Systems Inc. | 29,079 | |
173,351 | Littelfuse Inc. | 30,435 | |
960,459 | Sanmina Corp.* | 29,515 | |
133,388 | |||
ENERGY EQUIPMENT & SERVICES—2.3% | |||
335,575 | Core Laboratories NV (Netherlands) | 14,779 | |
293,994 | DMC Global Inc. | 13,153 | |
688,719 | Oil States International Inc.* | 9,828 | |
37,760 | |||
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—5.2% | |||
1,157,821 | Corporate Office Properties Trust | 34,318 | |
735,571 | Pebblebrook Hotel Trust | 18,912 | |
1,038,349 | Stag Industrial Inc. | 32,230 | |
85,460 | |||
FOOD PRODUCTS—1.9% | |||
1,605,254 | Darling Ingredients Inc.* | 30,981 | |
HEALTH CARE PROVIDERS & SERVICES—1.4% | |||
201,462 | Molina Healthcare Inc.* | 23,700 | |
HOUSEHOLD DURABLES—1.6% | |||
371,885 | Meritage Homes Corp.* | 26,809 | |
INSURANCE—6.5% | |||
946,358 | American Equity Investment Life Holding Co. | 23,356 | |
542,780 | Horace Mann Educators Corp. | 23,644 | |
236,651 | Reinsurance Group of America Inc. | 38,449 | |
464,417 | United Fire Group Inc. | 21,140 | |
106,589 | |||
IT SERVICES—2.3% | |||
472,616 | ManTech International Corp. | 37,422 | |
MACHINERY—8.8% | |||
465,588 | Albany International Corp. | 39,100 | |
624,298 | Altra Industrial Motion Corp. | 19,228 | |
681,106 | Franklin Electric Co. Inc. | 36,678 | |
599,701 | Timken Co. | 29,385 | |
1,031,322 | Welbilt Inc.* | 19,554 | |
143,945 |
32
Harbor Small Cap Value Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—Continued | |||
Shares | Value | ||
OIL, GAS & CONSUMABLE FUELS—0.9% | |||
1,098,085 | Matador Resources Co.* | $15,274 | |
PHARMACEUTICALS—2.5% | |||
856,799 | Catalent Inc.* | 41,683 | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—11.1% | |||
274,082 | Advanced Energy Industries Inc.* | 16,198 | |
351,973 | Cabot Microelectronics Corp. | 53,190 | |
875,540 | Entegris Inc. | 42,026 | |
1,500,424 | FormFactor Inc.* | 32,754 | |
247,728 | Monolithic Power Systems Inc. | 37,140 | |
181,308 | |||
TEXTILES, APPAREL & LUXURY GOODS—1.4% | |||
789,450 | Wolverine World Wide Inc. | 23,431 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
TRADING COMPANIES & DISTRIBUTORS—1.8% | |||
380,084 | GATX Corp. | $30,236 | |
TOTAL COMMON STOCKS | |||
(Cost $1,182,844) | 1,581,104 | ||
TOTAL INVESTMENTS—96.3% | |||
(Cost $1,182,844) | 1,581,104 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—3.7% | 60,323 | ||
TOTAL NET ASSETS—100.0% | $1,641,427 |
FAIR VALUE MEASUREMENTS
All investments at October 31, 2019 (as disclosed in the preceding Portfolio of Investments) were classified as Level 1. There were no Level 3 investments at October 31, 2019 or 2018.
For more information on valuation inputs and their aggregation into the levels identified above, please refer to the Fair Value Measurements and Disclosures in Note 2 of the accompanying Notes to Financial Statements.
* | Non-income producing security |
The accompanying notes are an integral part of the Financial Statements.
33
Harbor Small Cap Value Opportunities Fund
Manager’s Commentary (Unaudited)
Manager’s Commentary (Unaudited)
Subadviser
Sapience Investments, LLC
520 Newport Center Dr.
Suite 650
Suite 650
Newport Beach, CA
92660
92660
Portfolio Manager
Samir Sikka
Since 2017
Since 2017
Sapience Investments, LLC has subadvised the Fund since 2017.*
Investment Objective
The Fund seeks long-term total return.
Samir Sikka
Management’s Discussion of
Fund Performance
Fund Performance
Market Review
Much of modern finance theory depends upon the simple proposition that there is no such thing as a free lunch. However, in practice, when central banks lower the cost of capital to near or below zero to stimulate the real economy, there will likely be unintended consequences in the financial economy that give rise to significant investment opportunities. As the U.S. edges back to the zero-policy rate boundary, like it did during the Great Financial Crisis, capital becomes misallocated. Amid mounting macroeconomic uncertainty and ample, low-cost capital, risk-adverse equity investors have flocked into a handful of popular stocks, driving their valuations to extreme levels. This market inefficiency can be seen in many ways including the extraordinary behavior of momentum stocks with investors chasing recent performance, the growing cost of high-priced stocks, and the over-valuation of so-called “safe” stable stocks.
Performance
For the year November 1, 2018 through October 31, 2019, Harbor Small Cap Value Opportunities Fund underperformed its benchmark, the Russell 2000® Value Index. The Fund returned -4.14% (Retirement Class), -4.13% (Institutional Class), -4.45% (Administrative Class), and -4.49% (Investor Class) while the Russell 2000® Value Index returned 3.22%.
Due to the extremely wide variation in performance by sector, relative sector weighting had a larger impact on performance versus the Russell 2000® Value Index than is characteristic of our bottom-up, company-focused approach. From a relative perspective, sector weights accounted for nearly two-thirds of the Fund’s underperformance relative to the Index during the period. More specifically, compared with the Index, stock selection in Consumer Discretionary and Energy detracted from relative performance. In the Consumer Discretionary sector, Ascena Retail Group, Inc. subtracted the most value from the Fund’s return relative to the Index. Ascena continued to underperform after the company reported weak results for its fiscal third quarter of 2019 in June. Underperformance persisted for two reasons. First, there was a vacuum of information and results for fiscal fourth quarter 2019 were not reported until the first week of October. Second, tariff-related uncertainties created an overhang in the company’s stock price as an additional tranche of tariffs effective in late 2019 will directly impact the apparel category. In early October, Ascena posted in-line to slightly better results for its fiscal fourth quarter 2019. More importantly, the company provided clarity on the closure of its Dressbarn chain, which will be completed by December, and discussed its liquidity, including over $300 million of cash. We believe Ascena has 18-24 months to improve performance and sell one or more of its divisions to reduce debt in order to refinance its existing term loan that matures in August 2022. Within Energy, Forum Energy Technologies, Inc. was the largest detractor from relative performance. There was no fundamental reason for weakness in Forum’s stock price. We believe the underperformance is attributed to weakness in oil markets and investor apathy towards the oil service industry. Forum is a self-help story as the company is generating free cash flow by reducing their inventory and cutting costs to reduce its debt burden. While Forum has been impacted by near-term headwinds in their North American Completions business, we believe that there are reasons for optimism emerging in their International land and offshore segments.
Conversely, security selection in the Information Technology sector added to relative performance. In this sector, Diebold Nixdorf, Inc. added the most value to relative return. In our view, Diebold is executing its turnaround as planned and the company is currently ahead of their
* | At a meeting of the Board of Trustees held on November 10 and 11, 2019, the Board of Trustees voted to liquidate and dissolve the Harbor Small Cap Value Opportunities Fund. The liquidation of the Fund occurred on December 20, 2019. Additional information related to the liquidation can be found in the supplements to the Fund’s prospectus and statement of additional information as filed with the Securities and Exchange Commission on November 13, 2019. |
34
Harbor Small Cap Value Opportunities Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
CHANGE IN A $50,000 INVESTMENT
For the period 08/01/2017 through 10/31/2019
The graph compares a $50,000 investment in the Institutional Class shares of the Fund with the performance of the Russell 2000® Value Index. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
TOTAL RETURNS
For the periods ended 10/31/2019
1 Year | 5 Years | Annualized | ||||||
Life of Fund | ||||||||
Harbor Small Cap Value Opportunities Fund | ||||||||
Retirement Class1 | -4.14% | N/A | -1.63% | |||||
Institutional Class1 | -4.13 | N/A | -1.68 | |||||
Administrative Class1 | -4.45 | N/A | -1.96 | |||||
Investor Class1 | -4.49 | N/A | -2.04 | |||||
Comparative Index | ||||||||
Russell 2000® Value1 | 3.22% | N/A | 3.18% |
As stated in the Fund’s prospectus dated March 1, 2019, the expense ratios were 0.81% (Net) and 0.97% (Gross) (Retirement Class); 0.89% (Net) and 1.05% (Gross) (Institutional Class); 1.14% (Net) and 1.30% (Gross) (Administrative Class); and 1.26% (Net) and 1.42% (Gross) (Investor Class). The net expense ratios reflect an expense limitation agreement effective through 02/29/2020. The expense ratios in the prospectus may differ from the actual expense ratios for the period disclosed within this report. The expense ratios shown in the prospectus are based on the prior fiscal year, adjusted to reflect changes, if any, in contractual arrangements that occurred prior to the date of the prospectus (or supplement thereto, if applicable).
Performance data shown represents past performance and is no guarantee of future results. Past performance is net of management fees and expenses and reflects reinvested dividends and distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or upon the redemption of Fund shares. Past performance reflects the beneficial effect of any expense waivers or reimbursements, without which returns would have been lower. Investment returns and principal value will fluctuate so that Fund shares, when redeemed, may be worth more or less than their original cost. Returns for periods less than one year are not annualized. Current performance may be higher or lower and is available through the most recent month end atharborfunds.com or by calling 800-422-1050.
free cash flow goals. In addition, Diebold successfully refinanced its term loan, which was set to mature in December 2020, and we believe that its management team continues to deliver steady progress on its “DN Now” cost initiatives.
Outlook & Strategy
It is tempting to speculate on how today’s equity valuation anomalies will eventually resolve themselves. With a patient, long-term investment focus, we are reminded of economist Herb Stein’s Law: “If something cannot go on forever, it will stop.” We remain acutely aware that starting points are crucial to compounding positive long-term returns so chasing today’s investment fads is a fool’s game. As value investors, we choose stocks whose long-term earnings potential is not widely recognized, in our view, and seek to buy them when we believe investor pessimism is fully reflected in valuations. We believe the current market offers us a rare, significant investment opportunity to buy several good businesses at a deep discount.
We recognize the economic slowdown but do not believe that we are at the cusp of a deep recession. We believe the Fund to be well-positioned for either a partial or a full tilt shift towards value. Though we have exposure to a few deeply discounted businesses today relative to the perceived “safe” and momentum companies, we have been conscious to own businesses that we believe are fundamentally sound and have drivers in place to close the valuation gap with their intrinsic value.
We recognize the two-fold challenges today for a value investor like us: the economy has evolved such that, in our view, there are more value traps than at any time in our careers. We have to resist being seduced by significant discounts appearing in businesses that do not have the ability to sustain the current returns. In addition, the technical and quantitative aspects of this market may cause a few compelling investment opportunities to underperform over the short term, enough to discourage even experienced value investors like us. This is the test of discipline—to maintain conviction when we believe our investment thesis and valuations are correct.
1 | The “Life of Fund” return as shown reflects the period 08/01/2017 through 10/31/2019. |
This report contains the current opinions of Sapience Investments, LLC as of the date of this report and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Such opinions are subject to change without notice and securities described herein may no longer be included in, or may at any time be removed from, the Fund’s portfolio. This report is distributed for informational purposes only. Information contained herein has been obtained from sources believed reliable, but not guaranteed.
Stocks of small cap companies pose special risks, including possible illiquidity and greater price volatility than stocks of larger, more established companies. Equity securities, such as common stocks, are affected by company specific events and by movements in the overall stock markets in which those securities principally trade, among other factors. An adverse company specific event, or downturn in those stock markets, can depress the value of a particular company’s equity securities. For information on the different share classes and the risks associated with an investment in the Fund, please refer to the current prospectus.
35
Harbor Small Cap Value Opportunities Fund
Portfolio of Investments—October 31, 2019
Portfolio of Investments—October 31, 2019
SECTOR ALLOCATION(% of investments) – Unaudited
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—94.7% | |||
Shares | Value | ||
AUTO COMPONENTS—0.8% | |||
12,500 | Adient plc (Ireland)* | $265 | |
BANKS—13.8% | |||
27,020 | Bank of NT Butterfield & Son Ltd. (Bermuda) | 890 | |
16,100 | Bank OZK | 452 | |
10,950 | Cathay General Bancorp | 389 | |
24,200 | First Hawaiian Inc. | 661 | |
13,750 | Glacier Bancorp Inc. | 582 | |
5,800 | Popular Inc. (Puerto Rico) | 316 | |
26,250 | Sterling Bancorp | 516 | |
8,960 | Wintrust Financial Corp. | 572 | |
4,378 | |||
BUILDING PRODUCTS—1.9% | |||
12,650 | Continental Building Products Inc.* | 378 | |
24,750 | Resideo Technologies Inc.* | 236 | |
614 | |||
CAPITAL MARKETS—1.2% | |||
13,480 | Artisan Partners Asset Management Inc. | 369 | |
CHEMICALS—0.5% | |||
7,743 | Valvoline Inc. | 165 | |
COMMERCIAL SERVICES & SUPPLIES—8.4% | |||
13,430 | IAA Inc.* | 512 | |
39,133 | KAR Auction Services Inc. | 973 | |
9,490 | Ritchie Bros Auctioneers Inc. (Canada) | 390 | |
13,780 | Stericycle Inc.* | 794 | |
2,669 | |||
COMMUNICATIONS EQUIPMENT—2.5% | |||
19,906 | Plantronics Inc. | 785 | |
CONSUMER FINANCE—2.3% | |||
21,800 | Navient Corp. | 300 | |
49,280 | SLM Corp. | 416 | |
716 | |||
CONTAINERS & PACKAGING—1.1% | |||
11,400 | Silgan Holdings Inc. | 351 | |
DIVERSIFIED FINANCIAL SERVICES—1.5% | |||
51,950 | FGL Holdings (Cayman Islands) | 469 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
ENERGY EQUIPMENT & SERVICES—1.3% | |||
118,650 | Forum Energy Technologies Inc.* | $138 | |
54,150 | Hunting plc ADR (United Kingdom)1 | 275 | |
413 | |||
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—5.8% | |||
23,550 | Outfront Media Inc. | 619 | |
38,600 | Physicians Realty Trust | 721 | |
9,100 | QTS Realty Trust Inc. | 488 | |
1,828 | |||
FOOD PRODUCTS—4.9% | |||
7,350 | Post Holdings Inc.* | 756 | |
14,640 | TreeHouse Foods Inc.* | 791 | |
1,547 | |||
HEALTH CARE EQUIPMENT & SUPPLIES—3.1% | |||
11,450 | Integra LifeSciences Holdings Corp.* | 665 | |
9,800 | Natus Medical Inc.* | 330 | |
995 | |||
HEALTH CARE PROVIDERS & SERVICES—2.5% | |||
15,930 | Acadia Healthcare Co. Inc.* | 478 | |
14,300 | MEDNAX Inc.* | 314 | |
792 | |||
HOTELS, RESTAURANTS & LEISURE—3.8% | |||
20,290 | Dave & Buster's Entertainment Inc. | 807 | |
33,950 | El Pollo Loco Holdings Inc.* | 395 | |
1,202 | |||
INSURANCE—2.5% | |||
6,610 | Argo Group International Holdings Ltd. (Bermuda) | 409 | |
8,250 | Assured Guaranty Ltd. (Bermuda) | 387 | |
796 | |||
INTERNET & DIRECT MARKETING RETAIL—1.3% | |||
38,053 | Despegar.com Corp. (Virgin Islands)* | 425 | |
LIFE SCIENCES TOOLS & SERVICES—1.3% | |||
8,190 | Syneos Health Inc.* | 411 | |
MACHINERY—3.9% | |||
15,640 | Altra Industrial Motion Corp. | 482 |
36
Harbor Small Cap Value Opportunities Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—Continued | |||
Shares | Value | ||
MACHINERY—Continued | |||
4,680 | EnPro Industries Inc. | $325 | |
42,051 | Gates Industrial Corp. plc (United Kingdom)* | 421 | |
1,228 | |||
MEDIA—1.0% | |||
16,390 | Liberty Latin America Ltd. (Bermuda)* | 306 | |
METALS & MINING—1.7% | |||
25,200 | Allegheny Technologies Inc.* | 530 | |
MORTGAGE REAL ESTATE INVESTMENT TRUSTS (REITs)—2.0% | |||
38,300 | Redwood Trust Inc. | 626 | |
MULTI-UTILITIES—1.5% | |||
6,650 | NorthWestern Corp. | 482 | |
OIL, GAS & CONSUMABLE FUELS—1.9% | |||
61,345 | WPX Energy Inc.* | 612 | |
PERSONAL PRODUCTS—1.3% | |||
24,910 | e.l.f. Beauty Inc.* | 419 | |
PROFESSIONAL SERVICES—1.0% | |||
21,250 | Resources Connection Inc. | 311 | |
SPECIALTY RETAIL—5.0% | |||
623,898 | Ascena Retail Group Inc.* | 220 | |
99,330 | Michaels Companies Inc.* | 867 | |
90,803 | Party City Holdco Inc.* | 510 | |
1,597 | |||
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS—4.2% | |||
189,795 | Diebold Nixdorf Inc.* | 1,329 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
TEXTILES, APPAREL & LUXURY GOODS—3.9% | |||
17,400 | Capri Holdings Ltd. (Virgin Islands)* | �� $540 | |
68,185 | Samsonite International SA ADR (Luxembourg)1 | 689 | |
1,229 | |||
THRIFTS & MORTGAGE FINANCE—1.5% | |||
8,850 | Essent Group Ltd. (Bermuda) | 461 | |
TRADING COMPANIES & DISTRIBUTORS—5.3% | |||
9,140 | Air Lease Corp. | 402 | |
27,850 | Beacon Roofing Supply Inc.* | 864 | |
5,600 | MSC Industrial Direct Co. Inc. | 410 | |
1,676 | |||
TOTAL COMMON STOCKS | |||
(Cost $30,643) | 29,996 | ||
MASTER LIMITED PARTNERSHIPS—2.0% | |||
(Cost $702) | |||
OIL, GAS & CONSUMABLE FUELS—2.0% | |||
25,900 | Viper Energy Partners LP | 623 | |
TOTAL INVESTMENTS—96.7% | |||
(Cost $31,345) | 30,619 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—3.3% | 1,036 | ||
TOTAL NET ASSETS—100.0% | $31,655 |
FAIR VALUE MEASUREMENTS
All investments at October 31, 2019 (as disclosed in the preceding Portfolio of Investments) were classified as Level 1. There were no Level 3 investments at October 31, 2019 or 2018.
For more information on valuation inputs and their aggregation into the levels identified above, please refer to the Fair Value Measurements and Disclosures in Note 2 of the accompanying Notes to Financial Statements.
* | Non-income producing security |
1 | ADR after the name of a security 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.
37
Harbor Strategic Growth Fund
Manager’s Commentary (Unaudited)
Manager’s Commentary (Unaudited)
Subadviser
Mar Vista Investment Partners, LLC
11150 Santa Monica Boulevard, Suite 320
Los Angeles, CA 90025
Portfolio Managers
Silas A. Myers, CFA
Since 2017
Since 2017
Brian L. Massey, CFA
Since 2017
Since 2017
Joshua J. Honeycutt, CFA
Since 2017
Jeffrey B. Prestine
Since 2017
Since 2017
Mar Vista has subadvised the Fund since 2017.*
Investment Objective
The Fund seeks long-term growth of capital.
Silas A. Myers, CFA
Brian L. Massey, CFA
Joshua J. Honeycutt, CFA
Jeffrey B. Prestine
Management’s Discussion of
Fund Performance
Fund Performance
MARKET REVIEW
For the year ended October 31, 2019, the Russell 1000® Growth Index was up 17.10%, although erratic trade headlines and recession angst made for a volatile ride. Every sector within Russell 1000® Growth Index with the exception of Energy posted positive performance during the period. Information Technology, Consumer Discretionary, Communication Services, Industrials and Healthcare contributed the most to returns.
PERFORMANCE
Harbor Strategic Growth Fund returned 17.04% (Retirement Class), 16.91% (Institutional Class), 16.70% (Administrative Class), and 14.99% (Investor Class) while the Russell 1000® Growth Index returned 17.10% for the year ended October 31, 2019. Positive stock selection and relative outperformance versus the Russell 1000® Growth Index in Healthcare, Real Estate, Consumer Discretionary and Consumer Staples contributed to the Fund’s performance during the period. Industrials, Financials, Energy, an underweight in Information Technology and an overweight in cash detracted from results.
Contributors to performance included American Tower, TransDigm Group, Microchip Technology, Teleflex, and Moody’s. American Tower continues to benefit from three key factors: (1) burgeoning investments into 5G networks which directly benefit the tower companies, (2) the potential entry of a third-party wireless carrier, likely Dish Network, was mandated by the Federal Trade Commission (FTC) to approve the Sprint/T-Mobile merger, and (3) lower interest rates increased the value of all long-duration assets. TransDigm Group, the aircraft component designer, producer and supplier, beat on revenues, margins and raised on every relevant metric. The Esterline acquisition has gone better than expected, as they have reached their margin target of 20%, effectively one quarter into ownership. Microchip Technology has been volatile with the uncertainty surrounding U.S.-China trade tensions. However, in the second quarter of 2019, Microchip beat on earnings and met revenue estimates and quarterly guidance, as the company works through excess inventory in its distribution channel. While Teleflex’s stock performance reflects materially improved economics compared to five years ago (11% vs. 8% return on invested capital), the current price does not give full value to further acceleration in economic value added due to more durable competitive advantages, faster organic revenue growth, higher incremental margins and, importantly, their capital allocation strategy. Shares of Moody’s, the credit rating and analytics company, rebounded in the first quarter of 2019 as global debt issuance recovered after a moribund fourth quarter 2018 and concerns about an overly hawkish U.S. Federal Reserve (Fed) subsided.
Performance detractors included XPO Logistics, Schlumberger, Core Laboratories, Johnson & Johnson and Kansas City Southern. XPO Logistics’ stock price experienced a sharp decline during fourth quarter 2018 and first quarter 2019 for two primary reasons. First, the company lowered its 2019 profit outlook due to slowing global economic activity. Second, XPO Logistics was the subject of a hedge fund’s short report that questioned the company’s accounting practices. Although most of the short report’s accusations were refuted by the company, additional research uncovered further areas of concern. In addition, XPO Logistics underwhelming operational performance and misguided investor communication lowered our conviction in management’s capabilities. For these reasons, we decided to exit our investment in XPO Logistics during the first quarter of 2019. Schlumberger and Core Laboratories were sold during the second quarter of 2019 because of our substantially lower expectations for growth and declining estimates of fair value. Oil supply has proven to be more resilient than we expected despite an approximate 40% reduction in exploration and production investment.
* | On March 6, 2017, the Fund acquired all of the assets and substantially all of the liabilities of the Mar Vista Strategic Growth Fund (the “Predecessor Fund”). For the period November 1, 2011 (inception of the Predecessor Fund) to January 20, 2015, Mar Vista served as the Predecessor Fund’s subadviser and for the period January 20, 2015 to March 6, 2017, Mar Vista served as investment adviser to the Predecessor Fund. |
38
Harbor Strategic Growth Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
CHANGE IN A $50,000 INVESTMENT
For the period 11/01/2011 through 10/31/2019
The graph compares a $50,000 investment in the Institutional Class shares of the Fund with the performance of the Russell 1000® Growth Index. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
TOTAL RETURNS
For the periods ended 10/31/2019
1 Year | Annualized | |||||||
5 Years | Life of Class | |||||||
Harbor Strategic Growth Fund | ||||||||
Retirement Class1 | 17.04% | N/A | 13.52% | |||||
Institutional Class2 | 16.91 | 11.02 | 14.04 | |||||
Administrative Class1 | 16.70 | N/A | 13.15 | |||||
Investor Class1 | 14.99 | N/A | 12.43 | |||||
Comparative Index | ||||||||
Russell 1000® Growth2 | 17.10% | 13.43% | 15.60% |
As stated in the Fund’s prospectus dated March 1, 2019, the expense ratios were 0.63% (Net) and 0.77% (Gross) (Retirement Class); 0.71% (Net) and 0.85% (Gross) (Institutional Class); 0.96% (Net) and 1.10% (Gross) (Administrative Class); and 1.08% (Net) and 1.22% (Gross) (Investor Class). The net expense ratios reflect an expense limitation agreement (excluding interest expense, if any) effective through 02/29/2020. The expense ratios in the prospectus may differ from the actual expense ratios for the period disclosed within this report. The expense ratios shown in the prospectus are based on the prior fiscal year, adjusted to reflect changes, if any, in contractual arrangements that occurred prior to the date of the prospectus (or supplement thereto, if applicable).
Performance data shown represents past performance and is no guarantee of future results. Past performance is net of management fees and expenses and reflects reinvested dividends and distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or upon the redemption of Fund shares. Past performance reflects the beneficial effect of any expense waivers or reimbursements, without which returns would have been lower. Investment returns and principal value will fluctuate so that Fund shares, when redeemed, may be worth more or less than their original cost. Returns for periods less than one year are not annualized. Current performance may be higher or lower and is available through the most recent month end atharborfunds.com or by calling 800-422-1050.
The oversupplied energy market has resulted in lower oil prices and less demand for Schlumberger and Core Laboratories services. With less energy exploration, both companies are compounding intrinsic value slower than we anticipated. In our view, they each still possess economic moats and are operated by proven capital allocators, but their ranges of outcomes are wide and their ability to grow shareholder value is directly correlated to the volatile price of oil. Although Johnson & Johnson continued to meet or exceed growth expectations, uncertainty over opioid and talc powder litigation and the potential for onerous drug price regulation negatively impacted the stock. Kansas City Southern was sold during the fourth quarter of 2018 after the stock price achieved our estimate of intrinsic value.
The Fund’s largest underweight and overweight sector exposures versus the benchmark remained the same throughout the last 12 months. The largest over-weights were Financials, Industrials, Materials, and Real Estate, while the largest under-weights were in the traditional growth sectors of Information Technology, Consumer Discretionary, Communication Services and Healthcare. Our portfolio construction process focuses on bottom-up factors independent of benchmark weights. The resulting sector exposures represent the areas in which we are finding skewed risk-reward opportunities in serial compounders, and are not an expressed opinion on the sectors from a macro level.
OUTLOOK & STRATEGY
Over time, the expected returns of the Fund should reflect two components: the compounding nature of the companies in the portfolio and the discount we are paying relative to fair value. There will be times when the sentiment pendulum swings towards optimism; fund returns exceed the underlying intrinsic value growth, and margins of safety contract. Conversely, fear, skepticism and lower stock prices provide opportunities for both higher expected returns and less risk. Judged by our relatively narrow average margin of safety, or discount to intrinsic value, we think the pendulum sits on the optimistic side of the scale. The number of stocks that are trading below our estimate of fair value is the smallest our team has experienced.
We claim no special skill in predicting the market’s direction but, in the fullness of time, we believe a patient, high-conviction fund comprised of competitively advantaged businesses with stock prices that represent an appropriate margin of safety will generate excess risk-adjusted returns. In an investment environment with sustained optimism and stock prices that are outpacing intrinsic value growth, we will remain diligent, conservative and patient as we deploy capital within our wide-moat universe.
1 | The “Life of Class” return as shown reflects the period 03/06/2017 through 10/31/2019. |
2 | The “Life of Class” return as shown reflects the period 11/01/2011 through 10/31/2019. |
This report contains the current opinions of Mar Vista Investment Partners, LLC as of the date of this report and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Such opinions are subject to change without notice and securities described herein may no longer be included in, or may at any time be removed from, the Fund’s portfolio. This report is distributed for informational purposes only. Information contained herein has been obtained from sources believed reliable, but not guaranteed.
Equity securities, such as common stocks, are affected by company specific events and by movements in the overall stock markets in which those securities principally trade, among other factors. An adverse company specific event, or downturn in those stock markets, can depress the value of a particular company’s equity securities. For information on the different share classes and the risks associated with an investment in the Fund, please refer to the current prospectus.
39
Harbor Strategic Growth Fund
Portfolio of Investments—October 31, 2019
Portfolio of Investments—October 31, 2019
SECTOR ALLOCATION(% of investments) – Unaudited
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—89.9% | |||
Shares | Value | ||
AEROSPACE & DEFENSE—2.9% | |||
6,270 | TransDigm Group Inc.* | $3,300 | |
BANKS—4.7% | |||
25,043 | First Republic Bank | 2,663 | |
45,679 | U.S. Bancorp. | 2,605 | |
5,268 | |||
BEVERAGES—2.3% | |||
18,416 | PepsiCo Inc. | 2,526 | |
CAPITAL MARKETS—5.5% | |||
70,966 | Charles Schwab Corp. | 2,889 | |
14,974 | Moody's Corp. | 3,305 | |
6,194 | |||
CHEMICALS—5.3% | |||
20,031 | Ecolab Inc. | 3,847 | |
10,373 | Linde plc (Ireland) | 2,058 | |
5,905 | |||
DIVERSIFIED FINANCIAL SERVICES—5.2% | |||
27,177 | Berkshire Hathaway Inc. Class B* | 5,777 | |
ELECTRICAL EQUIPMENT—2.4% | |||
53,616 | Sensata Technologies Holding plc (United Kingdom)* | 2,744 | |
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—3.7% | |||
19,082 | American Tower Corp. | 4,161 | |
HEALTH CARE EQUIPMENT & SUPPLIES—3.6% | |||
11,571 | Teleflex Inc. | 4,020 | |
INDUSTRIAL CONGLOMERATES—6.7% | |||
24,549 | Honeywell International Inc. | 4,240 | |
9,831 | Roper Technologies Inc. | 3,313 | |
7,553 | |||
INSURANCE—4.7% | |||
4,537 | Markel Corp.* | 5,313 | |
INTERACTIVE MEDIA & SERVICES—7.0% | |||
4,275 | Alphabet Inc. Class C* | 5,387 | |
12,676 | Facebook Inc.* | 2,429 | |
7,816 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
INTERNET & DIRECT MARKETING RETAIL—4.5% | |||
1,506 | Amazon.com Inc.* | $2,676 | |
1,168 | Booking Holdings Inc.* | 2,393 | |
5,069 | |||
IT SERVICES—3.0% | |||
18,940 | Visa Inc. | 3,388 | |
LIFE SCIENCES TOOLS & SERVICES—1.8% | |||
2,803 | Mettler-Toledo International Inc.* | 1,976 | |
MACHINERY—1.9% | |||
30,171 | Fortive Corp. | 2,082 | |
PERSONAL PRODUCTS—2.9% | |||
53,994 | Unilever NV NY Registry Shares (Netherlands) | 3,199 | |
PHARMACEUTICALS—3.6% | |||
6,364 | Allergan plc (Ireland) | 1,121 | |
22,184 | Johnson & Johnson | 2,929 | |
4,050 | |||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—2.3% | |||
26,854 | Microchip Technology Inc. | 2,532 | |
SOFTWARE—9.6% | |||
11,924 | Adobe Inc.* | 3,314 | |
15,906 | Intuit Inc. | 4,096 | |
61,764 | Oracle Corp. | 3,365 | |
10,775 | |||
SPECIALTY RETAIL—2.7% | |||
12,708 | CarMax Inc.* | 1,184 | |
4,282 | O'Reilly Automotive Inc.* | 1,865 | |
3,049 |
40
Harbor Strategic Growth Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—Continued | |||
Shares | Value | ||
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS—3.6% | |||
16,322 | Apple Inc. | $4,060 | |
TOTAL COMMON STOCKS | |||
(Cost $76,390) | 100,757 | ||
TOTAL INVESTMENTS—89.9% | |||
(Cost $76,390) | 100,757 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—10.1% | 11,293 | ||
TOTAL NET ASSETS—100.0% | $112,050 |
FAIR VALUE MEASUREMENTS
All investments at October 31, 2019 (as disclosed in the preceding Portfolio of Investments) were classified as Level 1. There were no Level 3 investments at October 31, 2019 or 2018.
For more information on valuation inputs and their aggregation into the levels identified above, please refer to the Fair Value Measurements and Disclosures in Note 2 of the accompanying Notes to Financial Statements.
* | Non-income producing security |
The accompanying notes are an integral part of the Financial Statements.
41
Harbor Domestic Equity Funds
StatementS of Assets and Liabilities—October 31, 2019
StatementS of Assets and Liabilities—October 31, 2019
(All amounts in thousands, except per share amounts)
Harbor Capital Appreciation Fund | Harbor Large Cap Value Fund | Harbor Mid Cap Growth Fund | Harbor Mid Cap Value Fund | Harbor Small Cap Growth Fund | Harbor Small Cap Growth Opportunities Fund | Harbor Small Cap Value Fund | Harbor Small Cap Value Opportunities Fund | Harbor Strategic Growth Fund | ||||||||||
ASSETS | ||||||||||||||||||
Investments, at identified cost | $16,981,823 | $968,343 | $205,666* | $673,320 | $620,698 | $200,065 | $1,182,844 | $31,345 | $76,390 | |||||||||
Investments, at value | $29,524,767 | $1,238,744 | $250,549 | $698,345 | $721,704 | $189,277 | $1,581,104 | $30,619 | $100,757 | |||||||||
Repurchase agreements | — | — | 3,615 | — | — | — | — | — | — | |||||||||
Cash | 190,660 | 27,901 | 1 | 3,018 | 12,285 | 4,027 | 57,630 | 788 | 11,190 | |||||||||
Receivables for: | ||||||||||||||||||
Investments sold | 67,039 | — | 2,086 | 81 | 9,053 | 2,172 | 2,722 | 450 | — | |||||||||
Capital shares sold | 11,097 | 1,068 | 382 | 346 | 164 | 9 | 1,347 | — | 144 | |||||||||
Dividends | 2,919 | 491 | 21 | 722 | 59 | 23 | 837 | 6 | 29 | |||||||||
Interest | 6 | 1 | — | — | — | — | 2 | — | 1 | |||||||||
Withholding tax | 1,733 | 324 | 12 | — | — | — | — | — | 2 | |||||||||
Prepaid registration fees | 28 | 22 | 26 | 14 | 21 | 1 | 19 | 1 | 1 | |||||||||
Other assets | 2,895 | 104 | 67 | 70 | 81 | 18 | 133 | 28 | 9 | |||||||||
Total Assets | 29,801,144 | 1,268,655 | 256,759 | 702,596 | 743,367 | 195,527 | 1,643,794 | 31,892 | 112,133 | |||||||||
LIABILITIES | ||||||||||||||||||
Payables for: | ||||||||||||||||||
Investments purchased | 41,980 | — | 2,974 | 35 | 12,530 | 401 | — | 205 | — | |||||||||
Capital shares reacquired | 26,929 | 772 | 131 | 911 | 993 | 80 | 922 | — | 3 | |||||||||
Accrued expenses: | ||||||||||||||||||
Management fees | 13,695 | 635 | 151 | 428 | 457 | 121 | 1,022 | 20 | 56 | |||||||||
12b-1 fees | 303 | 10 | 5 | 16 | 1 | 1 | 13 | — | — | |||||||||
Transfer agent fees | 2,068 | 76 | 20 | 57 | 41 | 13 | 123 | 2 | 6 | |||||||||
Trustees' fees and expenses | 3,237 | 78 | 71 | 80 | 90 | 21 | 150 | 2 | 4 | |||||||||
Other | 1,282 | 97 | 20 | 59 | 34 | 14 | 137 | 8 | 14 | |||||||||
Total Liabilities | 89,494 | 1,668 | 3,372 | 1,586 | 14,146 | 651 | 2,367 | 237 | 83 | |||||||||
NET ASSETS | $29,711,650 | $1,266,987 | $253,387 | $701,010 | $729,221 | $194,876 | $1,641,427 | $31,655 | $112,050 | |||||||||
Net Assets Consist of: | ||||||||||||||||||
Paid-in capital | $14,705,265 | $997,585 | $157,091 | $655,596 | $609,499 | $213,480 | $1,222,837 | $35,009 | $86,020 | |||||||||
Total distributable earnings/(loss) | 15,006,385 | 269,402 | 96,296 | 45,414 | 119,722 | (18,604) | 418,590 | (3,354) | 26,030 | |||||||||
$29,711,650 | $1,266,987 | $253,387 | $701,010 | $729,221 | $194,876 | $1,641,427 | $31,655 | $112,050 | ||||||||||
NET ASSET VALUE PER SHARE BY CLASS | ||||||||||||||||||
Retirement Class | ||||||||||||||||||
Net assets | $6,970,617 | $457,908 | $31,265 | $102,945 | $281,603 | $37,884 | $230,861 | $7,444 | $5,152 | |||||||||
Shares of beneficial interest1 | 91,978 | 28,036 | 2,865 | 4,943 | 21,363 | 3,907 | 6,881 | 839 | 231 | |||||||||
Net asset value per share2 | $75.79 | $16.33 | $10.91 | $20.82 | $13.18 | $9.70 | $33.55 | $8.87 | $22.31 | |||||||||
Institutional Class | ||||||||||||||||||
Net assets | $21,311,587 | $761,262 | $198,544 | $520,629 | $440,553 | $154,965 | $1,346,098 | $23,722 | $106,463 | |||||||||
Shares of beneficial interest1 | 281,241 | 46,612 | 18,246 | 25,007 | 33,546 | 16,029 | 40,149 | 2,675 | 4,778 | |||||||||
Net asset value per share2 | $75.78 | $16.33 | $10.88 | $20.82 | $13.13 | $9.67 | $33.53 | $8.87 | $22.28 | |||||||||
Administrative Class | ||||||||||||||||||
Net assets | $345,550 | $12,195 | $2,687 | $18,508 | $395 | $1,667 | $6,537 | $239 | $18 | |||||||||
Shares of beneficial interest1 | 4,660 | 748 | 262 | 882 | 33 | 174 | 196 | 27 | 1 | |||||||||
Net asset value per share2 | $74.15 | $16.33 | $10.26 | $20.98 | $11.98 | $9.56 | $33.30 | $8.85 | $22.24 | |||||||||
Investor Class | ||||||||||||||||||
Net assets | $1,083,896 | $35,622 | $20,891 | $58,928 | $6,670 | $360 | $57,931 | $250 | $417 | |||||||||
Shares of beneficial interest1 | 14,955 | 2,162 | 2,114 | 2,836 | 592 | 38 | 1,779 | 28 | 19 | |||||||||
Net asset value per share2 | $72.48 | $16.48 | $9.88 | $20.78 | $11.28 | $9.40 | $32.56 | $8.85 | $21.87 |
* | Including repurchase agreement |
1 | Par value $0.01 (unlimited authorizations) |
2 | Per share amounts can be recalculated to the amounts disclosed herein when total net assets and shares of beneficial interest are not rounded to thousands. |
The accompanying notes are an integral part of the Financial Statements.
42
Harbor Domestic Equity Funds
StatementS of Operations—Year Ended October 31, 2019
StatementS of Operations—Year Ended October 31, 2019
(All amounts in thousands)
Harbor Capital Appreciation Fund | Harbor Large Cap Value Fund | Harbor Mid Cap Growth Fund | Harbor Mid Cap Value Fund | Harbor Small Cap Growth Fund | Harbor Small Cap Growth Opportunities Fund | Harbor Small Cap Value Fund | Harbor Small Cap Value Opportunities Fund | Harbor Strategic Growth Fund | |
Investment Income | |||||||||
Dividends | $228,066 | $19,284 | $935 | $26,532 | $4,476 | $707 | $20,765 | $512 | $1,031 |
Interest | 2,942 | 818 | 316 | 105 | 303 | 101 | 904 | 24 | 140 |
Net securities lending income | 80 | — | — | — | — | — | — | — | — |
Foreign taxes withheld | (2,716) | (459) | — | (5) | — | (9) | (97) | (2) | (18) |
Total Investment Income | 228,372 | 19,643 | 1,251 | 26,632 | 4,779 | 799 | 21,572 | 534 | 1,153 |
Operating Expenses | |||||||||
Management fees | 177,668 | 6,513 | 2,211 | 6,287 | 5,327 | 1,635 | 10,983 | 237 | 566 |
12b-1 fees: | |||||||||
Administrative Class | 1,007 | 38 | 17 | 70 | 2 | 4 | 17 | 1 | — |
Investor Class | 3,005 | 102 | 50 | 170 | 17 | 1 | 152 | 1 | 1 |
Shareholder communications | 940 | 84 | 19 | 86 | 19 | 6 | 156 | 4 | 6 |
Custodian fees | 1,012 | 27 | 35 | 56 | 42 | 31 | 41 | 14 | 10 |
Transfer agent fees: | |||||||||
Retirement Class | 1,041 | 62 | 12 | 18 | 49 | 7 | 34 | 1 | 1 |
Institutional Class | 21,207 | 647 | 179 | 613 | 398 | 170 | 1,168 | 23 | 87 |
Administrative Class | 389 | 15 | 6 | 27 | 1 | 2 | 6 | — | — |
Investor Class | 2,604 | 88 | 43 | 148 | 15 | 1 | 132 | — | 1 |
Professional fees | 1,273 | 47 | 22 | 38 | 30 | 9 | 61 | 2 | 4 |
Trustees' fees and expenses | 1,411 | 49 | 14 | 42 | 34 | 11 | 68 | 1 | 4 |
Registration fees | 202 | 87 | 64 | 73 | 76 | 64 | 95 | 69 | 59 |
Miscellaneous | 362 | 20 | 12 | 19 | 17 | 11 | 25 | 8 | 8 |
Total expenses | 212,121 | 7,779 | 2,684 | 7,647 | 6,027 | 1,952 | 12,938 | 361 | 747 |
Management fees waived | (14,728) | — | (26) | (244) | — | — | — | — | — |
Transfer agent fees waived | (766) | (27) | (7) | (23) | (17) | (6) | (39) | (1) | (3) |
Other expenses reimbursed | — | (392) | — | — | — | — | — | (83) | (79) |
Custodian fees reduction | (55) | (3) | (1) | (2) | (2) | (1) | (5) | (1) | — |
Net expenses | 196,572 | 7,357 | 2,650 | 7,378 | 6,008 | 1,945 | 12,894 | 276 | 665 |
Net Investment Income/(Loss) | 31,800 | 12,286 | (1,399) | 19,254 | (1,229) | (1,146) | 8,678 | 258 | 488 |
Realized and Change in Net Unrealized Gain/(Loss) on Investment Transactions | |||||||||
Net realized gain/(loss) on: | |||||||||
Investments | 2,821,869 | (1,877) | 61,125 | 1,296 | 23,936 | 2,508 | 15,233 | (2,831) | 1,660 |
Foreign currency transactions | (553) | — | — | — | — | (1) | — | — | — |
Change in net unrealized appreciation/(depreciation) on: | |||||||||
Investments | 877,262 | 159,031 | 5,571 | 17,301 | 82,988 | (16,920) | 129,521 | 1,225 | 12,686 |
Translations of assets and liabilities in foreign currencies | (10) | — | — | — | — | — | — | — | — |
Net gain/(loss) on investment transactions | 3,698,568 | 157,154 | 66,696 | 18,597 | 106,924 | (14,413) | 144,754 | (1,606) | 14,346 |
Net Increase/(Decrease) in Net Assets Resulting from Operations | $3,730,368 | $169,440 | $65,297 | $37,851 | $105,695 | $(15,559) | $153,432 | $(1,348) | $14,834 |
The accompanying notes are an integral part of the Financial Statements.
43
Harbor Domestic Equity Funds
Statements of Changes In Net Assets
Statements of Changes In Net Assets
(All amounts in thousands)
Harbor Capital Appreciation Fund | Harbor Large Cap Value Fund | Harbor Mid Cap Growth Fund | ||||||
November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | |||
INCREASE/(DECREASE) IN NET ASSETS | ||||||||
Operations: | ||||||||
Net investment income/(loss) | $31,800 | $68,671 | $12,286 | $9,602 | $(1,399) | $(1,347) | ||
Net realized gain/(loss) on investments | 2,821,316 | 3,389,399 | (1,877) | 18,268 | 61,125 | 72,227 | ||
Change in net unrealized appreciation/(depreciation) of investments | 877,252 | (743,393) | 159,031 | (39,265) | 5,571 | (44,332) | ||
Net increase/(decrease) in assets resulting from operations | 3,730,368 | 2,714,677 | 169,440 | (11,395) | 65,297 | 26,548 | ||
Distributions to Shareholders | ||||||||
Retirement Class | (502,294) | (396,568) | (8,957) | (7,627) | (25,016) | (14,153) | ||
Institutional Class | (2,034,649) | (2,446,657) | (16,546) | (18,431) | (26,702) | (15,890) | ||
Administrative Class | (41,111) | (51,883) | (368) | (421) | (2,326) | (3,120) | ||
Investor Class | (121,068) | (153,082) | (947) | (2,316) | (2,988) | (2,301) | ||
Total distributions to shareholders | (2,699,122) | (3,048,190) | (26,818) | (28,795) | (57,032) | (35,464) | ||
Net Increase/(Decrease) Derived from Capital Share Transactions | (855,516) | 1,054,440 | 144,596 | 253,253 | (101,560) | (47,997) | ||
Net increase/(decrease) in net assets | 175,730 | 720,927 | 287,218 | 213,063 | (93,295) | (56,913) | ||
Net Assets | ||||||||
Beginning of period | 29,535,920 | 28,814,993 | 979,769 | 766,706 | 346,682 | 403,595 | ||
End of period | $29,711,650 | $29,535,920 | $1,266,987 | $979,769 | $253,387 | $346,682 |
The accompanying notes are an integral part of the Financial Statements.
44
Harbor Mid Cap Value Fund | Harbor Small Cap Growth Fund | Harbor Small Cap Growth Opportunities Fund | Harbor Small Cap Value Fund | Harbor Small Cap Value Opportunities Fund | Harbor Strategic Growth Fund | |||||||||||
November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | |||||
$19,254 | $21,996 | $(1,229) | $(2,842) | $(1,146) | $(1,894) | $8,678 | $5,481 | $258 | $171 | $488 | $195 | |||||
1,296 | 56,222 | 23,936 | 163,740 | 2,507 | 57,856 | 15,233 | 154,899 | (2,831) | 1,824 | 1,660 | 1,922 | |||||
17,301 | (125,443) | 82,988 | (131,098) | (16,920) | (23,665) | 129,521 | (248,143) | 1,225 | (2,001) | 12,686 | 1,689 | |||||
37,851 | (47,225) | 105,695 | 29,800 | (15,559) | 32,297 | 153,432 | (87,763) | (1,348) | (6) | 14,834 | 3,806 | |||||
(6,960) | (3,555) | (58,115) | (18,209) | (7,893) | (3,505) | (11,611) | (2,150) | (412) | (1) | (104) | (13) | |||||
(49,842) | (28,481) | (76,800) | (48,249) | (43,633) | (13,477) | (99,888) | (21,038) | (1,568) | (147) | (1,822) | (1,185) | |||||
(2,796) | (1,726) | (157) | (71) | (357) | (71) | (638) | (105) | (16) | (1) | — | — | |||||
(5,150) | (3,658) | (1,469) | (834) | (142) | (71) | (5,986) | (963) | (16) | (1) | (9) | (1) | |||||
(64,748) | (37,420) | (136,541) | (67,363) | (52,025) | (17,124) | (118,123) | (24,256) | (2,012) | (150) | (1,935) | (1,199) | |||||
(215,050) | 39,635 | 45,807 | 43,786 | (23,302) | (34,380) | 223,153 | 314,366 | 3,489 | 6,491 | 29,032 | 10,964 | |||||
(241,947) | (45,010) | 14,961 | 6,223 | (90,886) | (19,207) | 258,462 | 202,347 | 129 | 6,335 | 41,931 | 13,571 | |||||
942,957 | 987,967 | 714,260 | 708,037 | 285,762 | 304,969 | 1,382,965 | 1,180,618 | 31,526 | 25,191 | 70,119 | 56,548 | |||||
$701,010 | $942,957 | $729,221 | $714,260 | $194,876 | $285,762 | $1,641,427 | $1,382,965 | $31,655 | $31,526 | $112,050 | $70,119 |
45
Harbor Domestic Equity Funds
Statements of Changes in Net Assets—Capital Stock Activity
Statements of Changes in Net Assets—Capital Stock Activity
(All amounts in thousands)
Harbor Capital Appreciation Fund | Harbor Large Cap Value Fund | Harbor Mid Cap Growth Fund | ||||||
November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | |||
AMOUNT ($) | ||||||||
Retirement Class | ||||||||
Net proceeds from sale of shares | $2,120,682 | $3,554,254 | $142,086 | $200,477 | $33,252 | $46,562 | ||
Reinvested distributions | 474,879 | 378,865 | 8,374 | 7,588 | 25,016 | 14,153 | ||
Cost of shares reacquired | (1,293,167) | (1,359,223) | (56,492) | (23,708) | (171,764) | (40,095) | ||
Net increase/(decrease) in net assets | $1,302,394 | $2,573,896 | $93,968 | $184,357 | $(113,496) | $20,620 | ||
Institutional Class | ||||||||
Net proceeds from sale of shares | $2,848,926 | $3,646,684 | $296,956 | $288,719 | $67,981 | $49,030 | ||
Reinvested distributions | 1,856,429 | 2,226,227 | 14,891 | 17,031 | 19,729 | 11,273 | ||
Cost of shares reacquired | (6,481,485) | (6,874,710) | (240,786) | (174,554) | (55,847) | (42,659) | ||
Cost of shares reacquired through redemption in-kind | — | (291,425) | — | — | — | — | ||
Net increase/(decrease) in net assets | $(1,776,130) | $(1,293,224) | $71,061 | $131,196 | $31,863 | $17,644 | ||
Administrative Class | ||||||||
Net proceeds from sale of shares | $78,686 | $90,994 | $628 | $3,946 | $690 | $9,158 | ||
Reinvested distributions | 39,641 | 50,177 | 367 | 421 | 2,321 | 3,116 | ||
Cost of shares reacquired | (228,371) | (180,144) | (6,315) | (41,507) | (26,644) | (95,899) | ||
Net increase/(decrease) in net assets | $(110,044) | $(38,973) | $(5,320) | $(37,140) | $(23,633) | $(83,625) | ||
Investor Class | ||||||||
Net proceeds from sale of shares | $130,741 | $340,918 | $7,391 | $25,671 | $12,290 | $9,964 | ||
Reinvested distributions | 119,520 | 151,394 | 939 | 2,305 | 2,958 | 2,285 | ||
Cost of shares reacquired | (521,997) | (679,571) | (23,443) | (53,136) | (11,542) | (14,885) | ||
Net increase/(decrease) in net assets | $(271,736) | $(187,259) | $(15,113) | $(25,160) | $3,706 | $(2,636) |
The accompanying notes are an integral part of the Financial Statements.
46
Harbor Mid Cap Value Fund | Harbor Small Cap Growth Fund | Harbor Small Cap Growth Opportunities Fund | Harbor Small Cap Value Fund | Harbor Small Cap Value Opportunities Fund | Harbor Strategic Growth Fund | |||||||||||
November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | |||||
$36,603 | $36,005 | $45,531 | $158,138 | $6,892 | $19,490 | $140,043 | $143,113 | $1,505 | $6,231 | $1,564 | $3,374 | |||||
6,960 | 3,555 | 56,734 | 17,919 | 7,893 | 3,505 | 6,760 | 1,153 | 412 | 1 | 104 | 12 | |||||
(42,938) | (16,551) | (113,847) | (40,086) | (6,396) | (35,883) | (80,276) | (33,113) | (81) | (3) | (766) | (182) | |||||
$625 | $23,009 | $(11,582) | $135,971 | $8,389 | $(12,888) | $66,527 | $111,153 | $1,836 | $6,229 | $902 | $3,204 | |||||
$140,350 | $263,531 | $75,466 | $65,821 | $42,933 | $81,888 | $467,716 | $478,010 | $107 | $106 | $47,025 | $17,159 | |||||
47,820 | 27,819 | 73,911 | 47,317 | 43,627 | 13,012 | 86,451 | 18,030 | 1,568 | 147 | 1,758 | 1,183 | |||||
(359,812) | (252,177) | (91,745) | (204,931) | (118,386) | (116,301) | (384,397) | (335,507) | (54) | (3) | (20,699) | (10,834) | |||||
— | — | — | — | — | — | — | — | — | — | — | — | |||||
$(171,642) | $39,173 | $57,632 | $(91,793) | $(31,826) | $(21,401) | $169,770 | $160,533 | $1,621 | $250 | $28,084 | $7,508 | |||||
$7,271 | $10,291 | $301 | $703 | $678 | $988 | $1,624 | $5,226 | $— | $— | $— | $3 | |||||
2,759 | 1,722 | 157 | 71 | 357 | 71 | 620 | 101 | 15 | 1 | — | — | |||||
(32,849) | (14,356) | (788) | (684) | (742) | (612) | (2,944) | (1,926) | — | — | — | — | |||||
$(22,819) | $(2,343) | $(330) | $90 | $293 | $447 | $(700) | $3,401 | $15 | $1 | $— | $3 | |||||
$18,709 | $18,261 | $1,073 | $1,819 | $107 | $479 | $15,106 | $71,109 | $18 | $10 | $78 | $337 | |||||
4,997 | 3,543 | 1,447 | 832 | 142 | 71 | 5,903 | 948 | 16 | 1 | 8 | 1 | |||||
(44,920) | (42,008) | (2,433) | (3,133) | (407) | (1,088) | (33,453) | (32,778) | (17) | — | (40) | (89) | |||||
$(21,214) | $(20,204) | $87 | $(482) | $(158) | $(538) | $(12,444) | $39,279 | $17 | $11 | $46 | $249 |
47
Harbor Domestic Equity Funds
Statements of Changes in Net Assets—Capital Stock Activity—Continued
Statements of Changes in Net Assets—Capital Stock Activity—Continued
(All amounts in thousands)
Harbor Capital Appreciation Fund | Harbor Large Cap Value Fund | Harbor Mid Cap Growth Fund | ||||||
November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | �� | November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | ||
SHARES | ||||||||
Retirement Class | ||||||||
Shares sold | 29,405 | 46,871 | 9,352 | 13,207 | 3,229 | 4,092 | ||
Shares issued due to reinvestment of distributions | 7,633 | 5,399 | 606 | 509 | 2,954 | 1,361 | ||
Shares reacquired | (17,963) | (17,760) | (3,757) | (1,562) | (16,564) | (3,535) | ||
Net increase/(decrease) in shares outstanding | 19,075 | 34,510 | 6,201 | 12,154 | (10,381) | 1,918 | ||
Institutional Class | ||||||||
Shares sold | 39,971 | 48,030 | 19,742 | 18,999 | 6,704 | 4,324 | ||
Shares issued due to reinvestment of distributions | 29,827 | 31,713 | 1,078 | 1,143 | 2,335 | 1,086 | ||
Shares reacquired | (90,937) | (90,775) | (16,319) | (11,540) | (5,408) | (3,780) | ||
Shares reacquired through redemption in-kind | — | (3,847) | — | — | — | — | ||
Net increase/(decrease) in shares outstanding | (21,139) | (14,879) | 4,501 | 8,602 | 3,631 | 1,630 | ||
Administrative Class | ||||||||
Shares sold | 1,141 | 1,216 | 43 | 262 | 73 | 834 | ||
Shares issued due to reinvestment of distributions | 649 | 727 | 27 | 28 | 291 | 314 | ||
Shares reacquired | (3,309) | (2,431) | (398) | (2,787) | (2,701) | (8,734) | ||
Net increase/(decrease) in shares outstanding | (1,519) | (488) | (328) | (2,497) | (2,337) | (7,586) | ||
Investor Class | ||||||||
Shares sold | 1,916 | 4,662 | 487 | 1,673 | 1,271 | 938 | ||
Shares issued due to reinvestment of distributions | 2,001 | 2,235 | 68 | 153 | 384 | 237 | ||
Shares reacquired | (7,625) | (9,252) | (1,537) | (3,444) | (1,223) | (1,402) | ||
Net increase/(decrease) in shares outstanding | (3,708) | (2,355) | (982) | (1,618) | 432 | (227) |
The accompanying notes are an integral part of the Financial Statements.
48
Harbor Mid Cap Value Fund | Harbor Small Cap Growth Fund | Harbor Small Cap Growth Opportunities Fund | Harbor Small Cap Value Fund | Harbor Small Cap Value Opportunities Fund | Harbor Strategic Growth Fund | |||||||||||
November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | |||||
1,837 | 1,544 | 3,726 | 10,053 | 696 | 1,517 | 4,533 | 3,898 | 163 | 631 | 78 | 168 | |||||
385 | 151 | 5,519 | 1,249 | 881 | 286 | 243 | 31 | 51 | — | 6 | 1 | |||||
(2,120) | (708) | (9,154) | (2,596) | (648) | (2,598) | (2,509) | (897) | (9) | — | (36) | (9) | |||||
102 | 987 | 91 | 8,706 | 929 | (795) | 2,267 | 3,032 | 205 | 631 | 48 | 160 | |||||
7,050 | 11,325 | 6,036 | 4,304 | 4,309 | 6,310 | 14,992 | 12,954 | 13 | 10 | 2,290 | 876 | |||||
2,644 | 1,178 | 7,211 | 3,302 | 4,880 | 1,061 | 3,109 | 496 | 195 | 15 | 99 | 62 | |||||
(18,090) | (10,785) | (7,596) | (13,569) | (11,766) | (9,007) | (12,202) | (9,126) | (7) | — | (984) | (537) | |||||
— | — | — | — | — | — | — | — | — | — | — | — | |||||
(8,396) | 1,718 | 5,651 | (5,963) | (2,577) | (1,636) | 5,899 | 4,324 | 201 | 25 | 1,405 | 401 | |||||
361 | 432 | 26 | 50 | 71 | 74 | 51 | 143 | — | — | — | — | |||||
151 | 72 | 17 | 6 | 40 | 6 | 22 | 3 | 2 | — | — | — | |||||
(1,607) | (606) | (67) | (49) | (74) | (47) | (94) | (53) | — | — | — | — | |||||
(1,095) | (102) | (24) | 7 | 37 | 33 | (21) | 93 | 2 | — | — | — | |||||
945 | 779 | 115 | 131 | 11 | 34 | 496 | 1,993 | 2 | 1 | 4 | 17 | |||||
276 | 150 | 164 | 65 | 16 | 6 | 218 | 27 | 2 | — | 1 | — | |||||
(2,258) | (1,795) | (240) | (224) | (43) | (80) | (1,102) | (917) | (2) | — | (2) | (5) | |||||
(1,037) | (866) | 39 | (28) | (16) | (40) | (388) | 1,103 | 2 | 1 | 3 | 12 |
49
Harbor Domestic Equity Funds Financial Highlights
Selected Data for a Share Outstanding for the Periods Presented
Selected Data for a Share Outstanding for the Periods Presented
HARBOR CAPITAL APPRECIATION FUND | ||||
Retirement Class | ||||
Year Ended October 31, | 2019 | 2018 | 2017 | 2016f |
Net asset value beginning of period | $73.98 | $75.34 | $60.37 | $55.79 |
Income from Investment Operations | ||||
Net investment income/(loss)a,e | 0.13 | 0.23 | 0.16 | 0.05 |
Net realized and unrealized gains/(losses) on investments | 8.54 | 6.50 | 18.40 | 4.53 |
Total from investment operations | 8.67 | 6.73 | 18.56 | 4.58 |
Less Distributions | ||||
Dividends from net investment income | (0.21) | (0.17) | (0.10) | — |
Distributions from net realized capital gains | (6.65) | (7.92) | (3.49) | — |
Total distributions | (6.86) | (8.09) | (3.59) | — |
Net asset value end of period | 75.79 | 73.98 | 75.34 | 60.37 |
Net assets end of period (000s) | $6,970,617 | $5,393,675 | $2,892,484 | $1,022,839 |
Ratios and Supplemental Data (%) | ||||
Total returnb | 13.73% | 9.50% | 32.62% | 8.21%c |
Ratio of total expenses to average net assets^ | 0.63 | 0.62 | 0.63 | 0.65d |
Ratio of net expenses to average net assetsa | 0.58 | 0.57 | 0.59 | 0.59d |
Ratio of net investment income to average net assetsa | 0.18 | 0.30 | 0.23 | 0.13d |
Portfolio turnover | 40 | 40 | 52 | 34 |
Administrative Class | |||||
Year Ended October 31, | 2019 | 2018 | 2017 | 2016 | 2015 |
Net asset value beginning of period | $72.54 | $74.08 | $59.50 | $64.51 | $61.39 |
Income from Investment Operations | |||||
Net investment income/(loss)a,e | (0.09) | (0.01) | (0.04) | (0.06) | (0.08) |
Net realized and unrealized gains/(losses) on investments | 8.35 | 6.39 | 18.11 | (0.84) | 6.97 |
Total from investment operations | 8.26 | 6.38 | 18.07 | (0.90) | 6.89 |
Less Distributions | |||||
Dividends from net investment income | — | — | — | — | — |
Distributions from net realized capital gains | (6.65) | (7.92) | (3.49) | (4.11) | (3.77) |
Total distributions | (6.65) | (7.92) | (3.49) | (4.11) | (3.77) |
Net asset value end of period | 74.15 | 72.54 | 74.08 | 59.50 | 64.51 |
Net assets end of period (000s) | $345,550 | $448,241 | $493,860 | $555,665 | $620,910 |
Ratios and Supplemental Data (%) | |||||
Total returnb | 13.35% | 9.16% | 32.20% | (1.48)% | 11.88% |
Ratio of total expenses to average net assets^ | 0.96 | 0.95 | 0.96 | 0.94 | 0.93 |
Ratio of net expenses to average net assetsa | 0.91 | 0.90 | 0.90 | 0.89 | 0.89 |
Ratio of net investment income to average net assetsa | (0.13) | (0.01) | (0.06) | (0.11) | (0.13) |
Portfolio turnover | 40 | 40 | 52 | 34 | 37 |
See page 68 for notes to the Financial Highlights.
The accompanying notes are an integral part of the Financial Statements.
50
Institutional Class | ||||
2019 | 2018 | 2017 | 2016 | 2015 |
$73.97 | $75.32 | $60.36 | $65.27 | $61.97 |
0.08 | 0.18 | 0.13 | 0.09 | 0.07 |
8.53 | 6.50 | 18.38 | (0.84) | 7.05 |
8.61 | 6.68 | 18.51 | (0.75) | 7.12 |
(0.15) | (0.11) | (0.06) | (0.05) | (0.05) |
(6.65) | (7.92) | (3.49) | (4.11) | (3.77) |
(6.80) | (8.03) | (3.55) | (4.16) | (3.82) |
75.78 | 73.97 | 75.32 | 60.36 | 65.27 |
$21,311,587 | $22,366,214 | $23,896,840 | $21,608,221 | $24,669,740 |
13.63% | 9.44% | 32.52% | (1.23)% | 12.16% |
0.71 | 0.70 | 0.71 | 0.69 | 0.68 |
0.66 | 0.65 | 0.65 | 0.64 | 0.64 |
0.11 | 0.23 | 0.20 | 0.15 | 0.12 |
40 | 40 | 52 | 34 | 37 |
Investor Class | ||||
2019 | 2018 | 2017 | 2016 | 2015 |
$71.15 | $72.88 | $58.66 | $63.73 | $60.76 |
(0.17) | (0.10) | (0.11) | (0.13) | (0.16) |
8.15 | 6.29 | 17.82 | (0.83) | 6.90 |
7.98 | 6.19 | 17.71 | (0.96) | 6.74 |
— | — | — | — | — |
(6.65) | (7.92) | (3.49) | (4.11) | (3.77) |
(6.65) | (7.92) | (3.49) | (4.11) | (3.77) |
72.48 | 71.15 | 72.88 | 58.66 | 63.73 |
$1,083,896 | $1,327,790 | $1,531,809 | $1,540,557 | $2,214,518 |
13.21% | 9.03% | 32.04% | (1.60)% | 11.75% |
1.08 | 1.07 | 1.08 | 1.06 | 1.05 |
1.03 | 1.02 | 1.02 | 1.01 | 1.01 |
(0.25) | (0.13) | (0.17) | (0.22) | (0.25) |
40 | 40 | 52 | 34 | 37 |
51
Harbor Domestic Equity Funds Financial Highlights—Continued
Selected Data for a Share Outstanding for the Periods Presented
Selected Data for a Share Outstanding for the Periods Presented
HARBOR LARGE CAP VALUE FUND | ||||
Retirement Class | ||||
Year Ended October 31, | 2019 | 2018 | 2017 | 2016f |
Net asset value beginning of period | $14.37 | $14.87 | $12.32 | $10.94 |
Income from Investment Operations | ||||
Net investment income/(loss)a,e | 0.18 | 0.17 | 0.12 | 0.12 |
Net realized and unrealized gains/(losses) on investments | 2.17 | (0.13) | 3.00 | 1.33 |
Total from investment operations | 2.35 | 0.04 | 3.12 | 1.45 |
Less Distributions | ||||
Dividends from net investment income | (0.16) | (0.13) | (0.14) | (0.07) |
Distributions from net realized capital gains | (0.23) | (0.41) | (0.43) | — |
Total distributions | (0.39) | (0.54) | (0.57) | (0.07) |
Net asset value end of period | 16.33 | 14.37 | 14.87 | 12.32 |
Net assets end of period (000s) | $457,908 | $313,721 | $143,966 | $3,822 |
Ratios and Supplemental Data (%) | ||||
Total returnb | 16.92% | 0.18% | 26.08% | 13.24%c |
Ratio of total expenses to average net assets^ | 0.65 | 0.64 | 0.64 | 0.67d |
Ratio of net expenses to average net assetsa | 0.61 | 0.60 | 0.60 | 0.63d |
Ratio of net investment income to average net assetsa | 1.19 | 1.12 | 0.83 | 1.46d |
Portfolio turnover | 11 | 15 | 16 | 34 |
Administrative Class | |||||
Year Ended October 31, | 2019 | 2018 | 2017 | 2016 | 2015 |
Net asset value beginning of period | $14.36 | $14.84 | $12.30 | $12.15 | $12.23 |
Income from Investment Operations | |||||
Net investment income/(loss)a,e | 0.14 | 0.13 | 0.10 | 0.13 | 0.12 |
Net realized and unrealized gains/(losses) on investments | 2.17 | (0.15) | 2.99 | 0.63 | 0.70 |
Total from investment operations | 2.31 | (0.02) | 3.09 | 0.76 | 0.82 |
Less Distributions | |||||
Dividends from net investment income | (0.11) | (0.05) | (0.12) | (0.10) | (0.11) |
Distributions from net realized capital gains | (0.23) | (0.41) | (0.43) | (0.51) | (0.79) |
Total distributions | (0.34) | (0.46) | (0.55) | (0.61) | (0.90) |
Net asset value end of period | 16.33 | 14.36 | 14.84 | 12.30 | 12.15 |
Net assets end of period (000s) | $12,195 | $15,460 | $53,006 | $9,361 | $24,690 |
Ratios and Supplemental Data (%) | |||||
Total returnb | 16.60% | (0.23)% | 25.77% | 6.77% | 7.02% |
Ratio of total expenses to average net assets^ | 0.98 | 0.97 | 0.97 | 0.96 | 0.95 |
Ratio of net expenses to average net assetsa | 0.94 | 0.93 | 0.93 | 0.93 | 0.93 |
Ratio of net investment income to average net assetsa | 0.91 | 0.84 | 0.70 | 1.09 | 1.00 |
Portfolio turnover | 11 | 15 | 16 | 34 | 24 |
See page 68 for notes to the Financial Highlights.
The accompanying notes are an integral part of the Financial Statements.
52
Institutional Class | ||||
2019 | 2018 | 2017 | 2016 | 2015 |
$14.37 | $14.87 | $12.32 | $12.16 | $12.24 |
0.17 | 0.16 | 0.15 | 0.16 | 0.15 |
2.17 | (0.13) | 2.97 | 0.64 | 0.70 |
2.34 | 0.03 | 3.12 | 0.80 | 0.85 |
(0.15) | (0.12) | (0.14) | (0.13) | (0.14) |
(0.23) | (0.41) | (0.43) | (0.51) | (0.79) |
(0.38) | (0.53) | (0.57) | (0.64) | (0.93) |
16.33 | 14.37 | 14.87 | 12.32 | 12.16 |
$761,262 | $605,040 | $498,360 | $310,127 | $231,033 |
16.83% | 0.11% | 26.00% | 7.14% | 7.29% |
0.73 | 0.72 | 0.72 | 0.72 | 0.70 |
0.69 | 0.68 | 0.68 | 0.68 | 0.68 |
1.12 | 1.05 | 1.10 | 1.32 | 1.25 |
11 | 15 | 16 | 34 | 24 |
Investor Class | ||||
2019 | 2018 | 2017 | 2016 | 2015 |
$14.49 | $14.99 | $12.42 | $12.25 | $12.33 |
0.12 | 0.11 | 0.10 | 0.11 | 0.11 |
2.19 | (0.14) | 2.99 | 0.66 | 0.70 |
2.31 | (0.03) | 3.09 | 0.77 | 0.81 |
(0.09) | (0.06) | (0.09) | (0.09) | (0.10) |
(0.23) | (0.41) | (0.43) | (0.51) | (0.79) |
(0.32) | (0.47) | (0.52) | (0.60) | (0.89) |
16.48 | 14.49 | 14.99 | 12.42 | 12.25 |
$35,622 | $45,548 | $71,374 | $57,716 | $29,745 |
16.39% | (0.27)% | 25.52% | 6.80% | 6.87% |
1.10 | 1.09 | 1.09 | 1.09 | 1.07 |
1.06 | 1.05 | 1.05 | 1.05 | 1.05 |
0.79 | 0.70 | 0.75 | 0.94 | 0.89 |
11 | 15 | 16 | 34 | 24 |
53
Harbor Domestic Equity Funds Financial Highlights—Continued
Selected Data for a Share Outstanding for the Periods Presented
Selected Data for a Share Outstanding for the Periods Presented
HARBOR MID CAP GROWTH FUND | ||||
Retirement Class | ||||
Year Ended October 31, | 2019 | 2018 | 2017 | 2016f |
Net asset value beginning of period | $10.88 | $11.25 | $8.58 | $7.76 |
Income from Investment Operations | ||||
Net investment income/(loss)a,e | (0.04) | (0.03) | 0.01 | (0.03) |
Net realized and unrealized gains/(losses) on investments | 1.85 | 0.88 | 2.66 | 0.85 |
Total from investment operations | 1.81 | 0.85 | 2.67 | 0.82 |
Less Distributions | ||||
Dividends from net investment income | — | — | — | — |
Distributions from net realized capital gains | (1.78) | (1.22) | — | — |
Total distributions | (1.78) | (1.22) | — | — |
Net asset value end of period | 10.91 | 10.88 | 11.25 | 8.58 |
Net assets end of period (000s) | $31,265 | $144,137 | $127,446 | $2,718 |
Ratios and Supplemental Data (%) | ||||
Total returnb | 21.38% | 8.02% | 31.12% | 10.57%c |
Ratio of total expenses to average net assets^ | 0.82 | 0.80 | 0.81 | 0.81d |
Ratio of net expenses to average net assetsa | 0.81 | 0.80 | 0.81 | 0.80d |
Ratio of net investment income to average net assetsa | (0.37) | (0.28) | 0.07 | (0.45)d |
Portfolio turnover | 70 | 85 | 87 | 84 |
Administrative Class | |||||
Year Ended October 31, | 2019 | 2018 | 2017 | 2016 | 2015 |
Net asset value beginning of period | $10.37 | $10.81 | $8.27 | $9.45 | $11.15 |
Income from Investment Operations | |||||
Net investment income/(loss)a,e | (0.06) | (0.06) | (0.04) | (0.05) | (0.06) |
Net realized and unrealized gains/(losses) on investments | 1.73 | 0.84 | 2.58 | (0.03) | 0.19 |
Total from investment operations | 1.67 | 0.78 | 2.54 | (0.08) | 0.13 |
Less Distributions | |||||
Dividends from net investment income | — | — | — | (0.04) | — |
Distributions from net realized capital gains | (1.78) | (1.22) | — | (1.06) | (1.83) |
Total distributions | (1.78) | (1.22) | — | (1.10) | (1.83) |
Net asset value end of period | 10.26 | 10.37 | 10.81 | 8.27 | 9.45 |
Net assets end of period (000s) | $2,687 | $26,936 | $110,114 | $175,211 | $366,121 |
Ratios and Supplemental Data (%) | |||||
Total returnb | 21.04% | 7.68% | 30.71% | (0.91)% | 1.29% |
Ratio of total expenses to average net assets^ | 1.15 | 1.13 | 1.13 | 1.10 | 1.09 |
Ratio of net expenses to average net assetsa | 1.14 | 1.12 | 1.12 | 1.10 | 1.09 |
Ratio of net investment income to average net assetsa | (0.66) | (0.55) | (0.45) | (0.57) | (0.58) |
Portfolio turnover | 70 | 85 | 87 | 84 | 82 |
See page 68 for notes to the Financial Highlights.
The accompanying notes are an integral part of the Financial Statements.
54
Institutional Class | ||||
2019 | 2018 | 2017 | 2016 | 2015 |
$10.86 | $11.24 | $8.58 | $9.76 | $11.43 |
(0.05) | (0.04) | (0.01) | (0.03) | (0.04) |
1.85 | 0.88 | 2.67 | (0.03) | 0.20 |
1.80 | 0.84 | 2.66 | (0.06) | 0.16 |
— | — | — | (0.06) | — |
(1.78) | (1.22) | — | (1.06) | (1.83) |
(1.78) | (1.22) | — | (1.12) | (1.83) |
10.88 | 10.86 | 11.24 | 8.58 | 9.76 |
$198,544 | $158,680 | $145,914 | $303,802 | $194,308 |
21.32% | 7.94% | 31.00% | (0.60)% | 1.55% |
0.90 | 0.88 | 0.88 | 0.86 | 0.84 |
0.89 | 0.87 | 0.87 | 0.85 | 0.84 |
(0.48) | (0.36) | (0.14) | (0.31) | (0.35) |
70 | 85 | 87 | 84 | 82 |
Investor Class | ||||
2019 | 2018 | 2017 | 2016 | 2015 |
$10.07 | $10.54 | $8.07 | $9.24 | $10.95 |
(0.08) | (0.08) | (0.04) | (0.05) | (0.07) |
1.67 | 0.83 | 2.51 | (0.04) | 0.19 |
1.59 | 0.75 | 2.47 | (0.09) | 0.12 |
— | — | — | (0.02) | — |
(1.78) | (1.22) | — | (1.06) | (1.83) |
(1.78) | (1.22) | — | (1.08) | (1.83) |
9.88 | 10.07 | 10.54 | 8.07 | 9.24 |
$20,891 | $16,929 | $20,121 | $17,167 | $24,647 |
20.83% | 7.57% | 30.61% | (1.05)% | 1.21% |
1.27 | 1.25 | 1.25 | 1.22 | 1.21 |
1.26 | 1.24 | 1.24 | 1.22 | 1.21 |
(0.85) | (0.72) | (0.48) | (0.68) | (0.71) |
70 | 85 | 87 | 84 | 82 |
55
Harbor Domestic Equity Funds Financial Highlights—Continued
Selected Data for a Share Outstanding for the Periods Presented
Selected Data for a Share Outstanding for the Periods Presented
HARBOR MID CAP VALUE FUND | ||||
Retirement Class | ||||
Year Ended October 31, | 2019 | 2018 | 2017 | 2016f |
Net asset value beginning of period | $21.39 | $23.33 | $20.17 | $18.36 |
Income from Investment Operations | ||||
Net investment income/(loss)a,e | 0.48 | 0.50 | 0.40 | 0.28 |
Net realized and unrealized gains/(losses) on investments | 0.47 | (1.52) | 3.43 | 1.53 |
Total from investment operations | 0.95 | (1.02) | 3.83 | 1.81 |
Less Distributions | ||||
Dividends from net investment income | (0.37) | (0.33) | (0.36) | — |
Distributions from net realized capital gains | (1.15) | (0.59) | (0.31) | — |
Total distributions | (1.52) | (0.92) | (0.67) | — |
Net asset value end of period | 20.82 | 21.39 | 23.33 | 20.17 |
Net assets end of period (000s) | $102,945 | $103,552 | $89,942 | $14,999 |
Ratios and Supplemental Data (%) | ||||
Total returnb | 5.53% | (4.75)% | 19.22% | 9.86%c |
Ratio of total expenses to average net assets^ | 0.80 | 0.79 | 0.80 | 0.82d |
Ratio of net expenses to average net assetsa | 0.77 | 0.76 | 0.77 | 0.79d |
Ratio of net investment income to average net assetsa | 2.39 | 2.15 | 1.79 | 2.11d |
Portfolio turnover | 11 | 24 | 22 | 18 |
Administrative Class | |||||
Year Ended October 31, | 2019 | 2018 | 2017 | 2016 | 2015 |
Net asset value beginning of period | $21.52 | $23.47 | $20.30 | $20.40 | $20.47 |
Income from Investment Operations | |||||
Net investment income/(loss)a,e | 0.42 | 0.43 | 0.34 | 0.40 | 0.29 |
Net realized and unrealized gains/(losses) on investments | 0.48 | (1.54) | 3.45 | 0.07 | (0.07) |
Total from investment operations | 0.90 | (1.11) | 3.79 | 0.47 | 0.22 |
Less Distributions | |||||
Dividends from net investment income | (0.29) | (0.25) | (0.31) | (0.22) | (0.16) |
Distributions from net realized capital gains | (1.15) | (0.59) | (0.31) | (0.35) | (0.13) |
Total distributions | (1.44) | (0.84) | (0.62) | (0.57) | (0.29) |
Net asset value end of period | 20.98 | 21.52 | 23.47 | 20.30 | 20.40 |
Net assets end of period (000s) | $18,508 | $42,557 | $48,809 | $40,992 | $28,929 |
Ratios and Supplemental Data (%) | |||||
Total returnb | 5.19% | (5.06)% | 18.84% | 2.54% | 1.05% |
Ratio of total expenses to average net assets^ | 1.13 | 1.12 | 1.12 | 1.11 | 1.11 |
Ratio of net expenses to average net assetsa | 1.10 | 1.08 | 1.09 | 1.09 | 1.11 |
Ratio of net investment income to average net assetsa | 2.08 | 1.83 | 1.51 | 2.03 | 1.41 |
Portfolio turnover | 11 | 24 | 22 | 18 | 12 |
See page 68 for notes to the Financial Highlights.
The accompanying notes are an integral part of the Financial Statements.
56
Institutional Class | ||||
2019 | 2018 | 2017 | 2016 | 2015 |
$21.38 | $23.33 | $20.17 | $20.27 | $20.32 |
0.47 | 0.49 | 0.39 | 0.44 | 0.34 |
0.47 | (1.54) | 3.43 | 0.08 | (0.07) |
0.94 | (1.05) | 3.82 | 0.52 | 0.27 |
(0.35) | (0.31) | (0.35) | (0.27) | (0.19) |
(1.15) | (0.59) | (0.31) | (0.35) | (0.13) |
(1.50) | (0.90) | (0.66) | (0.62) | (0.32) |
20.82 | 21.38 | 23.33 | 20.17 | 20.27 |
$520,629 | $714,309 | $739,122 | $600,800 | $484,078 |
5.48% | (4.85)% | 19.16% | 2.81% | 1.32% |
0.88 | 0.87 | 0.87 | 0.86 | 0.86 |
0.85 | 0.83 | 0.84 | 0.84 | 0.86 |
2.33 | 2.09 | 1.76 | 2.28 | 1.66 |
11 | 24 | 22 | 18 | 12 |
Investor Class | ||||
2019 | 2018 | 2017 | 2016 | 2015 |
$21.31 | $23.23 | $20.09 | $20.19 | $20.27 |
0.39 | 0.40 | 0.31 | 0.37 | 0.27 |
0.48 | (1.53) | 3.41 | 0.08 | (0.08) |
0.87 | (1.13) | 3.72 | 0.45 | 0.19 |
(0.25) | (0.20) | (0.27) | (0.20) | (0.14) |
(1.15) | (0.59) | (0.31) | (0.35) | (0.13) |
(1.40) | (0.79) | (0.58) | (0.55) | (0.27) |
20.78 | 21.31 | 23.23 | 20.09 | 20.19 |
$58,928 | $82,539 | $110,094 | $152,358 | $165,642 |
5.08% | (5.20)% | 18.71% | 2.45% | 0.93% |
1.25 | 1.24 | 1.24 | 1.23 | 1.23 |
1.22 | 1.20 | 1.21 | 1.21 | 1.23 |
1.95 | 1.71 | 1.40 | 1.92 | 1.29 |
11 | 24 | 22 | 18 | 12 |
57
Harbor Domestic Equity Funds Financial Highlights—Continued
Selected Data for a Share Outstanding for the Periods Presented
Selected Data for a Share Outstanding for the Periods Presented
HARBOR SMALL CAP GROWTH FUND | ||||
Retirement Class | ||||
Year Ended October 31, | 2019 | 2018 | 2017 | 2016f |
Net asset value beginning of period | $14.39 | $15.08 | $11.95 | $10.72 |
Income from Investment Operations | ||||
Net investment income/(loss)a,e | (0.01) | (0.05) | (0.04) | (0.02) |
Net realized and unrealized gains/(losses) on investments | 1.56 | 0.82 | 3.23 | 1.25 |
Total from investment operations | 1.55 | 0.77 | 3.19 | 1.23 |
Less Distributions | ||||
Dividends from net investment income | — | — | — | — |
Distributions from net realized capital gains | (2.76) | (1.46) | (0.06) | — |
Total distributions | (2.76) | (1.46) | (0.06) | — |
Net asset value end of period | 13.18 | 14.39 | 15.08 | 11.95 |
Net assets end of period (000s) | $281,603 | $306,026 | $189,516 | $54,634 |
Ratios and Supplemental Data (%) | ||||
Total returnb | 16.23% | 5.11% | 26.78% | 11.47%c |
Ratio of total expenses to average net assets^ | 0.80 | 0.79 | 0.79 | 0.81d |
Ratio of net expenses to average net assetsa | 0.80 | 0.79 | 0.79 | 0.80d |
Ratio of net investment income to average net assetsa | (0.12) | (0.33) | (0.26) | (0.27)d |
Portfolio turnover | 74 | 99 | 83 | 89 |
Administrative Class | |||||
Year Ended October 31, | 2019 | 2018 | 2017 | 2016 | 2015 |
Net asset value beginning of period | $13.39 | $14.17 | $11.30 | $13.04 | $14.89 |
Income from Investment Operations | |||||
Net investment income/(loss)a,e | (0.05) | (0.09) | (0.07) | (0.05) | (0.07) |
Net realized and unrealized gains/(losses) on investments | 1.40 | 0.77 | 3.00 | (0.11) | 0.54 |
Total from investment operations | 1.35 | 0.68 | 2.93 | (0.16) | 0.47 |
Less Distributions | |||||
Dividends from net investment income | — | — | — | — | — |
Distributions from net realized capital gains | (2.76) | (1.46) | (0.06) | (1.58) | (2.32) |
Total distributions | (2.76) | (1.46) | (0.06) | (1.58) | (2.32) |
Net asset value end of period | 11.98 | 13.39 | 14.17 | 11.30 | 13.04 |
Net assets end of period (000s) | $395 | $769 | $719 | $686 | $877 |
Ratios and Supplemental Data (%) | |||||
Total returnb | 15.87% | 4.76% | 26.02% | (1.29)% | 3.12% |
Ratio of total expenses to average net assets^ | 1.13 | 1.12 | 1.11 | 1.10 | 1.09 |
Ratio of net expenses to average net assetsa | 1.12 | 1.11 | 1.10 | 1.10 | 1.08 |
Ratio of net investment income to average net assetsa | (0.44) | (0.65) | (0.56) | (0.46) | (0.47) |
Portfolio turnover | 74 | 99 | 83 | 89 | 78 |
See page 68 for notes to the Financial Highlights.
The accompanying notes are an integral part of the Financial Statements.
58
Institutional Class | ||||
2019 | 2018 | 2017 | 2016 | 2015 |
$14.35 | $15.06 | $11.94 | $13.65 | $15.45 |
(0.03) | (0.06) | (0.04) | (0.02) | (0.03) |
1.57 | 0.81 | 3.22 | (0.11) | 0.55 |
1.54 | 0.75 | 3.18 | (0.13) | 0.52 |
— | — | — | — | — |
(2.76) | (1.46) | (0.06) | (1.58) | (2.32) |
(2.76) | (1.46) | (0.06) | (1.58) | (2.32) |
13.13 | 14.35 | 15.06 | 11.94 | 13.65 |
$440,553 | $400,389 | $509,889 | $523,888 | $587,761 |
16.18% | 4.97% | 26.72% | (0.99)% | 3.35% |
0.88 | 0.87 | 0.86 | 0.85 | 0.84 |
0.87 | 0.86 | 0.85 | 0.85 | 0.83 |
(0.20) | (0.40) | (0.30) | (0.21) | (0.22) |
74 | 99 | 83 | 89 | 78 |
Investor Class | ||||
2019 | 2018 | 2017 | 2016 | 2015 |
$12.79 | $13.62 | $10.84 | $12.59 | $14.47 |
(0.06) | (0.11) | (0.08) | (0.06) | (0.08) |
1.31 | 0.74 | 2.92 | (0.11) | 0.52 |
1.25 | 0.63 | 2.84 | (0.17) | 0.44 |
— | — | — | — | — |
(2.76) | (1.46) | (0.06) | (1.58) | (2.32) |
(2.76) | (1.46) | (0.06) | (1.58) | (2.32) |
11.28 | 12.79 | 13.62 | 10.84 | 12.59 |
$6,670 | $7,076 | $7,913 | $8,401 | $11,660 |
15.81% | 4.58% | 26.29% | (1.44)% | 2.98% |
1.25 | 1.24 | 1.23 | 1.22 | 1.21 |
1.24 | 1.23 | 1.22 | 1.22 | 1.20 |
(0.57) | (0.77) | (0.67) | (0.58) | (0.59) |
74 | 99 | 83 | 89 | 78 |
59
Harbor Domestic Equity Funds Financial Highlights—Continued
Selected Data for a Share Outstanding for the Periods Presented
Selected Data for a Share Outstanding for the Periods Presented
HARBOR SMALL CAP GROWTH OPPORTUNITIES FUND | ||||
Retirement Class | ||||
Year Ended October 31, | 2019 | 2018 | 2017 | 2016f |
Net asset value beginning of period | $13.14 | $12.61 | $10.24 | $9.04 |
Income from Investment Operations | ||||
Net investment income/(loss)a,e | (0.05) | (0.07) | (0.07) | (0.04) |
Net realized and unrealized gains/(losses) on investments | (0.72) | 1.35 | 2.44 | 1.24 |
Total from investment operations | (0.77) | 1.28 | 2.37 | 1.20 |
Less Distributions | ||||
Dividends from net investment income | — | — | — | — |
Distributions from net realized capital gains | (2.67) | (0.75) | — | — |
Total distributions | (2.67) | (0.75) | — | — |
Net asset value end of period | 9.70 | 13.14 | 12.61 | 10.24 |
Net assets end of period (000s) | $37,884 | $39,139 | $47,569 | $20,230 |
Ratios and Supplemental Data (%) | ||||
Total returnb | (4.17)% | 10.53% | 23.14% | 13.27%c |
Ratio of total expenses to average net assets^ | 0.83 | 0.80 | 0.81 | 0.85d |
Ratio of net expenses to average net assetsa | 0.82 | 0.80 | 0.81 | 0.84d |
Ratio of net investment income to average net assetsa | (0.47) | (0.55) | (0.57) | (0.60)d |
Portfolio turnover | 68 | 71 | 67 | 85 |
Administrative Class | |||||
Year Ended October 31, | 2019 | 2018 | 2017 | 2016 | 2015 |
Net asset value beginning of period | $13.03 | $12.54 | $10.22 | $10.27 | $10.75 |
Income from Investment Operations | |||||
Net investment income/(loss)a,e | (0.08) | (0.11) | (0.12) | (0.07) | (0.09) |
Net realized and unrealized gains/(losses) on investments | (0.72) | 1.35 | 2.44 | 0.37 | (0.34) |
Total from investment operations | (0.80) | 1.24 | 2.32 | 0.30 | (0.43) |
Less Distributions | |||||
Dividends from net investment income | — | — | — | — | — |
Distributions from net realized capital gains | (2.67) | (0.75) | — | (0.35) | (0.05) |
Total distributions | (2.67) | (0.75) | — | (0.35) | (0.05) |
Net asset value end of period | 9.56 | 13.03 | 12.54 | 10.22 | 10.27 |
Net assets end of period (000s) | $1,667 | $1,792 | $1,308 | $143 | $3,006 |
Ratios and Supplemental Data (%) | |||||
Total returnb | (4.50)% | 10.26% | 22.70% | 2.94% | (3.98)% |
Ratio of total expenses to average net assets^ | 1.16 | 1.12 | 1.13 | 1.14 | 1.15 |
Ratio of net expenses to average net assetsa | 1.15 | 1.11 | 1.13 | 1.13 | 1.15 |
Ratio of net investment income to average net assetsa | (0.80) | (0.86) | (0.96) | (0.69) | (0.80) |
Portfolio turnover | 68 | 71 | 67 | 85 | 103 |
See page 68 for notes to the Financial Highlights.
The accompanying notes are an integral part of the Financial Statements.
60
Institutional Class | ||||
2019 | 2018 | 2017 | 2016 | 2015 |
$13.12 | $12.59 | $10.23 | $10.31 | $10.77 |
(0.05) | (0.08) | (0.07) | (0.05) | (0.06) |
(0.73) | 1.36 | 2.43 | 0.32 | (0.35) |
(0.78) | 1.28 | 2.36 | 0.27 | (0.41) |
— | — | — | — | — |
(2.67) | (0.75) | — | (0.35) | (0.05) |
(2.67) | (0.75) | — | (0.35) | (0.05) |
9.67 | 13.12 | 12.59 | 10.23 | 10.31 |
$154,965 | $244,140 | $254,925 | $169,718 | $205,007 |
(4.27)% | 10.55% | 23.07% | 2.62% | (3.78)% |
0.91 | 0.88 | 0.88 | 0.89 | 0.90 |
0.90 | 0.87 | 0.88 | 0.89 | 0.90 |
(0.53) | (0.62) | (0.61) | (0.48) | (0.55) |
68 | 71 | 67 | 85 | 103 |
Investor Class | ||||
2019 | 2018 | 2017 | 2016 | 2015 |
$12.87 | $12.41 | $10.12 | $10.24 | $10.74 |
(0.09) | (0.13) | (0.11) | (0.09) | (0.09) |
(0.71) | 1.34 | 2.40 | 0.32 | (0.36) |
(0.80) | 1.21 | 2.29 | 0.23 | (0.45) |
— | — | — | — | — |
(2.67) | (0.75) | — | (0.35) | (0.05) |
(2.67) | (0.75) | — | (0.35) | (0.05) |
9.40 | 12.87 | 12.41 | 10.12 | 10.24 |
$360 | $691 | $1,167 | $871 | $599 |
(4.58)% | 10.12% | 22.63% | 2.24% | (4.17)% |
1.28 | 1.25 | 1.25 | 1.26 | 1.27 |
1.27 | 1.24 | 1.25 | 1.26 | 1.27 |
(0.91) | (0.99) | (0.99) | (0.87) | (0.86) |
68 | 71 | 67 | 85 | 103 |
61
Harbor Domestic Equity Funds Financial Highlights—Continued
Selected Data for a Share Outstanding for the Periods Presented
Selected Data for a Share Outstanding for the Periods Presented
HARBOR SMALL CAP VALUE FUND | ||||
Retirement Class | ||||
Year Ended October 31, | 2019 | 2018 | 2017 | 2016f |
Net asset value beginning of period | $33.60 | $36.16 | $27.29 | $23.91 |
Income from Investment Operations | ||||
Net investment income/(loss)a,e | 0.21 | 0.17 | 0.06 | 0.05 |
Net realized and unrealized gains/(losses) on investments | 2.84 | (1.98) | 8.94 | 3.33 |
Total from investment operations | 3.05 | (1.81) | 9.00 | 3.38 |
Less Distributions | ||||
Dividends from net investment income | (0.15) | (0.06) | (0.13) | — |
Distributions from net realized capital gains | (2.95) | (0.69) | — | — |
Total distributions | (3.10) | (0.75) | (0.13) | — |
Net asset value end of period | 33.55 | 33.60 | 36.16 | 27.29 |
Net assets end of period (000s) | $230,861 | $155,036 | $57,196 | $2,529 |
Ratios and Supplemental Data (%) | ||||
Total returnb | 10.98% | (5.18)% | 33.06% | 14.14%c |
Ratio of total expenses to average net assets^ | 0.80 | 0.79 | 0.81 | 0.82d |
Ratio of net expenses to average net assetsa | 0.80 | 0.79 | 0.81 | 0.81d |
Ratio of net investment income to average net assetsa | 0.67 | 0.45 | 0.17 | 0.27d |
Portfolio turnover | 27 | 22 | 8 | 10 |
Administrative Class | |||||
Year Ended October 31, | 2019 | 2018 | 2017 | 2016 | 2015 |
Net asset value beginning of period | $33.36 | $35.97 | $27.16 | $26.07 | $27.05 |
Income from Investment Operations | |||||
Net investment income/(loss)a,e | 0.11 | 0.06 | (0.02) | 0.05 | 0.06 |
Net realized and unrealized gains/(losses) on investments | 2.82 | (1.98) | 8.88 | 1.93 | (0.13) |
Total from investment operations | 2.93 | (1.92) | 8.86 | 1.98 | (0.07) |
Less Distributions | |||||
Dividends from net investment income | (0.04) | — | (0.05) | — | — |
Distributions from net realized capital gains | (2.95) | (0.69) | — | (0.89) | (0.91) |
Total distributions | (2.99) | (0.69) | (0.05) | (0.89) | (0.91) |
Net asset value end of period | 33.30 | 33.36 | 35.97 | 27.16 | 26.07 |
Net assets end of period (000s) | $6,537 | $7,253 | $4,462 | $1,360 | $1,144 |
Ratios and Supplemental Data (%) | |||||
Total returnb | 10.59% | (5.50)% | 32.67% | 7.93% | (0.28)% |
Ratio of total expenses to average net assets^ | 1.13 | 1.12 | 1.13 | 1.11 | 1.10 |
Ratio of net expenses to average net assetsa | 1.12 | 1.11 | 1.12 | 1.11 | 1.10 |
Ratio of net investment income to average net assetsa | 0.35 | 0.16 | (0.05) | 0.21 | 0.21 |
Portfolio turnover | 27 | 22 | 8 | 10 | 17 |
See page 68 for notes to the Financial Highlights.
The accompanying notes are an integral part of the Financial Statements.
62
Institutional Class | ||||
2019 | 2018 | 2017 | 2016 | 2015 |
$33.57 | $36.14 | $27.27 | $26.21 | $27.17 |
0.19 | 0.15 | 0.08 | 0.12 | 0.10 |
2.84 | (2.00) | 8.90 | 1.92 | (0.09) |
3.03 | (1.85) | 8.98 | 2.04 | 0.01 |
(0.12) | (0.03) | (0.11) | (0.09) | (0.06) |
(2.95) | (0.69) | — | (0.89) | (0.91) |
(3.07) | (0.72) | (0.11) | (0.98) | (0.97) |
33.53 | 33.57 | 36.14 | 27.27 | 26.21 |
$1,346,098 | $1,149,857 | $1,081,412 | $738,705 | $827,423 |
10.91% | (5.28)% | 33.00% | 8.18% | 0.01% |
0.88 | 0.87 | 0.88 | 0.86 | 0.85 |
0.87 | 0.86 | 0.87 | 0.86 | 0.85 |
0.60 | 0.40 | 0.24 | 0.48 | 0.38 |
27 | 22 | 8 | 10 | 17 |
Investor Class | ||||
2019 | 2018 | 2017 | 2016 | 2015 |
$32.68 | $35.29 | $26.65 | $25.63 | $26.63 |
0.08 | 0.01 | (0.05) | 0.03 | 0.01 |
2.75 | (1.93) | 8.71 | 1.88 | (0.10) |
2.83 | (1.92) | 8.66 | 1.91 | (0.09) |
— | — | (0.02) | — | — |
(2.95) | (0.69) | — | (0.89) | (0.91) |
(2.95) | (0.69) | (0.02) | (0.89) | (0.91) |
32.56 | 32.68 | 35.29 | 26.65 | 25.63 |
$57,931 | $70,819 | $37,548 | $17,775 | $16,797 |
10.48% | (5.60)% | 32.49% | 7.79% | (0.37)% |
1.25 | 1.24 | 1.25 | 1.23 | 1.22 |
1.24 | 1.23 | 1.24 | 1.23 | 1.22 |
0.24 | 0.03 | (0.16) | 0.10 | 0.02 |
27 | 22 | 8 | 10 | 17 |
63
Harbor Domestic Equity Funds Financial Highlights—Continued
Selected Data for a Share Outstanding for the Periods Presented
Selected Data for a Share Outstanding for the Periods Presented
HARBOR SMALL CAP VALUE OPPORTUNITIES FUND | |||
Retirement Class | |||
Year Ended October 31, | 2019 | 2018 | 2017i |
Net asset value beginning of period | $9.99 | $10.07 | $10.00 |
Income from Investment Operations | |||
Net investment income/(loss)a,e | 0.08 | 0.06 | 0.01 |
Net realized and unrealized gains/(losses) on investments | (0.56) | (0.08) | 0.06 |
Total from investment operations | (0.48) | (0.02) | 0.07 |
Less Distributions | |||
Dividends from net investment income | (0.06) | (0.03) | — |
Distributions from net realized capital gains | (0.58) | (0.03) | — |
Total distributions | (0.64) | (0.06) | — |
Net asset value end of period | 8.87 | 9.99 | 10.07 |
Net assets end of period (000s) | $7,444 | $6,329 | $30 |
Ratios and Supplemental Data (%) | |||
Total returnb | (4.14)% | (0.18)% | 0.70%c |
Ratio of total expenses to average net assets^ | 1.07 | 0.96 | 3.33d |
Ratio of net expenses to average net assetsa | 0.81 | 0.80 | 0.80d |
Ratio of net investment income to average net assetsa | 0.87 | 0.56 | 0.48d |
Portfolio turnover | 76 | 73 | 9c |
Administrative Class | |||
Year Ended October 31, | 2019 | 2018 | 2017i |
Net asset value beginning of period | $9.96 | $10.06 | $10.00 |
Income from Investment Operations | |||
Net investment income/(loss)a,e | 0.05 | 0.03 | 0.01 |
Net realized and unrealized gains/(losses) on investments | (0.55) | (0.08) | 0.05 |
Total from investment operations | (0.50) | (0.05) | 0.06 |
Less Distributions | |||
Dividends from net investment income | (0.03) | (0.02) | — |
Distributions from net realized capital gains | (0.58) | (0.03) | — |
Total distributions | (0.61) | (0.05) | — |
Net asset value end of period | 8.85 | 9.96 | 10.06 |
Net assets end of period (000s) | $239 | $250 | $252 |
Ratios and Supplemental Data (%) | |||
Total returnb | (4.45)% | (0.51)% | 0.60%c |
Ratio of total expenses to average net assets^ | 1.40 | 1.29 | 3.66d |
Ratio of net expenses to average net assetsa | 1.14 | 1.13 | 1.13d |
Ratio of net investment income to average net assetsa | 0.55 | 0.31 | 0.35d |
Portfolio turnover | 76 | 73 | 9c |
See page 68 for notes to the Financial Highlights.
The accompanying notes are an integral part of the Financial Statements.
64
Institutional Class | ||
2019 | 2018 | 2017i |
$9.98 | $10.07 | $10.00 |
0.07 | 0.06 | 0.02 |
(0.54) | (0.09) | 0.05 |
(0.47) | (0.03) | 0.07 |
(0.06) | (0.03) | — |
(0.58) | (0.03) | — |
(0.64) | (0.06) | — |
8.87 | 9.98 | 10.07 |
$23,722 | $24,685 | $24,655 |
(4.13)% | (0.31)% | 0.70%c |
1.15 | 1.04 | 3.41d |
0.89 | 0.88 | 0.88d |
0.80 | 0.56 | 0.60d |
76 | 73 | 9c |
Investor Class | ||
2019 | 2018 | 2017i |
$9.95 | $10.06 | $10.00 |
0.04 | 0.02 | 0.01 |
(0.54) | (0.09) | 0.05 |
(0.50) | (0.07) | 0.06 |
(0.02) | (0.01) | — |
(0.58) | (0.03) | — |
(0.60) | (0.04) | — |
8.85 | 9.95 | 10.06 |
$250 | $262 | $254 |
(4.49)% | (0.66)% | 0.60%c |
1.52 | 1.41 | 3.78d |
1.26 | 1.25 | 1.25d |
0.43 | 0.19 | 0.23d |
76 | 73 | 9c |
65
Harbor Domestic Equity Funds Financial Highlights—Continued
Selected Data for a Share Outstanding for the Periods Presented
Selected Data for a Share Outstanding for the Periods Presented
HARBOR STRATEGIC GROWTH FUND | |||||
Retirement Class | |||||
Year Ended October 31, | Year Ended June 30, | ||||
2019 | 2018 | 2017g | 2017h | ||
Net asset value beginning of period | $19.65 | $18.86 | $17.67 | $16.76 | |
Income from Investment Operations | |||||
Net investment income/(loss)a,e | 0.12 | 0.07 | 0.05 | 0.03 | |
Net realized and unrealized gains/(losses) on investments | 3.10 | 1.11 | 1.14 | 0.88 | |
Total from investment operations | 3.22 | 1.18 | 1.19 | 0.91 | |
Less Distributions | |||||
Dividends from net investment income | (0.08) | (0.04) | — | — | |
Distributions from net realized capital gains | (0.48) | (0.35) | — | — | |
Total distributions | (0.56) | (0.39) | — | — | |
Proceeds from redemption fees | N/A | N/A | N/A | N/A | |
Net asset value end of period | 22.31 | 19.65 | 18.86 | 17.67 | |
Net assets end of period (000s) | $5,152 | $3,584 | $435 | $316 | |
Ratios and Supplemental Data (%) | |||||
Total returnb | 17.04% | 6.34% | 6.73%c | 5.43%c | |
Ratio of total expenses to average net assets^ | 0.71 | 0.76 | 1.10d | 1.52d | |
Ratio of net expenses to average net assetsa | 0.63 | 0.62 | 0.62d | 0.62d | |
Ratio of net investment income to average net assetsa | 0.60 | 0.33 | 0.42d | 0.58d | |
Portfolio turnover | 26 | 15 | 9c | 21c |
Administrative Class | |||||
Year Ended October 31, | Year Ended June 30, | ||||
2019 | 2018 | 2017g | 2017h | ||
Net asset value beginning of period | $19.58 | $18.82 | $17.65 | $16.76 | |
Income from Investment Operations | |||||
Net investment income/(loss)a,e | 0.05 | 0.01 | 0.01 | 0.01 | |
Net realized and unrealized gains/(losses) on investments | 3.10 | 1.10 | 1.16 | 0.88 | |
Total from investment operations | 3.15 | 1.11 | 1.17 | 0.89 | |
Less Distributions | |||||
Dividends from net investment income | (0.01) | — | — | — | |
Distributions from net realized capital gains | (0.48) | (0.35) | — | — | |
Total distributions | (0.49) | (0.35) | — | — | |
Net asset value end of period | 22.24 | 19.58 | 18.82 | 17.65 | |
Net assets end of period (000s) | $18 | $16 | $12 | $11 | |
Ratios and Supplemental Data (%) | |||||
Total returnb | 16.70% | 5.96% | 6.63%c | 5.31%c | |
Ratio of total expenses to average net assets^ | 1.04 | 1.09 | 1.43d | 1.93d | |
Ratio of net expenses to average net assetsa | 0.96 | 0.95 | 0.95d | 0.95d | |
Ratio of net investment income to average net assetsa | 0.26 | 0.03 | 0.10d | 0.19d | |
Portfolio turnover | 26 | 15 | 9c | 21c |
See page 68 for notes to the Financial Highlights.
The accompanying notes are an integral part of the Financial Statements.
66
Institutional Class | ||||||
Year Ended October 31, | Year Ended June 30, | |||||
2019 | 2018 | 2017g | 2017 | 2016 | 2015 | |
$19.63 | $18.85 | $17.66 | $15.54 | $15.39 | $15.41 | |
0.11 | 0.06 | 0.03 | 0.12 | 0.03 | 0.04 | |
3.08 | 1.11 | 1.16 | 2.22 | 0.63 | 1.11 | |
3.19 | 1.17 | 1.19 | 2.34 | 0.66 | 1.15 | |
(0.06) | (0.04) | — | (0.11) | (0.01) | (0.06) | |
(0.48) | (0.35) | — | (0.11) | (0.50) | (1.11) | |
(0.54) | (0.39) | — | (0.22) | (0.51) | (1.17) | |
N/A | N/A | N/A | —* | —* | —* | |
22.28 | 19.63 | 18.85 | 17.66 | 15.54 | 15.39 | |
$106,463 | $66,197 | $56,026 | $31,866 | $25,388 | $20,540 | |
16.91% | 6.26% | 6.74%c | 15.21% | 4.44% | 7.67% | |
0.79 | 0.84 | 1.18d | 1.48 | 1.74 | 2.23 | |
0.71 | 0.70 | 0.70d | 0.83 | 0.90 | 0.90 | |
0.51 | 0.28 | 0.29d | 0.71 | 0.19 | 0.18 | |
26 | 15 | 9c | 21 | 40 | 33 |
Investor Class | ||||
Year Ended October 31, | Year Ended June 30, | |||
2019 | 2018 | 2017g | 2017h | |
$19.54 | $18.81 | $17.64 | $16.76 | |
0.03 | (0.02) | 0.02 | 0.01 | |
2.79 | 1.10 | 1.15 | 0.87 | |
2.82 | 1.08 | 1.17 | 0.88 | |
(0.01) | — | — | — | |
(0.48) | (0.35) | — | — | |
(0.49) | (0.35) | — | — | |
21.87 | 19.54 | 18.81 | 17.64 | |
$417 | $322 | $75 | $22 | |
14.99% | 5.80% | 6.63%c | 5.25%c | |
1.16 | 1.21 | 1.55d | 2.03d | |
1.08 | 1.07 | 1.07d | 1.07d | |
0.14 | (0.11) | 0.05d | 0.13d | |
26 | 15 | 9c | 21c |
67
Harbor Domestic Equity Funds Financial Highlights—Continued
Selected Data for a Share Outstanding for the Periods Presented
Selected Data for a Share Outstanding for the Periods Presented
* | Less than $0.01 |
^ | Percentage does not reflect reduction for credit balance arrangements (see the “Custodian” section Note 2 of the accompanying Notes to Financial Statements) |
a | Reflects the Adviser’s waiver, if any, of its management fees and/or other operating expenses |
b | The total returns would have been lower had certain expenses not been waived during the periods shown. |
c | Unannualized |
d | Annualized |
e | Amounts are based on daily average shares outstanding during the period. |
f | For the period March 1, 2016 (inception) through October 31, 2016 |
g | For the period July 1, 2017 through October 31, 2017 |
h | For the period March 6, 2017 (commencement of operations) through June 30, 2017 |
i | For the period August 1, 2017 (inception) through October 31, 2017 |
The accompanying notes are an integral part of the Financial Statements.
68
Harbor Domestic Equity Funds
Notes to Financial Statements—October 31, 2019
Notes to Financial Statements—October 31, 2019
Note 1—Organizational Matters
Harbor Funds (the “Trust”) is registered under the Investment Company Act of 1940, as amended (the “Investment Company Act”), as an open-end management investment company. As of October 31, 2019, the Trust consists of 32 separate portfolios. The portfolios covered by this report are: Harbor Capital Appreciation Fund, Harbor Large Cap Value Fund, Harbor Mid Cap Growth Fund, Harbor Mid Cap Value Fund, Harbor Small Cap Growth Fund, Harbor Small Cap Growth Opportunities Fund, Harbor Small Cap Value Fund, Harbor Small Cap Value Opportunities Fund, and Harbor Strategic Growth Fund (individually or collectively referred to as a “Fund” or the “Funds," respectively). Harbor Capital Advisors, Inc. (the “Adviser” or “Harbor Capital”) is the investment adviser for the Funds.
The Funds currently offer four classes of shares, designated as Retirement Class, Institutional Class, Administrative Class and Investor Class. The shares of each class represent an interest in the same portfolio of investments of the Funds and have equal rights with respect to voting, redemptions, dividends, and liquidations, except that: (i) subject to the approval of the Trust’s Board of Trustees (the “Board of Trustees”), certain expenses may be applied differently to each class of shares in accordance with current regulations of the U.S. Securities and Exchange Commission (“SEC”) and the Internal Revenue Service; and (ii) shareholders of a class that bears distribution and service expenses under terms of a distribution plan have exclusive voting rights as to that distribution plan.
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. Each Fund follows the investment company reporting requirements under U.S. Generally Accepted Accounting Principles (“U.S. GAAP”), which includes the accounting and reporting guidelines under Accounting Standards Codification (“ASC”) Topic 946,Financial Services-Investment Companies. The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results may differ from those estimates.
Security Valuation
The Trust’s valuation procedures permit the Funds to use a variety of valuation methodologies, consider a number of subjective factors, analyze applicable facts and circumstances and, in general, exercise judgment, when valuing Fund investments. The methodology used for a specific type of investment may vary based on the circumstances and relevant considerations, including available market data.
Equity securities (including common stock, preferred stock, convertible preferred stock, and master limited partnerships), exchange-traded notes and financial derivative instruments (such as futures contracts, options contracts, including warrants and rights, and centrally cleared swap agreements) that are traded or cleared on a national securities exchange or system (except securities listed on the National Association of Securities Dealers Automated Quotation (“NASDAQ”) system and United Kingdom securities) are valued at the last sale price on a national exchange or system on which they are principally traded or cleared as of the valuation date. Securities listed on the NASDAQ system or a United Kingdom exchange are valued at the official closing price of those securities. In the case of securities for which there are no sales on the valuation day, (i) securities traded principally on a U.S. exchange, including NASDAQ, are valued at the mean between the closing bid and ask price; and (ii) securities traded principally on a foreign exchange, including United Kingdom securities, are valued at the official bid price determined as of the close of the primary exchange. Securities of open-end registered investment companies that are held by a Fund are valued at net asset value. To the extent these securities are actively traded and fair valuation adjustments are not applied, they are normally categorized as Level 1 in the fair value hierarchy. Equity securities traded on inactive markets or valued by reference to similar instruments are normally categorized as Level 2 in the fair value hierarchy. For more information on the fair value hierarchy, please refer to the Fair Value Measurements and Disclosures section.
Short-term securities with a remaining maturity of less than 60 days at the time of acquisition that are held by a Fund are valued at amortized cost to the extent amortized cost represents fair value. Such securities are normally categorized as Level 2 in the fair value hierarchy.
Over-the-counter financial derivative instruments, such as forward currency contracts, options contracts, and swap agreements, derive their value from underlying asset prices, indices, reference rates and other inputs, or a combination of these factors. These instruments are valued using evaluated prices furnished by a pricing vendor selected by the Board of Trustees. In certain cases, when a valuation is not readily available from a pricing vendor, the Fund’s subadviser provides a valuation, typically
69
Harbor Domestic Equity Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 2—Significant Accounting Policies—Continued
using its own proprietary models. Depending on the instrument and the terms of the transaction, the value of the derivative instrument can be determined by a pricing vendor or subadviser using a series of techniques, including simulation pricing models. The pricing models use inputs, such as issuer details, indices, spreads, interest rates, yield curves, dividends and exchange rates, that are observed from actively quoted markets. Derivative instruments that use valuation techniques and inputs similar to those described above are normally categorized as Level 2 in the fair value hierarchy.
A Fund may also use fair value pricing if the value of some or all of the Fund’s securities have been materially affected by events occurring before the Fund’s pricing time but after the close of the primary markets or exchanges on which the security is traded. This most commonly occurs with foreign securities, but may occur with other securities as well. In such cases, the Fund may apply a fair value factor supplied by the pricing vendor to a foreign security’s market close value to reflect changes in value that may have occurred between the close of the primary market or exchange on which the security is traded and the Fund’s pricing time. That factor may be derived using observable inputs such as a comparison of the trading patterns of a foreign security to intraday trading in the U.S. markets that are highly correlated to the foreign security or other information that becomes available after the close of the foreign market on which the security principally traded. When fair value pricing is employed, the prices of securities used by a Fund to calculate its net asset value may differ from market quotations, official closing prices or evaluated prices for the same securities, which means that the Fund may value those securities higher or lower than another given fund that uses market quotations, official closing prices or evaluated prices supplied by a pricing vendor in its calculation of net asset value. Securities valued using observable inputs, such as those described above, are normally categorized as Level 2 of the fair value hierarchy.
When reliable market quotations or evaluated prices supplied by a pricing vendor are not readily available or are not believed to accurately reflect fair value, securities are priced at their fair value as determined by the Trust’s Valuation Committee (the “Valuation Committee”) pursuant to procedures adopted, and subject to oversight, by the Board of Trustees. The Valuation Committee is comprised of a trustee and officers of the Trust and employees of Harbor Capital with relevant experience or responsibilities. Each security for which the Valuation Committee determines a fair value, including the basis for the fair value decision, is reviewed by the Board of Trustees at its regularly scheduled board meetings. Securities valued using fair valuation methods that incorporate significant unobservable inputs are normally categorized as Level 3 in the fair value hierarchy.
Fair Value Measurements and Disclosures
Various inputs may be used to determine the value of each Fund’s investments, which are summarized in three broad categories defined as Level 1, Level 2, and Level 3. The inputs or methodologies used for valuing securities are not necessarily indicative of the risk associated with investing in those securities. The assignment of an investment to Levels 1, 2, or 3 is based on the lowest level of significant inputs used to determine its fair value.
Level 1– | Quoted prices in active markets for identical securities. |
Level 2– | Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). |
Level 3– | Significant unobservable inputs are used in situations where quoted prices or other observable inputs are not available or are deemed unreliable. Significant unobservable inputs may include each Fund’s own assumptions. |
The categorization of investments into Levels 1, 2, or 3, and a summary of significant unobservable inputs used for Level 3 investments, when applicable, can be found at the end of each Fund’s Portfolio of Investments schedule. For fair valuations using significant unobservable inputs, if any, a reconciliation of the beginning to ending balances for reported fair values is provided at the end of each Fund’s Portfolio of Investments schedule that presents changes attributable to realized and unrealized gains and losses and purchases, sales, and transfers in/out of the Level 3 category during the year.
Each Fund used observable inputs in its valuation methodologies whenever they were available and deemed reliable.
Repurchase Agreements
In a repurchase agreement, a Fund buys a security at one price and simultaneously agrees to sell it back at a higher price. Such agreements must be adequately collateralized to cover the counterparty’s obligation to a Fund to close out the repurchase agreement. Each repurchase agreement counterparty must meet the minimum credit quality requirements applicable to the respective Fund and any other appropriate counterparty criteria as determined by a Fund’s subadviser. The minimum credit quality requirements
70
Harbor Domestic Equity Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 2—Significant Accounting Policies—Continued
are those applicable to a Fund’s purchase of securities such that if a Fund is permitted to only purchase securities that are rated investment-grade (or the equivalent if unrated), a Fund could only enter into repurchase agreements with counterparties that have debt outstanding that is rated investment-grade (or the equivalent if unrated). The securities are regularly monitored to ensure that the collateral is adequate. A Fund seeks to further mitigate its counterparty risk by entering into master repurchase agreements with its counterparties. The master repurchase agreements provide that, in the event of a counterparty’s default, including bankruptcy, a Fund may terminate any repurchase agreements with that counterparty, determine the net amount owned, and sell or retain the collateral up to the net amount owed to a Fund. A counterparty’s default may cause a Fund to suffer losses, including loss of interest on or principal of the securities and costs associated with delay and enforcement of the terms of the master repurchase agreement.
During the year, Harbor Mid Cap Growth Fund entered into repurchase agreements with domestic or foreign banks or with a member firm of the Financial Industry Regulatory Authority, Inc., or an affiliate of a member firm that is a primary dealer in U.S. government securities.
Foreign Currency Spot Contracts
A foreign currency spot contract is an agreement between two parties to buy and sell currencies at the current market rate for settlement within two business days.
The foreign currency spot contract is marked-to-market daily for settlements beyond one day, and any change in fair 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. Risk of 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.
During the year, Harbor Capital Appreciation Fund, Harbor Mid Cap Growth Fund, and Harbor Small Cap Growth Opportunities Fund used foreign currency spot contracts to facilitate transactions in foreign securities or to convert foreign currency receipts into U.S. dollars.
Foreign Currency Translations
Purchases and sales of securities are translated into U.S. dollars at the current exchange rate on the respective dates of the transactions. Income and withholding taxes are translated at the prevailing exchange rate when accrued or incurred. The accounting records of the Funds are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency, when applicable, are translated into U.S. dollars based on the current exchange rates at year end.
Reported net realized gains and losses on foreign currency transactions, when applicable, represent net gains and losses from sales and maturities of foreign 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, when applicable, are included in the net realized and unrealized gain or loss on investments in the Statements of Operations.
Master Limited Partnerships
Master Limited Partnerships (“MLP”) are limited partnerships whose limited partnership units are available to investors and are traded on public exchanges. MLPs issue common units that represent an equity ownership interest in a partnership and provide limited voting rights. By providing capital to an MLP, a Fund is generally entitled to periodic cash distributions, which usually represent returns of capital.
During the year, Harbor Small Cap Value Opportunities Fund invested in a MLP.
71
Harbor Domestic Equity Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 2—Significant Accounting Policies—Continued
Investment Income
Dividends declared on portfolio securities are accrued on the ex-dividend date. For foreign securities, certain dividends are recorded after the ex-dividend date, but as soon as the respective Fund is notified of such dividends. Interest income is accrued daily as earned. Discounts and premiums on fixed income securities are amortized over the life of the respective securities using the effective yield method. Distributions from real estate investment trust securities and MLPs are recorded as dividend income, and may be reclassified as capital gains and/or return of capital, based on the information reported by the issuer, when available.
Distribution to Shareholders
Distributions on Fund shares are recorded on the ex-dividend date.
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.
Proceeds from Litigation
Each Fund may receive proceeds from shareholder litigation settlements involving current and/or previously held portfolio holdings. Any proceeds received from litigation involving portfolio holdings are reflected in the Statements of Operations in realized gain/(loss) if the security has been disposed of by a Fund, or in unrealized gain/(loss) if the security is still held by a Fund.
Expenses
Expenses incurred by the Trust are charged directly to the Fund that incurred such expense whenever possible. With respect to expenses incurred by any two or more Harbor Funds where amounts cannot be identified on a fund by fund basis, such expenses are generally allocated in proportion to the average net assets or the number of shareholders of each Fund.
Custodian
Each Fund has credit balance arrangements with its custodian whereby positive balances in demand deposit accounts used by the transfer and shareholder servicing agent for clearing shareholder transactions in the Fund generate credits that are applied against gross custody expenses. Such custodial expense reductions, if any, are reflected on the respective Fund’s accompanying Statement of Operations.
Class Allocations
Income, common expenses and realized and unrealized gains/(losses) are determined at the Fund level and allocated daily to each class of shares based on the applicable net assets of the respective classes. Distribution and service fees, if any, and transfer agent fees are calculated daily at the class level based on the applicable net assets of each class and the expense rate(s) applicable to each class.
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 of 1986, as amended (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 taxes on income and capital gains.
72
Harbor Domestic Equity Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 2—Significant Accounting Policies—Continued
Each Fund may be subject to taxes imposed by countries in which they invest. 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.
Management has analyzed each Fund’s tax positions for all open tax years (in particular, U.S. federal income tax returns for the tax years ended October 31, 2016–2018), including all positions expected to be taken upon filing the 2019 tax return, in all material jurisdictions where each Fund operates, and has concluded that no provision for income tax is required in the Funds’ financial statements. Each Fund will recognize interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of Operations.
Note 3—Investment Portfolio Transactions
Investment Portfolio Transactions
Purchases and sales of investments, other than short-term securities, for each Fund for the year ended October 31, 2019 are as follows:
Purchases (000s) | Sales (000s) | ||
Harbor Capital Appreciation Fund | $11,832,532 | $15,330,979 | |
Harbor Large Cap Value Fund | 262,277 | 120,732 | |
Harbor Mid Cap Growth Fund | 193,916 | 334,752 | |
Harbor Mid Cap Value Fund | 93,482 | 353,924 | |
Harbor Small Cap Growth Fund | 516,869 | 598,671 | |
Harbor Small Cap Growth Opportunities Fund | 145,665 | 220,556 | |
Harbor Small Cap Value Fund | 465,325 | 388,599 | |
Harbor Small Cap Value Opportunities Fund | 26,265 | 23,073 | |
Harbor Strategic Growth Fund | 43,583 | 22,490 |
In-Kind Redemption Transactions
In accordance with the Trust’s prospectus, the Funds may distribute portfolio securities rather than cash as payment for a redemption of Fund shares. For financial reporting purposes, the Fund recognizes a gain or loss on the securities distributed related to the in-kind redemption. Such Fund-level gains and losses on in-kind redemptions are not taxable to shareholders. For the year ended October 31, 2019, there were no in-kind redemptions from the Funds. For the year ended October 31, 2018, Harbor Capital Appreciation Fund realized gains of $174,277,000 upon the disposition of portfolio securities in connection with an in-kind redemption of Fund shares.
Securities Lending
Each Fund may engage in securities lending, whereby a Fund lends its securities to financial institutions in order to increase its income. The Trust has engaged State Street Bank and Trust Company to act as its agent (the “Lending Agent”) with respect to the lending of portfolio securities of the Funds, pursuant to the terms and conditions of a Securities Lending Authorization Agreement (the “SLA Agreement”). Securities loans are required to be secured at all times during the term of the loan by collateral that is at least equal to the value of the loaned securities determined at the close of each business day. Collateral may consist of cash and/or securities issued by the U.S. Treasury. During the year, all such collateral consisted of cash. Any additional collateral that may be required to secure a loan is delivered to the Fund on the next business day. This collateral is recognized as the gross liability for securities loaned in the Statements of Assets and Liabilities. Cash collateral is invested in the State Street Navigator Securities Lending Government Money Market Portfolio (the “Navigator Portfolio”), a money market mutual fund that seeks to provide income while maintaining a stable net asset value of $1.00. There is no assurance that the Navigator Portfolio will maintain a stable net asset value and the Funds are subject to the risk of loss on the cash collateral invested. A portion of the earnings generated by the investment of the cash collateral is rebated to the borrower for the use of the cash collateral and these earnings (less any rebate) are then divided between the Fund and the Lending Agent, as a fee for its services, according to agreed-upon rates. The Lending Agent and a Fund will share in any shortfall in the rebate
73
Harbor Domestic Equity Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 3—Investment Portfolio Transactions—Continued
due to the borrower, according to agreed-upon rates. In addition to receiving a fee from the borrower based on the demand for securities loaned and earning income on the investment of the cash collateral, a Fund receives substitute interest, dividends, or other amounts on the loaned securities, during the term of a loan. Net securities lending income is disclosed as such in the Statements of Operations.
Loans may be terminated at the option of the borrower or the Funds. Upon termination of the loan, the borrower will return to the Fund securities that are identical to the loaned securities. The Funds bear the risk of delay in recovery of, or loss of rights in, the securities loaned and the risk that the value of the collateral falls below the value of the securities on loan. Each Fund seeks to mitigate this risk through the SLA Agreement, which provides that in the event of default, the Lending Agent may apply the proceeds of the cash collateral from the loaned securities toward the purchase of replacement securities. If such proceeds are insufficient or the collateral is unavailable, the Lending Agent will purchase replacement securities at its sole expense, or if unable to do so, the Lending Agent may credit to the Fund’s account an amount equal to the fair value of the unreturned loaned securities. As the securities loans are subject to termination by the Fund or the borrower at any time, the remaining contractual maturities of each securities lending transaction is considered to be overnight and continuous.
During the year, Harbor Capital Appreciation Fund engaged in securities lending. As of October 31, 2019, Harbor Capital Appreciation Fund had no securities out on loan.
Note 4—FEES AND OTHER Transactions with Affiliates
Investment Adviser
Harbor Capital is a wholly-owned subsidiary of ORIX Corporation (“ORIX”). Harbor Capital is the Funds’ investment adviser and is also responsible for administrative and other services.
Each Fund has a separate advisory agreement with Harbor Capital. The agreements provide for management fees based on an annual percentage rate of average daily net assets as follows:
Contractual Rate | Actual Rate | ||
Harbor Capital Appreciation Fund | 0.60%a | 0.55% | |
Harbor Large Cap Value Fund | 0.60 | 0.60 | |
Harbor Mid Cap Growth Fund | 0.75b | 0.74 | |
Harbor Mid Cap Value Fund | 0.75c | 0.72 | |
Harbor Small Cap Growth Fund | 0.75 | 0.75 | |
Harbor Small Cap Growth Opportunities Fund | 0.75 | 0.75 | |
Harbor Small Cap Value Fund | 0.75 | 0.75 | |
Harbor Small Cap Value Opportunities Fund | 0.75 | 0.75 | |
Harbor Strategic Growth Fund | 0.60 | 0.60 |
a | The Adviser has contractually agreed to reduce the management fee to 0.56% on assets between $5 billion and $10 billion, 0.54% on assets between $10 billion and $20 billion and 0.53% on assets over $20 billion through February 29, 2020. |
b | Effective July 1, 2019, the Adviser has contractually agreed to reduce the management fee to 0.72% through June 30, 2020. |
c | The Adviser has contractually agreed to reduce the management fee to 0.70% on assets between $350 million and $1 billion and 0.65% on assets over $1 billion through February 29, 2020. |
74
Harbor Domestic Equity Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 4—FEES AND OTHER Transactions with Affiliates—Continued
Harbor Capital has from time to time voluntarily or contractually agreed not to impose a portion of its management fees and/or to bear a portion of the expenses incurred in the operation of certain Funds in order to limit Fund expenses. Such waivers, if any, are reflected on the accompanying Statements of Operations. Interest expense, if any, is excluded from contractual limitations. During the year, the following expense limitation agreements were in effect:
Retirement Class | Institutional Class | Administrative Class | Investor Class | Expense Limitation Agreement Expiration Date | |||||
Harbor Large Cap Value Fund1 | 0.61% | 0.69% | 0.94% | 1.06% | 02/29/2020 | ||||
Harbor Small Cap Value Opportunities Fund2 | 0.81 | 0.89 | 1.14 | 1.26 | 02/29/2020 | ||||
Harbor Strategic Growth Fund3 | 0.63 | 0.71 | 0.96 | 1.08 | 02/29/2020 |
1 | For the period November 1, 2018 through February 28, 2019, Harbor Capital contractually agreed to limit the operating expenses, excluding interest expense (if any), to 0.60%, 0.68%, 0.93%, and 1.05% for the Retirement Class, Institutional Class, Administrative Class, and Investor Class, respectively. |
2 | For the period November 1, 2018 through February 28, 2019, Harbor Capital contractually agreed to limit the operating expenses, excluding interest expense (if any), to 0.80%, 0.88%, 1.13%, and 1.25% for the Retirement Class, Institutional Class, Administrative Class, and Investor Class, respectively. |
3 | For the period November 1, 2018 through February 28, 2019, Harbor Capital contractually agreed to limit the operating expenses, excluding interest expense (if any), to 0.62%, 0.70%, 0.95%, and 1.07% for the Retirement Class, Institutional Class, Administrative Class, and Investor Class, respectively. |
All expense limitation agreements include the transfer agent fee waiver discussed in the Transfer Agent note.
Distributor
Harbor Funds Distributors, Inc. (the “Distributor”), a wholly-owned subsidiary of Harbor Capital, is the distributor for Harbor Funds’ shares. Under the Trust’s current distribution plan pursuant to Rule 12b-1 under the Investment Company Act with respect to each Fund’s Administrative and Investor Class shares (the “12b-1 Plan”) as applicable, each Fund pays the Distributor compensation at the annual rate of 0.25% of the average daily net assets of its Administrative and Investor Class shares. Pursuant to the 12b-1 Plan, the Distributor is compensated for financing any activity that is primarily intended to result in the sale of Administrative and Investor Class shares of each Fund or for recordkeeping services or the servicing of shareholder accounts in the Administrative and Investor Class shares of each Fund. Such activities include, but are not limited to: printing of prospectuses and statements of additional information and reports for prospective shareholders (i.e., other than existing shareholders); preparation and distribution of advertising material and sales literature; expenses of organizing and conducting sales seminars; supplemental payments to dealers or other institutions such as asset-based sales charges, payments of recordkeeping fees under recordkeeping arrangements, or payments of service fees under shareholder service arrangements; and costs of administering the 12b-1 Plan.
Amounts payable by a Fund under the 12b-1 Plan need not be directly related to the expenses actually incurred by the Distributor on behalf of each Fund. The 12b-1 Plan does not obligate each Fund to reimburse the Distributor for the actual expenses the Distributor may incur in fulfilling its obligations under the 12b-1 Plan. Thus, even if the Distributor’s actual expenses exceed the fee payable to the Distributor at any given time, each Fund will not be obligated to pay more than that fee. If the Distributor’s expenses are less than the fee it receives, the Distributor will retain the difference.
The fees attributable to each Fund’s respective class are shown on the accompanying Statements of Operations.
75
Harbor Domestic Equity Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Transfer Agent
Harbor Services Group, Inc. (“Harbor Services Group”), a wholly-owned subsidiary of Harbor Capital, is the transfer and shareholder servicing agent for the Funds. The transfer agency and service agreement is reviewed and approved annually by the Board of Trustees and provides currently for compensation up to the following amounts per class of each Fund:
Transfer Agent Fees1 | |
Retirement Class | 0.02% of the average daily net assets of all Retirement Class shares |
Institutional Class | 0.10% of the average daily net assets of all Institutional Class shares |
Administrative Class | 0.10% of the average daily net assets of all Administrative Class shares |
Investor Class | 0.22% of the average daily net assets of all Investor Class shares |
1 | For the period November 1, 2018 through February 28, 2019, Harbor Services Group received compensation up to 0.01%, 0.09%, 0.09%, and 0.21% for the Retirement Class, Institutional Class, Administrative Class, and Investor Class, respectively. |
Harbor Services Group has voluntarily waived a portion of its transfer agent fees during the year ended October 31, 2019. Fees incurred for these transfer agent services are shown on each Fund’s Statement of Operations. The voluntary waiver may be discontinued at any time.
Affiliated Transactions
The Investment Company Act permits purchase and sale transactions among affiliated investment companies subject to an exemptive rule. Harbor Funds has adopted policies and procedures pursuant to such rule. During the year, the Funds did not enter into any transactions with any other Harbor fund.
Shareholders
On October 31, 2019, Harbor Capital, and its wholly owned subsidiaries, collectively held the following shares of beneficial interest in each of the following Funds:
Number of Shares Owned by Harbor Capital and Subsidiaries | Percentage of Outstanding Shares | ||||||||||
Retirement Class | Institutional Class | Administrative Class | Investor Class | Total | |||||||
Harbor Capital Appreciation Fund | 32,261 | — | — | — | 32,261 | 0.0% | |||||
Harbor Large Cap Value Fund | 85,560 | — | — | — | 85,560 | 0.1 | |||||
Harbor Mid Cap Growth Fund | 118,899 | — | — | — | 118,899 | 0.5 | |||||
Harbor Mid Cap Value Fund | 59,201 | — | — | — | 59,201 | 0.2 | |||||
Harbor Small Cap Growth Fund | 84,649 | — | — | — | 84,649 | 0.2 | |||||
Harbor Small Cap Growth Opportunities Fund | 26,955 | — | — | — | 26,955 | 0.1 | |||||
Harbor Small Cap Value Fund | 35,035 | — | — | — | 35,035 | 0.1 | |||||
Harbor Small Cap Value Opportunities Fund | 8,296 | 2,657,389 | 27,015 | 26,965 | 2,719,665 | 76.2 | |||||
Harbor Strategic Growth Fund | 40,895 | 693,064 | 631 | — | 734,590 | 14.6 |
Independent Trustees
The fees and expenses of the Independent Trustees are included in “Trustees’ fees and expenses” on each Fund’s Statement of Operations.
The Board of Trustees has adopted a Deferred Compensation Plan for Independent Trustees (the “Plan”), which enables Trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from the Trust. For purposes of determining the amount owed to a Trustee under the Plan, deferred amounts are treated as though they had been invested in shares of the Fund(s) selected by the Trustee. While not required to do so, each Fund makes an investment equal to the Trustee’s investment election. The deferred compensation liability and the offsetting deferred compensation investment asset are included as a component of “Accrued expenses – Trustees’ fees and expenses” and “Other assets”, respectively, in the Statements of Assets and Liabilities. Such amounts fluctuate with changes in the value of the selected Fund(s). The deferred compensation and related mark-to-market impact liability and an offsetting investment asset will remain on each Fund’s Statement of Assets and Liabilities until distributed in accordance with the Plan.
76
Harbor Domestic Equity Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 4—FEES AND OTHER Transactions with Affiliates—Continued
Indemnification
Under the Trust’s organizational documents, its officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust. In addition, in the normal course of business the Trust enters into contracts that provide general indemnities to other parties. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote.
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 U.S. GAAP. These differences are attributable to permanent book and tax accounting differences that were primarily due to the tax treatment of net investment losses and the use of equalization. Reclassifications, if any, are made to each Fund’s capital account to reflect income and net realized gains available for distribution (or available capital loss carryovers) under income tax rules and regulations. The amounts reclassified on the Statements of Assets and Liabilities for the year ended October 31, 2019 are as follows:
Total Distributable Earnings/(Loss) (000s) | Paid in Capital (000s) | ||
Harbor Capital Appreciation Fund | $(308,590) | $308,590 | |
Harbor Large Cap Value Fund | (869) | 869 | |
Harbor Mid Cap Growth Fund | (9,184) | 9,184 | |
Harbor Mid Cap Value Fund | (1,461) | 1,461 | |
Harbor Small Cap Growth Fund | (691) | 691 | |
Harbor Small Cap Growth Opportunities Fund | (1,088) | 1,088 | |
Harbor Small Cap Value Fund | (1,644) | 1,644 | |
Harbor Strategic Growth Fund | (93) | 93 |
The tax composition of each Fund’s distributions is as follows:
As of October 31, 2019 | As of October 31, 2018 | ||||||||||
Ordinary Income (000s) | Long-Term Capital Gains (000s) | Total (000s) | Ordinary Income (000s) | Long-Term Capital Gains (000s) | Total (000s) | ||||||
Harbor Capital Appreciation Fund | $59,595 | $2,639,527 | $2,699,122 | $42,373 | $3,005,817 | $3,048,190 | |||||
Harbor Large Cap Value Fund | 12,011 | 14,807 | 26,818 | 7,595 | 21,200 | 28,795 | |||||
Harbor Mid Cap Growth Fund | 7,944 | 49,088 | 57,032 | 10,055 | 25,409 | 35,464 | |||||
Harbor Mid Cap Value Fund | 18,976 | 45,772 | 64,748 | 20,087 | 17,333 | 37,420 | |||||
Harbor Small Cap Growth Fund | 20,148 | 116,393 | 136,541 | 10,089 | 57,274 | 67,363 | |||||
Harbor Small Cap Growth Opportunities Fund | 12,681 | 39,344 | 52,025 | 2,422 | 14,702 | 17,124 | |||||
Harbor Small Cap Value Fund | 9,116 | 109,007 | 118,123 | 1,056 | 23,200 | 24,256 | |||||
Harbor Small Cap Value Opportunities Fund | 1,500 | 512 | 2,012 | 150 | — | 150 | |||||
Harbor Strategic Growth Fund | 530 | 1,405 | 1,935 | 165 | 1,034 | 1,199 |
77
Harbor Domestic Equity Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
NOTE 5—TAX INFORMATION—Continued
As of October 31, 2019, the components of each Fund’s distributable earnings on a tax basis are as follows:
Undistributed Ordinary Income (000s) | Undistributed Long-Term Capital Gains (000s) | Unrealized Appreciation/ (Depreciation) (000s) | |||
Harbor Capital Appreciation Fund | $21,522 | $2,576,947 | $12,410,233 | ||
Harbor Large Cap Value Fund | 2,894 | — | 268,492 | ||
Harbor Mid Cap Growth Fund | — | 50,261 | 47,332 | ||
Harbor Mid Cap Value Fund | 12,970 | 4,648 | 27,855 | ||
Harbor Small Cap Growth Fund | — | 26,443 | 94,516 | ||
Harbor Small Cap Growth Opportunities Fund | 6,343 | — | (24,931) | ||
Harbor Small Cap Value Fund | 6,048 | 15,523 | 397,119 | ||
Harbor Small Cap Value Opportunities Fund | 164 | — | (1,033) | ||
Harbor Strategic Growth Fund | 388 | 1,578 | 24,067 |
At October 31, 2019, for Federal income tax purposes, the following Funds had a qualified late year loss deferral to offset fiscal year 2020 ordinary income:
Qualified Late Year Ordinary Loss Deferral (000s) | |
Harbor Mid Cap Growth Fund | $1,249 |
Harbor Small Cap Growth Fund | 1,173 |
At October 31, 2019, the Funds in the following table had capital loss carryforwards for federal tax purposes which will reduce each Fund’s taxable income arising from future net realized gains on investments to the extent permitted by the Internal Revenue Code. Use of the capital loss carryforwards will reduce the amount of the distribution to shareholders which would otherwise be necessary to relieve each Fund of any federal tax liability. The capital loss carryforwards do not expire.
Capital Loss Carryfoward | |||||
Short-Term (000s) | Long-Term (000s) | Total (000s) | |||
Harbor Large Cap Value Fund | $1,159 | $769 | $1,928 | ||
Harbor Small Cap Value Opportunities Fund | 1,634 | 849 | 2,483 |
The identified cost for federal income tax purposes of investments owned by each Fund and its respective gross unrealized appreciation and depreciation at October 31, 2019 are as follows:
Identified Cost (000s) | Gross Unrealized | Net Unrealized Appreciation/ (Depreciation) (000s) | |||||
Appreciation (000s) | (Depreciation) (000s) | ||||||
Harbor Capital Appreciation Fund | $17,114,548 | $12,637,879 | $(227,646) | $12,410,233 | |||
Harbor Large Cap Value Fund* | 970,252 | 304,624 | (36,132) | 268,492 | |||
Harbor Mid Cap Growth Fund | 206,832 | 53,624 | (6,292) | 47,332 | |||
Harbor Mid Cap Value Fund | 670,490 | 127,934 | (100,079) | 27,855 | |||
Harbor Small Cap Growth Fund | 627,188 | 126,424 | (31,908) | 94,516 | |||
Harbor Small Cap Growth Opportunities Fund | 214,208 | 24,137 | (49,068) | (24,931) | |||
Harbor Small Cap Value Fund | 1,183,985 | 465,037 | (67,918) | 397,119 | |||
Harbor Small Cap Value Opportunities Fund* | 31,652 | 2,774 | (3,807) | (1,033) | |||
Harbor Strategic Growth Fund | 76,690 | 24,156 | (89) | 24,067 |
* | Capital loss carryforwards are available, which may reduce taxable income from future net realized gain on investments. |
78
Harbor Domestic Equity Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 6—Legal Proceedings
Tribune Company
Harbor Mid Cap Value Fund has been named as a defendant and/or as a putative member of a proposed defendant class in Kirschner v. FitzSimons (In re Tribune Co.), No. 12-2652 (S.D.N.Y.) (the “FitzSimons action”); Deutsche Bank v. Ohlson Enterprises, No. 12-0064 (S.D.N.Y.) (the “Deutsche Bank action”); and Niese v. ABN AMRO Clearing Chicago LLC, No. 12-0555 (S.D.N.Y.) (the “Niese action”), as a result of its ownership of shares in the Tribune Company (“Tribune”) in 2007, when Tribune effected a leveraged buyout transaction (“LBO”) by which Tribune converted to a privately-held company. The plaintiffs in these lawsuits have asserted claims for fraudulent conveyance against Harbor Mid Cap Value Fund and other former Tribune shareholders.
All three lawsuits have been consolidated with the majority of the other Tribune-related lawsuits in the multidistrict litigation proceeding In re Tribune Co. Fraudulent Conveyance Litig., No. 11-2296 (S.D.N.Y.) (the “MDL Proceeding”).
On September 23, 2013, the District Court granted the defendants’ omnibus motion to dismiss the Deutsche Bank and Niese actions, on the basis that the plaintiffs lacked standing. The plaintiffs appealed. On March 29, 2016, the U.S. Court of Appeals for the Second Circuit issued its opinion on the appeal, affirming the district court’s dismissal of those lawsuits. The appeals court held that while the plaintiffs have standing under the U.S. Bankruptcy Code, as amended (the “Bankruptcy Code”), their claims were preempted by Section 546(e) of the Bankruptcy Code—the statutory safe harbor for settlement payments. Plaintiffs sought rehearing en banc, which the Second Circuit denied. On September 9, 2016, the plaintiffs filed a petition for writ of certiorari in the U.S. Supreme Court challenging the Second Circuit’s decision, which the shareholder defendants opposed. On April 3, 2018, Justice Kennedy and Justice Thomas issued a “Statement” related to the petition for certiorari suggesting that the Second Circuit and/or District Court may want to take steps to reexamine the application of the Section 546(e) safe harbor to the previously dismissed state law constructive fraudulent transfer claims based on the Supreme Court’s decision in Merit Management Group LP v. FTI Consulting, Inc. On April 10, 2018, plaintiffs filed in the Second Circuit a motion for that court to recall its mandate, vacate its prior decision, and remand to the district court for further proceedings consistent with Merit Management. On April 20, 2018, the shareholder defendants filed a response to plaintiffs’ motion to recall the mandate. On May 15, 2018, the Second Circuit issued an order recalling the mandate “in anticipation of further panel review.” On December 19, 2019, the court issued an amended opinion that again affirmed the district court’s ruling on the basis that plaintiffs’ claims were preempted by Section 546(e) of the Bankruptcy Code.
On May 23, 2014, the defendants filed motions to dismiss the FitzSimons action, including a global motion to dismiss Count I, which is the claim brought against former Tribune shareholders for intentional fraudulent conveyance under U.S. federal law. On January 6, 2017, the United States District Court for the Southern District of New York granted the shareholder defendants’ motion to dismiss and denied plaintiff’s request to amend the complaint. The Court’s order was not immediately appealable. On July 18, 2017, the plaintiff submitted a letter to the District Court seeking leave to amend its complaint to add a constructive fraudulent transfer claim. The Court denied the plaintiff’s request without prejudice to renewal of the request in the event of an intervening change in the law. On March 8, 2018, plaintiff renewed his request for leave to file a motion to amend the complaint to assert a constructive fraudulent transfer claim based on the Supreme Court’s ruling in Merit Management. The shareholder defendants opposed that request. On June 18, 2018, the District Court ordered that the request would be stayed pending further action by the Second Circuit in the still pending appeal, discussed above. On December 18, 2018, plaintiff filed a letter with the District Court requesting that the stay be dissolved in order to permit briefing on the motion to amend the complaint and indicating plaintiff’s intention to file another motion to amend the complaint to reinstate claims for intentional fraudulent transfer. The shareholder defendants opposed that request. On January 14, 2019, the court held a case management conference, during which the court stated that it would allow the plaintiff to file a motion to amend to try to reinstate its intentional fraudulent transfer claim. On January 23, 2019, the court ordered the parties still facing pending claims to participate in a mediation within the following two months. On April 9, 2019, the plaintiff filed a motion to amend the complaint to add constructive fraudulent conveyance claims under federal law against certain shareholder defendants. The court denied the motion to amend on April 23, 2019. On June 13, 2019, the court entered judgment pursuant to Rule 54(b). On July 12, 2019, Plaintiff filed a notice of appeal with respect to the dismissal of his intentional fraudulent conveyance claim and the District Court’s denial of his motion for leave to amend. Plaintiff’s opening brief is due on January 7, 2020.
79
Harbor Domestic Equity Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 6—Legal Proceedings—Continued
None of these lawsuits alleges any wrongdoing on the part of Harbor Mid Cap Value Fund. Harbor Mid Cap Value Fund held shares of Tribune and tendered these shares as part of Tribune’s LBO. The value of the proceeds received by Harbor Mid Cap Value Fund was approximately $299,000. Harbor Mid Cap Value Fund’s cost basis in the shares of Tribune was approximately $262,000. At this stage of the proceedings, Harbor Mid Cap Value Fund is not able to make a reliable prediction as to the outcome of these lawsuits or the effect, if any, on the Fund’s net asset value.
Note 7—Subsequent Events
At a meeting of the Board of Trustees held on November 10 and 11, 2019, the Board of Trustees voted to liquidate and dissolve the Harbor Small Cap Value Opportunities Fund. The liquidation of the Fund occurred on December 20, 2019. Additional information related to the liquidation can be found in the supplements to the Fund’s prospectus and statement of additional information as filed with the SEC on November 13, 2019.
Through the date the financial statements were issued, there were no other subsequent events or transactions that would have materially impacted the financial statements or related disclosures as presented herein.
Through the date the financial statements were issued, there were no other subsequent events or transactions that would have materially impacted the financial statements or related disclosures as presented herein.
80
Harbor Domestic Equity Funds
Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
The Board of Trustees and Shareholders of
Harbor Funds
Harbor Funds
Opinion on the Financial Statements
We have audited the accompanying statements of assets and liabilities of Harbor Capital Appreciation Fund, Harbor Large Cap Value Fund, Harbor Mid Cap Growth Fund, Harbor Mid Cap Value Fund, Harbor Small Cap Growth Fund, Harbor Small Cap Growth Opportunities Fund, Harbor Small Cap Value Fund, Harbor Small Cap Value Opportunities Fund and Harbor Strategic Growth Fund (collectively referred to as the “Funds”), (nine of the funds constituting Harbor Funds (the “Trust”)), including the portfolios of investments, as of October 31, 2019, and the related statements of operations and changes in net assets, and the financial highlights for each of the periods indicated in the table below and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Funds (nine of the funds constituting Harbor Funds) at October 31, 2019, the results of their operations, changes in net assets and financial highlights for each of the periods indicated in the table below, in conformity with U.S. generally accepted accounting principles.
Individual fund comprising the Harbor Funds | Statement of operations | Statement of changes in net assets | Financial highlights |
Harbor Capital Appreciation Fund Harbor Large Cap Value Fund Harbor Mid Cap Growth Fund Harbor Mid Cap Value Fund Harbor Small Cap Growth Fund Harbor Small Cap Growth Opportunities Fund Harbor Small Cap Value Fund | For the year ended October 31, 2019 | For each of the two years in the period ended October 31, 2019 | For each of the five years in the period ended October 31, 2019 |
Harbor Small Cap Value Opportunities Fund | For the year ended October 31, 2019 | For each of the two years in the period ended October 31, 2019 | For each of the two years in the period ended October 31, 2019 and the period from August 1, 2017 (inception) through October 31, 2017 |
Harbor Strategic Growth Fund | For the year ended October 31, 2019 | For each of the two years in the period ended October 31, 2019 | For each of the two years in the period ended October 31, 2019, the period from July 1, 2017 through October 31, 2017, and the period from July 1, 2016 to June 30, 2017* |
* | The financial highlights for the Harbor Strategic Growth Fund for the periods presented through June 30, 2016, were audited by other auditors whose report dated August 26, 2016, expressed an unqualified opinion on those financial highlights. |
Basis for Opinion
These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on each of the Funds’ financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust’s internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2019, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Harbor Funds investment companies since 2000.
Chicago, Illinois
December 23, 2019
December 23, 2019
81
Harbor Domestic Equity Funds
Fees and Expenses Example (Unaudited)
Fees and Expenses Example (Unaudited)
Example
As a shareholder of a Fund, you incur two types of costs: (1) transaction costs, including redemption fees (if any) and (2) ongoing costs, including management fees, distribution and service (12b-1) fees (if any), and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in a Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period May 1, 2019 through October 31, 2019.
Actual Expenses
The first line of the table below provides information about actual account values and actual expenses for each share class. You may use the information in the respective class line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line of the respective class under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table for each share class below provides information about hypothetical account values and hypothetical expenses based on the respective Fund/Class’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the respective Fund/Class’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in a Fund to other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as redemption fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Annualized Expense Ratios* | Expenses Paid During Period** | Beginning Account Value May 1, 2019 | Ending Account Value October 31, 2019 | |||||
Harbor Capital Appreciation Fund | ||||||||
Retirement Class | 0.58% | |||||||
Actual | $2.92 | $1,000 | $1,002.12 | |||||
Hypothetical (5% return) | 2.96 | 1,000 | 1,022.21 | |||||
Institutional Class | 0.66% | |||||||
Actual | $3.33 | $1,000 | $1,001.72 | |||||
Hypothetical (5% return) | 3.36 | 1,000 | 1,021.79 | |||||
Administrative Class | 0.91% | |||||||
Actual | $4.59 | $1,000 | $1,000.40 | |||||
Hypothetical (5% return) | 4.63 | 1,000 | 1,020.50 | |||||
Investor Class | 1.03% | |||||||
Actual | $5.19 | $1,000 | $999.72 | |||||
Hypothetical (5% return) | 5.24 | 1,000 | 1,019.88 |
82
Harbor Domestic Equity Funds
Fees and Expenses Example—Continued
Fees and Expenses Example—Continued
Annualized Expense Ratios* | Expenses Paid During Period** | Beginning Account Value May 1, 2019 | Ending Account Value October 31, 2019 | |||||
Harbor Large Cap Value Fund | ||||||||
Retirement Class | 0.61% | |||||||
Actual | $3.15 | $1,000 | $1,045.79 | |||||
Hypothetical (5% return) | 3.11 | 1,000 | 1,022.05 | |||||
Institutional Class | 0.69% | |||||||
Actual | $3.56 | $1,000 | $1,045.42 | |||||
Hypothetical (5% return) | 3.52 | 1,000 | 1,021.64 | |||||
Administrative Class | 0.94% | |||||||
Actual | $4.84 | $1,000 | $1,044.15 | |||||
Hypothetical (5% return) | 4.79 | 1,000 | 1,020.35 | |||||
Investor Class | 1.06% | |||||||
Actual | $5.46 | $1,000 | $1,043.70 | |||||
Hypothetical (5% return) | 5.40 | 1,000 | 1,019.73 | |||||
Harbor Mid Cap Growth Fund | ||||||||
Retirement Class | 0.81% | |||||||
Actual | $4.07 | $1,000 | $996.35 | |||||
Hypothetical (5% return) | 4.13 | 1,000 | 1,021.02 | |||||
Institutional Class | 0.89% | |||||||
Actual | $4.48 | $1,000 | $996.34 | |||||
Hypothetical (5% return) | 4.53 | 1,000 | 1,020.61 | |||||
Administrative Class | 1.14% | |||||||
Actual | $5.74 | $1,000 | $995.15 | |||||
Hypothetical (5% return) | 5.80 | 1,000 | 1,019.31 | |||||
Investor Class | 1.26% | |||||||
Actual | $6.33 | $1,000 | $996.96 | |||||
Hypothetical (5% return) | 6.41 | 1,000 | 1,018.69 | |||||
Harbor Mid Cap Value Fund | ||||||||
Retirement Class | 0.77% | |||||||
Actual | $3.86 | $1,000 | $991.43 | |||||
Hypothetical (5% return) | 3.92 | 1,000 | 1,021.23 | |||||
Institutional Class | 0.85% | |||||||
Actual | $4.26 | $1,000 | $991.43 | |||||
Hypothetical (5% return) | 4.33 | 1,000 | 1,020.81 | |||||
Administrative Class | 1.10% | |||||||
Actual | $5.52 | $1,000 | $989.62 | |||||
Hypothetical (5% return) | 5.60 | 1,000 | 1,019.52 | |||||
Investor Class | 1.22% | |||||||
Actual | $6.12 | $1,000 | $989.52 | |||||
Hypothetical (5% return) | 6.21 | 1,000 | 1,018.90 |
83
Harbor Domestic Equity Funds
Fees and Expenses Example—Continued
Fees and Expenses Example—Continued
Annualized Expense Ratios* | Expenses Paid During Period** | Beginning Account Value May 1, 2019 | Ending Account Value October 31, 2019 | |||||
Harbor Small Cap Growth Fund | ||||||||
Retirement Class | 0.80% | |||||||
Actual | $4.08 | $1,000 | $1,024.88 | |||||
Hypothetical (5% return) | 4.08 | 1,000 | 1,021.07 | |||||
Institutional Class | 0.87% | |||||||
Actual | $4.44 | $1,000 | $1,024.18 | |||||
Hypothetical (5% return) | 4.43 | 1,000 | 1,020.71 | |||||
Administrative Class | 1.12% | |||||||
Actual | $5.72 | $1,000 | $1,023.06 | |||||
Hypothetical (5% return) | 5.70 | 1,000 | 1,019.42 | |||||
Investor Class | 1.24% | |||||||
Actual | $6.32 | $1,000 | $1,022.67 | |||||
Hypothetical (5% return) | 6.31 | 1,000 | 1,018.80 | |||||
Harbor Small Cap Growth Opportunities Fund | ||||||||
Retirement Class | 0.82% | |||||||
Actual | $3.95 | $1,000 | $915.09 | |||||
Hypothetical (5% return) | 4.18 | 1,000 | 1,020.97 | |||||
Institutional Class | 0.90% | |||||||
Actual | $4.35 | $1,000 | $914.85 | |||||
Hypothetical (5% return) | 4.58 | 1,000 | 1,020.55 | |||||
Administrative Class | 1.15% | |||||||
Actual | $5.55 | $1,000 | $913.96 | |||||
Hypothetical (5% return) | 5.85 | 1,000 | 1,019.26 | |||||
Investor Class | 1.27% | |||||||
Actual | $6.12 | $1,000 | $913.51 | |||||
Hypothetical (5% return) | 6.46 | 1,000 | 1,018.64 | |||||
Harbor Small Cap Value Fund | ||||||||
Retirement Class | 0.80% | |||||||
Actual | $4.05 | $1,000 | $1,007.51 | |||||
Hypothetical (5% return) | 4.08 | 1,000 | 1,021.07 | |||||
Institutional Class | 0.87% | |||||||
Actual | $4.41 | $1,000 | $1,007.21 | |||||
Hypothetical (5% return) | 4.43 | 1,000 | 1,020.71 | |||||
Administrative Class | 1.12% | |||||||
Actual | $5.67 | $1,000 | $1,005.74 | |||||
Hypothetical (5% return) | 5.70 | 1,000 | 1,019.42 | |||||
Investor Class | 1.24% | |||||||
Actual | $6.27 | $1,000 | $1,005.25 | |||||
Hypothetical (5% return) | 6.31 | 1,000 | 1,018.80 |
84
Harbor Domestic Equity Funds
Fees and Expenses Example—Continued
Fees and Expenses Example—Continued
Annualized Expense Ratios* | Expenses Paid During Period** | Beginning Account Value May 1, 2019 | Ending Account Value October 31, 2019 | |||||
Harbor Small Cap Value Opportunities Fund | ||||||||
Retirement Class | 0.81% | |||||||
Actual | $3.90 | $1,000 | $912.55 | |||||
Hypothetical (5% return) | 4.13 | 1,000 | 1,021.02 | |||||
Institutional Class | 0.89% | |||||||
Actual | $4.29 | $1,000 | $912.55 | |||||
Hypothetical (5% return) | 4.53 | 1,000 | 1,020.61 | |||||
Administrative Class | 1.14% | |||||||
Actual | $5.49 | $1,000 | $910.49 | |||||
Hypothetical (5% return) | 5.80 | 1,000 | 1,018.69 | |||||
Investor Class | 1.26% | |||||||
Actual | $6.07 | $1,000 | $910.49 | |||||
Hypothetical (5% return) | 6.41 | 1,000 | 1,019.31 | |||||
Harbor Strategic Growth Fund | ||||||||
Retirement Class | 0.63% | |||||||
Actual | $3.24 | $1,000 | $1,039.12 | |||||
Hypothetical (5% return) | 3.21 | 1,000 | 1,021.95 | |||||
Institutional Class | 0.71% | |||||||
Actual | $3.65 | $1,000 | $1,038.69 | |||||
Hypothetical (5% return) | 3.62 | 1,000 | 1,021.54 | |||||
Administrative Class | 0.96% | |||||||
Actual | $4.93 | $1,000 | $1,037.31 | |||||
Hypothetical (5% return) | 4.89 | 1,000 | 1,020.24 | |||||
Investor Class | 1.08% | |||||||
Actual | $5.54 | $1,000 | $1,036.49 | |||||
Hypothetical (5% return) | 5.50 | 1,000 | 1,019.62 |
* | Reflective of all fee waivers and expense reimbursements |
** | Expenses are equal to the Fund’s annualized net expense ratio, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
85
Harbor Domestic Equity Funds
Additional Information (Unaudited)
Additional Information (Unaudited)
Additional Tax Information
The Funds designate the following portions of their distributions from investment company taxable income for the fiscal year ended October 31, 2019 as qualifying for the dividends received deduction for corporate shareholders.
Percentage of Distribution | |
Harbor Capital Appreciation Fund | 100% |
Harbor Large Cap Value Fund | 100 |
Harbor Mid Cap Value Fund | 100 |
Harbor Small Cap Growth Opportunities Fund | 8 |
Harbor Small Cap Value Fund | 100 |
Harbor Small Cap Value Opportunities Fund | 100 |
Harbor Strategic Growth Fund | 100 |
Pursuant to Section 852 of the Internal Revenue Code, the Funds designate the following capital gain dividends for the fiscal year ended October 31, 2019:
Amount (000s) | |
Harbor Capital Appreciation Fund | $2,945,916 |
Harbor Large Cap Value Fund | 14,807 |
Harbor Mid Cap Growth Fund | 58,116 |
Harbor Mid Cap Value Fund | 45,009 |
Harbor Small Cap Growth Fund | 117,205 |
Harbor Small Cap Growth Opportunities Fund | 39,344 |
Harbor Small Cap Value Fund | 110,215 |
Harbor Small Cap Value Opportunities Fund | 512 |
Harbor Strategic Growth Fund | 1,479 |
For the fiscal year ended October 31, 2019, the Funds designate up to the maximum amount of such dividends allowable pursuant to the Internal Revenue Code as qualified dividend income eligible for reduced tax rates. These lower rates range from 0% to 20% depending on an individual’s tax bracket. If the Funds pay a distribution during calendar year 2019, complete information will be reported in conjunction with Form 1099-DIV.
Shareholders who own shares through a taxable Harbor Funds account and that received distributions from a Fund during calendar year 2019 will receive a Form 1099-DIV in January 2020 that will show the tax character of those distributions.
Proxy Voting
Harbor Funds has adopted Proxy Voting Policies and Procedures under which proxies relating to securities held by the Harbor funds are voted. In addition, Harbor Funds files Form N-PX, with its complete proxy voting record for the 12 months ended June 30th, no later than August 31st of each year. A description of Harbor Funds’ Proxy Voting Policies and Procedures and the proxy voting records (Form N-PX) are available (i) without charge, upon request, by calling Harbor Funds toll-free at 800-422-1050; (ii) on Harbor Funds’ website atharborfunds.com; and (iii) on the SEC’s website at sec.gov.
Householding
Harbor Funds has adopted a policy that allows it to send only one copy of a Fund’s prospectus, proxy materials, annual report and semi-annual report to certain shareholders residing at the same household. This reduces Fund expenses, which benefits you and other shareholders. If you need additional copies or do not want your mailings to be “householded,” please call the Shareholder Servicing Agent at 800-422-1050. Individual copies will be sent within thirty (30) days after the Shareholder Servicing Agent receives your instructions. Your consent to householding is considered valid until revoked.
86
Harbor Domestic Equity Funds
Additional Information—Continued
Additional Information—Continued
Quarterly Portfolio Disclosures
In 2019, the Funds filed a complete portfolio of investments with the SEC for the first fiscal quarter on Form N-Q and the third fiscal quarter as an exhibit to Form N-PORT. The Funds’ Forms N-Q and N-PORT are available (i) without charge, upon request, by calling Harbor Funds toll-free at 800-422-1050, (ii) on Harbor Funds’ website atharborfunds.com, and (iii) on the SEC’s website at sec.gov.
ADVISORY AGREEMENT APPROVALS
Approval of Amended Subadvisory Agreement for Harbor Mid Cap Growth Fund
At a meeting of the Board held on August 18-19, 2019, the Board, including the Independent Trustees voting separately, ratified an amended and restated Subadvisory Agreement (the “Amended Agreement”) with Wellington Management Company LLP (“Wellington”) that reduced the contractual subadvisory fee rate payable by Harbor Capital to Wellington for the subadvisory services it provides to Harbor Mid Cap Growth Fund. In determining to approve the Amended Agreement, the Trustees considered that Harbor Capital was passing through the benefit of this fee reduction to Harbor Mid Cap Growth Fund’s shareholders in the form of a fee waiver arrangement. The Trustees noted that, although they were being asked to ratify the Amended Agreement in order to implement the subadvisory fee reduction, they would have the opportunity to perform a full review of the Investment Advisory Agreement and Subadvisory Agreement for Harbor Mid Cap Growth Fund in connection with their annual review of investment advisory and subadvisory agreements, at which time the Trustees would consider the nature, extent and quality of services provided by Harbor Capital and Wellington; investment performance, advisory fees and expense ratios; profitability; any “fall out” benefits; and economies of scale.
Approval of Amended Subadvisory Agreements for Harbor Mid Cap Value Fund
At a meeting of the Board held on August 18-19, 2019, the Board, including the Independent Trustees voting separately, approved an amended and restated Subadvisory Agreement (the “Amended Agreement”) with LSV Asset Management (“LSV”) authorizing LSV to vote proxies on behalf of Harbor Mid Cap Value Fund. The Trustees noted that the Amended Agreement would take effect October 1, 2019 in connection with the delegation of proxy voting responsibilities to LSV, subject to Harbor Capital’s oversight. It was considered that, although the Trustees were being asked to approve the Amended Agreement in order to implement the delegation of proxy voting responsibilities to LSV, they would have the opportunity to perform a full review of the Investment Advisory Agreement and Subadvisory Agreement for the Fund in connection with their annual review of investment advisory and subadvisory agreements, at which time the Trustees would consider the nature, extent and quality of services provided by Harbor Capital and LSV; investment performance, advisory fees and expense ratios; profitability; any “fall out” benefits; and economies of scale.
87
Harbor Domestic Equity Funds
Additional Information—Continued
Additional Information—Continued
Trustees and Officers
As of December 2019
The business and affairs of the Trust shall be managed by or under the direction of the Trustees, and they shall have all powers necessary or desirable to carry out that responsibility. The Trustees shall have full power and authority to take or refrain from taking any action and to execute any contracts and instruments that they may consider necessary or desirable in the management of the Trust. Any determination made by the Trustees in good faith as to what is in the interests of the Trust shall be conclusive. Information pertaining to the Trustees and Officers of Harbor Funds is set forth below. The address of each Trustee and Officer is: [Name of Trustee or Officer] c/o Harbor Funds, 111 South Wacker Drive, 34th Floor, Chicago, IL 60606-4302.
Harbor Funds' Statement of Additional Information includes additional information about the Trust’s Trustees and is available without charge by calling 800-422-1050 or at the Trust’s website atharborfunds.com.
Name (Age) Position(s) with Fund | Term of Office and Length of Time Served1 | Principal Occupation(s) During Past Five Years | Number of Portfolios In Fund Complex Overseen By Trustee | Other Directorships Of Public Companies and Other Registered Investment Companies Held by Trustee During Past Five Years |
INDEPENDENT TRUSTEES | ||||
Scott M. Amero (56) Trustee | Since 2014 | Chairman (2015-Present) and Trustee (2011-2015), Rare (conservation nonprofit); Trustee, Berkshire School (2014-Present); Trustee, The Nature Conservancy, Massachusetts Chapter (2018-Present); Vice Chairman and Global Chief Investment Officer, Fixed Income (2010), Vice Chairman and Global Chief Investment Officer, Fixed Income, and Co-Head, Fixed Income Portfolio Management (2007-2010), BlackRock, Inc. (publicly traded investment management firm). | 39 | None |
Donna J. Dean (68) Trustee | Since 2010 | Chief Investment Officer of the Rockefeller Foundation (a private foundation) (1995-Present). | 39 | None |
Joseph L. Dowling III (55) Trustee | Since 2017 | Chief Executive Officer (2018-Present) and Chief Investment Officer, Brown University Investment Office (2013-2018); Advisory Board Member, Stage Point Capital (private mortgage specialist) (2016-2017); Advisory Board Member, Harbor Funds (2016-2017); and Founder and Managing Member, Narragansett Asset Management (private investment management firm) (1998-2013). | 39 | Director of Integrated Electrical Services (2012-Present). |
Randall A. Hack (72) Trustee | Since 2010 | Founder and Senior Managing Director of Capstone Capital LLC (private investment firm) (2003-Present); Director of Tower Development Corporation (cell tower developer) (2009-2016); Advisory Director of Berkshire Partners (private equity firm) (2002-2013); Founder and Senior Managing Director of Nassau Capital, LLC (private investment firm, investing solely on behalf of the Princeton Endowment) (1995-2001); and President of The Princeton University Investment Company (1990-1994). | 39 | None |
Robert Kasdin (61) Trustee | Since 2014 | Senior Vice President and Chief Operating Officer (2015-Present) and Chief Financial Officer (2018-Present), Johns Hopkins Medicine; Senior Executive Vice President, Columbia University (2002-2015); Trustee and Member of the Finance Committee, National September 11 Memorial & Museum at the World Trade Center (2005-Present); Director, Apollo Commercial Real Estate Finance, Inc. (2014-Present); Director and Executive Committee Member, The Y in Central Maryland (2018-Present); and Director, Noranda Aluminum Holdings Corp. (2007-2014). | 39 | Director of Noranda Aluminum Holdings Corporation (2007-2014); and Director of Apollo Commercial Real Estate Finance, Inc. (2014-Present). |
88
Harbor Domestic Equity Funds
Additional Information—Continued
Additional Information—Continued
Trustees and Officers—Continued
Name (Age) Position(s) with Fund | Term of Office and Length of Time Served1 | Principal Occupation(s) During Past Five Years | Number of Portfolios In Fund Complex Overseen By Trustee | Other Directorships Of Public Companies and Other Registered Investment Companies Held by Trustee During Past Five Years |
INDEPENDENT TRUSTEES—Continued | ||||
Kathryn L. Quirk (67) Trustee | Since 2017 | Retired; Vice President, Senior Compliance Officer and Head, U.S. Regulatory Compliance, Goldman Sachs Asset Management (2013-2017); Deputy Chief Legal Officer, Asset Management, and Vice President and Corporate Counsel, Prudential Insurance Company of America (2010-2012); Co-Chief Legal Officer, Prudential Investment Management, Inc., and Chief Legal Officer, Prudential Investments and Prudential Mutual Funds (2008-2012); Vice President and Corporate Counsel and Chief Legal Officer, Mutual Funds, Prudential Insurance Company of America, and Chief Legal Officer, Prudential Investments (2005-2008); Vice President and Corporate Counsel and Chief Legal Officer, Mutual Funds, Prudential Insurance Company of America (2004-2005); Member, Management Committee (2000-2002), General Counsel and Chief Compliance Officer, Zurich Scudder Investments, Inc. (1997-2002). | 39 | None |
Ann M. Spruill (65) Trustee | Since 2014 | Partner (1993-2008), member of Executive Committee (1996-2008), Member Board of Directors (2002-2008), Grantham, Mayo, Van Otterloo & Co, LLC (private investment management firm) (with the firm since 1990); Member Investment Committee and Chair of Global Public Equities, Museum of Fine Arts, Boston (2000-Present); and Trustee, Financial Accounting Foundation (2014-Present). | 39 | None |
INTERESTED TRUSTEE | ||||
Charles F. McCain (50)* Chairman, Trustee and President | Since 2017 | Chief Executive Officer (2017-Present), Director (2007-Present), President and Chief Operating Officer (2017), Executive Vice President and General Counsel (2004-2017), and Chief Compliance Officer (2004-2014), Harbor Capital Advisors, Inc.; Director (2007-Present) and Chief Compliance Officer (2004-2017), Harbor Services Group, Inc.; Chief Executive Officer (2017-Present), Director (2007-Present), Chief Compliance Officer and Executive Vice President (2007-2017), Harbor Funds Distributors, Inc.; and Chief Compliance Officer, Harbor Funds (2004-2017). | 39 | None |
Name (Age) Position(s) with Fund | Term of Office and Length of Time Served1 | Principal Occupation(s) During Past Five Years |
FUND OFFICERS NOT LISTED ABOVE** | ||
Erik D. Ojala (44) Chief Compliance Officer | Since 2017 | Executive Vice President and General Counsel (2017-Present) and Secretary (2010-Present); Senior Vice President and Associate General Counsel (2007-2017), Harbor Capital Advisors, Inc.; Director and Secretary (2019-Present), Harbor Trust Company, Inc.; Director, Executive Vice President and Chief Compliance Officer (2017-Present), Harbor Funds Distributors, Inc.; Director (2017-Present) and Assistant Secretary (2014-Present), Harbor Services Group, Inc.; and AML Compliance Officer (2010-2017) and Vice President and Secretary (2007-2017), Harbor Funds. |
Anmarie S. Kolinski (48) Treasurer | Since 2007 | Executive Vice President and Chief Financial Officer (2007-Present), Harbor Capital Advisors, Inc.; Chief Financial Officer (2007-Present), Director and Treasurer (2019-Present), Harbor Trust Company, Inc.; Harbor Services Group, Inc.; and Chief Financial Officer (2015-Present) and Treasurer (2012-Present), Harbor Funds Distributors, Inc. |
Brian L. Collins (51) Vice President | Since 2005 | Executive Vice President and Chief Investment Officer (2004-Present), Harbor Capital Advisors, Inc. and Director and Chief Investment Officer (2019-Present), Harbor Trust Company, Inc. |
Kristof M. Gleich (40) Vice President | Since 2019 | President (2018-Present), Harbor Capital Advisors, Inc.; Director, Vice Chairperson, and President (2019-Present), Harbor Trust Company, Inc.; and Managing Director, Global Head of Manager Selection (2010-2018), JP Morgan Chase & Co. |
89
Harbor Domestic Equity Funds
Additional Information—Continued
Additional Information—Continued
Trustees and Officers—Continued
Name (Age) Position(s) with Fund | Term of Office and Length of Time Served1 | Principal Occupation(s) During Past Five Years |
FUND OFFICERS NOT LISTED ABOVE**—Continued | ||
Gregg M. Boland (56) Vice President | Since 2019 | Vice President (2019-Present), Harbor Capital Advisors, Inc.; President (2019-Present), Senior Vice President – Operations (2016-2019), and Vice President – Operations (2007-2015), Harbor Services Group, Inc.; and Senior Vice President, AML Compliance Officer, and OFAC Officer (2019-Present), Harbor Funds Distributors, Inc. |
Diana R. Podgorny (40) Secretary | Since 2018 | Vice President and Assistant General Counsel, Harbor Capital Advisors, Inc. (2017-Present); Vice President and Counsel, AMG Funds LLC (2016-2017); Assistant Secretary, AMG Funds, AMG Funds I, AMG Funds II and AMG Funds III (2016-2017); Assistant Secretary, AMG Funds IV (2010-2017); and Vice President and Counsel, Aston Asset Management, LLC (2010-2016). |
Jodie L. Crotteau (47) Assistant Secretary | Since 2014 | Senior Vice President and Chief Compliance Officer, Harbor Capital Advisors, Inc. (2014-Present); Chief Compliance Officer and AML/OFAC Officer (2019-Present), Harbor Trust Company, Inc.; Chief Compliance Officer and Secretary (2017-present) and Assistant Secretary (2015-2016), Harbor Services Group, Inc.; Assistant Secretary (2016-present), Harbor Funds Distributors, Inc.; Vice President and Chief Compliance Officer, Grosvenor Registered Funds (2011-2014); and Vice President, Grosvenor Capital Management, L.P. (2010-2014). |
Lana M. Lewandowski (40) AML Compliance Officer and Assistant Secretary | Since 2017 | Legal & Compliance Manager (2016-Present) and Legal Specialist (2012-2015), Harbor Capital Advisors, Inc. |
Lora A. Kmieciak (55) Assistant Treasurer | Since 2017 | Senior Vice President – Fund Administration and Analysis (2017-Present) and Senior Vice President - Business Analysis (2015-2017), Harbor Capital Advisors, Inc.; and Assurance Executive Director, Ernst & Young LLP (1999-2015). |
John M. Paral (51) Assistant Treasurer | Since 2013 | Director of Fund Administration and Analysis (2017-Present), Vice President (2012-Present) and Financial Reporting Manager (2007-2017), Harbor Capital Advisors, Inc. |
1 | Each Trustee serves for an indefinite term, until his successor is elected. Each Officer is elected annually. |
* | Mr. McCain is deemed an “Interested Trustee” due to his affiliation with the Adviser and Distributor of Harbor Funds. |
** | Officers of the Funds are “interested persons” as defined in the Investment Company Act. |
90
This privacy statement is not part of this report
Harbor’s Privacy Statement
The following privacy statement (“Privacy Statement”) is issued by Harbor Funds and each series of Harbor Funds and its affiliates, Harbor Capital Advisors, Inc., Harbor Services Group, Inc. and Harbor Funds Distributors, Inc. (collectively, “Harbor” “we” or “us”). The measures described in this Privacy Statement reflect the commitments we make to protect the privacy of your personal information. We appreciate the confidence you have shown by entrusting us with your assets.
Personal Information
In the course of providing products and services, we collect personal information about you from the following sources: applications, forms, our website (including any information captured through our use of “cookies”), through mobile applications, by telephone and in correspondence and transactions with us, our affiliates or other parties, including when you contact Shareholder Services or establish an account with us. This Privacy Statement applies to personal information we collect from those sources unless we inform you otherwise.
The personal information collected may include name, address, email address, telephone/fax numbers, account number, social security or taxpayer identification number, investment activity, bank account information, location data (depending on your app settings and device permissions), and other information voluntarily provided by you.
We may also collect certain information automatically when you visit us through our website or a mobile application. For example, we may collect technical and navigational information, such as computer browser type, device type, device ID, Internet protocol address, pages visited average time spent on our website and searches performed on our website. We may use this information to alert you to software compatibility issues; to provide you with or improve or websites, applications, products or services; or to provide you with content that may be of interest to you. We use your IP address to help diagnose problems with our server and to administer our website. Your IP address is also used to gather broad demographic information. This information will be used for internal purposes only. We also collect information in the form of log files that record website and app activity and gather statistics about your browsing habits. These entries are generated automatically, and help us to troubleshoot errors, improve performance and maintain the security of our sites and apps. We use “cookies” and similar files that may be placed on your computer or device for security purposes, to facilitate site navigation and to personalize the appearance of our site. We provide more information regarding cookies and other tracking technologies below.
In addition, we may receive personal information about you that you authorize third parties to provide to us. We also may obtain personal information from third-party service providers to verify your identity, to prevent fraud, or to help us identify products and services that may be of interest to you.
The personal information we collect about you may be transferred to or stored by us or our service providers in the United States or elsewhere, as permitted by law.
If you do not wish to provide personal information to us, we may be unable to provide certain products or services to you.
Information Sharing
We disclose personal information with affiliated and non-affiliated parties: (1) as permitted or required by law or regulation; (2) if we believe that is necessary to: comply with applicable laws, regulations, or industry requirements; respond to requests from a legal, regulatory, or governmental authority; enforce legal terms; detect and resolve any fraud or security concerns, and protect the rights, property, and safety of us, our users, or others; (3) in the event of a merger, acquisition or sale of all or substantially all of our assets; or (4) as otherwise described in this Privacy Statement.
Personal information we collect may be shared with non-affiliated companies that perform support services on our behalf or to other firms that assist us in providing you with products and services (including, without limitation, completing transactions), such as custodians, transfer agents, broker-dealers and marketing service firms (to support our marketing to you), as well as with other financial institutions. We may also share information with affiliates that are engaged in a variety of financial services in order to better service your account(s).
When information is shared with third parties, they are not permitted to use the information for any purpose other than those purposes described in this Privacy Statement or as permitted by law.
If you close your account(s) or if we lose contact with you, we will continue to share information in accordance with our current privacy policy and practices.
If you close your account(s) or if we lose contact with you, we will continue to share information in accordance with our current privacy policy and practices.
91
Harbor’s Privacy Statement—Continued
Security
We maintain physical, electronic and procedural safeguards designed to protect your personal information; however, please be aware that no data security measures can guarantee 100% security.
For shareholders accessing information through our website or a mobile application, various forms of Internet security, such as data encryption firewall barriers, user names and passwords, two-factor authentication, and other tools are used. For additional information regarding our security measures, visit the terms and conditions of use on our website at harborfunds.com.
Linking to
Third Parties
Third Parties
When you visit our website and leave to go to another linked site, we are not responsible for the content or availability of the linked site. Please be advised that if you enter into a transaction on the third-party site, we do not represent either the third party or you. Further, the privacy and security policies of the linked site may differ from those practiced by us.
Cookies and Other Technologies
A cookie is a small text file that is stored on your computer, tablet, or device when you visit a website or a mobile application. Cookies usually store small bits of information about you and what you do on that site or application, which are then used to improve your browsing experience. Some cookies are only used during a single visit, while others are saved on your device until your next visit. Harbor Funds and our third-party providers use both types of cookies to make your visits more productive.
If you are concerned about cookies, they can be blocked from your device, or you can set your browser to notify you when they are being used. Use the Help feature of your browser to learn how.
Our website, mobile application, and emails may use a web beacon. A web beacon helps to measure usage and activity and reports that activity back to the system providers. In some cases, a web beacon triggers the placement of a cookie on your device.
We and our service providers use web beacons and cookies to determine things like if and when you open our emails, what type of device, operating system, email program, or web browser you are using, your IP address, and what links you click within our site or email. These things enable us to gauge the effectiveness, relevance, and value of our content and communications.
We use Google Analytics (which uses a web beacon) to collect information about use of our website and mobile application. For more information on opting out of being tracked by Google Analytics, visithttps://tools.google.com/dlpage/gaoptout. We also use Lucky Orange to collect information about how visitors interact with the content on our public website and mobile application pages. Lucky Orange doesnot track actions or behavior within the password-protected online account access systems. For more information about Lucky Orange, including how to opt out, please visit:https://www.luckyorange.com/privacy.php.
Do Not Track
Our third-party vendors may collect information about users across our website. We do not currently have the capability to respond to a web browser that does not track signals or other mechanisms that provide you with the ability to exercise choice regarding the collection of this information.
Changes to this
Privacy Statement
Privacy Statement
We reserve the right to change or revise this Privacy Statement at any time to reflect changes in the law or our data collection and use practices. New updates to the Privacy Statement will be posted to our website and are include in Harbor Funds’ annual reports to shareholders. Privacy Statement changes will apply to the information collected from the date we post our revised Privacy Statement, as well as to existing information we hold.
Contact Us
If you have any questions or concerns about how we maintain the privacy of your personal information or if you would like to update your personal information on file, please contact us at 800-422-1050 Monday through Friday, between the hours of 8:00 a.m. and 6:00 p.m. Eastern time. You may also write to us at the following postal address:
Harbor Funds
c/o Harbor Services Group, Inc.
PO Box 804660
Chicago, IL 60680-4108
c/o Harbor Services Group, Inc.
PO Box 804660
Chicago, IL 60680-4108
We recommend that you read and retain this notice for your personal files.
Last Updated: December 2018
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111 South Wacker Drive, 34th Floor | Chicago, IL 60606-4302 | 800-422-1050 | harborfunds.com |
Trustees & Officers
Charles F. McCain
Chairman, President & Trustee
Chairman, President & Trustee
Scott M. Amero
Trustee
Trustee
Raymond J. Ball
Trustee
Trustee
Donna J. Dean
Trustee
Trustee
Joseph L. Dowling, III
Trustee
Trustee
Randall A. Hack
Trustee
Trustee
Robert Kasdin
Trustee
Trustee
Kathryn L. Quirk
Trustee
Trustee
Ann M. Spruill
Trustee
Trustee
Erik D. Ojala
Chief Compliance Officer
Chief Compliance Officer
Anmarie S. Kolinski
Treasurer
Treasurer
Brian L. Collins
Vice President
Vice President
Kristof M. Gleich
Vice President
Vice President
Gregg M. Boland
Vice President
Vice President
Diana R. Podgorny
Secretary
Secretary
Jodie L. Crotteau
Assistant Secretary
Assistant Secretary
Lana M. Lewandowski
AML Compliance Officer
& Assistant Secretary
AML Compliance Officer
& Assistant Secretary
Lora A. Kmieciak
Assistant Treasurer
Assistant Treasurer
John M. Paral
Assistant Treasurer
Assistant Treasurer
Investment Adviser
Harbor Capital Advisors, Inc.
111 South Wacker Drive, 34th Floor
Chicago, IL 60606-4302
312-443-4400
111 South Wacker Drive, 34th Floor
Chicago, IL 60606-4302
312-443-4400
Distributor
Harbor Funds Distributors, Inc.
111 South Wacker Drive, 34th Floor
Chicago, IL 60606-4302
312-443-4600
111 South Wacker Drive, 34th Floor
Chicago, IL 60606-4302
312-443-4600
Shareholder Services
Harbor Services Group, Inc.
P.O. Box 804660
Chicago, IL 60680-4108
800-422-1050
P.O. Box 804660
Chicago, IL 60680-4108
800-422-1050
FD.AR.DE.1019
Table of Contents
Annual Report
October 31, 2019
International & Global Funds
Retirement Class | Institutional Class | Administrative Class | Investor Class | |
Harbor Diversified International All Cap Fund | HNIDX | HAIDX | HRIDX | HIIDX |
Harbor Emerging Markets Equity Fund | HNEMX | HAEMX | HREMX | HIEEX |
Harbor Focused International Fund | HNFRX | HNFSX | HNFDX | HNFIX |
Harbor Global Leaders Fund | HNGIX | HGGAX | HRGAX | HGGIX |
Harbor International Fund | HNINX | HAINX | HRINX | HIINX |
Harbor International Growth Fund | HNGFX | HAIGX | HRIGX | HIIGX |
Harbor International Small Cap Fund | HNISX | HAISX | HRISX | HIISX |
Harbor Overseas Fund | HAORX | HAOSX | HAOAX | HAONX |
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Funds’ annual and semi-annual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on the Funds’ website (harborfunds.com), and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from a Fund electronically anytime by contacting your financial intermediary (such as a broker-dealer or bank) or, if you invest directly with Harbor Funds, by calling 800-422-1050.
You may elect to receive all future reports in paper free of charge. If you invest through a financial intermediary (such as a broker-dealer or bank), you can contact your financial intermediary to request that you continue to receive paper copies of the Funds’ shareholder reports. If you invest directly, you can call 800-422-1050 to request that you continue to receive paper copies of the Funds’ shareholder reports. Your election to receive reports in paper will apply to all Harbor Funds held in your account.
Table of Contents
This document must be preceded or accompanied by a Prospectus.
Letter from the Chairman
Charles F. McCain Chairman |
Dear Fellow Shareholder:
After a challenging start early in the fiscal year, the equity markets recovered and performed well for much of the remainder of the year ending October 31, 2019. U.S. equity markets performed well compared to most other markets around the globe, lead by the strong performance of global technology and internet related stocks. Overseas, there were minimal differences between the returns of developed markets and emerging markets, though within regions there was greater dispersion. Concerns about the impact of rising geopolitical tensions and trade wars weighed on equity and fixed income markets. Steady though modest economic growth in the U.S. more than offset these concerns, leading to solid investment results across asset classes. The U.S. bond markets performed well, with the actions of an accommodative Federal Reserve leading to lower interest rates and higher returns for Government bonds as well as most corporate bonds that were supported by solid earnings.
Within the U.S. equity markets and across most overseas markets, larger cap stocks significantly outperformed smaller cap stocks, continuing a pattern observed in prior years. Also persisting was the dominance of growth over value. Outside of a few brief periods when value stocks rallied relative to growth stocks, it was a year generally dominated by larger cap growth stocks.
Comments from the portfolio managers of each Harbor fund are included in the following pages. You will notice that their market and performance comments and outlooks reflect their distinctive investment approaches. We believe shareholders benefit from reading these different perspectives, particularly as they look ahead to the future.
One thing that should stand out as you read the comments of our portfolio managers is their strong commitment to active management. We believe that actively managed portfolios, led by skilled practitioners of the art and science of investing, are well positioned to take advantage of the various opportunities that arise over time to deliver attractive long-term investment results.
Since the launch of the first Harbor funds in 1986, we have served as a gateway for shareholders to access talented, institutional caliber asset management through active, cost-aware investments. We identify specialists in each asset class to manage portfolios, and apply a comprehensive oversight program to monitor their performance and ensure their decisions are in the best interest of shareholders. We offer our shareholders the benefit of institutional caliber portfolio managers, in addition to serving as professional adviser to maintain portfolio manager accountability.
The ending of a calendar year always marks a good time to evaluate your financial goals and investments. We encourage shareholders to take a long-term prospective with their investments. While past performance is never a guarantee of future results, over the long-term, the returns of equities and fixed income securities have historically helped investors achieve their financial objectives. We believe investors should maintain a diversified portfolio of equities, fixed income and cash in an allocation consistent with their long-term financial goas and comfort with risk.
Harbor Funds is proud to offer a variety of equity and fixed income funds to help you achieve your financial goals.
Thank you for your confidence in Harbor Funds. We will do our best to continue to earn your trust in 2020 and the years ahead.
December 23, 2019
Charles F. McCain |
Chairman |
1
Harbor Diversified International All Cap Fund
Manager’s Commentary (Unaudited)
Manager’s Commentary (Unaudited)
Subadviser
Marathon Asset Management LLP
Orion House
5 Upper St. Martin’s Lane
London, WC2H 9EA
England
London, WC2H 9EA
England
Portfolio Managers
Neil M. Ostrer
Since 2015
Since 2015
Charles Carter
Since 2015
Since 2015
Nick Longhurst
Since 2015
Since 2015
William J. Arah
Since 2015
Since 2015
Simon Somerville
Since 2016
Since 2016
Michael Nickson, CFA
Since 2018
Since 2018
Michael Godfrey, CFA
Since 2015
Since 2015
David Cull, CFA
Since 2015
Since 2015
Robert Anstey, CFA
Since 2015
Since 2015
Marathon Asset Management LLP (Marathon-London) has subadvised the Fund since 2015.
Investment Objective
The Fund seeks long-term growth of capital.
Management’s Discussion of
Fund Performance
Fund Performance
Market Review
Following an initial V-shaped decline and swift recovery during the first six months of the year ended October 31, 2019, non-U.S. equity markets in the aggregate continued to perform strongly over the first three quarters of 2019 and rose markedly over the full year ended October 31, 2019 with the MSCI All Country World Ex U.S. Index (ND) ultimately returning 11.27% (all international and global returns are in U.S. Dollars).
On a regional basis, all major markets performed strongly over the period. The developed Asia ex-Japan markets collectively (Australia, Hong Kong, Singapore and New Zealand), which constituted 8.36% of the Index on average over the period, led the strong market performance with the emerging markets following behind. The European markets collectively also performed strongly over the period as did the Japanese market, which constituted 16.32% of the Index on average over the period.
Over the last several years, we have witnessed an extended global equity bull market cycle, reflected in the strong market returns over the past twelve months, yet several factors are now causing investors to become increasingly skittish about the trajectory ahead and more aware of the limitations of continued monetary policy “accommodation.” We believe there is hope that the U.S. Federal Reserve (Fed) keeps the cycle alive by cutting rates further to stimulate growth. In Europe, and Germany in particular, more recent weak manufacturing data heightened fears that the economy is slipping into a recession and the European Central Bank (ECB) reacted to the economic slowdown by restarting quantitative easing. Furthermore, political drama is proving to be unwavering in the United Kingdom (UK). Over the year ended October 31, 2019, Brexit negotiations went back and forth between Parliament and the European Union, ultimately leading to multiple extensions to the Brexit deadline. Additionally, the UK experienced its government leadership change hands during the period and is set to see more change with a general election on the horizon. These factors, alongside fears of trade war disputes, have had a wide-spread impact across all international markets and continue to cultivate a tenor of uncertainty, as evidenced by the relative outperformance of more defensive sectors recently.
Performance
Harbor Diversified International All Cap Fund outperformed the MSCI All Country World Ex. U.S. (ND) Index over the year ended October 31, 2019. The Fund returned 11.99% (Retirement Class), 11.90% (Institutional Class), 11.58% (Administrative Class), and 11.43% (Investor Class) over the year whilst the Index returned 11.27%, resulting in relative outperformance, with a significant positive contribution coming from stock selection. The regional allocation had a marginal negative impact as did the residual currency effect. Stock selection within the emerging markets, particularly Brazil, had the largest positive influence on Fund performance. Stock selection in Japan also contributed positively. Conversely, stock selection within the developed Asia Pacific ex-Japan region (namely Hong Kong) weighed on relative returns, as did stock selection in Europe.
From a sector standpoint, stock selection within the Materials, Consumer Discretionary and Information Technology sectors provided positive contributions to relative performance. Conversely, stock selection in the Financials and Communication Services sector weighed on relative returns as did the Fund’s underweight exposure to the Utilities sector, a typically defensive sector.
2
Harbor Diversified International All Cap Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
CHANGE IN A $50,000 INVESTMENT
For the period 11/02/2015 through 10/31/2019
The graph compares a $50,000 investment in the Institutional Class shares of the Fund with the performance of the MSCI All Country World Ex. U.S. (ND) Index. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
TOTAL RETURNS
For the periods ended 10/31/2019
1 Year | 5 Years | Annualized | ||||||
Life of Fund | ||||||||
Harbor Diversified International All Cap Fund | ||||||||
Retirement Class1,2 | 11.99% | N/A | 5.21% | |||||
Institutional Class1 | 11.90 | N/A | 5.15 | |||||
Administrative Class1 | 11.58 | N/A | 4.89 | |||||
Investor Class1 | 11.43 | N/A | 4.76 | |||||
Comparative Index | ||||||||
MSCI All Country World Ex. U.S. (ND)1 | 11.27% | N/A | 6.06% |
As stated in the Fund’s prospectus dated March 1, 2019, the expense ratios were 0.72% (Net) and 0.91% (Gross) (Retirement Class); 0.80% (Net) and 0.99% (Gross) (Institutional Class); 1.05% (Net) and 1.24% (Gross) (Administrative Class); 1.17% (Net) and 1.36% (Gross) (Investor Class). The net expense ratios reflect an expense limitation agreement (excluding interest expense, if any) effective through 02/29/2020. The expense ratios in the prospectus may differ from the actual expense ratios for the period disclosed within this report. The expense ratios shown in the prospectus are based on the prior fiscal year, adjusted to reflect changes, if any, in contractual arrangements that occurred prior to the date of the prospectus (or supplement thereto, if applicable).
Performance data shown represents past performance and is no guarantee of future results. Past performance is net of management fees and expenses and reflects reinvested dividends and distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or upon the redemption of Fund shares. Past performance reflects the beneficial effect of any expense waivers or reimbursements, without which returns would have been lower. Investment returns and principal value will fluctuate so that Fund shares, when redeemed, may be worth more or less than their original cost. Returns for periods less than one year are not annualized. Current performance may be higher or lower and is available through the most recent month end atharborfunds.com or by calling 800-422-1050.
Outlook & Strategy
While it continues to appear that market participants have convinced themselves that monetary policy “accommodation” will continue indefinitely, they are becoming more cognizant of the unintended negative consequences of this accommodative monetary backdrop and aware that monetary policy normalization must have its day at some point. Debt levels have ballooned as a consequence of historically low interest rates. At current valuation levels and on peak profit margins with little in the way of earnings growth over the last few quarters, equity markets are subject to downside risks and geopolitical uncertainties. Thus, while we are taking advantage of price dislocations and establishing new positions where relative valuations present an opportunity to do so, the Fund remains focused on downside protection with a “quality” tilt from a characteristics standpoint. Distinctively, we believe that emerging markets do present an attractive opportunity set over the medium term, particularly if investors continue to recalibrate growth expectations, pull capital from those markets as a result and, in turn, force managers operating businesses in those markets to allocate capital more efficiently.
1 | The “Life of Fund” return as shown reflects the period 11/02/2015 through 10/31/2019. |
2 | Retirement Class shares commenced operations on March 1, 2016. The performance attributed to the Retirement Class shares prior to that date is that of the Institutional Class shares. Performance prior to March 1, 2016 has not been adjusted to reflect the lower expenses of Retirement Class shares. During this period, Retirement Class shares would have had returns similar to, but potentially higher than, Institutional Class shares due to the fact that Retirement Class shares represent interests in the same portfolio as Institutional Class shares but are subject to lower expenses. |
This report contains the current opinions of Marathon Asset Management LLP as of the date of this report and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Such opinions are subject to change without notice and securities described herein may no longer be included in, or may at any time be removed from, the Fund’s portfolio. This report is distributed for informational purposes only. Information contained herein has been obtained from sources believed reliable, but not guaranteed.
Investing in international and emerging markets poses special risks, including potentially greater price volatility due to social, political and economic factors, as well as currency exchange rate fluctuations. These risks are more severe for securities of issuers in emerging market regions. For information on the different share classes and the risks associated with an investment in the Fund, please refer to the current prospectus.
3
Harbor Diversified International All Cap Fund
Portfolio of Investments—October 31, 2019
Portfolio of Investments—October 31, 2019
REGION BREAKDOWN(% of investments) – Unaudited
(Excludes derivatives and short-term investments)
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—97.1% | |||
Shares | Value | ||
AEROSPACE & DEFENSE—1.3% | |||
27,277 | Airbus SE (France) | $3,913 | |
314,027 | BAE Systems plc (United Kingdom) | 2,346 | |
123,880 | Embraer SA (Brazil) | 542 | |
253,642 | Rolls-Royce Holdings plc (United Kingdom)* | 2,334 | |
12,432 | Thales SA (France) | 1,215 | |
10,350 | |||
AIR FREIGHT & LOGISTICS—0.1% | |||
24,790 | Oesterreichische Post AG (Austria) | 914 | |
AIRLINES—0.2% | |||
92,068 | EasyJet plc (United Kingdom) | 1,477 | |
AUTO COMPONENTS—1.1% | |||
39,800 | Bridgestone Corp. (Japan) | 1,654 | |
174,438 | Gestamp Automocion SA ADR (Spain)1,2 | 747 | |
154,425 | GUD Holdings Ltd. (Australia) | 1,152 | |
35,429 | Hankook Tire & Technology Co. Ltd. (South Korea) | 945 | |
11,600 | Koito Manufacturing Co. Ltd. (Japan) | 607 | |
30,136 | Magna International Inc. (Canada) | 1,620 | |
2,318,597 | Nemak SAB de CV (Mexico)2 | 988 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
AUTO COMPONENTS—Continued | |||
37,500 | Sumitomo Electric Industries Ltd. (Japan) | $514 | |
7,900 | Toyota Industries Corp. (Japan) | 474 | |
8,701 | |||
AUTOMOBILES—1.3% | |||
1,321,931 | Baic Motor Corp. Ltd. (China)2 | 820 | |
27,976 | Bayerische Motoren Werke AG (Germany) | 2,142 | |
15,684 | Hyundai Motor Co. (South Korea) | 1,643 | |
74,800 | Toyota Motor Corp. (Japan) | 5,190 | |
9,795 | |||
BANKS—7.9% | |||
374,730 | Axis Bank Ltd. (India) | 3,860 | |
54,353 | Bancolombia SA ADR (Colombia)1 | 2,820 | |
111,500 | Bangkok Bank PCL (Thailand) | 642 | |
315,977 | Bank of Ireland Group plc (Ireland) | 1,523 | |
496,576 | Bankia SA (Spain) | 947 | |
1,471,965 | Barclays plc (United Kingdom) | 3,193 | |
64,460 | BNP Paribas SA (France) | 3,369 | |
21,862 | Danske Bank AS (Denmark) | 312 | |
39,517 | DBS Group Holdings Ltd. (Singapore) | 753 |
4
Harbor Diversified International All Cap Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—Continued | |||
Shares | Value | ||
BANKS—Continued | |||
60,883 | DNB ASA (Norway) | $1,109 | |
6,762,338 | Eurobank Ergasias SA (Greece)* | 6,855 | |
21,400 | Fukuoka Financial Group Inc. (Japan) | 413 | |
803,306 | Grupo Financiero Inbursa SAB de CV (Mexico) | 999 | |
49,212 | Hana Financial Group Inc. (South Korea) | 1,425 | |
439,065 | HSBC Holdings plc (Hong Kong) | 3,314 | |
264,779 | Intesa Sanpaolo SpA (Italy) | 663 | |
250,000 | Kasikornbank PCL (Thailand) | 1,150 | |
33,657 | Komercni Banka AS (Czech Republic) | 1,138 | |
3,424,406 | Lloyds Banking Group plc (United Kingdom) | 2,519 | |
943,300 | Mizuho Financial Group Inc. (Japan) | 1,464 | |
54,913 | Nordea Bank ABP (Sweden) | 402 | |
711,100 | Resona Holdings Inc. (Japan) | 3,092 | |
124,139 | Shinhan Financial Group Co. Ltd. (South Korea) | 4,523 | |
337,635 | Standard Chartered plc (United Kingdom) | 3,064 | |
84,900 | Sumitomo Mitsui Financial Group Inc. (Japan) | 3,014 | |
13,900 | Sumitomo Mitsui Trust Holdings Inc. (Japan) | 507 | |
227,907 | Svenska Handelsbanken AB (Sweden) | 2,287 | |
1,256,762 | Turkiye Garanti Bankasi AS (Turkey)* | 2,020 | |
167,744 | UniCredit SpA (Italy) | 2,128 | |
83,582 | United Overseas Bank Ltd. (Singapore) | 1,646 | |
61,151 | |||
BEVERAGES—3.5% | |||
31,872 | Anheuser-Busch InBev SA (Belgium) | 2,573 | |
11,400 | Asahi Group Holdings Ltd. (Japan) | 571 | |
16,996 | Carlsberg AS (Denmark) | 2,393 | |
151,461 | Cia Cervecerias Unidas SA (Chile) | 1,509 | |
332,303 | Coca-Cola Amatil Ltd. (Australia) | 2,332 | |
14,112 | Coca-Cola European Partners plc (United States) | 755 | |
129,278 | Davide Campari-Milano SpA (Italy) | 1,186 | |
109,133 | Diageo plc (United Kingdom) | 4,467 | |
850,534 | East African Breweries Ltd. (Kenya) | 1,653 | |
43,014 | Heineken NV (Netherlands) | 4,392 | |
175,100 | Kirin Holdings Co. Ltd. (Japan) | 3,715 | |
10,200 | Suntory Beverage & Food Ltd. (Japan) | 436 | |
140,000 | Tsingtao Brewery Co. Ltd. (China) | 811 | |
26,793 | |||
BUILDING PRODUCTS—1.7% | |||
255,541 | Assa Abloy AB Class B (Sweden) | 6,069 | |
10,723 | Geberit AG (Switzerland) | 5,448 | |
260,772 | GWA Group Ltd. (Australia) | 523 | |
51,700 | LIXIL Group Corp. (Japan) | 961 | |
13,001 | |||
CAPITAL MARKETS—2.5% | |||
312,765 | 3i Group plc (United Kingdom) | 4,570 | |
122,609 | Brookfield Asset Management Inc. (Canada) | 6,780 | |
29,991 | Close Brothers Group plc (United Kingdom) | 538 | |
49,839 | Georgia Capital plc (United Kingdom)* | 629 | |
155,228 | IG Group Holdings plc (United Kingdom) | 1,277 | |
19,100 | JAFCO Co. Ltd. (Japan) | 718 | |
28,000 | Japan Exchange Group Inc. (Japan) | 462 | |
214,928 | Jupiter Fund Management plc (United Kingdom) | 954 | |
314,500 | Nomura Holdings Inc. (Japan) | 1,429 | |
16,973 | Rathbone Brothers plc (United Kingdom) | 457 | |
81,187 | St. James's Place plc (United Kingdom) | 1,095 | |
31,935 | UBS Group AG (Switzerland)* | 378 | |
19,287 | |||
CHEMICALS—2.0% | |||
55,391 | BASF SE (Germany) | 4,211 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
CHEMICALS—Continued | |||
60,890 | Enaex SA (Chile) | $635 | |
12,900 | Nippon Shokubai Co. Ltd. (Japan) | 795 | |
19,500 | Nissan Chemical Corp. (Japan) | 801 | |
8,200 | Nitto Denko Corp. (Japan) | 454 | |
203,616 | Orica Ltd. (Australia) | 3,218 | |
140,468 | PhosAgro PJSC GDR (Russia)3 | 1,767 | |
8,400 | Shin-Etsu Chemical Co. Ltd. (Japan) | 937 | |
88,752 | Tikkurila OYJ (Finland)4 | 1,417 | |
13,700 | Tokyo Ohka Kogyo Co. Ltd. (Japan) | 542 | |
67,500 | Toray Industries Inc. (Japan) | 477 | |
15,254 | |||
COMMERCIAL SERVICES & SUPPLIES—3.3% | |||
8,000 | AEON Delight Co. Ltd. (Japan) | 279 | |
324,363 | Brambles Ltd. (Australia) | 2,681 | |
2,199,427 | Cleanaway Waste Management Ltd. (Australia) | 2,795 | |
74,648 | Edenred (France) | 3,935 | |
42,812 | Elis SA (France) | 818 | |
766,827 | G4S plc (United Kingdom) | 2,057 | |
317,255 | HomeServe plc (United Kingdom) | 4,765 | |
69,198 | Ritchie Bros Auctioneers Inc. (Canada) | 2,847 | |
13,884 | S-1 Corp. (South Korea) | 1,119 | |
12,300 | Secom Co. Ltd. (Japan) | 1,140 | |
1,138,297 | Serco Group plc (United Kingdom)* | 2,301 | |
10,200 | Sohgo Security Services Co. Ltd. (Japan) | 554 | |
25,291 | |||
CONSTRUCTION & ENGINEERING—0.9% | |||
46,415 | Boskalis Westminster NV (Netherlands)4 | 1,022 | |
19,895 | Ferrovial SA (Spain) | 587 | |
77,600 | Maeda Corp. (Japan) | 720 | |
160,200 | Obayashi Corp. (Japan) | 1,649 | |
119,800 | Penta-Ocean Construction Co. Ltd. (Japan) | 735 | |
814,724 | Raubex Group Ltd. (South Africa) | 1,052 | |
107,700 | Shimizu Corp. (Japan) | 1,004 | |
8,000 | SHO-BOND Holdings Co. Ltd. (Japan) | 310 | |
7,079 | |||
CONSTRUCTION MATERIALS—0.6% | |||
16,112 | CRH plc (Ireland) | 587 | |
164,747 | Fletcher Building Ltd. (New Zealand) | 484 | |
5,287 | Imerys SA (France) | 204 | |
28,400 | Taiheiyo Cement Corp. (Japan) | 804 | |
8,816 | Vicat SA (France) | 374 | |
78,799 | Wienerberger AG (Austria) | 2,134 | |
4,587 | |||
CONSUMER FINANCE—0.8% | |||
38,000 | AEON Financial Service Co. Ltd. (Japan) | 579 | |
2,985,340 | Gentera SAB de CV (Mexico) | 2,949 | |
310,183 | International Personal Finance plc (United Kingdom) | 534 | |
322,935 | Non-Standard Finance plc (United Kingdom)2 | 150 | |
149,728 | Provident Financial plc (United Kingdom) | 855 | |
62,401 | Shriram Transport Finance Co. Ltd. (India) | 1,001 | |
6,068 | |||
CONTAINERS & PACKAGING—0.4% | |||
476,742 | DS Smith plc (United Kingdom) | 2,210 | |
56,400 | Toyo Seikan Group Holdings Ltd. (Japan) | 892 | |
3,102 | |||
DISTRIBUTORS—0.2% | |||
157,628 | Inchcape plc (United Kingdom) | 1,318 |
5
Harbor Diversified International All Cap Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—Continued | |||
Shares | Value | ||
DIVERSIFIED FINANCIAL SERVICES—0.1% | |||
1,258,000 | First Pacific Co. Ltd. (Hong Kong) | $481 | |
DIVERSIFIED TELECOMMUNICATION SERVICES—2.0% | |||
41,480 | BCE Inc. (Canada) | 1,968 | |
132,047 | Deutsche Telekom AG (Germany) | 2,323 | |
707,872 | Koninklijke KPN NV (Netherlands) | 2,197 | |
180,191 | KT Corp. ADR (South Korea)1 | 2,024 | |
81,300 | Nippon Telegraph & Telephone Corp. (Japan) | 4,036 | |
274,005 | Spark New Zealand Ltd. (New Zealand) | 786 | |
464,081 | Telkom SA SOC Ltd. (South Africa) | 2,122 | |
15,456 | |||
ELECTRIC UTILITIES—0.4% | |||
58,500 | Kansai Electric Power Co. (Japan) | 682 | |
23,739 | Orsted AS (Denmark)2 | 2,084 | |
2,766 | |||
ELECTRICAL EQUIPMENT—2.2% | |||
60,800 | Legrand SA (France) | 4,750 | |
7,400 | Mabuchi Motor Co. Ltd. (Japan) | 300 | |
35,261 | Schneider Electric SE (France) | 3,277 | |
2,981,850 | TECO Electric and Machinery Co. Ltd. (Taiwan) | 2,644 | |
22,100 | Ushio Inc. (Japan) | 330 | |
72,439 | Vestas Wind Systems AS (Denmark) | 5,902 | |
17,203 | |||
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—2.0% | |||
24,500 | Azbil Corp. (Japan) | 682 | |
270,000 | Chroma ATE Inc. (Taiwan) | 1,342 | |
531,735 | Delta Electronics Inc. (Taiwan) | 2,335 | |
1,015 | Hirose Electric Co. Ltd. (Japan) | 128 | |
12,700 | Hitachi High-Technologies Corp. (Japan) | 790 | |
133,500 | Hitachi Ltd. (Japan) | 4,982 | |
24,900 | Kyocera Corp. (Japan) | 1,634 | |
10,300 | Omron Corp. (Japan) | 603 | |
13,000 | Shimadzu Corp. (Japan) | 347 | |
52,390 | Spectris plc (United Kingdom) | 1,624 | |
9,900 | TDK Corp. (Japan) | 977 | |
15,444 | |||
ENERGY EQUIPMENT & SERVICES—0.5% | |||
127,240 | John Wood Group plc (United Kingdom) | 559 | |
44,888 | Petrofac Ltd. (United Kingdom) | 224 | |
561,482 | Saipem SpA (Italy)* | 2,549 | |
28,598 | TechnipFMC plc (France) | 569 | |
3,901 | |||
ENTERTAINMENT—0.3% | |||
24,015 | CTS Eventim AG & Co. KGaA (Germany) | 1,454 | |
36,468 | Modern Times Group Mortgage AB Class B (Sweden)* | 338 | |
15,500 | Nexon Co. Ltd. (Japan)* | 180 | |
7,800 | Toho Co. Ltd. (Japan) | 315 | |
2,287 | |||
FOOD & STAPLES RETAILING—2.6% | |||
112,802 | Alimentation Couche-Tard Inc. (Canada) | 3,383 | |
52,700 | Dairy Farm International Holdings Ltd. (Hong Kong) | 318 | |
172,812 | Eurocash SA (Poland) | 992 | |
102,517 | Koninklijke Ahold Delhaize NV (Netherlands) | 2,555 | |
67,502 | Loblaw Cos. Ltd. (Canada) | 3,600 | |
19,017 | Magnit PJSC (Russia) | 955 | |
14,600 | Matsumotokiyoshi Holdings Co. Ltd. (Japan) | 514 | |
370,520 | Metcash Ltd. (Australia) | 720 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
FOOD & STAPLES RETAILING—Continued | |||
26,669 | PriceSmart Inc. (United States) | $1,976 | |
80,900 | Seven & I Holdings Co. Ltd. (Japan) | 3,056 | |
10,800 | Sundrug Co. Ltd. (Japan) | 357 | |
646,845 | Tesco plc (United Kingdom) | 1,975 | |
20,401 | |||
FOOD PRODUCTS—2.6% | |||
6,800 | Calbee Inc. (Japan) | 227 | |
380,000 | China Mengniu Dairy Co. Ltd. (China)* | 1,515 | |
2,633,100 | Delfi Ltd. (Singapore) | 1,919 | |
200,112 | Devro plc (United Kingdom) | 416 | |
1,514,376 | Grupo Lala SAB de CV (Mexico) | 1,490 | |
178,834 | Industrias Bachoco SAB de CV (Mexico) | 804 | |
21,600 | Megmilk Snow Brand Co. Ltd. (Japan) | 520 | |
6,400 | Meiji Holdings Co. Ltd. (Japan) | 461 | |
64,300 | Nippon Suisan Kaisha Ltd. (Japan) | 368 | |
214,891 | Tiger Brands Ltd. (South Africa) | 3,051 | |
1,774,255 | Tingyi Cayman Islands Holding Corp. (China) | 2,360 | |
40,600 | Toyo Suisan Kaisha Ltd. (Japan) | 1,710 | |
239,287 | Ulker Biskuvi Sanayi AS (Turkey)* | 770 | |
28,031 | Viscofan SA (Spain) | 1,520 | |
3,738,000 | Want Want China Holdings Ltd. (China) | 3,149 | |
20,280 | |||
GAS UTILITIES—0.1% | |||
19,900 | Tokyo Gas Co. Ltd. (Japan) | 486 | |
HEALTH CARE EQUIPMENT & SUPPLIES—3.1% | |||
61,450 | Coloplast AS (Denmark) | 7,398 | |
1,147,556 | ConvaTec Group plc (United Kingdom)2 | 2,932 | |
98,304 | Demant AS (Denmark)* | 2,597 | |
89,464 | GN Store Nord AS (Denmark) | 3,936 | |
14,000 | Hoya Corp. (Japan) | 1,237 | |
60,128 | Koninklijke Philips NV (Netherlands) | 2,638 | |
36,000 | Olympus Corp. (Japan) | 490 | |
40,256 | Smith & Nephew plc (United Kingdom) | 864 | |
7,340 | Sonova Holding AG (Switzerland) | 1,684 | |
23,776 | |||
HEALTH CARE PROVIDERS & SERVICES—0.9% | |||
51,900 | Alfresa Holdings Corp. (Japan) | 1,159 | |
37,194 | Amplifon SpA (Italy) | 935 | |
57,583 | Fresenius Medical Care AG & Co. KGaA (Germany) | 4,156 | |
33,000 | MediPAL Holdings Corp. (Japan) | 754 | |
461,043 | Sigma Healthcare Ltd. (Australia) | 185 | |
7,189 | |||
HOTELS, RESTAURANTS & LEISURE—3.8% | |||
1,488,000 | Ajisen China Holdings Ltd. (China) | 427 | |
34,782 | Carnival plc (United Kingdom) | 1,392 | |
254,997 | Compass Group plc (United Kingdom) | 6,789 | |
38,746 | Flutter Entertainment plc (United Kingdom) | 3,996 | |
1,272,800 | Genting Singapore Ltd. (Singapore) | 878 | |
246,649 | GVC Holdings plc (United Kingdom) | 2,846 | |
594,641 | Hongkong & Shanghai Hotels Ltd. (Hong Kong) | 670 | |
753,794 | Merlin Entertainments plc (United Kingdom)2 | 4,441 | |
72,765 | Playtech plc (United Kingdom) | 370 | |
319,828 | SSP Group plc (United Kingdom) | 2,637 | |
1,547,662 | Thomas Cook Group plc (United Kingdom)* | —x | |
364,146 | Tsogo Sun Gaming Ltd. (South Africa) | 300 | |
361,584 | Tsogo Sun Hotels Ltd. (South Africa)* | 87 |
6
Harbor Diversified International All Cap Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—Continued | |||
Shares | Value | ||
HOTELS, RESTAURANTS & LEISURE—Continued | |||
156,994 | TUI AG (Germany) | $2,048 | |
65,061 | Yum China Holdings Inc. (China) | 2,765 | |
29,646 | |||
HOUSEHOLD DURABLES—0.9% | |||
87,791 | Barratt Developments plc (United Kingdom) | 718 | |
56,300 | Casio Computer Co. Ltd. (Japan) | 914 | |
192,836 | McCarthy & Stone plc (United Kingdom)2 | 365 | |
573,400 | MRV Engenharia e Participacoes SA (Brazil) | 2,515 | |
6,800 | Rinnai Corp. (Japan) | 500 | |
45,300 | Sekisui Chemical Co. Ltd. (Japan) | 790 | |
21,900 | Sony Corp. (Japan) | 1,333 | |
7,135 | |||
HOUSEHOLD PRODUCTS—0.6% | |||
17,700 | Lion Corp. (Japan) | 371 | |
59,177 | Reckitt Benckiser Group plc (United Kingdom) | 4,579 | |
4,950 | |||
INDEPENDENT POWER & RENEWABLE ELECTRICITY PRODUCERS—0.0% | |||
1,793,400 | Lopez Holdings Corp. (Philippines) | 152 | |
INDUSTRIAL CONGLOMERATES—2.2% | |||
394,500 | CK Hutchison Holdings Ltd. (Hong Kong) | 3,642 | |
33,299 | DCC plc (United Kingdom) | 3,123 | |
83,200 | Jardine Matheson Holdings Ltd. (Hong Kong) | 4,743 | |
43,639 | LG Corp. (South Korea) | 2,602 | |
920,927 | Quinenco SA (Chile) | 2,013 | |
972,900 | Sime Darby Berhad (Malaysia) | 528 | |
16,651 | |||
INSURANCE—4.9% | |||
82,396 | Admiral Group plc (United Kingdom) | 2,156 | |
102,608 | AXA SA (France) | 2,716 | |
171,600 | Dai-ichi Life Holdings Inc. (Japan) | 2,797 | |
16,557 | Fairfax Financial Holdings Ltd. (Canada) | 7,014 | |
116,400 | Great Eastern Holdings Ltd. (Singapore) | 1,869 | |
5,680 | Hannover Rueck SE (Germany) | 1,007 | |
5,035 | Helvetia Holding AG (Switzerland) | 707 | |
188,000 | Japan Post Holdings Co. Ltd. (Japan) | 1,726 | |
34,500 | MS&AD Insurance Group Holdings Inc. (Japan) | 1,114 | |
211,928 | Porto Seguro SA (Brazil)* | 3,033 | |
263,529 | QBE Insurance Group Ltd. (Australia) | 2,293 | |
107,296 | Sampo OYJ (Finland) | 4,397 | |
14,550 | Samsung Fire & Marine Insurance Co. Ltd. (South Korea) | 2,707 | |
41,400 | Sompo Holdings Inc. (Japan) | 1,627 | |
11,100 | Sony Financial Holdings Inc. (Japan) | 239 | |
37,700 | T&D Holdings Inc. (Japan) | 420 | |
40,500 | Tokio Marine Holdings Inc. (Japan) | 2,190 | |
38,012 | |||
INTERACTIVE MEDIA & SERVICES—2.2% | |||
42,768 | Adevinta ASA B (Norway)* | 489 | |
238,917 | Auto Trader Group plc (United Kingdom)2 | 1,741 | |
37,067 | Baidu Inc. ADR (China)*,1 | 3,775 | |
183,216 | Carsales.com Ltd. (Australia) | 1,963 | |
315,715 | Domain Holdings Australia Ltd. (Australia) | 689 | |
872,302 | Rightmove plc (United Kingdom) | 6,771 | |
51,719 | Yandex NV (Russia)* | 1,727 | |
17,155 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
INTERNET & DIRECT MARKETING RETAIL—1.0% | |||
4,514 | GS Home Shopping Inc. (South Korea) | $577 | |
128,882 | HelloFresh SE (Germany)* | 2,247 | |
177,167 | Just Eat plc (United Kingdom)* | 1,687 | |
41,877 | MoneySuperMarket.com Group plc (United Kingdom) | 186 | |
331,520 | PChome Online Inc. (Taiwan)* | 1,437 | |
2,579 | Takeaway.com NV (Netherlands)*,2 | 210 | |
26,543 | Trip.com Group Ltd. ADR (China)*,1 | 876 | |
2,796 | Zooplus AG (Germany)* | 306 | |
9,700 | ZOZO Inc. (Japan) | 226 | |
7,752 | |||
IT SERVICES—0.9% | |||
14,500 | Alten SA (France) | 1,595 | |
12,308 | Genpact Ltd. (United States) | 482 | |
13,100 | ITOCHU Techno-Solutions Corp. (Japan) | 353 | |
18,100 | Nomura Research Institute Ltd. (Japan) | 384 | |
183,000 | NTT Data Corp. (Japan) | 2,403 | |
5,200 | OBIC Co. Ltd. (Japan) | 651 | |
8,700 | Otsuka Corp. (Japan) | 351 | |
14,700 | SCSK Corp. (Japan) | 748 | |
6,967 | |||
LEISURE PRODUCTS—1.1% | |||
41,100 | Bandai Namco Holdings Inc. (Japan) | 2,527 | |
293,386 | Giant Manufacturing Co. Ltd. (Taiwan) | 2,169 | |
802,000 | Goodbaby International Holdings Ltd. (Hong Kong)* | 117 | |
161,611 | Merida Industry Co. Ltd. (Taiwan) | 935 | |
71,100 | Sega Sammy Holdings Inc. (Japan) | 1,001 | |
2,000 | Shimano Inc. (Japan) | 333 | |
45,532 | Spin Master Corp. (Canada)*,2 | 1,288 | |
8,370 | |||
LIFE SCIENCES TOOLS & SERVICES—0.4% | |||
5,567 | Eurofins Scientific SE (France) | 2,822 | |
7,322 | Gerresheimer AG (Germany) | 591 | |
3,413 | |||
MACHINERY—2.1% | |||
15,097 | Andritz AG (Austria) | 679 | |
372,998 | CNH Industrial NV (Italy) | 4,061 | |
13,200 | Daifuku Co. Ltd. (Japan) | 700 | |
14,665 | GEA Group AG (Germany) | 448 | |
9,200 | Hoshizaki Corp. (Japan) | 782 | |
31,865 | IMI plc (United Kingdom) | 414 | |
14,600 | Makita Corp. (Japan) | 491 | |
14,500 | Mitsui E&S Holdings Co. Ltd. (Japan)* | 147 | |
130,751 | Rotork plc (United Kingdom) | 511 | |
148,148 | Sandvik AB (Sweden) | 2,617 | |
27,914 | Stabilus SA (Germany) | 1,567 | |
62,513 | Wartsila OYJ Abp (Finland) | 661 | |
1,504,000 | Yungtay Engineering Co. Ltd. (Taiwan) | 3,210 | |
16,288 | |||
MARINE—0.3% | |||
38,341,781 | Cia Sud Americana de Vapores SA (Chile)* | 1,261 | |
213,595 | Irish Continental Group plc (Ireland) | 1,021 | |
2,282 | |||
MEDIA—2.4% | |||
31,938 | Axel Springer SE (Germany)* | 2,235 | |
1,415,600 | BEC World PCL (Thailand)* | 312 | |
46,477 | Daily Mail & General Trust plc (United Kingdom) | 529 | |
17,287 | Euromoney Institutional Investor plc (United Kingdom) | 316 |
7
Harbor Diversified International All Cap Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—Continued | |||
Shares | Value | ||
MEDIA—Continued | |||
94,200 | Fuji Media Holdings Inc. (Japan) | $1,273 | |
113,894 | Grupo Televisa SAB ADR (Mexico)1 | 1,259 | |
102,100 | Informa plc (United Kingdom) | 1,026 | |
1,311,473 | ITV plc (United Kingdom) | 2,275 | |
32,043 | JCDecaux SA (France) | 876 | |
14,261,121 | Media Nusantara Citra TBK PT (Indonesia) | 1,335 | |
781,153 | Nine Entertainment Co. Holdings Ltd. (Australia) | 991 | |
95,820 | Nippon Television Holdings Inc. (Japan) | 1,253 | |
36,291 | Nordic Entertainment Group AB (Sweden) | 1,032 | |
23,293 | Schibsted ASA Class A (Norway) | 684 | |
19,784 | Schibsted ASA Class B (Norway) | 552 | |
345,879 | Sky Network Television Ltd. (New Zealand) | 200 | |
331,400 | Television Broadcasts Ltd. (Hong Kong) | 547 | |
155,865 | WPP plc (United Kingdom) | 1,945 | |
18,640 | |||
METALS & MINING—4.4% | |||
84,626 | Acerinox SA (Spain) | 793 | |
1,338,070 | Alrosa PJSC (Russia) | 1,553 | |
1,043,286 | Alumina Ltd. (Australia) | 1,629 | |
64,310 | Anglo American Platinum Ltd. (South Africa) | 4,803 | |
65,367 | Anglo American plc (South Africa) | 1,673 | |
127,466 | Antofagasta plc (United Kingdom) | 1,436 | |
101,503 | ArcelorMittal SA (France) | 1,509 | |
233,392 | Barrick Gold Corp. (Canada) | 4,054 | |
50,207 | BHP Group Ltd. (Australia) | 1,231 | |
189,654 | BlueScope Steel Ltd. (Australia) | 1,736 | |
74,724 | Cia de Minas Buenaventura SAA ADR (Peru)1 | 1,146 | |
20,434 | Franco-Nevada Corp. (Canada) | 1,983 | |
170,195 | Freeport-McMoRan Inc. (United States) | 1,671 | |
957,825 | Glencore plc (United Kingdom)* | 2,891 | |
117,651 | Newcrest Mining Ltd. (Australia) | 2,568 | |
62,966 | Rio Tinto plc (United Kingdom) | 3,278 | |
9,800 | Sumitomo Metal Mining Co. Ltd. (Japan) | 328 | |
34,282 | |||
MULTILINE RETAIL—0.1% | |||
30,900 | Marui Group Co. Ltd. (Japan) | 687 | |
18,000 | Ryohin Keikaku Co. Ltd. (Japan) | 401 | |
1,088 | |||
OIL, GAS & CONSUMABLE FUELS—2.7% | |||
1,232,095 | BP plc (United Kingdom) | 7,813 | |
36,742 | Caltex Australia Ltd. (Australia) | 691 | |
158,575 | Canadian Natural Resources Ltd. (Canada) | 3,999 | |
127,064 | Equinor ASA (Norway) | 2,359 | |
208,800 | INPEX Corp. (Japan) | 1,930 | |
98,253 | Inter Pipeline Ltd. (Canada) | 1,649 | |
14,719 | Lukoil PJSC ADR (Russia)1 | 1,355 | |
142,645 | PrairieSky Royalty Ltd. (Canada) | 1,393 | |
21,189 | |||
PAPER & FOREST PRODUCTS—0.0% | |||
25,800 | Oji Holdings Corp. (Japan) | 133 | |
PERSONAL PRODUCTS—2.0% | |||
37,486 | AMOREPACIFIC Group (South Korea) | 2,717 | |
679,916 | Asaleo Care Ltd. (Australia)* | 448 | |
38,100 | Kao Corp. (Japan) | 3,063 | |
2,700 | Kose Corp. (Japan) | 479 | |
320,709 | L'Occitane International SA (Hong Kong) | 722 | |
13,800 | Mandom Corp. (Japan) | 382 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
PERSONAL PRODUCTS—Continued | |||
365,536 | Natura Cosmeticos SA (Brazil) | $2,840 | |
81,261 | Unilever plc (United Kingdom) | 4,866 | |
15,517 | |||
PHARMACEUTICALS—3.2% | |||
29,400 | Astellas Pharma Inc. (Japan) | 505 | |
4,181,457 | Genomma Lab Internacional SAB de CV (Mexico)* | 4,423 | |
79,907 | Haw Par Corp. Ltd. (Singapore) | 787 | |
109,592 | Novo Nordisk AS (Denmark) | 6,026 | |
43,000 | Otsuka Holdings Co. Ltd. (Japan) | 1,793 | |
32,641 | Roche Holding AG (Switzerland) | 9,823 | |
5,600 | Sawai Pharmaceutical Co. Ltd. (Japan) | 316 | |
11,200 | Takeda Pharmaceutical Co. Ltd. (Japan) | 405 | |
15,700 | Tsumura & Co. (Japan) | 432 | |
24,510 | |||
PROFESSIONAL SERVICES—3.7% | |||
55,960 | Adecco Group AG (Switzerland) | 3,327 | |
328,726 | ALS Ltd. (Australia) | 1,828 | |
669,284 | Capita plc (United Kingdom)* | 1,354 | |
11,562 | DKSH Holding AG (Switzerland) | 550 | |
111,184 | Experian plc (United Kingdom) | 3,505 | |
837,989 | Hays plc (United Kingdom) | 1,705 | |
103,011 | Intertek Group plc (United Kingdom) | 7,142 | |
141,335 | IPH Ltd. (Australia) | 786 | |
43,100 | Nomura Co. Ltd. (Japan) | 532 | |
100,408 | PageGroup plc (United Kingdom) | 579 | |
26,100 | Persol Holdings Co. Ltd. (Japan) | 501 | |
10,771 | Randstad NV (Netherlands) | 598 | |
169,946 | RELX plc (United Kingdom) | 4,091 | |
6,500 | TechnoPro Holdings Inc. (Japan) | 400 | |
6,775 | Teleperformance (France) | 1,537 | |
28,435 | |||
REAL ESTATE MANAGEMENT & DEVELOPMENT—0.5% | |||
22,900 | Daiwa House Industry Co. Ltd. (Japan) | 788 | |
15,054 | LOG Commercial Properties e Participacoes SA (Brazil) | 95 | |
286,079 | LPS Brasil Consultoria de Imoveis SA (Brazil)* | 530 | |
125,000 | Mitsubishi Estate Co. Ltd. (Japan) | 2,427 | |
61,419 | New World Development Co. Ltd. (Hong Kong) | 88 | |
85,276 | United Industrial Corp. Ltd. (Singapore) | 182 | |
4,110 | |||
ROAD & RAIL—1.3% | |||
15,150 | Canadian Pacific Railway Ltd. (Canada) | 3,445 | |
22,900 | East Japan Railway Co. (Japan) | 2,079 | |
89,182 | Globaltrans Investment plc GDR (Russia)3 | 762 | |
99,413 | National Express Group plc (United Kingdom) | 575 | |
46,200 | Senko Group Holdings Co. Ltd. (Japan) | 372 | |
34,800 | West Japan Railway Co. (Japan) | 3,024 | |
10,257 | |||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—2.1% | |||
4,404 | ASML Holding NV (Netherlands) | 1,154 | |
207,100 | Renesas Electronics Corp. (Japan)* | 1,402 | |
12,600 | ROHM Co. Ltd. (Japan) | 998 | |
35,888 | SK Hynix Inc. (South Korea) | 2,524 | |
1,072,000 | Taiwan Semiconductor Manufacturing Co. Ltd. (Taiwan) | 10,506 | |
16,584 | |||
SOFTWARE—1.5% | |||
109,578 | Blackberry Ltd. (Canada)* | 576 | |
4,382 | Constellation Software Inc. (Canada) | 4,328 |
8
Harbor Diversified International All Cap Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—Continued | |||
Shares | Value | ||
SOFTWARE—Continued | |||
3,700 | Oracle Corp. Japan (Japan) | $325 | |
386,100 | TOTVS SA (Brazil)* | 5,996 | |
11,225 | |||
SPECIALTY RETAIL—1.0% | |||
5,400 | ABC-Mart Inc. (Japan) | 370 | |
4,316,600 | Esprit Holdings Ltd. (Hong Kong)* | 825 | |
168,075 | Fourlis Holdings SA (Greece)* | 1,012 | |
93,048 | JUMBO SA (Greece) | 1,813 | |
224,081 | Pets at Home Group plc (United Kingdom) | 597 | |
25,400 | USS Co. Ltd. (Japan) | 492 | |
80,661 | WH Smith plc (United Kingdom) | 2,286 | |
7,395 | |||
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS—1.8% | |||
43,736 | Logitech International SA (Switzerland) | 1,795 | |
40,000 | NEC Corp. (Japan) | 1,585 | |
18,806 | Quadient SAS (France) | 403 | |
228,980 | Samsung Electronics Co. Ltd. (South Korea) | 9,897 | |
13,680 | |||
TEXTILES, APPAREL & LUXURY GOODS—2.4% | |||
14,586 | adidas AG (Germany) | 4,509 | |
66,100 | ASICS Corp. (Japan) | 1,135 | |
39,954 | Cie Financiere Richemont SA (Switzerland) | 3,140 | |
172,149 | Cie Financiere Richemont SA ADR (South Africa)1 | 1,351 | |
29,971 | EssilorLuxottica SA (France) | 4,576 | |
52,278 | Gildan Activewear Inc. (Canada) | 1,336 | |
58,100 | Onward Holdings Co. Ltd. (Japan) | 336 | |
1,274,746 | Stella International Holdings Ltd. (Hong Kong) | 2,135 | |
110,000 | Texwinca Holdings Ltd. (Hong Kong) | 25 | |
18,543 | |||
TOBACCO—0.2% | |||
14,246 | British American Tobacco plc (United Kingdom) | 498 | |
25,382 | Swedish Match AB (Sweden) | 1,193 | |
1,691 | |||
TRADING COMPANIES & DISTRIBUTORS—1.1% | |||
48,351 | Brenntag AG (Germany) | 2,423 | |
133,173 | Bunzl plc (United Kingdom) | 3,465 | |
37,400 | ITOCHU Corp. (Japan) | 782 | |
65,500 | Mitsubishi Corp. (Japan) | 1,666 | |
8,336 | |||
TRANSPORTATION INFRASTRUCTURE—0.6% | |||
102,625 | Getlink SE (France) | 1,719 | |
501,539 | Global Ports Investments plc GDR (Russia)*,3 | 1,435 | |
2,416,664 | Grindrod Ltd. (South Africa) | 774 | |
16,600 | Mitsubishi Logistics Corp. (Japan) | 421 | |
4,349 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
WIRELESS TELECOMMUNICATION SERVICES—1.1% | |||
393,943 | Bharti Airtel Ltd. (India) | $2,071 | |
65,700 | KDDI Corp. (Japan) | 1,818 | |
15,666 | Millicom International Cellular SA SDR (Sweden)3 | 714 | |
40,200 | NTT DoCoMo Inc. (Japan) | 1,102 | |
33,487 | Rogers Communications Inc. (Canada) | 1,577 | |
179,248 | SmarTone Telecommunications Holdings Ltd. (Hong Kong) | 156 | |
14,527,307 | Vodafone Idea Ltd. (India)* | 786 | |
8,224 | |||
TOTAL COMMON STOCKS | |||
(Cost $731,768) | 750,799 | ||
PREFERRED STOCKS—1.5% | |||
AEROSPACE & DEFENSE—0.0% | |||
11,598,624 | Rolls Royce Holdings plc (United Kingdom)* | 15X | |
AUTOMOBILES—0.4% | |||
13,746 | Volkswagen AG (Germany) | 2,613 | |
BANKS—0.5% | |||
181,549 | Banco Bradesco SA (Brazil)* | 1,592 | |
1,839,305 | Grupo Aval Acciones y Valores SA (Colombia) | 754 | |
461,942 | Itausa - Investimentos Itau SA (Brazil) | 1,579 | |
3,925 | |||
TEXTILES, APPAREL & LUXURY GOODS—0.6% | |||
706,867 | Alpargatas SA (Brazil)* | 4,801 | |
TOTAL PREFERRED STOCKS | |||
(Cost $7,731) | 11,354 | ||
SHORT-TERM INVESTMENTS—0.2% | |||
(Cost $1,570) | |||
1,569,931 | State Street Navigator Securities Lending Government Money Market Portfolio (1 day yield of 1.75%)5 | 1,570 | |
TOTAL INVESTMENTS—98.8% | |||
(Cost $741,069) | 763,723 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—1.2% | 9,347 | ||
TOTAL NET ASSETS—100.0% | $773,070 |
WARRANTS/RIGHTS
Description | No. of Contracts | Strike Price | Expiration Date | Cost (000s) | Value (000s) | |||||
Adevinta ASA | 23,126 | NOK 0.20 | 11/12/2019 | $ — | $4 |
9
Harbor Diversified International All Cap Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
FAIR VALUE MEASUREMENTS
The following table summarizes the Fund’s investments as of October 31, 2019 based on the inputs used to value them.
Asset Category | Quoted Prices Level 1 (000s) | Other Significant Observable Inputs Level 2 (000s) | Significant Unobservable Inputs Level 3 (000s) | Total (000s) | ||||
Investments in Securities | ||||||||
Common Stocks | ||||||||
Africa | $— | $16,866 | $— | $16,866 | ||||
Europe | 9,554 | 359,175 | — | 368,729 | ||||
Latin America | 32,429 | 5,418 | — | 37,847 | ||||
Middle East/Central Asia | — | 7,718 | — | 7,718 | ||||
North America | 57,148 | 576 | — | 57,724 | ||||
Pacific Basin | 9,440 | 252,475 | — | 261,915 | ||||
Preferred Stocks | ||||||||
Europe | — | 2,613 | 15 | 2,628 | ||||
Latin America | 8,726 | — | — | 8,726 | ||||
Short-Term Investments | ||||||||
Investment Company-Securities Lending Investment Fund | 1,570 | — | — | 1,570 | ||||
Total Investments in Securities | $118,867 | $644,841 | $15 | $763,723 | ||||
Financial Derivative Instruments - Assets | ||||||||
Warrants/Rights | $— | $4 | $— | $4 | ||||
Total Investments | $118,867 | $644,845 | $15 | $763,727 |
For more information on valuation inputs and their aggregation into the levels used in the table above, please refer to the Fair Value Measurements and Disclosures in Note 2 of the accompanying Notes to Financial Statements.
The following is a rollforward of the Fund’s Level 3 investments during the year ended October 31, 2019. Transfers into or out of Level 3 are recognized as of the last day in the fiscal quarter of the period in which the event or change in circumstances that caused the reclassification occurred.
Valuation Description | Beginning Balance as of 11/01/2018 (000s) | Purchases (000s) | Sales (000s) | Discount/ (Premium) (000s) | Total Realized Gain/(Loss)w (000s) | Change in Unrealized Appreciation/ (Depreciation)w (000s) | Transfers Into Level 3h (000s) | Transfers Out of Level 3 (000s) | Ending Balance as of 10/31/2019w (000s) | |||||||||
Common Stocks | $— | $93 | $(45) | $— | $(220) | $(691) | $863 | $— | $— | |||||||||
Preferred Stocks | 13 | 15 | (13) | — | — | — | — | — | 15 | |||||||||
$13 | $108 | $(58) | $— | $(220) | $(691) | $863 | $— | $15 |
The following is a summary of significant unobservable inputs used in the fair valuations of assets and liabilities categorized within Level 3 of the fair value hierarchy.
Valuation Descriptions | Ending Balance as of 10/31/2019 (000s) | Valuation Technique | Unobservable Input(s) | Input Value(s) | ||||
Investments in Securities | ||||||||
Common Stocks | ||||||||
Thomas Cook Group plc (United Kingdom)* | $ — | Market Approach | Estimated Recovery Value | GBP 0.00 | ||||
Preferred Stocks | ||||||||
Rolls Royce Holdings plc (United Kingdom)* | 15 | Market Approach | Pre-Traded Price | GBP 0.001 | ||||
$15 |
10
Harbor Diversified International All Cap Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
* | Non-income producing security | ||
1 | ADR after the name of a security stands for American Depositary Receipts representing ownership of foreign securities. ADRs are issued by U.S. banking institutions. | ||
2 | Securities purchased in a transaction 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. The Fund has no right to demand registration of these securities. At October 31, 2019, the aggregate value of these securities was $15,766 or 2% of net assets. | ||
3 | GDR after the name of a security stands for Global Depositary Receipts representing ownership of foreign securities. GDRs are issued by either U.S. or non-U.S. banking institutions. Country specific examples of this type of depositary receipt, if any, are denoted using different abbreviations. SDR after the name of a security stands for Swedish Depository Receipts representing ownership of foreign securities in Sweden. | ||
4 | All or a portion of this security was out on loan as of October 31, 2019. | ||
5 | Represents the investment of collateral received from securities lending activities | ||
h | Transferred from Level 2 to Level 3 due to unavailability of observable market data for pricing | ||
w | Amounts in this category are included in the “Realized and Change in Net Unrealized Gain/(Loss) on Investment Transactions” section of the Statement of Operations. The net unrealized appreciation/(depreciation) per investment type is below: | ||
Valuation Description | Unrealized Gain/(Loss) as of 10/31/2019 (000s) | ||
Common Stocks | $(1,632) | ||
Preferred Stocks | — | ||
$(1,632) | |||
x | Fair valued in accordance with Harbor Funds' Valuation Procedures. | ||
GBP | British Pound | ||
NOK | Norwegian Krone |
The accompanying notes are an integral part of the Financial Statements.
11
Harbor Emerging Markets Equity Fund
Manager’s Commentary (Unaudited)
Manager’s Commentary (Unaudited)
Subadviser
Oaktree Capital Management, L.P.
333 South Grand Avenue
28th Floor
28th Floor
Los Angeles, CA 90071
Portfolio Managers
Frank J. Carroll
Since 2013
Since 2013
Timothy D. Jensen
Since 2013
Since 2013
Oaktree has subadvised the Fund since 2013.
Investment Objective
The Fund seeks long-term growth of capital.
Frank J. Carroll
Timothy D. Jensen
Management’s Discussion of
Fund Performance
Fund Performance
Market Review
Emerging markets equities performed well during the year ended October 31, 2019, although performance was volatile throughout the period and the MSCI Emerging Markets (ND) Index trailed developed markets. Emerging markets tended to perform well when U.S.-China trade tensions eased but weakened when tensions subsequently escalated. The markets have been subjected to tariff-induced volatility since mid-2018. Emerging markets equities performed relatively well in late 2018 when most equity markets tumbled, lagged during the eight months through September on concerns about the trade war and slowing global growth, but outperformed during October on news of a “Phase One” agreement on trade between the U.S. and China.
A slumping Purchasing Managers’ Index and slowing volumes of global trade indicate that the trade war and last year’s monetary tightening reduced global economic growth. In response, monetary policy continues to be eased, somewhat mitigating the economic uncertainty created by the trade war. Most major central banks, including the U.S. Federal Reserve (Fed) and the European Central Bank (ECB), are cutting interest rates. In October, the Fed announced that it will resume expanding its balance sheet by $60 billion a month, in a maneuver they do not call quantitative easing but has many of the same characteristic of quantitative easing. Most major emerging markets central banks are also reducing interest rates, in tandem with or faster than the Fed. As in developed economies, interest rates are approaching or hitting new all-time lows in many emerging markets, supporting equity valuations despite slower economic growth.
Russia was the best performer of the larger markets during the period on improving corporate governance and the distribution of strong free cash flow to investors despite range-bound oil prices. Taiwan also performed well and was supported by strength among technology and semiconductor names. China performed slightly better than the MSCI Emerging Markets (ND) index, despite being the direct target of rounds of American tariff escalations and other economic pressure. Argentina, a small index constituent, was the worst performing market after the market-friendly president lost in primary elections in August, heralding the return of the populist left.
Performance
Harbor Emerging Markets Equity Fund returned 16.21% (Retirement Class), 16.13% (Institutional Class), 17.30% (Administrative Class), and 15.56% (Investor Class) during the year ended October 31, 2019, outperforming the 11.86% return of the MSCI Emerging Markets (ND) Index.
Consistent with our bottom-up approach, the majority of the Fund’s relative performance during the period was driven by stock selection, with the balance attributable to allocation decisions. At the country level, stock selection in China drove much of the Fund’s relative outperformance. Stock selection in Taiwan, Indonesia and South Africa also helped, while stock selection in Mexico and Russia detracted. Our overweight allocation to Russia had a positive effect, along with our underweight exposures to Saudi Arabia and Malaysia. Our underweight allocation to Taiwan detracted. By sector, selection among Financials, Materials, Consumer Staples, Health Care, Information Technology, Industrials and Energy stocks all drove relative performance. Stock selection among Utilities had a negative effect, along with our underweight exposure to Consumer Discretionary. Our overweight exposure to Financials contributed positively.
12
Harbor Emerging Markets Equity Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
CHANGE IN A $50,000 INVESTMENT
For the period 11/01/2013 through 10/31/2019
The graph compares a $50,000 investment in the Institutional Class shares of the Fund with the performance of the MSCI Emerging Markets (ND) Index. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
TOTAL RETURNS
For the periods ended 10/31/2019
1 Year | Annualized | |||||||
5 Years | Life of Fund | |||||||
Harbor Emerging Markets Equity Fund | ||||||||
Retirement Class1,2 | 16.21% | 2.82% | 2.43% | |||||
Institutional Class1 | 16.13 | 2.78 | 2.40 | |||||
Administrative Class1 | 17.30 | 2.77 | 2.36 | |||||
Investor Class1 | 15.56 | 2.38 | 2.00 | |||||
Comparative Index | ||||||||
MSCI Emerging Markets (ND)1 | 11.86% | 2.93% | 2.55% |
As stated in the August 2, 2019 supplement to the Fund’s prospectus dated March 1, 2019, the expense ratios were 0.93% (Net) and 1.27% (Gross) (Retirement Class); 1.01% (Net) and 1.35% (Institutional Class); 1.26% (Net) and 1.60% (Gross) (Administrative Class); and 1.38% (Net) and 1.72% (Gross) (Investor Class). The net expense ratios reflect a contractual management fee waiver and an expense limitation agreement (excluding interest expense) effective through 07/31/2020. The expense ratios in the prospectus may differ from the actual expense ratios for the period disclosed within this report. The expense ratios shown in the prospectus are based on the prior fiscal year, adjusted to reflect changes, if any, in contractual arrangements that occurred prior to the date of the prospectus (or supplement thereto, if applicable).
Performance data shown represents past performance and is no guarantee of future results. Past performance is net of management fees and expenses and reflects reinvested dividends and distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or upon the redemption of Fund shares. Past performance reflects the beneficial effect of any expense waivers or reimbursements, without which returns would have been lower. Investment returns and principal value will fluctuate so that Fund shares, when redeemed, may be worth more or less than their original cost. Returns for periods less than one year are not annualized. Current performance may be higher or lower and is available through the most recent month end atharborfunds.com or by calling 800-422-1050.
Outlook & Strategy
We have a constructive view of the market going forward, and we will turn even more bullish if and when the trade negotiations are successfully concluded. We continue to believe that it is in everyone’s interest to maintain an open global trading system. U.S. corporate profits have expanded significantly since China joined the World Trade Organization (WTO) in 2001, and returns on invested capital increased as U.S. multinationals outsourced low-margin and low-return functions to Asian suppliers. China benefitted from the ability to import high technology parts and production equipment that cannot be sourced domestically. Nevertheless, we expect some long-term diversification of sourcing away from China and some recurring limitations on trade in equipment that is sensitive to national security. As the rhetoric has escalated, leaders of both U.S. political parties have criticized China and the national security establishment has become increasingly vocal. Although we continue to believe the countries will reach an agreement on trade, the process has been slow. It now appears as if the two sides will pursue phased compromises rather than a single overall agreement. On a positive note, although emerging markets fall when the conflict escalates, the declines have diminished in severity.
Monetary easing continues across most of our markets, and in most places interest rates are at extremely low levels. Markets are somewhat schizophrenic. They fall on bad trade news, but within days bids return for companies generating strong cash flow or delivering profit growth given the search for sound investments. Corporate governance continues to improve among a growing number of emerging markets companies. Finally, valuations are attractive in absolute terms and relative to developed markets.
We continue to maintain a sizeable overweight to China, with smaller overweight allocations to Brazil and Indonesia. We remain underweight Taiwan and have no exposure to Turkey, Malaysia or Saudi Arabia. By sector, the portfolio is overweight energy, financials and materials, while underweight consumer discretionary, communication services and industrials.
1 | The “Life of Fund” return as shown reflects the period 11/01/2013 through 10/31/2019. |
2 | Retirement Class shares commenced operations on March 1, 2016. The performance attributed to the Retirement Class shares prior to that date is that of the Institutional Class shares. Performance prior to March 1, 2016 has not been adjusted to reflect the lower expenses of Retirement Class shares. During this period, Retirement Class shares would have had returns similar to, but potentially higher than, Institutional Class shares due to the fact that Retirement Class shares represent interests in the same portfolio as Institutional Class shares but are subject to lower expenses. |
This report contains the current opinions of Oaktree Capital Management, L.P. as of the date of this report and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Such opinions are subject to change without notice and securities described herein may no longer be included in, or may at any time be removed from, the Fund’s portfolio. This report is distributed for informational purposes only. Information contained herein has been obtained from sources believed reliable, but not guaranteed.
Investing in international and emerging markets poses special risks, including potentially greater price volatility due to social, political and economic factors, as well as currency exchange rate fluctuations. These risks are more severe for securities of issuers in emerging market regions. For information on the different share classes and the risks associated with an investment in the Fund, please refer to the current prospectus.
13
Harbor Emerging Markets Equity Fund
Portfolio of Investments—October 31, 2019
Portfolio of Investments—October 31, 2019
REGION BREAKDOWN(% of investments) – Unaudited
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—98.0% | |||
Shares | Value | ||
AIRLINES—1.4% | |||
36,573 | Azul SA ADR (Brazil)*,1 | $1,426 | |
AUTOMOBILES—1.2% | |||
630,000 | Geely Automobile Holdings Ltd. (China) | 1,192 | |
BANKS—22.4% | |||
604,155 | Alpha Bank AE (Greece)* | 1,289 | |
6,552,000 | Bank Rakyat Indonesia Persero Tbk PT (Indonesia) | 1,963 | |
3,977,000 | China Construction Bank Corp. (China) | 3,187 | |
208,000 | China Merchants Bank Co. Ltd. (China) | 992 | |
206,737 | Grupo Financiero Banorte SAB de CV (Mexico) | 1,130 | |
50,857 | Hana Financial Group Inc. (South Korea) | 1,472 | |
245,086 | ICICI Bank Ltd. ADR (India)1 | 3,194 | |
2,590,000 | Industrial & Commercial Bank of China Ltd. (China) | 1,856 | |
248,599 | Itau Unibanco Holding SA ADR (Brazil)1 | 2,245 | |
23,997 | OTP Bank plc (Hungary) | 1,107 | |
439,200 | Ping An Bank Co. Ltd. (China) | 1,014 | |
175,017 | Sberbank of Russia PJSC ADR (Russia)1 | 2,577 | |
244,745 | United Bank Ltd. (Pakistan) | 217 | |
22,243 | |||
BEVERAGES—2.0% | |||
280,370 | Budweiser Brewing Co. Apac Ltd. (China)*,2 | 1,025 | |
50,400 | Wuliangye Yibin Co. Ltd. (China) | 943 | |
1,968 | |||
CHEMICALS—0.0% | |||
2,684,000 | Tianhe Chemicals Group Ltd. (China)*,2 | —x | |
CONSTRUCTION & ENGINEERING—0.7% | |||
1,233,000 | China Railway Group Ltd. (China) | 743 | |
CONSTRUCTION MATERIALS—5.1% | |||
228,000 | Anhui Conch Cement Co. Ltd. (China) | 1,363 | |
238,990 | Cemex SAB de CV ADR (Mexico)1 | 901 | |
1,611,800 | Semen Indonesia Persero TBK PT (Indonesia) | 1,454 | |
23,775 | UltraTech Cement Ltd. (India) | 1,388 | |
5,106 | |||
DIVERSIFIED CONSUMER SERVICES—0.7% | |||
24,244 | Afya Ltd. (Brazil)* | 655 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
ELECTRIC UTILITIES—0.4% | |||
74,446 | Neoenergia SA (Brazil)* | $389 | |
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—0.6% | |||
138,200 | Hangzhou Hikvision Digital Technology Co. Ltd. (China) | 633 | |
ENERGY EQUIPMENT & SERVICES—1.6% | |||
1,124,000 | China Oilfield Services Ltd. (China) | 1,565 | |
ENTERTAINMENT—0.6% | |||
25,300 | HUYA Inc. ADR (China)*,1 | 563 | |
FOOD & STAPLES RETAILING—1.0% | |||
108,850 | ShopRite Holdings Ltd. (South Africa) | 975 | |
FOOD PRODUCTS—5.2% | |||
209,915 | BRF SA ADR (Brazil)*,1 | 1,839 | |
2,063,200 | Charoen Pokphand Foods PCL (Thailand) | 1,726 | |
1,848,000 | Want Want China Holdings Ltd. (China) | 1,557 | |
5,122 | |||
HOTELS, RESTAURANTS & LEISURE—2.4% | |||
78,175 | China International Travel Service Corp. Ltd. (China) | 1,003 | |
202,000 | Galaxy Entertainment Group Ltd. (China)* | 1,391 | |
2,394 | |||
HOUSEHOLD DURABLES—0.5% | |||
214,698 | Suofeiya Home Collection Co. Ltd. (China) | 529 | |
INDEPENDENT POWER & RENEWABLE ELECTRICITY PRODUCERS—0.7% | |||
1,254,100 | China Longyuan Power Group Corp. Ltd. (China) | 677 | |
INSURANCE—4.7% | |||
176,200 | China Pacific Insurance Group Co. Ltd. (China) | 639 | |
85,084 | ICICI Prudential Life Insurance Co. Ltd. (India)2 | 611 | |
301,000 | Ping An Insurance Group Co. of China Ltd. (China) | 3,474 | |
4,724 | |||
INTERACTIVE MEDIA & SERVICES—5.2% | |||
127,000 | Tencent Holdings Ltd. (China) | 5,151 |
14
Harbor Emerging Markets Equity Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—Continued | |||
Shares | Value | ||
LIFE SCIENCES TOOLS & SERVICES—1.5% | |||
65,500 | Hangzhou Tigermed Consulting Co. Ltd. (China) | $636 | |
69,425 | WuXi AppTec Co. Ltd. (China)2 | 837 | |
1,473 | |||
MACHINERY—1.1% | |||
176,528 | Samsung Heavy Industries Co. Ltd. (South Korea)* | 1,096 | |
METALS & MINING—4.1% | |||
81,787 | AngloGold Ashanti Ltd. ADR (South Africa)1 | 1,806 | |
624,295 | Baoshan Iron + Steel Co. (China) | 514 | |
231,485 | Ganfeng Lithium Co. Ltd. (China)2 | 421 | |
2,128,800 | MMG Ltd. (China)* | 443 | |
4,924 | POSCO (South Korea) | 893 | |
4,077 | |||
OIL, GAS & CONSUMABLE FUELS—14.4% | |||
376,300 | China Shenhua Energy Co. Ltd. (China) | 764 | |
13,289 | CNOOC Ltd. ADR (China)1 | 1,974 | |
16,140 | Lukoil PJSC ADR (Russia)1 | 1,487 | |
2,004,000 | PetroChina Co. Ltd. (China) | 977 | |
271,425 | Petroleo Brasileiro SA ADR (Brazil)*,1 | 4,183 | |
117,773 | Reliance Industries Ltd. (India) | 2,429 | |
6,755 | S-Oil Corp. (South Korea) | 577 | |
264,000 | Thai Oil PCL (Thailand) | 599 | |
162,000 | Ultrapar Participacoes SA (Brazil) | 762 | |
58,407 | YPF SA ADR (Argentina)1 | 547 | |
14,299 | |||
PHARMACEUTICALS—0.2% | |||
52,004 | Glenmark Pharmaceuticals Ltd. (India) | 231 | |
REAL ESTATE MANAGEMENT & DEVELOPMENT—2.4% | |||
836,400 | Guangzhou R&F Properties Co. Ltd. (China) | 1,296 | |
332,000 | Shimao Property Holdings Ltd. (China) | 1,112 | |
2,408 | |||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—9.2% | |||
167,000 | MediaTek Inc. (Taiwan) | 2,230 | |
21,717 | SK Hynix Inc. (South Korea) | 1,527 | |
104,814 | Taiwan Semiconductor Manufacturing Co. Ltd. ADR (Taiwan)1 | 5,412 | |
9,169 | |||
SPECIALTY RETAIL—1.5% | |||
125,862 | Foschini Group Ltd. (South Africa) | 1,452 | |
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS—5.9% | |||
136,417 | Samsung Electronics Co. Ltd. (South Korea) | 5,896 | |
WIRELESS TELECOMMUNICATION SERVICES—1.3% | |||
210,140 | MTN Group Ltd. (South Africa) | 1,301 | |
TOTAL COMMON STOCKS | |||
(Cost $87,868) | 97,457 | ||
TOTAL INVESTMENTS—98.0% | |||
(Cost $87,868) | 97,457 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—2.0% | 2,010 | ||
TOTAL NET ASSETS—100.0% | $99,467 |
15
Harbor Emerging Markets Equity Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
FAIR VALUE MEASUREMENTS
The following table summarizes the Fund’s investments as of October 31, 2019 based on the inputs used to value them.
Asset Category | Quoted Prices Level 1 (000s) | Other Significant Observable Inputs Level 2 (000s) | Significant Unobservable Inputs Level 3 (000s) | Total (000s) | ||||
Common Stocks | ||||||||
Africa | $1,806 | $3,728 | $— | $5,534 | ||||
Europe | — | 6,460 | — | 6,460 | ||||
Latin America | 13,688 | 389 | — | 14,077 | ||||
Middle East/Central Asia | 3,194 | 4,876 | — | 8,070 | ||||
Pacific Basin | 7,949 | 55,367 | — | 63,316 | ||||
Total Investments in Securities | $26,637 | $70,820 | $— | $97,457 |
For more information on valuation inputs and their aggregation into the levels used in the table above, please refer to the Fair Value Measurements and Disclosures in Note 2 of the accompanying Notes to Financial Statements.
The following is a rollforward of the Fund’s Level 3 investments during the year ended October 31, 2019.
Valuation Description | Beginning Balance as of 11/01/2018 (000s) | Purchases (000s) | Sales (000s) | Discount/ (Premium) (000s) | Total Realized Gain/(Loss)w (000s) | Change in Unrealized Appreciation/ (Depreciation)w (000s) | Transfers Into Level 3 (000s) | Transfers Out of Level 3 (000s) | Ending Balance as of 10/31/2019w (000s) | |||||||||
Common Stocks | $— | $— | $— | $— | $— | $— | $— | $— | $— |
The following is a summary of significant unobservable inputs used in the fair valuations of assets and liabilities categorized within Level 3 of the fair value hierarchy.
Valuation Descriptions | Ending Balance as of 10/31/2019 (000s) | Valuation Technique | Unobservable Input(s) | Input Value(s) | ||||
Investments in Securities | ||||||||
Common Stocks | ||||||||
Tianhe Chemicals Group Ltd. (China)*,2 | $— | Market Approach | Estimated Recovery Value | HKD 0.00 |
* | Non-income producing security | ||
1 | ADR after the name of a security stands for American Depositary Receipts representing ownership of foreign securities. ADRs are issued by U.S. banking institutions. | ||
2 | Securities purchased in a transaction 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. The Fund has no right to demand registration of these securities. At October 31, 2019, the aggregate value of these securities was $2,894 or 3% of net assets. | ||
w | Amounts in this category are included in the “Realized and Change in Net Unrealized Gain/(Loss) on Investment Transactions” section of the Statement of Operations. The net unrealized appreciation/(depreciation) per investment type is below: | ||
Valuation Description | Unrealized Gain/(Loss) as of 10/31/2019 (000s) | ||
Common Stocks | $(512) | ||
x | Fair valued in accordance with Harbor Funds' Valuation Procedures. | ||
HKD | Hong Kong Dollar |
The accompanying notes are an integral part of the Financial Statements.
16
Harbor Focused International Fund
Manager’s Commentary (Unaudited)
Manager’s Commentary (Unaudited)
Subadviser
Comgest Asset Management International Limited
46 St. Stephen’s Green
Dublin 2
Ireland
Dublin 2
Ireland
Portfolio Managers
Vincent Houghton
Since 2019
Since 2019
Laure Négiar
Since 2019
Since 2019
Zak Smerczak
Since 2019
Since 2019
Alexandre Narboni
Since 2019
Since 2019
Comgest Asset Management International Limited has subadvised the Fund since 2019.
Investment Objective
The Fund seeks long-term growth of capital.
Vincent Houghton
Laure Négiar
Zak Smerczak
Alexandre Narboni
Management’s Discussion of
Fund Performance
Fund Performance
Market Review
Aside from a short-lived sell-off in August, global equity markets rallied over the period from June 1, 2019 to October 31, 2019. The full year has been plagued by geopolitical tensions that continue to impact the market and business sentiment which, like a self-fulfilling prophecy, has created protracted uncertainty which in itself has meant delayed investment and cautious business and consumer spending. That being said, more recent months have marked alleged progress in the U.S.-China trade negotiations “phase one deal,” accommodative central bank rhetoric, and a better-than-feared start to the recent quarterly earnings season.
Performance
Over this short period of assessment since Harbor Focused International Fund’s inception, the Fund delivered performance in line with the benchmark despite a somewhat volatile market backdrop. For the period June 1, 2019 to October 31, 2019 the Fund returned 7.80% (Retirement Class), 7.80% (Institutional Class), and 7.60% (Investor Class) while the MSCI All Country World Ex. U.S. (ND) returned 7.75%. Overall, companies in the portfolio have delivered in-line or better-than-expected earnings, reinforcing our longer-term quality growth investment theses.
Geographic and/or sector allocation plays little role in long-term performance of the Fund. That being said, over this short period, the Fund’s overweight in Information Technology and underweight in Energy were tailwinds and an overweight in Consumer Staples was a headwind. As investors turned more constructive on the economic cycle, they invested in more cyclical sectors such as Technology or Consumer Discretionary, at the expense of Consumer Staples.
Notable Fund performance contributors and detractors include:
• | Hoya, a Japanese world leader in eyeglasses and photomask blanks (components used in semiconductor manufacturing), was a strong contributor over the period. The company posted solid quarterly earnings, which confirmed our conviction that the company will be able to sustain double-digit earnings growth for the medium term. |
• | Kweichow Moutai, a premium and leading manufacturer of baijiu - a liquor made from wheat and sorghum, which is primarily consumed in China – also contributed positively to performance. The company boasts strong pricing power and a high operating margin with strong double-digit sales growth. As the stock’s valuation has appreciated contributing meaningfully to performance, we have sought to reduce the Fund’s exposure gradually. |
• | Inner Mongolia Yili, a leader in the China dairy industry, was one of the largest detractors from Fund performance. Poor stock performance can be attributed to declining investor sentiment due to a slowing domestic dairy market despite the company continuing to deliver solid sales growth. In addition, the market was further disappointed when management announced an overly generous remuneration incentive plan with uninspiring performance targets. The plan, which we opposed, has subsequently been revised for the better. Moreover, the long-term investment thesis, which is premised on our outlook for increased consumption of dairy in China and market-share gains, remains intact to such an extent that we added to the position on its weakness. |
• | Makita, a Japanese leading manufacturer of power tools sold internationally, which saw successive weak quarterly results over the period, also detracted from performance. The company is being impacted by the U.S.-China trade war and is also investing significantly in outdoor power equipment, a segment outside of its core market, which is hampering margins. In a slowing construction market, we sold the position as our conviction in the visibility of its earnings growth started to fail, noting, thankfully, that we had reduced the position meaningfully prior to the slowdown. |
17
Harbor Focused International Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
CHANGE IN A $50,000 INVESTMENT
For the period 06/01/2019 through 10/31/2019
The graph compares a $50,000 investment in the Institutional Class shares of the Fund with the performance of the MSCI All Country World Ex. U.S. (ND) Index. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
TOTAL RETURNS
For the periods ended 10/31/2019
1 Year | 5 Years | Unannualized | ||||||
Life of Fund | ||||||||
Harbor Focused International Fund | ||||||||
Retirement Class1 | N/A | N/A | 7.80% | |||||
Institutional Class1 | N/A | N/A | 7.80 | |||||
Investor Class1 | N/A | N/A | 7.60 | |||||
Comparative Index | ||||||||
MSCI All Country World Ex. U.S. (ND)1 | N/A | N/A | 7.75% |
As stated in the Fund’s prospectus dated June 1, 2019, the expense ratios were 0.77% (Net) and 2.27% (Gross) (Retirement Class); 0.85% (Net) and 2.35% (Gross) (Institutional Class); 1.10% (Net) and 2.60% (Gross) (Administrative Class); 1.22% (Net) and 2.72% (Gross) (Investor Class). The net expense ratios reflect an expense limitation agreement (excluding interest expense, if any) effective through 05/31/2020. The expense ratios in the prospectus may differ from the actual expense ratios for the period disclosed within this report. The expense ratios shown in the prospectus are based on the prior fiscal year, adjusted to reflect changes, if any, in contractual arrangements that occurred prior to the date of the prospectus (or supplement thereto, if applicable).
Performance data shown represents past performance and is no guarantee of future results. Past performance is net of management fees and expenses and reflects reinvested dividends and distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or upon the redemption of Fund shares. Past performance reflects the beneficial effect of any expense waivers or reimbursements, without which returns would have been lower. Investment returns and principal value will fluctuate so that Fund shares, when redeemed, may be worth more or less than their original cost. Returns for periods less than one year are not annualized. Current performance may be higher or lower and is available through the most recent month end atharborfunds.com or by calling 800-422-1050.
Outlook & Strategy
At Comgest, our investment philosophy is predicated on the belief that over the long term, share price appreciation follows that of earnings growth. We invest over the long term in what, we believe, are high quality companies with strong competitive advantages and high barriers to entry, enabling them to sustain double-digit visible and consistent annual earnings growth for an extended period. Given our high conviction stance, the portfolio tends to be concentrated between 25 and 40 stocks. At the end of the period, Harbor Focused International Fund had 28 positions. The Fund is constructed on a fundamental bottom-up basis, based on our highest convictions regardless of sector or geographic allocation in the benchmark index.
The period ended on more optimistic tones when compared to the first half of the year. Despite Brexit being kicked down the road for another few months, the U.S.-China trade negotiations appear to have made some progress. We wait for the “phase one” signing of a deal.
Despite central bank balance sheets losing firepower after a decade-long period of underwriting, their more accommodative rhetoric continues to message more of the same. In Europe, there is a prevailing and pervasive perception that interest rates will stay low or negative for a very long period and that inflation will never pick up.
The flip side of this is ever greater risk assumption by market participants. We believe that valuations in certain pockets of the market remain high; the stylistic sector shift seen in the last few weeks into more ‘cyclical value’ signals a risk-on appetite and investors seem to be giving the market a free pass for 2019, with earnings estimates remaining relatively lofty into 2020 given the slowdown we have witnessed over this year. Given this backdrop, we continue to pay particular attention to the growth profile and earnings visibility of the companies we invest in.
We remain vigilant and focused on fundamentals and visibility of earnings growth through market vagaries, endeavouring to preserve capital through quality holdings during these uncertain times.
1 | The “Life of Fund” return as shown reflects the period 06/01/2019 through 10/31/2019. |
This report contains the current opinions of Comgest Asset Management International Limited as of the date of this report and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Such opinions are subject to change without notice and securities described herein may no longer be included in, or may at any time be removed from, the Fund’s portfolio. This report is distributed for informational purposes only. Information contained herein has been obtained from sources believed reliable, but not guaranteed.
Investing in international and emerging markets poses special risks, including potentially greater price volatility due to social, political and economic factors, as well as currency exchange rate fluctuations. These risks are more severe for securities of issuers in emerging market regions. For information on the different share classes and the risks associated with an investment in the Fund, please refer to the current prospectus.
18
Harbor Focused International Fund
Portfolio of Investments—October 31, 2019
Portfolio of Investments—October 31, 2019
REGION BREAKDOWN(% of investments) – Unaudited
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—94.0% | |||
Shares | Value | ||
BEVERAGES—10.7% | |||
12,445 | Fomento Economico Mexicano SAB de CV ADR Class B (Mexico)1 | $1,108 | |
12,186 | Heineken NV (Netherlands) | 1,244 | |
3,600 | Kweichow Moutai Co. Ltd. Class A (China) | 603 | |
2,955 | |||
BUILDING PRODUCTS—2.5% | |||
5,000 | Daikin Industries Ltd. (Japan) | 700 | |
CHEMICALS—2.8% | |||
7,000 | Shin-Etsu Chemical Co. Ltd. (Japan) | 780 | |
ELECTRICAL EQUIPMENT—1.9% | |||
3,600 | Nidec Corp. (Japan) | 530 | |
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—9.7% | |||
31,800 | Hamamatsu Photonics KK (Japan) | 1,235 | |
216,100 | Hangzhou Hikvision Digital Technology Co. Ltd. Class A (China) | 990 | |
700 | Keyence Corp. (Japan) | 443 | |
2,668 | |||
FOOD PRODUCTS—4.9% | |||
329,323 | Inner Mongolia Yili Industrial Group Co. Ltd. Class A (China) | 1,356 | |
HEALTH CARE EQUIPMENT & SUPPLIES—9.3% | |||
5,591 | Coloplast AS Class B (Denmark) | 673 | |
16,100 | Hoya Corp. (Japan) | 1,423 | |
536 | Straumann Holding AG (Switzerland) | 479 | |
2,575 | |||
INSURANCE—9.8% | |||
108,259 | AIA Group Ltd. (Hong Kong) | 1,078 | |
141,000 | Ping An Insurance Group Co. of China Ltd. (China) | 1,627 | |
2,705 | |||
INTERACTIVE MEDIA & SERVICES—2.2% | |||
7,139 | Autohome Inc. ADR Class A (China)*,1 | 604 | |
IT SERVICES—2.5% | |||
9,164 | Amadeus IT Group SA Class A (Spain) | 678 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
MULTILINE RETAIL—3.6% | |||
62,100 | Pan Pacific International Holdings Corp. (Japan) | $978 | |
PERSONAL PRODUCTS—12.2% | |||
3,900 | Kose Corp. (Japan) | 691 | |
5,018 | L'Oreal SA (France) | 1,466 | |
19,923 | Unilever plc (United Kingdom) | 1,193 | |
3,350 | |||
PHARMACEUTICALS—3.6% | |||
3,285 | Roche Holding AG (Switzerland) | 989 | |
PROFESSIONAL SERVICES—2.8% | |||
24,052 | Experian plc (United Kingdom) | 758 | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—1.9% | |||
10,320 | Taiwan Semiconductor Manufacturing Co. Ltd. ADR (Taiwan)1 | 533 | |
SOFTWARE—3.4% | |||
7,131 | SAP SE (Germany) | 945 | |
SPECIALTY RETAIL—7.1% | |||
1,500 | Fast Retailing Co. Ltd. (Japan) | 925 | |
4,700 | Hikari Tsushin Inc. (Japan) | 1,030 | |
1,955 | |||
TEXTILES, APPAREL & LUXURY GOODS—3.1% | |||
5,504 | EssilorLuxottica SA (France) | 840 | |
TOTAL COMMON STOCKS | |||
(Cost $24,098) | 25,899 | ||
TOTAL INVESTMENTS—94.0% | |||
(Cost $24,098) | 25,899 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—6.0% | 1,664 | ||
TOTAL NET ASSETS—100.0% | $27,563 |
19
Harbor Focused International Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
FAIR VALUE MEASUREMENTS
The following table summarizes the Fund’s investments as of October 31, 2019 based on the inputs used to value them.
Asset Category | Quoted Prices Level 1 (000s) | Other Significant Observable Inputs Level 2 (000s) | Significant Unobservable Inputs Level 3 (000s) | Total (000s) | ||||
Common Stocks | ||||||||
Europe | $— | $9,265 | $— | $9,265 | ||||
Latin America | 1,108 | — | — | 1,108 | ||||
Pacific Basin | 1,137 | 14,389 | — | 15,526 | ||||
Total Investments in Securities | $2,245 | $23,654 | $— | $25,899 |
There were no Level 3 holdings at October 31, 2019 or June 1, 2019 (inception).
For more information on valuation inputs and their aggregation into the levels used in the table above, please refer to the Fair Value Measurements and Disclosures in Note 2 of the accompanying Notes to Financial Statements.
* | Non-income producing security |
1 | ADR after the name of a security 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.
20
Harbor Global Leaders Fund
Manager’s Commentary (Unaudited)
Manager’s Commentary (Unaudited)
Subadviser
Sands Capital Management, LLC
1000 Wilson Boulevard
Suite 3000
Suite 3000
Arlington, VA 22209
Portfolio Managers
Sunil H. Thakor, CFA
Since 2017
Since 2017
Michael F. Raab, CFA
Since 2019
Since 2019
Sands Capital has subadvised the Fund since 2017.
Investment Objective
The Fund seeks long-term growth of capital.
Sunil H. Thakor, CFA
Michael F. Raab, CFA
Management’s Discussion of
Fund Performance
Fund Performance
Market Review
Over the fiscal year ending October 31, 2019, the MSCI All Country World (ND) Index increased 12.59%, driven by better-than-feared macroeconomic events and business fundamentals. The U.S./Canada was the largest contributor, followed by Western Europe, and developed Asia. Within the U.S., equities rose despite many investors anticipating the end of the longest economic expansion in U.S. history, as well as heightened political uncertainties such as trade tensions between the U.S. and China, and a potentially contentious U.S. presidential election next year. However, a continued healthy job market with near record-low unemployment continued to fuel corporate profit growth, assuaging investor fears around a possible U.S. recession. The Index’s strong results over the fiscal year did not come without some market turbulence. We saw strong market pull backs, particularly in the fourth quarter of 2018, but these pull backs proved fleeting as strong economic and business rejuvenated investors.
Performance
Over the year ended October 31, 2019, Harbor Global Leaders Fund returned 23.72% (Retirement Class), 23.63% (Institutional Class), 23.35% (Administrative Class), and 23.18% (Investor Class) versus the 12.59% return for the MSCI All Country World (ND) Index. The Fund’s results were driven by broad-based strength, with nearly 90% of portfolio businesses seeing their share price appreciate over the latest fiscal year.
On an absolute basis, the largest contributors to investment results were TransDigm, Visa, Zoetis, HDFC Bank, and Alimentation Couche-Tard.
Zoetis is a leader in developing, manufacturing, and commercializing animal health medicines for livestock and companion animals around the globe. Zoetis—spun off from Pfizer in 2013—has a broadly diversified business across geographies, species, and product categories. In our view, the animal-health industry provides steadier and more predictable growth prospects than human health, due to lower generic threats, lack of third-party payers, and faster and lower-risk research and development (R&D) cycles. As the global market-share leader in this growing but consolidating industry, we believe Zoetis is best positioned to benefit from durable secular trends, including rising demand for animal proteins, a growing need to improve livestock productivity, and increasing ownership and spending on companion animals. This leadership position provides Zoetis with brand recognition, pricing power, and scale advantages. Zoetis was a pioneer in developing livestock medications, and continues to feature a highly innovative and productive R&D engine across both livestock and companion animals. Beyond its leadership position and pipeline, we view its salesforce, management team, and strategic potential as key differentiators.
We’ve continued to build conviction in the durability of Zoetis’ base business, as well as the company’s upcoming new product cycle highlighted by the first-quarter 2020 launch of Simparica Trio, a monthly chewable medicine to treat fleas, ticks, and worms in dogs. Our research indicates Trio has the potential to become a significant blockbuster product, disrupting the $4 billion parasiticide category. Given Zoetis’s leading direct sales force, R&D track record, and diverse portfolio across species, geographies, and product categories, we believe the company is poised to deliver sustained above-market growth in the double digits over our investment horizon.
The largest absolute detractors from investment results were Fresenius Medical Care, IQVIA, Roper Technologies, Booking, and UnitedHealth.
IQVIA is a leading Contract Research Organization (CRO) and healthcare IT service provider worldwide. The company offers outsourced solutions spanning the drug life cycle to pharmaceutical and biotech companies. IQVIA is capitalizing on a secular shift in biopharma to outsource non-core activities in the effort to mitigate costs and manage risks amid an
21
Harbor Global Leaders Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
CHANGE IN A $50,000 INVESTMENT
For the period 11/01/2009 through 10/31/2019
The graph compares a $50,000 investment in the Institutional Class shares of the Fund with the performance of the MSCI All Country World (ND) Index. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
TOTAL RETURNS
For the periods ended 10/31/2019
1 Year | Annualized | |||||||
5 Years | 10 Years | |||||||
Harbor Global Leaders Fund | ||||||||
Retirement Class1 | 23.72% | 10.95% | 13.37% | |||||
Institutional Class | 23.63 | 10.90 | 13.34 | |||||
Administrative Class | 23.35 | 10.63 | 13.06 | |||||
Investor Class | 23.18 | 10.48 | 12.92 | |||||
Comparative Index | ||||||||
MSCI All Country World (ND) | 12.59% | 7.08% | 8.81% |
As stated in the June 28, 2019 supplement to the Fund’s prospectus dated March 1, 2019, the expense ratios were 0.78% (Net) and 0.97% (Gross) (Retirement Class); 0.86% (Net) and 1.05% (Institutional Class); 1.11% (Net) and 1.30% (Gross) (Administrative Class); and 1.23% (Net) and 1.42% (Gross) (Investor Class). The net expense ratios reflect a contractual management fee waiver and an expense limitation agreement (excluding interest expense) effective through 05/31/2020. The expense ratios in the prospectus may differ from the actual expense ratios for the period disclosed within this report. The expense ratios shown in the prospectus are based on the prior fiscal year, adjusted to reflect changes, if any, in contractual arrangements that occurred prior to the date of the prospectus (or supplement thereto, if applicable).
Performance data shown represents past performance and is no guarantee of future results. Past performance is net of management fees and expenses and reflects reinvested dividends and distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or upon the redemption of Fund shares. Past performance reflects the beneficial effect of any expense waivers or reimbursements, without which returns would have been lower. Investment returns and principal value will fluctuate so that Fund shares, when redeemed, may be worth more or less than their original cost. Returns for periods less than one year are not annualized. Current performance may be higher or lower and is available through the most recent month end atharborfunds.com or by calling 800-422-1050.
increasingly complex, competitive, and cost-constrained environment. We believe IQVIA’s key value proposition lies in its unmatched global repository of patient data, which is leveraged by customers to accelerate patient recruitment for clinical trials, a key industry bottleneck, and insights from post-approval studies. We believe IQVIA is best positioned within its industry, as it expands its client base beyond large pharmaceuticals into emerging biotech and other healthcare segments. Given its leadership and competitive advantages, we expect the company to generate mid-teens earnings growth over our investment horizon.
IQVIA’s share price is down slightly since the Fund purchased it in August 2019. Going into the most recent quarter with high investor expectations, the company reported solid, in-line results. Revenues rose nearly 8%, Earnings Before Interest Taxes Depreciation and Amortization (EBITDA) was up 6%, and Earnings Per Share (EPS) outpaced topline metrics at 13%. Overall, the company continues to gain share and grow at above-market rates, though third quarter results were lighter relative to previous quarters. Its results are consistent with our thesis that we will likely see quarterly ebbs-and-flows.
Outlook & Strategy
Looking ahead, we expect a greater divide between winners and losers among companies, industries, and countries. This divergence of fortunes amplifies the importance of having the skills necessary to identify tomorrow’s leaders. We seek to invest in businesses that we believe are dominators, disruptors, and scale leaders. In our view, sustainable growth derives from the combination of leadership and competitive advantage, and we believe these types of businesses are best positioned for future earnings growth.
1 | Retirement Class shares commenced operations on March 1, 2016. The performance attributed to the Retirement Class shares prior to that date is that of the Institutional Class shares. Performance prior to March 1, 2016 has not been adjusted to reflect the lower expenses of Retirement Class shares. During this period, Retirement Class shares would have had returns similar to, but potentially higher than, Institutional Class shares due to the fact that Retirement Class shares represent interests in the same portfolio as Institutional Class shares but are subject to lower expenses. |
This report contains the current opinions of Sands Capital Management, LLC as of the date of this report and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Such opinions are subject to change without notice and securities described herein may no longer be included in, or may at any time be removed from, the Fund’s portfolio. This report is distributed for informational purposes only. Information contained herein has been obtained from sources believed reliable, but not guaranteed.
Investing in international and emerging markets poses special risks, including potentially greater price volatility due to social, political and economic factors, as well as currency exchange rate fluctuations. These risks are more severe for securities of issuers in emerging market regions. For information on the different share classes and the risks associated with an investment in the Fund, please refer to the current prospectus.
22
Harbor Global Leaders Fund
Portfolio of Investments—October 31, 2019
Portfolio of Investments—October 31, 2019
REGION BREAKDOWN(% of investments) – Unaudited
(Excludes short-term investments)
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—98.2% | |||
Shares | Value | ||
AEROSPACE & DEFENSE—8.6% | |||
31,044 | Safran SA (France) | $4,917 | |
7,964 | TransDigm Group Inc. (United States)* | 4,191 | |
9,108 | |||
AUTO COMPONENTS—2.6% | |||
30,816 | Aptiv plc (United States) | 2,760 | |
BANKS—5.8% | |||
967,200 | Bank Central Asia TBK PT (Indonesia) | 2,165 | |
65,478 | HDFC Bank Ltd. ADR (India)1 | 4,000 | |
6,165 | |||
BIOTECHNOLOGY—3.2% | |||
19,522 | CSL Ltd. (Australia) | 3,443 | |
CAPITAL MARKETS—4.3% | |||
31,481 | Intercontinental Exchange Inc. (United States) | 2,969 | |
7,119 | Moody's Corp. (United States) | 1,571 | |
4,540 | |||
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—3.4% | |||
5,730 | Keyence Corp. (Japan) | 3,623 | |
ENTERTAINMENT—2.2% | |||
33,643 | Live Nation Entertainment Inc. (United States)* | 2,372 | |
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—2.4% | |||
4,481 | Equinix Inc. (United States) | 2,540 | |
FOOD & STAPLES RETAILING—3.9% | |||
139,537 | Alimentation Couche-Tard Inc. (Canada) | 4,185 | |
HEALTH CARE EQUIPMENT & SUPPLIES—2.6% | |||
66,863 | Boston Scientific Corp. (United States)* | 2,788 | |
HEALTH CARE PROVIDERS & SERVICES—2.1% | |||
8,942 | UnitedHealth Group Inc. (United States) | 2,260 | |
INDUSTRIAL CONGLOMERATES—3.1% | |||
9,892 | Roper Technologies Inc. (United States) | 3,333 | |
INSURANCE—4.0% | |||
425,900 | AIA Group Ltd. (Hong Kong) | 4,241 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
INTERACTIVE MEDIA & SERVICES—1.5% | |||
196,995 | Rightmove plc (United Kingdom) | $1,529 | |
IT SERVICES—4.6% | |||
27,520 | Visa Inc. (United States) | 4,922 | |
LIFE SCIENCES TOOLS & SERVICES—4.3% | |||
16,534 | Iqvia Holdings Inc. (United States)* | 2,388 | |
6,069 | Lonza Group AG (Switzerland)* | 2,187 | |
4,575 | |||
MULTILINE RETAIL—4.5% | |||
21,512 | Dollar General Corp. (United States) | 3,449 | |
85,800 | Pan Pacific International Holdings Corp. (Japan) | 1,351 | |
4,800 | |||
PHARMACEUTICALS—3.6% | |||
29,983 | Zoetis Inc. (United States) | 3,835 | |
PROFESSIONAL SERVICES—5.4% | |||
107,050 | Recruit Holdings Co. Ltd. (Japan) | 3,558 | |
15,279 | Verisk Analytics Inc. (United States) | 2,211 | |
5,769 | |||
ROAD & RAIL—1.4% | |||
8,879 | Union Pacific Corp. (United States) | 1,469 | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—5.9% | |||
48,784 | Taiwan Semiconductor Manufacturing Co. Ltd. ADR (Taiwan)1 | 2,519 | |
31,973 | Texas Instruments Inc. (United States) | 3,772 | |
6,291 | |||
SOFTWARE—12.9% | |||
13,599 | Adobe Inc. (United States)* | 3,780 | |
11,388 | Dassault Systemes SE (France) | 1,730 | |
12,419 | Intuit Inc. (United States) | 3,198 | |
18,982 | Microsoft Corp. (United States) | 2,721 | |
15,866 | Temenos AG (Switzerland)* | 2,270 | |
13,699 |
23
Harbor Global Leaders Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—Continued | |||
Shares | Value | ||
SPECIALTY RETAIL—3.9% | |||
66,451 | Industria de Diseno Textil SA (Spain)2 | $2,071 | |
19,262 | Ross Stores Inc. (United States) | 2,112 | |
4,183 | |||
TEXTILES, APPAREL & LUXURY GOODS—2.0% | |||
14,021 | EssilorLuxottica SA (France) | 2,141 | |
TOTAL COMMON STOCKS | |||
(Cost $84,984) | 104,571 | ||
SHORT-TERM INVESTMENTS—1.9% | |||
(Cost $1,980) | |||
Shares | Value | ||
1,979,785 | State Street Navigator Securities Lending Government Money Market Portfolio (1 day yield of 1.75%)3 | $1,980 | |
TOTAL INVESTMENTS—100.1% | |||
(Cost $86,964) | 106,551 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—(0.1)% | (79) | ||
TOTAL NET ASSETS—100.0% | $106,472 |
FAIR VALUE MEASUREMENTS
The following table summarizes the Fund’s investments as of October 31, 2019 based on the inputs used to value them.
Asset Category | Quoted Prices Level 1 (000s) | Other Significant Observable Inputs Level 2 (000s) | Significant Unobservable Inputs Level 3 (000s) | Total (000s) | ||||
Common Stocks | ||||||||
Europe | $— | $16,845 | $— | $16,845 | ||||
Middle East/Central Asia | 4,000 | — | — | 4,000 | ||||
North America | 62,826 | — | — | 62,826 | ||||
Pacific Basin | 2,519 | 18,381 | — | 20,900 | ||||
Short-Term Investments | ||||||||
Investment Company-Securities Lending Investment Fund | 1,980 | — | — | 1,980 | ||||
Total Investments in Securities | $71,325 | $35,226 | $— | $106,551 |
There were no Level 3 holdings at October 31, 2019 or 2018.
For more information on valuation inputs and their aggregation into the levels used in the table above, please refer to the Fair Value Measurements and Disclosures in Note 2 of the accompanying Notes to Financial Statements.
* | Non-income producing security |
1 | ADR after the name of a security stands for American Depositary Receipts representing ownership of foreign securities. ADRs are issued by U.S. banking institutions. |
2 | All or a portion of this security was out on loan as of October 31, 2019. |
3 | Represents the investment of collateral received from securities lending activities |
The accompanying notes are an integral part of the Financial Statements.
24
Harbor International Fund
Manager’s Commentary (Unaudited)
Manager’s Commentary (Unaudited)
Subadviser
Marathon Asset Management LLP
Orion House
5 Upper St. Martin’s Lane
London, WC2H 9EA
England
London, WC2H 9EA
England
Portfolio Managers
Neil M. Ostrer
Since 2018
Since 2018
Charles Carter
Since 2018
Since 2018
Nick Longhurst
Since 2018
Since 2018
William J. Arah
Since 2018
Since 2018
Simon Somerville
Since 2018
Since 2018
Michael Nickson, CFA
Since 2018
Since 2018
Michael Godfrey, CFA
Since 2018
Since 2018
David Cull, CFA
Since 2018
Since 2018
Marathon Asset Management LLP (Marathon-London) has subadvised the Fund since 2018.
Investment Objective
The Fund seeks long-term total return, principally from growth of capital.
Management’s Discussion of
Fund Performance
Fund Performance
MARKET REVIEW
Following an initial V-shaped decline and swift recovery during the first six months of the year ended October 31, 2019, non-U.S. equity markets in aggregate continued to perform strongly over the first three quarters of 2019 and rose markedly over the full year ended October 31, 2019 with the MSCI EAFE (ND) Index ultimately returning 11.04% (all international and global returns are in U.S. Dollars).
On a regional basis, all major markets performed strongly over the period. The developed Asia ex-Japan markets collectively (Australia, Hong Kong, Singapore and New Zealand), which constituted 12.43% of the Index on average over the period, led the strong market performance, with European markets following behind. Furthermore, the Japanese market, which constituted 24.27% of the Index on average over the period, also performed strongly.
Over the last several years, we have witnessed an extended global equity bull market cycle, reflected in the strong market returns over the past twelve months, yet several factors are now causing investors to become increasingly skittish about the trajectory ahead and more aware of the limitations of continued monetary policy “accommodation.” We believe there is hope that the U.S. Federal Reserve (Fed) keeps the cycle alive by cutting rates further to stimulate growth. In Europe, and Germany in particular, more recent weak manufacturing data heightened fears that the economy is slipping into a recession and the European Central Bank (ECB) reacted to the economic slowdown by restarting quantitative easing. Furthermore, political drama is proving to be unwavering in the United Kingdom (UK). Over the year ended October 31, 2019, Brexit negotiations went back and forth between Parliament and the European Union, ultimately leading to multiple extensions to the Brexit deadline. Additionally, the UK experienced its government leadership change hands during the period and is set to see more change with a general election on the horizon. These factors, alongside fears of trade war disputes, have had a wide-spread impact across all international markets and continue to cultivate a tenor of uncertainty, as evidenced by the relative outperformance of more defensive sectors recently.
PERFORMANCE
Harbor International Fund underperformed the MSCI EAFE (ND) Index over the year ended October 31, 2019 with returns of 10.29% (Retirement Class), 10.18% (Institutional Class), 9.94% (Administrative Class), and 9.80% (Investor Class) while the Index returned 11.04%. Stock selection had a negative impact on relative returns; however, this was largely offset by the positive contribution from allocation and currency effects. Stock selection within Japan had the largest positive influence on Fund performance. Conversely, stock selection within the developed Asia Pacific ex-Japan region (namely Hong Kong) weighed on relative returns, as did the underweight allocation to that region (namely Australia).
From a sector standpoint, stock selection within the Consumer Discretionary and Communication Services sectors provided a positive contribution to relative performance. Conversely, stock selection in the Financials and Consumer Staples sector weighed on relative returns as did the Fund’s underweight exposure to the Utilities sector, a typically defensive sector.
25
Harbor International Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
CHANGE IN A $50,000 INVESTMENT
For the period 11/01/2009 through 10/31/2019
The graph compares a $50,000 investment in the Institutional Class shares of the Fund with the performance of the MSCI EAFE (ND) Index. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
TOTAL RETURNS
For the periods ended 10/31/2019
1 Year | Annualized | |||||||
5 Years | 10 Years | |||||||
Harbor International Fund | ||||||||
Retirement Class1 | 10.29% | 1.90% | 4.76% | |||||
Institutional Class | 10.18 | 1.85 | 4.73 | |||||
Administrative Class | 9.94 | 1.60 | 4.47 | |||||
Investor Class | 9.80 | 1.47 | 4.34 | |||||
Comparative Index | ||||||||
MSCI EAFE (ND) | 11.04% | 4.31% | 5.41% |
As stated in the Fund’s prospectus dated March 1, 2019, the expense ratios were 0.69% (Net) and 0.81% (Gross) (Retirement Class); 0.77% (Net) and 0.89% (Gross) (Institutional Class); 1.02% (Net) and 1.14% (Gross) (Administrative Class); and 1.14% (Net) and 1.26% (Gross) (Investor Class). The net expense ratios reflect a contractual management fee waiver effective through 02/29/2020. The expense ratios in the prospectus may differ from the actual expense ratios for the period disclosed within this report. The expense ratios shown in the prospectus are based on the prior fiscal year, adjusted to reflect changes, if any, in contractual arrangements that occurred prior to the date of the prospectus (or supplement thereto, if applicable).
Performance data shown represents past performance and is no guarantee of future results. Past performance is net of management fees and expenses and reflects reinvested dividends and distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or upon the redemption of Fund shares. Past performance reflects the beneficial effect of any expense waivers or reimbursements, without which returns would have been lower. Investment returns and principal value will fluctuate so that Fund shares, when redeemed, may be worth more or less than their original cost. Returns for periods less than one year are not annualized. Current performance may be higher or lower and is available through the most recent month end atharborfunds.com or by calling 800-422-1050.
OUTLOOK & STRATEGY
While it continues to appear that market participants have convinced themselves that monetary policy “accommodation” will continue indefinitely, they are becoming more cognizant of the unintended negative consequences of this accommodative monetary backdrop and aware that monetary policy normalization must have its day at some point. Debt levels have ballooned as a consequence of historically low interest rates. At current valuation levels and on peak profit margins with little in the way of earnings growth over the last few quarters, equity markets are subject to downside risks and geopolitical uncertainties. Thus, while we are taking advantage of price dislocations and establishing new positions where relative valuations present an opportunity to do so, the Fund in aggregate remains focused on downside protection with a “quality” tilt from a characteristics standpoint.
1 | Retirement Class shares commenced operations on March 1, 2016. The performance attributed to the Retirement Class shares prior to that date is that of the Institutional Class shares. Performance prior to March 1, 2016 has not been adjusted to reflect the lower expenses of Retirement Class shares. During this period, Retirement Class shares would have had returns similar to, but potentially higher than, Institutional Class shares due to the fact that Retirement Class shares represent interests in the same portfolio as Institutional Class shares but are subject to lower expenses. |
This report contains the current opinions of Marathon Asset Management LLP as of the date of this report and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Such opinions are subject to change without notice and securities described herein may no longer be included in, or may at any time be removed from, the Fund’s portfolio. This report is distributed for informational purposes only. Information contained herein has been obtained from sources believed reliable, but not guaranteed.
Investing in international and emerging markets poses special risks, including potentially greater price volatility due to social, political and economic factors, as well as currency exchange rate fluctuations. These risks are more severe for securities of issuers in emerging market regions. For information on the different share classes and the risks associated with an investment in the Fund, please refer to the current prospectus.
26
Harbor International Fund
Portfolio of Investments—October 31, 2019
Portfolio of Investments—October 31, 2019
REGION BREAKDOWN(% of investments) – Unaudited
(Excludes derivatives)
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—97.7% | |||
Shares | Value | ||
AEROSPACE & DEFENSE—1.8% | |||
291,893 | Airbus SE (France) | $41,875 | |
3,285,239 | BAE Systems plc (United Kingdom) | 24,540 | |
2,627,031 | Rolls-Royce Holdings plc (United Kingdom)* | 24,173 | |
135,517 | Thales SA (France) | 13,248 | |
103,836 | |||
AIR FREIGHT & LOGISTICS—0.2% | |||
246,637 | Oesterreichische Post AG (Austria) | 9,090 | |
AIRLINES—0.3% | |||
934,877 | EasyJet plc (United Kingdom) | 14,997 | |
AUTO COMPONENTS—0.9% | |||
438,400 | Bridgestone Corp. (Japan) | 18,215 | |
1,741,602 | Gestamp Automocion SA ADR (Spain)1,2 | 7,463 | |
865,015 | GUD Holdings Ltd. (Australia) | 6,451 | |
131,657 | Hankook Tire & Technology Co. Ltd. (South Korea) | 3,511 | |
130,200 | Koito Manufacturing Co. Ltd. (Japan) | 6,811 | |
406,300 | Sumitomo Electric Industries Ltd. (Japan) | 5,572 | |
88,900 | Toyota Industries Corp. (Japan) | 5,334 | |
53,357 | |||
AUTOMOBILES—1.6% | |||
4,466,264 | Baic Motor Corp. Ltd. (China)2 | 2,771 | |
292,467 | Bayerische Motoren Werke AG (Germany) | 22,396 | |
63,681 | Hyundai Motor Co. (South Korea) | 6,670 | |
834,600 | Toyota Motor Corp. (Japan) | 57,905 | |
89,742 | |||
BANKS—6.7% | |||
1,321,496 | Axis Bank Ltd. (India) | 13,613 | |
889,400 | Bangkok Bank PCL (Thailand) | 5,124 | |
3,294,099 | Bank of Ireland Group plc (Ireland) | 15,878 | |
5,147,510 | Bankia SA (Spain) | 9,821 | |
15,353,816 | Barclays plc (United Kingdom) | 33,304 | |
671,561 | BNP Paribas SA (France) | 35,095 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
BANKS—Continued | |||
221,131 | Danske Bank AS (Denmark) | $3,160 | |
643,517 | DNB ASA (Norway) | 11,717 | |
240,400 | Fukuoka Financial Group Inc. (Japan) | 4,634 | |
182,683 | Hana Financial Group Inc. (South Korea) | 5,289 | |
2,363,231 | HSBC Holdings plc (Hong Kong) | 17,836 | |
2,654,450 | Intesa Sanpaolo SpA (Italy) | 6,652 | |
1,277,500 | Kasikornbank PCL (Thailand) | 5,878 | |
35,941,110 | Lloyds Banking Group plc (United Kingdom) | 26,438 | |
10,403,200 | Mizuho Financial Group Inc. (Japan) | 16,151 | |
563,774 | Nordea Bank ABP (Sweden) | 4,126 | |
7,845,100 | Resona Holdings Inc. (Japan) | 34,115 | |
543,048 | Shinhan Financial Group Co. Ltd. (South Korea) | 19,786 | |
2,133,907 | Standard Chartered plc (United Kingdom) | 19,363 | |
940,900 | Sumitomo Mitsui Financial Group Inc. (Japan) | 33,405 | |
153,300 | Sumitomo Mitsui Trust Holdings Inc. (Japan) | 5,587 | |
2,398,451 | Svenska Handelsbanken AB (Sweden) | 24,070 | |
1,769,693 | UniCredit SpA (Italy) | 22,452 | |
400,900 | United Overseas Bank Ltd. (Singapore) | 7,893 | |
381,387 | |||
BEVERAGES—4.1% | |||
336,088 | Anheuser-Busch InBev SA (Belgium) | 27,128 | |
128,300 | Asahi Group Holdings Ltd. (Japan) | 6,425 | |
173,078 | Carlsberg AS (Denmark) | 24,373 | |
1,856,419 | Coca-Cola Amatil Ltd. (Australia) | 13,028 | |
150,791 | Coca-Cola European Partners plc (United States) | 8,069 | |
1,296,035 | Davide Campari-Milano SpA (Italy) | 11,888 | |
1,148,401 | Diageo plc (United Kingdom) | 47,005 | |
447,693 | Heineken NV (Netherlands) | 45,718 | |
1,932,700 | Kirin Holdings Co. Ltd. (Japan) | 41,001 | |
114,900 | Suntory Beverage & Food Ltd. (Japan) | 4,912 | |
594,000 | Tsingtao Brewery Co. Ltd. (China) | 3,442 | |
232,989 | |||
BUILDING PRODUCTS—2.4% | |||
2,669,065 | Assa Abloy AB Class B (Sweden) | 63,386 |
27
Harbor International Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—Continued | |||
Shares | Value | ||
BUILDING PRODUCTS—Continued | |||
112,475 | Geberit AG (Switzerland) | $57,148 | |
1,393,005 | GWA Group Ltd. (Australia) | 2,794 | |
573,200 | LIXIL Group Corp. (Japan) | 10,660 | |
133,988 | |||
CAPITAL MARKETS—2.2% | |||
3,193,500 | 3i Group plc (United Kingdom) | 46,666 | |
303,360 | Close Brothers Group plc (United Kingdom) | 5,440 | |
1,663,800 | IG Group Holdings plc (United Kingdom) | 13,689 | |
218,300 | JAFCO Co. Ltd. (Japan) | 8,200 | |
310,200 | Japan Exchange Group Inc. (Japan) | 5,121 | |
2,175,933 | Jupiter Fund Management plc (United Kingdom) | 9,661 | |
3,516,500 | Nomura Holdings Inc. (Japan) | 15,982 | |
171,685 | Rathbone Brothers plc (United Kingdom) | 4,620 | |
867,467 | St. James's Place plc (United Kingdom) | 11,700 | |
325,458 | UBS Group AG (Switzerland)* | 3,852 | |
124,931 | |||
CHEMICALS—1.9% | |||
584,820 | BASF SE (Germany) | 44,458 | |
142,400 | Nippon Shokubai Co. Ltd. (Japan) | 8,781 | |
216,800 | Nissan Chemical Corp. (Japan) | 8,901 | |
90,000 | Nitto Denko Corp. (Japan) | 4,979 | |
1,025,562 | Orica Ltd. (Australia) | 16,208 | |
96,700 | Shin-Etsu Chemical Co. Ltd. (Japan) | 10,782 | |
20,185 | Symrise AG (Germany) | 1,940 | |
150,900 | Tokyo Ohka Kogyo Co. Ltd. (Japan) | 5,976 | |
747,100 | Toray Industries Inc. (Japan) | 5,280 | |
107,305 | |||
COMMERCIAL SERVICES & SUPPLIES—3.5% | |||
88,000 | AEON Delight Co. Ltd. (Japan) | 3,065 | |
1,607,582 | Brambles Ltd. (Australia) | 13,290 | |
12,251,221 | Cleanaway Waste Management Ltd. (Australia) | 15,571 | |
739,008 | Edenred (France) | 38,951 | |
443,629 | Elis SA (France) | 8,481 | |
8,091,830 | G4S plc (United Kingdom) | 21,702 | |
3,280,307 | HomeServe plc (United Kingdom) | 49,272 | |
53,364 | S-1 Corp. (South Korea) | 4,300 | |
137,800 | Secom Co. Ltd. (Japan) | 12,769 | |
11,857,644 | Serco Group plc (United Kingdom)* | 23,970 | |
114,900 | Sohgo Security Services Co. Ltd. (Japan) | 6,241 | |
197,612 | |||
CONSTRUCTION & ENGINEERING—1.1% | |||
481,181 | Boskalis Westminster NV (Netherlands) | 10,591 | |
199,455 | Ferrovial SA (Spain) | 5,885 | |
864,400 | Maeda Corp. (Japan) | 8,022 | |
1,790,000 | Obayashi Corp. (Japan) | 18,422 | |
1,315,200 | Penta-Ocean Construction Co. Ltd. (Japan) | 8,068 | |
1,189,300 | Shimizu Corp. (Japan) | 11,087 | |
88,900 | SHO-BOND Holdings Co. Ltd. (Japan) | 3,450 | |
65,525 | |||
CONSTRUCTION MATERIALS—0.8% | |||
161,528 | CRH plc (Ireland) | 5,888 | |
842,658 | Fletcher Building Ltd. (New Zealand) | 2,476 | |
53,476 | Imerys SA (France) | 2,066 | |
313,400 | Taiheiyo Cement Corp. (Japan) | 8,866 | |
89,478 | Vicat SA (France) | 3,794 | |
795,174 | Wienerberger AG (Austria) | 21,538 | |
44,628 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
CONSUMER FINANCE—0.5% | |||
419,000 | AEON Financial Service Co. Ltd. (Japan) | $6,386 | |
3,272,119 | International Personal Finance plc (United Kingdom) | 5,633 | |
5,984,227 | Non-Standard Finance plc (United Kingdom)2 | 2,778 | |
1,714,665 | Provident Financial plc (United Kingdom)* | 9,791 | |
194,885 | Shriram Transport Finance Co. Ltd. (India) | 3,128 | |
27,716 | |||
CONTAINERS & PACKAGING—0.6% | |||
5,012,428 | DS Smith plc (United Kingdom) | 23,239 | |
622,300 | Toyo Seikan Group Holdings Ltd. (Japan) | 9,834 | |
33,073 | |||
DISTRIBUTORS—0.2% | |||
1,651,076 | Inchcape plc (United Kingdom) | 13,804 | |
DIVERSIFIED FINANCIAL SERVICES—0.1% | |||
7,796,000 | First Pacific Co. Ltd. (Hong Kong) | 2,982 | |
DIVERSIFIED TELECOMMUNICATION SERVICES—1.8% | |||
1,419,935 | Deutsche Telekom AG (Germany) | 24,985 | |
7,370,397 | Koninklijke KPN NV (Netherlands) | 22,880 | |
744,375 | KT Corp. ADR (South Korea)1 | 8,359 | |
907,900 | Nippon Telegraph & Telephone Corp. (Japan) | 45,071 | |
1,315,839 | Spark New Zealand Ltd. (New Zealand) | 3,775 | |
105,070 | |||
ELECTRIC UTILITIES—0.5% | |||
644,900 | Kansai Electric Power Co. (Japan) | 7,523 | |
251,662 | Orsted AS (Denmark)2 | 22,089 | |
29,612 | |||
ELECTRICAL EQUIPMENT—2.9% | |||
641,210 | Legrand SA (France) | 50,094 | |
82,300 | Mabuchi Motor Co. Ltd. (Japan) | 3,335 | |
389,481 | Schneider Electric SE (France) | 36,198 | |
12,517,000 | TECO Electric and Machinery Co. Ltd. (Taiwan) | 11,099 | |
244,000 | Ushio Inc. (Japan) | 3,646 | |
752,195 | Vestas Wind Systems AS (Denmark) | 61,280 | |
165,652 | |||
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—2.7% | |||
265,700 | Azbil Corp. (Japan) | 7,394 | |
2,093,000 | Chroma ATE Inc. (Taiwan) | 10,407 | |
2,162,000 | Delta Electronics Inc. (Taiwan) | 9,492 | |
17,600 | Hirose Electric Co. Ltd. (Japan) | 2,217 | |
140,700 | Hitachi High-Technologies Corp. (Japan) | 8,754 | |
1,475,100 | Hitachi Ltd. (Japan) | 55,054 | |
282,200 | Kyocera Corp. (Japan) | 18,514 | |
114,300 | Omron Corp. (Japan) | 6,687 | |
143,600 | Shimadzu Corp. (Japan) | 3,835 | |
616,816 | Spectris plc (United Kingdom) | 19,122 | |
110,700 | TDK Corp. (Japan) | 10,923 | |
152,399 | |||
ENERGY EQUIPMENT & SERVICES—0.7% | |||
1,282,426 | John Wood Group plc (United Kingdom) | 5,631 | |
454,040 | Petrofac Ltd. (United Kingdom) | 2,266 | |
5,881,204 | Saipem SpA (Italy)* | 26,695 | |
286,493 | TechnipFMC plc (France) | 5,703 | |
40,295 | |||
ENTERTAINMENT—0.4% | |||
256,456 | CTS Eventim AG & Co. KGaA (Germany) | 15,533 |
28
Harbor International Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—Continued | |||
Shares | Value | ||
ENTERTAINMENT—Continued | |||
366,119 | Modern Times Group Mortgage AB Class B (Sweden)* | $3,395 | |
171,400 | Nexon Co. Ltd. (Japan)* | 1,986 | |
87,100 | Toho Co. Ltd. (Japan) | 3,518 | |
24,432 | |||
FOOD & STAPLES RETAILING—1.7% | |||
392,300 | Dairy Farm International Holdings Ltd. (Hong Kong) | 2,364 | |
1,069,126 | Koninklijke Ahold Delhaize NV (Netherlands) | 26,643 | |
160,500 | Matsumotokiyoshi Holdings Co. Ltd. (Japan) | 5,653 | |
2,656,266 | Metcash Ltd. (Australia) | 5,164 | |
896,500 | Seven & I Holdings Co. Ltd. (Japan) | 33,870 | |
119,700 | Sundrug Co. Ltd. (Japan) | 3,961 | |
6,765,991 | Tesco plc (United Kingdom) | 20,654 | |
98,309 | |||
FOOD PRODUCTS—1.5% | |||
75,600 | Calbee Inc. (Japan) | 2,527 | |
2,125,000 | China Mengniu Dairy Co. Ltd. (China)* | 8,472 | |
2,105,351 | Devro plc (United Kingdom) | 4,373 | |
245,600 | Megmilk Snow Brand Co. Ltd. (Japan) | 5,907 | |
70,800 | Meiji Holdings Co. Ltd. (Japan) | 5,103 | |
697,600 | Nippon Suisan Kaisha Ltd. (Japan) | 3,995 | |
6,526,000 | Tingyi Cayman Islands Holding Corp. (China) | 8,682 | |
463,900 | Toyo Suisan Kaisha Ltd. (Japan) | 19,532 | |
295,999 | Viscofan SA (Spain) | 16,053 | |
13,037,000 | Want Want China Holdings Ltd. (China) | 10,983 | |
85,627 | |||
GAS UTILITIES—0.1% | |||
215,900 | Tokyo Gas Co. Ltd. (Japan) | 5,270 | |
HEALTH CARE EQUIPMENT & SUPPLIES—4.3% | |||
640,583 | Coloplast AS (Denmark) | 77,124 | |
10,038,878 | ConvaTec Group plc (United Kingdom)2 | 25,646 | |
1,038,291 | Demant AS (Denmark)* | 27,427 | |
923,467 | GN Store Nord AS (Denmark) | 40,626 | |
154,100 | Hoya Corp. (Japan) | 13,619 | |
631,787 | Koninklijke Philips NV (Netherlands) | 27,719 | |
396,300 | Olympus Corp. (Japan) | 5,392 | |
403,574 | Smith & Nephew plc (United Kingdom) | 8,663 | |
79,035 | Sonova Holding AG (Switzerland) | 18,137 | |
244,353 | |||
HEALTH CARE PROVIDERS & SERVICES—1.3% | |||
562,500 | Alfresa Holdings Corp. (Japan) | 12,560 | |
400,718 | Amplifon SpA (Italy) | 10,078 | |
602,026 | Fresenius Medical Care AG & Co. KGaA (Germany) | 43,454 | |
370,600 | MediPAL Holdings Corp. (Japan) | 8,467 | |
74,559 | |||
HOTELS, RESTAURANTS & LEISURE—4.8% | |||
5,485,000 | Ajisen China Holdings Ltd. (China) | 1,573 | |
363,748 | Carnival plc (United Kingdom) | 14,556 | |
2,669,698 | Compass Group plc (United Kingdom) | 71,078 | |
399,098 | Flutter Entertainment plc (United Kingdom) | 41,161 | |
6,078,300 | Genting Singapore Ltd. (Singapore) | 4,194 | |
2,543,890 | GVC Holdings plc (United Kingdom) | 29,348 | |
7,923,653 | Merlin Entertainments plc (United Kingdom)2 | 46,682 | |
747,726 | Playtech plc (United Kingdom) | 3,806 | |
3,370,273 | SSP Group plc (United Kingdom) | 27,792 | |
19,754,642 | Thomas Cook Group plc (United Kingdom)* | —x |
COMMON STOCKS—Continued | |||
Shares | Value | ||
HOTELS, RESTAURANTS & LEISURE—Continued | |||
1,636,340 | TUI AG (Germany) | $21,350 | |
246,585 | Yum China Holdings Inc. (China) | 10,480 | |
272,020 | |||
HOUSEHOLD DURABLES—0.9% | |||
880,118 | Barratt Developments plc (United Kingdom) | 7,198 | |
631,800 | Casio Computer Co. Ltd. (Japan) | 10,256 | |
1,953,969 | McCarthy & Stone plc (United Kingdom)2 | 3,701 | |
75,600 | Rinnai Corp. (Japan) | 5,557 | |
501,600 | Sekisui Chemical Co. Ltd. (Japan) | 8,746 | |
243,100 | Sony Corp. (Japan) | 14,797 | |
50,255 | |||
HOUSEHOLD PRODUCTS—0.9% | |||
200,100 | Lion Corp. (Japan) | 4,187 | |
618,052 | Reckitt Benckiser Group plc (United Kingdom) | 47,826 | |
52,013 | |||
INDEPENDENT POWER & RENEWABLE ELECTRICITY PRODUCERS—0.0% | |||
7,568,300 | Lopez Holdings Corp. (Philippines) | 643 | |
INDUSTRIAL CONGLOMERATES—1.5% | |||
2,048,500 | CK Hutchison Holdings Ltd. (Hong Kong) | 18,914 | |
341,780 | DCC plc (United Kingdom) | 32,052 | |
452,400 | Jardine Matheson Holdings Ltd. (Hong Kong) | 25,792 | |
143,844 | LG Corp. (South Korea) | 8,575 | |
4,063,300 | Sime Darby Berhad (Malaysia)* | 2,203 | |
87,536 | |||
INSURANCE—4.5% | |||
861,499 | Admiral Group plc (United Kingdom) | 22,547 | |
1,077,219 | AXA SA (France) | 28,515 | |
1,895,700 | Dai-ichi Life Holdings Inc. (Japan) | 30,899 | |
486,000 | Great Eastern Holdings Ltd. (Singapore) | 7,802 | |
56,943 | Hannover Rueck SE (Germany) | 10,091 | |
50,476 | Helvetia Holding AG (Switzerland) | 7,090 | |
2,074,600 | Japan Post Holdings Co. Ltd. (Japan) | 19,043 | |
367,800 | MS&AD Insurance Group Holdings Inc. (Japan) | 11,877 | |
1,437,246 | QBE Insurance Group Ltd. (Australia) | 12,505 | |
1,123,101 | Sampo OYJ (Finland) | 46,024 | |
61,495 | Samsung Fire & Marine Insurance Co. Ltd. (South Korea) | 11,440 | |
459,500 | Sompo Holdings Inc. (Japan) | 18,061 | |
123,500 | Sony Financial Holdings Inc. (Japan) | 2,657 | |
417,400 | T&D Holdings Inc. (Japan) | 4,649 | |
454,500 | Tokio Marine Holdings Inc. (Japan) | 24,573 | |
257,773 | |||
INTERACTIVE MEDIA & SERVICES—2.2% | |||
467,619 | Adevinta ASA B (Norway)* | 5,349 | |
2,362,334 | Auto Trader Group plc (United Kingdom)2 | 17,213 | |
160,901 | Baidu Inc. ADR (China)*,1 | 16,388 | |
1,131,677 | Carsales.com Ltd. (Australia) | 12,127 | |
1,719,572 | Domain Holdings Australia Ltd. (Australia) | 3,752 | |
9,112,992 | Rightmove plc (United Kingdom) | 70,737 | |
125,566 | |||
INTERNET & DIRECT MARKETING RETAIL—1.1% | |||
17,718 | GS Home Shopping Inc. (South Korea) | 2,265 | |
1,297,395 | HelloFresh SE (Germany)* | 22,625 | |
1,792,994 | Just Eat plc (United Kingdom)* | 17,073 | |
422,583 | MoneySuperMarket.com Group plc (United Kingdom) | 1,880 | |
1,309,000 | PChome Online Inc. (Taiwan) | 5,673 |
29
Harbor International Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—Continued | |||
Shares | Value | ||
INTERNET & DIRECT MARKETING RETAIL—Continued | |||
25,940 | Takeaway.com NV (Netherlands)*,2 | $2,116 | |
89,370 | Trip.com Group Ltd. ADR (China)*,1 | 2,948 | |
28,285 | Zooplus AG (Germany)* | 3,093 | |
107,200 | ZOZO Inc. (Japan) | 2,497 | |
60,170 | |||
IT SERVICES—1.2% | |||
151,403 | Alten SA (France) | 16,655 | |
145,500 | ITOCHU Techno-Solutions Corp. (Japan) | 3,918 | |
201,000 | Nomura Research Institute Ltd. (Japan) | 4,267 | |
2,018,600 | NTT Data Corp. (Japan) | 26,506 | |
58,600 | OBIC Co. Ltd. (Japan) | 7,337 | |
96,700 | Otsuka Corp. (Japan) | 3,899 | |
161,400 | SCSK Corp. (Japan) | 8,216 | |
70,798 | |||
LEISURE PRODUCTS—0.9% | |||
459,700 | Bandai Namco Holdings Inc. (Japan) | 28,267 | |
1,104,000 | Giant Manufacturing Co. Ltd. (Taiwan) | 8,163 | |
3,149,000 | Goodbaby International Holdings Ltd. (Hong Kong)* | 458 | |
786,100 | Sega Sammy Holdings Inc. (Japan) | 11,063 | |
22,000 | Shimano Inc. (Japan) | 3,662 | |
51,613 | |||
LIFE SCIENCES TOOLS & SERVICES—0.6% | |||
57,062 | Eurofins Scientific SE (France) | 28,930 | |
73,408 | Gerresheimer AG (Germany) | 5,920 | |
34,850 | |||
MACHINERY—2.6% | |||
151,350 | Andritz AG (Austria) | 6,806 | |
3,858,667 | CNH Industrial NV (Italy) | 42,012 | |
146,000 | Daifuku Co. Ltd. (Japan) | 7,747 | |
148,340 | GEA Group AG (Germany) | 4,531 | |
100,200 | Hoshizaki Corp. (Japan) | 8,517 | |
322,312 | IMI plc (United Kingdom) | 4,191 | |
161,800 | Makita Corp. (Japan) | 5,442 | |
299,100 | Mitsui E&S Holdings Co. Ltd. (Japan)* | 3,027 | |
1,322,551 | Rotork plc (United Kingdom) | 5,165 | |
1,558,647 | Sandvik AB (Sweden) | 27,537 | |
290,891 | Stabilus SA (Germany) | 16,331 | |
635,237 | Wartsila OYJ Abp (Finland) | 6,711 | |
5,509,000 | Yungtay Engineering Co. Ltd. (Taiwan) | 11,757 | |
149,774 | |||
MARINE—0.2% | |||
2,125,198 | Irish Continental Group plc (Ireland) | 10,163 | |
7,058,103 | Wan HAI Lines Ltd. (Taiwan) | 4,199 | |
14,362 | |||
MEDIA—2.9% | |||
329,864 | Axel Springer SE (Germany)* | 23,088 | |
4,618,700 | BEC World PCL (Thailand)* | 1,017 | |
478,088 | Daily Mail & General Trust plc (United Kingdom) | 5,444 | |
177,807 | Euromoney Institutional Investor plc (United Kingdom) | 3,250 | |
1,041,300 | Fuji Media Holdings Inc. (Japan) | 14,071 | |
1,041,639 | Informa plc (United Kingdom) | 10,470 | |
13,712,471 | ITV plc (United Kingdom) | 23,788 | |
333,524 | JCDecaux SA (France) | 9,117 | |
51,797,500 | Media Nusantara Citra TBK PT (Indonesia) | 4,850 | |
4,225,880 | Nine Entertainment Co. Holdings Ltd. (Australia) | 5,362 | |
1,046,100 | Nippon Television Holdings Inc. (Japan) | 13,682 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
MEDIA—Continued | |||
362,838 | Nordic Entertainment Group AB (Sweden)* | $10,314 | |
248,840 | Schibsted ASA Class A (Norway) | 7,308 | |
211,330 | Schibsted ASA Class B (Norway) | 5,896 | |
1,745,624 | Sky Network Television Ltd. (New Zealand) | 1,009 | |
2,130,000 | Television Broadcasts Ltd. (Hong Kong) | 3,513 | |
1,654,706 | WPP plc (United Kingdom) | 20,650 | |
162,829 | |||
METALS & MINING—2.2% | |||
890,042 | Acerinox SA (Spain) | 8,345 | |
4,275,362 | Alumina Ltd. (Australia) | 6,674 | |
1,056,239 | ArcelorMittal SA (France) | 15,705 | |
299,839 | BHP Group Ltd. (Australia) | 7,350 | |
700,439 | BlueScope Steel Ltd. (Australia) | 6,412 | |
9,970,031 | Glencore plc (United Kingdom)* | 30,093 | |
610,777 | Newcrest Mining Ltd. (Australia) | 13,332 | |
666,263 | Rio Tinto plc (United Kingdom) | 34,687 | |
107,900 | Sumitomo Metal Mining Co. Ltd. (Japan) | 3,609 | |
126,207 | |||
MULTILINE RETAIL—0.2% | |||
347,400 | Marui Group Co. Ltd. (Japan) | 7,723 | |
199,500 | Ryohin Keikaku Co. Ltd. (Japan) | 4,441 | |
12,164 | |||
OIL, GAS & CONSUMABLE FUELS—2.3% | |||
12,820,434 | BP plc (United Kingdom) | 81,299 | |
175,972 | Caltex Australia Ltd. (Australia) | 3,308 | |
1,382,925 | Equinor ASA (Norway) | 25,675 | |
2,308,400 | INPEX Corp. (Japan) | 21,340 | |
131,622 | |||
PAPER & FOREST PRODUCTS—0.0% | |||
284,900 | Oji Holdings Corp. (Japan) | 1,473 | |
PERSONAL PRODUCTS—2.0% | |||
163,827 | AMOREPACIFIC Group (South Korea) | 11,873 | |
4,990,864 | Asaleo Care Ltd. (Australia)* | 3,290 | |
421,900 | Kao Corp. (Japan) | 33,920 | |
31,600 | Kose Corp. (Japan) | 5,603 | |
1,155,500 | L'Occitane International SA (Hong Kong) | 2,601 | |
154,100 | Mandom Corp. (Japan) | 4,270 | |
855,306 | Unilever plc (United Kingdom) | 51,215 | |
112,772 | |||
PHARMACEUTICALS—3.6% | |||
325,500 | Astellas Pharma Inc. (Japan) | 5,586 | |
381,600 | Haw Par Corp. Ltd. (Singapore) | 3,758 | |
1,139,690 | Novo Nordisk AS (Denmark) | 62,670 | |
476,800 | Otsuka Holdings Co. Ltd. (Japan) | 19,878 | |
341,076 | Roche Holding AG (Switzerland) | 102,649 | |
63,500 | Sawai Pharmaceutical Co. Ltd. (Japan) | 3,583 | |
124,300 | Takeda Pharmaceutical Co. Ltd. (Japan) | 4,491 | |
173,200 | Tsumura & Co. (Japan) | 4,770 | |
207,385 | |||
PROFESSIONAL SERVICES—5.0% | |||
591,307 | Adecco Group AG (Switzerland) | 35,151 | |
2,005,650 | ALS Ltd. (Australia) | 11,155 | |
7,024,423 | Capita plc (United Kingdom)* | 14,209 | |
47,621 | DKSH Holding AG (Switzerland) | 2,264 | |
1,194,021 | Experian plc (United Kingdom) | 37,637 | |
8,972,959 | Hays plc (United Kingdom) | 18,261 |
30
Harbor International Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—Continued | |||
Shares | Value | ||
PROFESSIONAL SERVICES—Continued | |||
1,078,246 | Intertek Group plc (United Kingdom) | $74,761 | |
910,374 | IPH Ltd. (Australia) | 5,064 | |
480,700 | Nomura Co. Ltd. (Japan) | 5,933 | |
1,006,604 | PageGroup plc (United Kingdom) | 5,800 | |
293,000 | Persol Holdings Co. Ltd. (Japan) | 5,628 | |
107,986 | Randstad NV (Netherlands) | 5,993 | |
1,795,664 | RELX plc (United Kingdom) | 43,231 | |
71,700 | TechnoPro Holdings Inc. (Japan) | 4,410 | |
72,559 | Teleperformance (France) | 16,462 | |
285,959 | |||
REAL ESTATE MANAGEMENT & DEVELOPMENT—0.6% | |||
251,200 | Daiwa House Industry Co. Ltd. (Japan) | 8,647 | |
1,393,000 | Mitsubishi Estate Co. Ltd. (Japan) | 27,046 | |
35,693 | |||
ROAD & RAIL—1.2% | |||
252,600 | East Japan Railway Co. (Japan) | 22,931 | |
996,633 | National Express Group plc (United Kingdom) | 5,766 | |
514,300 | Senko Group Holdings Co. Ltd. (Japan) | 4,137 | |
384,000 | West Japan Railway Co. (Japan) | 33,366 | |
66,200 | |||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—1.2% | |||
44,112 | ASML Holding NV (Netherlands) | 11,562 | |
2,315,000 | Renesas Electronics Corp. (Japan)* | 15,672 | |
138,400 | ROHM Co. Ltd. (Japan) | 10,965 | |
158,257 | SK Hynix Inc. (South Korea) | 11,128 | |
2,219,000 | Taiwan Semiconductor Manufacturing Co. Ltd. (Taiwan) | 21,746 | |
71,073 | |||
SOFTWARE—0.1% | |||
40,200 | Oracle Corp. Japan (Japan) | 3,533 | |
SPECIALTY RETAIL—0.8% | |||
59,400 | ABC-Mart Inc. (Japan) | 4,073 | |
1,607,500 | Esprit Holdings Ltd. (Hong Kong)* | 307 | |
2,342,940 | Pets at Home Group plc (United Kingdom) | 6,240 | |
281,400 | USS Co. Ltd. (Japan) | 5,450 | |
958,612 | WH Smith plc (United Kingdom) | 27,165 | |
43,235 | |||
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS—1.3% | |||
468,018 | Logitech International SA (Switzerland) | 19,211 | |
453,200 | NEC Corp. (Japan) | 17,960 | |
202,716 | Quadient SAS (France) | 4,341 | |
738,172 | Samsung Electronics Co. Ltd. (South Korea) | 31,904 | |
73,416 | |||
TEXTILES, APPAREL & LUXURY GOODS—3.0% | |||
151,581 | adidas AG (Germany) | 46,858 | |
738,600 | ASICS Corp. (Japan) | 12,681 | |
417,291 | Cie Financiere Richemont SA (Switzerland) | 32,791 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
TEXTILES, APPAREL & LUXURY GOODS—Continued | |||
617,116 | Cie Financiere Richemont SA ADR (South Africa)1 | $4,845 | |
314,691 | EssilorLuxottica SA (France) | 48,052 | |
2,657,500 | Li Ning Co. Ltd. (China) | 9,011 | |
764,100 | Onward Holdings Co. Ltd. (Japan) | 4,417 | |
438,766 | Shenzhou International Group Holdings Ltd. (China) | 6,063 | |
2,619,000 | Stella International Holdings Ltd. (Hong Kong) | 4,387 | |
169,105 | |||
TOBACCO—0.3% | |||
144,102 | British American Tobacco plc (United Kingdom) | 5,040 | |
260,039 | Swedish Match AB (Sweden) | 12,216 | |
17,256 | |||
TRADING COMPANIES & DISTRIBUTORS—1.6% | |||
504,308 | Brenntag AG (Germany) | 25,276 | |
1,407,010 | Bunzl plc (United Kingdom) | 36,603 | |
413,600 | ITOCHU Corp. (Japan) | 8,647 | |
725,300 | Mitsubishi Corp. (Japan) | 18,448 | |
88,974 | |||
TRANSPORTATION INFRASTRUCTURE—0.4% | |||
1,128,000 | China Merchants Port Holdings Co. Ltd. (China) | 1,764 | |
1,100,738 | Getlink SE (France) | 18,438 | |
181,500 | Mitsubishi Logistics Corp. (Japan) | 4,607 | |
24,809 | |||
WIRELESS TELECOMMUNICATION SERVICES—0.8% | |||
1,428,743 | Bharti Airtel Ltd. (India) | 7,512 | |
736,600 | KDDI Corp. (Japan) | 20,383 | |
453,700 | NTT DoCoMo Inc. (Japan) | 12,438 | |
57,539,725 | Vodafone Idea Ltd. (India)* | 3,115 | |
43,448 | |||
TOTAL COMMON STOCKS | |||
(Cost $5,403,072) | 5,567,066 | ||
PREFERRED STOCKS—0.5% | |||
AEROSPACE & DEFENSE—0.0% | |||
125,230,078 | Rolls Royce Holdings plc (United Kingdom)* | 162x | |
AUTOMOBILES—0.5% | |||
144,744 | Volkswagen AG (Germany) | 27,517 | |
TOTAL PREFERRED STOCKS | |||
(Cost $23,972) | 27,679 | ||
TOTAL INVESTMENTS—98.2% | |||
(Cost $5,427,044) | 5,594,745 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—1.8% | 100,898 | ||
TOTAL NET ASSETS—100.0% | $5,695,643 |
WARRANTS/RIGHTS
Description | No. of Contracts | Strike Price | Expiration Date | Cost (000s) | Value (000s) | |||||
Adevinta ASA | 283,754 | NOK 0.20 | 11/12/2019 | $ — | $43 |
31
Harbor International Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
FAIR VALUE MEASUREMENTS
The following table summarizes the Fund’s investments as of October 31, 2019 based on the inputs used to value them.
Asset Category | Quoted Prices Level 1 (000s) | Other Significant Observable Inputs Level 2 (000s) | Significant Unobservable Inputs Level 3 (000s) | Total (000s) | ||||
Investments in Securities | ||||||||
Common Stocks | ||||||||
Europe | $— | $3,544,072 | $— | $3,544,072 | ||||
Middle East/Central Asia | — | 27,368 | — | 27,368 | ||||
North America | 8,069 | — | — | 8,069 | ||||
Pacific Basin | 38,175 | 1,949,382 | — | 1,987,557 | ||||
Preferred Stocks | ||||||||
Europe | — | 27,517 | 162 | 27,679 | ||||
Total Investments in Securities | $46,244 | $5,548,339 | $162 | $5,594,745 | ||||
Financial Derivative Instruments - Assets | ||||||||
Warrants/Rights | $— | $43 | $— | $43 | ||||
Total Investments | $46,244 | $5,548,382 | $162 | $5,594,788 |
For more information on valuation inputs and their aggregation into the levels used in the table above, please refer to the Fair Value Measurements and Disclosures in Note 2 of the accompanying Notes to Financial Statements.
The following is a rollforward of the Fund’s Level 3 investments during the year ended October 31, 2019. Transfers into or out of Level 3 are recognized as of the last day in the fiscal quarter of the period in which the event or change in circumstances that caused the reclassification occurred.
Valuation Description | Beginning Balance as of 11/01/2018 (000s) | Purchases (000s) | Sales (000s) | Discount/ (Premium) (000s) | Total Realized Gain/(Loss)w (000s) | Change in Unrealized Appreciation/ (Depreciation)w (000s) | Transfers Into Level 3h (000s) | Transfers Out of Level 3 (000s) | Ending Balance as of 10/31/2019w (000s) | |||||||||
Common Stocks | $— | $— | $(5,454) | $— | $(11,411) | $(3,741) | $20,606 | $— | $— | |||||||||
Preferred Stocks | 677 | 162 | (675) | — | (7) | 5 | — | — | 162 | |||||||||
$677 | $162 | $(6,129) | $— | $(11,418) | $(3,736) | $20,606 | $— | $162 |
The following is a summary of significant unobservable inputs used in the fair valuations of assets and liabilities categorized within Level 3 of the fair value hierarchy.
Valuation Descriptions | Ending Balance as of 10/31/2019 (000s) | Valuation Technique | Unobservable Input(s) | Input Value(s) | ||||
Investments in Securities | ||||||||
Common Stocks | ||||||||
Thomas Cook Group plc (United Kingdom)* | $ — | Market Approach | Estimated Recovery Value | GBP 0.00 | ||||
Preferred Stocks | ||||||||
Rolls-Royce Holdings plc (United Kingdom)* | 162 | Market Approach | Pre-Traded Price | GBP 0.001 | ||||
$162 |
AFFILIATED TRANSACTIONS
Certain of the Fund’s investments are in companies that are considered to be affiliated companies of the Fund because the Fund owned more than 5% of the outstanding voting securities of the company during the period November 1, 2018 through October 31, 2019. Transactions during the period in securities of these companies were as follows:
Security Name | Beginning Balance as of 11/01/2018 (000s) | Purchases (000s) | Sales (000s) | Net Realized Gain/(Loss) (000s) | Change in Unrealized Appreciation/ (Depreciation) (000s) | Net Dividend Income (000s) | Ending Balance as of 10/31/2019 (000s) | |||||||
Cementos Argos SA (Colombia) | $171,185 | $— | $(196,000) | $(69,131) | $93,946 | $1,265 | $— |
32
Harbor International Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
* | Non-income producing security | ||
1 | ADR after the name of a security stands for American Depositary Receipts representing ownership of foreign securities. ADRs are issued by U.S. banking institutions. | ||
2 | Securities purchased in a transaction 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. The Fund has no right to demand registration of these securities. At October 31, 2019, the aggregate value of these securities was $130,459 or 2% of net assets. | ||
h | Transferred from Level 2 to Level 3 due to unavailability of observable market data for pricing | ||
w | Amounts in this category are included in the “Realized and Change in Net Unrealized Gain/(Loss) on Investment Transactions” section of the Statement of Operations. The net unrealized appreciation/(depreciation) per investment type is below: | ||
Valuation Description | Unrealized Gain/(Loss) as of 10/31/2019 (000s) | ||
Common Stocks | $(17,166) | ||
Preferred Stocks | — | ||
$(17,166) | |||
x | Fair valued in accordance with Harbor Funds' Valuation Procedures. | ||
GBP | British Pound | ||
NOK | Norwegian Krone |
The accompanying notes are an integral part of the Financial Statements.
33
Harbor International Growth Fund
Manager’s Commentary (Unaudited)
Manager’s Commentary (Unaudited)
Subadviser
Baillie Gifford Overseas Limited
Calton Square
1 Greenside Row
Edinburgh, Scotland
United Kingdom
EH1 3AN
United Kingdom
EH1 3AN
Portfolio Managers
Gerard Callahan
Since 2013
Since 2013
Iain Campbell
Since 2013
Since 2013
Joe Faraday, CFA
Since 2013
Since 2013
Moritz Sitte, CFA
Since 2014
Since 2014
Sophie Earnshaw, CFA
Since 2014
Since 2014
Baillie Gifford Overseas Limited has subadvised the Fund since 2013.
Investment Objective
The Fund seeks long-term growth of capital.
Gerard Callahan
Iain Campbell
Joe Faraday, CFA
Moritz Sitte, CFA
Sophie Earnshaw, CFA
Management’s Discussion of
Fund Performance
Fund Performance
Market Review
International equities have performed well over the last twelve months despite a great deal of uncertainty on the global political stage. After a period of weakness during the last quarter of 2018, 2019 has been stronger in relative terms. Global influences on the markets during the period have included concern over U.S. interest rates being reduced three times in succession, a further escalation of U.S.-China trade tensions, and unresolved uncertainty over Brexit. Bond yields have also been falling to ultra-low levels, and some unusual patterns have developed in longer dated bond yields, which some believe might indicate darker economic clouds ahead.
The period has also seen some weakness in the United Kingdom (UK) as a result of uncertainties surrounding the Brexit process and the UK’s failure to leave the European Union in October of this year. Following the recent announcement of an upcoming UK general election to take place in December, the UK’s political developments are likely to remain a source for concern.
Performance
Harbor International Growth Fund returned 18.81% (Retirement Class), 18.73% (Institutional Class), 18.45% (Administrative Class), and 18.29% (Investor Class) for the year ended October 31, 2019, outperforming the 11.27% return of the MSCI All Country World Ex. U.S. (ND) Index.
We employ a fundamental long-term investment strategy, focused on bottom-up stock selection. Our approach to investing means that we are not distracted by short term market movements and wider economic issues. Instead, its focus is on finding good quality stocks that outperform over the long term. The Fund’s performance over the period was primarily driven by stock selection.
At a regional level, our approach resulted in the Fund having overweight positions relative to the benchmark in developed Asia and in the UK. The Fund was underweight in Europe, Canada and emerging markets. Developed Asia, particularly Japan, was the largest contributor to relative performance, and overall, all regions contributed to the Fund’s relative performance.
In terms of sectoral exposures, the Fund was most overweight in Consumer Discretionary, Industrials and Information Technology holdings. The main underweight sectors for the period were Energy, Financials and Utilities. Specifically looking at performance, stock selection in Consumer Staples and Information Technology helped performance. The largest detracting sectors were Consumer Discretionary and Utilities.
The Fund’s regional and sectoral positions are outputs of its bottom-up investment process. Given this fundamental approach, it is particularly appropriate to look at the individual companies which impacted performance. The largest individual contributors to performance included Shopify, Asian Paints and Raia Drogasil. The main stock detractors during the period included Baidu, ASOS and Wood Group.
Shopify is a Canadian e-commerce services company that builds software to help businesses sell products online. The company has had a positive year with share prices increasing threefold. We have been pleased to see the Shopify’s commitment to facilitating entrepreneurship and innovation being rewarded by an expanding client base across the globe. Asian Paints is an
34
Harbor International Growth Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
CHANGE IN A $50,000 INVESTMENT
For the period 11/01/2009 through 10/31/2019
The graph compares a $50,000 investment in the Institutional Class shares of the Fund with the performance of the MSCI All Country World Ex. U.S. (ND) Index. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
TOTAL RETURNS
For the periods ended 10/31/2019
1 Year | Annualized | |||||||
5 Years | 10 Years | |||||||
Harbor International Growth Fund | ||||||||
Retirement Class1 | 18.81% | 6.09% | 6.07% | |||||
Institutional Class | 18.73 | 6.04 | 6.04 | |||||
Administrative Class | 18.45 | 5.76 | 5.77 | |||||
Investor Class | 18.29 | 5.64 | 5.64 | |||||
Comparative Index | ||||||||
MSCI All Country World Ex. U.S. (ND) | 11.27% | 3.82% | 4.94% |
As stated in the Fund’s prospectus dated March 1, 2019, the expense ratios were 0.77% (Net) and 0.82% (Gross) (Retirement Class); 0.85% (Net) and 0.90% (Gross) (Institutional Class); 1.10% (Net) and 1.15% (Gross) (Administrative Class); and 1.22% (Net) and 1.27% (Gross) (Investor Class). The net expense ratios reflect an expense limitation agreement (excluding interest expense, if any) effective through 02/29/2020. The expense ratios in the prospectus may differ from the actual expense ratios for the period disclosed within this report. The expense ratios shown in the prospectus are based on the prior fiscal year, adjusted to reflect changes, if any, in contractual arrangements that occurred prior to the date of the prospectus (or supplement thereto, if applicable).
Performance data shown represents past performance and is no guarantee of future results. Past performance is net of management fees and expenses and reflects reinvested dividends and distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or upon the redemption of Fund shares. Past performance reflects the beneficial effect of any expense waivers or reimbursements, without which returns would have been lower. Investment returns and principal value will fluctuate so that Fund shares, when redeemed, may be worth more or less than their original cost. Returns for periods less than one year are not annualized. Current performance may be higher or lower and is available through the most recent month end atharborfunds.com or by calling 800-422-1050.
Indian paint business that has performed well over the last twelve months. A growing Indian middle-class, rising home ownership and a range of products catering to a variety of budgets and needs, have helped Asian Paints to continue to take market share. Its network of over 60,000 stores gives it a significant distribution advantage. Raia Drogasil is Brazil’s leading pharmacy chain. This company has built an extensive network of pharmacies across Brazil and continues to grow due to increasing demand for their products from an ageing population. Raia Drogasil maintains a good culture across its stores and have been able to service some of the most populated cities in Brazil. It continues to position itself to take market share through some acquisitions and organic growth.
Baidu is a Chinese internet company that has not performed well during the last year. Baidu has struggled to replace lagging revenues from its core internet search business with its newer investments in artificial intelligence and cloud services. Some of its underperformance can also be attributed to concerns stemming from strained U.S.-China trade relations. We have decided to monitor the situation closely. ASOS, the UK online fashion retail platform, has not performed well during this period. ASOS has had several profit warnings during the year and struggled with some operational and warehousing challenges with their European and U.S. business. Despite its 2019 struggles, the company reported some good results in September. However, we continue to monitor this holding. Wood Group is an oil services company based in the UK. Wood Group’s performance may be attributed in part to sterling weakness during the year and the market’s concern about the ongoing integration of Amec Foster Wheeler, a company that Wood Group purchased two years ago. We believe that the investment case which views Wood Group as the likely beneficiary of further exploration and development activities by larger resource companies, still stands and will continue to watch this holding.
Outlook & Strategy
Though there may be some ongoing anxieties around current geopolitical issues, we strive not to be distracted by short term market movements. Our bottom-up approach to investing focuses on finding what we believe are well-managed, good quality companies that can perform well over meaningful time periods. We are optimistic that the international businesses in the Fund have potential to deliver attractive growth for investors.
1 | Retirement Class shares commenced operations on March 1, 2016. The performance attributed to the Retirement Class shares prior to that date is that of the Institutional Class shares. Performance prior to March 1, 2016 has not been adjusted to reflect the lower expenses of Retirement Class shares. During this period, Retirement Class shares would have had returns similar to, but potentially higher than, Institutional Class shares due to the fact that Retirement Class shares represent interests in the same portfolio as Institutional Class shares but are subject to lower expenses. |
This report contains the current opinions of Baillie Gifford Overseas Limited as of the date of this report and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Such opinions are subject to change without notice and securities described herein may no longer be included in, or may at any time be removed from, the Fund’s portfolio. This report is distributed for informational purposes only. Information contained herein has been obtained from sources believed reliable, but not guaranteed.
Investing in international and emerging markets poses special risks, including potentially greater price volatility due to social, political and economic factors, as well as currency exchange rate fluctuations. These risks are more severe for securities of issuers in emerging market regions. For information on the different share classes and the risks associated with an investment in the Fund, please refer to the current prospectus.
35
Harbor International Growth Fund
Portfolio of Investments—October 31, 2019
Portfolio of Investments—October 31, 2019
REGION BREAKDOWN(% of investments) – Unaudited
(Excludes short-term investments)
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—97.3% | |||
Shares | Value | ||
AUTO COMPONENTS—0.8% | |||
97,700 | Denso Corp. (Japan) | $4,536 | |
AUTOMOBILES—0.8% | |||
552,683 | Mahindra & Mahindra Ltd. GDR (India)1 | 4,733 | |
BANKS—2.5% | |||
943,200 | Public Bank BHD (Malaysia) | 4,578 | |
532,127 | United Overseas Bank Ltd. (Singapore) | 10,476 | |
15,054 | |||
BEVERAGES—4.0% | |||
5,158,500 | Thai Beverage PCL (Thailand) | 3,463 | |
568,569 | Treasury Wine Estates Ltd. (Australia) | 6,893 | |
1,552,000 | Tsingtao Brewery Co. Ltd. (China) | 8,994 | |
465,064 | United Spirits Ltd. (India)* | 4,116 | |
23,466 | |||
BUILDING PRODUCTS—2.3% | |||
150,295 | Kingspan Group plc (Ireland) | 7,786 | |
417,724 | Nibe Industrier AB (Sweden) | 5,720 | |
13,506 | |||
CAPITAL MARKETS—2.8% | |||
554,515 | Hargreaves Lansdown plc (United Kingdom) | 12,733 | |
805,845 | Jupiter Fund Management plc (United Kingdom) | 3,578 | |
16,311 | |||
CHEMICALS—4.7% | |||
438,757 | Asian Paints Ltd. (India) | 11,180 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
CHEMICALS—Continued | |||
165,890 | Johnson Matthey plc (United Kingdom) | $6,590 | |
218,241 | Novozymes AS (Denmark) | 10,288 | |
28,058 | |||
COMMERCIAL SERVICES & SUPPLIES—1.0% | |||
375,382 | HomeServe plc (United Kingdom) | 5,638 | |
DIVERSIFIED FINANCIAL SERVICES—1.5% | |||
173,761 | Investor AB Class B (Sweden)2 | 8,915 | |
ELECTRICAL EQUIPMENT—3.0% | |||
112,852 | Legrand SA (France) | 8,816 | |
62,900 | Nidec Corp. (Japan) | 9,261 | |
18,077 | |||
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—2.5% | |||
9,900 | Keyence Corp. (Japan) | 6,260 | |
161,100 | Murata Manufacturing Co. Ltd. (Japan) | 8,771 | |
15,031 | |||
ENERGY EQUIPMENT & SERVICES—0.5% | |||
640,225 | John Wood Group plc (United Kingdom) | 2,811 | |
ENTERTAINMENT—1.1% | |||
45,623 | Spotify Technology SA (Sweden)* | 6,583 | |
FOOD & STAPLES RETAILING—4.1% | |||
449,959 | Jeronimo Martins SGPS SA (Portugal) | 7,561 | |
362,500 | Raia Drogasil SA (Brazil)* | 9,943 |
36
Harbor International Growth Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—Continued | |||
Shares | Value | ||
FOOD & STAPLES RETAILING—Continued | |||
56,900 | Sugi Holdings Co. Ltd. (Japan) | $3,158 | |
1,204,500 | Wal-Mart de Mexico SAB de CV (Mexico)* | 3,610 | |
24,272 | |||
HEALTH CARE EQUIPMENT & SUPPLIES—5.2% | |||
89,970 | Cochlear Ltd. (Australia) | 13,126 | |
677,400 | Olympus Corp. (Japan) | 9,217 | |
134,000 | Sysmex Corp. (Japan) | 8,743 | |
31,086 | |||
HOUSEHOLD PRODUCTS—1.1% | |||
136,400 | Pigeon Corp. (Japan) | 6,659 | |
INDUSTRIAL CONGLOMERATES—1.2% | |||
41,600 | Jardine Matheson Holdings Ltd. (Singapore) | 2,372 | |
155,300 | Jardine Strategic Holdings Ltd. (Singapore) | 5,015 | |
7,387 | |||
INSURANCE—5.6% | |||
1,200,400 | AIA Group Ltd. (Hong Kong) | 11,954 | |
11,088 | Fairfax Financial Holdings Ltd. (Canada) | 4,697 | |
337,700 | MS&AD Insurance Group Holdings Inc. (Japan) | 10,905 | |
494,000 | Ping An Insurance Group Co. of China Ltd. (China) | 5,702 | |
33,258 | |||
INTERACTIVE MEDIA & SERVICES—6.3% | |||
1,376,661 | Auto Trader Group plc (United Kingdom)3 | 10,031 | |
39,214 | Baidu Inc. ADR (China)*,4 | 3,994 | |
290,000 | Kakaku.com Inc. (Japan) | 6,734 | |
25,897 | Naver Corp. (South Korea) | 3,651 | |
1,655,139 | Rightmove plc (United Kingdom) | 12,847 | |
37,257 | |||
INTERNET & DIRECT MARKETING RETAIL—9.5% | |||
85,571 | Alibaba Group Holding Ltd. ADR (China)*,4 | 15,118 | |
78,260 | ASOS plc (United Kingdom)* | 3,597 | |
94,396 | MakeMyTrip Ltd. (India)* | 2,173 | |
64,512 | Naspers Ltd. (South Africa) | 9,129 | |
64,512 | Prosus NV (Netherlands)* | 4,449 | |
1,407,382 | Trainline plc (United Kingdom)*,3 | 7,603 | |
142,261 | Trip.com Group Ltd. ADR (China)*,4 | 4,693 | |
219,061 | Zalando SE (Germany)*,3 | 9,498 | |
56,260 | |||
IT SERVICES—3.6% | |||
84,207 | Bechtle AG (Germany) | 9,119 | |
38,782 | Shopify Inc. (Canada)* | 12,161 | |
21,280 | |||
LEISURE PRODUCTS—1.3% | |||
45,800 | Shimano Inc. (Japan) | 7,623 | |
LIFE SCIENCES TOOLS & SERVICES—1.6% | |||
13,735 | Mettler-Toledo International Inc. (Switzerland)* | 9,682 | |
MACHINERY—9.3% | |||
161,322 | Atlas Copco AB Class A (Sweden)2 | 5,694 | |
156,158 | Atlas Copco AB Class B (Sweden) | 4,845 | |
151,787 | Epiroc AB Class A (Sweden)*,2 | 1,710 | |
425,397 | Epiroc AB Class B (Sweden)* | 4,633 | |
126,549 | Kone OYJ (Finland) | 8,058 | |
38,859 | Schindler Holding AG (Switzerland) | 9,520 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
MACHINERY—Continued | |||
23,800 | SMC Corp. (Japan) | $10,283 | |
851,500 | Techtronic Industries Co. Ltd. (Hong Kong) | 6,655 | |
203,837 | Weir Group plc (United Kingdom) | 3,561 | |
54,959 | |||
PERSONAL PRODUCTS—3.5% | |||
78,000 | Kao Corp. (Japan) | 6,271 | |
177,100 | Shiseido Co. Ltd. (Japan) | 14,602 | |
20,873 | |||
PROFESSIONAL SERVICES—2.4% | |||
106,057 | Intertek Group plc (United Kingdom) | 7,353 | |
428,662 | SEEK Ltd (Australia) | 6,709 | |
14,062 | |||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—6.3% | |||
43,894 | ASML Holding NV (Netherlands) | 11,505 | |
352,822 | Infineon Technologies AG (Germany) | 6,834 | |
341,540 | Taiwan Semiconductor Manufacturing Co. Ltd. ADR (Taiwan)4 | 17,634 | |
14,113 | U-Blox Holding AG (Switzerland)* | 1,144 | |
37,117 | |||
SPECIALTY RETAIL—1.8% | |||
341,013 | Industria de Diseno Textil SA (Spain)2 | 10,626 | |
TEXTILES, APPAREL & LUXURY GOODS—4.3% | |||
31,692 | adidas AG (Germany) | 9,797 | |
230,036 | Burberry Group plc (United Kingdom) | 6,100 | |
121,975 | Cie Financiere Richemont SA (Switzerland)2 | 9,585 | |
25,482 | |||
THRIFTS & MORTGAGE FINANCE—1.9% | |||
376,102 | Housing Development Finance Corp. Ltd. (India) | 11,315 | |
WIRELESS TELECOMMUNICATION SERVICES—0.8% | |||
122,100 | SoftBank Group Corp. (Japan) | 4,697 | |
TOTAL COMMON STOCKS | |||
(Cost $499,075) | 576,614 | ||
PREFERRED STOCKS—1.5% | |||
(Cost $5,800) | |||
HEALTH CARE EQUIPMENT & SUPPLIES—1.5% | |||
44,566 | Sartorius AG (Germany) | 8,660 | |
SHORT-TERM INVESTMENTS—3.0% | |||
(Cost $17,687) | |||
17,687,216 | State Street Navigator Securities Lending Government Money Market Portfolio (1 day yield of 1.75%)5 | 17,687 | |
TOTAL INVESTMENTS—101.8% | |||
(Cost $522,562) | 602,961 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—(1.8)% | (10,529) | ||
TOTAL NET ASSETS—100.0% | $592,432 |
37
Harbor International Growth Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
FAIR VALUE MEASUREMENTS
The following table summarizes the Fund’s investments as of October 31, 2019 based on the inputs used to value them.
Asset Category | Quoted Prices Level 1 (000s) | Other Significant Observable Inputs Level 2 (000s) | Significant Unobservable Inputs Level 3 (000s) | Total (000s) | ||||
Common Stocks | ||||||||
Africa | $— | $9,129 | $— | $9,129 | ||||
Europe | 16,265 | 238,545 | — | 254,810 | ||||
Latin America | 13,553 | — | — | 13,553 | ||||
Middle East/Central Asia | 2,413 | 31,104 | — | 33,517 | ||||
North America | 16,858 | — | — | 16,858 | ||||
Pacific Basin | 41,439 | 207,308 | — | 248,747 | ||||
Preferred Stocks | ||||||||
Europe | — | 8,660 | — | 8,660 | ||||
Short-Term Investments | ||||||||
Investment Company-Securities Lending Investment Fund | 17,687 | — | — | 17,687 | ||||
Total Investments in Securities | $108,215 | $494,746 | $— | $602,961 |
There were no Level 3 holdings at October 31, 2019 or 2018.
For more information on valuation inputs and their aggregation into the levels used in the table above, please refer to the Fair Value Measurements and Disclosures in Note 2 of the accompanying Notes to Financial Statements.
* | Non-income producing security |
1 | GDR after the name of a security stands for Global Depositary Receipts representing ownership of foreign securities. GDRs are issued by either U.S. or non-U.S. banking institutions. |
2 | All or a portion of this security was out on loan as of October 31, 2019. |
3 | Securities purchased in a transaction 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. The Fund has no right to demand registration of these securities. At October 31, 2019, the aggregate value of these securities was $27,132 or 5% of net assets. |
4 | ADR after the name of a security stands for American Depositary Receipts representing ownership of foreign securities. ADRs are issued by U.S. banking institutions. |
5 | Represents the investment of collateral received from securities lending activities |
The accompanying notes are an integral part of the Financial Statements.
38
Harbor International Small Cap Fund
Manager’s Commentary (Unaudited)
Manager’s Commentary (Unaudited)
Subadviser
Cedar Street Asset Management LLC
455 North Cityfront Plaza Drive
Suite 1710
Suite 1710
Chicago, IL 60611
Portfolio Managers
Jonathan P. Brodsky
Since 2019
Since 2019
Waldemar A. Mozes
Since 2019
Since 2019
Cedar Street has subadvised the Fund since 2019.
Investment Objective
The Fund seeks long-term growth of capital.
Jonathan P. Brodsky
Waldemar A. Mozes
Management’s Discussion of
Fund Performance
Fund Performance
Market Review
During the fiscal year ended October 31, 2019, the MSCI EAFE Small Cap (ND) Index gained 8.82% (all international and global returns are in U.S. Dollars). For much of the fiscal year, financial markets have been driven more by increasing geopolitical uncertainty than by company fundamentals, in our view. The trade war between the U.S. and China, the meandering Brexit saga, and various drone attacks and bombings striking strategic energy assets in the Middle East are just some of the issues weighing on sentiment. Central banks have responded with more monetary easing. A quest for “safe haven” assets has produced a $17 trillion pool of debt that has a negative yield, while developed market government bond yields have mostly reverted to 2016 lows. In response, equity investors have aggressively bid up stocks exposed to size, quality, momentum, and low-volatility factors while small caps, value, negative momentum, and high-volatility factors have all experienced declines.
In this context, although the returns from the countries that constitute the MSCI EAFE Small Cap (ND) Index were generally positive, large caps tended to outperform small caps. From a sector perspective, Consumer Staples, Utilities, and Real Estate have tended to perform well relative to other sectors due to their high concentration of companies with favored factor exposure. In essence, we believe macroeconomic and geopolitical uncertainty has favored equities that have bond-like safety characteristics.
Performance
Harbor International Small Cap Fund underperformed the return of the MSCI EAFE Small Cap (ND) Index during the period. The Fund returned 5.23% (Retirement Class), 5.25% (Institutional Class), 4.90% (Administrative Class), and 4.70% (Investor Class) compared to the MSCI EAFE Small Cap (ND) Index return of 8.82%. On May 23, 2019, Cedar Street Asset Management LLC (“Cedar Street”) was appointed as subadviser to the Fund, replacing Baring International Investment Limited. The Fund’s performance was essentially in-line with its benchmark’s results from November 1, 2018 through May 22, 2019 and positive stock selection across a variety of sectors, especially Financials and Materials, was largely offset by poor sector positioning, including large underweights to REITs and Information Technology. Comments below are relevant for the period since Cedar Street assumed subadvisory responsibilities for the Fund in late May of 2019.
The negative relative return over the period was disappointing and primarily reflects stock selection in continental Europe, especially Germany, France, and the Netherlands, offset somewhat by positive returns in the UK and Japan, our two largest country weights. From a sector perspective, stock selection in Consumer Discretionary and a lack of exposure to the Real Estate sector were the main contributors to the negative relative return, but they were offset by positive stock selection in the Materials and Technology sectors.
Our investment strategy seeks to capture market pricing inefficiencies through our bottom up stock selection process that identifies cheaply priced stocks that do not fully reflect the strength of a company’s underlying business. The companies in which we seek to invest have in our view, solid balance sheets, generate above average returns on equity through a full business cycle, and, due to the strength of their businesses, have the potential to produce considerable sales and earnings growth. But because of some negative short-term dynamics, we believe that current market valuations do not fully capture the long-term potential, in our view.
During the period under review, the most significant detractors to Fund performance were Tarkett, a French commercial flooring and sports surfaces business with global presence and Bertrandt AG, a German engineering services business supplying research and development and testing services to European automotive OEMs. Tarkett has been experiencing both weak demand trends due to high levels of corporate uncertainty and input cost inflation from high commodity costs. Tarkett’s near-term restructuring and pricing actions have resulted in inconsistent execution, especially in key markets in North America and Europe. Bertrandt, which has been at the forefront of developing systems and work streams to support its OEM customers’
39
Harbor International Small Cap Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
CHANGE IN A $50,000 INVESTMENT
For the period 02/01/2016 through 10/31/2019
The graph compares a $50,000 investment in the Institutional Class shares of the Fund with the performance of the MSCI EAFE Small Cap (ND) Index. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
TOTAL RETURNS
For the periods ended 10/31/2019
1 Year | 5 Years | Annualized | ||||||
Life of Fund | ||||||||
Harbor International Small Cap Fund | ||||||||
Retirement Class1 | 5.23% | N/A | 8.06% | |||||
Institutional Class1 | 5.25 | N/A | 8.01 | |||||
Administrative Class1 | 4.90 | N/A | 7.71 | |||||
Investor Class1 | 4.70 | N/A | 7.59 | |||||
Comparative Index | ||||||||
MSCI EAFE Small Cap (ND)1 | 8.82% | N/A | 9.79% |
As stated in the Fund’s prospectus dated March 1, 2019, the expense ratios were 0.88% (Net) and 1.08% (Gross) (Retirement Class); 0.96% (Net) and 1.16% (Gross) (Institutional Class); 1.21% (Net) and 1.41% (Gross) (Administrative Class); and 1.33% (Net) and 1.53% (Gross) (Investor Class). The net expense ratios reflect an expense limitation agreement (excluding interest expense, if any) effective through 02/29/2020. The expense ratios in the prospectus may differ from the actual expense ratios for the period disclosed within this report. The expense ratios shown in the prospectus are based on the prior fiscal year, adjusted to reflect changes, if any, in contractual arrangements that occurred prior to the date of the prospectus (or supplement thereto, if applicable).
Performance data shown represents past performance and is no guarantee of future results. Past performance is net of management fees and expenses and reflects reinvested dividends and distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or upon the redemption of Fund shares. Past performance reflects the beneficial effect of any expense waivers or reimbursements, without which returns would have been lower. Investment returns and principal value will fluctuate so that Fund shares, when redeemed, may be worth more or less than their original cost. Returns for periods less than one year are not annualized. Current performance may be higher or lower and is available through the most recent month end atharborfunds.com or by calling 800-422-1050.
push into electric vehicles (“EV”) has faced delays in receiving orders from its from OEM customers because product requirements changed dramatically. Meanwhile the company continues to invest in facilities and people in anticipation of an EV wave, pressuring near-term margins. We would also note that both companies trade at earnings and book valuation multiples that are at or below global financial crisis lows, despite substantially larger operations and cleaner balance sheets.
Cobham PLC, a UK aerospace and defense contractor was the most significant contributor to returns during the period under review. Cobham has recently completed a major restructuring effort that entailed rationalizing its product scope and significantly de-levering the balance. Management divested a highly profitable but non-core electronics unit that accelerated its transformation. Advent International, a U.S. private equity firm, made an opportunistic bid for the company at a 35% premium to its pre-deal price. We exited the position when shares traded above the offer price on concerns that government scrutiny on national security grounds could scupper the deal.
Sector and geographic allocations within the Fund are dependent on bottom-up stock selection. As such the Fund’s considerable overweight position in the Industrials sector reflects our conviction around specific holdings.
From a geographical perspective, allocations for most countries were right in-line with the index except for our underweight position in the UK and Australia and moderate overweight positions in Germany, Hong Kong, and France.
Outlook & Strategy
While we continue to believe the current extreme environment, including $17 trillion in nominally negative yielding debt and utility indexes trading at 19x price to earnings multiples, is unsustainable, we are unable to predict when it will end. Instead we continue to utilize our time-tested process to identify what we believe to be good quality, low-priced stocks that are currently out of favor for some short-term reason. Having experienced extreme market conditions in past cycles, we believe that company-specific fundamentals rather than macro uncertainty will once again be the dominant driver of investment returns. Our view is that in the long term this value-centric approach allows investors to gain exposure to some of the most dynamic growth markets while also improving diversification and mitigating some of the potential risks of investing in non-U.S. asset classes.
1 | The “Life of Fund” return as shown reflects the period 02/01/2016 through 10/31/2019. |
This report contains the current opinions of Cedar Street Asset Management LLC as of the date of this report and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Such opinions are subject to change without notice and securities described herein may no longer be included in, or may at any time be removed from, the Fund’s portfolio. This report is distributed for informational purposes only. Information contained herein has been obtained from sources believed reliable, but not guaranteed.
Investing in international and emerging markets poses special risks, including potentially greater price volatility due to social, political and economic factors, as well as currency exchange rate fluctuations. These risks are more severe for securities of issuers in emerging market regions. For information on the different share classes and the risks associated with an investment in the Fund, please refer to the current prospectus.
Stocks of small cap companies pose special risks, including possible illiquidity and greater price volatility than stocks of larger, more established companies. Equity securities, such as common stocks, are affected by company specific events and by movements in the overall stock markets in which those securities principally trade, among other factors. An adverse company specific event, or downturn in those stock markets, can depress the value of a particular company’s equity securities. For information on the different share classes and the risks associated with an investment in the Fund, please refer to the current prospectus.
40
Harbor International Small Cap Fund
Portfolio of Investments—October 31, 2019
Portfolio of Investments—October 31, 2019
REGION BREAKDOWN(% of investments) – Unaudited
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—91.8% | |||
Shares | Value | ||
AEROSPACE & DEFENSE—1.8% | |||
346,223 | Senior plc (United Kingdom) | $828 | |
AIR FREIGHT & LOGISTICS—3.6% | |||
463,500 | Kerry Logistics Network Ltd. (Hong Kong) | 740 | |
56,703 | Kintetsu World Express Inc. (Japan) | 917 | |
1,657 | |||
BANKS—5.3% | |||
278,200 | Bank of East Asia Ltd. (Hong Kong) | 670 | |
510,484 | CYBG plc (United Kingdom) | 908 | |
85,666 | Spar Nord Bank AS (Denmark) | 837 | |
2,415 | |||
BUILDING PRODUCTS—2.8% | |||
19,100 | Central Glass Co. Ltd. (Japan) | 460 | |
51,270 | Tarkett SA (France) | 835 | |
1,295 | |||
CAPITAL MARKETS—2.2% | |||
26,802 | JAFCO Co. Ltd. (Japan) | 1,007 | |
CHEMICALS—3.2% | |||
37,600 | Fuso Chemical Co. Ltd. (Japan) | 970 | |
53,700 | Neo Performance Materials Inc. (Canada) | 492 | |
1,462 | |||
COMMERCIAL SERVICES & SUPPLIES—0.3% | |||
47,303 | Mears Group PLC (United Kingdom) | 156 | |
CONSTRUCTION & ENGINEERING—4.0% | |||
45,190 | Arcadis NV (Netherlands) | 894 | |
58,353 | Raito Kogyo Co. Ltd. (Japan) | 927 | |
1,821 | |||
CONSUMER FINANCE—1.6% | |||
128,386 | Resurs Holding AB (Sweden)1 | 756 | |
CONTAINERS & PACKAGING—1.7% | |||
64,567 | BillerudKorsnas AB (Sweden) | 777 | |
DISTRIBUTORS—2.0% | |||
108,450 | Inchcape plc (United Kingdom) | 907 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
ELECTRICAL EQUIPMENT—2.0% | |||
494,500 | Johnson Electric Holdings Ltd. (Hong Kong) | $903 | |
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—3.3% | |||
8,029 | Landis+Gyr Group AG (Switzerland)* | 745 | |
37,900 | Nohmi Bosai Ltd. (Japan) | 789 | |
1,534 | |||
FOOD PRODUCTS—5.2% | |||
42,374 | Ebro Foods SA (Spain) | 930 | |
162,173 | Elders Ltd. (Australia) | 660 | |
2,251,600 | Japfa Ltd. (Singapore) | 811 | |
2,401 | |||
HEALTH CARE EQUIPMENT & SUPPLIES—1.7% | |||
20,600 | Paramount Bed Holdings Co. Ltd. (Japan) | 788 | |
HEALTH CARE PROVIDERS & SERVICES—4.1% | |||
32,240 | BML Inc. (Japan) | 946 | |
450,715 | Healius Ltd. (Australia) | 958 | |
1,904 | |||
HOTELS, RESTAURANTS & LEISURE—1.8% | |||
51,308 | Resorttrust Inc. (Japan) | 819 | |
HOUSEHOLD DURABLES—2.2% | |||
56,600 | Fujitsu General Ltd. (Japan) | 1,022 | |
INSURANCE—3.1% | |||
19,080 | ASR Nederland NV (Netherlands) | 700 | |
66,161 | Coface SA (France) | 723 | |
1,423 | |||
INTERNET & DIRECT MARKETING RETAIL—2.8% | |||
329,958 | N Brown Group plc (United Kingdom) | 534 | |
62,594 | Takkt AG (Germany) | 744 | |
1,278 | |||
IT SERVICES—0.7% | |||
32,877 | Indra Sistemas SA (Spain)* | 318 | |
MACHINERY—6.8% | |||
12,900 | Krones AG (Germany) | 843 | |
25,851 | METAWATER Co. Ltd. (Japan) | 1,013 |
41
Harbor International Small Cap Fund
Portfolio of Investments��Continued
Portfolio of Investments��Continued
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—Continued | |||
Shares | Value | ||
MACHINERY—Continued | |||
18,317 | Nabtesco Corp. (Japan) | $583 | |
32,000 | OSG Corp. (Japan) | 684 | |
3,123 | |||
MARINE—2.1% | |||
25,937 | Clarkson plc (United Kingdom) | 950 | |
MEDIA—1.9% | |||
51,775 | Criteo SA ADR (France)*,2 | 865 | |
METALS & MINING—1.7% | |||
22,100 | DOWA Holdings Co. Ltd. (Japan) | 763 | |
OIL, GAS & CONSUMABLE FUELS—3.2% | |||
59,225 | Golar LNG Ltd. (Bermuda) | 815 | |
488,488 | Viva Energy Group Ltd. (Australia)1 | 673 | |
1,488 | |||
PAPER & FOREST PRODUCTS—1.6% | |||
199,625 | Navigator Co. SA (Portugal) | 720 | |
PERSONAL PRODUCTS—1.9% | |||
48,550 | Ontex Group NV (Belgium) | 881 | |
PROFESSIONAL SERVICES—4.3% | |||
14,807 | Bertrandt AG (Germany) | 739 | |
37,337 | Brunel International NV (Netherlands) | 346 | |
18,801 | DKSH Holding AG (Switzerland) | 894 | |
1,979 | |||
ROAD & RAIL—2.5% | |||
259,837 | Northgate plc (United Kingdom) | 1,160 | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—5.2% | |||
6,753 | Siltronic AG (Germany) | 643 | |
25,920 | Sumco Corp. (Japan) | 431 | |
39,725 | Tower Semiconductor Ltd. (Israel)* | 871 | |
95,225 | X-Fab Silicon Foundries SE (Belgium)*,1 | 429 | |
2,374 | |||
SPECIALTY RETAIL—1.2% | |||
72,850 | Matas AS (Denmark) | 558 | |
TRADING COMPANIES & DISTRIBUTORS—4.0% | |||
87,755 | BOC Aviation Ltd. (Singapore)1 | 824 | |
38,150 | Kanamoto Co. Ltd. (Japan) | 1,020 | |
1,844 | |||
TOTAL COMMON STOCKS | |||
(Cost $42,097) | 42,176 | ||
PREFERRED STOCKS—2.0% | |||
(Cost $882) | |||
HEALTH CARE EQUIPMENT & SUPPLIES—2.0% | |||
15,672 | Draegerwerk AG & Co KGaA (Germany) | 919 | |
TOTAL INVESTMENTS—93.8% | |||
(Cost $42,979) | 43,095 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—6.2% | 2,855 | ||
TOTAL NET ASSETS—100.0% | $45,950 |
42
Harbor International Small Cap Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
FAIR VALUE MEASUREMENTS
The following table summarizes the Fund’s investments as of October 31, 2019 based on the inputs used to value them.
Asset Category | Quoted Prices Level 1 (000s) | Other Significant Observable Inputs Level 2 (000s) | Significant Unobservable Inputs Level 3 (000s) | Total (000s) | ||||
Common Stocks | ||||||||
Europe | $1,680 | $19,755 | $— | $21,435 | ||||
Middle East/Central Asia | 871 | — | — | 871 | ||||
North America | — | 492 | — | 492 | ||||
Pacific Basin | — | 19,378 | — | 19,378 | ||||
Preferred Stocks | ||||||||
Europe | — | 919 | — | 919 | ||||
Total Investments in Securities | $2,551 | $40,544 | $— | $43,095 |
There were no Level 3 holdings at October 31, 2019 or 2018.
For more information on valuation inputs and their aggregation into the levels used in the table above, please refer to the Fair Value Measurements and Disclosures in Note 2 of the accompanying Notes to Financial Statements.
* | Non-income producing security |
1 | Securities purchased in a transaction 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. The Fund has no right to demand registration of these securities. At October 31, 2019, the aggregate value of these securities was $2,682 or 6% of net assets. |
2 | ADR after the name of a security 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.
43
Harbor Overseas Fund
Manager’s Commentary (Unaudited)
Manager’s Commentary (Unaudited)
Subadviser
Acadian Asset Management LLC
260 Franklin Street
Boston, MA 02110
Boston, MA 02110
Portfolio Managers
Brendan O. Bradley, Ph.D.
Since 2019
Ryan D. Taliaferro, Ph.D.
Since 2019
Harry Gakidis, Ph.D.
Since 2019
Since 2019
Acadian has subadvised the Fund since 2019.
Investment Objective
The Fund seeks long-term growth of capital.
Brendan O. Bradley, Ph.D.
Ryan D. Taliaferro, Ph.D.
Harry Gakidis, Ph.D.
Management’s Discussion of
Fund Performance
Fund Performance
MARKET REVIEW
International equities advanced for the period March 1, 2019 through October 31, 2019 but concerns over slowing global growth and U.S.-China trade tensions cast a shadow on international equity markets earlier in the year ended October 31, 2019. Weaker global growth forecasts in export-oriented European economies as well as Brexit uncertainty weighed further on equities. Markets, however, found a more stable footing and began to recover in late summer in response to easing by the U.S. Federal Reserve (Fed), accommodative monetary policy by the European Central Bank (ECB), and on the prospect of a possible resolution to U.S.-China trade tensions.
PERFORMANCE
For the period since inception, March 1, 2019, to October 31, 2019, Harbor Overseas Fund returned 3.10% (Retirement Class), 3.10% (Institutional Class), and 2.80% (Investor Class), compared to the MSCI EAFE (ND) Index return of 6.92%. Performance relative to the benchmark was driven by both negative stock selection and allocation effects during the period.
Acadian’s investment philosophy is centered in the belief that markets are inefficient and that these inefficiencies are driven in part by behavioral biases that result in mispricing opportunities. Acadian applies fundamental insights in a systematic manner to exploit security mis-pricings and identify attractive investment opportunities. Further, we believe that a successful investment approach must be multi-faceted and adaptive in nature, acknowledging that risk/reward relationships evolve over time and that markets may reward different characteristics during specific periods of a market cycle. These observations suggest that adding value in a consistent fashion can be best achieved by assessing the value of information at different points in time and applying these insights in an objective, quantitative manner across a broad opportunity set. To realize these insights, Acadian employs a dynamic investment strategy which adapts to the current market environment and utilizes a disciplined, systematic approach to stock selection.
From a stock selection perspective, attractive fundamental characteristics were generally not rewarded. UK materials firm Evraz Plc was the Fund’s largest detractor, as the stock price fell on weaker than expected margins and slowing global demand for steel. Japan Post similarly detracted from performance, with the stock falling on regulatory concerns. Stock positions within European pharmaceuticals and media also contributed negatively during the period.
Partially offsetting the above, positive stock selection added value in European diversified financials, Australian materials, and Australian software. For example, an investment in Italian financial services provider Banca Generali added value, as the stock advanced on stronger than expected earnings. In Australia, positions in miner Fortescue Metals and software maker Atlassian also contributed positively, consistent with their overweight holdings in the portfolio.
From an allocation perspective, the Fund also benefitted from an opportunistic exposure to Brazil and an underweight position to European and UK banks. However, an opportunistic exposure to China, as well as overweight positions in European telecoms and Japanese banks detracted from performance.
44
Harbor Overseas Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
CHANGE IN A $50,000 INVESTMENT
For the 03/01/2019 through 10/31/2019
The graph compares a $50,000 investment in the Institutional Class shares of the Fund with the performance of the MSCI EAFE (ND) Index. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
TOTAL RETURNS
For the periods ended 10/31/2019
1 Year | 5 Years | Unannualized | ||||||
Life of Fund | ||||||||
Harbor Overseas Fund | ||||||||
Retirement Class1 | N/A | N/A | 3.10% | |||||
Institutional Class1 | N/A | N/A | 3.10 | |||||
Investor Class1 | N/A | N/A | 2.80 | |||||
Comparative Index | ||||||||
MSCI EAFE (ND)1 | N/A | N/A | 6.92% |
As stated in the Fund’s prospectus dated March 1, 2019, the expense ratios were 0.77% (Net) and 2.16% (Gross) (Retirement Class); 0.85% (Net) and 2.24% (Gross) (Institutional Class); 1.10% (Net) and 2.49% (Gross) (Administrative Class); 1.22% (Net) and 2.61% (Gross) (Investor Class). The net expense ratios reflect an expense limitation agreement (excluding interest expense, if any) effective through 02/29/2020. The expense ratios in the prospectus may differ from the actual expense ratios for the period disclosed within this report. The expense ratios shown in the prospectus are based on the prior fiscal year, adjusted to reflect changes, if any, in contractual arrangements that occurred prior to the date of the prospectus (or supplement thereto, if applicable).
Performance data shown represents past performance and is no guarantee of future results. Past performance is net of management fees and expenses and reflects reinvested dividends and distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or upon the redemption of Fund shares. Past performance reflects the beneficial effect of any expense waivers or reimbursements, without which returns would have been lower. Investment returns and principal value will fluctuate so that Fund shares, when redeemed, may be worth more or less than their original cost. Returns for periods less than one year are not annualized. Current performance may be higher or lower and is available through the most recent month end atharborfunds.com or by calling 800-422-1050.
In following a systematic investment process, Acadian continually evaluates the effectiveness of stock selection based on attributes we believe predict future stock prices. For this period, we observed our views on stock valuations did not add to the portfolio’s returns relative to the benchmark. However, technical factors designed to take advantage of inherent supply and demand differences for stocks traded in the capital markets contributed positively to results for the period.
OUTLOOK & STRATEGY
Global markets began the final quarter of 2019 facing heightened economic and geopolitical uncertainty in many key regions. Although the themes underpinning current risks are nothing new to investors, their persistence and, in some cases, intensification, amplify downside risks. Slowing growth is a major concern, acknowledged by efforts of both the Fed and ECB to inject stimulus with rate cuts and bond purchase programs. The Organization for Economic Co-operation and Development, blaming the ongoing trade war, lowered its forecast for 2019 global growth in September to 2.9% from its prior forecast of 3.2%. The trade war remains the primary headwind, and specifically its impact on manufacturing and the knock-on effects felt in consumer spending. Economic indicators have been trending lower in recent months, none more dramatically than the manufacturing data. Purchasing Managers Indexes recently fell to 10-year lows in the U.S. in September. Europe’s manufacturing sector is also in contraction, and the effects have been dramatic in emerging economies which often do not have the robust services component to help buffer weak manufacturing. Overall, softening growth forecasts are not surprising given the lack of progress in resolving global trade friction, simmering geopolitical risk in Europe and Hong Kong, and political uncertainty in the U.S. We retain a view that risks are tilted to the downside and will remain so until world leaders are able to resolve trade differences and subdue political turmoil in key areas.
We believe that the portfolio is currently well positioned in both the near term and long term to add value for our clients. We also understand that markets are constantly evolving. As such, we are always looking for ways to enhance our investment process across all phases, including model enhancement, risk controls, and implementation. We believe this will allow us to continue to be successful in the long term.
1 | The “Life of Fund” return as shown reflects the period 03/01/2019 through 10/31/2019. |
This report contains the current opinions of Acadian Asset Management LLC as of the date of this report and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Such opinions are subject to change without notice and securities described herein may no longer be included in, or may at any time be removed from, the Fund’s portfolio. This report is distributed for informational purposes only. Information contained herein has been obtained from sources believed reliable, but not guaranteed.
Investing in international and emerging markets poses special risks, including potentially greater price volatility due to social, political and economic factors, as well as currency exchange rate fluctuations. These risks are more severe for securities of issuers in emerging market regions. For information on the different share classes and the risks associated with an investment in the Fund, please refer to the current prospectus.
45
Harbor Overseas Fund
Portfolio of Investments—October 31, 2019
Portfolio of Investments—October 31, 2019
REGION BREAKDOWN(% of investments) – Unaudited
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—99.2% | |||
Shares | Value | ||
AEROSPACE & DEFENSE—1.0% | |||
295 | Airbus SE (France) | $42 | |
30 | ECA (France) | 1 | |
782 | Hanwha Aerospace Co. Ltd. (South Korea)* | 26 | |
16,442 | Leonardo SpA (Italy) | 191 | |
98 | Sogeclair (France) | 3 | |
445 | Ultra Electronics Holdings plc (United Kingdom) | 11 | |
274 | |||
AIR FREIGHT & LOGISTICS—0.1% | |||
13,372 | Royal Mail plc (United Kingdom) | 37 | |
AIRLINES—0.0% | |||
442 | Deutsche Lufthansa AG (Germany) | 8 | |
AUTO COMPONENTS—0.1% | |||
3,830 | Grupo Industrial Saltillo SAB de CV (Mexico) | 5 | |
500 | Showa Corp. (Japan) | 10 | |
15 | |||
AUTOMOBILES—1.4% | |||
14,687 | Peugeot SA (France) | 372 | |
BANKS—14.7% | |||
245 | Bank Hapoalim BM ADR (Israel)1 | 10 | |
7,213 | Bank Leumi Le-Israel (Israel) | 53 | |
4,600 | Bank of Montreal (Canada) | 341 | |
1,862,100 | Bank Pembangunan Daerah Jawa Timur TBK PT (Indonesia) | 92 | |
10,664 | Barclays plc (United Kingdom) | 23 | |
7,251 | BNP Paribas SA (France) | 379 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
BANKS—Continued | |||
10,641 | CFE Capital S de RL de CV (Mexico) | $13 | |
400 | DBS Group Holdings Ltd. (Singapore) | 8 | |
5,401 | Erste Group Bank AG (Austria)* | 191 | |
38,668 | Faisal Islamic Bank of Egypt (Egypt) | 38 | |
132,000 | Industrial & Commercial Bank of China Ltd. (China) | 95 | |
49,490 | Israel Discount Bank Ltd. (Israel) | 226 | |
319 | Israel Discount Bank Ltd. ADR (Israel)1 | 14 | |
34,200 | Japan Post Bank Co. Ltd. (Japan) | 340 | |
95,100 | Mitsubishi UFJ Financial Group Inc. (Japan) | 493 | |
281,500 | Mizuho Financial Group Inc. (Japan) | 437 | |
4,800 | Royal Bank of Canada (Canada) | 387 | |
6,010 | SpareBank 1 BV (Norway) | 24 | |
593 | Sparebanken Sor (Norway) | 6 | |
3,722 | Standard Chartered plc (United Kingdom) | 34 | |
12,500 | Sumitomo Mitsui Financial Group Inc. (Japan) | 444 | |
2,000 | Sumitomo Mitsui Trust Holdings Inc. (Japan) | 73 | |
2,300 | Toronto-Dominion Bank (Canada) | 131 | |
3,852 | |||
BEVERAGES—0.8% | |||
1,354 | Carlsberg AS (Denmark) | 191 | |
16,198 | Ginebra San Miguel Inc. (Philippines) | 15 | |
70 | Heineken Holding NV (Netherlands) | 7 | |
213 | |||
BUILDING PRODUCTS—0.3% | |||
668 | FM Mattsson Mora Group AB (Sweden) | 6 | |
1,880 | Inwido AB (Sweden) | 12 |
46
Harbor Overseas Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—Continued | |||
Shares | Value | ||
BUILDING PRODUCTS—Continued | |||
5,888 | Norcros plc (United Kingdom) | $18 | |
2,477 | Systemair AB (Sweden) | 36 | |
72 | |||
CAPITAL MARKETS—3.4% | |||
8,871 | 3i Group plc (United Kingdom) | 130 | |
273 | Altamir (France)* | 5 | |
8,452 | Banca Generali SpA (Italy) | 276 | |
10,039 | Fiducian Group Ltd. (Australia) | 37 | |
3,001 | London Stock Exchange Group plc (United Kingdom) | 271 | |
7,000 | Singapore Exchange Ltd. (Singapore) | 46 | |
8,851 | St. James's Place plc (United Kingdom) | 119 | |
884 | |||
CHEMICALS—0.0% | |||
1,800 | AirBoss of America Corp. (Canada) | 11 | |
COMMERCIAL SERVICES & SUPPLIES—1.4% | |||
26,692 | BSA Ltd. (Australia) | 7 | |
100 | Calian Group Ltd. (Canada) | 3 | |
412 | Catering International Services (France) | 6 | |
6,400 | DAI Nippon Printing Co. Ltd. (Japan) | 171 | |
599 | Fursys Inc. (South Korea) | 16 | |
450 | GDI Integrated Facility Services Inc. (Canada)* | 10 | |
42 | Orell Fuessli Holding AG (Switzerland)* | 4 | |
7,600 | Toppan Printing Co. Ltd. (Japan) | 140 | |
357 | |||
COMMUNICATIONS EQUIPMENT—0.1% | |||
484 | Radware Ltd. (Israel)* | 11 | |
1,220 | Telefonaktiebolaget LM Ericsson (Sweden) | 11 | |
22 | |||
CONSTRUCTION & ENGINEERING—0.3% | |||
41,300 | Boustead Singapore Ltd. (Singapore) | 24 | |
19,465 | Decmil Group Ltd. (Australia) | 11 | |
32,791 | Johns Lyng Group Ltd. (Australia) | 42 | |
77 | |||
CONSTRUCTION MATERIALS—0.7% | |||
58,953 | Fletcher Building Ltd. (New Zealand) | 173 | |
19,932 | Steppe Cement Ltd. (Malaysia)* | 7 | |
180 | |||
CONSUMER FINANCE—0.1% | |||
44,900 | RCE Capital BHD (Malaysia) | 17 | |
CONTAINERS & PACKAGING—0.0% | |||
64,100 | Hanwell Holdings Ltd. (Singapore) | 11 | |
DISTRIBUTORS—1.0% | |||
10,800 | Jardine Cycle & Carriage Ltd. (Singapore) | �� 260 | |
DIVERSIFIED CONSUMER SERVICES—0.1% | |||
19,161 | China Beststudy Education Group (Hong Kong)* | 7 | |
1,743 | Internationella Engelska Skolan I Sverige Holding II AB (Sweden) | 13 | |
20 | |||
DIVERSIFIED FINANCIAL SERVICES—0.4% | |||
1,010 | Exor NV (Netherlands) | 78 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
DIVERSIFIED FINANCIAL SERVICES—Continued | |||
13,798 | IGB Bhd (Malaysia) | $9 | |
15,000 | Mulpha International BHD (Malaysia)* | 7 | |
94 | |||
DIVERSIFIED TELECOMMUNICATION SERVICES—2.6% | |||
145,911 | BT Group plc (United Kingdom) | 387 | |
604 | Magyar Telekom Telecommunications plc ADR (Hungary)1 | 4 | |
6,000 | Nippon Telegraph & Telephone Corp. (Japan) | 298 | |
109 | Telefonica SA (Spain) | 1 | |
690 | |||
ELECTRIC UTILITIES—1.6% | |||
3,216 | Enel Americas SA ADR (Chile)1 | 31 | |
28,931 | Enel SpA (Italy) | 224 | |
16,707 | Iberdrola SA (Spain) | 172 | |
23,158 | OPG Power Ventures plc (United Kingdom) | 4 | |
431 | |||
ELECTRICAL EQUIPMENT—0.1% | |||
250,000 | Jiangnan Group Ltd. (Hong Kong) | 11 | |
205 | Somfy SA (France) | 19 | |
30 | |||
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—1.7% | |||
190 | Barco NV (Belgium) | 41 | |
98,377 | Datatec Ltd. (South Africa) | 235 | |
13,314 | Hon Hai Precision Industry Co. Ltd. GDR (Taiwan)2 | 69 | |
548 | IDIS Holdings Co. Ltd. (South Korea) | 6 | |
1,006 | Telsys (Israel) | 21 | |
7,354 | Venture Corp. Ltd. (Singapore) | 85 | |
457 | |||
ENERGY EQUIPMENT & SERVICES—0.7% | |||
67,271 | CGG SA (France)* | 157 | |
149,000 | Hilong Holding Ltd. (Hong Kong) | 16 | |
173 | |||
ENTERTAINMENT—2.0% | |||
1,029 | Ol Groupe SA (France)* | 4 | |
1,206 | Ubisoft Entertainment SA (France)* | 71 | |
15,418 | Vivendi SA (France) | 429 | |
106,364 | Zengame Technology Holding Ltd. (Hong Kong)* | 9 | |
513 | |||
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—0.1% | |||
14,185 | Yeni Gimat Gayrimenkul Ortakligi AS (Turkey) | 28 | |
FOOD & STAPLES RETAILING—1.8% | |||
18,464 | Koninklijke Ahold Delhaize NV (Netherlands) | 460 | |
38,000 | Springland International Holdings Ltd. (Hong Kong) | 7x | |
467 | |||
FOOD PRODUCTS—0.1% | |||
900 | Maeil Holdings Co. Ltd. (South Korea) | 9 | |
119 | Neto ME Holdings Ltd. (Israel)* | 10 | |
4,363 | PGG Wrightson Ltd. (New Zealand) | 7 | |
26 | |||
HEALTH CARE EQUIPMENT & SUPPLIES—4.0% | |||
28,686 | Fisher & Paykel Healthcare Corp. Ltd. (New Zealand) | 352 | |
12,359 | Getinge AB Class B (Sweden) | 211 |
47
Harbor Overseas Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—Continued | |||
Shares | Value | ||
HEALTH CARE EQUIPMENT & SUPPLIES—Continued | |||
372 | GN Store Nord AS (Denmark) | $16 | |
10,379 | Koninklijke Philips NV (Netherlands) | 455 | |
1,579 | Medistim ASA (Norway) | 27 | |
1,061 | |||
HEALTH CARE PROVIDERS & SERVICES—0.2% | |||
1,337 | MediPAL Holdings Corp. (Japan) | 30 | |
200 | Neuca SA (Poland) | 19 | |
49 | |||
HOTELS, RESTAURANTS & LEISURE—0.4% | |||
989 | Compass Group plc (United Kingdom) | 26 | |
410 | Evolution Gaming Group AB ADR (Sweden)1 | 10 | |
83,100 | Jaya Bersama Indo TBK PT (Indonesia)* | 11 | |
4,217 | Jumbo Interactive Ltd. (Australia) | 65 | |
112 | |||
HOUSEHOLD DURABLES—4.3% | |||
477 | Amica SA (Poland) | 15 | |
35,688 | Barratt Developments plc (United Kingdom) | 292 | |
2,956 | Berkeley Group Holdings plc (United Kingdom) | 168 | |
9,600 | Lii Hen Industries BHD (Malaysia) | 7 | |
18,400 | Sekisui House Ltd. (Japan) | 397 | |
142 | Surteco Group SE (Germany) | 3 | |
117,956 | Taylor Wimpey plc (United Kingdom) | 253 | |
1,135 | |||
HOUSEHOLD PRODUCTS—0.1% | |||
2,824 | Kimberly-Clark de Mexico SAB de CV ADR (Mexico)*,1 | 28 | |
INDEPENDENT POWER & RENEWABLE ELECTRICITY PRODUCERS—0.5% | |||
46,938 | Meridian Energy Ltd. (New Zealand) | 138 | |
INSURANCE—7.9% | |||
788 | Ageas (Belgium) | 45 | |
1,495 | Allianz SE (Germany) | 365 | |
22,970 | Assicurazioni Generali SpA (Italy) | 466 | |
19,881 | Avivasa Emeklilik VE Hayat As (Turkey) | 40 | |
4,223 | European Reliance General Insurance Co. SA (Greece)* | 24 | |
1,100 | Great Eastern Holdings Ltd. (Singapore) | 18 | |
2,200 | iA Financial Corp. Inc. (Canada) | 106 | |
33,600 | Japan Post Holdings Co. Ltd. (Japan) | 308 | |
85,381 | Legal + General Group plc (United Kingdom) | 292 | |
113,000 | Paninvest TBK PT (Indonesia)* | 10 | |
3,167 | QBE Insurance Group Ltd. (Australia) | 28 | |
3,500 | Tokio Marine Holdings Inc. (Japan) | 189 | |
66,066 | Unipolsai Assicurazioni SpA (Italy) | 184 | |
2,075 | |||
INTERACTIVE MEDIA & SERVICES—0.1% | |||
20,061 | Auto Trader Group plc ADR (United Kingdom)1 | 35 | |
120 | Mediagrif Interactive Technologies Inc. (Canada) | 1 | |
36 | |||
INTERNET & DIRECT MARKETING RETAIL—0.3% | |||
1,871 | Lastminute.com NV (Netherlands)* | 78 | |
4,717 | Temple & Webster Group Ltd. (Australia)* | 7 | |
85 | |||
IT SERVICES—2.8% | |||
300 | Business Engineering Corp. (Japan) | 9 | |
819 | Comarch SA (Poland) | 38 | |
18,122 | Eckoh plc (United Kingdom) | 12 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
IT SERVICES—Continued | |||
4,500 | Fujitsu Ltd. (Japan) | $399 | |
241,419 | Hi Sun Technology China Ltd. (Hong Kong)* | 42 | |
3,715 | Kainos Group plc (United Kingdom) | 24 | |
345 | Know It AB (Sweden) | 7 | |
500 | Nomura Research Institute Ltd. (Japan) | 11 | |
4,900 | Otsuka Corp. (Japan) | 197 | |
413 | Techedge SpA (Italy) | 2 | |
741 | |||
LIFE SCIENCES TOOLS & SERVICES—1.9% | |||
4,402 | Ergomed plc (United Kingdom)* | 18 | |
1,657 | Sartorius Stedim Biotech (France) | 248 | |
559 | Siegfried Holding AG (Switzerland)* | 228 | |
494 | |||
MACHINERY—2.3% | |||
5,334 | Atlas Copco AB Class A (Sweden) | 188 | |
20,851 | Deutz AG (Germany) | 116 | |
5,102 | DY Corp. (South Korea) | 21 | |
1,200 | Mitsuboshi Belting Ltd. (Japan) | 23 | |
52,400 | Zhengzhou Coal Mining Machinery Group Co. Ltd. (China) | 26 | |
318,200 | Zoomlion Heavy Industry Science And Technology Co. Ltd. (China) | 234 | |
608 | |||
MEDIA—2.0% | |||
1,634 | 4imprint Group plc (United Kingdom) | 63 | |
4,693 | Bloomsbury Publishing plc (United Kingdom) | 15 | |
18,144 | Cello Health plc (United Kingdom) | 30 | |
195 | Cogeco Communications Inc. (Canada) | 17 | |
300 | Cogeco Inc. (Canada) | 23 | |
4,472 | Corus Entertainment Inc. (Canada) | 17 | |
85 | GTN Ltd. (Australia) | — | |
2,451 | HighCo SA (France) | 15 | |
3,663 | Ilkka-Yhtyma OYJ (Finland) | 16 | |
3,975 | North Media AS (Denmark) | 22 | |
34,186 | Nos SGPS SA (Portugal) | 203 | |
8,618 | WPP plc (United Kingdom) | 108 | |
529 | |||
METALS & MINING—4.2% | |||
94,785 | Arcelormittal South Africa Ltd. (South Africa)* | 11 | |
22,947 | Base Resources Ltd. (Australia)* | 4 | |
3,100 | Bear Creek Mining Corp. (Canada)* | 6 | |
52,347 | Champion Iron Ltd. (Australia)* | 77 | |
40,463 | Evolution Mining Ltd. (Australia) | 115 | |
36,784 | Evraz plc (United Kingdom) | 176 | |
59,033 | Fortescue Metals Group Ltd. (Australia) | 361 | |
26,518 | Maca Ltd. (Australia) | 17 | |
268 | Newcrest Mining Ltd. (Australia) | 6 | |
91,030 | Red 5 Ltd. (Australia)* | 17 | |
29,775 | Regis Resources Ltd. (Australia) | 101 | |
12,083 | Trans-Siberian Gold PLC (United Kingdom) | 13 | |
3,579 | Tribune Resources Ltd. (Australia)* | 21 | |
76,658 | Western Areas Ltd. (Australia) | 169 | |
1,094 | |||
MULTI-UTILITIES—0.8% | |||
46,370 | Hera SpA (Italy) | 199 | |
OIL, GAS & CONSUMABLE FUELS—1.0% | |||
24,800 | China Aviation Oil Singapore Corp. Ltd. (Singapore) | 22 | |
3,453 | OMV AG (Austria) | 202 |
48
Harbor Overseas Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—Continued | |||
Shares | Value | ||
OIL, GAS & CONSUMABLE FUELS—Continued | |||
525 | OMV AG ADR (Austria)1 | $30 | |
14,000 | PetroChina Co. Ltd. (China) | 7 | |
29,450 | Universal Coal plc CDI (United Kingdom) | 5 | |
266 | |||
PAPER & FOREST PRODUCTS—0.0% | |||
1,311 | Midway Ltd. (Australia) | 2 | |
PERSONAL PRODUCTS—2.1% | |||
593 | Jacques Bogart SA (France) | 5 | |
9,437 | Unilever NV (Netherlands) | 558 | |
563 | |||
PHARMACEUTICALS—9.5% | |||
321 | H Lundbeck AS ADR (Denmark)1 | 11 | |
1,666 | Ipsen SA (France) | 178 | |
51 | Merck KGAA (Germany) | 6 | |
4,800 | Mochida Pharmaceutical Co. Ltd. (Japan) | 191 | |
8,095 | Novartis AG (Switzerland) | 707 | |
9,347 | Novo Nordisk AS (Denmark) | 514 | |
2,777 | Roche Holding AG (Switzerland) | 836 | |
562 | Vetoquinol SA (France) | 37 | |
2,480 | |||
PROFESSIONAL SERVICES—2.3% | |||
5,084 | Keystone Law Group plc (United Kingdom) | 33 | |
4,498 | People Infrastructure Ltd. (Australia) | 11 | |
1,738 | RELX plc (United Kingdom) | 42 | |
7,160 | Semcon AB (Sweden) | 44 | |
6,315 | Wolters Kluwer NV (Netherlands) | 465 | |
595 | |||
REAL ESTATE MANAGEMENT & DEVELOPMENT—1.7% | |||
83,000 | China Overseas Grand Oceans Group Ltd. (Hong Kong) | 43 | |
116,681 | Ever Reach Group Holdings Co. Ltd. (Hong Kong) | 15 | |
37,000 | Glorious Property Holdings Ltd. (Hong Kong)* | 1 | |
120,899 | K Wah International Holdings Ltd. (Hong Kong) | 66 | |
1,235 | LSR Group PJSC GDR (Russia)2 | 3 | |
200 | Mainstreet Equity Corp. (Canada)* | 10 | |
62,150 | Powerlong Real Estate Holdings Ltd. (Hong Kong) | 41 | |
10,500 | Sun Hung KAI Properties Ltd. (Hong Kong) | 159 | |
3,608 | Tag Immobilien AG (Germany)* | 88 | |
7,000 | Vanke Property Overseas Ltd. (Hong Kong) | 4 | |
363,000 | Zhong An Group Ltd. (Hong Kong)* | 11 | |
441 | |||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—4.1% | |||
4,200 | Advantest Corp. (Japan) | 191 | |
4,960 | AIXTRON SE (Germany)* | 45 | |
213 | ASML Holding NV (Netherlands) | 56 | |
522 | Dialog Semiconductor plc (United Kingdom)* | 23 | |
400 | Nuflare Technology Inc. (Japan) | 30 | |
2,915 | NXP Semiconductors NV (Netherlands) | 331 | |
1,520 | Siltronic AG (Germany) | 145 | |
200 | Tokyo Electron Ltd. (Japan) | 41 | |
9,846 | Tower Semiconductor Ltd. (Israel)* | 216 | |
1,078 | |||
SOFTWARE—3.9% | |||
1,075 | Atlassian Corp. plc (United Kingdom)* | 130 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
SOFTWARE—Continued | |||
1,836 | Check Point Software Technologies Ltd. (Israel)* | $206 | |
1,405 | Cyberark Software Ltd. (Israel)* | 143 | |
3,315 | IVU Traffic Technologies AG (Germany)* | 40 | |
2,762 | MiX Telematics Ltd. ADR (South Africa)1 | 35 | |
2,698 | NICE Ltd. ADR (Israel)*,1 | 426 | |
3,383 | Sopheon plc (United Kingdom) | 36 | |
1,016 | |||
SPECIALTY RETAIL—0.4% | |||
43,981 | Kathmandu Holdings Ltd. (New Zealand)* | 88 | |
20 | Samse SA (France) | 4 | |
339,200 | Tiphone Mobile Indonesia TBK PT (Indonesia) | 8 | |
100 | |||
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS—1.5% | |||
62,000 | Lenovo Group Ltd. (China) | 43 | |
8,006 | Samsung Electronics Co. Ltd. (South Korea) | 346 | |
389 | |||
TEXTILES, APPAREL & LUXURY GOODS—0.4% | |||
193 | adidas AG (Germany) | 60 | |
4,864 | Piquadro SpA (Italy) | 13 | |
1,472 | Ratti SpA (Italy) | 8 | |
164 | RedcapTour Co. Ltd. (South Korea) | 2 | |
600 | Rhythm Watch Co. Ltd. (Japan) | 6 | |
344 | Samyang Tongsang Co. Ltd. (South Korea) | 17 | |
106 | |||
TOBACCO—1.3% | |||
7,470 | Swedish Match AB (Sweden) | 351 | |
TRANSPORTATION INFRASTRUCTURE—0.1% | |||
23,631 | Stalexport Autostrady SA (Poland) | 19 | |
WIRELESS TELECOMMUNICATION SERVICES—2.5% | |||
2,600 | KDDI Corp. (Japan) | 72 | |
17,500 | NTT DoCoMo Inc. (Japan) | 480 | |
500 | Trilogy International Partners Inc. (Canada) | 1 | |
50,803 | Vodafone Group plc (United Kingdom) | 103 | |
656 | |||
TOTAL COMMON STOCKS | |||
(Cost $25,075) | 26,037 | ||
PREFERRED STOCKS—0.1% | |||
MACHINERY—0.1% | |||
2,601 | Danieli & C Officine Meccaniche SpA (Italy) | 28 | |
TOTAL PREFERRED STOCKS | |||
(Cost $29) | 28 | ||
TOTAL INVESTMENTS—99.3% | |||
(Cost $25,104) | 26,065 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—0.7% | 187 | ||
TOTAL NET ASSETS—100.0% | $26,252 |
49
Harbor Overseas Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
FAIR VALUE MEASUREMENTS
The following table summarizes the Fund’s investments as of October 31, 2019 based on the inputs used to value them.
Asset Category | Quoted Prices Level 1 (000s) | Other Significant Observable Inputs Level 2 (000s) | Significant Unobservable Inputs Level 3 (000s) | Total (000s) | ||||
Common Stocks | ||||||||
Africa | $35 | $284 | $— | $319 | ||||
Europe | 551 | 13,848 | — | 14,427 | ||||
Latin America | 59 | 18 | — | 77 | ||||
Middle East/Central Asia | 1,026 | 310 | — | 1,336 | ||||
North America | 1,005 | 59 | — | 1,064 | ||||
Pacific Basin | — | 8,835 | 7 | 8,842 | ||||
Preferred Stocks | ||||||||
Europe | — | 28 | — | 28 | ||||
Total Investments in Securities | $2,676 | $23,382 | $7 | $26,065 |
For more information on valuation inputs and their aggregation into the levels used in the table above, please refer to the Fair Value Measurements and Disclosures in Note 2 of the accompanying Notes to Financial Statements.
The following is a rollforward of the Fund’s Level 3 investments during the period ended October 31, 2019. Transfers into or out of Level 3 are recognized as of the last day in the fiscal quarter of the period in which the event or change in circumstances that caused the reclassification occurred.
Valuation Description | Beginning Balance as of 03/01/2019 (Inception) (000s) | Purchases (000s) | Sales (000s) | Discount/ (Premium) (000s) | Total Realized Gain/(Loss)w (000s) | Change in Unrealized Appreciation/ (Depreciation)w (000s) | Transfers Into Level 3h (000s) | Transfers Out of Level 3 (000s) | Ending Balance as of 10/31/2019w (000s) | |||||||||
Common Stocks | $— | $— | $— | $— | $— | $(1) | $8 | $— | $7 |
The following is a summary of significant unobservable inputs used in the fair valuations of assets and liabilities categorized within Level 3 of the fair value hierarchy.
Valuation Descriptions | Ending Balance as of 10/31/2019 (000s) | Valuation Technique | Unobservable Input(s) | Input Value(s) | ||||
Investments in Securities | ||||||||
Common Stocks | ||||||||
Springland International | ||||||||
Holdings Ltd. (Hong Kong) | $7 | Market Approach | Last Traded Price | HKD 1.42 |
* | Non-income producing security | ||
1 | ADR after the name of a security stands for American Depositary Receipts representing ownership of foreign securities. ADRs are issued by U.S. banking institutions. | ||
2 | GDR after the name of a security stands for Global Depositary Receipts representing ownership of foreign securities. GDRs are issued by either U.S. or non-U.S. banking institutions. | ||
h | Transferred from Level 2 to Level 3 due to the unavailability of observable market data for pricing | ||
w | Amounts in this category are included in the “Realized and Change in Net Unrealized Gain/(Loss) on Investment Transactions” section of the Statement of Operations. The net unrealized appreciation/(depreciation) per investment type is below: | ||
Valuation Description | Unrealized Gain/(Loss) as of 10/31/2019 (000s) | ||
Common Stocks | $(1) | ||
x | Fair valued in accordance with Harbor Funds' Valuation Procedures. | ||
HKD | Hong Kong Dollar |
The accompanying notes are an integral part of the Financial Statements.
50
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51
Harbor International & Global Funds
StatementS of Assets and Liabilities—October 31, 2019
StatementS of Assets and Liabilities—October 31, 2019
(All amounts in thousands, except per share amounts)
Harbor Diversified International All Cap Fund | Harbor Emerging Markets Equity Fund | Harbor Focused International Fund | Harbor Global Leaders Fund | Harbor International Fund | Harbor International Growth Fund | Harbor International Small Cap Fund | Harbor Overseas Fund | |
ASSETS | ||||||||
Investments, at identified cost | $741,069 | $87,868 | $24,098 | $86,964 | $5,427,044 | $522,562 | $42,979 | $25,104 |
Investments, at value (Including securities loaned of $1,510, $0, $0, $1,852, $0, $16,640, $0 and $0) | $763,723 | $97,457 | $25,899 | $106,551 | $5,594,745 | $602,961 | $43,095 | $26,065 |
Cash | 5,699 | 1,726 | 1,668 | 2,269 | 9,068 | 6,483 | 2,027 | 86 |
Foreign currency, at value (cost: $2,523, $41, $0, $0, $8,213, $88, $823 and $10) | 2,542 | 41 | — | — | 8,248 | 88 | 827 | 10 |
Receivables for: | ||||||||
Investments sold | 2,614 | 769 | 246 | — | 38,228 | — | — | — |
Foreign currency spot contracts | 1,915 | 611 | 456 | 199 | 9,750 | 88 | — | — |
Capital shares sold | 54 | 2 | — | 225 | 1,382 | 459 | — | — |
Dividends | 2,089 | 58 | 46 | 90 | 23,594 | 918 | 87 | 111 |
Securities lending income | 1 | — | — | — | 3 | 3 | — | — |
Purchased options, at value (cost: $0, $0, $0, $0, $0, $0, $0 and $0) | 4 | — | — | — | 43 | — | — | — |
Withholding tax | 470 | — | 1 | 6 | 42,130 | 434 | 43 | 15 |
Prepaid registration fees | 30 | 26 | 1 | 1 | 25 | 24 | 1 | 1 |
Other assets | 135 | 11 | 32 | 11 | 4,515 | 113 | 40 | 23 |
Total Assets | 779,276 | 100,701 | 28,349 | 109,352 | 5,731,731 | 611,571 | 46,120 | 26,311 |
LIABILITIES | ||||||||
Payables for: | ||||||||
Investments purchased | 1,832 | 492 | 269 | 596 | 5,340 | — | 67 | — |
Foreign currency spot contracts | 1,913 | 617 | 457 | 199 | 9,752 | 88 | — | — |
Capital shares reacquired | 93 | — | — | 5 | 10,142 | 235 | 42 | — |
Collateral for securities loaned | 1,570 | — | — | 1,980 | — | 17,687 | — | — |
Accrued expenses: | ||||||||
Management fees | 462 | 66 | 17 | 59 | 3,910 | 363 | 33 | 16 |
12b-1 fees | 3 | — | — | 4 | 122 | 7 | — | — |
Transfer agent fees | 31 | 5 | 1 | 9 | 438 | 41 | 3 | 1 |
Trustees' fees and expenses | 37 | 6 | 1 | 6 | 4,067 | 90 | 3 | 1 |
Other | 265 | 48 | 41 | 22 | 2,317 | 628 | 22 | 41 |
Total Liabilities | 6,206 | 1,234 | 786 | 2,880 | 36,088 | 19,139 | 170 | 59 |
NET ASSETS | $773,070 | $99,467 | $27,563 | $106,472 | $5,695,643 | $592,432 | $45,950 | $26,252 |
Net Assets Consist of: | ||||||||
Paid-in capital | $760,047 | $90,441 | $25,599 | $80,586 | $6,053,958 | $514,893 | $45,489 | $25,466 |
Total distributable earnings/(loss) | 13,023 | 9,026 | 1,964 | 25,886 | (358,315) | 77,539 | 461 | 786 |
$773,070 | $99,467 | $27,563 | $106,472 | $5,695,643 | $592,432 | $45,950 | $26,252 | |
52
Harbor Diversified International All Cap Fund | Harbor Emerging Markets Equity Fund | Harbor Focused International Fund | Harbor Global Leaders Fund | Harbor International Fund | Harbor International Growth Fund | Harbor International Small Cap Fund | Harbor Overseas Fund | |||||||||
NET ASSET VALUE PER SHARE BY CLASS | ||||||||||||||||
Retirement Class | ||||||||||||||||
Net assets | $499,288 | $49,052 | $13,696 | $12,245 | $1,299,776 | $143,276 | $19,408 | $13,090 | ||||||||
Shares of beneficial interest1 | 44,711 | 4,456 | 1,271 | 397 | 33,327 | 8,876 | 1,554 | 1,269 | ||||||||
Net asset value per share2 | $11.17 | $11.01 | $10.78 | $30.81 | $39.00 | $16.14 | $12.49 | $10.31 | ||||||||
Institutional Class | ||||||||||||||||
Net assets | $257,860 | $49,891 | $13,833 | $72,429 | $3,814,616 | $414,528 | $25,758 | $13,131 | ||||||||
Shares of beneficial interest1 | 23,089 | 4,533 | 1,284 | 2,355 | 97,498 | 25,705 | 2,063 | 1,274 | ||||||||
Net asset value per share2 | $11.17 | $11.01 | $10.78 | $30.75 | $39.12 | $16.13 | $12.49 | $10.31 | ||||||||
Administrative Class | ||||||||||||||||
Net assets | $6,800 | $5 | N/A | $3,050 | $70,981 | $390 | $356 | N/A | ||||||||
Shares of beneficial interest1 | 611 | 1 | N/A | 101 | 1,808 | 24 | 29 | N/A | ||||||||
Net asset value per share2 | $11.14 | $11.14 | N/A | $30.15 | $39.26 | $16.10 | $12.46 | N/A | ||||||||
Investor Class | ||||||||||||||||
Net assets | $9,122 | $519 | $34 | $18,748 | $510,270 | $34,238 | $428 | $31 | ||||||||
Shares of beneficial interest1 | 823 | 47 | 3 | 631 | 13,202 | 2,139 | 34 | 3 | ||||||||
Net asset value per share2 | $11.08 | $10.96 | $10.76 | $29.74 | $38.65 | $16.00 | $12.45 | $10.28 |
1 | Par value $0.01 (unlimited authorizations) |
2 | Per share amounts can be recalculated to the amounts disclosed herein when total net assets and shares of beneficial interest are not rounded to thousands. |
53
Harbor International & Global Funds
StatementS of Operations—Year Ended October 31, 2019
StatementS of Operations—Year Ended October 31, 2019
(All amounts in thousands)
Harbor Diversified International All Cap Fund | Harbor Emerging Markets Equity Fund | Harbor Focused International Funda | Harbor Global Leaders Fund | Harbor International Fund | Harbor International Growth Fund | Harbor International Small Cap Fund | Harbor Overseas Fundb | |
Investment Income | ||||||||
Dividends | $24,228 | $2,457 | $148 | $994 | $233,216 | $14,902 | $1,694 | $811 |
Interest | 201 | 45 | 14 | 34 | 2,842 | 142 | 66 | 3 |
Net securities lending income | 119 | — | — | 1 | 739 | 55 | — | — |
Foreign taxes withheld | (1,902) | (262) | (12) | (44) | (17,145) | (840) | (149) | (66) |
Total Investment Income | 22,646 | 2,240 | 150 | 985 | 219,652 | 14,259 | 1,611 | 748 |
Operating Expenses | ||||||||
Management fees | 5,482 | 828 | 82 | 591 | 56,712 | 4,046 | 521 | 128 |
12b-1 fees: | ||||||||
Administrative Class | 15 | — | N/A | 4 | 186 | 1 | 1 | N/A |
Investor Class | 20 | 2 | — | 38 | 1,559 | 80 | 1 | — |
Shareholder communications | 34 | 7 | 10 | 7 | 351 | 18 | 13 | 5 |
Custodian fees | 490 | 98 | 9 | 28 | 1,227 | 147 | 70 | 39 |
Transfer agent fees: | ||||||||
Retirement Class | 78 | 6 | 1 | 2 | 358 | 21 | 3 | 2 |
Institutional Class | 247 | 52 | 6 | 51 | 4,499 | 376 | 43 | 9 |
Administrative Class | 6 | — | N/A | 2 | 72 | — | — | N/A |
Investor Class | 17 | 1 | — | 33 | 1,348 | 69 | 1 | — |
Professional fees | 80 | 42 | 63 | 9 | 478 | 51 | 71 | 55 |
Trustees' fees and expenses | 35 | 4 | 1 | 3 | 355 | 25 | 3 | 1 |
Registration fees | 75 | 57 | 61 | 61 | 127 | 63 | 65 | 65 |
Miscellaneous | 17 | 10 | 7 | 9 | 150 | 15 | 9 | 9 |
Total expenses | 6,596 | 1,107 | 240 | 838 | 67,442 | 4,912 | 801 | 313 |
Management fees waived | (1,373) | (37) | — | (20) | (4,836) | — | — | — |
Transfer agent fees waived | (16) | (2) | — | (2) | (204) | (14) | (2) | (1) |
Other expenses reimbursed | — | (119) | (151) | (69) | (4,838) | (288) | (222) | (174) |
Custodian fees reduction | (2) | — | — | — | (45) | (1) | — | — |
Net expenses | 5,205 | 949 | 89 | 747 | 57,499 | 4,609 | 577 | 138 |
Net Investment Income/(Loss) | 17,441 | 1,291 | 61 | 238 | 162,153 | 9,650 | 1,034 | 610 |
Realized and Change in Net Unrealized Gain/(Loss) on Investment Transactions | ||||||||
Net realized gain/(loss) on: | ||||||||
Investments(net of foreign capital gains tax: $0,$9,$0,$0,$0,$28,$0 and $0) | (12,701) | 439 | 130 | 6,715 | (656,891) | (2,662) | (517) | (795) |
Foreign currency transactions | (13) | (41) | (28) | 17 | (4,727) | (91) | (97) | 9 |
Purchased options | 1 | — | — | — | (11,002) | — | 63 | — |
Change in net unrealized appreciation/(depreciation) on: | ||||||||
Investments(net of foreign capital gains tax accrual: $0,$9,$0,$0,$0,$489,$0 and $0) | 76,136 | 11,587 | 1,801 | 9,378 | 1,061,552 | 86,001 | 1,899 | 960 |
Purchased options | 4 | — | — | — | 10,908 | — | — | — |
Translations of assets and liabilities in foreign currencies | 49 | 1 | — | — | 716 | 11 | 6 | 2 |
Net gain/(loss) on investment transactions | 63,476 | 11,986 | 1,903 | 16,110 | 400,556 | 83,259 | 1,354 | 176 |
Net Increase/(Decrease) in Net Assets Resulting from Operations | $80,917 | $13,277 | $1,964 | $16,348 | $562,709 | $92,909 | $2,388 | $786 |
a | For the period June 1, 2019 (inception) through October 31, 2019 |
b | For the period March 1, 2019 (inception) through October 31, 2019 |
The accompanying notes are an integral part of the Financial Statements.
54
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55
Harbor International & Global Funds
Statements of Changes In Net Assets
Statements of Changes In Net Assets
(All amounts in thousands)
Harbor Diversified International All Cap Fund | Harbor Emerging Markets Equity Fund | Harbor Focused International Fund | |||||
November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | June 1, 2019a through October 31, 2019 | |||
INCREASE/(DECREASE) IN NET ASSETS | |||||||
Operations: | |||||||
Net investment income/(loss) | $17,441 | $9,622 | $1,291 | $806 | $61 | ||
Net realized gain/(loss) on investments | (12,713) | 15,238 | 398 | 4,471 | 102 | ||
Change in net unrealized appreciation/(depreciation) of investments | 76,189 | (89,192) | 11,588 | (13,287) | 1,801 | ||
Net increase/(decrease) in assets resulting from operations | 80,917 | (64,332) | 13,277 | (8,010) | 1,964 | ||
Distributions to Shareholders | |||||||
Retirement Class | (18,266) | (7,408) | (149) | (46) | — | ||
Institutional Class | (9,595) | (7,178) | (585) | (499) | — | ||
Administrative Class | (227) | (10) | (1) | (2) | — | ||
Investor Class | (196) | (170) | (3) | (4) | — | ||
Total distributions to shareholders | (28,284) | (14,766) | (738) | (551) | — | ||
Net Increase/(Decrease) Derived from Capital Share Transactions | 50,721 | 425,394 | 15,648 | 22,785 | 25,599 | ||
Net increase/(decrease) in net assets | 103,354 | 346,296 | 28,187 | 14,224 | 27,563 | ||
Net Assets | |||||||
Beginning of period | 669,716 | 323,420 | 71,280 | 57,056 | — | ||
End of period | $773,070 | $669,716 | $99,467 | $71,280 | $27,563 |
a | Inception |
The accompanying notes are an integral part of the Financial Statements.
56
Harbor Global Leaders Fund | Harbor International Fund | Harbor International Growth Fund | Harbor International Small Cap Fund | Harbor Overseas Fund | ||||||||
November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | March 1, 2019a through October 31, 2019 | ||||
$238 | $(32) | $162,153 | $394,632 | $9,650 | $4,561 | $1,034 | $631 | $610 | ||||
6,732 | 1,452 | (672,620) | 8,189,741 | (2,753) | (7,547) | (551) | 2,179 | (786) | ||||
9,378 | 2,965 | 1,073,176 | (10,168,963) | 86,012 | (72,951) | 1,905 | (9,302) | 962 | ||||
16,348 | 4,385 | 562,709 | (1,584,590) | 92,909 | (75,937) | 2,388 | (6,492) | 786 | ||||
(165) | (395) | (886,406) | (301,911) | (755) | (483) | (326) | (169) | — | ||||
(819) | (2,548) | (2,278,752) | (1,460,339) | (2,750) | (3,975) | (1,897) | (536) | — | ||||
(26) | (102) | (33,262) | (18,715) | (2) | (4) | (10) | (4) | — | ||||
(307) | (1,035) | (286,043) | (97,976) | (118) | (105) | (21) | (6) | — | ||||
(1,317) | (4,080) | (3,484,463) | (1,878,941) | (3,625) | (4,567) | (2,254) | (715) | — | ||||
37,494 | 7,664 | (3,648,830) | (16,526,349) | (23,133) | 204,499 | (13,683) | 19,306 | 25,466 | ||||
52,525 | 7,969 | (6,570,584) | (19,989,880) | 66,151 | 123,995 | (13,549) | 12,099 | 26,252 | ||||
53,947 | 45,978 | 12,266,227 | 32,256,107 | 526,281 | 402,286 | 59,499 | 47,400 | — | ||||
$106,472 | $53,947 | $5,695,643 | $12,266,227 | $592,432 | $526,281 | $45,950 | $59,499 | $26,252 |
57
Harbor International & Global Funds
Statements of Changes in Net Assets—Capital Stock Activity
Statements of Changes in Net Assets—Capital Stock Activity
(All amounts in thousands)
Harbor Diversified International All Cap Fund | Harbor Emerging Markets Equity Fund | Harbor Focused International Fund | |||||
November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | June 1, 2019a through October 31, 2019 | |||
AMOUNT ($) | |||||||
Retirement Class | |||||||
Net proceeds from sale of shares | $152,301 | $442,635 | $35,106 | $9,727 | $12,725 | ||
Reinvested distributions | 17,966 | 7,256 | 149 | 46 | — | ||
Cost of shares reacquired | (123,556) | (73,305) | (3,054) | (641) | (7) | ||
Net increase/(decrease) in net assets | $46,711 | $376,586 | $32,201 | $9,132 | $12,718 | ||
Institutional Class | |||||||
Net proceeds from sale of shares | $50,697 | $204,761 | $16,850 | $22,433 | $12,849 | ||
Reinvested distributions | 9,578 | 7,160 | 580 | 498 | — | ||
Cost of shares reacquired | (59,775) | (170,087) | (33,526) | (9,292) | — | ||
Net increase/(decrease) in net assets | $500 | $41,834 | $(16,096) | $13,639 | $12,849 | ||
Administrative Class | |||||||
Net proceeds from sale of shares | $1,450 | $6,598 | $30 | $404 | N/A | ||
Reinvested distributions | 227 | 10 | 1 | 2 | N/A | ||
Cost of shares reacquired | (1,097) | (592) | (301) | (378) | N/A | ||
Net increase/(decrease) in net assets | $580 | $6,016 | $(270) | $28 | N/A | ||
Investor Class | |||||||
Net proceeds from sale of shares | $3,854 | $1,632 | $214 | $733 | $32 | ||
Reinvested distributions | 196 | 169 | 3 | 4 | — | ||
Cost of shares reacquired | (1,120) | (843) | (404) | (751) | — | ||
Net increase/(decrease) in net assets | $2,930 | $958 | $(187) | $(14) | $32 |
a | Inception |
The accompanying notes are an integral part of the Financial Statements.
58
Harbor Global Leaders Fund | Harbor International Fund | Harbor International Growth Fund | Harbor International Small Cap Fund | Harbor Overseas Fund | ||||||||
November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | March 1, 2019a through October 31, 2019 | ||||
$4,290 | $2,712 | $257,506 | $3,779,787 | $40,186 | $91,332 | $16,458 | $7,003 | $12,695 | ||||
165 | 395 | 850,774 | 289,406 | 754 | 483 | 325 | 169 | — | ||||
(855) | (670) | (1,812,424) | (3,327,599) | (9,981) | (8,663) | (5,791) | (5,596) | (2) | ||||
$3,600 | $2,437 | $(704,144) | $741,594 | $30,959 | $83,152 | $10,992 | $1,576 | $12,693 | ||||
$48,658 | $5,826 | $460,391 | $1,638,830 | $83,460 | $163,918 | $14,852 | $19,220 | $12,807 | ||||
773 | 2,455 | 2,078,310 | 1,264,571 | 2,429 | 3,876 | 1,876 | 536 | — | ||||
(20,776) | (4,003) | (5,342,349) | (19,210,292) | (136,828) | (69,370) | (41,253) | (2,166) | (64) | ||||
$28,655 | $4,278 | $(2,803,648) | $(16,306,891) | $(50,939) | $98,424 | $(24,525) | $17,590 | $12,743 | ||||
$1,787 | $105 | $17,911 | $80,793 | $98 | $117 | $32 | $— | N/A | ||||
26 | 102 | 32,597 | 18,354 | 2 | 4 | 10 | 4 | N/A | ||||
(153) | (312) | (42,730) | (368,808) | (100) | (205) | — | (29) | N/A | ||||
$1,660 | $(105) | $7,778 | $(269,661) | $— | $(84) | $42 | $(25) | N/A | ||||
$6,208 | $2,754 | $46,031 | $125,886 | $4,712 | $31,908 | $21 | $309 | $31 | ||||
307 | 1,035 | 282,826 | 96,300 | 117 | 103 | 21 | 6 | — | ||||
(2,936) | (2,735) | (477,673) | (913,577) | (7,982) | (9,004) | (234) | (150) | (1) | ||||
$3,579 | $1,054 | $(148,816) | $(691,391) | $(3,153) | $23,007 | $(192) | $165 | $30 |
59
Harbor International & Global Funds
Statements of Changes in Net Assets—Capital Stock Activity—Continued
Statements of Changes in Net Assets—Capital Stock Activity—Continued
(All amounts in thousands)
Harbor Diversified International All Cap Fund | Harbor Emerging Markets Equity Fund | Harbor Focused International Fund | |||||
November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | June 1, 2019a through October 31, 2019 | |||
SHARES | |||||||
Retirement Class | |||||||
Shares sold | 14,562 | 38,235 | 3,460 | 934 | 1,271 | ||
Shares issued due to reinvestment of distributions | 1,876 | 635 | 16 | 4 | — | ||
Shares reacquired | (12,080) | (6,359) | (289) | (60) | — | ||
Net increase/(decrease) in shares outstanding | 4,358 | 32,511 | 3,187 | 878 | 1,271 | ||
Institutional Class | |||||||
Shares sold | 4,900 | 17,970 | 1,646 | 2,127 | 1,284 | ||
Shares issued due to reinvestment of distributions | 998 | 626 | 62 | 47 | — | ||
Shares reacquired | (5,715) | (14,819) | (3,262) | (875) | — | ||
Net increase/(decrease) in shares outstanding | 183 | 3,777 | (1,554) | 1,299 | 1,284 | ||
Administrative Class | |||||||
Shares sold | 140 | 576 | 3 | 35 | N/A | ||
Shares issued due to reinvestment of distributions | 24 | 1 | — | — | N/A | ||
Shares reacquired | (105) | (51) | (28) | (34) | N/A | ||
Net increase/(decrease) in shares outstanding | 59 | 526 | (25) | 1 | N/A | ||
Investor Class | |||||||
Shares sold | 387 | 143 | 21 | 65 | 3 | ||
Shares issued due to reinvestment of distributions | 21 | 15 | — | — | — | ||
Shares reacquired | (113) | (74) | (38) | (66) | — | ||
Net increase/(decrease) in shares outstanding | 295 | 84 | (17) | (1) | 3 |
a | Inception |
The accompanying notes are an integral part of the Financial Statements.
60
Harbor Global Leaders Fund | Harbor International Fund | Harbor International Growth Fund | Harbor International Small Cap Fund | Harbor Overseas Fund | ||||||||
November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | March 1, 2019a through October 31, 2019 | ||||
151 | 105 | 6,796 | 54,607 | 2,641 | 5,787 | 1,336 | 502 | 1,269 | ||||
7 | 16 | 25,283 | 4,314 | 58 | 31 | 30 | 12 | — | ||||
(29) | (26) | (45,116) | (50,569) | (671) | (553) | (475) | (403) | — | ||||
129 | 95 | (13,037) | 8,352 | 2,028 | 5,265 | 891 | 111 | 1,269 | ||||
1,728 | 223 | 11,073 | 24,128 | 5,773 | 10,292 | 1,262 | 1,394 | 1,281 | ||||
32 | 101 | 61,525 | 18,841 | 188 | 248 | 171 | 38 | — | ||||
(722) | (154) | (122,208) | (287,896) | (9,476) | (4,389) | (3,439) | (156) | (7) | ||||
1,038 | 170 | (49,610) | (244,927) | (3,515) | 6,151 | (2,006) | 1,276 | 1,274 | ||||
61 | 4 | 419 | 1,212 | 7 | 7 | 3 | — | N/A | ||||
1 | 4 | 959 | 274 | — | — | 1 | — | N/A | ||||
(5) | (12) | (1,120) | (5,665) | (7) | (13) | — | (2) | N/A | ||||
57 | (4) | 258 | (4,179) | — | (6) | 4 | (2) | N/A | ||||
224 | 109 | 1,183 | 1,886 | 322 | 1,982 | 2 | 22 | 3 | ||||
13 | 44 | 8,448 | 1,446 | 9 | 7 | 2 | — | — | ||||
(108) | (111) | (11,963) | (13,807) | (564) | (574) | (20) | (11) | — | ||||
129 | 42 | (2,332) | (10,475) | (233) | 1,415 | (16) | 11 | 3 |
61
Harbor International & Global Funds Financial Highlights
Selected Data for a Share Outstanding for the Periods Presented
Selected Data for a Share Outstanding for the Periods Presented
HARBOR DIVERSIFIED INTERNATIONAL ALL CAP FUND | ||||
Retirement Class | ||||
Year Ended October 31, | 2019 | 2018 | 2017 | 2016f |
Net asset value beginning of period | $10.41 | $11.79 | $9.77 | $9.21 |
Income from Investment Operations | ||||
Net investment income/(loss)a,e | 0.26 | 0.21 | 0.14 | 0.06 |
Net realized and unrealized gains/(losses) on investments | 0.92 | (1.19) | 2.01 | 0.50 |
Total from investment operations | 1.18 | (0.98) | 2.15 | 0.56 |
Less Distributions | ||||
Dividends from net investment income | (0.13) | (0.12) | (0.13) | — |
Distributions from net realized capital gains | (0.29) | (0.28) | — | — |
Total distributions | (0.42) | (0.40) | (0.13) | — |
Net asset value end of period | 11.17 | 10.41 | 11.79 | 9.77 |
Net assets end of period (000s) | $499,288 | $420,056 | $92,442 | $1,786 |
Ratios and Supplemental Data (%) | ||||
Total returnb | 11.99% | (8.55)% | 22.35% | 6.08%c |
Ratio of total expenses to average net assets^ | 0.87 | 0.90 | 0.99 | 1.17d |
Ratio of net expenses to average net assetsa | 0.68 | 0.74 | 0.77 | 0.80d |
Ratio of net investment income to average net assetsa | 2.42 | 1.87 | 1.27 | 0.97d |
Portfolio turnover | 22 | 42 | 46 | 68c |
Administrative Class | ||||
Year Ended October 31, | 2019 | 2018 | 2017 | 2016g |
Net asset value beginning of period | $10.39 | $11.76 | $9.75 | $10.00 |
Income from Investment Operations | ||||
Net investment income/(loss)a,e | 0.22 | 0.22 | 0.14 | 0.13 |
Net realized and unrealized gains/(losses) on investments | 0.92 | (1.22) | 1.97 | (0.38) |
Total from investment operations | 1.14 | (1.00) | 2.11 | (0.25) |
Less Distributions | ||||
Dividends from net investment income | (0.10) | (0.09) | (0.10) | —* |
Distributions from net realized capital gains | (0.29) | (0.28) | — | — |
Total distributions | (0.39) | (0.37) | (0.10) | —* |
Net asset value end of period | 11.14 | 10.39 | 11.76 | 9.75 |
Net assets end of period (000s) | $6,800 | $5,734 | $310 | $246 |
Ratios and Supplemental Data (%) | ||||
Total returnb | 11.58% | (8.76)% | 21.91% | (2.49)%c |
Ratio of total expenses to average net assets^ | 1.20 | 1.23 | 1.32 | 1.46d |
Ratio of net expenses to average net assetsa | 1.01 | 1.06 | 1.10 | 1.10d |
Ratio of net investment income to average net assetsa | 2.06 | 1.96 | 1.29 | 1.39d |
Portfolio turnover | 22 | 42 | 46 | 68c |
See page 76 for notes to the Financial Highlights.
The accompanying notes are an integral part of the Financial Statements.
62
Institutional Class | |||
2019 | 2018 | 2017 | 2016g |
$10.41 | $11.79 | $9.77 | $10.00 |
0.25 | 0.20 | 0.17 | 0.20 |
0.92 | (1.18) | 1.98 | (0.42) |
1.17 | (0.98) | 2.15 | (0.22) |
(0.12) | (0.12) | (0.13) | (0.01) |
(0.29) | (0.28) | — | — |
(0.41) | (0.40) | (0.13) | (0.01) |
11.17 | 10.41 | 11.79 | 9.77 |
$257,860 | $238,470 | $225,473 | $150,263 |
11.90% | (8.62)% | 22.29% | (2.25)%c |
0.95 | 0.98 | 1.07 | 1.22d |
0.76 | 0.82 | 0.85 | 0.85d |
2.34 | 1.72 | 1.59 | 2.13d |
22 | 42 | 46 | 68c |
Investor Class | |||
2019 | 2018 | 2017 | 2016g |
$10.33 | $11.71 | $9.74 | $10.00 |
0.21 | 0.15 | 0.14 | 0.12 |
0.91 | (1.17) | 1.96 | (0.38) |
1.12 | (1.02) | 2.10 | (0.26) |
(0.08) | (0.08) | (0.13) | — |
(0.29) | (0.28) | — | — |
(0.37) | (0.36) | (0.13) | — |
11.08 | 10.33 | 11.71 | 9.74 |
$9,122 | $5,456 | $5,195 | $329 |
11.43% | (8.93)% | 21.82% | (2.60)%c |
1.32 | 1.35 | 1.44 | 1.59d |
1.13 | 1.19 | 1.22 | 1.22d |
1.99 | 1.34 | 1.31 | 1.28d |
22 | 42 | 46 | 68c |
63
Harbor International & Global Funds Financial Highlights—Continued
Selected Data for a Share Outstanding for the Periods Presented
Selected Data for a Share Outstanding for the Periods Presented
HARBOR EMERGING MARKETS EQUITY FUND | ||||
Retirement Class | ||||
Year Ended October 31, | 2019 | 2018 | 2017 | 2016f |
Net asset value beginning of period | $9.57 | $10.83 | $8.59 | $6.90 |
Income from Investment Operations | ||||
Net investment income/(loss)a,e | 0.21 | 0.12 | 0.13 | 0.05 |
Net realized and unrealized gains/(losses) on investments | 1.32 | (1.27) | 2.21 | 1.64 |
Total from investment operations | 1.53 | (1.15) | 2.34 | 1.69 |
Less Distributions | ||||
Dividends from net investment income | (0.09) | (0.11) | (0.10) | — |
Distributions from net realized capital gains | — | — | — | — |
Total distributions | (0.09) | (0.11) | (0.10) | — |
Net asset value end of period | 11.01 | 9.57 | 10.83 | 8.59 |
Net assets end of period (000s) | $49,052 | $12,146 | $4,232 | $1,335 |
Ratios and Supplemental Data (%) | ||||
Total returnb | 16.21% | (10.71)% | 27.62% | 24.49%c |
Ratio of total expenses to average net assets^ | 1.22 | 1.26 | 1.35 | 1.45d |
Ratio of net expenses to average net assetsa | 1.02 | 1.07 | 1.08 | 1.10d |
Ratio of net investment income to average net assetsa | 2.05 | 1.16 | 1.32 | 0.95d |
Portfolio turnover | 53 | 56 | 59 | 49 |
Administrative Class | |||||
Year Ended October 31, | 2019 | 2018 | 2017 | 2016 | 2015 |
Net asset value beginning of period | $9.55 | $10.80 | $8.58 | $7.87 | $10.03 |
Income from Investment Operations | |||||
Net investment income/(loss)a,e | 0.02 | 0.08 | 0.08 | 0.05 | 0.04 |
Net realized and unrealized gains/(losses) on investments | 1.62 | (1.25) | 2.22 | 0.71 | (2.18) |
Total from investment operations | 1.64 | (1.17) | 2.30 | 0.76 | (2.14) |
Less Distributions | |||||
Dividends from net investment income | (0.05) | (0.08) | (0.08) | (0.05) | (0.02) |
Distributions from net realized capital gains | — | — | — | — | — |
Total distributions | (0.05) | (0.08) | (0.08) | (0.05) | (0.02) |
Net asset value end of period | 11.14 | 9.55 | 10.80 | 8.58 | 7.87 |
Net assets end of period (000s) | $5 | $249 | $275 | $217 | $197 |
Ratios and Supplemental Data (%) | |||||
Total returnb | 17.30% | (10.91)% | 27.04% | 9.81% | (21.36)% |
Ratio of total expenses to average net assets^ | 1.54 | 1.59 | 1.68 | 1.74 | 1.72 |
Ratio of net expenses to average net assetsa | 1.40 | 1.40 | 1.40 | 1.40 | 1.43 |
Ratio of net investment income to average net assetsa | 0.16 | 0.77 | 0.85 | 0.69 | 0.49 |
Portfolio turnover | 53 | 56 | 59 | 49 | 58 |
See page 76 for notes to the Financial Highlights.
The accompanying notes are an integral part of the Financial Statements.
64
Institutional Class | ||||
2019 | 2018 | 2017 | 2016 | 2015 |
$9.57 | $10.83 | $8.59 | $7.89 | $10.05 |
0.12 | 0.14 | 0.11 | 0.07 | 0.08 |
1.41 | (1.30) | 2.22 | 0.71 | (2.19) |
1.53 | (1.16) | 2.33 | 0.78 | (2.11) |
(0.09) | (0.10) | (0.09) | (0.08) | (0.05) |
— | — | — | — | — |
(0.09) | (0.10) | (0.09) | (0.08) | (0.05) |
11.01 | 9.57 | 10.83 | 8.59 | 7.89 |
$49,891 | $58,271 | $51,849 | $36,390 | $41,927 |
16.13% | (10.77)% | 27.54% | 9.99% | (21.10)% |
1.30 | 1.34 | 1.43 | 1.49 | 1.47 |
1.12 | 1.15 | 1.15 | 1.15 | 1.17 |
1.13 | 1.28 | 1.13 | 0.93 | 0.90 |
53 | 56 | 59 | 49 | 58 |
Investor Class | ||||
2019 | 2018 | 2017 | 2016 | 2015 |
$9.53 | $10.78 | $8.56 | $7.85 | $10.01 |
0.09 | 0.09 | 0.07 | 0.05 | 0.04 |
1.39 | (1.27) | 2.22 | 0.70 | (2.18) |
1.48 | (1.18) | 2.29 | 0.75 | (2.14) |
(0.05) | (0.07) | (0.07) | (0.04) | (0.02) |
— | — | — | — | — |
(0.05) | (0.07) | (0.07) | (0.04) | (0.02) |
10.96 | 9.53 | 10.78 | 8.56 | 7.85 |
$519 | $614 | $700 | $482 | $406 |
15.56% | (11.03)% | 27.00% | 9.69% | (21.45)% |
1.67 | 1.71 | 1.80 | 1.86 | 1.84 |
1.49 | 1.52 | 1.52 | 1.52 | 1.55 |
0.87 | 0.82 | 0.75 | 0.69 | 0.40 |
53 | 56 | 59 | 49 | 58 |
65
Harbor International & Global Funds Financial Highlights—Continued
Selected Data for a Share Outstanding for the Periods Presented
Selected Data for a Share Outstanding for the Periods Presented
HARBOR FOCUSED INTERNATIONAL FUND | |||||
Retirement Class | Institutional Class | Investor Class | |||
Year Ended October 31, | 2019j | 2019j | 2019j | ||
Net asset value beginning of period | $10.00 | $10.00 | $10.00 | ||
Income from Investment Operations | |||||
Net investment income/(loss)a,e | 0.03 | 0.02 | 0.01 | ||
Net realized and unrealized gains/(losses) on investments | 0.75 | 0.76 | 0.75 | ||
Total from investment operations | 0.78 | 0.78 | 0.76 | ||
Less Distributions | |||||
Dividends from net investment income | — | — | — | ||
Distributions from net realized capital gains | — | — | — | ||
Total distributions | — | — | — | ||
Net asset value end of period | 10.78 | 10.78 | 10.76 | ||
Net assets end of period (000s) | $13,696 | $13,833 | $34 | ||
Ratios and Supplemental Data (%) | |||||
Total returnb | 7.80%c | 7.80%c | 7.60%c | ||
Ratio of total expenses to average net assets^ | 2.15d | 2.23d | 2.60d | ||
Ratio of net expenses to average net assetsa | 0.77d | 0.85d | 1.22d | ||
Ratio of net investment income to average net assetsa | 0.60d | 0.52d | 0.15d | ||
Portfolio turnover | 23c | 23c | 23c |
See page 76 for notes to the Financial Highlights.
The accompanying notes are an integral part of the Financial Statements.
66
[THIS PAGE INTENTIONALLY LEFT BLANK]
67
Harbor International & Global Funds Financial Highlights—Continued
Selected Data for a Share Outstanding for the Periods Presented
Selected Data for a Share Outstanding for the Periods Presented
HARBOR GLOBAL LEADERS FUND | ||||
Retirement Class | ||||
Year Ended October 31, | 2019 | 2018 | 2017k | 2016f |
Net asset value beginning of period | $25.52 | $25.33 | $20.29 | $19.79 |
Income from Investment Operations | ||||
Net investment income/(loss)a,e | 0.13 | 0.02 | 0.08 | (0.03) |
Net realized and unrealized gains/(losses) on investments | 5.76 | 2.40 | 4.96 | 0.53 |
Total from investment operations | 5.89 | 2.42 | 5.04 | 0.50 |
Less Distributions | ||||
Dividends from net investment income | — | (0.03) | — | — |
Distributions from net realized capital gains | (0.60) | (2.20) | — | — |
Total distributions | (0.60) | (2.23) | — | — |
Net asset value end of period | 30.81 | 25.52 | 25.33 | 20.29 |
Net assets end of period (000s) | $12,245 | $6,846 | $4,376 | $1,713 |
Ratios and Supplemental Data (%) | ||||
Total returnb | 23.72% | 10.01% | 24.84% | 2.53%c |
Ratio of total expenses to average net assets^ | 0.92 | 0.96 | 1.13 | 1.00d |
Ratio of net expenses to average net assetsa | 0.80 | 0.82 | 0.83 | 0.85d |
Ratio of net investment income to average net assetsa | 0.46 | 0.09 | 0.32 | (0.18)d |
Portfolio turnover | 47 | 20 | 123 | 76 |
Administrative Class | |||||
Year Ended October 31, | 2019 | 2018 | 2017k | 2016 | 2015 |
Net asset value beginning of period | $25.06 | $24.97 | $20.06 | $21.65 | $23.63 |
Income from Investment Operations | |||||
Net investment income/(loss)a,e | 0.06 | (0.05) | (0.04) | (0.05) | (0.07) |
Net realized and unrealized gains/(losses) on investments | 5.63 | 2.34 | 4.95 | (0.82) | 0.66 |
Total from investment operations | 5.69 | 2.29 | 4.91 | (0.87) | 0.59 |
Less Distributions | |||||
Dividends from net investment income | — | — | — | — | — |
Distributions from net realized capital gains | (0.60) | (2.20) | — | (0.72) | (2.57) |
Total distributions | (0.60) | (2.20) | — | (0.72) | (2.57) |
Net asset value end of period | 30.15 | 25.06 | 24.97 | 20.06 | 21.65 |
Net assets end of period (000s) | $3,050 | $1,111 | $1,204 | $1,253 | $1,198 |
Ratios and Supplemental Data (%) | |||||
Total returnb | 23.35% | 9.61% | 24.48% | (4.17)% | 2.74% |
Ratio of total expenses to average net assets^ | 1.25 | 1.29 | 1.46 | 1.29 | 1.26 |
Ratio of net expenses to average net assetsa | 1.13 | 1.15 | 1.15 | 1.15 | 1.15 |
Ratio of net investment income to average net assetsa | 0.22 | (0.21) | (0.13) | (0.23) | (0.31) |
Portfolio turnover | 47 | 20 | 123 | 76 | 106 |
See page 76 for notes to the Financial Highlights.
The accompanying notes are an integral part of the Financial Statements.
68
Institutional Class | ||||
2019 | 2018 | 2017k | 2016 | 2015 |
$25.49 | $25.31 | $20.29 | $21.83 | $23.79 |
0.11 | 0.01 | 0.03 | 0.01 | (0.01) |
5.75 | 2.38 | 4.99 | (0.83) | 0.65 |
5.86 | 2.39 | 5.02 | (0.82) | 0.64 |
— | (0.01) | — | — | (0.03) |
(0.60) | (2.20) | — | (0.72) | (2.57) |
(0.60) | (2.21) | — | (0.72) | (2.60) |
30.75 | 25.49 | 25.31 | 20.29 | 21.83 |
$72,429 | $33,574 | $29,034 | $25,471 | $34,402 |
23.63% | 9.90% | 24.74% | (3.90)% | 2.97% |
1.00 | 1.04 | 1.21 | 1.04 | 1.01 |
0.88 | 0.90 | 0.90 | 0.90 | 0.90 |
0.37 | 0.03 | 0.14 | 0.04 | (0.06) |
47 | 20 | 123 | 76 | 106 |
Investor Class | ||||
2019 | 2018 | 2017k | 2016 | 2015 |
$24.76 | $24.72 | $19.89 | $21.49 | $23.51 |
(0.01) | (0.09) | (0.06) | (0.07) | (0.10) |
5.59 | 2.33 | 4.89 | (0.81) | 0.65 |
5.58 | 2.24 | 4.83 | (0.88) | 0.55 |
— | — | — | — | — |
(0.60) | (2.20) | — | (0.72) | (2.57) |
(0.60) | (2.20) | — | (0.72) | (2.57) |
29.74 | 24.76 | 24.72 | 19.89 | 21.49 |
$18,748 | $12,416 | $11,364 | $10,659 | $13,693 |
23.18% | 9.50% | 24.28% | (4.25)% | 2.57% |
1.37 | 1.41 | 1.58 | 1.41 | 1.38 |
1.25 | 1.27 | 1.27 | 1.27 | 1.27 |
(0.03) | (0.35) | (0.25) | (0.35) | (0.44) |
47 | 20 | 123 | 76 | 106 |
69
Harbor International & Global Funds Financial Highlights—Continued
Selected Data for a Share Outstanding for the Periods Presented
Selected Data for a Share Outstanding for the Periods Presented
HARBOR INTERNATIONAL FUND | ||||
Retirement Class | ||||
Year Ended October 31, | 2019 | 2018l | 2017 | 2016f |
Net asset value beginning of period | $58.31 | $69.91 | $60.32 | $57.14 |
Income from Investment Operations | ||||
Net investment income/(loss)a,e | 0.91 | 1.21 | 0.94 | 0.68 |
Net realized and unrealized gains/(losses) on investments | 1.62 | (8.51) | 9.85 | 2.50 |
Total from investment operations | 2.53 | (7.30) | 10.79 | 3.18 |
Less Distributions | ||||
Dividends from net investment income | (0.97) | (1.30) | (1.20) | — |
Distributions from net realized capital gains | (20.87) | (3.00) | — | — |
Total distributions | (21.84) | (4.30) | (1.20) | — |
Net asset value end of period | 39.00 | 58.31 | 69.91 | 60.32 |
Net assets end of period (000s) | $1,299,776 | $2,703,360 | $2,657,442 | $739,842 |
Ratios and Supplemental Data (%) | ||||
Total returnb | 10.29% | (11.24)% | 18.30% | 5.57%c |
Ratio of total expenses to average net assets^ | 0.80 | 0.74 | 0.74 | 0.74d |
Ratio of net expenses to average net assetsa | 0.67 | 0.64 | 0.73 | 0.72d |
Ratio of net investment income to average net assetsa | 2.33 | 1.80 | 1.42 | 1.68d |
Portfolio turnover | 12 | 64 | 13 | 14 |
Administrative Class | |||||
Year Ended October 31, | 2019 | 2018l | 2017 | 2016 | 2015 |
Net asset value beginning of period | $58.08 | $69.57 | $59.99 | $65.32 | $67.48 |
Income from Investment Operations | |||||
Net investment income/(loss)a,e | 0.76 | 0.88 | 0.79 | 0.79 | 1.04 |
Net realized and unrealized gains/(losses) on investments | 1.70 | (8.37) | 9.77 | (3.44) | (2.20) |
Total from investment operations | 2.46 | (7.49) | 10.56 | (2.65) | (1.16) |
Less Distributions | |||||
Dividends from net investment income | (0.41) | (1.00) | (0.98) | (0.91) | (1.00) |
Distributions from net realized capital gains | (20.87) | (3.00) | — | (1.77) | — |
Total distributions | (21.28) | (4.00) | (0.98) | (2.68) | (1.00) |
Net asset value end of period | 39.26 | 58.08 | 69.57 | 59.99 | 65.32 |
Net assets end of period (000s) | $70,981 | $90,009 | $398,584 | $510,575 | $831,967 |
Ratios and Supplemental Data (%) | |||||
Total returnb | 9.94% | (11.53)% | 17.93% | (3.97)% | (1.73)% |
Ratio of total expenses to average net assets^ | 1.13 | 1.07 | 1.06 | 1.04 | 1.01 |
Ratio of net expenses to average net assetsa | 1.00 | 0.97 | 1.05 | 1.02 | 0.99 |
Ratio of net investment income to average net assetsa | 1.94 | 1.30 | 1.22 | 1.33 | 1.54 |
Portfolio turnover | 12 | 64 | 13 | 14 | 25 |
See page 76 for notes to the Financial Highlights.
The accompanying notes are an integral part of the Financial Statements.
70
Institutional Class | ||||
2019 | 2018l | 2017 | 2016 | 2015 |
$58.31 | $69.90 | $60.30 | $65.67 | $68.09 |
0.84 | 1.04 | 0.97 | 0.99 | 1.22 |
1.67 | (8.39) | 9.79 | (3.51) | (2.22) |
2.51 | (7.35) | 10.76 | (2.52) | (1.00) |
(0.83) | (1.24) | (1.16) | (1.08) | (1.42) |
(20.87) | (3.00) | — | (1.77) | — |
(21.70) | (4.24) | (1.16) | (2.85) | (1.42) |
39.12 | 58.31 | 69.90 | 60.30 | 65.67 |
$3,814,616 | $8,577,147 | $27,401,853 | $33,201,899 | $41,195,827 |
10.18% | (11.31)% | 18.24% | (3.74)% | (1.48)% |
0.88 | 0.82 | 0.81 | 0.79 | 0.76 |
0.75 | 0.72 | 0.80 | 0.77 | 0.74 |
2.11 | 1.53 | 1.51 | 1.66 | 1.80 |
12 | 64 | 13 | 14 | 25 |
Investor Class | ||||
2019 | 2018l | 2017 | 2016 | 2015 |
$57.66 | $69.14 | $59.61 | $64.86 | $67.23 |
0.70 | 0.81 | 0.72 | 0.73 | 0.96 |
1.65 | (8.33) | 9.71 | (3.43) | (2.19) |
2.35 | (7.52) | 10.43 | (2.70) | (1.23) |
(0.49) | (0.96) | (0.90) | (0.78) | (1.14) |
(20.87) | (3.00) | — | (1.77) | — |
(21.36) | (3.96) | (0.90) | (2.55) | (1.14) |
38.65 | 57.66 | 69.14 | 59.61 | 64.86 |
$510,270 | $895,711 | $1,798,228 | $2,188,360 | $3,756,852 |
9.80% | (11.65)% | 17.79% | (4.09)% | (1.84)% |
1.25 | 1.19 | 1.18 | 1.16 | 1.13 |
1.12 | 1.09 | 1.17 | 1.14 | 1.11 |
1.80 | 1.21 | 1.13 | 1.23 | 1.43 |
12 | 64 | 13 | 14 | 25 |
71
Harbor International & Global Funds Financial Highlights—Continued
Selected Data for a Share Outstanding for the Periods Presented
Selected Data for a Share Outstanding for the Periods Presented
HARBOR INTERNATIONAL GROWTH FUND | ||||
Retirement Class | ||||
Year Ended October 31, | 2019 | 2018 | 2017 | 2016f |
Net asset value beginning of period | $13.70 | $15.71 | $12.90 | $11.76 |
Income from Investment Operations | ||||
Net investment income/(loss)a,e | 0.30 | 0.17 | 0.17 | 0.09 |
Net realized and unrealized gains/(losses) on investments | 2.25 | (1.99) | 2.81 | 1.05 |
Total from investment operations | 2.55 | (1.82) | 2.98 | 1.14 |
Less Distributions | ||||
Dividends from net investment income | (0.11) | (0.19) | (0.17) | — |
Distributions from net realized capital gains | — | — | — | — |
Total distributions | (0.11) | (0.19) | (0.17) | — |
Net asset value end of period | 16.14 | 13.70 | 15.71 | 12.90 |
Net assets end of period (000s) | $143,276 | $93,815 | $24,872 | $2,360 |
Ratios and Supplemental Data (%) | ||||
Total returnb | 18.81% | (11.74)% | 23.52% | 9.69%c |
Ratio of total expenses to average net assets^ | 0.83 | 0.81 | 0.84 | 0.86d |
Ratio of net expenses to average net assetsa | 0.77 | 0.77 | 0.77 | 0.80d |
Ratio of net investment income to average net assetsa | 2.01 | 1.07 | 1.19 | 1.06d |
Portfolio turnover | 16 | 17 | 13 | 19 |
Administrative Class | |||||
Year Ended October 31, | 2019 | 2018 | 2017 | 2016 | 2015 |
Net asset value beginning of period | $13.66 | $15.67 | $12.87 | $12.63 | $12.66 |
Income from Investment Operations | |||||
Net investment income/(loss)a,e | 0.22 | 0.08 | 0.09 | 0.16 | 0.15 |
Net realized and unrealized gains/(losses) on investments | 2.28 | (1.95) | 2.84 | 0.12 | (0.03) |
Total from investment operations | 2.50 | (1.87) | 2.93 | 0.28 | 0.12 |
Less Distributions | |||||
Dividends from net investment income | (0.06) | (0.14) | (0.13) | (0.04) | (0.15) |
Distributions from net realized capital gains | — | — | — | — | — |
Total distributions | (0.06) | (0.14) | (0.13) | (0.04) | (0.15) |
Net asset value end of period | 16.10 | 13.66 | 15.67 | 12.87 | 12.63 |
Net assets end of period (000s) | $390 | $330 | $466 | $333 | $329 |
Ratios and Supplemental Data (%) | |||||
Total returnb | 18.45% | (12.03)% | 23.08% | 2.21% | 0.96% |
Ratio of total expenses to average net assets^ | 1.16 | 1.14 | 1.16 | 1.15 | 1.14 |
Ratio of net expenses to average net assetsa | 1.10 | 1.10 | 1.10 | 1.10 | 1.10 |
Ratio of net investment income to average net assetsa | 1.50 | 0.51 | 0.66 | 1.25 | 1.20 |
Portfolio turnover | 16 | 17 | 13 | 19 | 20 |
See page 76 for notes to the Financial Highlights.
The accompanying notes are an integral part of the Financial Statements.
72
Institutional Class | ||||
2019 | 2018 | 2017 | 2016 | 2015 |
$13.69 | $15.69 | $12.89 | $12.71 | $12.75 |
0.26 | 0.13 | 0.13 | 0.17 | 0.15 |
2.28 | (1.95) | 2.84 | 0.14 | —* |
2.54 | (1.82) | 2.97 | 0.31 | 0.15 |
(0.10) | (0.18) | (0.17) | (0.13) | (0.19) |
— | — | — | — | — |
(0.10) | (0.18) | (0.17) | (0.13) | (0.19) |
16.13 | 13.69 | 15.69 | 12.89 | 12.71 |
$414,528 | $399,911 | $362,035 | $277,638 | $254,461 |
18.73% | (11.75)% | 23.38% | 2.46% | 1.22% |
0.91 | 0.89 | 0.91 | 0.90 | 0.89 |
0.85 | 0.85 | 0.85 | 0.85 | 0.85 |
1.75 | 0.84 | 0.92 | 1.36 | 1.19 |
16 | 17 | 13 | 19 | 20 |
Investor Class | ||||
2019 | 2018 | 2017 | 2016 | 2015 |
$13.58 | $15.57 | $12.79 | $12.60 | $12.64 |
0.21 | 0.11 | 0.07 | 0.12 | 0.10 |
2.26 | (1.98) | 2.82 | 0.15 | —* |
2.47 | (1.87) | 2.89 | 0.27 | 0.10 |
(0.05) | (0.12) | (0.11) | (0.08) | (0.14) |
— | — | — | — | — |
(0.05) | (0.12) | (0.11) | (0.08) | (0.14) |
16.00 | 13.58 | 15.57 | 12.79 | 12.60 |
$34,238 | $32,225 | $14,913 | $13,466 | $15,978 |
18.29% | (12.12)% | 22.89% | 2.15% | 0.81% |
1.28 | 1.26 | 1.28 | 1.27 | 1.26 |
1.22 | 1.22 | 1.22 | 1.22 | 1.22 |
1.40 | 0.69 | 0.54 | 0.99 | 0.79 |
16 | 17 | 13 | 19 | 20 |
73
Harbor International & Global Funds Financial Highlights—Continued
Selected Data for a Share Outstanding for the Periods Presented
Selected Data for a Share Outstanding for the Periods Presented
HARBOR INTERNATIONAL SMALL CAP FUND | ||||
Retirement Class | ||||
Year Ended October 31, | 2019m | 2018 | 2017 | 2016h |
Net asset value beginning of period | $12.38 | $13.90 | $10.77 | $10.00 |
Income from Investment Operations | ||||
Net investment income/(loss)a,e | 0.24 | 0.17 | 0.08 | 0.06 |
Net realized and unrealized gains/(losses) on investments | 0.35 | (1.50) | 3.18 | 0.71 |
Total from investment operations | 0.59 | (1.33) | 3.26 | 0.77 |
Less Distributions | ||||
Dividends from net investment income | (0.10) | (0.09) | (0.13) | — |
Distributions from net realized capital gains | (0.38) | (0.10) | — | — |
Total distributions | (0.48) | (0.19) | (0.13) | — |
Net asset value end of period | 12.49 | 12.38 | 13.90 | 10.77 |
Net assets end of period (000s) | $19,408 | $8,213 | $7,671 | $629 |
Ratios and Supplemental Data (%) | ||||
Total returnb | 5.23% | (9.71)% | 30.67% | 7.70%c |
Ratio of total expenses to average net assets^ | 1.24 | 1.07 | 1.35 | 2.50d |
Ratio of net expenses to average net assetsa | 0.88 | 0.87 | 0.87 | 0.90d |
Ratio of net investment income to average net assetsa | 1.98 | 1.19 | 0.60 | 0.73d |
Portfolio turnover | 178 | 53 | 44 | 35c |
Administrative Class | ||||
Year Ended October 31, | 2019m | 2018 | 2017 | 2016h |
Net asset value beginning of period | $12.34 | $13.87 | $10.75 | $10.00 |
Income from Investment Operations | ||||
Net investment income/(loss)a,e | 0.15 | 0.11 | 0.07 | 0.09 |
Net realized and unrealized gains/(losses) on investments | 0.40 | (1.49) | 3.15 | 0.66 |
Total from investment operations | 0.55 | (1.38) | 3.22 | 0.75 |
Less Distributions | ||||
Dividends from net investment income | (0.05) | (0.05) | (0.10) | — |
Distributions from net realized capital gains | (0.38) | (0.10) | — | — |
Total distributions | (0.43) | (0.15) | (0.10) | — |
Net asset value end of period | 12.46 | 12.34 | 13.87 | 10.75 |
Net assets end of period (000s) | $356 | $309 | $371 | $263 |
Ratios and Supplemental Data (%) | ||||
Total returnb | 4.90% | (10.06)% | 30.25% | 7.50%c |
Ratio of total expenses to average net assets^ | 1.57 | 1.40 | 1.67 | 2.80d |
Ratio of net expenses to average net assetsa | 1.21 | 1.20 | 1.20 | 1.20d |
Ratio of net investment income to average net assetsa | 1.25 | 0.76 | 0.59 | 1.16d |
Portfolio turnover | 178 | 53 | 44 | 35c |
See page 76 for notes to the Financial Highlights.
The accompanying notes are an integral part of the Financial Statements.
74
Institutional Class | |||
2019m | 2018 | 2017 | 2016h |
$12.37 | $13.90 | $10.77 | $10.00 |
0.19 | 0.15 | 0.10 | 0.11 |
0.40 | (1.50) | 3.15 | 0.66 |
0.59 | (1.35) | 3.25 | 0.77 |
(0.09) | (0.08) | (0.12) | — |
(0.38) | (0.10) | — | — |
(0.47) | (0.18) | (0.12) | — |
12.49 | 12.37 | 13.90 | 10.77 |
$25,758 | $50,358 | $38,818 | $17,509 |
5.25% | (9.83)% | 30.59% | 7.70%c |
1.32 | 1.15 | 1.42 | 2.55d |
0.96 | 0.95 | 0.95 | 0.95d |
1.60 | 1.05 | 0.81 | 1.40d |
178 | 53 | 44 | 35c |
Investor Class | |||
2019m | 2018 | 2017 | 2016h |
$12.34 | $13.86 | $10.74 | $10.00 |
0.13 | 0.10 | 0.06 | 0.10 |
0.40 | (1.48) | 3.14 | 0.64 |
0.53 | (1.38) | 3.20 | 0.74 |
(0.04) | (0.04) | (0.08) | — |
(0.38) | (0.10) | — | — |
(0.42) | (0.14) | (0.08) | — |
12.45 | 12.34 | 13.86 | 10.74 |
$428 | $619 | $540 | $287 |
4.70% | (10.08)% | 30.10% | 7.40%c |
1.69 | 1.52 | 1.79 | 2.92d |
1.33 | 1.32 | 1.32 | 1.32d |
1.10 | 0.73 | 0.53 | 1.33d |
178 | 53 | 44 | 35c |
75
Harbor International & Global Funds Financial Highlights—Continued
Selected Data for a Share Outstanding for the Periods Presented
Selected Data for a Share Outstanding for the Periods Presented
HARBOR OVERSEAS FUND | |||||
Retirement Class | Institutional Class | Investor Class | |||
Year Ended October 31, | 2019i | 2019i | 2019i | ||
Net asset value beginning of period | $10.00 | $10.00 | $10.00 | ||
Income from Investment Operations | |||||
Net investment income/(loss)a,e | 0.24 | 0.24 | 0.21 | ||
Net realized and unrealized gains/(losses) on investments | 0.07 | 0.07 | 0.07 | ||
Total from investment operations | 0.31 | 0.31 | 0.28 | ||
Less Distributions | |||||
Dividends from net investment income | — | — | — | ||
Distributions from net realized capital gains | — | — | — | ||
Total distributions | — | — | — | ||
Net asset value end of period | 10.31 | 10.31 | 10.28 | ||
Net assets end of period (000s) | $13,090 | $13,131 | $31 | ||
Ratios and Supplemental Data (%) | |||||
Total returnb | 3.10%c | 3.10%c | 2.80%c | ||
Ratio of total expenses to average net assets^ | 1.79d | 1.87d | 2.24d | ||
Ratio of net expenses to average net assetsa | 0.77d | 0.85d | 1.22d | ||
Ratio of net investment income to average net assetsa | 3.61d | 3.54d | 3.17d | ||
Portfolio turnover | 73c | 73c | 73c |
* | Less than $0.01 |
^ | Percentage does not reflect reduction for credit balance arrangements (see the “Custodian” section Note 2 of the accompanying Notes to Financial Statements) |
a | Reflects the Adviser’s waiver, if any, of its management fees and/or other operating expenses |
b | The total returns would have been lower had certain expenses not been waived during the periods shown. |
c | Unannualized |
d | Annualized |
e | Amounts are based on daily average shares outstanding during the period. |
f | For the period March 1, 2016 (inception) through October 31, 2016 |
g | For the period November 2, 2015 (inception) through October 31, 2016 |
h | For the period February 1, 2016 (inception) through October 31, 2016 |
i | For the period March 1, 2019 (inception) through October 31, 2019 |
j | For the period June 1, 2019 (inception) through October 31, 2019 |
k | Effective March 1, 2017, the Board of Trustees appointed Sands Capital Management, LLC as subadviser to Harbor Global Leaders Fund. |
l | Effective August 22, 2018, the Board of Trustees appointed Marathon Asset Management LLP as subadviser to Harbor International Fund. |
m | Effective May 23, 2019, the Board of Trustees appointed Cedar Street Asset Management LLC as subadviser to Harbor International Small Cap Fund. |
The accompanying notes are an integral part of the Financial Statements.
76
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77
Harbor International & Global Funds
Notes to Financial Statements—October 31, 2019
Notes to Financial Statements—October 31, 2019
Note 1—Organizational Matters
Harbor Funds (the “Trust”) is registered under the Investment Company Act of 1940, as amended (the “Investment Company Act”), as an open-end management investment company. As of October 31, 2019, the Trust consists of 32 separate portfolios. The portfolios covered by this report are: Harbor Diversified International All Cap Fund, Harbor Emerging Markets Equity Fund, Harbor Focused International Fund, Harbor Global Leaders Fund, Harbor International Fund, Harbor International Growth Fund, Harbor International Small Cap Fund, and Harbor Overseas Fund (individually or collectively referred to as a “Fund” or the “Funds," respectively). Harbor Capital Advisors, Inc. (the “Adviser” or “Harbor Capital”) is the investment adviser for the Funds.
The Funds currently offer four classes of shares, designated as Retirement Class, Institutional Class, Administrative Class and Investor Class. The shares of each class represent an interest in the same portfolio of investments of the Funds and have equal rights with respect to voting, redemptions, dividends, and liquidations, except that: (i) subject to the approval of the Trust’s Board of Trustees (the “Board of Trustees”), certain expenses may be applied differently to each class of shares in accordance with current regulations of the U.S. Securities and Exchange Commission (“SEC”) and the Internal Revenue Service; and (ii) shareholders of a class that bears distribution and service expenses under terms of a distribution plan have exclusive voting rights as to that distribution plan.
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. Each Fund follows the investment company reporting requirements under U.S. Generally Accepted Accounting Principles (“U.S. GAAP”), which includes the accounting and reporting guidelines under Accounting Standards Codification (“ASC”) Topic 946,Financial Services-Investment Companies. The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results may differ from those estimates.
Security Valuation
The Trust’s valuation procedures permit the Funds to use a variety of valuation methodologies, consider a number of subjective factors, analyze applicable facts and circumstances and, in general, exercise judgment, when valuing Fund investments. The methodology used for a specific type of investment may vary based on the circumstances and relevant considerations, including available market data.
Equity securities (including common stock, preferred stock, convertible preferred stock, and master limited partnerships), exchange-traded notes and financial derivative instruments (such as futures contracts, options contracts, including warrants and rights, and centrally cleared swap agreements) that are traded or cleared on a national securities exchange or system (except securities listed on the National Association of Securities Dealers Automated Quotation (“NASDAQ”) system and United Kingdom securities) are valued at the last sale price on a national exchange or system on which they are principally traded or cleared as of the valuation date. Securities listed on the NASDAQ system or a United Kingdom exchange are valued at the official closing price of those securities. In the case of securities for which there are no sales on the valuation day, (i) securities traded principally on a U.S. exchange, including NASDAQ, are valued at the mean between the closing bid and ask price; and (ii) securities traded principally on a foreign exchange, including United Kingdom securities, are valued at the official bid price determined as of the close of the primary exchange. Securities of open-end registered investment companies that are held by a Fund are valued at net asset value. To the extent these securities are actively traded and fair valuation adjustments are not applied, they are normally categorized as Level 1 in the fair value hierarchy. Equity securities traded on inactive markets or valued by reference to similar instruments are normally categorized as Level 2 in the fair value hierarchy. For more information on the fair value hierarchy, please refer to the Fair Value Measurements and Disclosures section.
Short-term securities with a remaining maturity of less than 60 days at the time of acquisition that are held by a Fund are valued at amortized cost to the extent amortized cost represents fair value. Such securities are normally categorized as Level 2 in the fair value hierarchy.
Over-the-counter financial derivative instruments, such as forward currency contracts, options contracts, and swap agreements, derive their value from underlying asset prices, indices, reference rates and other inputs, or a combination of these factors. These instruments are valued using evaluated prices furnished by a pricing vendor selected by the Board of Trustees. In certain cases, when a valuation is not readily available from a pricing vendor, the Fund’s subadviser provides a valuation, typically
78
Harbor International & Global Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 2—Significant Accounting Policies—Continued
using its own proprietary models. Depending on the instrument and the terms of the transaction, the value of the derivative instrument can be determined by a pricing vendor or subadviser using a series of techniques, including simulation pricing models. The pricing models use inputs, such as issuer details, indices, spreads, interest rates, yield curves, dividends and exchange rates, that are observed from actively quoted markets. Derivative instruments that use valuation techniques and inputs similar to those described above are normally categorized as Level 2 in the fair value hierarchy.
A Fund may also use fair value pricing if the value of some or all of the Fund’s securities have been materially affected by events occurring before the Fund’s pricing time but after the close of the primary markets or exchanges on which the security is traded. This most commonly occurs with foreign securities, but may occur with other securities as well. In such cases, the Fund may apply a fair value factor supplied by the pricing vendor to a foreign security’s market close value to reflect changes in value that may have occurred between the close of the primary market or exchange on which the security is traded and the Fund’s pricing time. That factor may be derived using observable inputs such as a comparison of the trading patterns of a foreign security to intraday trading in the U.S. markets that are highly correlated to the foreign security or other information that becomes available after the close of the foreign market on which the security principally traded. When fair value pricing is employed, the prices of securities used by a Fund to calculate its net asset value may differ from market quotations, official closing prices or evaluated prices for the same securities, which means that the Fund may value those securities higher or lower than another given fund that uses market quotations, official closing prices or evaluated prices supplied by a pricing vendor in its calculation of net asset value. Securities valued using observable inputs, such as those described above, are normally categorized as Level 2 of the fair value hierarchy.
When reliable market quotations or evaluated prices supplied by a pricing vendor are not readily available or are not believed to accurately reflect fair value, securities are priced at their fair value as determined by the Trust’s Valuation Committee (the “Valuation Committee”) pursuant to procedures adopted, and subject to oversight, by the Board of Trustees. The Valuation Committee is comprised of a trustee and officers of the Trust and employees of Harbor Capital with relevant experience or responsibilities. Each security for which the Valuation Committee determines a fair value, including the basis for the fair value decision, is reviewed by the Board of Trustees at its regularly scheduled board meetings. Securities valued using fair valuation methods that incorporate significant unobservable inputs are normally categorized as Level 3 in the fair value hierarchy.
Fair Value Measurements and Disclosures
Various inputs may be used to determine the value of each Fund’s investments, which are summarized in three broad categories defined as Level 1, Level 2, and Level 3. The inputs or methodologies used for valuing securities are not necessarily indicative of the risk associated with investing in those securities. The assignment of an investment to Levels 1, 2, or 3 is based on the lowest level of significant inputs used to determine its fair value.
Level 1– | Quoted prices in active markets for identical securities. |
Level 2– | Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). |
Level 3– | Significant unobservable inputs are used in situations where quoted prices or other observable inputs are not available or are deemed unreliable. Significant unobservable inputs may include each Fund’s own assumptions. |
The categorization of investments into Levels 1, 2, or 3, and a summary of significant unobservable inputs used for Level 3 investments, when applicable, can be found at the end of each Fund’s Portfolio of Investments schedule. For fair valuations using significant unobservable inputs, if any, a reconciliation of the beginning to ending balances for reported fair values is provided at the end of each Fund’s Portfolio of Investments schedule that presents changes attributable to realized and unrealized gains and losses and purchases, sales, and transfers in/out of the Level 3 category during the year.
Each Fund used observable inputs in its valuation methodologies whenever they were available and deemed reliable.
79
Harbor International & Global Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 2—Significant Accounting Policies—Continued
Warrants and Rights
Warrants are contracts that generally give the holder the right, but not the obligation, to buy a stated number of shares of common stock at a specified price at any time during the life of the warrant. Rights represent a privilege offered to holders of record of issued securities to subscribe (usually on a pro rata basis) for additional securities of the same class, of a different class or of a different issuer. Warrants and rights are typically written by the issuer of the security underlying the warrant or right. Although some warrants and rights may be non-transferable, others may be traded over-the-counter or on an exchange.
A Fund may acquire warrants or rights in order to gain exposure to the underlying security without owning the security, including, for example, cases where the Fund hopes to lock in the price today of a security it may wish to purchase in the future. In order for a warrant to be profitable, the market price of the underlying security must rise sufficiently above the exercise price to cover any premium and transaction costs. The value of a warrant or right may not necessarily change with the value of the underlying securities. When a Fund acquires warrants or rights, it runs the risk that it will lose its entire investment in the warrants or rights, unless the Fund exercises the warrant or right, acquires the underlying securities, or enters into a closing transaction before expiration. Warrants and rights cease to have value if they are not exercised prior to their expiration date. If the price of the underlying security does not rise to an extent sufficient to cover any premium and transaction costs, the Fund will lose part or all of its investment. Any premiums or purchase price paid for warrants or other rights that expire are treated as realized losses. If a 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 warrants or rights.
Warrants or rights outstanding at the end of the year, if any, are disclosed at the end of each applicable Fund’s Portfolio of Investments and are included in “Purchased options” in the Statements of Assets and Liabilities. Realized gain/(loss) and unrealized appreciation/(depreciation) recognized during the year are included in “Purchased options” in the Statements of Operations.
During the year, Harbor Diversified International All Cap Fund, Harbor International Fund, and Harbor International Small Cap Fund held warrants/rights as a result of their investments in underlying securities.
Forward Currency Contracts
A forward currency contract is an agreement between two parties to buy and sell currencies at a set price on a future date.
The forward currency contract is marked-to-market daily and the change in fair 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. Risk of 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.
During the year, Harbor Diversified International All Cap Fund, Harbor Global Leaders Fund, and Harbor International Small Cap Fund used forward currency contracts to manage their exposure to changes in exchange rates or as a hedge against foreign exchange risk related to specific transactions or portfolio positions.
Foreign Currency Spot Contracts
A foreign currency spot contract is an agreement between two parties to buy and sell currencies at the current market rate for settlement within two business days.
The foreign currency spot contract is marked-to-market daily for settlements beyond one day, and any change in fair 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. Risk of 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.
During the year, each Fund used foreign currency spot contracts to facilitate transactions in foreign securities or to convert foreign currency receipts into U.S. dollars.
80
Harbor International & Global Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 2—Significant Accounting Policies—Continued
Foreign Currency Translations
Purchases and sales of securities are translated into U.S. dollars at the current exchange rate on the respective dates of the transactions. Income and withholding taxes are translated at the prevailing exchange rate when accrued or incurred. The accounting records of the Funds are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency, when applicable, are translated into U.S. dollars based on the current exchange rates at year end.
Reported net realized gains and losses on foreign currency transactions, when applicable, represent net gains and losses from sales and maturities of foreign 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, when applicable, are included in the net realized and unrealized gain or loss on investments in the Statements of Operations.
Investment Income
Dividends declared on portfolio securities are accrued on the ex-dividend date. For foreign securities, certain dividends are recorded after the ex-dividend date, but as soon as the respective Fund is notified of such dividends. Interest income is accrued daily as earned. Discounts and premiums on fixed income securities are amortized over the life of the respective securities using the effective yield method. Distributions from real estate investment trust securities are recorded as dividend income, and may be reclassified as capital gains and/or return of capital, based on the information reported by the issuer, when available.
Distribution to Shareholders
Distributions on Fund shares are recorded on the ex-dividend date.
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.
Proceeds from Litigation
Each Fund may receive proceeds from shareholder litigation settlements involving current and/or previously held portfolio holdings. Any proceeds received from litigation involving portfolio holdings are reflected in the Statements of Operations in realized gain/(loss) if the security has been disposed of by a Fund, or in unrealized gain/(loss) if the security is still held by a Fund.
Expenses
Expenses incurred by the Trust are charged directly to the Fund that incurred such expense whenever possible. With respect to expenses incurred by any two or more Harbor Funds where amounts cannot be identified on a fund by fund basis, such expenses are generally allocated in proportion to the average net assets or the number of shareholders of each Fund.
Custodian
Each Fund has credit balance arrangements with its custodian whereby positive balances in demand deposit accounts used by the transfer and shareholder servicing agent for clearing shareholder transactions in the Fund generate credits that are applied against gross custody expenses. Such custodial expense reductions, if any, are reflected on the respective Fund’s accompanying Statement of Operations.
81
Harbor International & Global Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 2—Significant Accounting Policies—Continued
Class Allocations
Income, common expenses and realized and unrealized gains/(losses) are determined at the Fund level and allocated daily to each class of shares based on the applicable net assets of the respective classes. Distribution and service fees, if any, and transfer agent fees are calculated daily at the class level based on the applicable net assets of each class and the expense rate(s) applicable to each class.
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 of 1986, as amended (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 taxes on income and capital gains.
Each Fund may be subject to taxes imposed by countries in which they invest. 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.
Management has analyzed each Fund’s tax positions for all open tax years (in particular, U.S. federal income tax returns for the tax years ended October 31, 2016–2018), including all positions expected to be taken upon filing the 2019 tax return, in all material jurisdictions where each Fund operates, and has concluded that no provision for income tax is required in the Funds’ financial statements. Each Fund will recognize interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of Operations.
Note 3—Investment Portfolio Transactions
Investment Portfolio Transactions
Purchases and sales of investments, other than short-term securities, for each Fund for the year ended October 31, 2019 are as follows:
Purchases (000s) | Sales (000s) | ||
Harbor Diversified International All Cap Fund | $200,020 | $157,754 | |
Harbor Emerging Markets Equity Fund | 60,901 | 44,639 | |
Harbor Focused International Fund | 29,800 | 5,833 | |
Harbor Global Leaders Fund | 71,359 | 36,352 | |
Harbor International Fund | 892,890 | 7,288,698 | |
Harbor International Growth Fund | 87,696 | 101,542 | |
Harbor International Small Cap Fund | 99,426 | 114,019 | |
Harbor Overseas Fund | 44,187 | 18,288 |
Securities Lending
Each Fund may engage in securities lending, whereby a Fund lends its securities to financial institutions in order to increase its income. The Trust has engaged State Street Bank and Trust Company to act as its agent (the “Lending Agent”) with respect to the lending of portfolio securities of the Funds, pursuant to the terms and conditions of a Securities Lending Authorization Agreement (the “SLA Agreement”). Securities loans are required to be secured at all times during the term of the loan by collateral that is at least equal to the value of the loaned securities determined at the close of each business day. Collateral may consist of cash and/or securities issued by the U.S. Treasury. During the year, all such collateral consisted of cash. Any additional collateral that may be required to secure a loan is delivered to the Fund on the next business day. This collateral is recognized as the gross liability for securities loaned in the Statements of Assets and Liabilities. Cash collateral is invested in the State Street Navigator Securities Lending Government Money Market Portfolio (the “Navigator Portfolio”), a money market mutual fund that seeks to provide income while maintaining a stable net asset value of $1.00. There is no assurance
82
Harbor International & Global Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 3—Investment Portfolio Transactions—Continued
that the Navigator Portfolio will maintain a stable net asset value and the Funds are subject to the risk of loss on the cash collateral invested. A portion of the earnings generated by the investment of the cash collateral is rebated to the borrower for the use of the cash collateral and these earnings (less any rebate) are then divided between the Fund and the Lending Agent, as a fee for its services, according to agreed-upon rates. The Lending Agent and a Fund will share in any shortfall in the rebate due to the borrower, according to agreed-upon rates. In addition to receiving a fee from the borrower based on the demand for securities loaned and earning income on the investment of the cash collateral, a Fund receives substitute interest, dividends, or other amounts on the loaned securities, during the term of a loan. Net securities lending income is disclosed as such in the Statements of Operations.
Loans may be terminated at the option of the borrower or the Funds. Upon termination of the loan, the borrower will return to the Fund securities that are identical to the loaned securities. The Funds bear the risk of delay in recovery of, or loss of rights in, the securities loaned and the risk that the value of the collateral falls below the value of the securities on loan. Each Fund seeks to mitigate this risk through the SLA Agreement, which provides that in the event of default, the Lending Agent may apply the proceeds of the cash collateral from the loaned securities toward the purchase of replacement securities. If such proceeds are insufficient or the collateral is unavailable, the Lending Agent will purchase replacement securities at its sole expense, or if unable to do so, the Lending Agent may credit to the Fund’s account an amount equal to the fair value of the unreturned loaned securities. As the securities loans are subject to termination by the Fund or the borrower at any time, the remaining contractual maturities of each securities lending transaction is considered to be overnight and continuous.
The following table shows the Funds that engaged in securities lending during the year and summarizes the value of equity securities loaned and related cash collateral at October 31, 2019.
Market Value of Securities on Loan (000s) | Cash Collateral (000s) | ||
Harbor Diversified International All Cap Fund | $1,510 | $1,570 | |
Harbor Global Leaders Fund | 1,852 | 1,980 | |
Harbor International Fund | — | — | |
Harbor International Growth Fund | 16,640 | 17,687 | |
Harbor International Small Cap Fund | — | — |
Note 4—FEES AND OTHER Transactions with Affiliates
Investment Adviser
Harbor Capital is a wholly-owned subsidiary of ORIX Corporation (“ORIX”). Harbor Capital is the Funds’ investment adviser and is also responsible for administrative and other services.
Each Fund has a separate advisory agreement with Harbor Capital. The agreements provide for management fees based on an annual percentage rate of average daily net assets as follows:
Contractual Rate | Actual Rate | ||
Harbor Diversified International All Cap Fund | 0.75%a | 0.56% | |
Harbor Emerging Markets Equity Fund | 0.95b | 0.91 | |
Harbor Focused International Fund | 0.75 | 0.75 | |
Harbor Global Leaders Fund | 0.75c | 0.73 | |
Harbor International Fund | 0.75, 0.65d | 0.69 | |
Harbor International Growth Fund | 0.75 | 0.75 | |
Harbor International Small Cap Fund | 0.85 | 0.85 | |
Harbor Overseas Fund | 0.75 | 0.75 |
a | For the period November 1, 2018 to October 31, 2019, Harbor Capital voluntarily waived a portion of its management fee. |
b | Effective August 1, 2019, the Adviser has contractually agreed to reduce the management fee to 0.80% through July 31, 2020. |
c | Effective June 1, 2019, the Adviser has contractually agreed to reduce the management fee to 0.70% through May 31, 2020. |
d | The management fee rate is 0.75% on assets up to $12 billion and 0.65% on assets in excess of $12 billion. |
83
Harbor International & Global Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 4—FEES AND OTHER Transactions with Affiliates—Continued
Harbor Capital has from time to time voluntarily or contractually agreed not to impose a portion of its management fees and/or to bear a portion of the expenses incurred in the operation of certain Funds in order to limit Fund expenses. Such waivers, if any, are reflected on the accompanying Statements of Operations. Interest expense, if any, is excluded from contractual limitations. During the year, the following expense limitation agreements were in effect:
Retirement Class | Institutional Class | Administrative Class | Investor Class | Expense Limitation Agreement Expiration Date | |||||
Harbor Diversified International All Cap Fund | 0.72% | 0.80% | 1.05% | 1.17% | 02/29/2020 | ||||
Harbor Emerging Markets Equity Fund1 | 0.93 | 1.01 | 1.26 | 1.38 | 07/31/2020 | ||||
Harbor Focused International Fund | 0.77 | 0.85 | 1.10 | 1.22 | 05/31/2020 | ||||
Harbor Global Leaders Fund2 | 0.78 | 0.86 | 1.11 | 1.23 | 05/31/2020 | ||||
Harbor International Fund3 | 0.69 | 0.77 | 1.02 | 1.14 | 02/29/2020 | ||||
Harbor International Growth Fund | 0.77 | 0.85 | 1.10 | 1.22 | 02/29/2020 | ||||
Harbor International Small Cap Fund4 | 0.88 | 0.96 | 1.21 | 1.33 | 02/29/2020 | ||||
Harbor Overseas Fund | 0.77 | 0.85 | 1.10 | 1.22 | 02/29/2020 |
1 | For the period November 1, 2018 through February 28, 2019, Harbor Capital contractually agreed to limit the operating expenses, excluding interest expense (if any), to 1.07%, 1.15%, 1.40%, and 1.52% for the Retirement Class, Institutional Class, Administrative Class, and Investor Class, respectively. For the period March 1, 2019 through July 31, 2019, Harbor Capital contractually agreed to limit the operating expenses, excluding interest expense (if any), to 1.08%, 1.16%, 1.41%, and 1.53% for the Retirement Class, Institutional Class, Administrative Class, and Investor Class, respectively. |
2 | For the period November 1, 2018 through February 28, 2019, Harbor Capital contractually agreed to limit the operating expenses, excluding interest expense (if any), to 0.82%, 0.90%, 1.15%, and 1.27% for the Retirement Class, Institutional Class, Administrative Class, and Investor Class, respectively. For the period March 1, 2019 through May 31, 2019, Harbor Capital contractually agreed to limit the operating expenses, excluding interest expense (if any), to 0.83%, 0.91%, 1.16%, and 1.28% for the Retirement Class, Institutional Class, Administrative Class, and Investor Class, respectively. |
3 | For the period November 1, 2018 through February 28, 2019, Harbor Capital contractually agreed to reduce its advisory fee to 0.63% on assets between $24 billion and $36 billion, 0.58% on assets between $36 billion and $48 billion and 0.57% on assets over $48 billion through February 28, 2019. In addition, Harbor Capital contractually agreed to further waive a portion of its management fee to limit the Fund’s operating expenses, excluding interest expense (if any), to 0.64%, 0.72%, 0.97%, and 1.09% for the Retirement Class, Institutional Class, Administrative Class, and Investor Class, respectively. |
4 | For the period November 1, 2018 through February 28, 2019, Harbor Capital contractually agreed to limit the operating expenses, excluding interest expense (if any), to 0.87%, 0.95%, 1.20%, and 1.32% for the Retirement Class, Institutional Class, Administrative Class, and Investor Class, respectively. |
All expense limitation agreements include the transfer agent fee waiver discussed in the Transfer Agent note.
Distributor
Harbor Funds Distributors, Inc. (the “Distributor”), a wholly-owned subsidiary of Harbor Capital, is the distributor for Harbor Funds’ shares. Under the Trust’s current distribution plan pursuant to Rule 12b-1 under the Investment Company Act with respect to each Fund’s Administrative and Investor Class shares (the “12b-1 Plan”) as applicable, each Fund pays the Distributor compensation at the annual rate of 0.25% of the average daily net assets of its Administrative and Investor Class shares. Pursuant to the 12b-1 Plan, the Distributor is compensated for financing any activity that is primarily intended to result in the sale of Administrative and Investor Class shares of each Fund or for recordkeeping services or the servicing of shareholder accounts in the Administrative and Investor Class shares of each Fund. Such activities include, but are not limited to: printing of prospectuses and statements of additional information and reports for prospective shareholders (i.e., other than existing shareholders); preparation and distribution of advertising material and sales literature; expenses of organizing and conducting sales seminars; supplemental payments to dealers or other institutions such as asset-based sales charges, payments of recordkeeping fees under recordkeeping arrangements, or payments of service fees under shareholder service arrangements; and costs of administering the 12b-1 Plan.
Amounts payable by a Fund under the 12b-1 Plan need not be directly related to the expenses actually incurred by the Distributor on behalf of each Fund. The 12b-1 Plan does not obligate each Fund to reimburse the Distributor for the actual expenses the Distributor may incur in fulfilling its obligations under the 12b-1 Plan. Thus, even if the Distributor’s actual expenses exceed the fee payable to the Distributor at any given time, each Fund will not be obligated to pay more than that fee. If the Distributor’s expenses are less than the fee it receives, the Distributor will retain the difference.
The fees attributable to each Fund’s respective class are shown on the accompanying Statements of Operations.
84
Harbor International & Global Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 4—FEES AND OTHER Transactions with Affiliates—Continued
Transfer Agent
Harbor Services Group, Inc. (“Harbor Services Group”), a wholly-owned subsidiary of Harbor Capital, is the transfer and shareholder servicing agent for the Funds. The transfer agency and service agreement is reviewed and approved annually by the Board of Trustees and provides currently for compensation up to the following amounts per class of each Fund:
Transfer Agent Fees1 | |
Retirement Class | 0.02% of the average daily net assets of all Retirement Class shares |
Institutional Class | 0.10% of the average daily net assets of all Institutional Class shares |
Administrative Class | 0.10% of the average daily net assets of all Administrative Class shares |
Investor Class | 0.22% of the average daily net assets of all Investor Class shares |
1 | For the period November 1, 2018 through February 28, 2019, Harbor Services Group received compensation up to 0.01%, 0.09%, 0.09%, and 0.21% for the Retirement Class, Institutional Class, Administrative Class, and Investor Class, respectively. |
Harbor Services Group has voluntarily waived a portion of its transfer agent fees during the year ended October 31, 2019. Fees incurred for these transfer agent services are shown on each Fund’s Statement of Operations. The voluntary waiver may be discontinued at any time.
Affiliated Transactions
The Investment Company Act permits purchase and sale transactions among affiliated investment companies subject to an exemptive rule. Harbor Funds has adopted policies and procedures pursuant to such rule. During the year, the Funds did not enter into any transactions with any other Harbor fund.
Shareholders
On October 31, 2019, Harbor Capital, and its wholly owned subsidiaries, collectively held the following shares of beneficial interest in each of the following Funds:
Number of Shares Owned by Harbor Capital and Subsidiaries | Percentage of Outstanding Shares | ||||||||||
Retirement Class | Institutional Class | Administrative Class | Investor Class | Total | |||||||
Harbor Diversified International All Cap Fund | 97,399 | — | — | — | 97,399 | 0.1% | |||||
Harbor Emerging Markets Equity Fund | 84,108 | — | — | — | 84,108 | 0.9 | |||||
Harbor Focused International Fund | 1,252,709 | 1,248,500 | — | 3,000 | 2,504,209 | 97.9 | |||||
Harbor Global Leaders Fund | 36,429 | 479,463 | 26,459 | 26,478 | 568,829 | 16.4 | |||||
Harbor International Fund | 23,619 | — | — | — | 23,619 | 0.0 | |||||
Harbor International Growth Fund | 80,302 | — | — | — | 80,302 | 0.2 | |||||
Harbor International Small Cap Fund | 52,795 | 1,549,671 | 25,976 | 25,888 | 1,654,330 | 44.9 | |||||
Harbor Overseas Fund | 1,250,731 | 1,248,500 | — | 3,000 | 2,502,231 | 98.3 |
Independent Trustees
The fees and expenses of the Independent Trustees are included in “Trustees’ fees and expenses” on each Fund’s Statement of Operations.
The Board of Trustees has adopted a Deferred Compensation Plan for Independent Trustees (the “Plan”), which enables Trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from the Trust. For purposes of determining the amount owed to a Trustee under the Plan, deferred amounts are treated as though they had been invested in shares of the Fund(s) selected by the Trustee. While not required to do so, each Fund makes an investment equal to the Trustee’s investment election. The deferred compensation liability and the offsetting deferred compensation investment asset are included as a component of “Accrued expenses – Trustees’ fees and expenses” and “Other assets”, respectively, in the Statements of Assets and Liabilities. Such amounts fluctuate with changes in the value of the selected Fund(s). The deferred compensation and related mark-to-market impact liability and an offsetting investment asset will remain on each Fund’s Statement of Assets and Liabilities until distributed in accordance with the Plan.
85
Harbor International & Global Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 4—FEES AND OTHER Transactions with Affiliates—Continued
Indemnification
Under the Trust’s organizational documents, its officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust. In addition, in the normal course of business the Trust enters into contracts that provide general indemnities to other parties. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote.
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 U.S. GAAP. These differences are attributable to permanent book and tax accounting differences that were primarily due to the use of equalization. Reclassifications, if any, are made to each Fund’s capital account to reflect income and net realized gains available for distribution (or available capital loss carryovers) under income tax rules and regulations. The amounts reclassified on the Statements of Assets and Liabilities for the year ended October 31, 2019 are as follows:
Total Distributable Earnings/(Loss) (000s) | Paid in Capital (000s) | ||
Harbor Diversified International All Cap Fund | $(1,153) | $1,153 | |
Harbor Emerging Markets Equity Fund | (1) | 1 | |
Harbor Focused International Fund | — | — | |
Harbor Global Leaders Fund | (536) | 536 | |
Harbor International Fund | (1,232,639) | 1,232,639 | |
Harbor International Growth Fund | (1) | 1 | |
Harbor International Small Cap Fund | (46) | 46 | |
Harbor Overseas Fund | — | — |
The tax composition of each Fund’s distributions is as follows:
As of October 31, 2019 | As of October 31, 2018 | ||||||||||
Ordinary Income (000s) | Long-Term Capital Gains (000s) | Total (000s) | Ordinary Income (000s) | Long-Term Capital Gains (000s) | Total (000s) | ||||||
Harbor Diversified International All Cap Fund | $10,152 | $18,132 | $28,284 | $4,413 | $10,353 | $14,766 | |||||
Harbor Emerging Markets Equity Fund | 738 | — | 738 | 551 | — | 551 | |||||
Harbor Focused International Fund | — | — | — | N/A | N/A | N/A | |||||
Harbor Global Leaders Fund | — | 1,317 | 1,317 | 16 | 4,064 | 4,080 | |||||
Harbor International Fund | 133,695 | 3,350,768 | 3,484,463 | 547,393 | 1,331,548 | 1,878,941 | |||||
Harbor International Growth Fund | 3,625 | — | 3,625 | 4,567 | — | 4,567 | |||||
Harbor International Small Cap Fund | 435 | 1,819 | 2,254 | 315 | 400 | 715 | |||||
Harbor Overseas Fund | — | — | — | N/A | N/A | N/A |
86
Harbor International & Global Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
NOTE 5—TAX INFORMATION—Continued
As of October 31, 2019, the components of each Fund’s distributable earnings on a tax basis are as follows:
Undistributed Ordinary Income (000s) | Undistributed Long-Term Capital Gains (000s) | Unrealized Appreciation/ (Depreciation) (000s) | |||
Harbor Diversified International All Cap Fund | $15,886 | $— | $1,071 | ||
Harbor Emerging Markets Equity Fund | 1,128 | — | 8,702 | ||
Harbor Focused International Fund | 172 | — | 1,796 | ||
Harbor Global Leaders Fund | 220 | 6,257 | 19,412 | ||
Harbor International Fund | 174,403 | — | 104,117 | ||
Harbor International Growth Fund | 10,806 | — | 76,523 | ||
Harbor International Small Cap Fund | 1,186 | — | (253) | ||
Harbor Overseas Fund | 666 | — | 924 |
At October 31, 2019, the Funds in the following table had capital loss carryforwards for federal tax purposes which will reduce the Funds' taxable income arising from future net realized gains on investments to the extent permitted by the Internal Revenue Code. Use of the capital loss carryforwards will reduce the amount of the distribution to shareholders which would otherwise be necessary to relieve each Fund of any federal tax liability. The capital loss carryforwards do not expire.
Capital Loss Carryforward | |||||
Short-Term (000s) | Long-Term (000s) | Total (000s) | |||
Harbor Diversified International All Cap Fund | $1,189 | $2,547 | $3,736 | ||
Harbor Emerging Markets Equity Fund | 793 | — | 793 | ||
Harbor International Fund | 595,460 | 36,739 | 632,199 | ||
Harbor International Growth Fund | 2,737 | 6,906 | 9,643 | ||
Harbor International Small Cap Fund | 463 | — | 463 | ||
Harbor Overseas Fund | 795 | — | 795 |
The identified cost for federal income tax purposes of investments owned by each Fund and its respective gross unrealized appreciation and depreciation at October 31, 2019 are as follows:
Identified Cost (000s) | Gross Unrealized | Net Unrealized Appreciation/ (Depreciation) (000s) | |||||
Appreciation (000s) | (Depreciation) (000s) | ||||||
Harbor Diversified International All Cap Fund* | $765,211 | $81,713 | $(80,642) | $1,071 | |||
Harbor Emerging Markets Equity Fund* | 88,788 | 13,660 | (4,958) | 8,702 | |||
Harbor Focused International Fund | 24,102 | 2,040 | (244) | 1,796 | |||
Harbor Global Leaders Fund | 87,139 | 19,718 | (306) | 19,412 | |||
Harbor International Fund* | 5,499,121 | 546,509 | (442,392) | 104,117 | |||
Harbor International Growth Fund* | 526,038 | 104,712 | (28,189) | 76,523 | |||
Harbor International Small Cap Fund* | 44,174 | 2,890 | (3,143) | (253) | |||
Harbor Overseas Fund* | 25,152 | 1,856 | (932) | 924 |
* | Capital loss carryforwards are available, which may reduce taxable income from future net realized gain on investments. |
87
Harbor International & Global Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 6—Derivatives
Each Fund’s derivative holdings do not qualify for hedge accounting treatment and as such are recorded at current fair value. For a discussion of risks related to these investments please refer to the descriptions of each type of derivative instrument in Note 2— Significant Accounting Policies.
Each Fund’s derivative instruments outstanding as of the year ended October 31, 2019, if any, as disclosed in the Portfolio of Investments, and the related amounts of realized and changes in net unrealized gains and losses on derivative instruments during the year as disclosed in the Statement of Operations, are indicators of the volume of derivative activity for each Fund.
Derivative Instruments
At October 31, 2019, the fair values of derivatives, by primary risk exposure, were reflected in the Statement of Assets and Liabilities as follows:
HARBOR DIVERSIFIED INTERNATIONAL ALL CAP FUND
Statement of Assets and Liabilities Caption | Equity Contracts (000s) | Foreign Exchange Contracts (000s) | ||
Purchased options (warrants/rights) | $4 | $— |
HARBOR INTERNATIONAL FUND
Statement of Assets and Liabilities Caption | Equity Contracts (000s) | Foreign Exchange Contracts (000s) | ||
Purchased options (warrants/rights) | $43 | $— |
Net realized gain/(loss) and the change in net unrealized appreciation/(depreciation) on derivatives, by primary risk exposure, for the year ended October 31, 2019, were:
HARBOR DIVERSIFIED INTERNATIONAL ALL CAP FUND
Net realized gain/(loss) on derivatives | Equity Contracts (000s) | Foreign Exchange Contracts (000s) | ||
Purchased options (warrants/rights) | $1 | $— | ||
Forward currency contracts | — | 25 | ||
Total | $1 | $25 |
Change in net unrealized appreciation/(depreciation) on derivatives | Equity Contracts (000s) | Foreign Exchange Contracts (000s) | ||
Purchased options (warrants/rights) | $4 | $— |
HARBOR INTERNATIONAL FUND
Net realized gain/(loss) on derivatives | Equity Contracts (000s) | Foreign Exchange Contracts (000s) | ||
Purchased options (warrants/rights) | $(11,002) | $— |
Change in net unrealized appreciation/(depreciation) on derivatives | Equity Contracts (000s) | Foreign Exchange Contracts (000s) | ||
Purchased options (warrants/rights) | $10,908 | $— |
88
Harbor International & Global Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 6—Derivatives—Continued
HARBOR INTERNATIONAL SMALL CAP FUND
Net realized gain/(loss) on derivatives | Equity Contracts (000s) | Foreign Exchange Contracts (000s) | ||
Purchased options (warrants/rights) | $63 | $— | ||
Forward currency contracts | — | 25 | ||
Total | $63 | $25 |
Note 7—Subsequent Events
Through the date the financial statements were issued, there were no subsequent events or transactions that would have materially impacted the financial statements or related disclosures as presented herein.
89
Harbor International & Global Funds
Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
The Board of Trustees and Shareholders of
Harbor Funds
Harbor Funds
Opinion on the Financial Statements
We have audited the accompanying statements of assets and liabilities of Harbor Diversified International All Cap Fund, Harbor Emerging Markets Equity Fund, Harbor Focused International Fund, Harbor Global Leaders Fund, Harbor International Fund, Harbor International Growth Fund, Harbor International Small Cap Fund and Harbor Overseas Fund (collectively referred to as the “Funds”), (eight of the funds constituting Harbor Funds (the “Trust”)), including the portfolios of investments, as of October 31, 2019, and the related statements of operations and changes in net assets, and the financial highlights for each of the periods indicated in the table below and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Funds (eight of the funds constituting Harbor Funds), at October 31, 2019, the results of their operations, changes in net assets and financial highlights for each of the periods indicated in the table below, in conformity with U.S. generally accepted accounting principles.
Individual fund comprising the Harbor Funds | Statement of operations | Statement of changes in net assets | Financial highlights |
Harbor Diversified International All Cap Fund | For the year ended October 31, 2019 | For each of the two years in the period ended October 31, 2019 | For each of the three years in the period ended October 31, 2019 and the period from November 2, 2015 (inception) through October 31, 2016 |
Harbor Emerging Markets Equity Fund Harbor Global Leaders Fund Harbor International Fund Harbor International Growth Fund | For the year ended October 31, 2019 | For each of the two years in the period ended October 31, 2019 | For each of the five years in the period ended October 31, 2019 |
Harbor Focused International Fund | For the period from June 1, 2019 (inception) through October 31, 2019 | ||
Harbor International Small Cap Fund | For the year ended October 31, 2019 | For each of the two years in the period ended October 31, 2019 | For each of the three years in the period ended October 31, 2019 and the period from February 1, 2016 (inception) through October 31, 2016 |
Harbor Overseas Fund | For the period from March 1, 2019 (inception) through October 31, 2019 |
Basis for Opinion
These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on each of the Funds’ financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust’s internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2019, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Harbor Funds investment companies since 2000.
Chicago, Illinois
December 23, 2019
December 23, 2019
90
Harbor International & Global Funds
Fees and Expenses Example (Unaudited)
Fees and Expenses Example (Unaudited)
Example
As a shareholder of a Fund, you incur two types of costs: (1) transaction costs, including redemption fees (if any) and (2) ongoing costs, including management fees, distribution and service (12b-1) fees (if any), and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in a Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period May 1, 2019 through October 31, 2019.
Actual Expenses
The first line of the table below provides information about actual account values and actual expenses for each share class. You may use the information in the respective class line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line of the respective class under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table for each share class below provides information about hypothetical account values and hypothetical expenses based on the respective Fund/Class’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the respective Fund/Class’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in a Fund to other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as redemption fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Annualized Expense Ratios* | Expenses Paid During Period** | Beginning Account Value May 1, 2019 | Ending Account Value October 31, 2019 | |||||
Harbor Diversified International All Cap Fund | ||||||||
Retirement Class | 0.68% | |||||||
Actual | $3.47 | $1,000 | $1,024.77 | |||||
Hypothetical (5% return) | 3.47 | 1,000 | 1,021.69 | |||||
Institutional Class | 0.76% | |||||||
Actual | $3.88 | $1,000 | $1,024.77 | |||||
Hypothetical (5% return) | 3.87 | 1,000 | 1,021.28 | |||||
Administrative Class | 1.01% | |||||||
Actual | $5.15 | $1,000 | $1,022.96 | |||||
Hypothetical (5% return) | 5.14 | 1,000 | 1,019.99 | |||||
Investor Class | 1.13% | |||||||
Actual | $5.76 | $1,000 | $1,022.14 | |||||
Hypothetical (5% return) | 5.75 | 1,000 | 1,019.37 |
91
Harbor International & Global Funds
Fees and Expenses Example—Continued
Fees and Expenses Example—Continued
Annualized Expense Ratios* | Expenses Paid During Period** | Beginning Account Value May 1, 2019 | Ending Account Value October 31, 2019 | |||||
Harbor Emerging Markets Equity Fund | ||||||||
Retirement Class | 1.02% | |||||||
Actual | $5.17 | $1,000 | $1,010.09 | |||||
Hypothetical (5% return) | 5.19 | 1,000 | 1,019.93 | |||||
Institutional Class | 1.12% | |||||||
Actual | $5.68 | $1,000 | $1,010.09 | |||||
Hypothetical (5% return) | 5.70 | 1,000 | 1,019.42 | |||||
Administrative Class | 1.40% | |||||||
Actual | $7.09 | $1,000 | $1,009.06 | |||||
Hypothetical (5% return) | 7.12 | 1,000 | 1,017.97 | |||||
Investor Class | 1.49% | |||||||
Actual | $7.54 | $1,000 | $1,007.35 | |||||
Hypothetical (5% return) | 7.58 | 1,000 | 1,017.50 | |||||
Harbor Focused International Fund | ||||||||
Retirement Class | 0.77% | |||||||
Actual*** | $3.31 | $1,000 | $1,074.69 | |||||
Hypothetical (5% return) | 3.21 | 1,000 | 1,014.22 | |||||
Institutional Class | 0.85% | |||||||
Actual*** | $3.66 | $1,000 | $1,074.34 | |||||
Hypothetical (5% return) | 3.55 | 1,000 | 1,013.55 | |||||
Investor Class | 1.22% | |||||||
Actual*** | $5.24 | $1,000 | $1,070.76 | |||||
Hypothetical (5% return) | 5.09 | 1,000 | 1,010.45 | |||||
Harbor Global Leaders Fund | ||||||||
Retirement Class | 0.80% | |||||||
Actual | $4.15 | $1,000 | $1,058.76 | |||||
Hypothetical (5% return) | 4.08 | 1,000 | 1,021.07 | |||||
Institutional Class | 0.88% | |||||||
Actual | $4.57 | $1,000 | $1,058.52 | |||||
Hypothetical (5% return) | 4.48 | 1,000 | 1,020.66 | |||||
Administrative Class | 1.13% | |||||||
Actual | $5.86 | $1,000 | $1,057.15 | |||||
Hypothetical (5% return) | 5.75 | 1,000 | 1,019.37 | |||||
Investor Class | 1.25% | |||||||
Actual | $6.48 | $1,000 | $1,056.48 | |||||
Hypothetical (5% return) | 6.36 | 1,000 | 1,018.75 | |||||
Harbor International Fund | ||||||||
Retirement Class | 0.67% | |||||||
Actual | $3.42 | $1,000 | $1,026.32 | |||||
Hypothetical (5% return) | 3.41 | 1,000 | 1,021.74 | |||||
Institutional Class | 0.75% | |||||||
Actual | $3.83 | $1,000 | $1,025.69 | |||||
Hypothetical (5% return) | 3.82 | 1,000 | 1,021.33 | |||||
Administrative Class | 1.00% | |||||||
Actual | $5.10 | $1,000 | $1,024.53 | |||||
Hypothetical (5% return) | 5.09 | 1,000 | 1,020.04 | |||||
Investor Class | 1.12% | |||||||
Actual | $5.72 | $1,000 | $1,023.84 | |||||
Hypothetical (5% return) | 5.70 | 1,000 | 1,019.42 |
92
Harbor International & Global Funds
Fees and Expenses Example—Continued
Fees and Expenses Example—Continued
Annualized Expense Ratios* | Expenses Paid During Period** | Beginning Account Value May 1, 2019 | Ending Account Value October 31, 2019 | |||||
Harbor International Growth Fund | ||||||||
Retirement Class | 0.77% | |||||||
Actual | $3.93 | $1,000 | $1,027.37 | |||||
Hypothetical (5% return) | 3.92 | 1,000 | 1,021.23 | |||||
Institutional Class | 0.85% | |||||||
Actual | $4.34 | $1,000 | $1,027.39 | |||||
Hypothetical (5% return) | 4.33 | 1,000 | 1,020.81 | |||||
Administrative Class | 1.10% | |||||||
Actual | $5.62 | $1,000 | $1,026.13 | |||||
Hypothetical (5% return) | 5.60 | 1,000 | 1,019.52 | |||||
Investor Class | 1.22% | |||||||
Actual | $6.23 | $1,000 | $1,024.98 | |||||
Hypothetical (5% return) | 6.21 | 1,000 | 1,018.90 | |||||
Harbor International Small Cap Fund | ||||||||
Retirement Class | 0.88% | |||||||
Actual | $4.43 | $1,000 | $996.01 | |||||
Hypothetical (5% return) | 4.48 | 1,000 | 1,020.66 | |||||
Institutional Class | 0.96% | |||||||
Actual | $4.83 | $1,000 | $996.01 | |||||
Hypothetical (5% return) | 4.89 | 1,000 | 1,020.24 | |||||
Administrative Class | 1.21% | |||||||
Actual | $6.08 | $1,000 | $994.41 | |||||
Hypothetical (5% return) | 6.16 | 1,000 | 1,018.95 | |||||
Investor Class | 1.33% | |||||||
Actual | $6.68 | $1,000 | $993.62 | |||||
Hypothetical (5% return) | 6.77 | 1,000 | 1,018.33 | |||||
Harbor Overseas Fund | ||||||||
Retirement Class | 0.77% | |||||||
Actual | $3.90 | $1,000 | $1,010.78 | |||||
Hypothetical (5% return) | 3.92 | 1,000 | 1,021.23 | |||||
Institutional Class | 0.85% | |||||||
Actual | $4.30 | $1,000 | $1,010.78 | |||||
Hypothetical (5% return) | 4.33 | 1,000 | 1,020.81 | |||||
Investor Class | 1.22% | |||||||
Actual | $6.18 | $1,000 | $1,008.83 | |||||
Hypothetical (5% return) | 6.21 | 1,000 | 1,018.90 |
* | Reflective of all fee waivers and expense reimbursements |
** | Expenses are equal to the Fund’s annualized net expense ratio, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
*** | Fund has less than six months of operating history. Expenses are equal to the Fund’s annualized net expense ratio, multiplied by the average account value over the period, multiplied by 151/365 (to reflect the period since the commencement of operations). The expense amounts reported under Hypothetical (5% return) are not comparable to the amounts reported using actual fund return. |
93
Harbor International & Global Funds
Additional Information (Unaudited)
Additional Information (Unaudited)
Additional Tax Information
The Funds designate the following portions of their distributions from investment company taxable income for the fiscal year ended October 31, 2019 as qualifying for the dividends received deduction for corporate shareholders.
Percentage of Distribution | |
Harbor Global Leaders Fund | 100% |
Pursuant to Section 852 of the Internal Revenue Code, the Funds designate the following capital gain dividends for the fiscal year ended October 31, 2019:
Amount (000s) | |
Harbor Diversified International All Cap Fund | $18,133 |
Harbor Global Leaders Fund | 1,858 |
Harbor International Fund | 4,523,124 |
Harbor International Small Cap Fund | 1,819 |
For the fiscal year ended October 31, 2019, the Funds designate up to the maximum amount of such dividends allowable pursuant to the Internal Revenue Code as qualified dividend income eligible for reduced tax rates. These lower rates range from 0% to 20% depending on an individual’s tax bracket. If the Funds pay a distribution during calendar year 2019, complete information will be reported in conjunction with Form 1099-DIV.
The Funds designate the following for Federal income tax purposes:
Foreign Taxes Paid (000s) | Foreign Source Earned Income (000s) | ||
Harbor Diversified International All Cap Fund | $1,615 | $22,613 | |
Harbor Emerging Markets Equity Fund | 271 | 2,508 | |
Harbor Focused International Fund | 8 | 148 | |
Harbor International Fund | 17,396 | 221,401 | |
Harbor International Growth Fund | 677 | 13,773 | |
Harbor International Small Cap Fund | 151 | 1,669 | |
Harbor Overseas Fund | 56 | 811 |
Shareholders who own shares through a taxable Harbor Funds account and that received distributions from a Fund during calendar year 2019 will receive a Form 1099-DIV in January 2020 that will show the tax character of those distributions.
Proxy Voting
Harbor Funds has adopted Proxy Voting Policies and Procedures under which proxies relating to securities held by the Harbor funds are voted. In addition, Harbor Funds files Form N-PX, with its complete proxy voting record for the 12 months ended June 30th, no later than August 31st of each year. A description of Harbor Funds’ Proxy Voting Policies and Procedures and the proxy voting records (Form N-PX) are available (i) without charge, upon request, by calling Harbor Funds toll-free at 800-422-1050; (ii) on Harbor Funds’ website atharborfunds.com; and (iii) on the SEC’s website at sec.gov.
Householding
Harbor Funds has adopted a policy that allows it to send only one copy of a Fund’s prospectus, proxy materials, annual report and semi-annual report to certain shareholders residing at the same household. This reduces Fund expenses, which benefits you and other shareholders. If you need additional copies or do not want your mailings to be “householded,” please call the Shareholder Servicing Agent at 800-422-1050. Individual copies will be sent within thirty (30) days after the Shareholder Servicing Agent receives your instructions. Your consent to householding is considered valid until revoked.
94
Harbor International & Global Funds
Additional Information—Continued
Additional Information—Continued
Quarterly Portfolio Disclosures
In 2019, the Funds filed a complete portfolio of investments with the SEC for the first fiscal quarter on Form N-Q and the third fiscal quarter as an exhibit to Form N-PORT. The Funds’ Forms N-Q and N-PORT are available (i) without charge, upon request, by calling Harbor Funds toll-free at 800-422-1050, (ii) on Harbor Funds’ website atharborfunds.com, and (iii) on the SEC’s website at sec.gov.
95
Harbor International & Global Funds
Additional Information—Continued
Additional Information—Continued
ADVISORY AGREEMENT APPROVALS
Approval of Subadvisory Agreement for Harbor Emerging Markets Equity Fund
At a meeting of the Board held on May 19-20, 2019, the Board, including the Independent Trustees voting separately, approved a Subadvisory Agreement with Oaktree Capital Management, L.P. (“Oaktree Capital”) (the “New Agreement”) with respect to Harbor Emerging Markets Equity Fund (the “Fund”) to take effect upon the closing of a transaction whereby Brookfield Asset Management, Inc. would acquire a 62% economic interest in Oaktree Capital Group, LLC, the indirect parent of Oaktree Capital (the “Transaction”). The Transaction was deemed to effect a change of control of Oaktree Capital and the “assignment” of the existing subadvisory agreement with Oaktree Capital (“Prior Agreement”) under the Investment Company Act of 1940, causing such Prior Agreement to terminate automatically. In determining whether to approve the New Agreement, the Board reviewed materials furnished by Oaktree Capital regarding the Transaction and its anticipated impact on Oaktree Capital and the services it provides to the Fund.
In anticipation of the termination of the Prior Agreement in connection with the Transaction, the Board, including all of the Independent Trustees, determined that the terms of the New Agreement were fair and reasonable, and that the New Agreement should be approved.
Specific Factors
In considering the approval of the New Agreement, the Board, including all of the Independent Trustees, evaluated a number of factors relevant to their determination. They did not identify any single factor as all-important or controlling, and individual Trustees did not necessarily attribute the same weight or importance to each factor.
Among the factors considered by the Trustees in approving the new subadvisory agreement were the following:
• | The Transaction was not expected to affect the nature, extent, and quality of the services to be provided by Oaktree Capital or result in a change in the day-to-day management of Oaktree Capital or the investment professionals who provide investment management services to the Fund; |
• | Key Oaktree Capital personnel, including those who provide services to the Fund, were not expected to be negatively impacted by the consummation of the Transaction; and |
• | The terms of the New Agreement with respect to the Fund are identical to the terms of the Prior Agreement for the Fund except for the date of effectiveness and initial term, and the services to be provided by Oaktree Capital and compensation payable to Oaktree Capital will remain the same. |
The Trustees considered the nature, extent and quality of the services to be provided by Oaktree Capital to the Fund. In their deliberations, the Trustees were mindful of the fact that, by choosing to invest in the Fund, the Fund’s shareholders entrusted Harbor Capital with the responsibility, subject to the approval of the Trustees, for selecting the Fund’s subadviser, overseeing and monitoring that subadviser’s performance and replacing the subadviser if necessary.
The Board considered that it had approved the annual renewal of the Prior Agreement at the February 15-16, 2019 Board meeting. The Board also determined that it was appropriate to take into consideration the extensive information received throughout the year regarding performance and operating results of the Fund given the continuity of portfolio management expected following the Transaction. The Board concluded, based upon all of these considerations, along with the conclusions the Board reached with respect to the most recent approval of the renewal of the Prior Agreement for the Fund, that it need not reconsider all of the factors that it would typically consider in connection with an initial approval or contract renewal. The Board also noted that, notwithstanding the initial two-year period permitted under the Investment Company Act of 1940, it would nonetheless consider the renewal of the new subadvisory agreement in connection with its annual review of investment advisory and subadvisory agreements.
Approval of Amended Agreements
Subsequent to its approval of the New Agreement but prior to the closing of the Transaction, the Board approved a reduction in the contractual subadvisory fee rate payable by Harbor Capital to Oaktree Capital for the subadvisory services it provides to the Fund. At a meeting of the Board held on August 18-19, 2019, the Board, including the Independent Trustees voting separately: (i) ratified an amended and restated Subadvisory Agreement with Oaktree Capital that reduced the contractual subadvisory fee rate payable thereunder; and (ii) approved the New Agreement to take effect upon the closing of the Transaction, as amended to reflect the new fee rate (together, the “Amended Agreements”). In determining to approve the Amended Agreements, the Trustees considered that Harbor Capital was passing through the benefit of this fee reduction to the Fund’s shareholders in the form of a fee waiver/expense limitation arrangement. The Trustees noted that, although they were being asked to approve the Amended Agreements in order to implement the subadvisory fee reduction, they would have the opportunity to perform
96
Harbor International & Global Funds
Additional Information—Continued
Additional Information—Continued
ADVISORY AGREEMENT APPROVALS—Continued
a full review of the Investment Advisory Agreement and Subadvisory Agreement for the Fund in connection with their annual review of investment advisory and subadvisory agreements, at which time the Trustees would consider the nature, extent and quality of services provided by Harbor Capital and Oaktree Capital; investment performance, advisory fees and expense ratios; profitability; any “fall out” benefits; and economies of scale.
FACTORS CONSIDERED BY THE TRUSTEES IN APPROVING THE INVESTMENT ADVISORY AGREEMENT AND SUBADVISORY AGREEMENT OF HARBOR FOCUSED International FUND
The Investment Company Act of 1940, as amended, requires that the Investment Advisory and Subadvisory Agreement of each Fund be approved initially, and following an initial two-year term, at least annually, by the Harbor Funds Board of Trustees (the “Board” or the “Trustees”), including a majority of the Independent Trustees voting separately.
At an in-person meeting of the Board of Trustees held on February 15 and 16, 2019 (the “Meeting”), the Board, including the Independent Trustees voting separately, considered and approved an Investment Advisory Agreement with Harbor Capital Advisors, Inc., the adviser to the series of Harbor Funds (the “Adviser” or “Harbor Capital”), and a Subadvisory Agreement with Comgest Asset Management International Limited (“CAMIL” or the “Subadviser”) with respect to Harbor Focused International Fund (the “Fund”), a newly formed series of Harbor Funds.
In evaluating the Investment Advisory Agreement and the Subadvisory Agreement, the Trustees reviewed materials furnished by the Adviser and the Subadviser, including information about their respective affiliates, personnel, and operations, and also relied upon their knowledge of the Adviser resulting from their quarterly meetings, periodic telephonic meetings and other prior communications. In connection with the Meeting, which had been called for the purpose of considering the Investment Advisory Agreement and Subadvisory Agreement, the Trustees, including the Independent Trustees, requested and received materials and presentations relating to the services to be rendered by the Adviser and Subadviser. The Trustees also discussed with representatives of the Adviser, at the Meeting and at prior meetings, Harbor Funds’ operations and the Adviser’s ability, consistent with the “manager of managers” structure of Harbor Funds, to (i) identify and recommend to the Trustees a subadviser for the Fund, (ii) monitor and oversee the performance and investment capabilities of the Subadviser, and (iii) recommend the replacement of a subadviser where appropriate.
At the Meeting, the Trustees, including all of the Independent Trustees voting separately, determined, in the exercise of their business judgment, that the terms of the Investment Advisory Agreement and the Subadvisory Agreement with respect to Harbor Focused International Fund were fair and reasonable and approved the Investment Advisory Agreement and the Subadvisory Agreement for an initial two-year term as being in the best interests of the Fund and its future shareholders.
In their deliberations, the Independent Trustees had the opportunity to meet privately without representatives of the Adviser or the Subadviser present and were represented throughout the process by legal counsel to the Independent Trustees and the Harbor Funds.
In considering the approval of the Fund’s proposed Investment Advisory Agreement and Subadvisory Agreement, the Board, including the Independent Trustees, evaluated a number of factors it considered relevant to its determination. The Board did not identify any single factor as all-important or controlling, and individual Trustees did not necessarily attribute the same weight or importance to each factor.
Among the factors considered by the Trustees in approving the new Investment Advisory Agreement and Subadvisory Agreement were the following:
• | the nature, extent, and quality of the services expected to be provided by the Adviser and CAMIL and its participating affiliates (collectively, “Comgest”), including the background, education, expertise and experience of the investment professionals of the Adviser and Comgest to provide services to the Fund; |
• | the favorable history, reputation, qualifications and background of the Adviser and Comgest, as well as the qualifications of their personnel; |
• | the fees proposed to be charged by the Adviser and Comgest for investment advisory and subadvisory services, respectively, including the portion of the fee to be retained by the Adviser, after payment of Comgest’s fee, for investment advisory and related services including investment, business, legal, compliance, financial and administrative services, that the Adviser would provide; |
• | the proposed fees and expense ratios of the Fund relative to the fees and expense ratios of similar investment companies; |
• | the investment performance of Comgest in managing other accounts in a style similar to the style to be utilized in managing the Fund relative to the performance of a benchmark index; |
97
Harbor International & Global Funds
Additional Information—Continued
Additional Information—Continued
ADVISORY AGREEMENT APPROVALS—Continued
• | information received at regular meetings throughout the year related to services rendered by the Adviser; |
• | the compensation to be received by Harbor Services Group Inc. (“Harbor Services Group”), the Fund’s transfer agent, and Harbor Funds Distributors, Inc. (“Harbor Funds Distributors”), the Fund’s principal underwriter, in consideration of the services each would provide to the Fund; |
• | any “fall out” benefits that might inure to the Adviser and its affiliates or CAMIL and its affiliates as a result of their relationship with the Fund; |
• | information received at regular meetings throughout the year related to the Adviser’s profitability; |
• | the expected profitability of the Adviser with respect to the Fund, including the effect of revenues of Harbor Services Group and Harbor Funds Distributors on such profitability; and |
• | the extent to which economies of scale might be realized as the Fund grows, and the extent to which the Fund’s proposed advisory fee level reflects any economies of scale for the benefit of Fund investors. |
Nature, Extent, and Quality of Services
In evaluating the nature, extent, and quality of the services to be provided by the Adviser, the reasonableness of the overall compensation provided under the proposed Investment Advisory Agreement and other considerations, the Trustees considered the Adviser’s ability, consistent with the manager-of-managers structure of Harbor Funds, to identify and recommend to the Trustees quality subadvisers for the Funds, to monitor and oversee the performance and investment capabilities of each subadviser, and to recommend the replacement of a subadviser when appropriate. The Trustees specifically considered the Adviser’s history as a manager-of-managers, including its history of replacing subadvisers for particular Funds in circumstances in which the Board and the Adviser had determined that a change in subadviser was in the best interests of a Fund and its shareholders, whether as a result of (i) long-term underperformance not explained by market conditions or market cycles relative to the subadviser’s investment style, (ii) prolonged style inconsistency, (iii) material adverse changes in management or personnel, or (iv) other factors, such as if the Adviser were to identify another subadviser believed to better serve the shareholders than the existing subadviser.
The Board evaluated the nature, extent, and quality of the Adviser’s proposed services in light of the Board’s actual experience with the Adviser, as well as materials provided by the Adviser concerning the financial and other resources devoted by the Adviser to the Funds generally, including the breadth and depth of experience and expertise of the investment, administrative, legal and compliance professionals dedicated to the Funds’ operations. The Trustees determined that the Adviser has the expertise and resources to identify, select, oversee and monitor subadvisers and to operate effectively as the manager-of-managers for the Fund.
In evaluating the nature and quality of the services to be provided by Comgest, the Trustees considered the collective expertise and experience of the professionals at Comgest and the favorable record they had generated in the international equity asset class. The Trustees also noted the experience of the proposed portfolio managers of the Fund in this asset class and the favorable record generated by them at Comgest. In considering Comgest’s performance, the Trustees noted that Comgest’s record in its global ex-U.S. strategy was favorable compared to its benchmark and peers.
Advisory Fees and Expense Ratios
The Trustees observed that the data available concerning comparative fees and expense ratios showed that the Fund’s proposed advisory fee was below the median and average management fees of the peer group of funds presented to the Board for comparison purposes using Morningstar data. The Trustees also reviewed and determined to be reasonable, in relation to the services provided by each party, the split between the advisory fee paid to Harbor Capital and the subadvisory fee paid to CAMIL and specifically the net advisory fee retained by the Adviser at various asset levels.
It was further noted that the Fund’s proposed Institutional Class and Retirement Class net expense ratios were both below the average and median expense ratios of the peer group of funds presented to the Board for comparison purposes using Morningstar data. The Trustees observed that the incremental expenses of the Administrative Class and Investor Class relative to the Institutional Class data they considered would be comprised solely of Rule 12b-1 and/or transfer agent fees, which the Board reviews separately.
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Harbor International & Global Funds
Additional Information—Continued
Additional Information—Continued
ADVISORY AGREEMENT APPROVALS—Continued
Profitability
The Trustees also noted that the Adviser expected to operate the Fund initially at a loss (and had agreed to reduce or waive a portion of its advisory fee and/or absorb fund expenses while paying CAMIL its fee and/or paying or reimbursing fund expenses).
Economies of Scale
The Trustees also concluded that breakpoints in the Fund’s advisory fee were not necessary at the present time in light of, among other things, the Adviser’s forward-looking approach to setting the contractual advisory fee, its absorbing fund expenses during the initial period of the Fund’s operations while paying CAMIL its full subadvisory fee and the uncertainty surrounding the aspects of the Fund’s future asset growth. It was agreed, however, that the Board would consider the issue of breakpoints in the Fund’s advisory fee schedule at least annually after the initial two-year contract term as part of its annual investment contract review process for all of the Funds.
Approval of Amended Subadvisory Agreement for Harbor Global Leaders Fund
At a meeting of the Board held on August 18-19, 2019, the Board, including the Independent Trustees voting separately, ratified an amended and restated Subadvisory Agreement (the “Amended Agreement”) with Sands Capital Management, LLC (“Sands Capital”) that reduced the contractual subadvisory fee rate payable by Harbor Capital to Sands Capital for the subadvisory services it provides to Harbor Global Leaders Fund. In determining to approve the Amended Agreement, the Trustees considered that Harbor Capital was passing through the benefit of this fee reduction to Harbor Global Leaders Fund’s shareholders in the form of a fee waiver/expense limitation arrangement. The Trustees noted that, although they were being asked to ratify the Amended Agreement in order to implement the subadvisory fee reduction, they would have the opportunity to perform a full review of the Investment Advisory Agreement and Subadvisory Agreement for Harbor Global Leaders Fund in connection with their annual review of investment advisory and subadvisory agreements, at which time the Trustees would consider the nature, extent and quality of services provided by Harbor Capital and Sands Capital; investment performance, advisory fees and expense ratios; profitability; any “fall out” benefits; and economies of scale.
Approval of Amended Subadvisory Agreements for Harbor Global Leaders Fund AND Harbor Overseas Fund
At a meeting of the Board held on August 18-19, 2019, the Board, including the Independent Trustees voting separately, approved amended and restated Subadvisory Agreements (the “Amended Agreements”) with each of Sands Capital Management, LLC and Acadian Asset Management LLC (each, a “Subadviser”) authorizing each Subadviser to vote proxies on behalf of the Fund with respect to which they serve as Subadviser. The Trustees noted that the Amended Agreements would take effect October 1, 2019 in connection with the delegation of proxy voting responsibilities to the Subadvisers, subject to Harbor Capital’s oversight. It was considered that, although the Trustees were being asked to approve the Amended Agreements in order to implement the delegation of proxy voting responsibilities to the Subadvisers, they would have the opportunity to perform a full review of the Investment Advisory Agreement and Subadvisory Agreements for the Funds in connection with their annual review of investment advisory and subadvisory agreements, at which time the Trustees would consider the nature, extent and quality of services provided by Harbor Capital and the Subadvisers; investment performance, advisory fees and expense ratios; profitability; any “fall out” benefits; and economies of scale.
FACTORS CONSIDERED BY THE TRUSTEES IN APPROVING THE SUBADVISORY AGREEMENT OF HARBOR INTERNATIONAL SMALL CAP FUND
The Investment Company Act of 1940, as amended, requires that the subadvisory agreement be approved initially, and following an initial two-year term, at least annually, by the Harbor Funds Board of Trustees (the “Board” or the “Trustees”), including a majority of the Independent Trustees voting separately.
At an in-person meeting of the Board held on May 19-20, 2019, the Board, including the Independent Trustees voting separately, unanimously determined, in the exercise of their business judgment, that it was in the best interests of Harbor International Small Cap Fund (the “Fund”) and its shareholders that Baring International Investment Limited (“Barings”) be replaced by Cedar Street Asset Management LLC (“Cedar Street”) as subadviser to the Fund and that the terms of the new subadvisory agreement among Harbor Funds, on behalf of the Fund, Harbor Capital Advisors, Inc. (the “Adviser” or “Harbor Capital”) and Cedar Street were fair and reasonable. Accordingly, the Trustees approved the new subadvisory agreement for an initial two-year term. In their deliberations, the Independent Trustees had the opportunity to meet privately without representatives of Harbor Capital or Cedar Street present and were represented throughout the process by legal counsel to the Independent Trustees and the Fund.
99
Harbor International & Global Funds
Additional Information—Continued
Additional Information—Continued
ADVISORY AGREEMENT APPROVALS—Continued
The Trustees considered that over several recent months, Harbor Capital, the adviser to the series of Harbor Funds had discussed with the Board the challenges to the economic viability of the Fund in the future with Barings continuing to serve as subadviser. The Trustees had been apprised of Harbor Capital’s search for a potential replacement subadviser, which had resulted in several potential candidates. The Trustees had received a presentation by Cedar Street containing information about the firm and its experience, investment philosophy and process, operational and trading capabilities, and proposed approach to managing the Fund’s assets, among other things.
In determining whether to approve the new subadvisory agreement, the Trustees reviewed materials furnished by Harbor Capital and Cedar Street, including information provided by Harbor Capital regarding the Fund’s economic viability in the long-term with Barings continuing to serve as subadviser, information regarding Cedar Street, its investment philosophy and strategies, past performance, financial condition, operational capabilities, and personnel. The Trustees also reviewed information provided by Harbor Capital regarding the arrangement between Harbor Capital and Cedar Street by which Harbor Capital may acquire: (i) a less than 5% non-voting ownership stake in Cedar Street, which arrangement would be tied to asset levels achieved by the Fund, and (ii) a less than 25% ownership stake in Cedar Street in the event that the firm seeks to sell equity in the firm to a third party, the potential conflicts of interest that may result from such an arrangement, and ways in which such conflicts may be mitigated.
The Trustees considered that, in recommending Cedar Street, Harbor Capital had conducted an extensive search for an international small cap investment adviser and believed that Cedar Street had the potential to add value for the Fund’s shareholders.
In considering the approval of the new subadvisory agreement, the Board, including all of the Independent Trustees, evaluated a number of factors relevant to their determination. The Board did not identify any single factor as all-important or controlling, and individual Trustees did not necessarily attribute the same weight or importance to each factor.
Specific Factors
Among the factors considered by the Trustees in approving the new subadvisory agreement were the following:
• | the desire to continue to offer to Fund shareholders exposure to international small cap equities as an asset class through a Fund that is well managed, competitively priced and viable over the long term; |
• | that Harbor Capital has subsidized the Fund’s operations significantly since its inception to enable the Fund to maintain competitive expense ratios but that Harbor Capital was not willing to continue to subsidize the Fund after the February 29, 2020 expiration of its current expense limitation arrangement absent a change to a more collaborative subadvisory arrangement, as there was otherwise no longer a reasonable opportunity for the Fund to grow to a more viable size in the future; |
• | that Harbor Capital had agreed to reduce the net expense ratios for the Fund to further improve the Fund’s cost competitiveness if the Fund was able grow to a more viable size in the future with a more supportive subadviser; |
• | the nature, extent, and quality of the services proposed to be provided by Cedar Street, including the background, education, expertise and experience of the investment professionals of Cedar Street who would provide investment management services to the Fund; |
• | the favorable history, reputation, qualifications and background of Cedar Street, as well as the reputation, qualifications and background of Cedar Street’s personnel; |
• | the proposed fee to be charged by Cedar Street to Harbor Capital for subadvisory services, including the impact of any differences between the current and proposed subadvisory fees on the portion of the advisory fee to be retained by Harbor Capital, after payment of Cedar Street’s fee, for the subadviser oversight, administration and manager of managers services Harbor Capital provides; |
• | the investment performance of Cedar Street in managing other accounts in a style similar to the style to be utilized in managing the Fund relative to the performance of a benchmark index and the performance of the Fund under Barings; |
• | the expected impact of the implementation of the subadvisory agreement on the profitability of Harbor Capital with respect to the Fund; |
• | any “fall out” benefits that might inure to Harbor Capital, Cedar Street and their respective affiliates as a result of the implementation of the new subadvisory agreement; and |
• | that the alternative of liquidating the Fund would deprive Fund shareholders of the opportunity to continue to maintain their desired exposure to international small cap equities through a well-managed, competitively priced mutual fund going forward. |
100
Harbor International & Global Funds
Additional Information—Continued
Additional Information—Continued
ADVISORY AGREEMENT APPROVALS—Continued
The Trustees considered the nature, extent and quality of the services proposed to be provided by Cedar Street in relation to the services provided by Barings since the inception of the Fund on February 1, 2016. In their deliberations, the Trustees were mindful of the fact that, by choosing to invest in the Fund, the Fund’s shareholders entrusted Harbor Capital with the responsibility, subject to the approval of the Trustees, for selecting the Fund’s subadviser, overseeing and monitoring that subadviser’s performance and replacing the subadviser if necessary. The Trustees also considered as relevant to their determination the depth, knowledge and experience level of the investment team, the quality of the investment process and the culture of Cedar Street.
The Board discussed the presentation by Cedar Street and the merits of appointing Cedar Street as subadviser to the Fund. The Board considered the necessity of having the support of the subadviser in order for the Fund to grow to an economically viable size and its belief that Cedar Street would provide that support going forward by partnering with Harbor Capital on terms that would benefit shareholders. The Board also considered Harbor Capital’s undertaking, following discussion with the Board, to reduce the net expense ratios for the Fund in the event the Fund achieves certain asset levels.
In discussing the nature and quality of the services to be provided by Cedar Street, the Trustees considered the collective expertise and experience of the professionals who had formed Cedar Street. The Trustees also noted the experience of the proposed portfolio managers of the Fund in the international small cap value equity asset class and the favorable record generated by each of them both at Cedar Street and at their respective prior firms.
The Board also discussed the potential for conflicts of interest resulting from Harbor Capital’s arrangement to take an equity stake in Cedar Street. The Trustees acknowledged these conflicts, discussed their potential mitigation, and determined that Harbor Capital’s recommendation to approve the new subadvisory agreement was based foremost on the investment merits of Cedar Street.
The Board considered the potential tax and financial impacts of liquidating portfolio holdings and realizing gains and incurring brokerage costs in transitioning the portfolio. It was noted that the tax ramifications of a subadviser change were expected to be de minimis given the level of net realized and unrealized gains in the portfolio. The Board considered the portion of portfolio holdings that would likely be replaced as a result of the proposed engagement of Cedar Street and noted that the portfolio transition would be handled by Cedar Street.
The Trustees also discussed other potential replacement subadvisers that Harbor Capital had considered for the Fund. The Trustees further discussed whether the Fund should be liquidated but determined that the benefits of continuing the Fund with Cedar Street as investment subadviser were more compelling.
Subadvisory Fee. In considering the proposed subadvisory fee payable to Cedar Street pursuant to the new subadvisory agreement, the Trustees compared the proposed fee to the fee payable to Barings under the prior subadvisory agreement. The Trustees noted that, based on the Fund’s assets as of April 30, 2019, the effective annual fee rate for the Fund under the prior subadvisory agreement with Barings was equal to the effective annual fee rate to be paid by the Adviser under the new subadvisory agreement with Cedar Street.
As a result of these deliberations, the Trustees agreed that the prior subadvisory agreement should be terminated and voted to approve the new subadvisory agreement with Cedar Street.
101
Harbor International & Global Funds
Additional Information—Continued
Additional Information—Continued
Trustees and Officers
As of December 2019
The business and affairs of the Trust shall be managed by or under the direction of the Trustees, and they shall have all powers necessary or desirable to carry out that responsibility. The Trustees shall have full power and authority to take or refrain from taking any action and to execute any contracts and instruments that they may consider necessary or desirable in the management of the Trust. Any determination made by the Trustees in good faith as to what is in the interests of the Trust shall be conclusive. Information pertaining to the Trustees and Officers of Harbor Funds is set forth below. The address of each Trustee and Officer is: [Name of Trustee or Officer] c/o Harbor Funds, 111 South Wacker Drive, 34th Floor, Chicago, IL 60606-4302.
Harbor Funds' Statement of Additional Information includes additional information about the Trust’s Trustees and is available without charge by calling 800-422-1050 or at the Trust’s website atharborfunds.com.
Name (Age) Position(s) with Fund | Term of Office and Length of Time Served1 | Principal Occupation(s) During Past Five Years | Number of Portfolios In Fund Complex Overseen By Trustee | Other Directorships Of Public Companies and Other Registered Investment Companies Held by Trustee During Past Five Years |
INDEPENDENT TRUSTEES | ||||
Scott M. Amero (56) Trustee | Since 2014 | Chairman (2015-Present) and Trustee (2011-2015), Rare (conservation nonprofit); Trustee, Berkshire School (2014-Present); Trustee, The Nature Conservancy, Massachusetts Chapter (2018-Present); Vice Chairman and Global Chief Investment Officer, Fixed Income (2010), Vice Chairman and Global Chief Investment Officer, Fixed Income, and Co-Head, Fixed Income Portfolio Management (2007-2010), BlackRock, Inc. (publicly traded investment management firm). | 39 | None |
Donna J. Dean (68) Trustee | Since 2010 | Chief Investment Officer of the Rockefeller Foundation (a private foundation) (1995-Present). | 39 | None |
Joseph L. Dowling III (55) Trustee | Since 2017 | Chief Executive Officer (2018-Present) and Chief Investment Officer, Brown University Investment Office (2013-2018); Advisory Board Member, Stage Point Capital (private mortgage specialist) (2016-2017); Advisory Board Member, Harbor Funds (2016-2017); and Founder and Managing Member, Narragansett Asset Management (private investment management firm) (1998-2013). | 39 | Director of Integrated Electrical Services (2012-Present). |
Randall A. Hack (72) Trustee | Since 2010 | Founder and Senior Managing Director of Capstone Capital LLC (private investment firm) (2003-Present); Director of Tower Development Corporation (cell tower developer) (2009-2016); Advisory Director of Berkshire Partners (private equity firm) (2002-2013); Founder and Senior Managing Director of Nassau Capital, LLC (private investment firm, investing solely on behalf of the Princeton Endowment) (1995-2001); and President of The Princeton University Investment Company (1990-1994). | 39 | None |
Robert Kasdin (61) Trustee | Since 2014 | Senior Vice President and Chief Operating Officer (2015-Present) and Chief Financial Officer (2018-Present), Johns Hopkins Medicine; Senior Executive Vice President, Columbia University (2002-2015); Trustee and Member of the Finance Committee, National September 11 Memorial & Museum at the World Trade Center (2005-Present); Director, Apollo Commercial Real Estate Finance, Inc. (2014-Present); Director and Executive Committee Member, The Y in Central Maryland (2018-Present); and Director, Noranda Aluminum Holdings Corp. (2007-2014). | 39 | Director of Noranda Aluminum Holdings Corporation (2007-2014); and Director of Apollo Commercial Real Estate Finance, Inc. (2014-Present). |
102
Harbor International & Global Funds
Additional Information—Continued
Additional Information—Continued
Trustees and Officers—Continued
Name (Age) Position(s) with Fund | Term of Office and Length of Time Served1 | Principal Occupation(s) During Past Five Years | Number of Portfolios In Fund Complex Overseen By Trustee | Other Directorships Of Public Companies and Other Registered Investment Companies Held by Trustee During Past Five Years |
INDEPENDENT TRUSTEES—Continued | ||||
Kathryn L. Quirk (67) Trustee | Since 2017 | Retired; Vice President, Senior Compliance Officer and Head, U.S. Regulatory Compliance, Goldman Sachs Asset Management (2013-2017); Deputy Chief Legal Officer, Asset Management, and Vice President and Corporate Counsel, Prudential Insurance Company of America (2010-2012); Co-Chief Legal Officer, Prudential Investment Management, Inc., and Chief Legal Officer, Prudential Investments and Prudential Mutual Funds (2008-2012); Vice President and Corporate Counsel and Chief Legal Officer, Mutual Funds, Prudential Insurance Company of America, and Chief Legal Officer, Prudential Investments (2005-2008); Vice President and Corporate Counsel and Chief Legal Officer, Mutual Funds, Prudential Insurance Company of America (2004-2005); Member, Management Committee (2000-2002), General Counsel and Chief Compliance Officer, Zurich Scudder Investments, Inc. (1997-2002). | 39 | None |
Ann M. Spruill (65) Trustee | Since 2014 | Partner (1993-2008), member of Executive Committee (1996-2008), Member Board of Directors (2002-2008), Grantham, Mayo, Van Otterloo & Co, LLC (private investment management firm) (with the firm since 1990); Member Investment Committee and Chair of Global Public Equities, Museum of Fine Arts, Boston (2000-Present); and Trustee, Financial Accounting Foundation (2014-Present). | 39 | None |
INTERESTED TRUSTEE | ||||
Charles F. McCain (50)* Chairman, Trustee and President | Since 2017 | Chief Executive Officer (2017-Present), Director (2007-Present), President and Chief Operating Officer (2017), Executive Vice President and General Counsel (2004-2017), and Chief Compliance Officer (2004-2014), Harbor Capital Advisors, Inc.; Director (2007-Present) and Chief Compliance Officer (2004-2017), Harbor Services Group, Inc.; Chief Executive Officer (2017-Present), Director (2007-Present), Chief Compliance Officer and Executive Vice President (2007-2017), Harbor Funds Distributors, Inc.; and Chief Compliance Officer, Harbor Funds (2004-2017). | 39 | None |
Name (Age) Position(s) with Fund | Term of Office and Length of Time Served1 | Principal Occupation(s) During Past Five Years |
FUND OFFICERS NOT LISTED ABOVE** | ||
Erik D. Ojala (44) Chief Compliance Officer | Since 2017 | Executive Vice President and General Counsel (2017-Present) and Secretary (2010-Present); Senior Vice President and Associate General Counsel (2007-2017), Harbor Capital Advisors, Inc.; Director and Secretary (2019-Present), Harbor Trust Company, Inc.; Director, Executive Vice President and Chief Compliance Officer (2017-Present), Harbor Funds Distributors, Inc.; Director (2017-Present) and Assistant Secretary (2014-Present), Harbor Services Group, Inc.; and AML Compliance Officer (2010-2017) and Vice President and Secretary (2007-2017), Harbor Funds. |
Anmarie S. Kolinski (48) Treasurer | Since 2007 | Executive Vice President and Chief Financial Officer (2007-Present), Harbor Capital Advisors, Inc.; Chief Financial Officer (2007-Present), Director and Treasurer (2019-Present), Harbor Trust Company, Inc.; Harbor Services Group, Inc.; and Chief Financial Officer (2015-Present) and Treasurer (2012-Present), Harbor Funds Distributors, Inc. |
Brian L. Collins (51) Vice President | Since 2005 | Executive Vice President and Chief Investment Officer (2004-Present), Harbor Capital Advisors, Inc. and Director and Chief Investment Officer (2019-Present), Harbor Trust Company, Inc. |
Kristof M. Gleich (40) Vice President | Since 2019 | President (2018-Present), Harbor Capital Advisors, Inc.; Director, Vice Chairperson, and President (2019-Present), Harbor Trust Company, Inc.; and Managing Director, Global Head of Manager Selection (2010-2018), JP Morgan Chase & Co. |
103
Harbor International & Global Funds
Additional Information—Continued
Additional Information—Continued
Trustees and Officers—Continued
Name (Age) Position(s) with Fund | Term of Office and Length of Time Served1 | Principal Occupation(s) During Past Five Years |
FUND OFFICERS NOT LISTED ABOVE**—Continued | ||
Gregg M. Boland (56) Vice President | Since 2019 | Vice President (2019-Present), Harbor Capital Advisors, Inc.; President (2019-Present), Senior Vice President – Operations (2016-2019), and Vice President – Operations (2007-2015), Harbor Services Group, Inc.; and Senior Vice President, AML Compliance Officer, and OFAC Officer (2019-Present), Harbor Funds Distributors, Inc. |
Diana R. Podgorny (40) Secretary | Since 2018 | Vice President and Assistant General Counsel, Harbor Capital Advisors, Inc. (2017-Present); Vice President and Counsel, AMG Funds LLC (2016-2017); Assistant Secretary, AMG Funds, AMG Funds I, AMG Funds II and AMG Funds III (2016-2017); Assistant Secretary, AMG Funds IV (2010-2017); and Vice President and Counsel, Aston Asset Management, LLC (2010-2016). |
Jodie L. Crotteau (47) Assistant Secretary | Since 2014 | Senior Vice President and Chief Compliance Officer, Harbor Capital Advisors, Inc. (2014-Present); Chief Compliance Officer and AML/OFAC Officer (2019-Present), Harbor Trust Company, Inc.; Chief Compliance Officer and Secretary (2017-present) and Assistant Secretary (2015-2016), Harbor Services Group, Inc.; Assistant Secretary (2016-present), Harbor Funds Distributors, Inc.; Vice President and Chief Compliance Officer, Grosvenor Registered Funds (2011-2014); and Vice President, Grosvenor Capital Management, L.P. (2010-2014). |
Lana M. Lewandowski (40) AML Compliance Officer and Assistant Secretary | Since 2017 | Legal & Compliance Manager (2016-Present) and Legal Specialist (2012-2015), Harbor Capital Advisors, Inc. |
Lora A. Kmieciak (55) Assistant Treasurer | Since 2017 | Senior Vice President – Fund Administration and Analysis (2017-Present) and Senior Vice President - Business Analysis (2015-2017), Harbor Capital Advisors, Inc.; and Assurance Executive Director, Ernst & Young LLP (1999-2015). |
John M. Paral (51) Assistant Treasurer | Since 2013 | Director of Fund Administration and Analysis (2017-Present), Vice President (2012-Present) and Financial Reporting Manager (2007-2017), Harbor Capital Advisors, Inc. |
1 | Each Trustee serves for an indefinite term, until his successor is elected. Each Officer is elected annually. |
* | Mr. McCain is deemed an “Interested Trustee” due to his affiliation with the Adviser and Distributor of Harbor Funds. |
** | Officers of the Funds are “interested persons” as defined in the Investment Company Act. |
104
This privacy statement is not part of this report
Harbor’s Privacy Statement
The following privacy statement (“Privacy Statement”) is issued by Harbor Funds and each series of Harbor Funds and its affiliates, Harbor Capital Advisors, Inc., Harbor Services Group, Inc. and Harbor Funds Distributors, Inc. (collectively, “Harbor” “we” or “us”). The measures described in this Privacy Statement reflect the commitments we make to protect the privacy of your personal information. We appreciate the confidence you have shown by entrusting us with your assets.
Personal Information
In the course of providing products and services, we collect personal information about you from the following sources: applications, forms, our website (including any information captured through our use of “cookies”), through mobile applications, by telephone and in correspondence and transactions with us, our affiliates or other parties, including when you contact Shareholder Services or establish an account with us. This Privacy Statement applies to personal information we collect from those sources unless we inform you otherwise.
The personal information collected may include name, address, email address, telephone/fax numbers, account number, social security or taxpayer identification number, investment activity, bank account information, location data (depending on your app settings and device permissions), and other information voluntarily provided by you.
We may also collect certain information automatically when you visit us through our website or a mobile application. For example, we may collect technical and navigational information, such as computer browser type, device type, device ID, Internet protocol address, pages visited average time spent on our website and searches performed on our website. We may use this information to alert you to software compatibility issues; to provide you with or improve or websites, applications, products or services; or to provide you with content that may be of interest to you. We use your IP address to help diagnose problems with our server and to administer our website. Your IP address is also used to gather broad demographic information. This information will be used for internal purposes only. We also collect information in the form of log files that record website and app activity and gather statistics about your browsing habits. These entries are generated automatically, and help us to troubleshoot errors, improve performance and maintain the security of our sites and apps. We use “cookies” and similar files that may be placed on your computer or device for security purposes, to facilitate site navigation and to personalize the appearance of our site. We provide more information regarding cookies and other tracking technologies below.
In addition, we may receive personal information about you that you authorize third parties to provide to us. We also may obtain personal information from third-party service providers to verify your identity, to prevent fraud, or to help us identify products and services that may be of interest to you.
The personal information we collect about you may be transferred to or stored by us or our service providers in the United States or elsewhere, as permitted by law.
If you do not wish to provide personal information to us, we may be unable to provide certain products or services to you.
Information Sharing
We disclose personal information with affiliated and non-affiliated parties: (1) as permitted or required by law or regulation; (2) if we believe that is necessary to: comply with applicable laws, regulations, or industry requirements; respond to requests from a legal, regulatory, or governmental authority; enforce legal terms; detect and resolve any fraud or security concerns, and protect the rights, property, and safety of us, our users, or others; (3) in the event of a merger, acquisition or sale of all or substantially all of our assets; or (4) as otherwise described in this Privacy Statement.
Personal information we collect may be shared with non-affiliated companies that perform support services on our behalf or to other firms that assist us in providing you with products and services (including, without limitation, completing transactions), such as custodians, transfer agents, broker-dealers and marketing service firms (to support our marketing to you), as well as with other financial institutions. We may also share information with affiliates that are engaged in a variety of financial services in order to better service your account(s).
When information is shared with third parties, they are not permitted to use the information for any purpose other than those purposes described in this Privacy Statement or as permitted by law.
If you close your account(s) or if we lose contact with you, we will continue to share information in accordance with our current privacy policy and practices.
If you close your account(s) or if we lose contact with you, we will continue to share information in accordance with our current privacy policy and practices.
105
Harbor’s Privacy Statement—Continued
Security
We maintain physical, electronic and procedural safeguards designed to protect your personal information; however, please be aware that no data security measures can guarantee 100% security.
For shareholders accessing information through our website or a mobile application, various forms of Internet security, such as data encryption firewall barriers, user names and passwords, two-factor authentication, and other tools are used. For additional information regarding our security measures, visit the terms and conditions of use on our website at harborfunds.com.
Linking to
Third Parties
Third Parties
When you visit our website and leave to go to another linked site, we are not responsible for the content or availability of the linked site. Please be advised that if you enter into a transaction on the third-party site, we do not represent either the third party or you. Further, the privacy and security policies of the linked site may differ from those practiced by us.
Cookies and Other Technologies
A cookie is a small text file that is stored on your computer, tablet, or device when you visit a website or a mobile application. Cookies usually store small bits of information about you and what you do on that site or application, which are then used to improve your browsing experience. Some cookies are only used during a single visit, while others are saved on your device until your next visit. Harbor Funds and our third-party providers use both types of cookies to make your visits more productive.
If you are concerned about cookies, they can be blocked from your device, or you can set your browser to notify you when they are being used. Use the Help feature of your browser to learn how.
Our website, mobile application, and emails may use a web beacon. A web beacon helps to measure usage and activity and reports that activity back to the system providers. In some cases, a web beacon triggers the placement of a cookie on your device.
We and our service providers use web beacons and cookies to determine things like if and when you open our emails, what type of device, operating system, email program, or web browser you are using, your IP address, and what links you click within our site or email. These things enable us to gauge the effectiveness, relevance, and value of our content and communications.
We use Google Analytics (which uses a web beacon) to collect information about use of our website and mobile application. For more information on opting out of being tracked by Google Analytics, visithttps://tools.google.com/dlpage/gaoptout. We also use Lucky Orange to collect information about how visitors interact with the content on our public website and mobile application pages. Lucky Orange doesnot track actions or behavior within the password-protected online account access systems. For more information about Lucky Orange, including how to opt out, please visit:https://www.luckyorange.com/privacy.php.
Do Not Track
Our third-party vendors may collect information about users across our website. We do not currently have the capability to respond to a web browser that does not track signals or other mechanisms that provide you with the ability to exercise choice regarding the collection of this information.
Changes to this
Privacy Statement
Privacy Statement
We reserve the right to change or revise this Privacy Statement at any time to reflect changes in the law or our data collection and use practices. New updates to the Privacy Statement will be posted to our website and are include in Harbor Funds’ annual reports to shareholders. Privacy Statement changes will apply to the information collected from the date we post our revised Privacy Statement, as well as to existing information we hold.
Contact Us
If you have any questions or concerns about how we maintain the privacy of your personal information or if you would like to update your personal information on file, please contact us at 800-422-1050 Monday through Friday, between the hours of 8:00 a.m. and 6:00 p.m. Eastern time. You may also write to us at the following postal address:
Harbor Funds
c/o Harbor Services Group, Inc.
PO Box 804660
Chicago, IL 60680-4108
c/o Harbor Services Group, Inc.
PO Box 804660
Chicago, IL 60680-4108
We recommend that you read and retain this notice for your personal files.
Last Updated: December 2018
106
111 South Wacker Drive, 34th Floor | Chicago, IL 60606-4302 | 800-422-1050 | harborfunds.com |
Trustees & Officers
Charles F. McCain
Chairman, President & Trustee
Chairman, President & Trustee
Scott M. Amero
Trustee
Trustee
Raymond J. Ball
Trustee
Trustee
Donna J. Dean
Trustee
Trustee
Joseph L. Dowling, III
Trustee
Trustee
Randall A. Hack
Trustee
Trustee
Robert Kasdin
Trustee
Trustee
Kathryn L. Quirk
Trustee
Trustee
Ann M. Spruill
Trustee
Trustee
Erik D. Ojala
Chief Compliance Officer
Chief Compliance Officer
Anmarie S. Kolinski
Treasurer
Treasurer
Brian L. Collins
Vice President
Vice President
Kristof M. Gleich
Vice President
Vice President
Gregg M. Boland
Vice President
Vice President
Diana R. Podgorny
Secretary
Secretary
Jodie L. Crotteau
Assistant Secretary
Assistant Secretary
Lana M. Lewandowski
AML Compliance Officer
& Assistant Secretary
AML Compliance Officer
& Assistant Secretary
Lora A. Kmieciak
Assistant Treasurer
Assistant Treasurer
John M. Paral
Assistant Treasurer
Assistant Treasurer
Investment Adviser
Harbor Capital Advisors, Inc.
111 South Wacker Drive, 34th Floor
Chicago, IL 60606-4302
312-443-4400
111 South Wacker Drive, 34th Floor
Chicago, IL 60606-4302
312-443-4400
Distributor
Harbor Funds Distributors, Inc.
111 South Wacker Drive, 34th Floor
Chicago, IL 60606-4302
312-443-4600
111 South Wacker Drive, 34th Floor
Chicago, IL 60606-4302
312-443-4600
Shareholder Services
Harbor Services Group, Inc.
P.O. Box 804660
Chicago, IL 60680-4108
800-422-1050
P.O. Box 804660
Chicago, IL 60680-4108
800-422-1050
FD.AR.IG.1019
Table of Contents
Annual Report
October 31, 2019
Fixed Income Funds
Retirement Class | Institutional Class | Administrative Class | Investor Class | |
Harbor Bond Fund | HBFRX | HABDX | HRBDX | – |
Harbor Convertible Securities Fund | HNCVX | HACSX | HRCSX | HICSX |
Harbor Core Bond Fund | HCBRX | HACBX | – | – |
Harbor High-Yield Bond Fund | HNHYX | HYFAX | HYFRX | HYFIX |
Harbor High-Yield Opportunities Fund | HHYRX | HHYNX | HHYAX | HHYVX |
Harbor Money Market Fund | – | HARXX | HRMXX | – |
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Funds’ annual and semi-annual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on the Funds’ website (harborfunds.com), and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from a Fund electronically anytime by contacting your financial intermediary (such as a broker-dealer or bank) or, if you invest directly with Harbor Funds, by calling 800-422-1050.
You may elect to receive all future reports in paper free of charge. If you invest through a financial intermediary (such as a broker-dealer or bank), you can contact your financial intermediary to request that you continue to receive paper copies of the Funds’ shareholder reports. If you invest directly, you can call 800-422-1050 to request that you continue to receive paper copies of the Funds’ shareholder reports. Your election to receive reports in paper will apply to all Harbor Funds held in your account.
Table of Contents
1 | |
Fixed Income Funds | |
Harbor Bond Fund | |
2 | |
5 | |
Harbor Convertible Securities Fund | |
24 | |
26 | |
Harbor Core Bond Fund | |
30 | |
32 | |
Harbor High-Yield Bond Fund | |
37 | |
39 | |
Harbor High-Yield Opportunities Fund | |
49 | |
51 | |
Harbor Money Market Fund | |
59 | |
61 | |
Financial Statements | |
62 | |
64 | |
66 | |
72 | |
84 | |
101 | |
102 | |
Additional Information | |
104 | |
104 | |
104 | |
104 | |
105 | |
106 | |
109 |
This document must be preceded or accompanied by a Prospectus.
Letter from the Chairman
Charles F. McCain Chairman |
Dear Fellow Shareholder:
After a challenging start early in the fiscal year, the equity markets recovered and performed well for much of the remainder of the year ending October 31, 2019. U.S. equity markets performed well compared to most other markets around the globe, lead by the strong performance of global technology and internet related stocks. Overseas, there were minimal differences between the returns of developed markets and emerging markets, though within regions there was greater dispersion. Concerns about the impact of rising geopolitical tensions and trade wars weighed on equity and fixed income markets. Steady though modest economic growth in the U.S. more than offset these concerns, leading to solid investment results across asset classes. The U.S. bond markets performed well, with the actions of an accommodative Federal Reserve leading to lower interest rates and higher returns for Government bonds as well as most corporate bonds that were supported by solid earnings.
Within the U.S. equity markets and across most overseas markets, larger cap stocks significantly outperformed smaller cap stocks, continuing a pattern observed in prior years. Also persisting was the dominance of growth over value. Outside of a few brief periods when value stocks rallied relative to growth stocks, it was a year generally dominated by larger cap growth stocks.
Comments from the portfolio managers of each Harbor fund are included in the following pages. You will notice that their market and performance comments and outlooks reflect their distinctive investment approaches. We believe shareholders benefit from reading these different perspectives, particularly as they look ahead to the future.
One thing that should stand out as you read the comments of our portfolio managers is their strong commitment to active management. We believe that actively managed portfolios, led by skilled practitioners of the art and science of investing, are well positioned to take advantage of the various opportunities that arise over time to deliver attractive long-term investment results.
Since the launch of the first Harbor funds in 1986, we have served as a gateway for shareholders to access talented, institutional caliber asset management through active, cost-aware investments. We identify specialists in each asset class to manage portfolios, and apply a comprehensive oversight program to monitor their performance and ensure their decisions are in the best interest of shareholders. We offer our shareholders the benefit of institutional caliber portfolio managers, in addition to serving as professional adviser to maintain portfolio manager accountability.
The ending of a calendar year always marks a good time to evaluate your financial goals and investments. We encourage shareholders to take a long-term prospective with their investments. While past performance is never a guarantee of future results, over the long-term, the returns of equities and fixed income securities have historically helped investors achieve their financial objectives. We believe investors should maintain a diversified portfolio of equities, fixed income and cash in an allocation consistent with their long-term financial goas and comfort with risk.
Harbor Funds is proud to offer a variety of equity and fixed income funds to help you achieve your financial goals.
Thank you for your confidence in Harbor Funds. We will do our best to continue to earn your trust in 2020 and the years ahead.
December 23, 2019
Charles F. McCain |
Chairman |
1
Harbor Bond Fund
Manager’s Commentary (Unaudited)
Manager’s Commentary (Unaudited)
Subadviser
Pacific Investment Management Company LLC (PIMCO)
650 Newport Center Dr.
Newport Beach, CA
92660
Newport Beach, CA
92660
Portfolio Managers
Scott A. Mather
Since 2014
Since 2014
Mark R. Kiesel
Since 2014
Since 2014
Mihir P. Worah, Ph.D.
Since 2014
Since 2014
PIMCO has subadvised the Fund since 1987.
Investment Objective
The Fund seeks total return.
Scott A. Mather
Mark R. Kiesel
Mihir P. Worah, Ph.D.
Management’s Discussion of
Fund Performance
Fund Performance
MARKET REVIEW
To start the fiscal year, elevated volatility as concerns about slowing global growth and rising geopolitical uncertainty weighed on risk sentiment. U.S. stocks reversed their gains from earlier in 2018 and fell sharply alongside a broader global risk asset sell-off.
Following December’s steep sell-off, risk assets bounced back as dovish pivots from global central banks helped ease financial conditions and optimism over U.S.-China trade negotiations bolstered investor sentiment. Still, economic data continued to signal decelerating global growth. Robust risk appetites reverberated across most risk assets – global equities surged higher, developed market yields fell, credit spreads tightened, and oil prices climbed – though not all retraced the extent of the drawdowns in the fourth quarter of 2018.
Over the second half of the fiscal year - despite heightened global trade tensions - both safe haven and risk assets broadly rallied as central bank rhetoric struck even more accommodative tones amid mounting economic uncertainties. “Safe-haven” and risk assets alike rallied as financial conditions eased in anticipation of easier global monetary policy. While risk sentiment moved in tandem with the ebb and flow of global trade tensions throughout the quarter, the S&P 500 Index still set new highs and credit spreads broadly tightened. Meanwhile, 10-year bond yields fell in the U.S. and Germany – with the latter setting a new record low – and the U.S. yield curve inverted again.
Geopolitical developments garnered headlines and drove market volatility. Chief among these was the U.S.-China trade war as tensions rose with more tariff action. Outside of trade, political instability rose around the world: protests escalated in Hong Kong, unexpected electoral outcomes occurred in Argentina, and a formal impeachment inquiry against President Trump materialized in the U.S. Tensions in the Middle East also flared following attacks on Saudi oil facilities.
Against an increasingly mixed geopolitical landscape and a backdrop of continued softening in global growth momentum, risk assets generally withstood bouts of market volatility while sovereign yields declined.
In the final month of the fiscal year, activity broadly reflected more favorable sentiment in markets as trade tensions between the US and China eased modestly.
PERFORMANCE
Harbor Bond Fund underperformed the Bloomberg Barclays U.S. Aggregate Bond Index for the year ended October 31, 2019. The Fund returned 10.84% (Retirement Class), 10.74% (Institutional Class), and 10.44% (Administrative Class) for the fiscal year, compared with the benchmark’s return of 11.51%.
The following strategies helped returns for fiscal year 2019:
• | An overweight to U.S. duration as U.S. rates fell over the fiscal year. |
• | Security selection within investment grade credit, particularly a preference for financials. |
• | Tactical exposure to a basket of emerging market currencies, particularly the Mexican peso and Brazilian real. |
• | An allocation to U.S. dollar-denominated emerging market debt as select issues outperformed over the period. |
2
Harbor Bond Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
CHANGE IN A $10,000 INVESTMENT
For the period 11/01/2009 through 10/31/2019
The graph compares a $10,000 investment in the Institutional Class shares of the Fund with the performance of the Bloomberg Barclays U.S. Aggregate Bond Index. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
TOTAL RETURNS
For the periods ended 10/31/2019
1 Year | Annualized | |||||||
5 Years | 10 Years | |||||||
Harbor Bond Fund | ||||||||
Retirement Class1 | 10.84% | 3.51% | 4.10% | |||||
Institutional Class | 10.74 | 3.51 | 4.10 | |||||
Administrative Class | 10.44 | 3.25 | 3.84 | |||||
Comparative Index | ||||||||
Bloomberg Barclays U.S. Aggregate Bond | 11.51% | 3.24% | 3.73% |
As stated in the Fund’s prospectus dated March 1, 2019, the expense ratios were 0.72% (Net) and 0.83% (Gross) (Retirement Class); 0.80% (Net) and 0.91% (Gross) (Institutional Class); and 1.05% (Net) and 1.16% (Gross) (Administrative Class). The net expense ratios reflect a contractual management fee waiver and an expense limitation agreement (excluding interest expense) effective through 02/29/2020. The expense ratios in the prospectus may differ from the actual expense ratios for the period disclosed within this report. The expense ratios shown in the prospectus are based on the prior fiscal year, adjusted to reflect changes, if any, in contractual arrangements that occurred prior to the date of the prospectus (or supplement thereto, if applicable).
Performance data shown represents past performance and is no guarantee of future results. Past performance is net of management fees and expenses and reflects reinvested dividends and distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or upon the redemption of Fund shares. Past performance reflects the beneficial effect of any expense waivers or reimbursements, without which returns would have been lower. Investment returns and principal value will fluctuate so that Fund shares, when redeemed, may be worth more or less than their original cost. Returns for periods less than one year are not annualized. Current performance may be higher or lower and is available through the most recent month end atharborfunds.com or by calling 800-422-1050.
The following strategies were negative or neutral for returns:
• | Short duration exposure to select developed markets including Australia, Japan and the U.K. as yields in these countries fell over the fiscal year. |
• | An allocation to U.S. inflation-linked bonds, as inflation expectations moved lower alongside energy prices and weak global macro data. |
OUTLOOK & STRATEGY
We believe the global economy is about to enter a low-growth “window of weakness” as ongoing trade tensions and heightened political uncertainty continue to act as a drag on global trade, manufacturing activity, and business investment. In our baseline forecast, the low-growth period of vulnerability – with trade, monetary, and fiscal policy acting as swing factors – gives way to a moderate recovery in U.S. and global growth in the course of 2020.
In the U.S., we continue to expect growth to slow to 1.25%–
1.75% in 2020 from a peak of 3.2% in the second quarter of 2018. Slower global growth and elevated trade tensions are expected to depress investment and export growth, while slower business output and lower profit growth slow labor markets, weighing on consumption. We believe core inflation is likely to firm somewhat to the 2.25%−2.75% range due to the recent tariffs on Chinese goods, though it is likely to moderate in later 2020. We expect the U.S. Federal Reserve to support growth by cutting rates further over the next few quarters.
For the eurozone, we see the continuation of a 1% growth, 1% inflation economy. Ongoing trade tensions are expected to exert a significant drag on growth, somewhat offset by supportive domestic conditions, including easy financial conditions, modest fiscal stimulus, and remaining pent-up demand. Core inflation could rise a bit over the next year in response to rising wages, but weak growth suggests that margin pressure on businesses will continue, limiting the pass-through of higher labor costs. While the European Central Bank may cut the policy rate a little further, we expect the focus to remain on forward guidance, targeted longer-term refinancing operations, and asset purchases.
In the United Kingdom (UK), we expect real growth in the range of 0.75%–1.25% in 2020, modestly below trend. We anticipate an orderly Brexit, either through an amended withdrawal agreement or a relatively orderly no-deal exit. However, we see headwinds from weak global trade, Brexit-related uncertainty, and possible disturbances in the event of a no-deal exit weighing on growth. We expect core CPI inflation to remain stable at or close to the 2% target. While wage growth has picked up, we think firms are likely to absorb higher labor costs. The Bank of England will likely keep its policy rate unchanged at 0.75%, but we expect a cut in the event of a no-deal exit.
Japan’s GDP growth is expected to slow to a 0.25%–0.75% range in 2020 from an estimated 1.1% this year. Although we expect domestic demand to remain resilient thanks to a tight labor market and anticipated fiscal accommodation, the balance of risk remains on the downside due to external factors. Core inflation is expected to remain low at 0.5%–1%, with most of the impact
1 | Retirement Class shares commenced operations on June 1, 2018. The performance attributed to the Retirement Class shares prior to that date is that of the Institutional Class shares. Performance prior to June 1, 2018 has not been adjusted to reflect the lower expenses of Retirement Class shares. During this period, Retirement Class shares would have had returns similar to, but potentially higher than, Institutional Class shares due to the fact that Retirement Class shares represent interests in the same portfolio as Institutional Class shares but are subject to lower expenses. |
3
Harbor Bond Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
from the consumption tax hike offset by lower mobile phone charges and free nursery education. We believe the hurdle for deeper negative interest rates remains high, but there is clear appetite for fiscal stimulus from both the Bank of Japan and the government.
In China, we see growth slowing in 2020 to a 5.0%‒6.0% range from an estimated 6.1% in 2019 due to the trade conflict, rising unemployment, weakening consumption, and sluggish business investment. We expect fiscal stimulus of around 1% of gross domestic product (GDP), likely front-loaded in the first quarter of 2020. Inflation should remain benign at 1.5%–2.5%, and we expect the People’s Bank of China to cut rates by 50 basis points, in addition to reductions in bank reserve requirement ratios. We also expect further moderate yuan depreciation against the U.S. dollar to cushion the trade war’s impact on manufacturing.
With respect to portfolio strategy:
• | We are about neutral headline duration but favor U.S. duration against rate exposure in other developed regions, including in the U.K. and Japan. |
• | We prefer the intermediate portion of the curve, anchored by our views that short-term rates are likely to remain at low levels and that lower global yields will exert downward pressure on rates at home. |
• | We have more diversified credit exposures in sectors beyond investment grade corporates and are more focused on sector/ security selection over generic beta exposure and look to add opportunistically amid market dislocations. |
• | We maintain TIPS exposure given low breakeven rates and our expectations for inflation to drift toward target. |
• | We remain tactical with currency positioning, particularly given less conviction in the overall direction of the U.S. dollar. |
This report contains the current opinions of Pacific Investment Management Company LLC (PIMCO) as of the date of this report and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Such opinions are subject to change without notice and securities described herein may no longer be included in, or may at any time be removed from, the Fund’s portfolio. This report is distributed for informational purposes only. Information contained herein has been obtained from sources believed reliable, but not guaranteed.
Fixed income investments are affected by interest rate changes and the creditworthiness of the issues held by the Fund. A rise in interest rates will cause a decrease in the value of fixed income securities. Such an event would have an adverse effect on the Fund. The use of derivative instruments may add additional risk. There may be a greater risk that the Fund could lose money due to prepayment and extension risks because the Fund invests heavily at times in mortgage-related securities. The Fund may engage in active and frequent trading to achieve its principal investment strategies. References to securities that are backed by the full faith and credit of the U.S. Government do not apply to the shares of the Fund. For information on the different share classes and the risks associated with an investment in the Fund, please refer to the current prospectus.
4
Harbor Bond Fund
Portfolio of Investments—October 31, 2019
Portfolio of Investments—October 31, 2019
Investment Allocation(% of investments) – Unaudited
(Excludes derivative positions)
Value, Cost, and Principal Amounts in Thousands
ASSET-BACKED SECURITIES—8.3% | |||
Principal Amount | Value | ||
Allegro CLO I Ltd.1 | |||
Series 2013 Cl. 1A | |||
$ | 808 | 3.486% (3 Month USD Libor + 1.220) 01/30/20262,3 | $808 |
Ally Auto Receivables Trust | |||
Series 2018-3 Cl. A2 | |||
1,389 | 2.720%—05/17/2021 | 1,390 | |
AmeriCredit Automobile Receivables Trust | |||
Series 2018-1 Cl. A2B | |||
446 | 2.530% (1 Month USD Libor) 07/19/20212 | 446 | |
Arbor Realty Commercial Real Estate Notes Ltd. | |||
Series 2017-FL1 Cl. A | |||
6,800 | 3.328% (1 Month USD Libor + 1.300) 04/15/20272,3 | 6,805 | |
Argent Securities Inc. | |||
Series 2006-W4 Cl. A2C | |||
6,352 | 2.178% (1 Month USD Libor + 0.160) 05/25/20362 | 2,399 | |
Series 2005-W2 Cl. A2C | |||
1,500 | 2.378% (1 Month USD Libor + 0.360) 10/25/20352 | 1,506 | |
Series 2004-W11 Cl. M3 | |||
939 | 3.143% (1 Month USD Libor + 0.750) 11/25/20342 | 950 | |
4,855 | |||
Asset Backed Securities Corp. Home Equity Loan Trust | |||
Series 2003-HE4 Cl. M1 | |||
4,948 | 3.273% (1 Month USD Libor + 0.830) 08/15/20332 | 4,990 | |
Cent CLO Ltd.1 | |||
Series 2015-24A Cl. A1R | |||
5,200 | 3.373% (3 Month USD Libor + 1.070) 10/15/20262,3 | 5,192 | |
Countrywide Asset-Backed Certificates | |||
Series 2006-21 Cl. 2A3 | |||
1,265 | 2.168% (1 Month USD Libor + 0.150) 05/25/20372 | 1,259 | |
Series 2006-ABC1 Cl. A3 | |||
4,527 | 2.258% (1 Month USD Libor + 0.240) 05/25/20362 | 3,604 | |
Series 2006-2 Cl. M1 | |||
1,200 | 2.418% (1 Month USD Libor + 0.400) 06/25/20362 | 1,194 | |
6,057 | |||
Credit Acceptance Auto Loan Trust | |||
Series 2018-2A Cl. A | |||
6,300 | 3.470%—05/17/20273 | 6,393 |
ASSET-BACKED SECURITIES—Continued | |||
Principal Amount | Value | ||
Crown Point CLO Ltd.1 | |||
Series 2018-5A Cl. A | |||
$ | 5,700 | 3.243% (3 Month USD Libor + 0.940) 07/17/20282,3 | $5,685 |
Dryden XXV Senior Loan Fund | |||
Series 2012-25A Cl. ARR | |||
5,500 | 3.203% (3 Month USD Libor + 0.900) 10/15/20272,3 | 5,496 | |
Evergreen Credit Card Trust | |||
Series 2019-2 Cl. A | |||
6,000 | 1.900%—09/16/20243 | 6,003 | |
First Franklin Mortgage Loan Trust | |||
Series 2006-FF10 Cl. A4 | |||
111 | 2.168% (1 Month USD Libor + 0.150) 07/25/20362 | 111 | |
GSAA Trust | |||
Series 2006-20 Cl. 1A2 | |||
4,304 | 2.198% (1 Month USD Libor + 0.180) 12/25/20462 | 2,157 | |
Series 2007-9 Cl. A1A | |||
1,157 | 6.000%—08/25/2047 | 1,141 | |
3,298 | |||
GSAMP Trust | |||
Series 2007-FM1 Cl. 2A2 | |||
112 | 2.088% (1 Month USD Libor + 0.070) 12/25/20362 | 66 | |
HSI Asset Securitization Corp. Trust | |||
Series 2006-HE2 Cl. 2A3 | |||
5,018 | 2.188% (1 Month USD Libor + 0.170) 12/25/20362 | 1,982 | |
IXIS Real Estate Capital Trust | |||
Series 2005-HE1 Cl. M4 | |||
2,042 | 3.068% (1 Month USD Libor + 1.050) 06/25/20352 | 1,989 | |
JPMorgan Mortgage Acquisition Corp. | |||
Series 2006-HE1 Cl.A4 | |||
2,384 | 2.598% (1 Month USD Libor + 0.290) 01/25/20362 | 2,375 | |
JPMorgan Mortgage Acquisition Trust | |||
Series 2007-HE1 Cl. AF3 | |||
884 | 4.208%—05/25/20354 | 689 | |
LoanCore Ltd. | |||
Series 2018-CRE1 Cl. A | |||
5,200 | 3.158% (1 Month USD Libor + 1.130) 05/15/20282,3 | 5,205 | |
MASTR Asset Backed Securities Trust | |||
Series 2006-HE2 Cl. A4 | |||
5,473 | 2.258% (1 Month USD Libor + 0.240) 06/25/20362 | 3,235 |
5
Harbor Bond Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
ASSET-BACKED SECURITIES—Continued | |||
Principal Amount | Value | ||
Mid-State Trust | |||
Series 2004-1 Cl. A | |||
$ | 956 | 6.005%—08/15/2037 | $1,034 |
Monarch Grove CLO1 | |||
Series 2018-1A Cl. A1 | |||
4,300 | 3.156% (3 Month USD Libor + 0.880) 01/25/20282,3 | 4,284 | |
Morgan Stanley ABS Capital I Inc. Trust | |||
Series 2007-HE1 Cl. A2C | |||
2,114 | 2.168% (1 Month USD Libor + 0.150) 11/25/20362 | 1,479 | |
Morgan Stanley Dean Witter Capital I | |||
Series 2002-HE1 Cl. M1 | |||
398 | 2.918% (1 Month USD Libor + 0.600) 07/25/20322 | 400 | |
Mountain View CLO Ltd.1 | |||
Series 2014-1A Cl. ARR | |||
4,850 | 3.103% (3 Month USD Libor + 0.800) 10/15/20262,3 | 4,848 | |
Navient Student Loan Trust | |||
Series 2017-3A Cl. A1 | |||
560 | 2.318% (1 Month USD Libor + 0.300) 07/26/20662,3 | 560 | |
OneMain Financial Issuance Trust | |||
Series 2017-1A Cl. A1 | |||
5,368 | 2.370%—09/14/20323 | 5,371 | |
Option One Mortgage Loan Trust | |||
Series 2007-6 Cl. 2A4 | |||
4,450 | 2.268% (1 Month USD Libor + 0.250) 07/25/20372 | 3,387 | |
Park Place Securities Inc. | |||
Series 2005-WCW3 Cl. M1 | |||
5,091 | 2.498% (1 Month USD Libor + 0.480) 08/25/20352 | 5,132 | |
People's Financial Realty Mortgage Securities Trust | |||
Series 2006-1 Cl. 1A2 | |||
4,654 | 2.148% (1 Month USD Libor + 0.130) 09/25/20362 | 1,300 | |
RAMP Trust | |||
Series 2004-RS8 Cl. MII1 | |||
362 | 3.166% (1 Month USD Libor + 0.600) 08/25/20342 | 363 | |
Securitized Asset Backed Receivables LLC Trust | |||
Series 2005-FR5 Cl. M1 | |||
8,106 | 2.678% (1 Month USD Libor + 0.440) 08/25/20352 | 5,656 | |
Small Business Administration Participation Certificates | |||
Series 2003-20I Cl. 1 | |||
33 | 5.130%—09/01/2023 | 34 | |
Series 2009-20A Cl. 1 | |||
1,741 | 5.720%—01/01/2029 | 1,905 | |
Series 2008-20H Cl. 1 | |||
3,292 | 6.020%—08/01/2028 | 3,594 | |
Series 2001-20A Cl. 1 | |||
28 | 6.290%—01/01/2021 | 28 | |
5,561 | |||
SoFi Professional Loan Program Trust | |||
Series 2018-A1FX Cl. B | |||
2,585 | 2.640%—08/25/20473 | 2,594 | |
Soundview Home Loan Trust | |||
Series 2006-WF2 Cl. A1 | |||
8 | 2.148% (1 Month USD Libor + 0.130) 12/25/20362 | 8 | |
Specialty Underwriting & Residential Finance Trust | |||
Series 2006-BC4 Cl. A2B | |||
2,977 | 2.128% (1 Month USD Libor + 0.110) 09/25/20372 | 1,503 |
ASSET-BACKED SECURITIES—Continued | |||
Principal Amount | Value | ||
Structured Asset Securities Co. | |||
Series 2007-MN1A Cl. A1 | |||
$ | 20,984 | 2.248% (1 Month USD Libor + 0.230) 01/25/20372,3 | $15,192 |
Telos CLO Ltd.1 | |||
Series 2014 Cl. 6A | |||
5,908 | 3.573% (3 Month USD Libor + 1.270) 01/17/20272,3 | 5,910 | |
TPG Real Estate Finance Trust | |||
Series 2019-Fl3 Cl. A | |||
5,000 | 3.150%—10/15/20343 | 5,013 | |
Tralee CLO V Ltd.1 | |||
Series 2018-5A Cl. A1 | |||
5,900 | 3.388% (3 Month USD Libor + 1.110) 10/20/20282,3 | 5,898 | |
Trillium Credit Card Trust II | |||
Series 2018-1A Cl. A | |||
8,100 | 2.296% (1 Month USD Libor) 02/27/20232,3 | 8,100 | |
Venture XVI CLO Ltd.1 | |||
Series 2014-16A Cl. ARR | |||
5,400 | 3.153% (3 Month USD Libor + 0.850) 01/15/20282,3 | 5,386 | |
Westlake Automobile Receivables Trust | |||
Series 2018-A2A Cl. 3A | |||
3,584 | 2.980%—01/18/20223 | 3,593 | |
TOTAL ASSET-BACKED SECURITIES | |||
(Cost $161,995) | 165,642 | ||
BANK LOAN OBLIGATIONS—0.3% | |||
(Cost $5,200) | |||
Toyota Motor Credit Corp. | |||
Revolver Term Out Loan | |||
5,200 | 2.680% (3 Month USD Libor + 0.580) 09/28/20202 | 5,198x | |
COLLATERALIZED MORTGAGE OBLIGATIONS—7.7% | |||
Adjustable Rate Mortgage Trust | |||
Series 2006-3 Cl. 4A2 | |||
2,760 | 2.138% (1 Month USD Libor + 0.120) 08/25/20362 | 1,528 | |
Alba plc | |||
Series 2007-1 Cl. A3 | |||
GBP | 2,525 | 0.953% (3 Month GBP Libor + 0.170) 03/17/20392 | 3,101 |
Banc of America Funding Corp. | |||
Series 2007-C Cl. 7A5 | |||
$ | 851 | 2.344% (1 Month USD Libor + 0.300) 05/20/20472 | 844 |
BCAP LLC Trust | |||
Series 2007-AA2 Cl. 12A1 | |||
5,856 | 2.228% (1 Month USD Libor + 0.210) 05/25/20472 | 5,510 | |
Series 2011-RR5 Cl. 12A1 | |||
459 | 4.882%—03/26/20373,4 | 465 | |
Series 2011-RR4 Cl. 8A1 | |||
2,046 | 5.250%—02/26/20362,3 | 1,500 | |
7,475 | |||
Bear Stearns Adjustable Rate Mortgage Trust | |||
Series 2000-2 Cl. A1 | |||
16 | 2.781% (Cost of Funds for the 11th District of San Francisco) 11/25/20302 | 16 | |
Series 2004-10 Cl. 12A3 | |||
27 | 4.222%—01/25/20352 | 28 | |
Series 2006-4 Cl. 1A1 | |||
310 | 4.667%—10/25/20362 | 306 |
6
Harbor Bond Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
COLLATERALIZED MORTGAGE OBLIGATIONS—Continued | |||
Principal Amount | Value | ||
Series 2004-1 Cl. 12A5 | |||
$ | 300 | 4.686%—04/25/20342 | $310 |
660 | |||
Bear Stearns Alt-A Trust | |||
Series 2005-4 Cl. 1A1 | |||
103 | 2.458% (1 Month USD Libor + 0.220) 07/25/20352 | 103 | |
Chase Mortgage Finance Corp. | |||
Series 2006-A1 Cl. 4A1 | |||
1,445 | 4.049%—09/25/20362 | 1,366 | |
Countrywide Alternative Loan Trust | |||
Series 2006-6BC Cl. 1A2 | |||
3,134 | 2.418% (1 Month USD Libor + 0.400) 05/25/20362 | 2,656 | |
Series 2005-84 Cl. 1A1 | |||
2,403 | 3.675%—02/25/20362 | 2,115 | |
Series 2005-20CB Cl. 2A5 | |||
2,080 | 5.500%—07/25/2035 | 1,888 | |
Series 2006-36T2 Cl. 1A4 | |||
1,194 | 5.750%—12/25/2036 | 798 | |
7,457 | |||
Countrywide Home Loan Mortgage Pass Through Trust | |||
Series 2007-HY5 Cl. 1A1 | |||
769 | 4.409%—09/25/20472 | 765 | |
Credit Suisse First Boston Mortgage Securities Corp. | |||
Series 2006-C2 Cl. A3 | |||
330 | 6.000%—11/25/2035 | 281 | |
DC Office Trust | |||
Series 2019-MTC Cl. A | |||
4,900 | 2.965%—09/15/20453 | 5,094 | |
Deutsche Alt-A Securities Inc. Mortgage Loan Trust | |||
Series 2007-AR2 Cl. A1 | |||
4,721 | 2.168% (1 Month USD Libor + 0.150) 03/25/20372 | 4,538 | |
DSLA Mortgage Loan Trust | |||
Series 2006-AR1 Cl. 1A1A | |||
2,029 | 3.366% (Fed 12 Month Treasury Average Constant Maturity Treasury + 0.920) 03/19/20462 | 1,907 | |
Eurohome UK Mortgages plc | |||
Series 2007-1 Cl. A | |||
GBP | 2,050 | 0.935% (3 Month GBP Libor + 0.150) 06/15/20442 | 2,545 |
First Horizon Asset Securities Inc. | |||
Series 2005-AR6 Cl. 4A1 | |||
$ | 1,072 | 4.550%—02/25/20362 | 1,055 |
First Nationwide Trust | |||
Series 2001-3 Cl. 1A1 | |||
— | 6.750%—08/21/2031 | — | |
GPT Mortgage Trust | |||
Series 2018-GPP Cl. A | |||
426 | 3.040% (1 Month USD Libor + 1.013) 06/15/20352,3 | 426 | |
GS Mortgage Securities Corp. Trust | |||
Series 2016-RENT Cl. A | |||
6,900 | 3.203%—02/10/20293 | 6,958 | |
GSMPS Mortgage Loan Trust | |||
Series 2006-RP2 Cl. 1AF1 | |||
4,838 | 2.418% (1 Month USD Libor + 0.400) 04/25/20362,3 | 4,139 | |
GSR Mortgage Loan Trust | |||
Series 2005-AR7 Cl. 6A1 | |||
238 | 4.287%—11/25/20352 | 246 |
COLLATERALIZED MORTGAGE OBLIGATIONS—Continued | |||
Principal Amount | Value | ||
Series 2005-AR3 Cl. 3A1 | |||
$ | 474 | 4.600%—05/25/20352 | $427 |
673 | |||
HarborView Mortgage Loan Trust | |||
Series 2004-8 Cl. 2A3 | |||
622 | 2.877% (1 Month USD Libor + 0.410) 11/19/20342 | 590 | |
Hawksmoor Mortgages | |||
Series 2019-1A Cl. A | |||
GBP | 18,800 | 1.758% (Sonia Interest Rate Benchmark + 1.050) 05/25/20532,3 | 24,374 |
HomeBanc Mortgage Trust | |||
Series 2006-H2 Cl. A2 | |||
$ | 2,854 | 2.198% (1 Month USD Libor + 0.180) 12/25/20362 | 2,846 |
IndyMac ARM Trust | |||
Series 2001-H2 Cl. A2 | |||
4 | 3.671%—01/25/20322 | 4 | |
IndyMac IMSC Mortgage Loan Trust | |||
Series 2007-F2 Cl. 2A1 | |||
2,968 | 6.500%—07/25/2037 | 1,745 | |
IndyMac INDX Mortgage Loan Trust | |||
Series 2007-AR13 Cl. 4A1 | |||
13,445 | 3.554%—07/25/20372 | 11,366 | |
Series 2005-AR31 Cl. 1A1 | |||
1,078 | 3.927%—01/25/20362 | 1,013 | |
12,379 | |||
JP Morgan Mortgage Trust | |||
Series 2006-A6 Cl. 1A4L | |||
2,054 | 4.120%—10/25/20362 | 1,873 | |
Series 2006-S1 Cl. 3A1 | |||
580 | 5.500%—04/25/2036 | 610 | |
2,483 | |||
JP Morgan Re-REMIC5 | |||
Series 2009-7 Cl. 11A1 | |||
30 | 3.987%—09/27/20362,3 | 30 | |
Mansard Mortgages plc | |||
Series 2007-2X Cl. A1 | |||
GBP | 1,001 | 1.431% (3 Month GBP Libor + 0.650) 12/15/20492 | 1,268 |
Merrill Lynch Alternative Note Asset Trust | |||
Series 2007-F1 Cl. 2A6 | |||
$ | 570 | 6.000%—03/25/2037 | 401 |
Merrill Lynch Mortgage Investors Inc. | |||
Series 2005-3 Cl. 4A | |||
1 | 2.516% (1 Month USD Libor + 0.250) 11/25/20352 | 1 | |
Morgan Stanley Bank of America Merrill Lynch Trust | |||
Series 2015-C22 Cl. ASB | |||
6,000 | 3.040%—04/15/2048 | 6,158 | |
Provident Funding Mortgage Loan Trust | |||
Series 2005-2 Cl. 3A | |||
1,611 | 4.712%—10/25/20352 | 1,644 | |
Residential Accredit Loans Inc. | |||
Series 2007-QS4 Cl. 3A9 | |||
1,914 | 6.000%—03/25/2037 | 1,797 | |
Residential Asset Securitization Trust | |||
Series 2007-A8 Cl. 2A1 | |||
17,895 | 6.250%—08/25/2037 | 7,167 | |
Residential Funding Mortgage Securities I | |||
Series 2007-SA1 Cl. 2A2 | |||
244 | 4.675%—02/25/20372 | 207 | |
Series 2006-SA1 Cl. 2A1 | |||
290 | 5.108%—02/25/20362 | 267 | |
474 |
7
Harbor Bond Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
COLLATERALIZED MORTGAGE OBLIGATIONS—Continued | |||
Principal Amount | Value | ||
RMAC Securities plc | |||
Series 2006-NS4X Cl. A3A | |||
GBP | 1,659 | 0.950% (3 Month GBP Libor + 0.170) 06/12/20442 | $2,030 |
Structured Adjustable Rate Mortgage Loan Trust | |||
Series 2007-1 Cl. 1A1 | |||
$ | 1,801 | 2.168% (1 Month USD Libor + 0.150) 02/25/20372 | 1,769 |
Series 2005-21A Cl. 3A1 | |||
428 | 4.396%—04/25/20352 | 431 | |
2,200 | |||
Structured Asset Mortgage Investments Inc. | |||
Series 2005-AR5 Cl. A2 | |||
384 | 2.307% (1 Month USD Libor + 0.250) 07/19/20352 | 382 | |
Suntrust Adjustable Rate Mortgage Loan Trust | |||
Series 2007-S1 Cl. 1A | |||
579 | 4.798%—01/25/20372 | 547 | |
Towd Point Mortgage Funding | |||
Series 2019-A13A Cl. A1 | |||
GBP | 17,300 | 0.900%—07/20/20453 | 22,255 |
Series 2019-GR4A Cl. A1 | |||
6,667 | 1.798% (3 Month GBP Libor + 1.025) 10/20/20512,3 | 8,660 | |
30,915 | |||
Washington Mutual Mortgage Pass Through Certificates Trust | |||
Series 2005-AR13 Cl. A1A1 | |||
$ | 188 | 2.308% (1 Month USD Libor + 0.290) 10/25/20452 | 187 |
Series 2005-AR6 Cl. 2A1A | |||
387 | 2.478% (1 Month USD Libor + 0.230) 04/25/20452 | 387 | |
Series 2006-AR11 Cl. 3A1A | |||
1,847 | 3.366% (Fed 12 Month Treasury Average Constant Maturity Treasury + 0.920) 09/25/20462 | 1,793 | |
2,367 | |||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS | |||
(Cost $146,278) | 152,717 | ||
CORPORATE BONDS & NOTES—51.2% | |||
AEROSPACE & DEFENSE—0.3% | |||
Rockwell Collins Inc. | |||
5,500 | 2.800%—03/15/2022 | 5,606 | |
AIRLINES—0.4% | |||
Air Canada 2017-1 Class Aa Pass-Through Trust | |||
3,985 | 3.300%—07/15/20313 | 4,122 | |
Delta Air Lines Inc. | |||
3,000 | 3.400%—04/19/2021 | 3,046 | |
700 | 3.625%—03/15/2022 | 718 | |
3,764 | |||
7,886 | |||
AUTO COMPONENTS—0.3% | |||
ZF North America Capital Inc. | |||
5,800 | 4.500%—04/29/20223 | 5,949 | |
AUTOMOBILES—3.9% | |||
BMW Finance NV | |||
4,900 | 2.250%—08/12/20223 | 4,921 | |
BMW US Capital LLC | |||
1,000 | 1.850%—09/15/20213 | 999 | |
Daimler Finance North America LLC | |||
5,900 | 2.550%—08/15/20223 | 5,956 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
AUTOMOBILES—Continued | |||
Ford Motor Credit Co. LLC | |||
$ | 3,400 | 2.343%—11/02/2020 | $3,392 |
3,400 | 2.425%—06/12/2020 | 3,396 | |
1,300 | 2.459%—03/27/2020 | 1,300 | |
1,550 | 3.200%—01/15/2021 | 1,557 | |
10,050 | 8.125%—01/15/2020 | 10,158 | |
19,803 | |||
General Motors Financial Co. Inc. | |||
6,600 | 2.450%—11/06/2020 | 6,611 | |
7,700 | 2.779% (3 Month USD Libor + 0.540) 11/06/20202 | 7,681 | |
2,800 | 3.150%—01/15/2020 | 2,804 | |
2,600 | 3.200%—07/13/2020 | 2,617 | |
19,713 | |||
Nissan Motor Acceptance Corp. | |||
2,600 | 2.550%—03/08/20213 | 2,608 | |
Volkswagen Bank GmbH MTN6 | |||
EUR | 2,000 | 0.102% (3 Month EUR Libor + 1.550) 06/15/20212 | 2,232 |
2,500 | 1.875%—01/31/2024 | 2,955 | |
5,187 | |||
Volkswagen Group of America Finance LLC | |||
$ | 4,800 | 2.946% (3 Month USD Libor + 0.770) 11/13/20202,3 | 4,822 |
4,800 | 4.250%—11/13/20233 | 5,147 | |
4,800 | 4.750%—11/13/20283 | 5,448 | |
15,417 | |||
Volkswagen International Finance NV | |||
EUR | 1,800 | 1.144% (3 Month EUR Libor + 1.550) 11/16/20242 | 2,066 |
76,670 | |||
BANKS—14.4% | |||
Australia & New Zealand Banking Group Ltd. | |||
$ | 5,200 | 3.300%—05/17/2021 | 5,311 |
5,100 | 3.312% (3 Month USD Libor + 0.460) 05/17/20212,3 | 5,121 | |
10,432 | |||
Banco Bilbao Vizcaya Argentaria SA | |||
EUR | 4,000 | 6.750% (EUR 5 Year Swaps Curve + 6.604) 02/18/20202,7 | 4,529 |
Banco Espirito Santo SA MTN6 | |||
3,500 | 0.000%—01/15/2049* | 1,097 | |
Bank of America Corp. MTN6 | |||
$ | 1,300 | 2.151%—11/09/2020 | 1,300 |
4,960 | 2.917% (3 Month USD Libor + 0.790) 03/05/20242 | 4,995 | |
6,295 | |||
Banque Federative du Credit Mutuel SA | |||
6,300 | 3.750%—07/20/20233 | 6,639 | |
Barclays Bank plc | |||
3,700 | 4.610% (3 Month USD Libor + 1.400) 02/15/20232 | 3,867 | |
Barclays MTN6 | |||
GBP | 4,000 | 3.250%—02/12/2027 | 5,531 |
Barclays plc | |||
$ | 4,200 | 3.684%—01/10/2023 | 4,298 |
6,300 | 4.291% (3 Month USD Libor + 2.110) 08/10/20212 | 6,437 | |
EUR | 2,000 | 8.000% (EUR 5 Year Swaps Curve + 6.750) 12/15/20202,7 | 2,393 |
13,128 | |||
BBVA Bancomer SA/Texas | |||
$ | 289 | 6.500%—03/10/2021 | 304 |
8
Harbor Bond Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
BANKS—Continued | |||
BBVA USA | |||
$ | 2,900 | 2.500%—08/27/2024 | $2,906 |
Citibank NA | |||
5,400 | 3.400%—07/23/2021 | 5,537 | |
Citigroup Inc. | |||
3,000 | 2.350%—08/02/2021 | 3,019 | |
6,800 | 2.750%—04/25/2022 | 6,906 | |
3,900 | 2.876% (3 Month USD Libor + 0.950) 07/24/20232 | 3,966 | |
4,000 | 3.568% (3 Month USD Libor + 1.430) 09/01/20232 | 4,085 | |
17,976 | |||
Deutsche Bank AG/New York | |||
5,500 | 2.700%—07/13/2020 | 5,503 | |
3,800 | 3.950%—02/27/2023 | 3,890 | |
3,200 | 4.250%—10/14/2021 | 3,282 | |
12,675 | |||
HSBC Bank plc | |||
4,300 | 4.125%—08/12/20203 | 4,374 | |
ING Bank NV | |||
5,600 | 2.450%—03/16/20203 | 5,611 | |
Intesa Sanpaolo SpA | |||
5,000 | 4.000%—09/23/20293 | 5,075 | |
JPMorgan Chase & Co. | |||
5,500 | 2.400%—06/07/2021 | 5,544 | |
5,700 | 3.514% (3 Month USD Libor + 0.610) 06/18/20222 | 5,834 | |
11,378 | |||
JPMorgan Chase Bank NA | |||
10,000 | 2.607% (3 Month USD Libor + 0.340) 04/26/20212 | 10,007 | |
4,500 | 3.086% (3 Month USD Libor + 0.350) 04/26/20212 | 4,524 | |
14,531 | |||
Lloyds Bank plc | |||
5,900 | 2.250%—08/14/2022 | 5,934 | |
4,900 | 3.300%—05/07/2021 | 4,990 | |
10,924 | |||
Lloyds Banking Group plc | |||
6,000 | 2.858%—03/17/20232 | 6,066 | |
5,300 | 4.450%—05/08/2025 | 5,798 | |
11,864 | |||
Mitsubishi UFJ Financial Group Inc. | |||
4,800 | 2.623%—07/18/2022 | 4,861 | |
3,900 | 3.455%—03/02/2023 | 4,053 | |
8,914 | |||
Mitsubishi UFJ Lease & Finance Co. Ltd. MTN6 | |||
3,000 | 2.250%—09/07/2021 | 2,996 | |
Mizuho Financial Group Inc. | |||
4,900 | 2.555%—09/13/20252 | 4,900 | |
Nordea Bank Abp | |||
2,500 | 3.750%—08/30/20233 | 2,625 | |
Oversea-Chinese Banking Corp. Ltd. | |||
4,200 | 2.574% (3 Month USD Libor + 0.450) 05/17/20212,3 | 4,208 | |
Royal Bank of Canada | |||
4,300 | 2.300%—03/22/2021 | 4,330 | |
Royal Bank of Scotland Group plc | |||
700 | 3.628% (3 Month USD Libor + 1.470) 05/15/20232 | 706 | |
3,800 | 4.892% (3 Month USD Libor + 1.754) 05/18/20292 | 4,274 | |
2,500 | 8.625% (USD Swap Semi 30/360 5Y + 7.598) 08/15/20212,7 | 2,700 | |
7,680 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
BANKS—Continued | |||
Royal Bank of Scotland Group plc MTN6 | |||
EUR | 600 | 2.000% (3 Month EUR Libor + 1.737) 03/04/20252 | $709 |
Skandinaviska Enskilda Banken AB | |||
$ | 5,300 | 2.554% (3 Month USD Libor + 0.430) 05/17/20212,3 | 5,317 |
5,300 | 3.250%—05/17/20213 | 5,402 | |
10,719 | |||
Societe Generale SA MTN6 | |||
4,900 | 4.250%—09/14/20233 | 5,208 | |
Standard Chartered plc | |||
5,000 | 2.744%—09/10/20222,3 | 5,025 | |
5,000 | 4.247% (3 Month USD Libor + 1.150) 01/20/20232,3 | 5,187 | |
10,212 | |||
Sumitomo Mitsui Financial Group Inc. | |||
6,900 | 3.782% (3 Month USD Libor + 1.680) 03/09/20212 | 7,029 | |
Svenska Handelsbanken AB MTN6 | |||
5,500 | 3.350%—05/24/2021 | 5,623 | |
Synchrony Bank | |||
5,500 | 3.650%—05/24/2021 | 5,612 | |
Toronto-Dominion Bank | |||
5,900 | 3.350%—10/22/20213 | 6,077 | |
UBS AG/London | |||
3,400 | 2.450%—12/01/20203 | 3,417 | |
2,700 | 2.618% (3 Month USD Libor + 0.480) 12/01/20202,3 | 2,708 | |
6,125 | |||
UniCredit SpA MTN6 | |||
10,600 | 7.830%—12/04/20233 | 12,505 | |
US Bank NA | |||
6,300 | 3.150%—04/26/2021 | 6,427 | |
Wells Fargo & Co. | |||
3,100 | 3.486% (3 Month USD Libor + 1.230) 10/31/20232 | 3,156 | |
4,408 | 5.889% (3 Month USD Libor + 3.770) 09/15/20192,7 | 4,468 | |
7,624 | |||
Wells Fargo & Co. MTN6 | |||
5,600 | 3.550%—09/29/2025 | 5,938 | |
Wells Fargo Bank NA | |||
5,900 | 3.625%—10/22/2021 | 6,085 | |
286,219 | |||
BEVERAGES—0.7% | |||
Anheuser-Busch InBev Finance Inc. | |||
4,700 | 3.700%—02/01/2024 | 5,018 | |
Bacardi Ltd. | |||
4,700 | 4.450%—05/15/20253 | 5,062 | |
Pernod Ricard SA | |||
4,200 | 4.450%—01/15/20223 | 4,414 | |
14,494 | |||
BUILDING PRODUCTS—0.6% | |||
CRH America Finance Inc. | |||
3,200 | 3.950%—04/04/20283 | 3,455 | |
3,200 | 4.500%—04/04/20483 | 3,487 | |
6,942 | |||
Fortune Brands Home & Security Inc. | |||
4,700 | 3.250%—09/15/2029 | 4,777 |
9
Harbor Bond Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
BUILDING PRODUCTS—Continued | |||
Owens Corning | |||
$ | 300 | 4.200%—12/01/2024 | $316 |
12,035 | |||
CAPITAL MARKETS—4.3% | |||
BGC Partners Inc. | |||
6,300 | 5.375%—07/24/2023 | 6,742 | |
BM & FBovespa SA | |||
1,300 | 5.500%—07/16/2020 | 1,329 | |
Credit Agricole SA/London MTN6 | |||
4,900 | 3.750%—04/24/20233 | 5,126 | |
Credit Suisse Group AG | |||
5,100 | 2.997% (3 Month USD Libor + 1.200) 12/14/20232,3 | 5,172 | |
Credit Suisse Group Funding Guernsey Ltd. | |||
8,900 | 3.750%—03/26/2025 | 9,399 | |
4,845 | 3.800%—09/15/2022 | 5,052 | |
14,451 | |||
Deutsche Bank AG/New York | |||
6,000 | 3.150%—01/22/2021 | 6,026 | |
3,500 | 3.273% (3 Month USD Libor + 0.970) 07/13/20202 | 3,497 | |
9,523 | |||
E*Trade Financial Corp. | |||
5,100 | 2.950%—08/24/2022 | 5,198 | |
Goldman Sachs Group Inc. | |||
7,700 | 3.036% (3 Month USD Libor + 0.780) 10/31/20222 | 7,739 | |
5,500 | 3.200%—02/23/2023 | 5,674 | |
800 | 5.750%—01/24/2022 | 863 | |
14,276 | |||
Goldman Sachs Group Inc. MTN6 | |||
5,000 | 4.000%—03/03/2024 | 5,344 | |
Moody's Corp. | |||
300 | 2.625%—01/15/2023 | 305 | |
462 | 4.500%—09/01/2022 | 491 | |
796 | |||
Morgan Stanley | |||
5,200 | 3.458% (3 Month USD Libor + 1.180) 01/20/20222 | 5,255 | |
Platin 1426 GmbH | |||
EUR | 2,700 | 6.875%—06/15/20233 | 2,920 |
UBS Group Funding Jersey Ltd. | |||
$ | 8,500 | 3.000%—04/15/20213 | 8,628 |
84,760 | |||
CHEMICALS—0.2% | |||
Sasol Financing USA LLC | |||
3,900 | 5.875%—03/27/2024 | 4,214 | |
CONSUMER FINANCE—2.7% | |||
Ally Financial Inc. | |||
200 | 4.125%—03/30/2020 | 202 | |
200 | 7.500%—09/15/2020 | 209 | |
411 | |||
American Express Co. | |||
5,200 | 3.375%—05/17/2021 | 5,312 | |
6,400 | 3.400%—02/27/2023 | 6,679 | |
5,200 | 3.700%—08/03/2023 | 5,505 | |
17,496 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
CONSUMER FINANCE—Continued | |||
Capital One Financial Corp. | |||
$ | 5,400 | 2.400%—10/30/2020 | $5,424 |
5,500 | 2.716% (3 Month USD Libor + 0.450) 10/30/20202 | 5,511 | |
10,935 | |||
Daimler Finance North America LLC | |||
4,861 | 2.200%—10/30/20213 | 4,878 | |
5,300 | 3.350%—05/04/20213 | 5,403 | |
5,300 | 3.700%—05/04/20233 | 5,540 | |
15,821 | |||
Harley-Davidson Financial Services Inc. | |||
5,300 | 3.550%—05/21/20213 | 5,379 | |
Navient Corp. MTN6 | |||
100 | 8.000%—03/25/2020 | 102 | |
Springleaf Finance Corp. | |||
2,800 | 6.875%—03/15/2025 | 3,178 | |
53,322 | |||
DIVERSIFIED FINANCIAL SERVICES—2.7% | |||
Avolon Holdings Funding Ltd. | |||
2,904 | 5.125%—10/01/20233 | 3,141 | |
AXA Equitable Holdings Inc. | |||
3,200 | 3.900%—04/20/2023 | 3,357 | |
BAT Capital Corp. | |||
1,500 | 2.765% (3 Month USD Libor + 0.590) 08/14/20202 | 1,503 | |
BAT International Finance plc | |||
3,600 | 3.250%—06/07/20223 | 3,679 | |
Cantor Fitzgerald LP | |||
5,400 | 6.500%—06/17/20223 | 5,830 | |
Depository Trust & Clearing Corp. | |||
3,000 | 4.875% (3 Month USD Libor + 3.167) 06/15/20202,3,7 | 3,027 | |
GE Capital UK Funding Unlimited Co. MTN6 | |||
GBP | 3,730 | 5.875%—11/04/2020 | 5,037 |
Guardian Life Global Funding | |||
$ | 4,000 | 3.400%—04/25/20233 | 4,171 |
Imperial Brands Finance plc | |||
2,100 | 3.500%—02/11/20233 | 2,153 | |
5,600 | 3.875%—07/26/20293 | 5,620 | |
7,773 | |||
Reckitt Benckiser Treasury Services plc | |||
3,400 | 2.375%—06/24/20223 | 3,425 | |
Rio Oil Finance Trust | |||
1,442 | 9.250%—07/06/20243 | 1,611 | |
5,882 | 9.750%—01/06/20273 | 6,823 | |
8,434 | |||
Syngenta Finance NV | |||
4,500 | 3.933%—04/23/20213 | 4,577 | |
53,954 | |||
DIVERSIFIED TELECOMMUNICATION SERVICES—2.3% | |||
Altice Financing SA | |||
2,200 | 6.625%—02/15/20233 | 2,265 | |
Altice France SA | |||
1,000 | 7.375%—05/01/20263 | 1,073 | |
AT&T Inc. | |||
3,500 | 2.888% (3 Month USD Libor + 1.180) 06/12/20242 | 3,563 | |
6,200 | 2.953% (3 Month USD Libor + 0.750) 06/01/20212 | 6,229 | |
5,200 | 3.000% (3 Month USD Libor + 0.650) 01/15/20202 | 5,207 | |
5,000 | 3.000%—06/30/2022 | 5,114 | |
20,113 |
10
Harbor Bond Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
DIVERSIFIED TELECOMMUNICATION SERVICES—Continued | |||
British Telecommunications plc | |||
$ | 1,300 | 4.500%—12/04/2023 | $1,405 |
Deutsche Telekom International Finance BV | |||
6,080 | 2.820%—01/19/20223 | 6,168 | |
Telefonica Emisiones SAU | |||
1,800 | 5.134%—04/27/2020 | 1,826 | |
Verizon Communications Inc. | |||
12,695 | 3.376%—02/15/2025 | 13,484 | |
46,334 | |||
ELECTRIC UTILITIES—2.3% | |||
American Electric Power Co. Inc. | |||
1,000 | 2.150%—11/13/2020 | 1,002 | |
Duke Energy Corp. | |||
5,300 | 2.675% (3 Month USD Libor + 0.500) 05/14/20212,3 | 5,320 | |
4,536 | 3.750%—04/15/2024 | 4,823 | |
10,143 | |||
Evergy Inc. | |||
5,000 | 2.450%—09/15/2024 | 5,036 | |
FirstEnergy Corp. | |||
1,100 | 2.850%—07/15/2022 | 1,121 | |
Greenko Solar Mauritius Ltd. | |||
4,900 | 5.550%—01/29/20253 | 4,906 | |
Interstate Power & Light Co. | |||
4,800 | 3.250%—12/01/2024 | 5,043 | |
Nextera Energy Capital Holdings Inc. | |||
5,000 | 1.950%—09/01/2022 | 5,000 | |
1,624 | 2.800%—01/15/2023 | 1,657 | |
4,800 | 3.200%—02/25/2022 | 4,926 | |
11,583 | |||
Sempra Energy | |||
5,200 | 2.569% (3 Month USD Libor + 0.450) 03/15/20212 | 5,187 | |
Virginia Electric & Power Co. | |||
1,100 | 2.950%—01/15/2022 | 1,122 | |
45,143 | |||
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—0.1% | |||
Arrow Electronics Inc. | |||
2,100 | 3.500%—04/01/2022 | 2,142 | |
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—3.5% | |||
Alexandria Real Estate Equities Inc. | |||
2,100 | 2.750%—12/15/2029 | 2,089 | |
American Tower Corp. | |||
5,000 | 2.750%—01/15/2027 | 5,027 | |
2,099 | 3.300%—02/15/2021 | 2,131 | |
7,158 | |||
AvalonBay Communities Inc. MTN6 | |||
3,000 | 3.450%—06/01/2025 | 3,197 | |
Boston Properties LP | |||
4,905 | 2.750%—10/01/2026 | 4,984 | |
Brandywine Oper Partners Co. | |||
5,000 | 4.100%—10/01/2024 | 5,286 | |
CBL & Associates LP | |||
2,700 | 4.600%—10/15/2024 | 1,728 | |
6,600 | 5.950%—12/15/2026 | 4,422 | |
6,150 | |||
Crown Castle International Corp. | |||
4,000 | 3.700%—06/15/2026 | 4,245 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—Continued | |||
Digital Realty Trust LP | |||
$ | 5,500 | 4.450%—07/15/2028 | $6,095 |
EPR Properties | |||
1,900 | 4.500%—06/01/2027 | 2,037 | |
600 | 4.950%—04/15/2028 | 659 | |
2,696 | |||
GLP Capital LP | |||
4,500 | 4.000%—01/15/2030 | 4,574 | |
OMEGA Healthcare Investors Inc. | |||
2,300 | 4.375%—08/01/2023 | 2,444 | |
Physicians Realty LP | |||
1,400 | 3.950%—01/15/2028 | 1,475 | |
Service Properties Trust | |||
4,800 | 4.350%—10/01/2024 | 4,913 | |
Spirit Realty LP | |||
4,700 | 3.400%—01/15/2030 | 4,744 | |
Washington Prime Group LP | |||
5,800 | 6.450%—08/15/2024 | 5,590 | |
Welltower Inc. | |||
4,600 | 3.100%—01/15/2030 | 4,665 | |
70,305 | |||
FOOD & STAPLES RETAILING—0.1% | |||
CVS Pass-Through Trust | |||
520 | 6.943%—01/10/2030 | 614 | |
Viterra Inc. | |||
200 | 5.950%—08/01/20203 | 205 | |
Walgreens Boots Alliance Inc. | |||
1,600 | 3.300%—11/18/2021 | 1,636 | |
2,455 | |||
FOOD PRODUCTS—0.6% | |||
Kraft Heinz Foods Co. | |||
400 | 2.751% (3 Month USD Libor + 0.570) 02/10/20212 | 400 | |
McCormick & Co. Inc. | |||
4,400 | 2.700%—08/15/2022 | 4,479 | |
Mondelez International Inc. | |||
5,000 | 3.000%—05/07/2020 | 5,026 | |
Tyson Foods Inc. | |||
1,100 | 2.250%—08/23/2021 | 1,106 | |
11,011 | |||
HEALTH CARE EQUIPMENT & SUPPLIES—0.2% | |||
Zimmer Biomet Holdings Inc. | |||
4,900 | 2.700%—04/01/2020 | 4,910 | |
HEALTH CARE PROVIDERS & SERVICES—0.6% | |||
Centene Corp. | |||
500 | 5.375%—06/01/20263 | 530 | |
CVS Health Corp. | |||
1,073 | 2.800%—07/20/2020 | 1,078 | |
5,800 | 3.700%—03/09/2023 | 6,052 | |
7,130 | |||
HCA Inc. | |||
4,000 | 5.375%—09/01/2026 | 4,370 | |
100 | 5.875%—02/01/2029 | 114 | |
4,484 | |||
12,144 |
11
Harbor Bond Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
HOTELS, RESTAURANTS & LEISURE—0.7% | |||
Marriott International | |||
$ | 3,900 | 2.125%—10/03/2022 | $3,911 |
Wynn Las Vegas LLC / Wynn Las Vegas Capital Corp. | |||
5,200 | 4.250%—05/30/20233 | 5,402 | |
4,800 | 5.500%—03/01/20253 | 5,112 | |
10,514 | |||
14,425 | |||
INSURANCE—1.2% | |||
AIA Group Ltd. | |||
5,900 | 2.676% (3 Month USD Libor + 0.520) 09/20/20212,3 | 5,897 | |
AIG Global Funding | |||
6,400 | 3.350%—06/25/20213 | 6,537 | |
Ambac LSNI LLC | |||
887 | 7.104% (3 Month USD Libor + 5.000) 02/12/20232,3 | 896 | |
Jackson National Life Global Funding | |||
4,800 | 2.375%—09/15/20223 | 4,828 | |
6,300 | 3.300%—06/11/20213 | 6,438 | |
11,266 | |||
24,596 | |||
IT SERVICES—0.3% | |||
Paypal Holdings Inc. | |||
5,000 | 2.850%—10/01/2029 | 5,026 | |
MACHINERY—0.4% | |||
CNH Industrial Capital LLC | |||
500 | 3.875%—10/15/2021 | 515 | |
2,200 | 4.375%—11/06/2020 | 2,250 | |
2,765 | |||
John Deere Capital Corp. MTN6 | |||
5,600 | 2.652% (3 Month USD Libor + 0.550) 06/07/20232 | 5,615 | |
8,380 | |||
MEDIA—0.7% | |||
Charter Communications Operating LLC | |||
1,800 | 3.579%—07/23/2020 | 1,815 | |
7,600 | 4.464%—07/23/2022 | 8,003 | |
9,818 | |||
COX Communications Inc. | |||
4,700 | 3.250%—12/15/20223 | 4,854 | |
14,672 | |||
MORTGAGE REAL ESTATE INVESTMENT TRUSTS (REITs)—0.5% | |||
ERP Operating LP | |||
4,100 | 3.375%—06/01/2025 | 4,354 | |
Simon Property Group LP | |||
6,000 | 2.500%—09/01/2020 | 6,023 | |
10,377 | |||
OIL, GAS & CONSUMABLE FUELS—1.2% | |||
Enbridge Inc. | |||
2,900 | 2.738% (3 Month USD Libor + 0.400) 01/10/20202 | 2,902 | |
Energy Transfer Partners LP | |||
1,100 | 4.150%—10/01/2020 | 1,116 | |
Equities Midstream Partners LP | |||
1,550 | 4.750%—07/15/2023 | 1,539 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
OIL, GAS & CONSUMABLE FUELS—Continued | |||
MPLX LP | |||
$ | 3,300 | 4.900%—04/15/2058 | $3,279 |
Occidental Petroleum Corp. | |||
3,900 | 2.900%—08/15/2024 | 3,935 | |
Odebrecht Drilling Norbe VIII/IX Ltd. | |||
1,123 | 6.350%—12/01/2021 | 1,120 | |
3,293 | 7.350%—12/01/2026 | 1,913 | |
8 | 7.350%—12/01/20263 | 5 | |
3,038 | |||
Odebrecht Offshore Drilling Finance Ltd. | |||
789 | 6.720%—12/01/2022 | 778 | |
3,364 | 7.720%—12/01/2026 | 848 | |
1,626 | |||
Odebrecht Oil & Gas Finance Ltd. | |||
2,183 | 0.000%—09/12/20193,7,8 | 22 | |
Petroleos Mexicanos | |||
2,400 | 6.840%—01/23/20303 | 2,565 | |
Rio Oil Finance Trust | |||
2,196 | 9.250%—07/06/2024 | 2,454 | |
Southern California Gas Co. | |||
900 | 3.200%—06/15/2025 | 939 | |
23,415 | |||
PHARMACEUTICALS—1.8% | |||
Abbvie Inc. | |||
1,000 | 3.200%—11/06/2022 | 1,027 | |
Allergan Funding SCS | |||
6,700 | 3.000%—03/12/2020 | 6,717 | |
2,200 | 3.450%—03/15/2022 | 2,256 | |
8,973 | |||
Bayer US Finance II LLC | |||
6,300 | 3.875%—12/15/20233 | 6,604 | |
2,800 | 4.250%—12/15/20253 | 3,009 | |
9,613 | |||
Mylan NV | |||
EUR | 5,100 | 2.250%—11/22/2024 | 6,060 |
Takeda Pharmaceutical Co. Ltd. | |||
$ | 3,900 | 4.400%—11/26/20233 | 4,212 |
Teva Pharmaceutical Finance Netherlands II BV | |||
EUR | 2,200 | 3.250%—04/15/2022 | 2,433 |
Teva Pharmaceutical Finance Netherlands III BV | |||
$ | 3,000 | 6.750%—03/01/20289 | 2,700 |
35,018 | |||
REAL ESTATE MANAGEMENT & DEVELOPMENT—0.2% | |||
Tesco Property Finance 5 plc | |||
GBP | 2,257 | 5.661%—10/13/2041 | 3,765 |
ROAD & RAIL—0.3% | |||
ERAC USA Finance LLC | |||
$ | 2,600 | 3.300%—10/15/20223 | 2,683 |
Penske Truck Leasing Co. LP | |||
3,800 | 2.700%—03/14/20233 | 3,845 | |
TTX Co. MTN6 | |||
250 | 2.600%—06/15/20203 | 251 | |
6,779 |
12
Harbor Bond Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—0.8% | |||
Broadcom Corp. / Broadcom Cayman Finance Ltd. | |||
$ | 3,800 | 3.000%—01/15/2022 | $3,852 |
3,800 | 3.875%—01/15/2027 | 3,842 | |
7,694 | |||
Broadcom Inc. | |||
4,900 | 3.125%—10/15/20223 | 4,994 | |
NXP BV | |||
700 | 4.125%—06/01/20213 | 720 | |
1,800 | 4.625%—06/15/20223 | 1,892 | |
2,612 | |||
15,300 | |||
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS—0.7% | |||
Dell International LLC | |||
4,000 | 5.450%—06/15/20233 | 4,351 | |
EMC Corp. | |||
3,600 | 2.650%—06/01/2020 | 3,605 | |
Hewlett Packard Enterprise Co. | |||
5,900 | 3.009% (3 Month USD Libor + 0.720) 10/05/20212 | 5,900 | |
13,856 | |||
THRIFTS & MORTGAGE FINANCE—0.3% | |||
Nationwide Building Society | |||
5,300 | 4.363% (3 Month USD Libor + 1.392) 08/01/20242,3 | 5,626 | |
TOBACCO—0.2% | |||
Japan Tobacco Inc. MTN6 | |||
800 | 2.000%—04/13/2021 | 797 | |
Reynolds American Inc. | |||
3,600 | 4.000%—06/12/2022 | 3,755 | |
4,552 | |||
TRADING COMPANIES & DISTRIBUTORS—1.4% | |||
AerCap Ireland Capital DAC / Aercap Global Aviation Trust | |||
2,000 | 3.500%—05/26/2022 | 2,058 | |
5,500 | 4.875%—01/16/2024 | 5,976 | |
8,034 | |||
Air Lease Corp. | |||
2,500 | 3.875%—04/01/2021 | 2,556 | |
Air Lease Corp. MTN6 | |||
3,600 | 4.250%—02/01/2024 | 3,868 | |
Aviation Capital Group LLC | |||
3,900 | 2.875%—01/20/20223 | 3,923 | |
3,300 | 3.875%—05/01/20233 | 3,423 | |
5,300 | 4.125%—08/01/20253 | 5,552 | |
12,898 | |||
International Lease Finance Corp. | |||
837 | 8.250%—12/15/2020 | 894 | |
Mitsubishi Corp. MTN6 | |||
400 | 2.625%—07/14/2022 | 404 | |
28,654 | |||
TRANSPORTATION INFRASTRUCTURE—0.1% | |||
Central Nippon Expressway Co. Ltd. | |||
1,150 | 2.849%—03/03/2022 | 1,166 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
WIRELESS TELECOMMUNICATION SERVICES—0.2% | |||
Sprint Communications Inc. | |||
$ | 800 | 6.000%—11/15/2022 | $848 |
1,400 | 7.000%—08/15/2020 | 1,446 | |
2,294 | |||
Sprint Corp. | |||
1,390 | 7.250%—09/15/2021 | 1,487 | |
3,781 | |||
TOTAL CORPORATE BONDS & NOTES | |||
(Cost $995,238) | 1,018,941 | ||
ESCROW—0.0% | |||
(Cost $15) | |||
Shares | |||
AUTOMOBILES—0.0% | |||
36,000 | General Motors Co. Escrow | —x | |
FOREIGN GOVERNMENT OBLIGATIONS—6.5% | |||
Principal Amount | |||
Argent Letras del Tesoro Bills | |||
ARS | 6,120 | 0.000%—11/28/2019-02/26/20208 | 43 |
Brazil Letras Do Tesouro Nacional | |||
BRL | 189,000 | 0.000%—01/01/2020-04/01/20208 | 46,426 |
Japan Finance Organization For Municipalities MTN6 | |||
$ | 6,800 | 2.625%—04/20/20223 | 6,911 |
Japan Government Twenty Year Bond | |||
JPY | 760,000 | 0.300%—06/20/2039 | 7,143 |
Japan International Cooperation Agency | |||
$ | 6,900 | 2.750%—04/27/2027 | 7,187 |
Province of Ontario Canada | |||
CAD | 5,600 | 3.150%—06/02/2022 | 4,406 |
Province of Quebec Canada | |||
3,800 | 3.500%—12/01/2022 | 3,039 | |
13,900 | 4.250%—12/01/2021 | 11,106 | |
14,145 | |||
Provincia de Buenos Aires/Government Bonds | |||
ARS | 310 | 56.175%—04/12/20252,3 | 2 |
Qatar Government International Bond | |||
$ | 5,500 | 3.375%—03/14/2024 | 5,760 |
Spain Government Bond | |||
EUR | 9,600 | 1.400%—07/30/20283 | 11,876 |
5,400 | 1.450%—04/30/20293 | 6,724 | |
3,300 | 1.850%—07/30/20353 | 4,342 | |
22,942 | |||
Spain Government Bond MTN | |||
12,700 | 0.600%—10/31/20293 | 14,673 | |
TOTAL FOREIGN GOVERNMENT OBLIGATIONS | |||
(Cost $133,672) | 129,638 | ||
13
Harbor Bond Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
MORTGAGE PASS-THROUGH—54.0% | |||
Principal Amount | Value | ||
Bancorp Commercial Mortgage Trust | |||
Series 2018-CRE4 Cl. A | |||
$ | 4,507 | 2.928% (1 Month USD Libor + 0.900) 09/15/20352,3 | $4,509 |
Federal Home Loan Mortgage Corp. | |||
5,900 | 2.700%—08/01/2023 | 5,956 | |
13,510 | 4.000%—12/01/2047-01/01/2049 | 14,062 | |
26 | 4.353% (U.S. Treasury Yield Curve Rate T Note 1 Year Constant Maturity Treasury + 2.250) 08/01/20352 | 28 | |
320 | 4.500%—12/01/2040-09/01/2041 | 347 | |
4 | 4.616% (U.S. Treasury Yield Curve Rate T Note 1 Year Constant Maturity Treasury + 2.209) 06/01/20242 | 4 | |
874 | 5.500%—02/01/2038-07/01/2038 | 984 | |
3,154 | 6.000%—01/01/2029-05/01/2040 | 3,627 | |
25,008 | |||
Federal Home Loan Mortgage Corp. Multifamily Structured Pass Through Certificates | |||
18,153 | 1.371%—08/25/20222 | 555 | |
Federal Home Loan Mortgage Corp. REMIC5 | |||
4,756 | 2.428% (1 Month USD Libor + 0.400) 06/15/20412 | 4,760 | |
17 | 2.478% (1 Month USD Libor + 0.450) 11/15/20302 | 17 | |
29 | 8.000%—08/15/2022 | 31 | |
1 | 9.000%—12/15/2020 | 2 | |
4,810 | |||
Federal Home Loan Mortgage Corp. Structured Pass Through Securities | |||
Series T-63 Cl. 1A1 | |||
89 | 3.492% (Fed 12 Month Treasury Average Constant Maturity Treasury + 1.200) 02/25/20452 | 90 | |
Series E3 Cl. A | |||
30 | 4.024%—08/15/20322 | 30 | |
120 | |||
Federal Housing Authority Project | |||
— | 7.400%—02/01/2021 | — | |
Federal National Mortgage Association | |||
5,283 | 2.310%—08/01/2022 | 5,339 | |
6,000 | 2.870%—09/01/2027 | 6,323 | |
348 | 3.000%—02/01/2021-11/01/2025 | 357 | |
424 | 3.330%—11/01/2021 | 434 | |
3,837 | 3.500%—04/01/2045 | 4,011 | |
202 | 3.847% (Fed 12 Month Treasury Average Constant Maturity Treasury + 1.400) 10/01/20402 | 201 | |
66,511 | 4.000%—09/01/2023-06/01/2049 | 69,468 | |
447 | 4.412% (12 Month USD Libor + 1.693) 08/01/20352 | 469 | |
55 | 4.428% (12 Month USD Libor + 1.674) 05/01/20352 | 57 | |
9,477 | 4.500%—07/01/2020-11/01/2048 | 10,013 | |
729 | 4.592% (12 Month USD Libor + 1.715) 06/01/20352 | 768 | |
2,311 | 5.000%—10/01/2031-06/01/2044 | 2,509 | |
24,665 | 5.500%—01/01/2025-12/13/2048 | 27,644 | |
7,475 | 6.000%—07/01/2023-06/01/2040 | 8,505 | |
136,098 | |||
Federal National Mortgage Association REMIC5 | |||
Series 2015-38 Cl. DF | |||
4,223 | 2.540% (1 Month USD Libor + 0.310) 06/25/20552 | 4,201 | |
Series 2011-98 Cl. ZL | |||
74,034 | 3.500%—10/25/2041 | 78,957 |
MORTGAGE PASS-THROUGH—Continued | |||
Principal Amount | Value | ||
Series 2006-5 Cl. 3A2 | |||
$ | 52 | 4.414%—05/25/20352 | $55 |
Series 2003-25 Cl. KP | |||
454 | 5.000%—04/25/2033 | 502 | |
Series 2003-W1 Cl. 1A1 | |||
156 | 5.313%—12/25/20422 | 171 | |
83,886 | |||
Federal National Mortgage Association TBA10 | |||
151,300 | 3.000%—11/13/2049-12/12/2049 | 153,612 | |
140,950 | 3.500%—11/15/2033-12/12/2049 | 144,852 | |
2,500 | 4.000%—12/18/2033-11/13/2049 | 2,606 | |
3,500 | 4.500%—12/13/2048 | 3,685 | |
304,755 | |||
Government National Mortgage Association | |||
600 | 3.000%—12/19/2049 | 617 | |
98,344 | 4.500%—02/20/2049-12/19/2049 | 103,076 | |
47,854 | 5.000%—08/15/2033-12/19/2049 | 51,067 | |
154,760 | |||
Government National Mortgage Association II | |||
92 | 3.750% (U.S. Treasury Yield Curve Rate T Note 1 Year Constant Maturity Treasury + 7.500) 08/20/2022-07/20/20272 | 94 | |
20 | 3.875% (U.S. Treasury Yield Curve Rate T Note 1 Year Constant Maturity Treasury + 1.500) 05/20/20242 | 20 | |
239 | 4.000% (U.S. Treasury Yield Curve Rate T Note 1 Year Constant Maturity Treasury + 3.000) 01/20/2025-02/20/20322 | 248 | |
5,535 | 4.000%—06/20/2047 | 5,808 | |
101 | 4.125% (U.S. Treasury Yield Curve Rate T Note 1 Year Constant Maturity Treasury + 9.000) 12/20/2024-11/20/20292 | 103 | |
8,396 | 4.500%—06/20/2048-04/20/2049 | 8,821 | |
4,300 | 5.000%—01/20/2049-05/20/2049 | 4,550 | |
19,644 | |||
Government National Mortgage Association II TBA10 | |||
163,600 | 4.000%—11/21/2046 | 170,082 | |
8,800 | 5.000%—11/20/2049 | 9,290 | |
179,372 | |||
Government National Mortgage Association TBA10 | |||
2,000 | 3.000%—11/19/2048 | 2,058 | |
68,200 | 3.500%—12/21/2046 | 70,699 | |
85,000 | 4.000%—11/20/2047-12/19/2048 | 88,372 | |
161,129 | |||
TOTAL MORTGAGE PASS-THROUGH | |||
(Cost $1,064,487) | 1,074,646 | ||
MUNICIPAL BONDS—0.0% | |||
Chicago Transit Authority | |||
220 | 6.300%—12/01/2021 | 229 | |
City of Chicago, IL | |||
816 | 7.750%—01/01/2042 | 935 | |
TOTAL MUNICIPAL BONDS | |||
(Cost $1,022) | 1,164 | ||
14
Harbor Bond Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
U.S. GOVERNMENT OBLIGATIONS—30.7% | |||
Principal Amount | Value | ||
U.S. Treasury Bonds | |||
$ | 14,000 | 2.250%—08/15/20469 | $14,184 |
34,200 | 2.500%—02/15/2045-02/15/20469 | 36,347 | |
16,800 | 2.875%—05/15/2043-05/15/20499 | 19,018 | |
7,800 | 3.000%—05/15/2042-02/15/20489 | 9,109 | |
81,900 | 3.125%—02/15/2042-08/15/20449 | 96,898 | |
5,200 | 3.125%—02/15/2043 | 6,126 | |
6,800 | 3.375%—05/15/2044-11/15/2048 | 8,371 | |
1,800 | 3.625%—02/15/20449 | 2,299 | |
4,200 | 4.250%—05/15/2039 | 5,732 | |
10,500 | 4.375%—05/15/20409 | 14,608 | |
12,000 | 4.625%—02/15/20409 | 17,185 | |
229,877 | |||
U.S. Treasury Inflation Indexed Bonds11 | |||
22,552 | 0.375%—07/15/2025-07/15/2027 | 22,924 | |
36,511 | 0.625%—04/15/2023-01/15/2026 | 37,171 | |
45,750 | 0.750%—07/15/2028-02/15/2045 | 48,082 | |
39,448 | 0.875%—01/15/2029-02/15/2047 | 41,970 | |
14,372 | 1.000%—02/15/2048-02/15/2049 | 16,029 | |
2,532 | 1.375%—02/15/2044 | 3,014 | |
169,190 |
U.S. GOVERNMENT OBLIGATIONS—Continued | |||
Principal Amount | Value | ||
U.S. Treasury Notes | |||
$ | 16,800 | 1.375%—03/31/20209 | $16,785 |
36,200 | 1.750%—09/30/2022-06/30/20249 | 36,501 | |
25,100 | 1.875%—07/31/20229 | 25,342 | |
90,500 | 2.000%—08/31/2021-12/31/20219 | 91,306 | |
17,700 | 2.250%—11/15/20249 | 18,305 | |
22,800 | 2.625%—02/15/20299 | 24,653 | |
212,892 | |||
TOTAL U.S. GOVERNMENT OBLIGATIONS | |||
(Cost $589,707) | 611,959 | ||
TOTAL INVESTMENTS—158.7% | |||
(Cost $3,097,614) | 3,159,905 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—(58.7)% | (1,169,005) | ||
TOTAL NET ASSETS—100.0% | $1,990,900 |
FUTURES CONTRACTS
Description | Number of Contracts | Expiration Date | Current Notional Value (000s) | Unrealized Appreciation/ (Depreciation) (000s) | ||||
Australian Government Bond Futures 3 year (Short) | 93 | 12/16/2019 | AUD 10,729 | $ (6) | ||||
Australian Government Bond Futures 10 year (Short) | 146 | 12/16/2019 | 21,288 | 65 | ||||
Euribor Interest Rate 3 month (Short) | 462 | 09/14/2020 | EUR 116,020 | 259 | ||||
Euribor Interest Rate 3 month (Short) | 327 | 12/14/2020 | 82,122 | 151 | ||||
Euro-BOBL Futures (Short) | 214 | 12/06/2019 | 28,809 | 330 | ||||
Euro-BTP Futures (Long) | 832 | 12/06/2019 | 120,199 | 464 | ||||
Euro-Bund Futures (Long) | 910 | 12/06/2019 | 156,302 | (777) | ||||
Euro-BUXL Futures (Long) | 42 | 12/06/2019 | 8,818 | (532) | ||||
Euro-OAT Futures (Short) | 403 | 12/06/2019 | 67,857 | 1,857 | ||||
Euro-Schatz Futures (Short) | 262 | 12/06/2019 | 29,362 | 119 | ||||
Short Euro-BTP Futures (Long) | 190 | 12/06/2019 | 21,369 | 20 | ||||
United Kingdom GILT Futures 90 day (Short) | 207 | 12/27/2019 | GBP 27,498 | (95) | ||||
U.S Treasury Bond Futures 30 year (Short) | 529 | 12/19/2019 | $ 85,367 | (1,132) | ||||
U.S. Treasury Note Futures 5 year (Long) | 3,605 | 12/31/2019 | 429,727 | (1,949) | ||||
U.S. Treasury Note Futures 10 year (Short) | 420 | 12/19/2019 | 54,725 | (175) | ||||
Total Futures Contracts | $(1,401) |
PURCHASED OPTIONS
PURCHASED OPTIONS THAT REQUIRE PERIODIC SETTLEMENT OF VARIATION MARGIN
Description | Exchange | Strike Price | Expiration Date | Number of Contracts/ Notional | Premiums Paid (000s) | Value (000s) | ||||||
Euro-BOBL Futures Option (Call) | Eurex | EUR 138.50 | 11/22/2019 | 10 | $— | $— | ||||||
Euro-BOBL Futures Option (Call) | Eurex | 139.00 | 11/22/2019 | 200 | 1 | 1 | ||||||
Euro-BTP Futures Option (Put) | Eurex | 100.00 | 11/22/2019 | 389 | 4 | 4 | ||||||
Euro-BTP Futures Option (Put) | Eurex | 101.00 | 11/22/2019 | 250 | 3 | 3 | ||||||
Euro-BTP Futures Option (Put) | Eurex | 110.00 | 11/22/2019 | 100 | 1 | 1 | ||||||
Euro-Bund Futures Option (Call) | Eurex | 185.50 | 11/22/2019 | 50 | 1 | 1 | ||||||
Euro-Bund Futures Option (Call) | Eurex | 192.00 | 11/22/2019 | 150 | 2 | 2 | ||||||
Euro-OAT Futures Option (Call) | Eurex | 192.00 | 11/22/2019 | 250 | 3 | 3 | ||||||
Euro-OAT Futures Option (Call) | Eurex | 200.00 | 11/22/2019 | 111 | 1 | 1 |
15
Harbor Bond Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
PURCHASED OPTIONS—Continued
PURCHASED OPTIONS THAT REQUIRE PERIODIC SETTLEMENT OF VARIATION MARGIN—Continued
Description | Exchange | Strike Price | Expiration Date | Number of Contracts/ Notional | Premiums Paid (000s) | Value (000s) | ||||||
Euro-Schatz Futures Option (Call) | Eurex | EUR 112.70 | 11/22/2019 | 10 | $— | $— | ||||||
Euro-Schatz Futures Option (Call) | Eurex | 112.90 | 11/22/2019 | 250 | 2 | 1 | ||||||
Total Purchased Options that Require Periodic Settlement of Variation Margin | $18 | $17 |
PURCHASED OPTIONS NOT SETTLED THROUGH VARIATION MARGIN
Description | Counterparty/Exchange | Strike Price | Expiration Date | Number of Contracts/ Notional | Premiums Paid (000s) | Value (000s) | ||||||
U.S. Treasury Bond Futures Option 30 year (Call) | Chicago Board of Trade | $ 188.00 | 12/27/2019 | 75 | $1 | $— | ||||||
U.S. Treasury Bond Futures Option 30 year (Call) | Chicago Board of Trade | 191.00 | 11/22/2019 | 125 | 1 | — | ||||||
U.S. Treasury Bond Futures Option 30 year (Call) | Chicago Board of Trade | 194.00 | 02/21/2020 | 111 | 1 | — | ||||||
U.S. Treasury Bond Futures Option 30 year (Call) | Chicago Board of Trade | 205.00 | 12/27/2019 | 3 | — | — | ||||||
U.S. Treasury Bond Futures Option 30 year (Call) | Chicago Board of Trade | 208.00 | 12/27/2019 | 18 | — | — | ||||||
U.S. Treasury Bond Futures Option 30 year (Call) | Chicago Board of Trade | 220.00 | 02/21/2020 | 1 | — | — | ||||||
U.S. Treasury Bond Futures Option 30 year (Call) | Chicago Board of Trade | 225.00 | 11/22/2019 | 60 | 1 | — | ||||||
U.S. Treasury Bond Futures Option 30 year (Put) | Chicago Board of Trade | 130.00 | 11/22/2019 | 2 | — | — | ||||||
U.S. Treasury Bond Futures Option 30 year (Put) | Chicago Board of Trade | 133.00 | 11/22/2019 | 16 | — | — | ||||||
U.S. Treasury Bond Futures Option 30 year (Put) | Chicago Board of Trade | 136.00 | 11/22/2019 | 108 | 1 | — | ||||||
U.S. Treasury Note Futures Option 5 year (Put) | Chicago Board of Trade | 108.00 | 11/22/2019 | 777 | 7 | 1 | ||||||
U.S. Treasury Note Futures Option 5 year (Put) | Chicago Board of Trade | 108.25 | 11/22/2019 | 969 | 8 | 1 | ||||||
U.S. Treasury Note Futures Option 5 year (Put) | Chicago Board of Trade | 108.50 | 11/22/2019 | 811 | 7 | 1 | ||||||
U.S. Treasury Note Futures Option 5 year (Put) | Chicago Board of Trade | 109.00 | 11/22/2019 | 389 | 3 | — | ||||||
U.S. Treasury Note Futures Option 5 year (Put) | Chicago Board of Trade | 110.00 | 11/22/2019 | 530 | 5 | 1 | ||||||
U.S. Treasury Note Futures Option 5 year (Put) | Chicago Board of Trade | 110.50 | 11/22/2019 | 168 | 1 | — | ||||||
U.S. Treasury Note Futures Option 5 year (Put) | Chicago Board of Trade | 111.00 | 11/22/2019 | 153 | 1 | — | ||||||
U.S. Treasury Note Futures Option 5 year (Put) | Chicago Board of Trade | 111.25 | 11/22/2019 | 7 | — | — | ||||||
U.S. Treasury Note Futures Option 5 year (Put) | Chicago Board of Trade | 111.50 | 11/22/2019 | 56 | 1 | — | ||||||
U.S. Treasury Note Futures Option 10 year (Call) | Chicago Board of Trade | 143.00 | 11/22/2019 | 320 | 3 | — | ||||||
U.S. Treasury Note Futures Option 10 year (Call) | Chicago Board of Trade | 143.50 | 11/22/2019 | 72 | 1 | — | ||||||
U.S. Treasury Note Futures Option 10 year (Call) | Chicago Board of Trade | 144.00 | 11/22/2019 | 15 | — | — | ||||||
U.S. Treasury Note Futures Option 10 year (Call) | Chicago Board of Trade | 144.50 | 11/22/2019 | 185 | 2 | — | ||||||
U.S. Treasury Note Futures Option 10 year (Call) | Chicago Board of Trade | 148.50 | 02/21/2020 | 2 | — | — | ||||||
U.S. Treasury Note Futures Option 10 year (Call) | Chicago Board of Trade | 149.00 | 02/21/2020 | 14 | — | — | ||||||
U.S. Treasury Note Futures Option 10 year (Put) | Chicago Board of Trade | 115.00 | 11/22/2019 | 297 | 2 | — | ||||||
U.S. Treasury Note Futures Option 10 year (Put) | Chicago Board of Trade | 115.50 | 11/22/2019 | 167 | 1 | — | ||||||
U.S. Treasury Note Futures Option 10 year (Put) | Chicago Board of Trade | 116.50 | 11/22/2019 | 202 | 2 | — | ||||||
U.S. Treasury Note Futures Option 10 year (Put) | Chicago Board of Trade | 117.00 | 11/22/2019 | 17 | — | — | ||||||
U.S. Treasury Note Futures Option 10 year (Put) | Chicago Board of Trade | 118.50 | 11/22/2019 | 3 | — | — | ||||||
U.S. Treasury Note Futures Option 10 year (Put) | Chicago Board of Trade | 118.50 | 12/27/2019 | 42 | — | — | ||||||
U.S. Treasury Note Futures Option 10 year (Put) | Chicago Board of Trade | 119.00 | 11/22/2019 | 148 | 1 | — | ||||||
U.S. Treasury Note Futures Option 10 year (Put) | Chicago Board of Trade | 119.00 | 12/27/2019 | 13 | — | — | ||||||
Total Purchased Options Not Settled Through Variation Margin | $50 | $4 |
PURCHASED SWAP OPTIONS NOT SETTLED THROUGH VARIATION MARGIN
Description | Counterparty | Floating Rate Index | Pay/Receive Floating Rate | Strike Rate | Expiration Date | Number of Contracts/ Notional | Premiums Paid (000s) | Value (000s) | ||||||||
Interest Rate Swap Option 30 year (Put) | Goldman Sachs Bank USA | 3-Month USD-LIBOR | Receive | 2.94% | 12/12/2019 | 1,800,000 | $86 | $1 | ||||||||
Total Purchased Swap Options Not Settled Through Variation Margin | $86 | $1 | ||||||||||||||
Total Purchased Options | $154 | $22 |
WRITTEN OPTIONS
WRITTEN OPTIONS NOT SETTLED THROUGH VARIATION MARGIN
Description | Counterparty/Exchange | Strike Index/Price | Expiration Date | Number of Contracts/ Notional | Premiums Received (000s) | Value (000s) | ||||||
Consumer Price All Urban Non-Seasonally Adjusted Index - Floor (Put) | Citibank NA | 215.949j | 03/12/2020 | 13,400,000 | $114 | $— |
16
Harbor Bond Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
WRITTEN OPTIONS—Continued
WRITTEN OPTIONS NOT SETTLED THROUGH VARIATION MARGIN—Continued
Description | Counterparty/Exchange | Strike Index/Price | Expiration Date | Number of Contracts/ Notional | Premiums Received (000s) | Value (000s) | ||||||
Consumer Price All Urban Non-Seasonally Adjusted Index - Floor (Put) | Citibank NA | 216.687j | 04/07/2020 | 32,400,000 | $289 | $— | ||||||
Consumer Price All Urban Non-Seasonally Adjusted Index - Floor (Put) | Citibank NA | 217.965j | 09/29/2020 | 14,800,000 | 191 | — | ||||||
Consumer Price All Urban Non-Seasonally Adjusted Index - Floor (Put) | Deutsche Bank AG | 215.949j | 03/10/2020 | 5,100,000 | 38 | — | ||||||
Consumer Price All Urban Non-Seasonally Adjusted Index - Floor (Put) | Deutsche Bank AG | 218.011j | 10/13/2020 | 15,600,000 | 153 | — | ||||||
Federal National Mortgage Association Future Option 30 year (Call) | JP Morgan Chase Bank NA | $ 101.59 | 11/06/2019 | 11,300,000 | 37 | (19) | ||||||
Federal National Mortgage Association Future Option 30 year (Call) | JP Morgan Chase Bank NA | 101.60 | 11/06/2019 | 11,300,000 | 36 | (18) | ||||||
Federal National Mortgage Association Future Option 30 year (Call) | JP Morgan Chase Bank NA | 102.13 | 11/06/2019 | 10,400,000 | 33 | (1) | ||||||
Federal National Mortgage Association Future Option 30 year (Call) | JP Morgan Chase Bank NA | 102.19 | 11/06/2019 | 10,400,000 | 30 | (1) | ||||||
U.S. Treasury Note Option 10 year (Put) | Chicago Board of Trade | 129.75 | 11/22/2019 | 179 | 57 | (56) | ||||||
Total Written Options Not Settled Through Variation Margin | $978 | $(95) |
WRITTEN SWAP OPTIONS NOT SETTLED THROUGH VARIATION MARGIN
Description | Counterparty | Floating Rate Index | Pay/Receive Floating Rate | Strike Rate | Expiration Date | Number of Contracts/ Notional | Premiums Received (000s) | Value (000s) | ||||||||
Interest Rate Swap Option 5 year (Put) | Goldman Sachs Bank USA | 3-Month USD-LIBOR | Pay | 2.75% | 12/12/2019 | 7,800,000 | $85 | $— | ||||||||
Total Written Options | $1,063 | $(95) |
FORWARD CURRENCY CONTRACTS
Counterparty | Amount to be Delivered (000s) | Amount to be Received (000s) | Settlement Date | Unrealized Appreciation/ (Depreciation) (000s) | ||||
Citibank NA | $ 1,547 | AUD 2,306 | 11/04/2019 | $ 43 | ||||
HSBC Bank USA | $ 1,080 | AUD 1,602 | 11/04/2019 | 25 | ||||
JP Morgan Chase Bank NA | AUD 1,082 | $ 731 | 11/04/2019 | (15) | ||||
BNP Paribas SA | $ 10,555 | BRL 40,300 | 01/03/2020 | (543) | ||||
JP Morgan Chase Bank | $ 11,367 | BRL 103,300 | 01/03/2020 | (1,437) | ||||
BNP Paribas SA | BRL 67,500 | $ 17,611 | 01/03/2020 | 842 | ||||
BNP Paribas SA | BRL 89,900 | $ 21,827 | 04/02/2020 | (411) | ||||
Citibank NA | BRL 54,000 | $ 31,899 | 01/03/2020 | (423) | ||||
Citibank NA | BRL 45,100 | $ 10,944 | 04/02/2020 | (212) | ||||
Barclays Bank plc | $ 8,923 | GBP 7,268 | 11/15/2019 | 496 | ||||
BNP Paribas SA | $ 4,917 | GBP 5,811 | 11/15/2019 | 122 | ||||
Citibank NA | $ 1,349 | GBP 2,070 | 11/15/2019 | 139 | ||||
HSBC Bank USA | $ 11,016 | GBP 8,766 | 11/15/2019 | 344 | ||||
JP Morgan Chase Bank NA | $ 5,363 | GBP 17,690 | 11/15/2019 | 967 | ||||
BNP Paribas SA | GBP 28,958 | $ 35,079 | 11/15/2019 | (2,450) | ||||
Citibank NA | GBP 9,041 | $ 16,360 | 11/15/2019 | (787) | ||||
JP Morgan Chase Bank NA | GBP 18,217 | $ 24,593 | 11/15/2019 | (1,409) | ||||
JP Morgan Chase Bank NA | $ 19,038 | CAD 24,861 | 11/04/2019 | (162) | ||||
HSBC Bank USA | CAD 24,861 | $ 18,766 | 11/04/2019 | (110) | ||||
JP Morgan Chase Bank NA | CAD 24,861 | $ 19,041 | 12/03/2019 | 163 | ||||
BNP Paribas SA | $ 4,414 | CNY 31,274 | 03/18/2020 | 7 | ||||
Citibank NA | $ 4,047 | CNY 28,721 | 03/18/2020 | 12 | ||||
HSBC Bank USA | $ 5,232 | CNY 37,108 | 03/18/2020 | 13 | ||||
Deutsche Bank AG | CNY 167,553 | $ 23,257 | 03/18/2020 | (427) | ||||
HSBC Bank USA | CNY 55,833 | $ 7,740 | 03/18/2020 | (151) | ||||
NatWest Markets Plc | CNY 225,305 | $ 31,239 | 03/18/2020 | (608) | ||||
Barclays Bank plc | $ 1,201 | EUR 1,076 | 11/15/2019 | 1 | ||||
BNP Paribas SA | $ 1,588 | EUR 24,431 | 11/15/2019 | 212 | ||||
Citibank NA | $ 1,351 | EUR 1,200 | 11/15/2019 | (11) | ||||
Citibank NA | $ 1,377 | EUR 1,237 | 11/15/2019 | 4 | ||||
HSBC Bank USA | $ 1,006 | EUR 912 | 11/15/2019 | 12 | ||||
JP Morgan Chase Bank NA | $ 1,113 | EUR 1,012 | 11/15/2019 | 17 | ||||
NatWest Markets Plc | $ 1,137 | EUR 1,020 | 11/15/2019 | 2 | ||||
Barclays Bank plc | EUR 534 | $ 592 | 11/15/2019 | (5) | ||||
Barclays Bank plc | EUR 60,721 | $ 68,644 | 11/15/2019 | 853 |
17
Harbor Bond Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
FORWARD CURRENCY CONTRACTS—Continued
Counterparty | Amount to be Delivered (000s) | Amount to be Received (000s) | Settlement Date | Unrealized Appreciation/ (Depreciation) (000s) | ||||
BNP Paribas SA | EUR 1,592 | $ 1,766 | 11/15/2019 | $(11) | ||||
Citibank NA | EUR 16,078 | $ 22,668 | 11/15/2019 | (39) | ||||
Citibank NA | EUR 1,417 | $ 1,585 | 11/15/2019 | 3 | ||||
JP Morgan Chase Bank NA | EUR 2,828 | $ 8,618 | 11/15/2019 | (43) | ||||
HSBC Bank USA | $ 137 | INR 10,029 | 12/18/2019 | 4 | ||||
Barclays Bank plc | $ 5,573 | JPY 844,200 | 11/15/2019 | (79) | ||||
Citibank NA | $ 7,598 | JPY 1,315,200 | 11/15/2019 | (311) | ||||
HSBC Bank USA | $ 83,453 | JPY 8,724,700 | 11/15/2019 | (2,591) | ||||
JP Morgan Chase Bank NA | $ 15,016 | JPY 1,579,900 | 11/15/2019 | (373) | ||||
BNP Paribas SA | JPY 391,100 | $ 3,602 | 11/15/2019 | (23) | ||||
BNP Paribas SA | JPY 1,529,500 | $ 14,532 | 11/15/2019 | 356 | ||||
Citibank NA | JPY 493,700 | $ 4,558 | 11/15/2019 | (17) | ||||
Citibank NA | JPY 783,200 | $ 24,839 | 11/15/2019 | 487 | ||||
Barclays Bank plc | $ 11,263 | MXN 218,798 | 01/28/2020 | (42) | ||||
BNP Paribas SA | $ 313 | MXN 6,187 | 01/16/2020 | 5 | ||||
Goldman Sachs Bank USA | $ 4,021 | MXN 199,401 | 11/05/2019 | 177 | ||||
HSBC Bank USA | $ 1,994 | MXN 136,080 | 11/05/2019 | 153 | ||||
HSBC Bank USA | $ 8,402 | MXN 165,343 | 04/22/2020 | (24) | ||||
JP Morgan Chase Bank NA | $ 800 | MXN 111,732 | 11/05/2019 | 32 | ||||
JP Morgan Chase Bank NA | $ 13,832 | MXN 277,981 | 01/22/2020 | 437 | ||||
Barclays Bank plc | MXN 281,870 | $ 14,365 | 11/05/2019 | (275) | ||||
Barclays Bank plc | MXN 218,798 | $ 11,273 | 01/22/2020 | 41 | ||||
Goldman Sachs Bank USA | MXN 218,798 | $ 10,864 | 01/28/2020 | (358) | ||||
HSBC Bank USA | MXN 165,343 | $ 8,615 | 11/05/2019 | 27 | ||||
Citibank NA | $ 128 | RUB 8,441 | 11/15/2019 | 4 | ||||
Citibank NA | RUB 7,573 | $ 116 | 11/15/2019 | (2) | ||||
BNP Paribas SA | TRY 830 | $ 139 | 11/15/2019 | (5) | ||||
Total Forward Currency Contracts | $(7,354) |
INTEREST RATE SWAP AGREEMENTS
CENTRALLY CLEARED SWAP AGREEMENTS
INTEREST RATE SWAPS
Counterparty | Floating Rate Index | Pay/ Receive Floating Rate | Fixed Rate | Payment Frequency | Expiration Date | Notional Amount (000s) | Value (000s) | Upfront Premiums (Received)/ Paid (000s) | Unrealized Appreciation/ (Depreciation) (000s) | |||||||||
LCH Group | British Bankers' Association LIBOR GBP 6-Month | Receive | 0.750% | Semi-annual | 03/18/2050 | GBP 10,500 | $627 | $255 | $372 | |||||||||
LCH Group | British Bankers' Association LIBOR GBP 6-Month | Receive | 1.000 | Semi-annual | 12/18/2029 | 7,800 | (174) | 35 | (209) | |||||||||
LCH Group | British Bankers' Association LIBOR GBP 6-Month | Receive | 1.250 | Semi-annual | 12/18/2049 | 9,500 | (1,140) | (200) | (940) | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Pay | (0.092) | Semi-annual | 09/13/2026 | JPY 590,000 | — | — | — | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Pay | (0.095) | Semi-annual | 09/13/2026 | 1,190,000 | (2) | (1) | (1) | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Pay | (0.088) | Semi-annual | 09/17/2026 | 1,000,000 | 3 | — | 3 | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Pay | (0.062) | Semi-annual | 09/18/2026 | 1,580,000 | 30 | (1) | 31 | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Pay | (0.068) | Semi-annual | 09/18/2026 | 990,000 | 15 | — | 15 | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Pay | (0.063) | Semi-annual | 09/19/2026 | 595,000 | 11 | — | 11 | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Pay | (0.064) | Semi-annual | 09/19/2026 | 595,000 | 11 | — | 11 | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Pay | (0.087) | Semi-annual | 09/20/2026 | 297,000 | 1 | — | 1 | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Pay | (0.097) | Semi-annual | 09/24/2026 | 723,000 | (3) | 1 | (4) | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Pay | 0.122 | Semi-annual | 08/22/2039 | 1,310,000 | (144) | 107 | (251) |
18
Harbor Bond Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
INTEREST RATE SWAP AGREEMENTS—Continued
CENTRALLY CLEARED SWAP AGREEMENTS—Continued
INTEREST RATE SWAPS—Continued
Counterparty | Floating Rate Index | Pay/ Receive Floating Rate | Fixed Rate | Payment Frequency | Expiration Date | Notional Amount (000s) | Value (000s) | Upfront Premiums (Received)/ Paid (000s) | Unrealized Appreciation/ (Depreciation) (000s) | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Pay | 0.123% | Semi-annual | 08/22/2039 | JPY 1,020,000 | $(111) | $27 | $(138) | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Pay | 0.103 | Semi-annual | 08/28/2039 | 190,000 | (28) | — | (28) | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Pay | 1.000 | Semi-annual | 03/21/2048 | 230,000 | 444 | 561 | (117) | |||||||||
CME Group | British Bankers' Association LIBOR JPY 6-Month | Receive | 0.300 | Semi-annual | 03/18/2026 | 11,580,000 | (2,722) | (643) | (2,079) | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Receive | 0.300 | Semi-annual | 03/18/2026 | 7,800,000 | (1,852) | (485) | (1,367) | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Receive | 0.300 | Semi-annual | 09/20/2027 | 2,180,000 | (597) | (114) | (483) | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Receive | 0.300 | Semi-annual | 03/20/2028 | 1,020,000 | (281) | 73 | (354) | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Pay | 0.380 | Semi-annual | 06/18/2028 | 5,480,000 | 1,930 | 210 | 1,720 | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Receive | 0.399 | Semi-annual | 06/18/2028 | 770,000 | (283) | — | (283) | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Receive | 0.450 | Semi-annual | 03/20/2029 | 660,000 | (278) | (48) | (230) | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Receive | 0.750 | Semi-annual | 03/20/2038 | 2,004,000 | (2,022) | 37 | (2,059) | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Receive | 0.800 | Semi-annual | 10/22/2038 | 220,000 | (244) | — | (244) | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Receive | 0.705 | Semi-annual | 10/31/2038 | 640,000 | (621) | 41 | (662) | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Receive | 0.785 | Semi-annual | 11/12/2038 | 320,000 | (357) | 1 | (358) | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Receive | 0.750 | Semi-annual | 12/20/2038 | 1,847,800 | (1,936) | 100 | (2,036) | |||||||||
CME Group | British Bankers' Association LIBOR USD 3-Month | Pay | 2.800 | Semi-annual | 08/22/2023 | $ 86,000 | 4,264 | (1,932) | 6,196 | |||||||||
Centrally Cleared Interest Rate Swaps | (3,483) | |||||||||||||||||
Interest Rate Swaps | $(3,483) |
CREDIT DEFAULT SWAP AGREEMENTS
CENTRALLY CLEARED SWAP AGREEMENTS
CREDIT DEFAULT SWAPS
Counterparty | Reference Entity | Buy/ Sellb,c | Pay/ Receive Fixed Rate | Expiration Date | Implied Credit Spreadd | Payment Frequency | Notional Amounte (000s) | Valuef (000s) | Upfront Premiums (Received)/ Paid (000s) | Unrealized Appreciation/ (Depreciation) (000s) | ||||||||||
ICE Group | TESCO PLC 6.000% due 12/14/2029 | Sell | 1.000% | 06/20/2022 | 0.439% | Quarterly | EUR 5,000 | $93 | $(243) | $336 | ||||||||||
ICE Group | General Electric Company 2.700% due 10/09/2022 | Sell | 1.000 | 12/20/2024 | 1.173 | Quarterly | $ 2,600 | (18) | (37) | 19 | ||||||||||
ICE Group | Ford Motor Company 4.346% due 12/08/2026 | Sell | 5.000 | 06/20/2023 | 1.299 | Quarterly | 500 | 68 | 74 | (6) | ||||||||||
ICE Group | General Electric Company 2.700% due 10/09/2022 | Sell | 1.000 | 12/20/2023 | 0.879 | Quarterly | 2,700 | 16 | (119) | 135 | ||||||||||
ICE Group | General Electric Company 2.700% due 10/09/2022 | Sell | 1.000 | 06/20/2024 | 1.043 | Quarterly | 1,200 | — | (4) | 4 | ||||||||||
ICE Group | MBIA Inc. 6.625% due 10/01/2028 | Sell | 5.000 | 12/20/2019 | 0.217 | Quarterly | 7,000 | 87 | (238) | 325 | ||||||||||
ICE Group | MetLife, Inc. 4.750% due 02/08/2021 | Sell | 1.000 | 12/20/2021 | 0.186 | Quarterly | 6,900 | 126 | 2 | 124 |
19
Harbor Bond Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
CREDIT DEFAULT SWAP AGREEMENTS—Continued
CENTRALLY CLEARED SWAP AGREEMENTS—Continued
CREDIT DEFAULT SWAPS—Continued
Counterparty | Reference Entity | Buy/ Sellb,c | Pay/ Receive Fixed Rate | Expiration Date | Implied Credit Spreadd | Payment Frequency | Notional Amounte (000s) | Valuef (000s) | Upfront Premiums (Received)/ Paid (000s) | Unrealized Appreciation/ (Depreciation) (000s) | ||||||||||
ICE Group | The Goldman Sachs Group, Inc. 5.950% due 01/18/2018 | Sell | 1.000% | 09/20/2020 | 0.210% | Quarterly | $ 8,000 | $66 | $127 | $(61) | ||||||||||
Centrally Cleared Credit Default Swaps | $876 |
OVER-THE-COUNTER (OTC) SWAP AGREEMENTS
CREDIT DEFAULT SWAPS
Counterparty | Reference Entity | Buy/ Sellb,c | Pay/ Receive Fixed Rate | Expiration Date | Implied Credit Spreadd | Payment Frequency | Notional Amounte (000s) | Valuef (000s) | Upfront Premiums (Received)/ Paid (000s) | Unrealized Appreciation/ (Depreciation) (000s) | ||||||||||
Citibank NA | AXA Equitable Holdings Inc. 3.900% due 06/20/2018 | Sell | 1.000% | 06/20/2023 | 1.241% | Quarterly | $ 4,200 | $(21) | $(115) | $94 | ||||||||||
HSBC Bank USA NA | Federative Republic of Brazil 4.25% due 6/20/2019 | Sell | 1.000 | 03/20/2020 | 0.310 | Quarterly | 9,800 | — | (11) | 11 | ||||||||||
Goldman Sachs International | Petroleo Brasileiro SA Petrobras 8.375% due 12/10/2018 | Sell | 1.000 | 12/20/2019 | 0.207 | Quarterly | 400 | 1 | (42) | 43 | ||||||||||
HSBC Bank USA NA | Petroleo Brasileiro SA Petrobras 8.375% due 12/10/2018 | Sell | 1.000 | 03/20/2020 | 0.232 | Quarterly | 200 | 1 | (36) | 37 | ||||||||||
JP Morgan Chase Bank NA | Petroleo Brasileiro SA Petrobras 8.375% due 12/10/2018 | Sell | 1.000 | 12/20/2019 | 0.207 | Quarterly | 2,100 | 5 | (237) | 242 | ||||||||||
Over-the-Counter Credit Default Swaps | 427 | |||||||||||||||||||
Credit Default Swaps | $1,303 | |||||||||||||||||||
Total Swaps | $(2,180) |
FIXED INCOME INVESTMENTS SOLD SHORT — (2.1)%
Principal Amount (000s) | Security | Proceeds (000s) | Value (000s) | |||
$ 27,050 | Federal National Mortgage Association TBA10 3.500%—11/13/2049 | $ 27,693 | $ (27,777) | |||
4,400 | Federal National Mortgage Association TBA10 5.000%—11/13/2049 | 4,711 | (4,707) | |||
9,000 | Federal National Mortgage Association TBA10 6.000%—11/13/2049 | 9,920 | (9,956) | |||
$42,324 | $(42,440) |
REVERSE REPURCHASE AGREEMENTS — (19.7)%
Counterparty | Borrowing Rate | Borrowing Date | Maturity Date | Proceeds (000s) | Value (000s) | |||||
Bank of America | 2.000% | 10/28/2019 | 11/05/2019 | $15,145 | $(15,145) | |||||
Bank of Montreal | 1.870 - 2.190% | 08/08/2019 - 10/29/2019 | 11/12/2019 - 1/30/2020 | 34,117 | (34,117) | |||||
Bank of Nova Scotia | 1.790 - 2.080% | 10/01/2019 - 10/31/2019 | 11/01/2019 - 1/13/2020 | 238,112 | (238,112) | |||||
Barclays | (0.150)% | 10/28/2019 | 10/28/2021 | 1,362 | (1,362) | |||||
BNP Paribas S.A. | 0.200% | 10/21/2019 | 10/21/2021 | 1,291 | (1,291) | |||||
Deutsche Bank | 2.010% | 10/16/2019 | 11/07/2019 | 4,665 | (4,665) | |||||
JP Morgan Chase | 1.650 - 2.000% | 10/16/2019 - 10/31/2019 | 11/01/2019 - 11/15/2019 | 9,497 | (9,497) | |||||
NatWest Markets plc | 1.780 - 2.030% | 10/18/2019 - 10/31/2019 | 11/04/2019 - 11/08/2019 | 57,193 | (57,193) | |||||
Societe Generale | 1.940% | 10/22/2019 | 11/05/2019 | 30,097 | (30,097) | |||||
Total Reverse Repurchase Agreements | $391,479 | $(391,479) |
20
Harbor Bond Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
SALE-BUYBACK TRANSACTIONS — (10.7)%
Counterparty | Borrowing Rate | Borrowing Date | Maturity Date | Proceeds (000s) | Value (000s) | |||||
BNP Paribus NY Branch | 1.375 - 2.250% | 10/07/2019 - 10/09/2019 | 11/13/2019 - 12/06/2019 | $114,978 | $(119,775) | |||||
UBS Securities LLC | 1.750 - 4.625% | 10/30/2019 - 10/31/2019 | 11/01/2019 - 11/04/2019 | 90,716 | (92,521) | |||||
Total Sale-Buybacks | $205,694 | $(212,296) |
FAIR VALUE MEASUREMENTS
The following table summarizes the Fund’s investments as of October 31, 2019 based on the inputs used to value them.
Asset Category | Quoted Prices Level 1 (000s) | Other Significant Observable Inputs Level 2 (000s) | Significant Unobservable Inputs Level 3 (000s) | Total (000s) | ||||
Investments in Securities | ||||||||
Asset-Backed Securities | $— | $165,642 | $— | $165,642 | ||||
Bank Loan Obligations | — | — | 5,198 | 5,198 | ||||
Collateralized Mortgage Obligations | — | 152,717 | — | 152,717 | ||||
Corporate Bonds & Notes | — | 1,018,941 | — | 1,018,941 | ||||
Escrow | — | — | — | — | ||||
Foreign Government Obligations | — | 129,638 | — | 129,638 | ||||
Mortgage Pass-Through | — | 1,074,646 | — | 1,074,646 | ||||
Municipal Bonds | — | 1,164 | — | 1,164 | ||||
U.S. Government Obligations | — | 611,959 | — | 611,959 | ||||
Total Investments in Securities | $— | $3,154,707 | $5,198 | $3,159,905 | ||||
Financial Derivative Instruments - Assets | ||||||||
Forward Currency Contracts | $— | $6,000 | $— | $6,000 | ||||
Futures Contracts | 3,265 | — | — | 3,265 | ||||
Purchased Options | 21 | 1 | — | 22 | ||||
Swap Agreements | — | 9,730 | — | 9,730 | ||||
Total Financial Derivative Instruments - Assets | $3,286 | $15,731 | $— | $19,017 | ||||
Liability Category | ||||||||
Fixed Income Investments Sold Short | $— | $(42,440) | $— | $(42,440) | ||||
Reverse Repurchase Agreements | — | (391,479) | — | (391,479) | ||||
Sale-Buyback Transactions | — | (212,296) | — | (212,296) | ||||
Total Investments Sold Short and Secured Borrowings | $— | $(646,215) | $— | $(646,215) | ||||
Financial Derivative Instruments - Liabilities | ||||||||
Forward Currency Contracts | $— | $(13,354) | $— | $(13,354) | ||||
Futures Contracts | (4,666) | — | — | (4,666) | ||||
Swap Agreements | — | (11,910) | — | (11,910) | ||||
Written Options | (56) | (39) | — | (95) | ||||
Total Financial Derivative Instruments - Liabilities | $(4,722) | $(25,303) | $— | $(30,025) | ||||
Total Investments | $(1,436) | $2,498,920 | $5,198 | $2,502,682 |
For more information on valuation inputs and their aggregation into the levels used in the table above, please refer to the Fair Value Measurements and Disclosures in Note 2 of the accompanying Notes to Financial Statements.
21
Harbor Bond Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
FAIR VALUE MEASUREMENTS—Continued
The following is a rollforward of the Fund’s Level 3 investments during the year ended October 31, 2019. Transfers into or out of Level 3 are recognized as of the last day in the fiscal quarter of the period in which the event or change in circumstances that caused the reclassification occurred.
Valuation Description | Beginning Balance as of 11/01/2018 (000s) | Purchases (000s) | Sales (000s) | Discount/ (Premium) (000s) | Total Realized Gain/(Loss)w (000s) | Change in Unrealized Appreciation/ (Depreciation)w (000s) | Transfers Into Level 3 (000s) | Transfers Out of Level 3h (000s) | Ending Balance as of 10/31/2019w (000s) | |||||||||
Bank Loan Obligations | $5,185 | $— | $— | $25 | $— | $(12) | $— | $— | $5,198 | |||||||||
Escrow | — | — | — | — | — | — | — | — | — | |||||||||
Mortgage Pass-Through | 1 | — | — | — | — | — | — | (1) | — | |||||||||
$5,186 | $— | $— | $25 | $— | $(12) | $— | $(1) | $5,198 |
The following is a summary of significant unobservable inputs used in the fair valuations of assets and liabilities categorized within Level 3 of the fair value hierarchy.
Valuation Descriptions | Ending Balance as of 10/31/2019 (000s) | Valuation Technique | Unobservable Input(s) | Input Value(s) | ||||
Investments in Securities | ||||||||
Bank Loan Obligations | ||||||||
Toyota Motor Credit Corp. Revolver Term Out Loan | $ 5,198 | Benchmark Pricing | Base Price | $ 99.96 | ||||
Escrow | ||||||||
General Motors Co. Escrow | — | Cash Available in Relation to Claims | Estimated Recovery Value | $ 0.00 | ||||
$5,198 |
REMAINING CONTRACTUAL MATURITY OF TRANSFERS ACCOUNTED FOR AS SECURED BORROWINGS
The following is a summary of the remaining contractual maturities of transfers accounted for as secured borrowings, by collateral type, as of October 31, 2019.
Overnight and Continuous (000s) | Up to 30 days (000s) | 31-90 days (000s) | Greater Than 90 days (000s) | Total (000s) | |||||
Reverse Repurchase Agreements | |||||||||
U.S. Treasury Obligations | $74,569 | $214,976 | $83,388 | $18,546 | $391,479 | ||||
Sale-Buyback Transactions | |||||||||
U.S. Treasury Obligations | $110,823 | $31,646 | $69,827 | $— | $212,296 | ||||
Total Secured Borrowings | $185,392 | $246,622 | $153,215 | $18,546 | $603,775 |
22
Harbor Bond Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
* | Security in default | ||
1 | CLO after the name of a security stands for Collateralized Loan Obligation. | ||
2 | Variable or floating rate security; the stated rate represents the rate in effect at October 31, 2019. The variable rate for such securities may be based on the indicated reference rate and spread or on an underlying asset or pool of assets rather than a reference rate and may be determined by current interest rates, prepayments or other financial indicators. | ||
3 | Securities purchased in a transaction 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. The Fund has no right to demand registration of these securities. At October 31, 2019, the aggregate value of these securities was $573,374 or 29% of net assets. | ||
4 | Step coupon security; the stated rate represents the rate in effect at October 31, 2019. | ||
5 | REMICs are CMOs which can hold mortgages secured by any type of real property and issue multiple-class securities backed by those mortgages. | ||
6 | MTN after the name of a security stands for Medium Term Note. | ||
7 | Perpetuity bond; the maturity date represents the next callable date. | ||
8 | Zero coupon bond | ||
9 | At October 31, 2019, a portion of securities held by the Fund were pledged as collateral for exchange traded and centrally cleared derivatives, over-the-counter (OTC) derivatives, forward commitments, or secured borrowings (see Note 2 of the accompanying Notes to Financial Statements). The securities pledged had an aggregate value of $406,050 or 20% of net assets. | ||
10 | TBAs are mortgage-backed securities traded under delayed delivery commitments, settling after October 31, 2019. Although the unit price for the trades has been established, the principal value has not been finalized. However, the amount of the commitments will not fluctuate more than 2% from the principal amount. Income on TBAs is not earned until settlement date (see Note 2 of the accompanying Notes to Financial Statements). | ||
11 | Inflation-protected securities (“IPS”) are securities in which the principal amount is adjusted for inflation and interest payments are applied to the inflation-adjusted principal. | ||
b | If the Fund is a buyer of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) receive from the seller of protection an amount equal to the notional amount of the swap and deliver the referenced obligation or underlying securities comprising the referenced index or (ii) receive a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index. | ||
c | If the Fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation or underlying securities comprising the referenced index or (ii) pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index. | ||
d | Implied credit spreads, represented in absolute terms, utilized in determining the value of credit default swap agreements on corporate issues or sovereign issues of an emerging country as of period end serve as an indicator of the current status of the payment/performance risk and represent the likelihood or risk of default for the credit derivative. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement. A credit spread identified as “Defaulted” indicates a credit event has occurred for the referenced entity or obligation. | ||
e | The maximum potential amount the Fund could be required to make as a seller of credit protection or receive as a buyer of credit protection if a credit event occurs as defined under the terms of that particular swap agreement. | ||
f | The quoted market prices and resulting values for credit default swap agreements on asset-backed securities and credit indices serve as an indicator of the current status of the payment/performance risk and represent the likelihood of an expected liability (or profit) for the credit derivative should the notional amount of the swap agreement be closed/sold as of the period end. Increasing values, in absolute terms when compared to the notional amount of the swap, represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement. | ||
h | Transferred from Level 3 to Level 2 due to the availability of observable market data for pricing | ||
j | Amount represents index value | ||
w | Amounts in this category are included in the “Realized and Change in Net Unrealized Gain/(Loss) on Investment Transactions” section of the Statement of Operations. The net unrealized appreciation/(depreciation) per investment type is below: | ||
Valuation Description | Unrealized Gain/(Loss) as of 10/31/2019 (000s) | ||
Bank Loan Obligations | $(2) | ||
Escrow | (15) | ||
$(17) | |||
x | Fair valued in accordance with Harbor Funds' Valuation Procedures. | ||
ARS | Argentine Peso | ||
AUD | Australian Dollar | ||
BRL | Brazilian Real | ||
GBP | British Pound | ||
CAD | Canadian Dollar | ||
CNY | Chinese Yuam Renminbi | ||
EUR | Euro | ||
INR | Indian Rupee | ||
JPY | Japanese Yen | ||
MXN | Mexican Peso | ||
RUB | Russian Ruble | ||
ZAR | South African Rand | ||
TRY | Turkish Lira |
The accompanying notes are an integral part of the Financial Statements.
23
Harbor Convertible Securities Fund
Manager’s Commentary (Unaudited)
Manager’s Commentary (Unaudited)
Subadviser
Shenkman Capital Management, Inc.
461 Fifth Avenue
22nd Floor
22nd Floor
New York, NY 10017
Portfolio Managers
Mark R. Shenkman
Since 2011
Since 2011
Justin W. Slatky
Since 2017
Since 2017
Raymond F. Condon
Since 2011
Since 2011
Jordan N. Barrow, CFA
Since 2016
Since 2016
Thomas Whitley, CFA
Since 2019
Since 2019
Shenkman Capital has subadvised the Fund since 2011.
Investment Objective
The Fund seeks to maximize total returns (i.e., current income and capital appreciation).
Mark R. Shenkman
Justin W. Slatky
Raymond F. Condon
Jordan N. Barrow, CFA
Thomas Whitley, CFA
Management’s Discussion of
Fund Performance
Fund Performance
Market Review
December’s sharp sell-off due to global economic growth concerns prompted an about face in U.S. Federal Reserve (Fed) policy, which sparked positive market momentum that sustained itself throughout most of the balance of the Fund’s 2019 fiscal year. Benefitting from three Fed interest-rate cuts, continued strength in the labor markets, low inflation and the general abatement of trade concerns, the S&P 500 Index closed October 2019 at 3,037.56, a 14.32% total return since November 2018 and 29.2% above the fiscal year low of 2,351.10 established on December 24, 2018. The Fund’s benchmark, the ICE BofAML U.S. Convertible Ex Mandatory Index, returned 12.39% for the fiscal year ending October 31, 2019 with underlying equities returning 9.26% for the same period. It is worth noting that that the market’s largest sector, Information Technology, with underlying equities gaining 29.02%, contributed approximately 50% of the benchmark’s total return.
With equities trading near record highs, the continued resurgence of the convertible new issue market was encouraging, with 107 deals raising $48.4 billion for the fiscal year. This compares favorably with the preceding two years average issuance of 126 deals raising $45.6 billion each year. Another encouraging sign for the growth of the market was that first-time issuers represented approximately 45% and 65% of the notional new issue value, respectively, during each of the last two fiscal years. Beneficially, throughout the fiscal year, the continued strength and variety in new issue activity provided ample opportunity to diversify the Fund through selective purchases.
Performance
Harbor Convertible Securities Fund returned 10.48% (Retirement Class), 10.39% (Institutional Class), 10.11% (Administrative Class), and 9.99% (Investor Class) for the fiscal year, compared with the 12.39% return of the ICE BofAML U.S. Convertible Ex Mandatory Index during the same period. Generally speaking, the Fund was most negatively impacted relative to the benchmark by an underweight allocation to the most equity-like portion of the market (those securities with an investment premium of 100% or higher), which the Fund stylistically tends to underweight/sell due to excess equity sensitivity. During the fiscal year, the Fund’s average allocation to these securities was 3.60%, compared to the 15.27% weight in the benchmark. On a sector basis, negative selection in the Energy sector more than offset the positive impact of an underweight to this sector. Underlying equities in the Energy sector during the fiscal year registered a return of -61.01%. In addition, Information Technology, the Fund’s largest sector, with an average weighting of 31.44%, contributed 6.21% to the Fund’s performance, which was partially offset by a negative allocation effect due to the Fund’s underweight position to this sector.
Software was the largest industry in the Fund with an average weight of 15.55% and, with a total return of 17.79%, was the largest contributor to Fund performance. Industry performance was well diversified among 28 separate holdings. Semiconductors, the Fund’s second largest industry with an average weight of 7.86%, had a total return of 26%, and was the second largest contributor to Fund performance. Other industries with notable positive contributions to performance were health care equipment and information technology services due to security selection and real estate investment trusts due to an overweight to this industry.
24
Harbor Convertible Securities Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
CHANGE IN A $50,000 INVESTMENT
For the period 05/01/2011 through 10/31/2019
The graph compares a $50,000 investment in the Institutional Class shares of the Fund with the performance of the ICE BofAML U.S. Convertible Ex Mandatory Index. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
TOTAL RETURNS
For the periods ended 10/31/2019
1 Year | Annualized | |||||||
5 Years | Life of Fund | |||||||
Harbor Convertible Securities Fund | ||||||||
Retirement Class1,2 | 10.48% | 5.13% | 5.38% | |||||
Institutional Class1 | 10.39 | 5.09 | 5.35 | |||||
Administrative Class1 | 10.11 | 4.77 | 5.05 | |||||
Investor Class1 | 9.99 | 4.70 | 4.95 | |||||
Comparative Index | ||||||||
ICE BofAML U.S. Convertible Ex Mandatory1 | 12.39% | 8.00% | 8.92% |
As stated in the Fund’s prospectus dated March 1, 2019, the expense ratios were 0.70% (Net) and 0.75% (Gross) (Retirement Class), 0.78% (Net) and 0.83% (Gross) (Institutional Class), 1.03% (Net) and 1.08% (Gross) (Administrative Class), and 1.15% (Net) and 1.20% (Gross) (Investor Class). The net expense ratios reflect a contractual management fee waiver effective through 02/29/2020. The expense ratios in the prospectus may differ from the actual expense ratios for the period disclosed within this report. The expense ratios shown in the prospectus are based on the prior fiscal year, adjusted to reflect changes, if any, in contractual arrangements that occurred prior to the date of the prospectus (or supplement thereto, if applicable).
Performance data shown represents past performance and is no guarantee of future results. Past performance is net of management fees and expenses and reflects reinvested dividends and distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or upon the redemption of Fund shares. Past performance reflects the beneficial effect of any expense waivers or reimbursements, without which returns would have been lower. Investment returns and principal value will fluctuate so that Fund shares, when redeemed, may be worth more or less than their original cost. Returns for periods less than one year are not annualized. Current performance may be higher or lower and is available through the most recent month end atharborfunds.com or by calling 800-422-1050. The Fund charges a redemption fee of 1% on redemption of Fund shares that are held for less than 90 days.
The industries that were the primary detractors to Fund performance were oil & gas and energy equipment. The Energy sector was under pressure throughout the fiscal year due to concerns about a global slowdown in demand, potential overproduction and competition from alternative energy sources. Other industries that were negative contributors to performance were pharmaceuticals, metals & mining and health care technology.
Outlook & Strategy
Looking forward, we believe that the overall prospects for convertibles remain positive. The prospects include a growth-oriented equity environment, positive overall credit conditions and increased new issue activity combined with a historical non-correlation to Treasury rates.
Also, the continued resurgence of the convertible new issue calendar has presented many new opportunities. Recently issued convertibles have included both new companies as well as existing issuers. This development has allowed us to diversify into new businesses that meet our credit criteria, as well as maintain exposure to repeat issuers by purchasing new issues closer to their bond floors. We believe this trend favors our investment style, as we focus first on investment creditworthiness, with an emphasis on positive risk/reward characteristics.
As we continue to experience a period of uncertainty due to concerns for global growth, the trade war outcome and the future direction of interest rates, with associated periods of intermittent volatility, we expect that the market is likely to favor more balanced convertible securities with a positive credit profile, which we believe is consistent with our investment approach.
1 | The “Life of Fund” return as shown reflects the period 05/01/2011 through 10/31/2019. |
2 | Retirement Class shares commenced operations on March 1, 2016. The performance attributed to the Retirement Class shares prior to that date is that of the Institutional Class shares. Performance prior to March 1, 2016 has not been adjusted to reflect the lower expenses of Retirement Class shares. During this period, Retirement Class shares would have had returns similar to, but potentially higher than, Institutional Class shares due to the fact that Retirement Class shares represent interests in the same portfolio as Institutional Class shares but are subject to lower expenses. |
This report contains the current opinions of Shenkman Capital Management, Inc. as of the date of this report and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Such opinions are subject to change without notice and securities described herein may no longer be included in, or may at any time be removed from, the Fund’s portfolio. This report is distributed for informational purposes only. Information contained herein has been obtained from sources believed reliable, but not guaranteed.
Convertible securities tend to be of lower credit quality, and the value of a convertible security generally increases and decreases with the value of the underlying common stock, but may also be sensitive to changes in interest rates. A rise in interest rates will likely cause a decrease in the value of convertible securities. Such an event would likely have an adverse effect on the Harbor Convertible Securities Fund. High-yield investing poses additional credit risk related to lower-rated bonds. For information on the different share classes and the risks associated with an investment in the Fund, please refer to the current prospectus.
25
Harbor Convertible Securities Fund
Portfolio of Investments—October 31, 2019
Portfolio of Investments—October 31, 2019
SECTOR ALLOCATION(% of investments) – Unaudited
Value, Cost, and Principal Amounts in Thousands
CONVERTIBLE BONDS—94.8% | |||
Principal Amount | Value | ||
AUTO COMPONENTS—1.2% | |||
CIE Generale des Etablissements Michelin SCA | |||
$ | 600 | 0.000%—01/10/20221 | $608 |
Valeo SA MTN2 | |||
1,200 | 0.000%—06/16/20211 | 1,155 | |
1,763 | |||
AUTOMOBILES—1.5% | |||
Tesla Inc. | |||
1,541 | 2.000%—05/15/2024 | 1,890 | |
172 | 2.375%—03/15/2022 | 202 | |
2,092 | |||
BANKS—0.4% | |||
BofA Finance LLC MTN2 | |||
604 | 0.250%—05/01/2023 | 609 | |
BIOTECHNOLOGY—4.1% | |||
BioMarin Pharmaceutical Inc. | |||
2,428 | 0.599%—08/01/2024 | 2,435 | |
Exact Sciences Corp. | |||
1,403 | 0.375%—03/15/2027 | 1,511 | |
222 | 1.000%—01/15/2025 | 309 | |
1,820 | |||
Ionis Pharmaceuticals Inc. | |||
449 | 1.000%—11/15/2021 | 495 | |
Ligand Pharmaceuticals Inc. | |||
590 | 0.750%—05/15/2023 | 513 | |
Neurocrine Biosciences Inc. | |||
403 | 2.250%—05/15/2024 | 589 | |
5,852 | |||
CAPITAL MARKETS—1.8% | |||
Ares Capital Corp. | |||
1,743 | 3.750%—02/01/2022 | 1,785 | |
770 | 4.625%—03/01/2024 | 820 | |
2,605 | |||
COMMUNICATIONS EQUIPMENT—2.4% | |||
InterDigital Inc. | |||
592 | 2.000%—06/01/20243 | 585 | |
Lumentum Holdings Inc. | |||
559 | 0.250%—03/15/2024 | 708 |
CONVERTIBLE BONDS—Continued | |||
Principal Amount | Value | ||
COMMUNICATIONS EQUIPMENT—Continued | |||
Palo Alto Networks Inc. | |||
$ | 1,940 | 0.750%—07/01/2023 | $2,144 |
3,437 | |||
CONSTRUCTION & ENGINEERING—3.2% | |||
Dycom Industries Inc. | |||
1,477 | 0.750%—09/15/2021 | 1,402 | |
KBR Inc. | |||
610 | 2.500%—11/01/20233 | 766 | |
Tutor Perini Corp. | |||
709 | 2.875%—06/15/2021 | 676 | |
Vinci SA | |||
1,400 | 0.375%—02/16/2022 | 1,729 | |
4,573 | |||
DIVERSIFIED CONSUMER SERVICES—0.8% | |||
Chegg Inc. | |||
1,286 | 0.125%—03/15/20253 | 1,207 | |
DIVERSIFIED TELECOMMUNICATION SERVICES—3.4% | |||
Liberty Interactive LLC | |||
758 | 1.750%—09/30/20463 | 1,075 | |
Liberty Media Corp. | |||
582 | 1.000%—01/30/2023 | 738 | |
242 | 1.375%—10/15/2023 | 306 | |
1,945 | 2.125%—03/31/20483 | 2,031 | |
547 | 2.250%—09/30/2046 | 317 | |
3,392 | |||
Vonage Holdings Corp. | |||
340 | 1.750%—06/01/20243 | 331 | |
4,798 | |||
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—0.9% | |||
Insight Enterprises Inc. | |||
690 | 0.750%—02/15/20253 | 754 | |
OSI Systems Inc. | |||
433 | 1.250%—09/01/2022 | 479 | |
1,233 | |||
ENERGY EQUIPMENT & SERVICES—0.6% | |||
Oil States International Inc. | |||
601 | 1.500%—02/15/2023 | 512 |
26
Harbor Convertible Securities Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
CONVERTIBLE BONDS—Continued | |||
Principal Amount | Value | ||
ENERGY EQUIPMENT & SERVICES—Continued | |||
Transocean Inc. | |||
$ | 478 | 0.500%—01/30/2023 | $394 |
906 | |||
ENTERTAINMENT—4.8% | |||
Bilibili Inc. | |||
716 | 1.375%—04/01/20263 | 664 | |
iQIYI Inc. | |||
1,733 | 2.000%—04/01/20253 | 1,569 | |
Live Nation Entertainment Inc. | |||
2,564 | 2.500%—03/15/2023 | 3,143 | |
Zynga Inc. | |||
1,395 | 0.250%—06/01/20243 | 1,430 | |
6,806 | |||
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—3.3% | |||
Extra Space Storage LP | |||
1,369 | 3.125%—10/01/20353 | 1,684 | |
IH Merger Sub LLC | |||
1,054 | 3.500%—01/15/2022 | 1,453 | |
National Health Investors Inc. | |||
76 | 3.250%—04/01/2021 | 95 | |
Spirit Realty Capital Inc. | |||
1,340 | 3.750%—05/15/2021 | 1,388 | |
4,620 | |||
HEALTH CARE EQUIPMENT & SUPPLIES—4.4% | |||
CONMED Corp. | |||
581 | 2.625%—02/01/20243 | 800 | |
Dexcom Inc. | |||
1,262 | 0.750%—12/01/20233 | 1,511 | |
Insulet Corp. | |||
1,360 | 0.375%—09/01/20263 | 1,307 | |
Nuvasive Inc. | |||
834 | 2.250%—03/15/2021 | 1,050 | |
Repligen Corp. | |||
260 | 0.375%—07/15/2024 | 261 | |
Wright Medical Group Inc. | |||
1,292 | 1.625%—06/15/2023 | 1,237 | |
6,166 | |||
HEALTH CARE TECHNOLOGY—1.0% | |||
Allscripts Healthcare Solutions Inc. | |||
997 | 1.250%—07/01/2020 | 989 | |
Tabula Rasa Healthcare Inc. | |||
353 | 1.750%—02/15/20263 | 368 | |
1,357 | |||
HOTELS, RESTAURANTS & LEISURE—2.2% | |||
Caesars Entertainment Corp. | |||
190 | 5.000%—10/01/2024 | 337 | |
Huazhu Group Ltd. | |||
350 | 0.375%—11/01/2022 | 384 | |
Marriott Vacations Worldwide Corp. | |||
2,300 | 1.500%—09/15/2022 | 2,354 | |
3,075 | |||
INDEPENDENT POWER & RENEWABLE ELECTRICITY PRODUCERS—1.3% | |||
Nextera Energy Partners LP | |||
1,773 | 1.500%—09/15/20203 | 1,859 |
CONVERTIBLE BONDS—Continued | |||
Principal Amount | Value | ||
INTERACTIVE MEDIA & SERVICES—3.7% | |||
Snap Inc. | |||
$ | 1,326 | 0.750%—08/01/20263 | $1,344 |
Twitter Inc. | |||
1,440 | 0.250%—06/15/2024 | 1,379 | |
Weibo Corp. | |||
1,308 | 1.250%—11/15/2022 | 1,235 | |
Zillow Group Inc. | |||
690 | 0.750%—09/01/20243 | 696 | |
604 | 2.000%—12/01/2021 | 612 | |
1,308 | |||
5,266 | |||
INTERNET & DIRECT MARKETING RETAIL—4.5% | |||
Booking Holdings Inc. | |||
824 | 0.350%—06/15/2020 | 1,285 | |
Ctrip.com International Ltd. | |||
1,900 | 1.990%—07/01/2025 | 1,991 | |
Etsy Inc. | |||
756 | 0.125%—10/01/20263 | 687 | |
Mercadolibre Inc. | |||
371 | 2.000%—08/15/2028 | 526 | |
Wayfair Inc. | |||
1,745 | 1.000%—08/15/20263 | 1,560 | |
233 | 1.125%—11/01/20243 | 239 | |
1,799 | |||
6,288 | |||
IT SERVICES—5.0% | |||
Akamai Technologies Inc. | |||
999 | 0.125%—05/01/2025 | 1,124 | |
1,307 | 0.375%—09/01/20273 | 1,307 | |
2,431 | |||
Euronet Worldwide Inc. | |||
587 | 0.750%—03/15/20493 | 669 | |
Okta Inc. | |||
1,567 | 0.125%—09/01/20253 | 1,491 | |
Square Inc. | |||
949 | 0.500%—05/15/2023 | 1,050 | |
Twilio Inc. | |||
219 | 0.250%—06/01/2023 | 333 | |
Wix.com Ltd. | |||
966 | 0.000%—07/01/20231 | 1,106 | |
7,080 | |||
LIFE SCIENCES TOOLS & SERVICES—2.2% | |||
Illumina Inc. | |||
1,274 | 0.000%—08/15/20231 | 1,383 | |
219 | 0.500%—06/15/2021 | 286 | |
1,669 | |||
Qiagen NV | |||
200 | 0.875%—03/19/2021 | 229 | |
1,200 | 1.000%—11/13/2024 | 1,151 | |
1,380 | |||
3,049 | |||
MACHINERY—3.6% | |||
Chart Industries Inc. | |||
382 | 1.000%—11/15/20243 | 461 | |
Fortive Corp. | |||
740 | 0.875%—02/15/20223 | 732 |
27
Harbor Convertible Securities Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
CONVERTIBLE BONDS—Continued | |||
Principal Amount | Value | ||
MACHINERY—Continued | |||
Greenbrier Cos. Inc. | |||
$ | 1,312 | 2.875%—02/01/2024 | $1,269 |
Meritor Inc. | |||
2,547 | 3.250%—10/15/2037 | 2,622 | |
5,084 | |||
MEDIA—4.2% | |||
Dish Network Corp. | |||
3,269 | 3.375%—08/15/2026 | 3,065 | |
Liberty Latin America Ltd. | |||
2,055 | 2.000%—07/15/20243 | 2,140 | |
Pandora Media Inc. | |||
548 | 1.750%—12/01/2023 | 663 | |
5,868 | |||
MORTGAGE REAL ESTATE INVESTMENT TRUSTS (REITs)—3.5% | |||
Blackstone Mortgage Trust Inc. | |||
2,535 | 4.750%—03/15/2023 | 2,682 | |
Starwood Property Trust Inc. | |||
1,139 | 4.375%—04/01/2023 | 1,186 | |
Two Harbors Investment Corp. | |||
985 | 6.250%—01/15/2022 | 1,020 | |
4,888 | |||
OIL, GAS & CONSUMABLE FUELS—1.5% | |||
PDC Energy Inc. | |||
353 | 1.125%—09/15/2021 | 320 | |
SM Energy Co. | |||
309 | 1.500%—07/01/2021 | 277 | |
Total SA MTN2 | |||
1,400 | 0.500%—12/02/2022 | 1,474 | |
2,071 | |||
PERSONAL PRODUCTS—0.6% | |||
Herbalife Nutrition Ltd. | |||
794 | 2.625%—03/15/2024 | 802 | |
PHARMACEUTICALS—2.4% | |||
Ironwood Pharmaceuticals Inc. | |||
345 | 0.750%—06/15/20243 | 346 | |
345 | 1.500%—06/15/20263 | 348 | |
694 | |||
Jazz Investments I Ltd. | |||
1,524 | 1.500%—08/15/2024 | 1,465 | |
364 | 1.875%—08/15/2021 | 364 | |
1,829 | |||
Supernus Pharmaceuticals Inc. | |||
938 | 0.625%—04/01/2023 | 868 | |
3,391 | |||
PROFESSIONAL SERVICES—0.6% | |||
FTI Consulting Inc. | |||
645 | 2.000%—08/15/2023 | 809 | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—7.7% | |||
Advanced Micro Devices Inc. | |||
113 | 2.125%—09/01/2026 | 491 | |
Cypress Semiconductor Corp. | |||
518 | 2.000%—02/01/2023 | 628 | |
Intel Corp. | |||
502 | 3.250%—08/01/2039 | 1,399 |
CONVERTIBLE BONDS—Continued | |||
Principal Amount | Value | ||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—Continued | |||
Microchip Technology Inc. | |||
$ | 1,842 | 1.625%—02/15/2027 | $2,416 |
NXP Semiconductors NV | |||
609 | 1.000%—12/01/2019 | 669 | |
ON Semiconductor Corp. | |||
1,308 | 1.000%—12/01/2020 | 1,586 | |
Silicon Laboratories Inc. | |||
1,300 | 1.375%—03/01/2022 | 1,648 | |
STMicroelectronics NV | |||
1,000 | 0.250%—07/03/2024 | 1,297 | |
Teradyne Inc. | |||
340 | 1.250%—12/15/2023 | 677 | |
10,811 | |||
SOFTWARE—14.6% | |||
Altair Engineering Inc. | |||
374 | 0.250%—06/01/2024 | 389 | |
Alteryx Inc. | |||
744 | 0.500%—08/01/20243 | 690 | |
402 | 1.000%—08/01/20263 | 364 | |
1,054 | |||
Atlassian Inc. | |||
226 | 0.625%—05/01/2023 | 360 | |
Blackline Inc. | |||
925 | 0.125%—08/01/20243 | 883 | |
Carbonite Inc. | |||
350 | 2.500%—04/01/2022 | 342 | |
Coupa Software Inc. | |||
295 | 0.125%—06/15/20253 | 335 | |
DocuSign Inc. | |||
1,106 | 0.500%—09/15/2023 | 1,304 | |
Envestnet Inc. | |||
1,231 | 1.750%—12/15/2019-06/01/2023 | 1,356 | |
FireEye Inc. | |||
1,245 | 0.875%—06/01/2024 | 1,235 | |
Five9 Inc. | |||
247 | 0.125%—05/01/2023 | 367 | |
New Relic Inc. | |||
1,651 | 0.500%—05/01/2023 | 1,591 | |
Nice Systems Inc. | |||
249 | 1.250%—01/15/2024 | 485 | |
Nuance Communications Inc. | |||
362 | 1.000%—12/15/2035 | 354 | |
1,308 | 1.250%—04/01/2025 | 1,381 | |
1,735 | |||
Proofpoint Inc. | |||
1,020 | 0.250%—08/15/20243 | 1,058 | |
Q2 Holdings Inc. | |||
457 | 0.750%—06/01/20263 | 485 | |
RingCentral Inc. | |||
202 | 0.000%—03/15/20231 | 409 | |
Sailpoint Technologies Holding Inc. | |||
848 | 0.125%—09/15/20243 | 822 | |
ServiceNow Inc. | |||
209 | 0.000%—06/01/20221 | 392 | |
Splunk Inc. | |||
2,084 | 0.500%—09/15/2023 | 2,273 | |
180 | 1.125%—09/15/2025 | 200 | |
2,473 | |||
Verint Systems Inc. | |||
1,721 | 1.500%—06/01/2021 | 1,762 |
28
Harbor Convertible Securities Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
CONVERTIBLE BONDS—Continued | |||
Principal Amount | Value | ||
SOFTWARE—Continued | |||
Workday Inc. | |||
$ | 681 | 0.250%—10/01/2022 | $870 |
Workiva Inc. | |||
407 | 1.125%—08/15/20263 | 367 | |
Zendesk Inc. | |||
351 | 0.250%—03/15/2023 | 458 | |
20,532 | |||
SPECIALTY RETAIL—1.1% | |||
Guess? Inc. | |||
702 | 2.000%—04/15/20243 | 673 | |
RH | |||
764 | 0.000%—06/15/20231 | 864 | |
1,537 | |||
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS—2.3% | |||
Pure Storage Inc. | |||
1,196 | 0.125%—04/15/2023 | 1,260 |
CONVERTIBLE BONDS—Continued | |||
Principal Amount | Value | ||
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS—Continued | |||
Western Digital Corp. | |||
$ | 2,025 | 1.500%—02/01/20243 | $1,931 |
3,191 | |||
TOTAL CONVERTIBLE BONDS | |||
(Cost $128,868) | 133,625 | ||
TOTAL INVESTMENTS—94.8% | |||
(Cost $128,868) | 133,625 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—5.2% | 7,327 | ||
TOTAL NET ASSETS—100.0% | $140,952 |
FAIR VALUE MEASUREMENTS
All investments at October 31, 2019 (as disclosed in the preceding Portfolio of Investments) were classified as Level 2. There were no Level 3 investments at October 31, 2019 or 2018.
For more information on valuation inputs and their aggregation into the levels identified above, please refer to the Fair Value Measurements and Disclosures in Note 2 of the accompanying Notes to Financial Statements.
1 | Zero coupon bond |
2 | MTN after the name of a security stands for Medium Term Note. |
3 | Securities purchased in a transaction 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. The Fund has no right to demand registration of these securities. At October 31, 2019, the aggregate value of these securities was $37,569 or 27% of net assets. |
The accompanying notes are an integral part of the Financial Statements.
29
Harbor Core Bond Fund
Manager’s Commentary (Unaudited)
Manager’s Commentary (Unaudited)
Subadviser
Income Research + Management
100 Federal Street
30th Floor
30th Floor
Boston, MA 02110
Portfolio Managers
William A. O’Malley, CFA
Since 2018
James E. Gubitosi, CFA
Since 2018
Since 2018
Sarah Kilpatrick
Since 2018
Since 2018
IR+M has subadvised the Fund since 2018.
Investment Objective
The Fund seeks total return.
William A. O’Malley, CFA
James E. Gubitosi, CFA
Sarah Kilpatrick
Management’s Discussion of
Fund Performance
Fund Performance
Market Review
In late 2018, geopolitical concerns, falling oil prices, and a continuation of tightening monetary policy pushed market volatility higher. At the December meeting, the U.S. Federal Reserve (Fed), as expected, raised the federal funds target range by another 0.25% to 2.25-2.50%. This marked the fourth rate increase in 2018 and ninth since December 2015. However, the Fed reversed course and cut the federal funds rate by 0.25% three separate times in 2019. This marked the first rate cut by the Fed in a decade. The dovish Fed, low inflation, and slowing global growth caused investors to price in the rate cuts earlier in the year. Fear of a slowdown and continued trade tensions with China caused investor sentiment to drastically shift. As a result, a flight-to-quality temporarily pushed Treasury yields to an all-time low. Yields fell across the curve, and in the third quarter the spread between the 2- and 10-year Treasury yields inverted for the first time since 2007. Rate volatility was not limited to the Treasury market, as the overnight repurchase agreement rate rose as high as 10% in late September. However, the Fed introduced temporary measures to provide additional liquidity to the markets, and the rate retreated to under 2%. In the corporate market, a healthy appetite for risk, despite lower Treasury yields, supported investment-grade bonds. Strong demand helped tighten spreads from 1.53% at the beginning of the year to 1.10% at the end of October 2019. Investment-grade issuers borrowed $940 billion in 2019, trailing last year’s pace by almost 7%.
Performance
During the fiscal year, Harbor Core Bond Fund returned 11.34% (Retirement Class) and 11.26% (Institutional Class), underperforming the Bloomberg Barclays U.S. Aggregate Bond Index’s 11.51% return. Detractors from relative performance included the Fund’s out of benchmark allocation to small business administration loans, underweight to Non-Corporates, and security selection within residential mortgage backed securities (RMBS) and commercial mortgage backed securities (CMBS). Contributors to relative performance included the Fund’s underweight to Treasuries and security selection within corporates; namely Industrial and Financial sectors. Holdings that drove positive performance in the Fund included Anheuser-Busch InBev, Charter Communications and Berkshire Hathaway Energy, while detractors included Abbvie Inc., Nissan Motors and Progress Residential CMBS.
Allocation shifts were made on the margin over the reporting period, as we took advantage of spread tightening and monetized tighter trading corporate bonds by reallocating the proceeds to more attractive opportunities within the sector. Over the course of the period, we also broadly brought down our Treasury allocation and took the opportunity to increase our Securitized exposure. Compared to the Bloomberg Barclays U.S. Aggregate Bond Index, the Fund holds a 23% underweight to Treasuries and an overweight to spread sectors, with a 4% Credit sector overweight and a 15% Securitized sector overweight at the end of the reporting period.
30
Harbor Core Bond Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
CHANGE IN A $10,000 INVESTMENT
For the period 06/01/2018 through 10/31/2019
The graph compares a $10,000 investment in the Institutional Class shares of the Fund with the performance of the Bloomberg Barclays U.S. Aggregate Bond Index. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
TOTAL RETURNS
For the periods ended 10/31/2019
1 Year | 5 Years | Annualized | ||||||
Life of Fund | ||||||||
Harbor Core Bond Fund | ||||||||
Retirement Class1 | 11.34% | N/A | 7.31% | |||||
Institutional Class1 | 11.26 | N/A | 7.24 | |||||
Comparative Index | ||||||||
Bloomberg Barclays U.S. Aggregate Bond1 | 11.51% | N/A | 7.30% |
As stated in the Fund’s prospectus dated March 1, 2019, the expense ratios were 0.37% (Net) and 0.46% (Gross) (Retirement Class) and 0.45% (Net) and 0.54% (Gross) (Institutional Class). The net expense ratios reflect a contractual management fee waiver effective through 02/29/2020. The expense ratios in the prospectus may differ from the actual expense ratios for the period disclosed within this report. The expense ratios shown in the prospectus are based on estimates for the current fiscal year.
Performance data shown represents past performance and is no guarantee of future results. Past performance is net of management fees and expenses and reflects reinvested dividends and distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or upon the redemption of Fund shares. Past performance reflects the beneficial effect of any expense waivers or reimbursements, without which returns would have been lower. Investment returns and principal value will fluctuate so that Fund shares, when redeemed, may be worth more or less than their original cost. Returns for periods less than one year are not annualized. Current performance may be higher or lower and is available through the most recent month end atharborfunds.com or by calling 800-422-1050.
Outlook & Strategy
We remain optimistic on corporate fundamentals. We believe that investment-grade corporate fundamentals remain healthy, and therefore we are slightly overweight credit versus the benchmark index. However, we are concerned about geopolitical tensions, long credit spreads and non-corporates. To take advantage of any broad market weakness as the result of slowing global growth or setbacks in trade talks, we currently have a slight spread duration overweight to high-quality securitized bonds. By doing so, we believe that we have ample liquidity to shift allocations as opportunities present themselves.
Our investment philosophy is consistent across all of our broad market strategies and is based on the belief that careful security selection and active portfolio risk management will lead to superior returns over the long-term (e.g., a market cycle). Portfolios are constructed to meet client objectives by using a disciplined, bottom-up approach to a variety of investment grade fixed income sectors. We believe that predicting the timing, direction, and magnitude of future interest rate changes is very difficult to consistently get right; as such, we keep duration and yield curve exposure neutral to the benchmark. This philosophy has remained consistent since the inception of the firm. We do not maintain an outlook on rates and did not change our view as a result of events that took place over the reporting period. We remain committed to our disciplined, bottom-up approach while keeping our portfolios duration-neutral to their respective benchmarks and actively managing portfolio risks.
As we look forward, the total amount of negative yielding debt worldwide has reached almost $15 trillion. Central banks have taken an accommodative stance by lowering rates and restarting quantitative easing, as global growth has slowed. The U.S. economy, however, appears to be relatively stable, despite fears that a global economic downturn could spill over into the U.S. The market expects another rate cut later in 2019, counter to the Fed’s expectation of no cuts until 2020. The market-implied probability of another rate cut by the end of 2019 is 27%. At IR+M, we are aware of how quickly markets can change, especially after last year’s volatile fourth quarter. With that, we continue to value incremental carry, while balancing downside protection, given rich valuations. We believe we have positioned portfolios accordingly, and should dislocations arise, we are prepared with ample liquidity. We seek to remain surgical in our bottom-up approach, while being mindful of potential risks.
1 | The “Life of Fund” return as shown reflects the period 06/01/2018 through 10/31/2019. |
This report contains the current opinions of Income Research + Management as of the date of this report and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Such opinions are subject to change without notice and securities described herein may no longer be included in, or may at any time be removed from, the Fund’s portfolio. This report is distributed for informational purposes only. Information contained herein has been obtained from sources believed reliable, but not guaranteed.
Fixed income investments are affected by interest rate changes and the creditworthiness of the issues held by the Fund. A rise in interest rates will cause a decrease in the value of fixed income securities. Such an event would have an adverse effect on the Fund. There may be a greater risk that the Fund could lose money due to prepayment and extension risks because the Fund invests heavily at times in mortgage-related securities. The Fund may engage in active and frequent trading to achieve its principal investment strategies. References to securities that are backed by the full faith and credit of the U.S. Government do not apply to the shares of the Fund. For information on the different share classes and the risks associated with an investment in the Fund, please refer to the current prospectus.
31
Harbor Core Bond Fund
Portfolio of Investments—October 31, 2019
Portfolio of Investments—October 31, 2019
Investment Allocation(% of investments) – Unaudited
Value, Cost and Principal Amounts in Thousands
ASSET-BACKED SECURITIES—11.8% | |||
Principal Amount | Value | ||
Air Canada Pass-Through Trust | |||
Series 2015-1 Cl. A | |||
$ | 326 | 3.600%—03/15/20271 | $344 |
American Airlines Pass-Through Trust | |||
Series 2015-1 Cl. A | |||
578 | 3.375%—05/01/2027 | 602 | |
99 | 4.950%—01/15/2023 | 104 | |
706 | |||
CNH Equipment Trust | |||
Series 2018-A Cl. A3 | |||
590 | 3.120%—07/17/2023 | 599 | |
Series 2018-B Cl. A3 | |||
271 | 3.190%—11/15/2023 | 276 | |
875 | |||
DB Master Finance LLC | |||
Series 2017-1A Cl. A2I | |||
246 | 3.629%—11/20/20471 | 251 | |
175 | 3.787%—05/20/20491 | 180 | |
431 | |||
Delta Air Lines Pass-Through Trust | |||
Series 2015-1 Cl. AA | |||
298 | 3.625%—07/30/2027 | 319 | |
DLL Securitization Trust | |||
Series 2017-A Cl. A3 | |||
209 | 2.140%—12/15/20211 | 209 | |
Domino's Pizza Master Issuer LLC | |||
Series 2017-1A Cl. A2I | |||
245 | 4.021% (3 Month USD Libor + 1.250) 04/25/20221,2 | 245 | |
Ford Credit Floorplan Master Owner Trust | |||
Series 2016-5 Cl. A1 | |||
492 | 1.950%—11/15/2021 | 492 | |
GM Financial Automobile Leasing Trust | |||
Series 2019-1 Cl. A3 | |||
437 | 2.980%—12/20/2021 | 442 | |
GMF Floorplan Owner Revolving Trust | |||
Series 2017-1 Cl. A1 | |||
1,194 | 2.220%—01/18/20221 | 1,194 | |
Invitation Homes Trust | |||
Series 2018-SFR1 Cl. A | |||
116 | 2.589%—03/17/20371,2 | 115 | |
MMAF Equipment Finance LLC | |||
Series 2019-A Cl. A3 | |||
334 | 2.840%—11/13/20231 | 340 |
ASSET-BACKED SECURITIES—Continued | |||
Principal Amount | Value | ||
Progress Residential Trust | |||
Series 2018-SFR3 Cl. A | |||
$ | 433 | 3.880%—10/17/20351 | $445 |
Store Master Funding I-VII | |||
Series 2018-1A Cl. A1 | |||
203 | 3.960%—10/20/20481 | 215 | |
United Airlines Pass-Through Trust | |||
Series 2014-1 Cl. A | |||
815 | 4.000%—04/11/2026 | 879 | |
Verizon Owner Trust | |||
Series 2019-B Cl. A1A | |||
374 | 2.330%—12/20/2023 | 377 | |
Series 2018-A Cl. A1A | |||
501 | 3.230%—04/20/2023 | 511 | |
888 | |||
Wendy's Funding LLC | |||
Series 2019-1A Cl. A2I | |||
178 | 3.783%—06/15/20491 | 184 | |
Wheels SPV LLC | |||
Series 2017-1A Cl. A2 | |||
142 | 3.060%—04/20/20271 | 143 | |
World Omni Auto Receivables Trust | |||
Series 2017-B Cl. A3 | |||
456 | 1.950%—02/15/2023 | 456 | |
Series 2019-A Cl. A3 | |||
273 | 3.040%—05/15/2024 | 279 | |
Series 2018-D Cl. A3 | |||
750 | 3.330%—04/15/2024 | 767 | |
1,502 | |||
TOTAL ASSET-BACKED SECURITIES | |||
(Cost $9,702) | 9,968 | ||
COLLATERALIZED MORTGAGE OBLIGATIONS—8.5% | |||
BANK 2019-BNK16 | |||
Series 2019-BN16 Cl. ASB | |||
651 | 3.898%—02/15/2052 | 713 | |
BX Commercial Mortgage Trust | |||
Series 2019-XL Cl. A | |||
559 | 2.920%—10/15/2036 | 560 | |
Commercial Mortgage Pass-Through Certificates | |||
Series 2014-CR14 Cl. A2 | |||
223 | 3.147%—02/10/2047 | 223 |
32
Harbor Core Bond Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost and Principal Amounts in Thousands
COLLATERALIZED MORTGAGE OBLIGATIONS—Continued | |||
Principal Amount | Value | ||
Series 2014-CR21 Cl. A3 | |||
$ | 248 | 3.528%—12/10/2047 | $262 |
485 | |||
Flagstar Mortgage Trust | |||
Series 2018-1 Cl. A5 | |||
175 | 3.500%—03/25/20481,2 | 178 | |
GS Mortgage Securities Trust | |||
Series 2012-GCJ7 Cl. A4 | |||
400 | 3.377%—05/10/2045 | 407 | |
JPMBB Commercial Mortgage Securities Trust | |||
Series 2015-C32 Cl. A2 | |||
729 | 2.816%—11/15/2048 | 731 | |
JPMorgan Chase Commercial Mortgage Securities Trust | |||
Series 2019-COR5 Cl. A2 | |||
635 | 3.150%—06/13/2052 | 660 | |
Series 2012-CBX Cl. A4 | |||
307 | 3.483%—06/15/2045 | 314 | |
974 | |||
JPMorgan Mortgage Trust | |||
Series 2016-4 Cl. A5 | |||
196 | 3.500%—10/25/20461,2 | 201 | |
Series 2018-4 Cl. A5 | |||
341 | 3.500%—10/25/20481,2 | 346 | |
Series 2018-6 Cl. 1A4 | |||
220 | 3.500%—12/25/2048 | 222 | |
Series 2019-1 Cl. A6 | |||
135 | 4.000%—05/25/20491,2 | 136 | |
905 | |||
Morgan Stanley Capital I Trust | |||
Series 2012-C4 Cl. A4 | |||
319 | 3.244%—03/15/2045 | 326 | |
PSMC Trust | |||
Series 2019-2 Cl. A3 | |||
255 | 3.500%—10/25/2049 | 260 | |
Seasoned Credit Risk Transfer Trust Series 2018-4 | |||
Series 2018-4 Cl. MA | |||
520 | 3.500%—03/25/2058 | 542 | |
Seasoned Credit Risk Transfer Trust Series 2019-2 | |||
Series 2019-2 Cl. MA | |||
251 | 3.500%—08/25/2058 | 263 | |
Wells Fargo Mortgage Backed Securities Trust | |||
Series 2019-2 Cl. A3 | |||
231 | 4.000%—04/25/20491,2 | 233 | |
WF RBS Commercial Mortgage Trust | |||
Series 2012-C10 Cl. A3 | |||
244 | 2.875%—12/15/2045 | 249 | |
Series 2011-C4 Cl. A4 | |||
400 | 4.902%—06/15/20441,2 | 413 | |
662 | |||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS | |||
(Cost $7,117) | 7,239 | ||
CORPORATE BONDS & NOTES—29.8% | |||
AEROSPACE & DEFENSE—0.7% | |||
BAE Systems Holdings Inc. | |||
300 | 3.800%—10/07/20241 | 318 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
AEROSPACE & DEFENSE—Continued | |||
Lockheed Martin Corp. | |||
$ | 225 | 4.700%—05/15/2046 | $285 |
603 | |||
AIR FREIGHT & LOGISTICS—0.3% | |||
FedEx Corp. | |||
270 | 4.050%—02/15/2048 | 266 | |
AUTOMOBILES—0.7% | |||
Daimler Finance North America LLC | |||
300 | 2.200%—05/05/20201 | 300 | |
Volkswagen Group of America Finance LLC | |||
240 | 4.625%—11/13/20251 | 267 | |
567 | |||
BANKS—2.4% | |||
Bank of America Corp. MTN3 | |||
200 | 3.500%—04/19/2026 | 213 | |
206 | 4.330%—03/15/20502 | 245 | |
458 | |||
Citigroup Inc. | |||
421 | 3.400%—05/01/2026 | 442 | |
JPMorgan Chase & Co. | |||
300 | 3.200%—01/25/2023 | 311 | |
476 | 4.203%—07/23/20292 | 529 | |
840 | |||
PNC Bank NA | |||
250 | 3.500%—06/08/2023 | 263 | |
2,003 | |||
BEVERAGES—0.5% | |||
Anheuser-Busch Cos. LLC / Anheuser-Busch InBev Worldwide Inc. | |||
358 | 4.900%—02/01/2046 | 428 | |
BIOTECHNOLOGY—1.0% | |||
AbbVie Inc. | |||
400 | 2.500%—05/14/2020 | 401 | |
Celgene Corp. | |||
400 | 2.875%—08/15/2020 | 403 | |
804 | |||
CAPITAL MARKETS—3.7% | |||
Apollo Management Holdings LP | |||
250 | 4.000%—05/30/20241 | 263 | |
Blackstone Holdings Finance Co. LLC | |||
286 | 3.500%—09/10/20491 | 287 | |
Goldman Sachs Group Inc. | |||
420 | 5.750%—01/24/2022 | 453 | |
KKR Group Finance Co. II LLC | |||
456 | 5.500%—02/01/20431 | 560 | |
Macquarie Group Ltd. | |||
165 | 3.189%—11/28/20231,2 | 169 | |
Macquarie Group Ltd. MTN3 | |||
250 | 4.150%—03/27/20241,2 | 264 | |
Moody's Corp. | |||
407 | 3.250%—06/07/2021 | 414 | |
Morgan Stanley MTN3 | |||
145 | 3.125%—07/27/2026 | 151 | |
252 | 3.875%—01/27/2026 | 272 | |
423 |
33
Harbor Core Bond Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost and Principal Amounts in Thousands
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
CAPITAL MARKETS—Continued | |||
UBS Group Funding Switzerland AG | |||
$ | 300 | 4.125%—04/15/20261 | $328 |
3,161 | |||
CONSUMER FINANCE—2.0% | |||
American Express Co. | |||
250 | 3.375%—05/17/2021 | 255 | |
150 | 3.400%—02/27/2023 | 157 | |
412 | |||
GE Capital International Funding Co. Unlimited Co. | |||
415 | 2.342%—11/15/2020 | 415 | |
General Motors Financial Co. Inc. | |||
444 | 4.150%—06/19/2023 | 462 | |
Nissan Motor Acceptance Corp. MTN3 | |||
400 | 2.150%—09/28/20201 | 400 | |
1,689 | |||
DIVERSIFIED FINANCIAL SERVICES—1.1% | |||
Cooperatieve Rabobank U.A. | |||
400 | 3.875%—09/26/20231 | 424 | |
Siemens Financieringsmaatschappij NV | |||
300 | 2.150%—05/27/20201 | 301 | |
Voya Financial Inc. | |||
200 | 3.125%—07/15/2024 | 207 | |
932 | |||
DIVERSIFIED TELECOMMUNICATION SERVICES—1.5% | |||
AT&T Inc. | |||
664 | 3.312% (3 Month USD Libor + 1.180) 06/12/20242 | 676 | |
305 | 3.400%—05/15/2025 | 320 | |
996 | |||
Verizon Communications Inc. | |||
247 | 4.522%—09/15/2048 | 294 | |
1,290 | |||
ELECTRIC UTILITIES—2.9% | |||
Berkshire Hathaway Energy Co. | |||
525 | 6.125%—04/01/2036 | 730 | |
Eversource Energy | |||
260 | 2.750%—03/15/2022 | 265 | |
Exelon Corp. | |||
368 | 5.100%—06/15/2045 | 447 | |
Nextera Energy Capital Holdings Inc. | |||
255 | 2.403%—09/01/2021 | 257 | |
Southern Co. | |||
430 | 3.250%—07/01/2026 | 449 | |
Virginia Electric & Power Co. | |||
305 | 3.150%—01/15/2026 | 320 | |
2,468 | |||
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—1.8% | |||
Boston Properties LP | |||
468 | 4.500%—12/01/2028 | 536 | |
Digital Realty Trust LP | |||
500 | 3.700%—08/15/2027 | 527 | |
HCP Inc. | |||
188 | 4.250%—11/15/2023 | 202 | |
Ventas Realty LP | |||
250 | 4.125%—01/15/2026 | 273 | |
1,538 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
FOOD & STAPLES RETAILING—0.3% | |||
Kroger Co. | |||
$ | 250 | 4.000%—02/01/2024 | $268 |
HEALTH CARE PROVIDERS & SERVICES—1.9% | |||
Cigna Corp. | |||
495 | 3.400%—03/01/2027 | 511 | |
CommonSpirit Health | |||
232 | 4.187%—10/01/2049 | 238 | |
CVS Pass-Through Trust | |||
132 | 5.880%—01/10/2028 | 147 | |
529 | 8.353%—07/10/20311 | 678 | |
825 | |||
1,574 | |||
INDUSTRIAL CONGLOMERATES—0.2% | |||
General Electric Co. MTN3 | |||
172 | 4.625%—01/07/2021 | 177 | |
INSURANCE—1.4% | |||
American International Group Inc. | |||
465 | 4.125%—02/15/2024 | 500 | |
Five Corners Funding Trust | |||
250 | 4.419%—11/15/20231 | 272 | |
Liberty Mutual Group Inc. | |||
400 | 4.569%—02/01/20291 | 452 | |
1,224 | |||
MEDIA—2.2% | |||
Charter Communications Operating LLC / Charter Communications Operating Capital | |||
478 | 6.384%—10/23/2035 | 588 | |
Comcast Cable Communications Holdings Inc. | |||
200 | 9.455%—11/15/2022 | 245 | |
Comcast Corp. | |||
470 | 3.000%—02/01/2024 | 489 | |
COX Communications Inc. | |||
300 | 2.950%—06/30/20231 | 307 | |
200 | 3.250%—12/15/20221 | 206 | |
513 | |||
1,835 | |||
OIL, GAS & CONSUMABLE FUELS—1.9% | |||
Concho Resources Inc. | |||
155 | 4.300%—08/15/2028 | 167 | |
Occidental Petroleum Corp. | |||
1,000 | 0.000%—10/10/20364 | 504 | |
Phillips 66 Partners LP | |||
250 | 3.605%—02/15/2025 | 262 | |
Schlumberger Holdings Corp. | |||
252 | 3.900%—05/17/20281 | 267 | |
Sunoco Logistics Partners Operations LP | |||
428 | 3.900%—07/15/2026 | 444 | |
1,644 | |||
ROAD & RAIL—1.1% | |||
Norfolk Southern Corp. | |||
310 | 4.837%—10/01/2041 | 372 | |
Penske Truck Leasing Co. LP / PTL Finance Corp. | |||
500 | 3.900%—02/01/20241 | 528 | |
900 |
34
Harbor Core Bond Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost and Principal Amounts in Thousands
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—0.6% | |||
Broadcom Inc. | |||
$ | 257 | 3.625%—10/15/20241 | $264 |
NXP BV / NXP Funding LLC | |||
251 | 4.625%—06/01/20231 | 268 | |
532 | |||
TRADING COMPANIES & DISTRIBUTORS—1.4% | |||
AerCap Ireland Capital DAC / AerCap Global Aviation Trust | |||
272 | 4.125%—07/03/2023 | 287 | |
Air Lease Corp. | |||
374 | 3.875%—07/03/2023 | 393 | |
Ferguson Finance plc | |||
466 | 4.500%—10/24/20281 | 502 | |
1,182 | |||
WATER UTILITIES—0.2% | |||
Aquarion Co. | |||
117 | 4.000%—08/15/20241 | 124 | |
TOTAL CORPORATE BONDS & NOTES | |||
(Cost $23,536) | 25,209 | ||
MORTGAGE PASS-THROUGH—26.2% | |||
Federal Home Loan Mortgage Corp. | |||
2,390 | 3.000%—11/01/2043-02/01/2047 | 2,466 | |
821 | 3.500%—07/01/2046 | 873 | |
802 | 4.000%—02/01/2046 | 849 | |
219 | 5.000%—06/01/2041 | 242 | |
4,430 | |||
Federal National Mortgage Association | |||
3,527 | 3.500%—10/01/2037-10/01/2049 | 3,673 | |
2,896 | 4.000%—04/01/2045-08/01/2049 | 3,062 | |
3,057 | 4.500%—05/01/2046-06/01/2049 | 3,262 | |
3,848 | 5.000%—09/01/2033-04/01/2049 | 4,226 | |
14,223 | |||
Government National Mortgage Association | |||
925 | 4.000%—09/20/2041-09/15/2046 | 994 | |
2,419 | 4.500%—01/15/2042-08/20/2047 | 2,589 | |
3,583 | |||
TOTAL MORTGAGE PASS-THROUGH | |||
(Cost $21,629) | 22,236 | ||
MUNICIPAL BONDS—1.9% | |||
Metropolitan Transportation Authority | |||
195 | 5.871%—11/15/2039 | 257 | |
Metropolitan Water Reclamation District of Greater Chicago | |||
145 | 5.720%—12/01/2038 | 194 |
MUNICIPAL BONDS—Continued | |||
Principal Amount | Value | ||
New York State Urban Development Corp. | |||
$ | 555 | 5.770%—03/15/2039 | $683 |
State of California | |||
300 | 7.500%—04/01/2034 | 460 | |
TOTAL MUNICIPAL BONDS | |||
(Cost $1,470) | 1,594 | ||
U.S. GOVERNMENT OBLIGATIONS—21.0% | |||
U.S. Small Business Administration | |||
Series 2012-20C Cl. 1 | |||
180 | 2.510%—03/01/2032 | 183 | |
Series 2017-20H Cl. 1 | |||
169 | 2.750%—08/01/2037 | 174 | |
Series 2016-20L Cl. 1 | |||
1,229 | 2.810%—12/01/2036 | 1,280 | |
Series 2015-20H Cl. 1 | |||
435 | 2.820%—08/01/2035 | 452 | |
Series 2017-20J Cl. 1 | |||
273 | 2.850%—10/01/2037 | 284 | |
Series 2018-20B Cl. 1 | |||
322 | 3.220%—02/01/2038 | 341 | |
Series 2018-20G Cl. 1 | |||
490 | 3.540%—07/01/2038 | 529 | |
Series 2018-20F Cl. 1 | |||
731 | 3.600%—06/01/2038 | 793 | |
4,036 | |||
U.S. Treasury Bonds | |||
362 | 2.250%—08/15/2049 | 367 | |
3,606 | 3.000%—02/15/2048-08/15/2048 | 4,234 | |
458 | 3.500%—02/15/2039 | 568 | |
2,904 | 4.500%—05/15/2038 | 4,059 | |
9,228 | |||
U.S. Treasury Notes | |||
3,944 | 1.750%—06/30/2024 | 3,984 | |
158 | 2.625%—02/15/2029 | 171 | |
404 | 2.750%—09/15/2021 | 413 | |
4,568 | |||
TOTAL U.S. GOVERNMENT OBLIGATIONS | |||
(Cost $16,437) | 17,832 | ||
TOTAL INVESTMENTS—99.2% | |||
(Cost $79,891) | 84,078 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—0.8% | 678 | ||
TOTAL NET ASSETS—100.0% | $84,756 |
FAIR VALUE MEASUREMENTS
All investments at October 31, 2019 (as disclosed in the preceding Portfolio of Investments) were classified as Level 2. There were no Level 3 investments at October 31, 2019 or 2018.
For more information on valuation inputs and their aggregation into the levels identified above, please refer to the Fair Value Measurements and Disclosures in Note 2 of the accompanying Notes to Financial Statements.
35
Harbor Core Bond Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
1 | Securities purchased in a transaction 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. The Fund has no right to demand registration of these securities. At October 31, 2019, the aggregate value of these securities was $13,121 or 15% of net assets. |
2 | Variable or floating rate security; the stated rate represents the rate in effect at October 31, 2019. The variable rate for such securities may be based on the indicated reference rate and spread or on an underlying asset or pool of assets rather than a reference rate and may be determined by current interest rates, prepayments or other financial indicators. |
3 | MTN after the name of a security stands for Medium Term Note. |
4 | Zero coupon bond |
The accompanying notes are an integral part of the Financial Statements.
36
Harbor High-Yield Bond Fund
Manager’s Commentary (Unaudited)
Manager’s Commentary (Unaudited)
Subadviser
Shenkman Capital Management, Inc.
461 Fifth Avenue
22nd Floor
22nd Floor
New York, NY 10017
Portfolio Managers
Mark R. Shenkman
Since 2002
Since 2002
Justin W. Slatky
Since 2012
Since 2012
Eric Dobbin
Since 2012
Since 2012
Robert S. Kricheff
Since 2015
Since 2015
Neil Wechsler, CFA
Since 2017
Since 2017
Shenkman Capital has subadvised the Fund since 2002.
Investment Objective
The Fund seeks total returns (i.e., current income and capital appreciation).
Mark R. Shenkman
Justin W. Slatky
Eric Dobbin
Robert S. Kricheff
Neil Wechsler, CFA
Management’s Discussion of
Fund Performance
Fund Performance
Market review
For the fiscal year ended October 31, 2019, the high-yield markets started with two months of negative returns, including December when major high-yield bond indexes were down more than 2%. However, the market quickly bounced back and on a twelve month basis posted high single-digit returns. During the fiscal year, the ICE BofAML U.S. Non-Distressed High Yield Index posted a return of 9.95%, while the broader market, as measured by the ICE BofAML U.S. High Yield (H0A0) Index, returned 8.32%.
There were several distinct performance characteristics during the year. There was a significant positive bias toward better quality credits, as the CCC-rated part of the market significantly underperformed the more highly rated tiers. This led the more narrowly defined ICE BofAML U.S. Non-Distressed High Yield Index to outperform the more inclusive ICE BofAML U.S. High Yield (H0A0) Index. Additionally, longer duration tiers of the market significantly outperformed shorter duration parts of the market. This was likely due in large part to the interest-rate cuts by the U.S. Federal Reserve (Fed) that helped drive the yield on the U.S. 10-year Treasury from 3.1% to 1.7% during the year. The ICE BofAML U.S. Non-Distressed High Yield Index’s average price moved from 97.7 to 102.9 during the fiscal year and ended the year with a spread-to-worst of 3.31% and a yield-to-worst of 4.9%.
While interest rates had a major impact on the markets during the year, there were other factors that moved prices too. There was significant focus on trade conflicts between the U.S. and China and its overall impact on global growth. By the end of the fiscal year, it appeared that some sort of trade agreement was close to being completed between the two countries. There also continued to be questions over the pace of growth in the U.S. economy and particular concern over weakness in the manufacturing sector. Additionally, oil & gas exploration and production businesses, a large industry in the high-yield market, was under pressure for much of the year.
performance
Harbor High-Yield Bond Fund returned 8.13% (Retirement Class), 8.16% (Institutional Class), 7.91% (Administrative Class), and 7.72% (Investor Class) during the year ended October 31, 2019. This lagged the ICE BofAML U.S. Non-Distressed High Yield Index, which excludes bonds trading at more distressed levels, and the ICE BofAML U.S. High Yield (H0A0) Index. The Fund benefitted on a relative performance basis from weighting and selection in the environmental industry and due to selection in the satellite industry. The Fund also benefitted from an overweight and better selection in bonds with option-adjusted durations between 6 and 8 years, a longer duration than the overall ICE BofAML U.S. Non-Distressed High Yield Index or ICE BofAML U.S. High Yield (H0A0) Index. Detracting from relative performance was the oil & gas and telecom industries. The Fund’s average exposure of 3.5% to senior secured loans also contributed to relative under-performance. The Fund had an underweight to CCC-rated issues and an overweight to single B-rated issues and had its largest industry exposures in healthcare and cable television.
37
Harbor High-Yield Bond Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
CHANGE IN A $50,000 INVESTMENT
For the period 11/01/2009 through 10/31/2019
The graph compares a $50,000 investment in the Institutional Class shares of the Fund with the performance of the ICE BofAML U.S. Non-Distressed High Yield Index and the ICE BofAML U.S. High Yield Index (H0A0). The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
TOTAL RETURNS
For the periods ended 10/31/2019
1 Year | Annualized | |||||||
5 Years | 10 Years | |||||||
Harbor High-Yield Bond Fund | ||||||||
Retirement Class1 | 8.13% | 4.27% | 6.28% | |||||
Institutional Class | 8.16 | 4.22 | 6.25 | |||||
Administrative Class | 7.91 | 3.96 | 5.99 | |||||
Investor Class | 7.72 | 3.82 | 5.86 | |||||
Comparative Indices | ||||||||
ICE BofAML U.S. Non-Distressed High Yield | 9.95% | 5.51% | 7.65% | |||||
ICE BofAML U.S. High Yield (H0A0) | 8.32 | 5.17 | 7.69 |
As stated in the Fund’s prospectus dated March 1, 2019, the expense ratios were 0.53% (Net) and 0.62% (Gross) (Retirement Class); 0.61% (Net) and 0.70% (Gross) (Institutional Class); 0.86% (Net) and 0.95% (Gross) (Administrative Class); and 0.98% (Net) and 1.07% (Gross) (Investor Class). The net expense ratios reflect a contractual management fee waiver effective through 02/29/2020. The expense ratios in the prospectus may differ from the actual expense ratios for the period disclosed within this report. The expense ratios shown in the prospectus are based on the prior fiscal year, adjusted to reflect changes, if any, in contractual arrangements that occurred prior to the date of the prospectus (or supplement thereto, if applicable).
Performance data shown represents past performance and is no guarantee of future results. Past performance is net of management fees and expenses and reflects reinvested dividends and distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or upon the redemption of Fund shares. Past performance reflects the beneficial effect of any expense waivers or reimbursements, without which returns would have been lower. Investment returns and principal value will fluctuate so that Fund shares, when redeemed, may be worth more or less than their original cost. Returns for periods less than one year are not annualized. Current performance may be higher or lower and is available through the most recent month end atharborfunds.com or by calling 800-422-1050. The Fund charges a redemption fee of 1% on redemption of Fund shares that are held for less than 90 days.
Outlook & Strategy
The high-yield market showed significant resilience during fiscal 2019. We expect volatility to increase in fiscal year 2020, in part due to the U.S. election cycle, on-going trade developments, and concerns over the pace of global economic growth. We believe the market is likely to be less forgiving to credit disappointments and missed earnings and, accordingly, believe that disciplined vigilance will be critical performance differentiator. In our view, the relative strength in the performance of the more highly rated tiers of the market is likely to continue over the next 12 months. Technical factors could remain healthy for U.S. credit given all of the negative and ultra-low rates around the world, coupled with the demand for income that has appeared to drive some meaningful capital to the U.S. credit markets.
1 | Retirement Class shares commenced operations on March 1, 2016. The performance attributed to the Retirement Class shares prior to that date is that of the Institutional Class shares. Performance prior to March 1, 2016 has not been adjusted to reflect the lower expenses of Retirement Class shares. During this period, Retirement Class shares would have had returns similar to, but potentially higher than, Institutional Class shares due to the fact that Retirement Class shares represent interests in the same portfolio as Institutional Class shares but are subject to lower expenses. |
This report contains the current opinions of Shenkman Capital Management, Inc. as of the date of this report and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Such opinions are subject to change without notice and securities described herein may no longer be included in, or may at any time be removed from, the Fund’s portfolio. This report is distributed for informational purposes only. Information contained herein has been obtained from sources believed reliable, but not guaranteed.
Fixed income investments are affected by interest rate changes and the creditworthiness of the issues held by the Fund. A rise in interest rates will cause a decrease in the value of fixed income securities. Such an event would have an adverse effect on the Fund. High-yield investing poses additional credit risk related to lower-rated bonds. For information on the different share classes and the risks associated with an investment in the Fund, please refer to the current prospectus.
38
Harbor High-Yield Bond Fund
Portfolio of Investments—October 31, 2019
Portfolio of Investments—October 31, 2019
SECTOR ALLOCATION(% of investments) – Unaudited
Value, Cost, and Principal Amounts in Thousands
BANK LOAN OBLIGATIONS—5.5% | |||
Principal Amount | Value | ||
CAPITAL MARKETS—0.4% | |||
Refinitiv US Holdings Inc. | |||
Initial Term Loan | |||
$ | 1,830 | 5.536% (1 Month USD Libor + 3.750) 10/01/20251 | $1,842 |
CHEMICALS—0.2% | |||
Solenis International LP | |||
Initial First-Lien Term Loan | |||
1,180 | 6.124% (3 Month USD Libor + 4.000) 06/26/20251 | 1,126 | |
COMMERCIAL SERVICES & SUPPLIES—0.7% | |||
Garda World Security Corp. | |||
Initial Term Loan | |||
2,270 | 6.536% (1 Month USD Libor + 4.750) 10/17/20261 | 2,260 | |
Granite Acquisition Inc. | |||
First-Lien Term Loan B | |||
1,213 | 5.604% (3 Month USD Libor + 3.500) 12/17/20211 | 1,216 | |
3,476 | |||
CONTAINERS & PACKAGING—0.3% | |||
Flex Acquisition Co. Inc. | |||
Term Loan | |||
467 | 5.096% (Multiple Contracts + 3.000) 12/29/20231 | 441 | |
Mauser Packaging Solutions Holding Co. | |||
Term Loan B | |||
1,128 | 5.234% (Multiple Contracts + 3.250) 04/03/20241 | 1,100 | |
1,541 | |||
ENTERTAINMENT—0.1% | |||
Nascar Holdings Inc. | |||
Initial Term Loan | |||
570 | 4.628% (1 Month USD Libor + 2.750) 10/19/20261 | 573 | |
FOOD & STAPLES RETAILING—0.3% | |||
BJ's Wholesale Club Inc. | |||
Term Loan B | |||
1,268 | 4.671% (1 Month USD Libor + 2.750) 02/03/20241 | 1,270 | |
HEALTH CARE PROVIDERS & SERVICES—1.1% | |||
AHP Health Partners Inc. | |||
Term Loan | |||
1,459 | 6.286% (1 Month USD Libor + 4.500) 06/30/20251 | 1,461 | |
MPH Acquisition Holdings LLC | |||
Initial Term Loan | |||
1,011 | 4.854% (3 Month USD Libor + 2.750) 06/07/20231 | 951 |
BANK LOAN OBLIGATIONS—Continued | |||
Principal Amount | Value | ||
HEALTH CARE PROVIDERS & SERVICES—Continued | |||
PAREXEL International Corp. | |||
Term Loan B | |||
$ | 699 | 4.536% (1 Month USD Libor + 2.750) 09/27/20241 | $668 |
RegionalCare Hospital Partners Holdings Inc. | |||
First-Lien Term Loan B | |||
1,110 | 6.304% (1 Month USD Libor + 4.500) 11/16/20251 | 1,109 | |
US Renal Care Inc. | |||
Initial Term Loan | |||
1,190 | 6.786% (1 Month USD Libor + 5.000) 06/26/20261 | 1,102 | |
5,291 | |||
HEALTH CARE TECHNOLOGY—0.1% | |||
Change Healthcare Holdings LLC | |||
Term Loan B | |||
514 | 4.286% (1 Month USD Libor + 2.500) 03/01/20241 | 512 | |
HOTELS, RESTAURANTS & LEISURE—0.5% | |||
Alterra Mountain Co. | |||
Term Loan B | |||
585 | 4.786% (1 Month USD Libor + 3.000) 07/31/20241 | 587 | |
IRB Holding Corp. | |||
First-Lien Term Loan B | |||
763 | 5.216% (3 Month USD Libor + 3.250) 02/05/20251 | 759 | |
Stars Group Holdings BV | |||
Term Loan | |||
1,222 | 5.604% (3 Month USD Libor + 3.500) 07/10/20251 | 1,228 | |
2,574 | |||
INSURANCE—0.2% | |||
Hub International Ltd. | |||
Initial Term Loan | |||
778 | 4.940% (Multiple Contracts + 3.000) 04/25/20251 | 763 | |
INTERACTIVE MEDIA & SERVICES—0.2% | |||
Ancestry.com Inc. | |||
First-Lien Term Loan | |||
1,223 | 6.040% (1 Month USD Libor + 4.250) 08/27/20261 | 1,095 | |
LIFE SCIENCES TOOLS & SERVICES—0.2% | |||
Jaguar Holding Co. II | |||
2018 Term Loan | |||
1,149 | 4.286% (1 Month USD Libor + 2.500) 08/18/20221 | 1,148 |
39
Harbor High-Yield Bond Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
BANK LOAN OBLIGATIONS—Continued | |||
Principal Amount | Value | ||
MEDIA—0.4% | |||
Univision Communications Inc. | |||
Term Loan | |||
$ | 692 | 4.536% (1 Month USD Libor + 2.750) 03/15/20241 | $668 |
William Morris Endeavor Entertainment LLC | |||
First-Lien Term Loan B | |||
1,314 | 4.600% (Multiple Contracts + 2.750) 05/18/20251 | 1,273 | |
1,941 | |||
SOFTWARE—0.4% | |||
Project Alpha Intermediate Holding Inc. | |||
2019 Incremental Term Loan | |||
754 | 6.240% (3 Month USD Libor + 4.250) 04/26/20241 | 753 | |
Solarwinds Holdings Inc. | |||
2018 Refinancing First-Lien Term Loan | |||
1,270 | 4.536% (1 Month USD Libor + 2.750) 02/05/20241 | 1,271 | |
2,024 | |||
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS—0.4% | |||
Diebold Nixdorf Inc. | |||
Term Loan A | |||
1,765 | 11.063% (1 Month USD Libor + 9.250) 08/31/20221 | 1,825 | |
TOTAL BANK LOAN OBLIGATIONS | |||
(Cost $27,150) | 27,001 | ||
CORPORATE BONDS & NOTES—90.7% | |||
AEROSPACE & DEFENSE—2.7% | |||
Arconic Inc. | |||
1,500 | 5.400%—04/15/2021 | 1,548 | |
272 | 5.900%—02/01/2027 | 303 | |
1,851 | |||
Bombardier Inc. | |||
600 | 6.000%—10/15/20222 | 588 | |
757 | 7.500%—03/15/20252 | 727 | |
1,835 | 7.875%—04/15/20272 | 1,739 | |
1,750 | 8.750%—12/01/20212 | 1,859 | |
4,913 | |||
TransDigm Inc. | |||
1,075 | 5.500%—11/15/2027 | 1,074 | |
820 | 6.000%—07/15/2022 | 835 | |
500 | 6.250%—03/15/20262 | 537 | |
1,045 | 6.500%—07/15/2024 | 1,083 | |
3,529 | |||
TransDigm UK Holdings plc | |||
1,480 | 6.875%—05/15/2026 | 1,583 | |
Triumph Group Inc. | |||
754 | 6.250%—09/15/20242 | 793 | |
665 | 7.750%—08/15/2025 | 667 | |
1,460 | |||
13,336 | |||
AIR FREIGHT & LOGISTICS—0.8% | |||
XPO Logistics Inc. | |||
1,260 | 6.125%—09/01/20232 | 1,301 | |
1,600 | 6.500%—06/15/20222 | 1,634 | |
1,000 | 6.750%—08/15/20242 | 1,082 | |
4,017 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
AUTO COMPONENTS—0.8% | |||
Adient Global Holdings Ltd. | |||
$ | 1,120 | 4.875%—08/15/20262 | $885 |
Adient US LLC | |||
670 | 7.000%—05/15/20262 | 708 | |
American Axle & Manufacturing Inc. | |||
1,100 | 6.625%—10/15/2022 | 1,108 | |
IHO Verwaltungs GMBH | |||
600 | 6.375%—05/15/20292 | 617 | |
Tenneco Inc. | |||
960 | 5.000%—07/15/2026 | 768 | |
4,086 | |||
AUTOMOBILES—0.6% | |||
Ford Motor Credit Co. LLC | |||
1,215 | 3.350%—11/01/2022 | 1,220 | |
Jaguar Land Rover Automotive plc | |||
750 | 4.500%—10/01/20272 | 647 | |
Tesla Inc. | |||
1,045 | 5.300%—08/15/20252 | 991 | |
2,858 | |||
BANKS—0.1% | |||
CIT Group Inc. | |||
350 | 6.125%—03/09/2028 | 414 | |
BEVERAGES—0.4% | |||
Cott Holdings Inc. | |||
1,750 | 5.500%—04/01/20252 | 1,831 | |
BIOTECHNOLOGY—0.7% | |||
Avantor Inc. | |||
1,350 | 6.000%—10/01/20242 | 1,446 | |
1,645 | 9.000%—10/01/20252 | 1,842 | |
3,288 | |||
BUILDING PRODUCTS—2.1% | |||
American Builders & Contractors Supply Co. Inc. | |||
900 | 5.875%—05/15/20262 | 949 | |
Griffon Corp. | |||
1,480 | 5.250%—03/01/2022 | 1,495 | |
New Enterprise Stone & Lime Co. Inc. | |||
975 | 6.250%—03/15/20262 | 1,018 | |
Norbord Inc. | |||
650 | 5.750%—07/15/20272 | 674 | |
Standard Industries Inc. | |||
1,867 | 4.750%—01/15/20282 | 1,944 | |
1,090 | 5.375%—11/15/20242 | 1,124 | |
1,500 | 5.500%—02/15/20232 | 1,537 | |
4,605 | |||
Summit Materials LLC / Summit Materials Finance Corp. | |||
1,400 | 6.125%—07/15/2023 | 1,429 | |
300 | 6.500%—03/15/20272 | 325 | |
1,754 | |||
10,495 | |||
CAPITAL MARKETS—0.2% | |||
Refinitiv US Holdings Inc. | |||
750 | 6.250%—05/15/20262 | 816 |
40
Harbor High-Yield Bond Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
CHEMICALS—2.1% | |||
Blue Cube Spinco LLC | |||
$ | 975 | 9.750%—10/15/2023 | $1,065 |
GCP Applied Technologies Inc. | |||
645 | 5.500%—04/15/20262 | 664 | |
NOVA Chemicals Corp. | |||
750 | 4.875%—06/01/20242 | 764 | |
1,000 | 5.250%—08/01/20232 | 1,013 | |
1,777 | |||
OCI NV | |||
2,470 | 6.625%—04/15/20232 | 2,587 | |
Olin Corp. | |||
600 | 5.625%—08/01/2029 | 625 | |
PQ Corp. | |||
1,410 | 6.750%—11/15/20222 | 1,461 | |
Trinseo LLC | |||
1,000 | 5.375%—09/01/20252 | 970 | |
Tronox Inc. | |||
1,250 | 6.500%—04/15/20262 | 1,205 | |
10,354 | |||
COMMERCIAL SERVICES & SUPPLIES—3.1% | |||
Advanced Disposal Services Inc. | |||
500 | 5.625%—11/15/20242 | 523 | |
Allied Universal Holdco LLC / Allied Universal Finance Corp. | |||
625 | 6.625%—07/15/20262 | 669 | |
1,274 | 9.750%—07/15/20272 | 1,334 | |
2,003 | |||
Covanta Holding Corp. | |||
970 | 5.875%—07/01/2025 | 1,010 | |
GFL Environmental Inc. | |||
415 | 5.375%—03/01/20232 | 429 | |
750 | 7.000%—06/01/20262 | 797 | |
1,850 | 8.500%—05/01/20272 | 2,040 | |
3,266 | |||
GW B-CR Security Corp. | |||
2,100 | 9.500%—11/01/2027 | 2,163 | |
LABL Escrow Issuer LLC | |||
820 | 6.750%—07/15/20262 | 851 | |
Matthews International Corp. | |||
530 | 5.250%—12/01/20252 | 497 | |
NuStar Logistics LP | |||
1,650 | 6.750%—02/01/2021 | 1,718 | |
Stericycle Inc. | |||
964 | 5.375%—07/15/20242 | 1,007 | |
Williams Scotsman International Inc. | |||
555 | 6.875%—08/15/20232 | 584 | |
1,660 | 7.875%—12/15/20222 | 1,735 | |
2,319 | |||
15,357 | |||
COMMUNICATIONS EQUIPMENT—2.0% | |||
CommScope Inc. | |||
481 | 5.000%—06/15/20212 | 483 | |
695 | 6.000%—03/01/20262 | 717 | |
455 | 8.250%—03/01/20272 | 433 | |
1,633 | |||
CommScope Technologies LLC | |||
30 | 5.000%—03/15/20272 | 25 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
COMMUNICATIONS EQUIPMENT—Continued | |||
Hughes Satellite Systems Corp. | |||
$ | 1,000 | 6.625%—08/01/2026 | $1,085 |
3,000 | 7.625%—06/15/2021 | 3,240 | |
4,325 | |||
Telesat Canada / Telesat LLC | |||
1,611 | 6.500%—10/15/20272 | 1,685 | |
Viasat Inc. | |||
2,250 | 5.625%—09/15/20252 | 2,292 | |
9,960 | |||
CONSUMER FINANCE—2.0% | |||
Ally Financial Inc. | |||
985 | 5.750%—11/20/2025 | 1,101 | |
Navient Corp. | |||
750 | 5.000%—10/26/2020 | 765 | |
245 | 6.500%—06/15/2022 | 263 | |
1,028 | |||
Navient Corp. MTN3 | |||
1,100 | 5.500%—01/25/2023 | 1,147 | |
2,000 | 7.250%—01/25/2022 | 2,177 | |
3,324 | |||
Springleaf Finance Corp. | |||
500 | 5.625%—03/15/2023 | 539 | |
685 | 6.125%—03/15/2024 | 751 | |
260 | 6.625%—01/15/2028 | 289 | |
650 | 6.875%—03/15/2025 | 738 | |
1,675 | 7.750%—10/01/2021 | 1,832 | |
4,149 | |||
9,602 | |||
CONTAINERS & PACKAGING—2.0% | |||
ARD Finance SA | |||
1,250 | 7.125%—09/15/2023 | 1,305 | |
Ardagh Packaging Finance plc | |||
800 | 6.000%—02/15/20252 | 842 | |
Berry Global Inc. | |||
650 | 4.875%—07/15/20262 | 685 | |
1,000 | 6.000%—10/15/2022 | 1,020 | |
1,705 | |||
Cascades Inc. | |||
1,000 | 5.500%—07/15/20222 | 1,020 | |
Flex Acquisition Co. Inc. | |||
1,215 | 6.875%—01/15/20252 | 1,145 | |
Reynolds Group Issuer Inc. | |||
750 | 5.125%—07/15/20232 | 771 | |
2,180 | 5.750%—10/15/2020 | 2,191 | |
535 | 7.000%—07/15/20242 | 555 | |
3,517 | |||
Trivium Packaging Finance BV | |||
485 | 8.500%—08/15/20272 | 516 | |
10,050 | |||
DISTRIBUTORS—0.2% | |||
Performance Food Group Inc. | |||
985 | 5.500%—10/15/20272 | 1,046 | |
DIVERSIFIED CONSUMER SERVICES—0.5% | |||
Frontdoor Inc. | |||
1,105 | 6.750%—08/15/20262 | 1,213 |
41
Harbor High-Yield Bond Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
DIVERSIFIED CONSUMER SERVICES—Continued | |||
Service Corp. International | |||
$ | 935 | 5.125%—06/01/2029 | $1,000 |
2,213 | |||
DIVERSIFIED FINANCIAL SERVICES—1.0% | |||
Avolon Holdings Funding Ltd. | |||
500 | 5.250%—05/15/20242 | 546 | |
Compass Group Diversified Holdings LLC | |||
750 | 8.000%—05/01/20262 | 810 | |
DAE Funding LLC | |||
470 | 4.000%—08/01/20202 | 474 | |
1,000 | 5.000%—08/01/20242 | 1,046 | |
1,000 | 5.750%—11/15/20232 | 1,050 | |
2,570 | |||
Fidelity & Guaranty Life Holdings Inc. | |||
1,000 | 5.500%—05/01/20252 | 1,073 | |
4,999 | |||
DIVERSIFIED TELECOMMUNICATION SERVICES—4.7% | |||
Altice Financing SA | |||
1,622 | 6.625%—02/15/20232 | 1,670 | |
1,012 | 7.500%—05/15/20262 | 1,078 | |
2,748 | |||
Altice Luxembourg SA | |||
200 | 7.625%—02/15/20252 | 207 | |
CenturyLink Inc. | |||
2,150 | 5.800%—03/15/2022 | 2,284 | |
1,000 | 6.450%—06/15/2021 | 1,055 | |
100 | 6.750%—12/01/2023 | 112 | |
655 | 6.875%—01/15/2028 | 697 | |
4,148 | |||
Connect Finco Sarl / Connect US Finco LLC | |||
3,820 | 6.750%—10/01/20262 | 3,963 | |
GCI LLC | |||
2,040 | 6.625%—06/15/20242 | 2,216 | |
167 | 6.875%—04/15/2025 | 176 | |
2,392 | |||
Inmarsat Finance plc | |||
2,000 | 4.875%—05/15/20222 | 2,030 | |
Intelsat Jackson Holdings SA | |||
1,090 | 5.500%—08/01/2023 | 1,024 | |
2,045 | 8.500%—10/15/20242 | 2,065 | |
3,089 | |||
Level 3 Communications Inc. | |||
1,925 | 5.750%—12/01/2022 | 1,935 | |
Level 3 Financing Inc. | |||
420 | 5.375%—08/15/2022 | 422 | |
Telecom Italia Capital SA | |||
625 | 6.000%—09/30/2034 | 670 | |
200 | 6.375%—11/15/2033 | 222 | |
892 | |||
Zayo Group LLC | |||
1,250 | 5.750%—01/15/20272 | 1,274 | |
23,100 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
ELECTRIC UTILITIES—1.2% | |||
Talen Energy Supply LLC | |||
$ | 545 | 6.625%—01/15/20282 | $529 |
940 | 7.250%—05/15/20272 | 942 | |
1,471 | |||
Vistra Operations Co. LLC | |||
1,910 | 4.300%—07/15/20292 | 1,987 | |
2,111 | 5.000%—07/31/20272 | 2,190 | |
300 | 5.625%—02/15/20272 | 319 | |
4,496 | |||
5,967 | |||
ELECTRICAL EQUIPMENT—0.1% | |||
Sensata Technologies Inc. | |||
370 | 4.375%—02/15/20302 | 373 | |
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—0.2% | |||
Anixter Inc. | |||
1,075 | 5.500%—03/01/2023 | 1,108 | |
ENERGY EQUIPMENT & SERVICES—1.6% | |||
Archrock Partners LP / Archrock Partners Finance Corp. | |||
760 | 6.875%—04/01/20272 | 788 | |
Ensign Drilling Inc. | |||
1,235 | 9.250%—04/15/20242 | 1,053 | |
Nabors Industries Inc. | |||
1,860 | 5.750%—02/01/2025 | 1,396 | |
Pride International LLC | |||
1,000 | 7.875%—08/15/2040 | 520 | |
Transocean Inc. | |||
500 | 6.800%—03/15/2038 | 311 | |
1,160 | 7.250%—11/01/20252 | 1,029 | |
588 | 7.500%—01/15/20262 | 526 | |
1,866 | |||
Transocean Poseidon Ltd. | |||
500 | 6.875%—02/01/20272 | 507 | |
Unit Corp. | |||
1,285 | 6.625%—05/15/2021 | 855 | |
USA Compression Partners LP / USA Compression Finance Corp. | |||
680 | 6.875%—09/01/20272 | 683 | |
Valaris plc | |||
400 | 7.750%—02/01/2026 | 212 | |
7,880 | |||
ENTERTAINMENT—2.6% | |||
Cinemark USA Inc. | |||
1,400 | 5.125%—12/15/2022 | 1,418 | |
Diamond Sports Group LLC / Diamond Sports Finance Co. | |||
2,307 | 5.375%—08/15/20262 | 2,414 | |
1,904 | 6.625%—08/15/20272 | 1,966 | |
4,380 | |||
Lions Gate Capital Holdings LLC | |||
2,282 | 6.375%—02/01/20242 | 2,198 | |
Live Nation Entertainment Inc. | |||
1,465 | 4.750%—10/15/2027 | 1,531 | |
Meredith Corp. | |||
1,580 | 6.875%—02/01/2026 | 1,636 | |
Netflix Inc. | |||
880 | 4.875%—06/15/2030 | 892 |
42
Harbor High-Yield Bond Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
ENTERTAINMENT—Continued | |||
$ | 350 | 5.500%—02/15/2022 | $372 |
300 | 6.375%—05/15/20292 | 338 | |
1,602 | |||
12,765 | |||
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—3.6% | |||
CoreCivic Inc. | |||
1,000 | 4.750%—10/15/2027 | 855 | |
CyrusOne LP | |||
1,000 | 5.000%—03/15/2024 | 1,034 | |
Equinix Inc. | |||
1,000 | 5.375%—01/01/2022 | 1,021 | |
Iron Mountain Inc. | |||
2,395 | 4.875%—09/15/2027-09/15/20292 | 2,462 | |
500 | 5.750%—08/15/2024 | 506 | |
1,750 | 6.000%—08/15/2023 | 1,791 | |
4,759 | |||
Kennedy-Wilson Inc. | |||
1,500 | 5.875%—04/01/2024 | 1,560 | |
Ladder Capital Finance Corp. | |||
850 | 5.250%—10/01/20252 | 865 | |
460 | 5.875%—08/01/20212 | 468 | |
1,333 | |||
MPT Operating Partnership LP / MPT Finance Corp. | |||
500 | 4.625%—08/01/2029 | 523 | |
2,500 | 6.375%—03/01/2024 | 2,612 | |
3,135 | |||
QualityTech LP | |||
314 | 4.750%—11/15/20252 | 330 | |
RHP Hotel Properties LP | |||
500 | 5.000%—04/15/2023 | 513 | |
Ryman Hospitality Properties Inc. | |||
845 | 4.750%—10/15/20272 | 876 | |
Sabra Health Care LP | |||
495 | 3.900%—10/15/2029 | 492 | |
580 | 5.125%—08/15/2026 | 629 | |
1,121 | |||
SBA Communications Corp. | |||
1,250 | 4.000%—10/01/2022 | 1,281 | |
17,818 | |||
FOOD & STAPLES RETAILING—0.7% | |||
Albertsons Companies LLC | |||
1,065 | 5.750%—03/15/2025 | 1,107 | |
800 | 5.875%—02/15/20282 | 861 | |
230 | 6.625%—06/15/2024 | 243 | |
630 | 7.500%—03/15/20262 | 703 | |
2,914 | |||
Ingles Markets Inc. | |||
540 | 5.750%—06/15/2023 | 553 | |
3,467 | |||
FOOD PRODUCTS—1.1% | |||
B&G Foods Inc. | |||
805 | 5.250%—09/15/2027 | 804 | |
Darling Ingredients Inc. | |||
1,290 | 5.250%—04/15/20272 | 1,359 | |
Post Holdings Inc. | |||
2,585 | 5.500%—03/01/2025-12/15/20292 | 2,722 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
FOOD PRODUCTS—Continued | |||
TreeHouse Foods Inc. | |||
$ | 437 | 4.875%—03/15/2022 | $441 |
5,326 | |||
GAS UTILITIES—0.7% | |||
AmeriGas Partners LP | |||
500 | 5.750%—05/20/2027 | 550 | |
DCP Midstream Operating LP | |||
690 | 5.125%—05/15/2029 | 703 | |
500 | 6.750%—09/15/20372 | 524 | |
1,227 | |||
Suburban Propane Partners LP | |||
1,600 | 5.875%—03/01/2027 | 1,664 | |
3,441 | |||
HEALTH CARE EQUIPMENT & SUPPLIES—0.3% | |||
Hill-Rom Holdings Inc. | |||
260 | 4.375%—09/15/20272 | 269 | |
Teleflex Inc. | |||
1,000 | 4.625%—11/15/2027 | 1,051 | |
1,320 | |||
HEALTH CARE PROVIDERS & SERVICES—5.4% | |||
Acadia Healthcare Co. Inc. | |||
794 | 5.125%—07/01/2022 | 804 | |
815 | 5.625%—02/15/2023 | 831 | |
1,635 | |||
AHP Health Partners Inc. | |||
596 | 9.750%—07/15/20262 | 645 | |
AMN Healthcare Inc. | |||
960 | 4.625%—10/01/20272 | 980 | |
BCPE Cycle Merger Sub II Inc. | |||
505 | 10.625%—07/15/20272 | 473 | |
Centene Corp. | |||
670 | 4.750%—05/15/2022 | 687 | |
3,375 | 5.375%—06/01/20262 | 3,581 | |
1,614 | 6.125%—02/15/2024 | 1,680 | |
5,948 | |||
DaVita Inc. | |||
1,230 | 5.125%—07/15/2024 | 1,259 | |
HCA Inc. | |||
950 | 5.375%—02/01/2025-09/01/2026 | 1,040 | |
300 | 5.625%—09/01/2028 | 338 | |
1,750 | 5.875%—05/01/2023-02/01/2029 | 1,963 | |
1,465 | 7.690%—06/15/2025 | 1,773 | |
5,114 | |||
Molina Healthcare Inc. | |||
1,082 | 4.875%—06/15/20252 | 1,104 | |
2,000 | 5.375%—11/15/2022 | 2,117 | |
3,221 | |||
Polaris Intermediate Corp. | |||
540 | 8.500%—12/01/20222 | 456 | |
RegionalCare Hospital Partners Holdings Inc. | |||
1,195 | 8.250%���05/01/20232 | 1,276 | |
Regionalcare Hospital Partners Holdings Inc. / LifePoint Health Inc. | |||
877 | 9.750%—12/01/20262 | 965 |
43
Harbor High-Yield Bond Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
HEALTH CARE PROVIDERS & SERVICES—Continued | |||
Tenet Healthcare Corp. | |||
$ | 2,000 | 4.875%—01/01/20262 | $2,071 |
2,000 | 5.125%—11/01/20272 | 2,088 | |
4,159 | |||
Wellcare Health Plans Inc. | |||
550 | 5.250%—04/01/2025 | 578 | |
26,709 | |||
HEALTH CARE TECHNOLOGY—0.2% | |||
Change Healthcare Holdings LLC | |||
1,000 | 5.750%—03/01/20252 | 1,027 | |
HOTELS, RESTAURANTS & LEISURE—4.7% | |||
Brinker International Inc. | |||
965 | 3.875%—05/15/2023 | 970 | |
ESH Hospitality Inc. | |||
370 | 4.625%—10/01/20272 | 372 | |
1,500 | 5.250%—05/01/20252 | 1,551 | |
1,923 | |||
Hilton Domestic Operating Co. Inc. | |||
1,500 | 4.875%—01/15/20302 | 1,598 | |
884 | 5.125%—05/01/2026 | 930 | |
2,528 | |||
International Game Technology plc | |||
1,000 | 6.250%—02/15/20222 | 1,058 | |
IRB Holding Corp. | |||
980 | 6.750%—02/15/20262 | 1,000 | |
Landry's Inc. | |||
575 | 6.750%—10/15/20242 | 594 | |
LTF Merger Sub Inc. | |||
550 | 8.500%—06/15/2023 | 565 | |
Marriott Ownership Resorts Inc. | |||
975 | 4.750%—01/15/20282 | 1,000 | |
Marriott Ownership Resorts Inc. / Ilg LLC | |||
1,345 | 6.500%—09/15/2026 | 1,461 | |
MGM Resorts International | |||
214 | 6.000%—03/15/2023 | 236 | |
101 | 6.625%—12/15/2021 | 110 | |
1,500 | 7.750%—03/15/2022 | 1,684 | |
2,030 | |||
New Red Finance Inc. | |||
485 | 3.875%—01/15/20282 | 489 | |
1,000 | 5.000%—10/15/20252 | 1,032 | |
1,521 | |||
Scientific Games International Inc. | |||
630 | 5.000%—10/15/20252 | 650 | |
600 | 8.250%—03/15/20262 | 636 | |
1,286 | |||
Speedway Motorsports LLC | |||
540 | 4.875%—11/01/2027 | 540 | |
Stars Group Holdings BV / Stars Group US Co. Borrower LLC | |||
2,255 | 7.000%—07/15/20262 | 2,438 | |
VICI Properties Inc. | |||
2,100 | 8.000%—10/15/2023 | 2,297 | |
Viking Cruises Ltd. | |||
621 | 5.875%—09/15/20272 | 661 | |
VOC Escrow Ltd. | |||
450 | 5.000%—02/15/20282 | 470 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
HOTELS, RESTAURANTS & LEISURE—Continued | |||
Yum! Brands Inc. | |||
$ | 730 | 4.750%—01/15/20302 | $767 |
23,109 | |||
HOUSEHOLD DURABLES—1.2% | |||
Lennar Corp. | |||
1,345 | 4.750%—04/01/2021-11/29/2027 | 1,430 | |
1,000 | 4.875%—12/15/2023 | 1,074 | |
475 | 5.250%—06/01/2026 | 524 | |
3,028 | |||
M/I Homes Inc. | |||
800 | 5.625%—08/01/2025 | 836 | |
PulteGroup Inc. | |||
450 | 5.000%—01/15/2027 | 494 | |
Toll Brothers Finance Corp. | |||
586 | 3.800%—11/01/2029 | 577 | |
190 | 4.350%—02/15/2028 | 199 | |
776 | |||
Tri Pointe Group Inc. | |||
650 | 4.875%—07/01/2021 | 671 | |
5,805 | |||
HOUSEHOLD PRODUCTS—0.4% | |||
Prestige Brands Inc. | |||
1,250 | 5.375%—12/15/20212 | 1,255 | |
400 | 6.375%—03/01/20242 | 419 | |
1,674 | |||
Spectrum Brands Inc. | |||
255 | 5.000%—10/01/20292 | 262 | |
1,936 | |||
INDEPENDENT POWER & RENEWABLE ELECTRICITY PRODUCERS—1.5% | |||
AES Corp. | |||
1,065 | 4.000%—03/15/2021 | 1,085 | |
500 | 5.500%—04/15/2025 | 521 | |
300 | 6.000%—05/15/2026 | 321 | |
1,927 | |||
Calpine Corp. | |||
505 | 5.250%—06/01/20262 | 527 | |
NRG Energy Inc. | |||
760 | 5.250%—06/15/20292 | 818 | |
293 | 5.750%—01/15/2028 | 318 | |
240 | 6.625%—01/15/2027 | 261 | |
1,847 | 7.250%—05/15/2026 | 2,030 | |
3,427 | |||
Terraform Power Operating LLC | |||
583 | 4.250%—01/31/20232 | 603 | |
258 | 4.750%—01/15/2030 | 268 | |
600 | 5.000%—01/31/20282 | 636 | |
1,507 | |||
7,388 | |||
INSURANCE—0.3% | |||
Acrisure LLC / Acrisure Finance Inc. | |||
500 | 8.125%—02/15/20242 | 534 | |
GTCR AP Finance Inc. | |||
965 | 8.000%—05/15/20272 | 989 | |
1,523 |
44
Harbor High-Yield Bond Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
INTERACTIVE MEDIA & SERVICES—0.2% | |||
Match Group Inc. | |||
$ | 1,000 | 6.375%—06/01/2024 | $1,052 |
IT SERVICES—1.0% | |||
Sabre GLBL Inc. | |||
1,146 | 5.250%—11/15/20232 | 1,177 | |
Verisign Inc. | |||
455 | 4.625%—05/01/2023 | 464 | |
WEX Inc. | |||
3,000 | 4.750%—02/01/20232 | 3,038 | |
4,679 | |||
LEISURE PRODUCTS—0.4% | |||
NCL Corp. Ltd. | |||
740 | 4.750%—12/15/20212 | 752 | |
Wyndham Destinations Inc. | |||
305 | 3.900%—03/01/2023 | 308 | |
390 | 5.400%—04/01/2024 | 415 | |
210 | 5.750%—04/01/2027 | 230 | |
953 | |||
1,705 | |||
LIFE SCIENCES TOOLS & SERVICES—1.1% | |||
Charles River Laboratories International Inc. | |||
465 | 4.250%—05/01/2028 | 475 | |
Eagle Holding Co. II LLC | |||
2,235 | 7.750%—05/15/20222 | 2,274 | |
IQVIA Inc. | |||
1,280 | 5.000%—05/15/20272 | 1,360 | |
Jaguar Holding Co. II | |||
1,300 | 6.375%—08/01/20232 | 1,349 | |
5,458 | |||
MACHINERY—0.3% | |||
EnPro Industries Inc. | |||
1,000 | 5.750%—10/15/2026 | 1,060 | |
Terex Corp. | |||
466 | 5.625%—02/01/20252 | 470 | |
1,530 | |||
MEDIA—11.5% | |||
Altice France SA | |||
1,535 | 5.500%—01/15/20282 | 1,568 | |
1,326 | 7.375%—05/01/20262 | 1,423 | |
297 | 8.125%—02/01/20272 | 330 | |
3,321 | |||
AMC Networks Inc. | |||
1,240 | 4.750%—08/01/2025 | 1,257 | |
1,510 | 5.000%—04/01/2024 | 1,542 | |
2,799 | |||
Block Communications Inc. | |||
2,050 | 6.875%—02/15/20252 | 2,147 | |
C&W Senior Financing Designated Activity Company | |||
1,170 | 7.500%—10/15/20262 | 1,259 | |
CBS Radio Inc. | |||
812 | 7.250%—11/01/20242 | 851 | |
CCO Holdings LLC | |||
850 | 5.250%—09/30/2022 | 863 | |
1,850 | 5.375%—05/01/2025-06/01/20292 | 1,965 | |
2,828 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
MEDIA—Continued | |||
CSC Holdings LLC | |||
$ | 505 | 5.375%—02/01/20282 | $535 |
2,170 | 5.750%—01/15/20302 | 2,287 | |
495 | 6.625%—10/15/20252 | 529 | |
940 | 7.500%—04/01/2028 | 1,062 | |
1,000 | 7.750%—07/15/20252 | 1,075 | |
3,000 | 10.875%—10/15/20252 | 3,391 | |
8,879 | |||
Cumulus Media New Holdings Inc. | |||
630 | 6.750%—07/01/20262 | 669 | |
DISH DBS Corp. | |||
400 | 5.875%—11/15/2024 | 403 | |
3,000 | 7.750%—07/01/2026 | 3,034 | |
3,437 | |||
Entercom Media Corp. | |||
600 | 6.500%—05/01/20272 | 629 | |
EW Scripps Co. | |||
1,000 | 5.125%—05/15/20252 | 1,016 | |
Graham Holdings Co. | |||
945 | 5.750%—06/01/20262 | 1,011 | |
iHeartCommunications Inc. | |||
770 | 8.375%—05/01/2027 | 830 | |
Lamar Media Corp. | |||
500 | 5.000%—05/01/2023 | 510 | |
LCPR Sr Secured Finance Dac Sr Secured | |||
1,105 | 6.750%—10/15/2027 | 1,134 | |
MDC Partners Inc. | |||
535 | 6.500%—05/01/20242 | 514 | |
Mediacom Broadband LLC | |||
150 | 5.500%—04/15/2021 | 151 | |
Nexstar Broadcasting Inc. | |||
300 | 5.875%—11/15/2022 | 305 | |
Outfront Media Capital LLC | |||
1,400 | 5.875%—03/15/2025 | 1,449 | |
Quebecor Media Inc. | |||
600 | 5.750%—01/15/2023 | 652 | |
Radiate HoldCo LLC | |||
620 | 6.625%—02/15/20252 | 629 | |
Sable International Finance Ltd. | |||
250 | 5.750%—09/07/20272 | 261 | |
Scripps Escrow Inc. | |||
550 | 5.875%—07/15/20272 | 565 | |
Sinclair Television Group Inc. | |||
2,000 | 6.125%—10/01/2022 | 2,030 | |
Sirius XM Radio Inc. | |||
1,408 | 4.625%—07/15/20242 | 1,475 | |
350 | 5.375%—04/15/20252 | 365 | |
1,625 | 5.500%—07/01/20292 | 1,760 | |
3,600 | |||
TEGNA Inc. | |||
1,215 | 5.000%—09/15/20292 | 1,233 | |
2,525 | 6.375%—10/15/2023 | 2,601 | |
3,834 | |||
Telenet Finance Luxembourg Notes Sarl | |||
1,000 | 5.500%—03/01/20282 | 1,063 | |
Univision Communications Inc. | |||
2,570 | 5.125%—05/15/2023-02/15/20252 | 2,549 | |
UPCB Finance IV Ltd. | |||
1,800 | 5.375%—01/15/20252 | 1,865 | |
Virgin Media Finance plc | |||
800 | 6.000%—10/15/20242 | 828 |
45
Harbor High-Yield Bond Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
MEDIA—Continued | |||
Virgin Media Secured Finance plc | |||
$ | 2,000 | 5.500%—05/15/20292 | $2,130 |
Ziggo Bond Finance BV | |||
1,000 | 4.875%—01/15/2030 | 1,022 | |
750 | 5.875%—01/15/20252 | 776 | |
1,000 | 6.000%—01/15/20272 | 1,050 | |
2,848 | |||
56,593 | |||
METALS & MINING—2.5% | |||
Alcoa Nederland Holding BV | |||
1,540 | 6.125%—05/15/20282 | 1,655 | |
Alliance Resource Operating Partners LP | |||
500 | 7.500%—05/01/20252 | 428 | |
Commercial Metals Co. | |||
770 | 5.375%—07/15/2027 | 792 | |
Constellium NV | |||
400 | 5.750%—05/15/20242 | 413 | |
FMG Resources August 2006 Pty Ltd. | |||
1,365 | 4.750%—05/15/20222 | 1,411 | |
600 | 5.125%—03/15/20232 | 626 | |
2,037 | |||
Freeport-McMoRan Inc. | |||
880 | 3.550%—03/01/2022 | 892 | |
475 | 5.000%—09/01/2027 | 486 | |
470 | 5.250%—09/01/2029 | 480 | |
513 | 5.400%—11/14/2034 | 503 | |
885 | 5.450%—03/15/2043 | 828 | |
3,189 | |||
Grinding Media Inc. | |||
1,000 | 7.375%—12/15/20232 | 970 | |
Novelis Corp. | |||
155 | 5.875%—09/30/20262 | 163 | |
1,000 | 6.250%—08/15/20242 | 1,050 | |
1,213 | |||
Steel Dynamics Inc. | |||
1,800 | 5.125%—10/01/2021 | 1,809 | |
12,506 | |||
MORTGAGE REAL ESTATE INVESTMENT TRUSTS (REITs)—0.6% | |||
Starwood Property Trust Inc. | |||
900 | 3.625%—02/01/2021 | 909 | |
2,000 | 5.000%—12/15/2021 | 2,075 | |
2,984 | |||
OIL, GAS & CONSUMABLE FUELS—8.8% | |||
Antero Midstream Partners LP / Antero Midstream Finance Corp. | |||
1,370 | 5.750%—03/01/2027-01/15/20282 | 1,026 | |
Ascent Resources Utica Holdings LLC / Aru Finance Corp. | |||
1,300 | 7.000%—11/01/20262 | 1,001 | |
Blue Racer Midstream LLC | |||
800 | 6.125%—11/15/20222 | 790 | |
Buckeye Partners LP | |||
516 | 3.950%—12/01/2026 | 477 | |
377 | 5.600%—10/15/2044 | 315 | |
792 | |||
Callon Petroleum Co. | |||
1,080 | 6.375%—07/01/2026 | 1,013 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
OIL, GAS & CONSUMABLE FUELS—Continued | |||
Centennial Resource Production LLC | |||
$ | 132 | 5.375%—01/15/20262 | $124 |
Cheniere Energy Partners LP | |||
1,035 | 4.500%—10/01/20292 | 1,060 | |
750 | 5.250%—10/01/2025 | 779 | |
750 | 5.625%—10/01/2026 | 796 | |
2,635 | |||
Chesapeake Energy Corp. | |||
1,500 | 8.000%—06/15/2027 | 945 | |
CNX Midstream Partners LP | |||
800 | 6.500%—03/15/20262 | 750 | |
Crestwood Midstream Partners LP / Crestwood Midstream Finance Corp. | |||
870 | 5.625%—05/01/20272 | 879 | |
Crownrock Finance Inc. | |||
1,405 | 5.625%—10/15/20252 | 1,379 | |
EnLink Midstream LLC | |||
920 | 5.375%—06/01/2029 | 819 | |
EnLink Midstream Partners LP | |||
450 | 4.850%—07/15/2026 | 413 | |
Extraction Oil & Gas Inc. | |||
60 | 5.625%—02/01/20262 | 26 | |
1,085 | 7.375%—05/15/20242 | 450 | |
476 | |||
Genesis Energy LP | |||
311 | 5.625%—06/15/2024 | 291 | |
255 | 6.000%—05/15/2023 | 249 | |
134 | 6.250%—05/15/2026 | 125 | |
1,750 | 6.750%—08/01/2022 | 1,765 | |
2,430 | |||
Global Partners LP | |||
1,450 | 7.000%—06/15/2023 | 1,504 | |
Gulfport Energy Corp. | |||
920 | 6.000%—10/15/2024 | 595 | |
750 | 6.375%—01/15/2026 | 454 | |
1,049 | |||
Indigo Natural Resources LLC | |||
490 | 6.875%—02/15/20262 | 448 | |
Jagged Peak Energy LLC | |||
790 | 5.875%—05/01/2026 | 802 | |
Magnolia Oil & Gas Operating LLC / Magnolia Oil & Gas Finance Corp. | |||
1,635 | 6.000%—08/01/20262 | 1,643 | |
Matador Resources Co. | |||
1,100 | 5.875%—09/15/2026 | 1,062 | |
Murphy Oil Corp. | |||
1,900 | 5.625%—12/01/2042 | 1,627 | |
870 | 7.050%—05/01/2029 | 935 | |
2,562 | |||
NGL Energy Partners LP | |||
1,600 | 7.500%—11/01/2023 | 1,602 | |
NGPL Pipeco LLC | |||
555 | 4.375%—08/15/20222 | 577 | |
Oasis Petroleum Inc. | |||
1,925 | 6.875%—01/15/2023 | 1,675 | |
Parkland Fuel Corp. | |||
430 | 5.875%—07/15/20272 | 456 | |
1,300 | 6.000%—04/01/20262 | 1,379 | |
1,835 |
46
Harbor High-Yield Bond Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
OIL, GAS & CONSUMABLE FUELS—Continued | |||
Parsley Energy LLC / Parsley Finance Corp. | |||
$ | 515 | 5.625%—10/15/20272 | $534 |
PDC Energy Inc. | |||
1,250 | 5.750%—05/15/2026 | 1,172 | |
505 | 6.125%—09/15/2024 | 491 | |
1,663 | |||
QEP Resources Inc. | |||
1,689 | 5.625%—03/01/2026 | 1,529 | |
Rockies Express Pipeline LLC | |||
1,455 | 6.875%—04/15/20402 | 1,542 | |
Rose Rock Midstream LP | |||
1,055 | 5.625%—07/15/2022-11/15/2023 | 1,077 | |
Sanchez Energy Corp. | |||
3,000 | 0.000%—06/15/2021* | 150 | |
SM Energy Co. | |||
262 | 6.125%—11/15/2022 | 251 | |
SRC Energy Inc. | |||
1,085 | 6.250%—12/01/2025 | 1,020 | |
Summit Midstream Holdings LLC | |||
866 | 5.750%—04/15/2025 | 676 | |
Sunoco LP / Sunoco Finance Corp. | |||
1,000 | 4.875%—01/15/2023 | 1,029 | |
Tallgrass Energy Finance Corp. | |||
785 | 4.750%—10/01/20232 | 764 | |
15 | 5.500%—09/15/20242 | 15 | |
779 | |||
Targa Resources Partners LP / Targa Resources Partners Finance Corp. | |||
406 | 6.750%—03/15/2024 | 422 | |
384 | 6.875%—01/15/20292 | 416 | |
838 | |||
Wildhorse Resource Development Corp. | |||
1,360 | 6.875%—02/01/2025 | 1,074 | |
WPX Energy Inc. | |||
625 | 5.250%—10/15/2027 | 609 | |
43,002 | |||
PHARMACEUTICALS—2.3% | |||
Bausch Health Cos. Inc. | |||
1,009 | 5.500%—03/01/20232 | 1,022 | |
2,350 | 7.000%—03/15/2024-01/15/20282 | 2,478 | |
485 | 7.250%—05/30/20292 | 535 | |
850 | 8.500%—01/31/20272 | 958 | |
4,993 | |||
Catalent Pharma Solutions Inc. | |||
445 | 5.000%—07/15/20272 | 466 | |
Teva Pharmaceutical Finance Netherlands III BV | |||
1,020 | 2.200%—07/21/2021 | 971 | |
Valeant Pharmaceuticals International Inc. | |||
3,038 | 5.875%—05/15/20232 | 3,093 | |
1,750 | 6.500%—03/15/20222 | 1,805 | |
4,898 | |||
11,328 | |||
PROFESSIONAL SERVICES—1.2% | |||
Camelot Finance SA | |||
915 | 4.500%—11/01/2026 | 927 | |
Nielsen Finance LLC. | |||
2,725 | 5.000%—04/15/20222 | 2,752 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
PROFESSIONAL SERVICES—Continued | |||
Tempo Acquisition LLC / Tempo Acquisition Finance Corp. | |||
$ | 2,080 | 6.750%—06/01/20252 | $2,150 |
5,829 | |||
REAL ESTATE MANAGEMENT & DEVELOPMENT—0.4% | |||
Greystar Real Estate Partners LLC | |||
1,158 | 5.750%—12/01/20252 | 1,210 | |
Newmark Group Inc. | |||
650 | 6.125%—11/15/2023 | 709 | |
1,919 | |||
ROAD & RAIL—0.7% | |||
Avis Budget Car Rental LLC / Avis Budget Finance Inc. | |||
296 | 5.500%—04/01/2023 | 303 | |
1,750 | 5.750%—07/15/20272 | 1,791 | |
2,094 | |||
Hertz Corp. | |||
1,110 | 7.125%—08/01/20262 | 1,148 | |
3,242 | |||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—0.1% | |||
Advanced Micro Devices Inc. | |||
682 | 7.000%—07/01/2024 | 717 | |
SOFTWARE—0.8% | |||
CDK Global Inc. | |||
213 | 5.000%—10/15/2024 | 231 | |
495 | 5.250%—05/15/20292 | 526 | |
757 | |||
Informatica LLC | |||
1,500 | 7.125%—07/15/20232 | 1,528 | |
Open Text Corp. | |||
1,795 | 5.625%—01/15/20232 | 1,838 | |
4,123 | |||
SPECIALTY RETAIL—0.8% | |||
Asbury Automotive Group Inc. | |||
725 | 6.000%—12/15/2024 | 752 | |
L Brands Inc. | |||
500 | 5.625%—02/15/2022 | 528 | |
500 | 6.875%—11/01/2035 | 427 | |
464 | 7.500%—06/15/2029 | 462 | |
1,417 | |||
Michaels Stores Inc. | |||
740 | 8.000%—07/15/20272 | 734 | |
Penske Automotive Group Inc. | |||
1,000 | 5.750%—10/01/2022 | 1,015 | |
3,918 | |||
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS—2.2% | |||
Dell International LLC / EMC Corp. | |||
1,025 | 5.300%—10/01/20292 | 1,133 | |
1,323 | 5.875%—06/15/20212 | 1,345 | |
4,182 | 7.125%—06/15/20242 | 4,439 | |
6,917 |
47
Harbor High-Yield Bond Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS—Continued | |||
NCR Corp. | |||
$ | 2,500 | 5.875%—12/15/2021 | $2,513 |
1,310 | 6.125%—09/01/20292 | 1,377 | |
3,890 | |||
10,807 | |||
THRIFTS & MORTGAGE FINANCE—1.1% | |||
Nationstar Mortgage Holdings Inc. | |||
925 | 8.125%—07/15/20232 | 983 | |
Nationstar Mortgage LLC / Nationstar Capital | |||
3,116 | 6.500%—07/01/2021 | 3,135 | |
Quicken Loans Inc. | |||
360 | 5.250%—01/15/20282 | 373 | |
1,000 | 5.750%—05/01/20252 | 1,034 | |
1,407 | |||
5,525 | |||
TRADING COMPANIES & DISTRIBUTORS—0.4% | |||
United Rentals North America Inc. | |||
1,735 | 6.500%—12/15/2026 | 1,885 | |
WIRELESS TELECOMMUNICATION SERVICES—2.5% | |||
Sprint Capital Corp. | |||
2,793 | 6.875%—11/15/2028 | 3,037 | |
Sprint Communications Inc. | |||
2,400 | 6.000%—11/15/2022 | 2,544 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
WIRELESS TELECOMMUNICATION SERVICES—Continued | |||
Sprint Corp. | |||
$ | 70 | 7.125%—06/15/2024 | $76 |
810 | 7.250%—09/15/2021 | 867 | |
368 | 7.625%—02/15/2025 | 405 | |
425 | 7.875%—09/15/2023 | 470 | |
1,818 | |||
T-Mobile USA Inc. | |||
600 | 4.000%—04/15/2022 | 621 | |
1,380 | 4.750%—02/01/2028 | 1,459 | |
1,050 | 6.000%—03/01/2023-04/15/2024 | 1,078 | |
850 | 6.375%—03/01/2025 | 884 | |
750 | 6.500%—01/15/2024 | 781 | |
4,823 | |||
12,222 | |||
TOTAL CORPORATE BONDS & NOTES | |||
(Cost $441,870) | 445,808 | ||
TOTAL INVESTMENTS—96.2% | |||
(Cost $469,018) | 472,809 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—3.8% | 18,866 | ||
TOTAL NET ASSETS—100.0% | $491,675 |
FAIR VALUE MEASUREMENTS
All investments at October 31, 2019 (as disclosed in the preceding Portfolio of Investments) were classified as Level 2. There were no Level 3 investments at October 31, 2019 or 2018.
For more information on valuation inputs and their aggregation into the levels identified above, please refer to the Fair Value Measurements and Disclosures in Note 2 of the accompanying Notes to Financial Statements.
* | Security in default |
1 | Variable or floating rate security; the stated rate represents the rate in effect at October 31, 2019. The variable rate for such securities may be based on the indicated reference rate and spread or on an underlying asset or pool of assets rather than a reference rate and may be determined by current interest rates, prepayments or other financial indicators. |
2 | Securities purchased in a transaction 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. The Fund has no right to demand registration of these securities. At October 31, 2019, the aggregate value of these securities was $248,841 or 51% of net assets. |
3 | MTN after the name of a security stands for Medium Term Note. |
The accompanying notes are an integral part of the Financial Statements.
48
Harbor High-Yield Opportunities Fund
Manager’s Commentary (Unaudited)
Manager’s Commentary (Unaudited)
Subadviser
Crescent Capital Group LP
11100 Santa Monica Blvd
Suite 2000
Los Angeles, CA 90025
Portfolio Managers
John A. Fekete
Since2017
Since2017
Conrad E. Chen
Since 2017
Since 2017
Ross M. Slusser
Since 2017
Since 2017
Scott K. Fukumoto
Since 2017
Since 2017
Crescent Capital has subadvised the Fund since 2017.
Investment Objective
The Fund seeks total return.
John A. Fekete
Conrad E. Chen
Ross M. Slusser
Scott K. Fukumoto
Management’s Discussion of
Fund Performance
Fund Performance
MARKET REVIEW
The U.S. high-yield market performed strongly for the one-year period ended October 31, 2019, returning 8.32% as measured by the ICE BofAML U.S. High Yield (H0A0) Index. The market was under pressure in November and December 2018 when the U.S. Federal Reserve (Fed) raised the Fed Funds Rate by 0.25% at the December Federal Open Market Committee (FOMC) meeting, sending the market tumbling down. Most asset classes turned negative by year-end giving up most of the year-to-date gains. Investor sentiment was grim amid significant volatility, heavy withdrawals from the asset class, slowing global growth indicators and the unresolved trade dispute between the U.S. and China. West Texas Intermediate (WTI) oil prices declined from $65.31/ barrel at the end of October 2018 to $45.41/ barrel by year-end, a 30% decline. The S&P 500 Index also suffered losses generating -7% return over the last two months of 2018. After a disappointing end to 2018, the U.S. high-yield asset class rallied strongly in 2019 generating double-digit returns through October 2019. Despite the ongoing trade related concerns between the U.S. and its trading partners, oil price volatility and slower global growth data, the U.S. high-yield market was supported by a shift in the Fed policy to a dovish tone, stronger than expected earnings and decent U.S. macro data.
Thus far in 2019, the Fed has cut short-term interest rates three times, representing the first rate cuts since 2008. Since a year ago, U.S. Treasury yields moved lower: the 5-year yield and the 10- year yield decreased by 145 basis points each to end at 1.52% and 1.69%, respectively. U.S. high-yield spreads and yields were lower: yield to worst decreased by 100 basis points to end at 5.89% and spread to worst decreased by 42 basis points to end at 430 basis points by the end of October 2019. The price of WTI oil decreased 17% since a year ago, ending at $54.18/ barrel by the end of October 2019. Flows into high-yield mutual funds and exchange traded funds reversed trend from last year, and reported inflows of $16.5 billion as of October 2019 (source: Lipper). Year-to-date gross new high-yield issuance now stands at $230.1 billion, which is up 27% over the same period last year according to JP Morgan. The trailing 12-month default rate according to Moody’s was 3.2% at the end of October.
PERFORMANCE
Harbor High-Yield Opportunities Fund returned 8.46% (Retirement Class), 8.27% (Institutional Class), 8.00% (Administrative Class), and 7.88% (Investor Class) while the ICE BofAML U.S. High Yield (H0A0) Index returned 8.32% for the year ended October 31, 2019. The Fund’s performance is attributable to the Fund’s underweight positioning in the Energy sector, as Energy was the worst performing sector during the review period and the only sector with a negative return. Energy also led high-yield defaults in 2019; the Fund avoided exposure to several issuers that defaulted such as Halcon Resources, Sable Permian and Alta Mesa. The Fund also benefitted from strong security selection in the Services, Telecommunications, Capital Goods and Leisure sectors. Lastly, the Fund benefitted from an overweight positioning in the Financial Services sector, one of the top performing sectors for the review period. Conversely, the Fund maintained an average cash position of approximately 2.5%, which detracted from relative performance given the strong market rally year to date. Weak security selection within the Healthcare and Technology & Electronics sectors also detracted from relative performance.
49
Harbor High-Yield Opportunities Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
CHANGE IN A $50,000 INVESTMENT
For the period 11/01/2017 through 10/31/2019
The graph compares a $50,000 investment in the Institutional Class shares of the Fund with the performance of the ICE BofAML U.S. High Yield Index (H0A0). The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
TOTAL RETURNS
For the periods ended 10/31/2019
1 Year | 5 Years | Annualized | ||||||
Life of Fund | ||||||||
Harbor High-Yield Opportunities Fund | ||||||||
Retirement Class1 | 8.46% | N/A | 3.87% | |||||
Institutional Class1 | 8.27 | N/A | 3.75 | |||||
Administrative Class1 | 8.00 | N/A | 3.50 | |||||
Investor Class1 | 7.88 | N/A | 3.38 | |||||
Comparative Index | ||||||||
ICE BofAML U.S. High Yield (H0A0)1 | 8.32% | N/A | 4.53% |
As stated in the Fund’s prospectus dated March 1, 2019, the expense ratios were 0.65% (Net) and 0.93% (Gross) (Retirement Class); 0.73% (Net) and 1.01% (Gross) (Institutional Class); 0.98% (Net) and 1.26% (Gross) (Administrative Class); and 1.10% (Net) and 1.38% (Gross) (Investor Class). The net expense ratios reflect an expense limitation agreement (excluding interest expense, if any) effective through 02/29/2020. The expense ratios in the prospectus may differ from the actual expense ratios for the period disclosed within this report. The expense ratios shown in the prospectus are based on the prior fiscal year, adjusted to reflect changes, if any, in contractual arrangements that occurred prior to the date of the prospectus (or supplement thereto, if applicable).
Performance data shown represents past performance and is no guarantee of future results. Past performance is net of management fees and expenses and reflects reinvested dividends and distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or upon the redemption of Fund shares. Past performance reflects the beneficial effect of any expense waivers or reimbursements, without which returns would have been lower. Investment returns and principal value will fluctuate so that Fund shares, when redeemed, may be worth more or less than their original cost. Returns for periods less than one year are not annualized. Current performance may be higher or lower and is available through the most recent month end atharborfunds.com or by calling 800-422-1050. The Fund charges a redemption fee of 1% on redemption of Fund shares that are held for less than 90 days.
From a credit quality perspective, the Fund benefitted from strong security selection in the BB and B-rated credit tiers and the small out-of-benchmark allocation to BBB-rated credits was also accretive to relative performance. Lastly, the Fund benefitted from an underweight positioning in the CCC-rated credit tier as higher quality credits strongly outperformed all other ratings categories for the review period.
OUTLOOK & STRATEGY
We maintain a constructive outlook on below investment grade corporate credit. Rate concerns have subsided with a dovish pivot in the monetary policy from the Fed, a positive development for credit assets, in our view. The market is now expecting one additional rate cut by the Fed by the end of 2019. Fundamentals in the U.S. high yield space remain stable with minor signs of weakness. Specifically in the second quarter, leverage ratios decreased to 4.07x, following a small uptick in the first quarter of 2019. Leverage ratios still remain below historical averages and have been improving in eleven out of the last twelve quarters. Revenue and earnings before interest, taxes, depreciation, and amortization (EBITDA) growth was positive year- over- year but indicating signs of deceleration. Continued strength in technical factors is supportive of U.S high yield as fund flows have reversed trend since last year and now stand at $16.5 billion year to date. Major rating agencies project defaults to come in below 3.0% in 2019, well below the historical average of 4.6%.
We do not foresee any major fundamental concerns for the asset class. Risks to our view include unexpected FOMC rate actions, potential peak in corporate earnings growth, oil price volatility, and rising risks of a global trade war. At present, a continuation of the status quo for the U.S. economy seems likely. With estimated gross domestic product (GDP) growth of 2.0-3.0% per annum, we believe there is neither concern for recession nor overheating in the near term.
1 | The “Life of Fund” return as shown reflects the period 11/01/2017 through 10/31/2019. |
This report contains the current opinions of Crescent Capital Group LP as of the date of this report and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Such opinions are subject to change without notice and securities described herein may no longer be included in, or may at any time be removed from, the Fund’s portfolio. This report is distributed for informational purposes only. Information contained herein has been obtained from sources believed reliable, but not guaranteed.
Fixed income investments are affected by interest rate changes and the creditworthiness of the issues held by the Fund. A rise in interest rates will cause a decrease in the value of fixed income securities. Such an event would have an adverse effect on the Fund. High-yield investing poses additional credit risk related to lower-rated bonds. For information on the different share classes and the risks associated with an investment in the Fund, please refer to the current prospectus.
50
Harbor High-Yield Opportunities Fund
Portfolio of Investments—October 31, 2019
Portfolio of Investments—October 31, 2019
SECTOR ALLOCATION(% of investments) – Unaudited
Value, Cost, and Principal Amounts in Thousands
ASSET-BACKED SECURITIES—0.1% | |||
(Cost $112) | |||
Principal Amount | Value | ||
AIRLINES—0.1% | |||
US Airways 2012-2 Class B Pass-Through Trust | |||
Series 2012-2 Cl. B | |||
$ | 105 | 6.750%—06/03/2021 | $111 |
COMMON STOCKS—0.0% | |||
(Cost $5) | |||
Shares | |||
OIL, GAS & CONSUMABLE FUELS—0.0% | |||
305 | Jones Energy II Inc. | 4x | |
CORPORATE BONDS & NOTES—96.2% | |||
Principal Amount | |||
AEROSPACE & DEFENSE—2.8% | |||
Arconic Inc. | |||
$ | 350 | 5.125%—10/01/2024 | 376 |
BBA US Holdings Inc. | |||
425 | 5.375%—05/01/20261 | 445 | |
Bombardier Inc. | |||
600 | 7.500%—12/01/2024-03/15/20251 | 579 | |
TransDigm Inc. | |||
400 | 5.500%—11/15/2027 | 400 | |
100 | 6.250%—03/15/20261 | 107 | |
507 | |||
TransDigm UK Holdings plc | |||
200 | 6.875%—05/15/2026 | 214 | |
2,121 | |||
AIR FREIGHT & LOGISTICS—0.3% | |||
XPO Logistics Inc. | |||
100 | 6.125%—09/01/20231 | 103 | |
150 | 6.750%—08/15/20241 | 163 | |
266 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
AUTO COMPONENTS—1.3% | |||
KGA Escrow LLC | |||
$ | 550 | 7.500%—08/15/20231 | $588 |
Panther BF Aggregator 2 LP / Panther Finance Co. Inc. | |||
275 | 6.250%—05/15/20261 | 291 | |
100 | 8.500%—05/15/20271 | 101 | |
392 | |||
980 | |||
AUTOMOBILES—0.5% | |||
Fiat Chrysler Automobiles NV | |||
175 | 5.250%—04/15/2023 | 188 | |
McLaren Finance plc | |||
200 | 5.750%—08/01/20221 | 192 | |
380 | |||
BANKS—1.2% | |||
Intesa Sanpaolo SpA MTN2 | |||
200 | 5.017%—06/26/20241 | 209 | |
Oxford Finance LLC | |||
500 | 6.375%—12/15/20221 | 516 | |
Royal Bank of Scotland Group plc | |||
200 | 6.000%—12/19/2023 | 222 | |
947 | |||
BEVERAGES—0.7% | |||
Cott Holdings Inc. | |||
500 | 5.500%—04/01/20251 | 523 | |
BUILDING PRODUCTS—1.6% | |||
Beazer Homes USA Inc. | |||
250 | 7.250%—10/15/20291 | 264 | |
Builders FirstSource Inc. | |||
400 | 6.750%—06/01/20271 | 436 | |
Norbord Inc. | |||
300 | 5.750%—07/15/20271 | 311 | |
Standard Industries Inc. | |||
250 | 5.375%—11/15/20241 | 258 | |
1,269 | |||
CAPITAL MARKETS—1.1% | |||
LPL Holdings Inc. | |||
400 | 5.750%—09/15/20251 | 416 |
51
Harbor High-Yield Opportunities Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
CAPITAL MARKETS—Continued | |||
Refinitiv US Holdings Inc. | |||
$ | 200 | 6.250%—05/15/20261 | $218 |
200 | 8.250%—11/15/20261 | 225 | |
443 | |||
859 | |||
CHEMICALS—0.7% | |||
CF Industries Inc. | |||
250 | 5.150%—03/15/2034 | 266 | |
NOVA Chemicals Corp. | |||
125 | 4.875%—06/01/20241 | 128 | |
Olin Corp. | |||
150 | 5.125%—09/15/2027 | 155 | |
549 | |||
COMMERCIAL SERVICES & SUPPLIES—1.9% | |||
ADT Security Corp. | |||
100 | 4.875%—07/15/20321 | 87 | |
Allied Universal Holdco LLC / Allied Universal Finance Corp. | |||
200 | 9.750%—07/15/20271 | 210 | |
GW B-CR Security Corp. | |||
375 | 9.500%—11/01/2027 | 386 | |
Prime Security Services Borrower LLC / Prime Finance Inc. | |||
200 | 5.750%—04/15/20261 | 205 | |
89 | 9.250%—05/15/20231 | 94 | |
299 | |||
Williams Scotsman International Inc. | |||
200 | 6.875%—08/15/20231 | 211 | |
250 | 7.875%—12/15/20221 | 261 | |
472 | |||
1,454 | |||
COMMUNICATIONS EQUIPMENT—0.5% | |||
Plantronics Inc. | |||
400 | 5.500%—05/31/20231 | 408 | |
CONSTRUCTION MATERIALS—0.5% | |||
Cemex SAB de CV | |||
325 | 7.750%—04/16/20261 | 351 | |
CONSUMER FINANCE—4.7% | |||
Ally Financial Inc. | |||
300 | 5.125%—09/30/2024 | 330 | |
150 | 5.750%—11/20/2025 | 168 | |
498 | |||
Credit Acceptance Corp. | |||
550 | 6.625%—03/15/20261 | 586 | |
Goeasy Ltd. | |||
550 | 7.875%—11/01/20221 | 573 | |
Icahn Enterprises LP / Icahn Enterprises Finance Corp. | |||
550 | 6.250%—05/15/2026 | 584 | |
Navient Corp. MTN2 | |||
600 | 6.125%—03/25/2024 | 630 | |
Springleaf Finance Corp. | |||
150 | 6.875%—03/15/2025 | 170 | |
500 | 7.125%—03/15/2026 | 572 | |
742 | |||
3,613 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
CONTAINERS & PACKAGING—3.4% | |||
ARD Securities Finance SARL | |||
$ | 372 | 8.750%—01/31/20231 | $390 |
Ardagh Packaging Finance plc | |||
175 | 5.250%—08/15/20271 | 180 | |
Ball Corp. | |||
100 | 4.875%—03/15/2026 | 109 | |
100 | 5.250%—07/01/2025 | 111 | |
220 | |||
Berry Global Inc. | |||
100 | 4.875%—07/15/20261 | 105 | |
150 | 5.625%—07/15/20271 | 160 | |
265 | |||
Cascades Inc. | |||
250 | 5.750%—07/15/20231 | 258 | |
Flex Acquisition Co. Inc. | |||
100 | 6.875%—01/15/20251 | 94 | |
Mauser Packaging Solutions Holding Co. | |||
250 | 5.500%—04/15/20241 | 258 | |
175 | 7.250%—04/15/20251 | 168 | |
426 | |||
Pactiv LLC | |||
550 | 7.950%—12/15/2025 | 597 | |
Trivium Packaging Finance BV | |||
75 | 5.500%—08/15/20261 | 79 | |
125 | 8.500%—08/15/20271 | 133 | |
212 | |||
2,642 | |||
DIVERSIFIED CONSUMER SERVICES—0.3% | |||
Laureate Education Inc. | |||
200 | 8.250%—05/01/20251 | 218 | |
DIVERSIFIED FINANCIAL SERVICES—3.3% | |||
Clearway Energy Operating LLC | |||
200 | 5.375%—08/15/2024 | 203 | |
CommScope Inc. | |||
300 | 6.000%—03/01/20261 | 310 | |
CRC Escrow Issuer LLC | |||
250 | 5.250%—10/15/20251 | 256 | |
Crownrock Finance Inc. | |||
275 | 5.625%—10/15/20251 | 270 | |
Jefferies Finance LLC / JFIN Co. Issuer Corp. | |||
425 | 6.250%—06/03/20261 | 438 | |
New Red Finance Inc. | |||
400 | 5.000%—10/15/20251 | 413 | |
Polaris Intermediate Corp. | |||
175 | 8.500%—12/01/20221 | 148 | |
UPCB Finance IV Ltd. | |||
500 | 5.375%—01/15/20251 | 518 | |
2,556 | |||
DIVERSIFIED TELECOMMUNICATION SERVICES—6.3% | |||
Altice Financing SA | |||
250 | 7.500%—05/15/20261 | 266 | |
Altice France SA | |||
525 | 7.375%—05/01/20261 | 564 | |
Altice Luxembourg SA | |||
350 | 7.625%—02/15/20251 | 362 | |
200 | 10.500%—05/15/20271 | 227 | |
589 |
52
Harbor High-Yield Opportunities Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
DIVERSIFIED TELECOMMUNICATION SERVICES—Continued | |||
CenturyLink Inc. | |||
$ | 325 | 7.500%—04/01/2024 | $370 |
Connect Finco Sarl / Connect US Finco LLC | |||
300 | 6.750%—10/01/20261 | 311 | |
Frontier Communications Corp. | |||
125 | 8.000%—04/01/20271 | 131 | |
125 | 8.500%—04/01/20261 | 126 | |
257 | |||
Hughes Satellite Systems Corp. | |||
275 | 5.250%—08/01/2026 | 296 | |
275 | 6.625%—08/01/2026 | 298 | |
594 | |||
Qwest Corp. | |||
475 | 6.875%—09/15/2033 | 478 | |
Telecom Italia SpA | |||
375 | 5.303%—05/30/20241 | 403 | |
Videotron Ltd. | |||
200 | 5.125%—04/15/20271 | 213 | |
Virgin Media Secured Finance plc | |||
500 | 5.500%—08/15/20261 | 527 | |
Zayo Group LLC | |||
275 | 5.750%—01/15/20271 | 280 | |
4,852 | |||
ELECTRIC UTILITIES—1.7% | |||
Talen Energy Supply LLC | |||
475 | 7.250%—05/15/20271 | 476 | |
Vistra Operations Co. LLC | |||
750 | 5.625%—02/15/20271 | 798 | |
1,274 | |||
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—0.5% | |||
Ingram Micro Inc. | |||
400 | 5.450%—12/15/2024 | 414 | |
ENERGY EQUIPMENT & SERVICES—1.0% | |||
Archrock Partners LP / Archrock Partners Finance Corp. | |||
250 | 6.875%—04/01/20271 | 259 | |
Diamond Offshore Drilling Inc. | |||
250 | 4.875%—11/01/2043 | 128 | |
Oceaneering International Inc. | |||
175 | 4.650%—11/15/2024 | 164 | |
USA Compression Partners LP / USA Compression Finance Corp. | |||
150 | 6.875%—04/01/2026 | 152 | |
100 | 6.875%—09/01/20271 | 101 | |
253 | |||
804 | |||
ENTERTAINMENT—0.9% | |||
AMC Entertainment Holdings Inc. | |||
150 | 5.750%—06/15/2025 | 143 | |
Netflix Inc. | |||
75 | 4.875%—06/15/2030 | 76 | |
400 | 5.875%—11/15/2028 | 442 | |
518 | |||
661 | |||
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—1.4% | |||
Iron Mountain Inc. | |||
450 | 5.250%—03/15/20281 | 475 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—Continued | |||
Ladder Capital Finance Corp. | |||
$ | 175 | 5.250%—10/01/20251 | $178 |
MGM Growth Properties Operating Partnership LP / MGP Finance Co.-Issuer Inc. | |||
300 | 5.750%—02/01/20271 | 340 | |
MPT Operating Partnership LP | |||
100 | 5.250%—08/01/2026 | 105 | |
1,098 | |||
FOOD & STAPLES RETAILING—0.3% | |||
Albertsons Companies LLC | |||
125 | 5.750%—03/15/2025 | 130 | |
75 | 5.875%—02/15/20281 | 81 | |
211 | |||
FOOD PRODUCTS—1.1% | |||
JBS USA Lux SA / JBS USA Food Co. / JBS USA Finance Inc. | |||
150 | 6.500%—04/15/20291 | 167 | |
Pilgrim's Pride Corp. | |||
200 | 5.875%—09/30/20271 | 215 | |
Post Holdings Inc. | |||
300 | 5.500%—12/15/20291 | 317 | |
150 | 5.750%—03/01/20271 | 161 | |
478 | |||
860 | |||
GAS UTILITIES—0.3% | |||
DCP Midstream Operating LP | |||
250 | 5.125%—05/15/2029 | 255 | |
HEALTH CARE PROVIDERS & SERVICES—5.9% | |||
Centene Corp. | |||
600 | 4.750%—01/15/2025 | 622 | |
Community Health Systems Inc. | |||
225 | 5.125%—08/01/2021 | 225 | |
100 | 6.250%—03/31/2023 | 98 | |
125 | 6.875%—02/01/2022 | 97 | |
175 | 8.000%—11/15/2019 | 173 | |
75 | 8.625%—01/15/20241 | 77 | |
670 | |||
DaVita Inc. | |||
250 | 5.125%—07/15/2024 | 256 | |
Encompass Health Corp. | |||
100 | 4.500%—02/01/2028 | 102 | |
HCA Inc. | |||
850 | 4.125%—06/15/2029 | 903 | |
MEDNAX Inc. | |||
175 | 6.250%—01/15/20271 | 174 | |
RegionalCare Hospital Partners Holdings Inc. | |||
250 | 8.250%—05/01/20231 | 267 | |
Regionalcare Hospital Partners Holdings Inc. / LifePoint Health Inc. | |||
125 | 9.750%—12/01/20261 | 137 | |
Tenet Healthcare Corp. | |||
75 | 5.125%—11/01/20271 | 78 | |
400 | 6.250%—02/01/20271 | 423 | |
325 | 6.750%—06/15/2023 | 346 | |
275 | 7.000%—08/01/2025 | 285 | |
1,132 |
53
Harbor High-Yield Opportunities Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
HEALTH CARE PROVIDERS & SERVICES—Continued | |||
Wellcare Health Plans Inc. | |||
$ | 250 | 5.375%—08/15/20261 | $267 |
4,530 | |||
HOTELS, RESTAURANTS & LEISURE—5.8% | |||
Aramark Services Inc. | |||
350 | 5.000%—02/01/20281 | 367 | |
Churchill Downs Inc. | |||
425 | 5.500%—04/01/20271 | 452 | |
Everi Payments Inc. | |||
400 | 7.500%—12/15/20251 | 423 | |
Golden Nugget Inc. | |||
150 | 8.750%—10/01/20251 | 158 | |
Hilton Domestic Operating Co. Inc. | |||
150 | 4.875%—01/15/20301 | 160 | |
150 | 5.125%—05/01/2026 | 158 | |
318 | |||
International Game Technology plc | |||
250 | 6.500%—02/15/20251 | 279 | |
KFC Holding Co./Pizza Hut Holdings LLC/Taco Bell of America LLC | |||
100 | 5.250%—06/01/20261 | 106 | |
Marriott Ownership Resorts Inc. | |||
175 | 4.750%—01/15/20281 | 179 | |
Melco Resorts Finance Ltd. | |||
200 | 4.875%—06/06/20251 | 205 | |
MGM Resorts International | |||
200 | 5.500%—04/15/2027 | 220 | |
275 | 5.750%—06/15/2025 | 307 | |
527 | |||
Scientific Games International Inc. | |||
225 | 8.250%—03/15/20261 | 238 | |
245 | 10.000%—12/01/2022 | 253 | |
491 | |||
Viking Cruises Ltd. | |||
275 | 5.875%—09/15/20271 | 293 | |
75 | 6.250%—05/15/20251 | 79 | |
372 | |||
Wynn Las Vegas LLC / Wynn Las Vegas Capital Corp. | |||
125 | 5.250%—05/15/20271 | 130 | |
275 | 5.500%—03/01/20251 | 293 | |
423 | |||
Yum! Brands Inc. | |||
175 | 4.750%—01/15/20301 | 184 | |
4,484 | |||
HOUSEHOLD DURABLES—2.0% | |||
Lennar Corp. | |||
400 | 4.750%—11/29/2027 | 434 | |
M/I Homes Inc. | |||
150 | 5.625%—08/01/2025 | 157 | |
PulteGroup Inc. | |||
250 | 5.500%—03/01/2026 | 281 | |
Tempur Sealy International Inc. | |||
500 | 5.500%—06/15/2026 | 525 | |
Toll Brothers Finance Corp. | |||
125 | 3.800%—11/01/2029 | 123 | |
1,520 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
HOUSEHOLD PRODUCTS—0.9% | |||
Clearwater Paper Corp. | |||
$ | 150 | 5.375%—02/01/2025 | $148 |
Energizer Holdings Inc. | |||
200 | 7.750%—01/15/20271 | 222 | |
Kronos Acquisition Holdings Inc. | |||
400 | 9.000%—08/15/20231 | 350 | |
720 | |||
INDEPENDENT POWER & RENEWABLE ELECTRICITY PRODUCERS—1.4% | |||
AES Corp. | |||
200 | 5.125%—09/01/2027 | 215 | |
Calpine Corp. | |||
350 | 5.250%—06/01/20261 | 365 | |
100 | 5.750%—01/15/2025 | 103 | |
468 | |||
NRG Energy Inc. | |||
350 | 6.625%—01/15/2027 | 381 | |
1,064 | |||
INSURANCE—0.5% | |||
Acrisure LLC / Acrisure Finance Inc. | |||
200 | 8.125%—02/15/20241 | 213 | |
Hub International Ltd. | |||
150 | 7.000%—05/01/20261 | 155 | |
368 | |||
INTERACTIVE MEDIA & SERVICES—0.8% | |||
Match Group Inc. | |||
550 | 5.625%—02/15/20291 | 591 | |
INTERNET SERVICES & INFRASTRUCTURE—1.1% | |||
EIG Investors Corp. | |||
300 | 10.875%—02/01/2024 | 305 | |
J2 Cloud Services LLC | |||
475 | 6.000%—07/15/20251 | 506 | |
811 | |||
IT SERVICES—0.7% | |||
Cardtronics Inc. | |||
350 | 5.500%—05/01/20251 | 363 | |
CommScope Technologies Finance LLC | |||
200 | 6.000%—06/15/20251 | 180 | |
543 | |||
LEISURE PRODUCTS—0.4% | |||
Mattel Inc. | |||
300 | 6.750%—12/31/20251 | 315 | |
LIFE SCIENCES TOOLS & SERVICES—0.5% | |||
Avantor Inc. | |||
350 | 9.000%—10/01/20251 | 392 | |
MACHINERY—0.2% | |||
Allison Transmission Inc. | |||
175 | 5.875%—06/01/20291 | 189 | |
MEDIA—11.7% | |||
AMC Networks Inc. | |||
500 | 5.000%—04/01/2024 | 511 | |
Block Communications Inc. | |||
750 | 6.875%—02/15/20251 | 786 | |
CCO Holdings LLC | |||
100 | 5.000%—02/01/20281 | 105 |
54
Harbor High-Yield Opportunities Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
MEDIA—Continued | |||
$ | 250 | 5.375%—05/01/2025-06/01/20291 | $263 |
775 | 5.500%—05/01/20261 | 818 | |
1,186 | |||
Charter Communications Operating LLC | |||
200 | 3.750%—02/15/2028 | 207 | |
75 | 5.050%—03/30/2029 | 85 | |
292 | |||
CSC Holdings LLC | |||
375 | 5.375%—02/01/20281 | 398 | |
675 | 5.500%—04/15/20271 | 717 | |
100 | 5.750%—01/15/20301 | 105 | |
1,220 | |||
Diamond Sports Group LLC / Diamond Sports Finance Co. | |||
100 | 5.375%—08/15/20261 | 105 | |
225 | 6.625%—08/15/20271 | 232 | |
337 | |||
DISH DBS Corp. | |||
550 | 5.875%—11/15/2024 | 553 | |
iHeartCommunications Inc. | |||
125 | 8.375%—05/01/2027 | 135 | |
Intelsat Jackson Holdings SA | |||
500 | 8.500%—10/15/20241 | 505 | |
125 | 9.750%—07/15/20251 | 130 | |
635 | |||
Lamar Media Corp. | |||
400 | 5.750%—02/01/2026 | 425 | |
National CineMedia LLC | |||
200 | 5.875%—04/15/2028 | 211 | |
Nexstar Broadcasting Inc. | |||
350 | 5.625%—08/01/20241 | 366 | |
Salem Media Group Inc. | |||
525 | 6.750%—06/01/20241 | 454 | |
Sinclair Television Group Inc. | |||
400 | 5.625%—08/01/20241 | 413 | |
Sirius XM Radio Inc. | |||
900 | 5.000%—08/01/20271 | 949 | |
TEGNA Inc. | |||
250 | 5.000%—09/15/20291 | 254 | |
Univision Communications Inc. | |||
100 | 5.125%—02/15/20251 | 98 | |
Ziggo Secured Finance BV | |||
150 | 5.500%—01/15/20271 | 158 | |
8,983 | |||
METALS & MINING—1.2% | |||
Alcoa Nederland Holding BV | |||
200 | 6.750%—09/30/20241 | 212 | |
100 | 7.000%—09/30/20261 | 109 | |
321 | |||
Freeport-McMoRan Inc. | |||
425 | 4.550%—11/14/2024 | 443 | |
175 | 5.000%—09/01/2027 | 179 | |
622 | |||
943 | |||
OIL, GAS & CONSUMABLE FUELS—9.4% | |||
Aker BP ASA | |||
50 | 4.750%—06/15/20241 | 52 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
OIL, GAS & CONSUMABLE FUELS—Continued | |||
Antero Resources Corp. | |||
$ | 125 | 5.125%—12/01/2022 | $94 |
Ascent Resources Utica Holdings LLC / ARU Finance Corp. | |||
125 | 7.000%—11/01/20261 | 96 | |
225 | 10.000%—04/01/20221 | 214 | |
310 | |||
Berry Petroleum Co. LLC | |||
150 | 7.000%—02/15/20261 | 140 | |
Blue Racer Midstream LLC | |||
125 | 6.125%—11/15/20221 | 123 | |
California Resources Corp. | |||
250 | 8.000%—12/15/20221 | 74 | |
Cheniere Corpus Christi Holdings LLC | |||
400 | 5.125%—06/30/2027 | 432 | |
Cheniere Energy Partners LP | |||
250 | 5.250%—10/01/2025 | 260 | |
150 | 5.625%—10/01/2026 | 159 | |
419 | |||
Crestwood Midstream Partners LP / Crestwood Midstream Finance Corp. | |||
250 | 5.625%—05/01/20271 | 253 | |
DCP Midstream Operating LP | |||
100 | 5.375%—07/15/2025 | 105 | |
Energy Transfer Operating LP | |||
275 | 5.250%—04/15/2029 | 309 | |
EnLink Midstream Partners LP | |||
200 | 4.150%—06/01/2025 | 181 | |
Hess Infrastructure Partners LP / Hess Infrastructure Partners Finance Corp. | |||
175 | 5.625%—02/15/20261 | 184 | |
Hilcorp Finance Co. | |||
300 | 5.000%—12/01/20241 | 268 | |
MEG Energy Corp. | |||
150 | 7.000%—03/31/20241 | 142 | |
Murphy Oil Corp. | |||
500 | 6.875%—08/15/2024 | 530 | |
Murphy Oil USA Inc. | |||
350 | 5.625%—05/01/2027 | 377 | |
Nabors Industries Inc. | |||
150 | 5.500%—01/15/2023 | 128 | |
NGL Energy Partners LP / NGL Energy Finance Corp. | |||
125 | 7.500%—04/15/20261 | 120 | |
Parsley Energy LLC / Parsley Finance Corp. | |||
250 | 5.625%—10/15/20271 | 259 | |
PBF Logistics LP / PBF Logistics Finance Corp. | |||
75 | 6.875%—05/15/2023 | 77 | |
QEP Resources Inc. | |||
125 | 5.625%—03/01/2026 | 113 | |
Range Resources Corp. | |||
125 | 5.000%—08/15/2022 | 119 | |
Rose Rock Midstream LP | |||
400 | 5.625%—07/15/2022-11/15/2023 | 409 | |
Sunoco LP / Sunoco Finance Corp. | |||
600 | 6.000%—04/15/2027 | 632 | |
Tallgrass Energy Finance Corp. | |||
125 | 5.500%—09/15/20241 | 122 | |
Targa Resources Partners LP / Targa Resources Partners Finance Corp. | |||
225 | 5.375%—02/01/2027 | 232 | |
250 | 6.500%—07/15/20271 | 268 | |
500 |
55
Harbor High-Yield Opportunities Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
OIL, GAS & CONSUMABLE FUELS—Continued | |||
Transocean Inc. | |||
$ | 448 | 7.500%—01/15/20261 | $401 |
Valaris plc | |||
175 | 5.750%—10/01/2044 | 72 | |
W&T Offshore Inc. | |||
150 | 9.750%—11/01/20231 | 141 | |
Whiting Petroleum Corp. | |||
175 | 6.625%—01/15/2026 | 109 | |
7,195 | |||
PERSONAL PRODUCTS—0.6% | |||
HLF Financing SaRL LLC / Herbalife International Inc. | |||
450 | 7.250%—08/15/20261 | 471 | |
PHARMACEUTICALS—3.2% | |||
Bausch Health Cos. Inc. | |||
600 | 5.750%—08/15/20271 | 653 | |
75 | 7.000%—01/15/20281 | 81 | |
175 | 7.250%—05/30/20291 | 193 | |
175 | 8.500%—01/31/20271 | 197 | |
325 | 9.250%—04/01/20261 | 369 | |
1,493 | |||
Catalent Pharma Solutions Inc. | |||
125 | 5.000%—07/15/20271 | 131 | |
Elanco Animal Health Inc. | |||
175 | 4.900%—08/28/2028 | 190 | |
Endo Finance LLC | |||
325 | 5.875%—10/15/20241 | 298 | |
Prestige Brands Inc. | |||
300 | 6.375%—03/01/20241 | 315 | |
2,427 | |||
PROFESSIONAL SERVICES—0.5% | |||
Nielsen Finance LLC. | |||
375 | 5.000%—04/15/20221 | 379 | |
REAL ESTATE MANAGEMENT & DEVELOPMENT—0.3% | |||
Newmark Group Inc. | |||
200 | 6.125%—11/15/2023 | 218 | |
ROAD & RAIL—0.5% | |||
Hertz Corp. | |||
275 | 5.500%—10/15/20241 | 274 | |
100 | 7.625%—06/01/20221 | 104 | |
378 | |||
SOFTWARE—1.3% | |||
Open Text Corp. | |||
300 | 5.875%—06/01/20261 | 320 | |
Solera LLC | |||
500 | 10.500%—03/01/20241 | 526 | |
SS&C Technologies Inc. | |||
175 | 5.500%—09/30/20271 | 187 | |
1,033 | |||
SPECIALTY RETAIL—1.0% | |||
Penske Automotive Group Inc. | |||
150 | 5.500%—05/15/2026 | 157 | |
PetSmart Inc. | |||
175 | 5.875%—06/01/20251 | 173 | |
100 | 7.125%—03/15/20231 | 93 | |
266 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
SPECIALTY RETAIL—Continued | |||
Staples Inc. | |||
$ | 300 | 7.500%—04/15/20261 | $314 |
737 | |||
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS—1.7% | |||
Dell Inc. | |||
400 | 6.500%—04/15/2038 | 423 | |
Dell International LLC / EMC Corp. | |||
325 | 6.020%—06/15/20261 | 371 | |
250 | 7.125%—06/15/20241 | 266 | |
637 | |||
Xerox Corp. | |||
275 | 4.125%—03/15/2023 | 282 | |
1,342 | |||
TEXTILES, APPAREL & LUXURY GOODS—0.2% | |||
Hanesbrands Inc. | |||
125 | 4.625%—05/15/20241 | 132 | |
TOBACCO—0.5% | |||
Vector Group Ltd. | |||
375 | 6.125%—02/01/20251 | 362 | |
TRADING COMPANIES & DISTRIBUTORS—2.1% | |||
Fortress Transportation & Infrastructure Investors LLC | |||
350 | 6.500%—10/01/20251 | 354 | |
H&E Equipment Services Inc. | |||
175 | 5.625%—09/01/2025 | 185 | |
Herc Holdings Inc. | |||
300 | 5.500%—07/15/20271 | 312 | |
United Rentals North America Inc. | |||
225 | 5.250%—01/15/2030 | 237 | |
500 | 5.500%—05/15/2027 | 529 | |
766 | |||
1,617 | |||
WIRELESS TELECOMMUNICATION SERVICES—3.5% | |||
C&W Senior Financing Designated Activity Company | |||
200 | 6.875%—09/15/20271 | 211 | |
200 | 7.500%—10/15/20261 | 215 | |
426 | |||
Level 3 Financing Inc. | |||
125 | 5.250%—03/15/2026 | 131 | |
Sprint Capital Corp. | |||
100 | 6.875%—11/15/2028 | 109 | |
50 | 8.750%—03/15/2032 | 61 | |
170 | |||
Sprint Corp. | |||
725 | 7.125%—06/15/2024 | 788 | |
400 | 7.875%—09/15/2023 | 443 | |
1,231 |
56
Harbor High-Yield Opportunities Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
WIRELESS TELECOMMUNICATION SERVICES—Continued | |||
T-Mobile USA Inc. | |||
$ | 700 | 4.750%—02/01/2028 | $740 |
2,698 | |||
TOTAL CORPORATE BONDS & NOTES | |||
(Cost $72,205) | 74,007 | ||
TOTAL INVESTMENTS—96.3% | |||
(Cost $72,322) | 74,122 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—3.7% | 2,817 | ||
TOTAL NET ASSETS—100.0% | $76,939 |
WARRANTS/RIGHTS
Description | No. of Contracts | Strike Price | Expiration Date | Cost (000s) | Value (000s) | |||||
Jones Energy II Inc. | 1,345 | $ 31.67 | 05/17/2024 | $ — | $—x |
FAIR VALUE MEASUREMENTS
At October 31, 2019, the investments in Jones Energy II Inc. (as disclosed in the preceeding Portfolio of Investments and Warrants/Rights schedule) were classified as Level 3 and all other investments were classified as Level 2.
For more information on valuation inputs and their aggregation into the levels identified above, please refer to the Fair Value Measurements and Disclosures in Note 2 of the accompanying Notes to Financial Statements.
The following is a rollforward of the Fund’s Level 3 investments during the year ended October 31, 2019.
Valuation Description | Beginning Balance as of 11/01/2018 (000s) | Purchases (000s) | Sales (000s) | Discount/ (Premium) (000s) | Total Realized Gain/(Loss)w (000s) | Change in Unrealized Appreciation/ (Depreciation)w (000s) | Transfers Into Level 3 (000s) | Transfers Out of Level 3 (000s) | Ending Balance as of 10/31/2019w (000s) | |||||||||
Common Stocks | $— | $5 | $— | $— | $— | $(1) | $— | $— | $4 | |||||||||
Warrants/Rights | — | — | — | — | — | — | — | — | — | |||||||||
$— | $5 | $— | $— | $— | $(1) | $— | $— | $4 |
The following is a summary of significant unobservable inputs used in the fair valuations of assets and liabilities categorized within Level 3 of the fair value hierarchy.
Valuation Descriptions | Ending Balance as of 10/31/2019 (000s) | Valuation Technique | Unobservable Input(s) | Input Value(s) | ||||
Investments in Securities | ||||||||
Common Stocks | ||||||||
Jones Energy II Inc. | $ 4 | Market Approach | Broker Quotes | $ 13.75 | ||||
Financial Derivative Instruments | ||||||||
Warrants/Rights | ||||||||
Jones Energy II Inc. | $— | Market Approach | Estimated Recovery Value | $ 0.00 |
57
Harbor High-Yield Opportunities Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
1 | Securities purchased in a transaction 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. The Fund has no right to demand registration of these securities. At October 31, 2019, the aggregate value of these securities was $46,578 or 61% of net assets. | ||
2 | MTN after the name of a security stands for Medium Term Note. | ||
w | Amounts in this category are included in the “Realized and Net Change in Unrealized Gain/(Loss) on Investment Transactions” section of the Statement of Operations. The net unrealized appreciation/(depreciation) per investment type is below: | ||
Valuation Description | Unrealized Gain/(Loss) as of 10/31/2019 (000s) | ||
Common Stocks | $(1) | ||
Warrants/Rights | – | ||
$(1) | |||
x | Fair valued in accordance with Harbor Funds' Valuation Procedures. |
The accompanying notes are an integral part of the Financial Statements.
58
Harbor Money Market Fund
Manager’s Commentary (Unaudited)
Manager’s Commentary (Unaudited)
Subadviser
BNP Paribas Asset Management USA, Inc.
200 Park Avenue
New York, NY 10166
Portfolio Manager
Kenneth J. O’Donnell, CFA
Since 2003
Since 2003
BNP has subadvised the Fund since 1987.
Investment Objective
The Fund seeks to provide current income while maintaining liquidity and a stable share price of $1.
Kenneth J. O’Donnell, CFA
Management’s Discussion of
Fund Performance
Fund Performance
Market Review
Global growth slowed across advanced economies in the twelve months ended October 31, 2019. The U.S. economy decelerated but continued to expand at an above trend pace. In Europe, the slowdown was more pronounced leaving Germany flirting with recession as the year closes. Japan experienced a more stable growth trajectory with declining deflationary pressures. The shift in growth trends was a troubling sign for major central banks as they looked to unwind post crisis-era stimulus measures. The U.S. Federal Reserve (Fed), which began the year on a tightening trend, succumbed to global headwinds and reversed course mid-year with three easing steps. Volatility increased as markets adjusted to the abrupt shift in monetary policy. Currently, markets are pricing an additional cut in policy rates in 2020 followed by an extended pause. Fed Chair Jerome Powell continued to assert that the U.S. economy is stable and that current policy rates are acceptable while confirming that the Fed is ready to act as needed to support the expansion. The shift in Fed policy pushed short-term U.S. Treasury Note yields lower as markets discounted the path of Fed policy. Intermediate yields also declined significantly flattening the slope of the yield curve. Money market yields remained anchored to monetary policy rates, closely tracking the decline in the Federal Funds effective rate.
PerformancE
For the year ended October 31, 2019, Harbor Money Market Fund returned 2.02% (Institutional Class) and 1.76% (Administrative Class). The fund lagged the Fund’s longer duration benchmark, the ICE BofAML U.S. 3-Month Treasury Bill Index which returned 2.40% for the year. The duration of the portfolio, a measure of its sensitivity to changes in interest rates, was maintained at approximately 42 days with some variability throughout the 12-month period.
59
Harbor Money Market Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
TOTAL RETURNS
For the periods ended 10/31/2019
1 Year | Annualized | |||||||
5 Years | 10 Years | |||||||
Harbor Money Market Fund | ||||||||
Institutional Class | 2.02% | 0.91% | 0.51% | |||||
Administrative Class | 1.76 | 0.85 | 0.47 | |||||
Comparative Index | ||||||||
ICE BofAML U.S. 3-Month Treasury Bill | 2.40% | 1.02% | 0.56% |
Current 7-day subsidizeda SEC yield for period ended 10/31/2019: | Institutional Class: 1.54% | Administrative Class: 1.29% |
Current 7-day unsubsidizedb SEC yield for period ended 10/31/2019: | Institutional Class: 1.42% | Administrative Class: 1.17% |
Performance data shown represents past performance and is no guarantee of future results. Past performance is net of management fees and expenses and reflects reinvested dividends and distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or upon the redemption of Fund shares. Past performance reflects the beneficial effect of any expense waivers or reimbursements, without which returns would have been lower. Investment returns and principal value will fluctuate so that Fund shares, when redeemed, may be worth more or less than their original cost. Returns for periods less than one year are not annualized. Current performance may be higher or lower and is available through the most recent month end atharborfunds.com or by calling 800-422-1050. Current yield excludes gains and losses as defined by the Securities and Exchange Commission. The current yield more closely reflects the current earnings of the Fund than the total return.
Outlook & Strategy
Looking ahead, we expect monetary policy to remain accommodative in 2020 as interest rates remain low. We believe that global monetary stimulus will be bolstered by an increase in fiscal policy as central bank policy measures reach their limits. We expect that real, or inflation-adjusted, economic growth in the U.S. will average approximately 2.1% and that wage pressures will slowly emerge throughout the year with unemployment at historical lows. We are hopeful that business investment will resume providing additional support for domestic growth.
The Fed’s policy stance will depend on the evolution of global financial conditions. In our opinion, the Fed will likely continue to support economic growth with the target Federal Funds rate serving as the primary metric. We do not expect any changes in the tools used to manage short-term interest rates, i.e. interest paid on banking reserves and the overnight fixed- rate reserve purchase agreement program, or the reverse repurchase facility, however, the Fed may need to further increase the size of the balance sheet to support short term funding needs. We believe that the portfolio returns will decline from the prior year as money market yields incorporate expectations for the path of monetary policy.
a | Reflects reimbursement or waivers currently in effect |
b | Does not reflect reimbursements or waivers currently in effect |
This report contains the current opinions of BNP Paribas Asset Management USA, Inc. as of the date of this report and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Such opinions are subject to change without notice and securities described herein may no longer be included in, or may at any time be removed from, the Fund’s portfolio. This report is distributed for informational purposes only. Information contained herein has been obtained from sources believed reliable, but not guaranteed.
You could lose money by investing in Harbor Money Market Fund. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. An investment in the Fund is not insured or guaranteed by the FDIC or any other government agency. The Fund’s sponsor has no legal obligation to provide financial support to the Fund and you should not expect the sponsor to provide financial support to the Fund at any time. For information on the different share classes and the risks associated with an investment in the Fund, please refer to the current prospectus.
60
Harbor Money Market Fund
Portfolio of Investments—October 31, 2019
Portfolio of Investments—October 31, 2019
Investment Allocation(% of investments) — Unaudited
Value, Cost, and Principal Amounts in Thousands
GOVERNMENT AGENCY DEBT—38.3%† | ||||
Principal Amount | Value | |||
Federal Home Loan Bank Discount Notes | ||||
$ | 6,000 | 1.650%—01/22/2020 | $5,977 | |
5,000 | 1.690%—12/16/2019 | 4,989 | ||
8,500 | 1.700%—11/15/2019-01/03/2020 | 8,480 | ||
2,450 | 1.710%—12/13/2019 | 2,445 | ||
5,350 | 1.877%—11/27/2019 | 5,343 | ||
8,600 | 1.895%—12/11/2019 | 8,582 | ||
6,350 | 2.025%—11/01/2019 | 6,350 | ||
42,166 | ||||
Federal National Mortgage Association Discount Notes | ||||
4,200 | 1.750%—11/18/2019 | 4,197 | ||
TOTAL GOVERNMENT AGENCY DEBT | ||||
(Cost $46,363) | 46,363 | |||
TREASURY DEBT—61.8%† | |||
Principal Amount | Value | ||
U.S. Treasury Bills | |||
$ | 2,400 | 1.594%—01/16/2020 | $2,392 |
11,250 | 1.596%—12/19/2019 | 11,226 | |
7,000 | 1.621%—01/02/2020 | 6,980 | |
10,000 | 1.639%—12/05/2019 | 9,985 | |
10,000 | 1.769%—11/29/2019 | 9,986 | |
10,000 | 1.855%—12/12/2019 | 9,979 | |
10,000 | 1.917%—11/14/2019 | 9,993 | |
9,450 | 1.923%—11/21/2019 | 9,440 | |
4,900 | 1.953%—11/07/2019 | 4,898 | |
TOTAL TREASURY DEBT | |||
(Cost $74,879) | 74,879 | ||
TOTAL INVESTMENTS—100.1% | |||
(Cost $121,242) | 121,242 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—(0.1)% | (75) | ||
TOTAL NET ASSETS—100.0% | $121,167 |
FAIR VALUE MEASUREMENTS
All investments at October 31, 2019 (as disclosed in the preceding Portfolio of Investments) were classified as Level 2. There were no Level 3 investments at October 31, 2019 or 2018.
For more information on valuation inputs and their aggregation into the levels identified above, please refer to the Fair Value Measurements and Disclosures in Note 2 of the accompanying Notes to Financial Statements.
† | Coupon represents yield to maturity |
The accompanying notes are an integral part of the Financial Statements.
61
Harbor Fixed Income Funds
StatementS of Assets and Liabilities—October 31, 2019
StatementS of Assets and Liabilities—October 31, 2019
(All amounts in thousands, except per share amounts)
Harbor Bond Fund | Harbor Convertible Securities Fund | Harbor Core Bond Fund | Harbor High-Yield Bond Fund | Harbor High-Yield Opportunities Fund | Harbor Money Market Fund | |
ASSETS | ||||||
Investments, at identified cost | $3,097,614 | $128,868 | $79,891 | $469,018 | $72,322 | $121,242 |
Investments, at value | $3,159,905 | $133,625 | $84,078 | $472,809 | $74,122 | $121,242 |
Due from brokers | 1,090 | — | — | — | — | — |
Cash | 18,705 | 6,671 | 2,254 | 13,928 | 1,290 | 130 |
Foreign currency, at value (cost: $6,767,$0,$0,$0,$0 and $0) | 6,660 | — | — | — | — | — |
Receivables for: | ||||||
Investments sold | 1,160,624 | 263 | 43 | 6,767 | 1,142 | — |
Foreign currency spot contracts | 16,038 | — | — | — | — | — |
Capital shares sold | 763 | 174 | 36 | 117 | 21 | 50 |
Interest | 14,176 | 418 | 517 | 7,046 | 1,149 | — |
Unrealized appreciation on open forward currency contracts | 6,000 | — | — | — | — | — |
Unrealized appreciation on OTC swap agreements | 427 | — | — | — | — | — |
Variation margin on options and futures contracts | 6,588 | — | — | — | — | — |
Variation margin on centrally cleared swap agreements | 9,418 | — | — | — | — | — |
Purchased options not settled through variation margin, at value (cost: $136,$0,$0,$0,$0 and $0) | 5 | — | — | — | — | — |
Options sold | 57 | — | — | — | — | — |
Withholding tax | — | — | — | — | 2 | — |
Prepaid registration fees | 17 | 1 | — | 25 | 33 | 13 |
Other assets | 576 | 23 | 2 | 162 | 9 | 26 |
Total Assets | 4,401,049 | 141,175 | 86,930 | 500,854 | 77,768 | 121,461 |
LIABILITIES | ||||||
Payables for: | ||||||
Due to brokers | 2,098 | — | — | — | — | — |
Investments purchased | 1,724,452 | 99 | 2,130 | 8,584 | 771 | — |
Foreign currency spot contracts | 16,038 | — | — | — | — | — |
Capital shares reacquired | 2,098 | — | — | 139 | — | 220 |
Dividends to shareholders | — | — | — | — | — | 1 |
Interest on reverse repurchase agreements | 392 | — | — | — | — | — |
Investments sold short, at value (proceeds: $42,324,$0,$0,$0,$0 and $0) | 42,440 | — | — | — | — | — |
Written options not settled through variation margin, at value (premiums received: $1,063,$0,$0,$0,$0 and $0) | 95 | — | — | — | — | — |
Swap premiums received on OTC swap agreements | 441 | — | — | — | — | — |
Reverse repurchase agreements | 391,479 | — | — | — | — | — |
Sale-buyback financing transactions | 212,296 | — | — | — | — | — |
Variation margin on options and futures contracts | 3,346 | — | — | — | — | — |
Unrealized depreciation on open forward currency contracts | 13,354 | — | — | — | — | — |
Accrued expenses: | ||||||
Management fees | 768 | 70 | 24 | 211 | 39 | 22 |
12b-1 fees | 4 | 1 | — | 4 | — | — |
Transfer agent fees | 164 | 9 | 6 | 38 | 6 | 12 |
Trustees' fees and expenses | 536 | 25 | 3 | 169 | 4 | 17 |
Other | 148 | 19 | 11 | 34 | 9 | 22 |
Total Liabilities | 2,410,149 | 223 | 2,174 | 9,179 | 829 | 294 |
NET ASSETS | $1,990,900 | $140,952 | $84,756 | $491,675 | $76,939 | $121,167 |
Net Assets Consist of: | ||||||
Paid-in capital | $1,989,155 | $132,358 | $79,663 | $568,677 | $78,317 | $121,133 |
Total distributable earnings/(loss) | 1,745 | 8,594 | 5,093 | (77,002) | (1,378) | 34 |
$1,990,900 | $140,952 | $84,756 | $491,675 | $76,939 | $121,167 | |
The accompanying notes are an integral part of the Financial Statements.
62
Harbor Bond Fund | Harbor Convertible Securities Fund | Harbor Core Bond Fund | Harbor High-Yield Bond Fund | Harbor High-Yield Opportunities Fund | Harbor Money Market Fund | |||||||
NET ASSET VALUE PER SHARE BY CLASS | ||||||||||||
Retirement Class | ||||||||||||
Net assets | $12,802 | $24,697 | $5,298 | $73,676 | $259 | N/A | ||||||
Shares of beneficial interest1 | 1,076 | 2,283 | 498 | 7,456 | 26 | N/A | ||||||
Net asset value per share2 | $11.90 | $10.82 | $10.64 | $9.88 | $9.78 | N/A | ||||||
Institutional Class | ||||||||||||
Net assets | $1,958,600 | $114,130 | $79,458 | $398,320 | $76,566 | $118,032 | ||||||
Shares of beneficial interest1 | 164,467 | 10,543 | 7,469 | 40,320 | 7,833 | 118,032 | ||||||
Net asset value per share2 | $11.91 | $10.83 | $10.64 | $9.88 | $9.77 | $1.00 | ||||||
Administrative Class | ||||||||||||
Net assets | $19,498 | $59 | N/A | $686 | $54 | $3,135 | ||||||
Shares of beneficial interest1 | 1,636 | 5 | N/A | 69 | 5 | 3,135 | ||||||
Net asset value per share2 | $11.92 | $10.80 | N/A | $9.92 | $9.77 | $1.00 | ||||||
Investor Class | ||||||||||||
Net assets | N/A | $2,066 | N/A | $18,993 | $60 | N/A | ||||||
Shares of beneficial interest1 | N/A | 191 | N/A | 1,917 | 6 | N/A | ||||||
Net asset value per share2 | N/A | $10.80 | N/A | $9.91 | $9.77 | N/A |
1 | Par value $0.01 (unlimited authorizations) |
2 | Per share amounts can be recalculated to the amounts disclosed herein when total net assets and shares of beneficial interest are not rounded to thousands. |
63
Harbor Fixed Income Funds
StatementS of Operations—Year Ended October 31, 2019
StatementS of Operations—Year Ended October 31, 2019
(All amounts in thousands)
Harbor Bond Fund | Harbor Convertible Securities Fund | Harbor Core Bond Fund | Harbor High-Yield Bond Fund | Harbor High-Yield Opportunities Fund | Harbor Money Market Fund | |
Investment Income | ||||||
Interest | $82,772 | $2,130 | $2,571 | $34,224 | $4,487 | $3,560 |
Consent fee income | — | 2 | — | 19 | 3 | — |
Total Investment Income | 82,772 | 2,132 | 2,571 | 34,243 | 4,490 | 3,560 |
Operating Expenses | ||||||
Management fees | 9,303 | 834 | 262 | 3,415 | 445 | 311 |
12b-1 fees: | ||||||
Administrative Class | 73 | — | N/A | 2 | — | 14 |
Investor Class | N/A | 5 | N/A | 52 | — | N/A |
Shareholder communications | 149 | 2 | 10 | 31 | 3 | 5 |
Custodian fees | 269 | 14 | 12 | 33 | 14 | 23 |
Transfer agent fees: | ||||||
Retirement Class | 2 | 4 | 1 | 20 | — | N/A |
Institutional Class | 1,836 | 99 | 70 | 391 | 71 | 145 |
Administrative Class | 28 | — | N/A | 1 | — | 5 |
Investor Class | N/A | 5 | N/A | 45 | — | N/A |
Professional fees | 86 | 5 | 6 | 24 | 5 | 7 |
Trustees' fees and expenses | 91 | 6 | 3 | 29 | 3 | 6 |
Registration fees | 75 | 60 | 36 | 71 | 56 | 36 |
Miscellaneous | 31 | 9 | 6 | 18 | 9 | 7 |
Expenses before interest expense | 11,943 | 1,043 | 406 | 4,132 | 606 | 559 |
Interest expense | 10,274 | — | — | — | — | — |
Total expenses | 22,217 | 1,043 | 406 | 4,132 | 606 | 559 |
Management fees waived | (469) | (64) | — | (524) | — | (31) |
Transfer agent fees waived | (53) | (3) | (2) | (14) | (2) | (4) |
Other expenses reimbursed | (1,469) | — | (61) | — | (63) | (71) |
Custodian fees reduction | (3) | (1) | (1) | (3) | — | (4) |
Net expenses | 20,223 | 975 | 342 | 3,591 | 541 | 449 |
Net Investment Income/(Loss) | 62,549 | 1,157 | 2,229 | 30,652 | 3,949 | 3,111 |
Realized and Change in Net Unrealized Gain/(Loss) on Investment Transactions | ||||||
Net realized gain/(loss) on: | ||||||
Investments | 61,083 | 4,662 | 955 | (14,481) | (2,438) | — |
Foreign currency transactions | 6,794 | — | — | — | — | — |
Investments sold short | (1,289) | — | — | — | — | — |
Swap agreements | (280) | — | — | — | — | — |
Futures contracts | (26,470) | — | — | — | — | — |
Purchased options | (265) | — | — | — | — | — |
Written options | 3,666 | — | — | — | — | — |
Change in net unrealized appreciation/(depreciation) on: | ||||||
Investments | 117,930 | 6,316 | 5,019 | 24,504 | 4,416 | — |
Forwards currency contracts | (15,576) | — | — | — | — | — |
Investments sold short | (104) | — | — | — | — | — |
Swap agreements | (6,199) | — | — | — | — | — |
Futures contracts | (4,033) | — | — | — | — | — |
Purchased options | (160) | — | — | — | — | — |
Written options | 18 | — | — | — | — | — |
Translations of assets and liabilities in foreign currencies | (41) | — | — | — | — | — |
Net gain/(loss) on investment transactions | 135,074 | 10,978 | 5,974 | 10,023 | 1,978 | — |
Net Increase/(Decrease) in Net Assets Resulting from Operations | $197,623 | $12,135 | $8,203 | $40,675 | $5,927 | $3,111 |
The accompanying notes are an integral part of the Financial Statements.
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65
Harbor Fixed Income Funds
Statements of Changes In Net Assets
Statements of Changes In Net Assets
(All amounts in thousands)
Harbor Bond Fund | Harbor Convertible Securities Fund | Harbor Core Bond Fund | ||||||
November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | November 1, 2018 through October 31, 2019 | June 1, 2018a through October 31, 2018 | |||
INCREASE/(DECREASE) IN NET ASSETS | ||||||||
Operations: | ||||||||
Net investment income/(loss) | $62,549 | $61,306 | $1,157 | $1,044 | $2,229 | $646 | ||
Net realized gain/(loss) on investments | 43,239 | (35,461) | 4,662 | 7,491 | 955 | (228) | ||
Change in net unrealized appreciation/(depreciation) of investments | 91,835 | (60,429) | 6,316 | (5,744) | 5,019 | (832) | ||
Net increase/(decrease) in assets resulting from operations | 197,623 | (34,584) | 12,135 | 2,791 | 8,203 | (414) | ||
Distributions to Shareholders | ||||||||
Retirement Class | (328) | (69) | (1,614) | (2,467) | (145) | (18) | ||
Institutional Class | (59,992) | (71,173) | (5,977) | (8,137) | (2,015) | (445) | ||
Administrative Class | (878) | (953) | (3) | (37) | N/A | N/A | ||
Investor Class | N/A | N/A | (111) | (187) | N/A | N/A | ||
Total distributions to shareholders | (61,198) | (72,195) | (7,705) | (10,828) | (2,160) | (463) | ||
Net Increase/(Decrease) Derived from Capital Share Transactions | (83,237) | (145,275) | 15,772 | 14,401 | 23,403 | 56,187 | ||
Net increase/(decrease) in net assets | 53,188 | (252,054) | 20,202 | 6,364 | 29,446 | 55,310 | ||
Net Assets | ||||||||
Beginning of period | 1,937,712 | 2,189,766 | 120,750 | 114,386 | 55,310 | — | ||
End of period | $1,990,900 | $1,937,712 | $140,952 | $120,750 | $84,756 | $55,310 |
a | Inception |
The accompanying notes are an integral part of the Financial Statements.
66
Harbor High-Yield Bond Fund | Harbor High-Yield Opportunities Fund | Harbor Money Market Fund | |||||
November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | ||
$30,652 | $57,979 | $3,949 | $3,506 | $3,111 | $2,029 | ||
(14,481) | 7,393 | (2,438) | (1,192) | — | — | ||
24,504 | (61,944) | 4,416 | (2,616) | — | — | ||
40,675 | 3,428 | 5,927 | (302) | 3,111 | 2,029 | ||
(8,772) | (11,614) | (13) | (9) | N/A | N/A | ||
(23,233) | (47,842) | (4,010) | (2,970) | (3,012) | (1,999) | ||
(44) | (86) | (3) | (2) | (99) | (30) | ||
(1,147) | (1,869) | (3) | (2) | N/A | N/A | ||
(33,196) | (61,411) | (4,029) | (2,983) | (3,111) | (2,029) | ||
(322,558) | (608,957) | 3,327 | 74,999 | (10,745) | (39,270) | ||
(315,079) | (666,940) | 5,225 | 71,714 | (10,745) | (39,270) | ||
806,754 | 1,473,694 | 71,714 | — | 131,912 | 171,182 | ||
$491,675 | $806,754 | $76,939 | $71,714 | $121,167 | $131,912 |
67
Harbor Fixed Income Funds
Statements of Changes in Net Assets—Capital Stock Activity
Statements of Changes in Net Assets—Capital Stock Activity
(All amounts in thousands)
Harbor Bond Fund | Harbor Convertible Securities Fund | Harbor Core Bond Fund | ||||||
November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | November 1, 2018 through October 31, 2019 | June 1, 2018a through October 31, 2018 | |||
AMOUNT ($) | ||||||||
Retirement Class | ||||||||
Net proceeds from sale of shares | $6,756 | $7,107 | $246 | $1,150 | $3,158 | $3,069 | ||
Net proceeds from redemption fees | — | — | — | — | — | — | ||
Reinvested distributions | 328 | 69 | 1,614 | 2,467 | 128 | 18 | ||
Cost of shares reacquired | (2,022) | (185) | (3,434) | (1,044) | (1,473) | — | ||
Net increase/(decrease) in net assets | $5,062 | $6,991 | $(1,574) | $2,573 | $1,813 | $3,087 | ||
Institutional Class | ||||||||
Net proceeds from sale of shares | $288,671 | $305,904 | $36,943 | $32,066 | $31,811 | $54,477 | ||
Net proceeds from redemption fees | — | — | 1 | 1 | — | — | ||
Reinvested distributions | 56,920 | 67,995 | 5,898 | 7,984 | 2,015 | 445 | ||
Cost of shares reacquired | (420,202) | (528,432) | (25,631) | (27,880) | (12,236) | (1,822) | ||
Net increase/(decrease) in net assets | $(74,611) | $(154,533) | $17,211 | $12,171 | $21,590 | $53,100 | ||
Administrative Class | ||||||||
Net proceeds from sale of shares | $6,129 | $9,690 | $— | $— | N/A | N/A | ||
Net proceeds from redemption fees | — | — | — | — | N/A | N/A | ||
Reinvested distributions | 878 | 952 | 3 | 37 | N/A | N/A | ||
Cost of shares reacquired | (20,695) | (8,375) | — | (358) | N/A | N/A | ||
Net increase/(decrease) in net assets | $(13,688) | $2,267 | $3 | $(321) | N/A | N/A | ||
Investor Class | ||||||||
Net proceeds from sale of shares | N/A | N/A | $1,212 | $768 | N/A | N/A | ||
Net proceeds from redemption fees | N/A | N/A | — | — | N/A | N/A | ||
Reinvested distributions | N/A | N/A | 111 | 187 | N/A | N/A | ||
Cost of shares reacquired | N/A | N/A | (1,191) | (977) | N/A | N/A | ||
Net increase/(decrease) in net assets | N/A | N/A | $132 | $(22) | N/A | N/A |
a | Inception |
The accompanying notes are an integral part of the Financial Statements.
68
Harbor High-Yield Bond Fund | Harbor High-Yield Opportunities Fund | Harbor Money Market Fund | |||||
November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | ||
$15,713 | $389,532 | $80 | $253 | N/A | N/A | ||
5 | 12 | — | — | N/A | N/A | ||
8,598 | 10,972 | 13 | 9 | N/A | N/A | ||
(254,561) | (128,042) | (90) | (3) | N/A | N/A | ||
$(230,245) | $272,474 | $3 | $259 | N/A | N/A | ||
$80,070 | $106,617 | $5,062 | $73,824 | $375,658 | $550,663 | ||
12 | 293 | — | — | — | — | ||
22,836 | 38,689 | 4,010 | 2,970 | 2,986 | 1,988 | ||
(181,784) | (1,017,400) | (5,756) | (2,162) | (390,438) | (592,462) | ||
$(78,866) | $(871,801) | $3,316 | $74,632 | $(11,794) | $(39,811) | ||
$79 | $173 | $— | $50 | $21,058 | $2,601 | ||
— | 1 | — | — | — | — | ||
42 | 73 | 3 | 2 | 99 | 30 | ||
(822) | (542) | — | — | (20,108) | (2,090) | ||
$(701) | $(295) | $3 | $52 | $1,049 | $541 | ||
$6,096 | $7,271 | $2 | $54 | N/A | N/A | ||
1 | 9 | — | — | N/A | N/A | ||
1,133 | 1,847 | 3 | 2 | N/A | N/A | ||
(19,976) | (18,462) | — | — | N/A | N/A | ||
$(12,746) | $(9,335) | $5 | $56 | N/A | N/A |
69
Harbor Fixed Income Funds
Statements of Changes in Net Assets—Capital Stock Activity—Continued
Statements of Changes in Net Assets—Capital Stock Activity—Continued
(All amounts in thousands)
Harbor Bond Fund | Harbor Convertible Securities Fund | Harbor Core Bond Fund | ||||||
November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | November 1, 2018 through October 31, 2019 | June 1, 2018a through October 31, 2018 | |||
SHARES | ||||||||
Retirement Class | ||||||||
Shares sold | 603 | 635 | 24 | 103 | 316 | 309 | ||
Shares issued due to reinvestment of distributions | 29 | 6 | 166 | 239 | 12 | 2 | ||
Shares reacquired | (180) | (17) | (334) | (97) | (141) | — | ||
Net increase/(decrease) in shares outstanding | 452 | 624 | (144) | 245 | 187 | 311 | ||
Institutional Class | ||||||||
Shares sold | 25,078 | 26,978 | 3,514 | 3,011 | 3,140 | 5,447 | ||
Shares issued due to reinvestment of distributions | 4,986 | 6,008 | 606 | 773 | 196 | 45 | ||
Shares reacquired | (36,786) | (46,739) | (2,496) | (2,619) | (1,176) | (183) | ||
Net increase/(decrease) in shares outstanding | (6,722) | (13,753) | 1,624 | 1,165 | 2,160 | 5,309 | ||
Administrative Class | ||||||||
Shares sold | 537 | 857 | — | — | N/A | N/A | ||
Shares issued due to reinvestment of distributions | 77 | 84 | — | 4 | N/A | N/A | ||
Shares reacquired | (1,779) | (739) | — | (34) | N/A | N/A | ||
Net increase/(decrease) in shares outstanding | (1,165) | 202 | — | (30) | N/A | N/A | ||
Investor Class | ||||||||
Shares sold | N/A | N/A | 114 | 73 | N/A | N/A | ||
Shares issued due to reinvestment of distributions | N/A | N/A | 12 | 18 | N/A | N/A | ||
Shares reacquired | N/A | N/A | (113) | (92) | N/A | N/A | ||
Net increase/(decrease) in shares outstanding | N/A | N/A | 13 | (1) | N/A | N/A |
a | Inception |
The accompanying notes are an integral part of the Financial Statements.
70
Harbor High-Yield Bond Fund | Harbor High-Yield Opportunities Fund | Harbor Money Market Fund | |||||
November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | ||
1,616 | 39,085 | 8 | 25 | N/A | N/A | ||
898 | 1,119 | 2 | 1 | N/A | N/A | ||
(26,404) | (12,964) | (10) | — | N/A | N/A | ||
(23,890) | 27,240 | — | 26 | N/A | N/A | ||
8,195 | 10,670 | 524 | 7,401 | 375,658 | 550,663 | ||
2,362 | 3,920 | 422 | 306 | 2,986 | 1,988 | ||
(18,795) | (101,838) | (598) | (222) | (390,438) | (592,462) | ||
(8,238) | (87,248) | 348 | 7,485 | (11,794) | (39,811) | ||
8 | 17 | — | 5 | 21,058 | 2,601 | ||
4 | 7 | — | — | 99 | 30 | ||
(84) | (54) | — | — | (20,108) | (2,090) | ||
(72) | (30) | — | 5 | 1,049 | 541 | ||
623 | 725 | — | 6 | N/A | N/A | ||
117 | 186 | — | — | N/A | N/A | ||
(2,073) | (1,836) | — | — | N/A | N/A | ||
(1,333) | (925) | — | 6 | N/A | N/A |
71
Harbor Fixed Income Funds Financial Highlights
Selected Data for a Share Outstanding for the Periods Presented
Selected Data for a Share Outstanding for the Periods Presented
HARBOR BOND FUND | ||
Retirement Class | ||
Year Ended October 31 | 2019 | 2018g |
Net asset value beginning of period | $11.09 | $11.28 |
Income from Investment Operations | ||
Net investment income/(loss)a,e | 0.38 | 0.16 |
Net realized and unrealized gains/(losses) on investments | 0.80 | (0.16) |
Total from investment operations | 1.18 | —* |
Less Distributions | ||
Dividends from net investment income | (0.37) | (0.19) |
Distributions from net realized capital gains | — | — |
Total distributions | (0.37) | (0.19) |
Net asset value end of period | 11.90 | 11.09 |
Net assets end of period (000s) | $12,802 | $6,921 |
Ratios and Supplemental Data (%) | ||
Total returnb | 10.84% | 0.01%c |
Ratio of total expenses to average net assets^ | 1.06 | 1.16d |
Ratio of net expenses to average net assetsa | 0.96 | 1.06d |
Ratio of net expenses excluding interest expense to average net assetsa | 0.43 | 0.43d |
Ratio of net investment income to average net assetsa | 3.30 | 3.44d |
Portfolio turnover | 644 | 674 |
Administrative Class | |||||
Year Ended October 31, | 2019 | 2018 | 2017 | 2016 | 2015 |
Net asset value beginning of period | $11.11 | $11.69 | $11.89 | $11.93 | $12.28 |
Income from Investment Operations | |||||
Net investment income/(loss)a,e | 0.35 | 0.31 | 0.34 | 0.34 | 0.30 |
Net realized and unrealized gains/(losses) on investments | 0.79 | (0.53) | (0.05) | 0.16 | (0.16) |
Total from investment operations | 1.14 | (0.22) | 0.29 | 0.50 | 0.14 |
Less Distributions | |||||
Dividends from net investment income | (0.33) | (0.36) | (0.32) | (0.45) | (0.38) |
Distributions from net realized capital gains | — | — | (0.17) | (0.09) | (0.11) |
Total distributions | (0.33) | (0.36) | (0.49) | (0.54) | (0.49) |
Net asset value end of period | 11.92 | 11.11 | 11.69 | 11.89 | 11.93 |
Net assets end of period (000s) | $19,498 | $31,111 | $30,376 | $37,887 | $57,874 |
Ratios and Supplemental Data (%) | |||||
Total returnb | 10.44% | (1.88)% | 2.56% | 4.42% | 1.13% |
Ratio of total expenses to average net assets^ | 1.39 | 1.16 | 0.88 | 0.85 | 0.83 |
Ratio of net expenses to average net assetsa | 1.29 | 1.06 | 0.79 | 0.78 | 0.77 |
Ratio of net expenses excluding interest expense to average net assetsa | 0.76 | 0.76 | 0.76 | 0.76 | 0.77 |
Ratio of net investment income to average net assetsa | 3.01 | 2.69 | 2.90 | 2.89 | 2.47 |
Portfolio turnover | 644 | 674 | 654 | 592 | 586 |
See page 82 for notes to the Financial Highlights.
The accompanying notes are an integral part of the Financial Statements.
72
Institutional Class | ||||
2019 | 2018 | 2017 | 2016 | 2015 |
$11.10 | $11.68 | $11.88 | $11.92 | $12.28 |
0.37 | 0.33 | 0.36 | 0.37 | 0.34 |
0.80 | (0.52) | (0.04) | 0.16 | (0.18) |
1.17 | (0.19) | 0.32 | 0.53 | 0.16 |
(0.36) | (0.39) | (0.35) | (0.48) | (0.41) |
— | — | (0.17) | (0.09) | (0.11) |
(0.36) | (0.39) | (0.52) | (0.57) | (0.52) |
11.91 | 11.10 | 11.68 | 11.88 | 11.92 |
$1,958,600 | $1,899,680 | $2,159,390 | $2,438,815 | $2,874,705 |
10.74% | (1.63)% | 2.82% | 4.70% | 1.32% |
1.14 | 0.90 | 0.63 | 0.60 | 0.58 |
1.04 | 0.80 | 0.54 | 0.53 | 0.52 |
0.51 | 0.51 | 0.51 | 0.51 | 0.52 |
3.23 | 2.93 | 3.15 | 3.16 | 2.80 |
644 | 674 | 654 | 592 | 586 |
73
Harbor Fixed Income Funds Financial Highlights—Continued
Selected Data for a Share Outstanding for the Periods Presented
Selected Data for a Share Outstanding for the Periods Presented
HARBOR CONVERTIBLE SECURITIES FUND | ||||
Retirement Class | ||||
Year Ended October 31, | 2019 | 2018 | 2017 | 2016f |
Net asset value beginning of period | $10.47 | $11.27 | $10.53 | $9.78 |
Income from Investment Operations | ||||
Net investment income/(loss)a,e | 0.10 | 0.10 | 0.14 | 0.08 |
Net realized and unrealized gains/(losses) on investments | 0.92 | 0.19 | 0.78 | 0.75 |
Total from investment operations | 1.02 | 0.29 | 0.92 | 0.83 |
Less Distributions | ||||
Dividends from net investment income | (0.18) | (0.09) | (0.18) | (0.08) |
Distributions from net realized capital gains | (0.49) | (1.00) | — | — |
Total distributions | (0.67) | (1.09) | (0.18) | (0.08) |
Proceeds from redemption fees | —* | —* | —* | — |
Net asset value end of period | 10.82 | 10.47 | 11.27 | 10.53 |
Net assets end of period (000s) | $24,697 | $25,412 | $24,585 | $2,215 |
Ratios and Supplemental Data (%) | ||||
Total returnb | 10.48% | 2.80% | 8.81% | 8.51%c |
Ratio of total expenses to average net assets^ | 0.74 | 0.74 | 0.72 | 0.73d |
Ratio of net expenses to average net assetsa | 0.69 | 0.69 | 0.67 | 0.71d |
Ratio of net investment income to average net assetsa | 0.98 | 0.95 | 1.24 | 1.13d |
Portfolio turnover | 74 | 94 | 102 | 102 |
Administrative Class | |||||
Year Ended October 31, | 2019 | 2018 | 2017 | 2016 | 2015 |
Net asset value beginning of period | $10.44 | $11.26 | $10.53 | $10.62 | $11.19 |
Income from Investment Operations | |||||
Net investment income/(loss)a,e | 0.07 | 0.07 | 0.10 | 0.09 | 0.12 |
Net realized and unrealized gains/(losses) on investments | 0.91 | 0.17 | 0.77 | 0.20 | (0.08) |
Total from investment operations | 0.98 | 0.24 | 0.87 | 0.29 | 0.04 |
Less Distributions | |||||
Dividends from net investment income | (0.13) | (0.06) | (0.14) | (0.19) | (0.19) |
Distributions from net realized capital gains | (0.49) | (1.00) | — | (0.19) | (0.42) |
Total distributions | (0.62) | (1.06) | (0.14) | (0.38) | (0.61) |
Proceeds from redemption fees | —* | —* | —* | —* | —* |
Net asset value end of period | 10.80 | 10.44 | 11.26 | 10.53 | 10.62 |
Net assets end of period (000s) | $59 | $53 | $395 | $392 | $376 |
Ratios and Supplemental Data (%) | |||||
Total returnb | 10.11% | 2.27% | 8.37% | 2.96% | 0.47% |
Ratio of total expenses to average net assets^ | 1.07 | 1.07 | 1.04 | 1.02 | 1.00 |
Ratio of net expenses to average net assetsa | 1.02 | 1.01 | 1.00 | 1.01 | 1.00 |
Ratio of net investment income to average net assetsa | 0.64 | 0.63 | 0.93 | 0.90 | 1.11 |
Portfolio turnover | 74 | 94 | 102 | 102 | 81 |
See page 82 for notes to the Financial Highlights.
The accompanying notes are an integral part of the Financial Statements.
74
Institutional Class | ||||
2019 | 2018 | 2017 | 2016 | 2015 |
$10.48 | $11.27 | $10.53 | $10.63 | $11.20 |
0.09 | 0.09 | 0.13 | 0.12 | 0.15 |
0.92 | 0.20 | 0.78 | 0.19 | (0.08) |
1.01 | 0.29 | 0.91 | 0.31 | 0.07 |
(0.17) | (0.08) | (0.17) | (0.22) | (0.22) |
(0.49) | (1.00) | — | (0.19) | (0.42) |
(0.66) | (1.08) | (0.17) | (0.41) | (0.64) |
—* | —* | —* | —* | —* |
10.83 | 10.48 | 11.27 | 10.53 | 10.63 |
$114,130 | $93,424 | $87,391 | $421,671 | $373,421 |
10.39% | 2.82% | 8.74% | 3.12% | 0.72% |
0.82 | 0.82 | 0.79 | 0.77 | 0.75 |
0.77 | 0.76 | 0.76 | 0.76 | 0.75 |
0.89 | 0.88 | 1.18 | 1.15 | 1.37 |
74 | 94 | 102 | 102 | 81 |
Investor Class | ||||
2019 | 2018 | 2017 | 2016 | 2015 |
$10.45 | $11.25 | $10.52 | $10.61 | $11.18 |
0.05 | 0.05 | 0.09 | 0.08 | 0.11 |
0.92 | 0.19 | 0.77 | 0.20 | (0.08) |
0.97 | 0.24 | 0.86 | 0.28 | 0.03 |
(0.13) | (0.04) | (0.13) | (0.18) | (0.18) |
(0.49) | (1.00) | — | (0.19) | (0.42) |
(0.62) | (1.04) | (0.13) | (0.37) | (0.60) |
—* | —* | —* | —* | —* |
10.80 | 10.45 | 11.25 | 10.52 | 10.61 |
$2,066 | $1,861 | $2,015 | $2,039 | $1,861 |
9.99% | 2.35% | 8.26% | 2.85% | 0.35% |
1.19 | 1.19 | 1.16 | 1.14 | 1.12 |
1.14 | 1.13 | 1.12 | 1.13 | 1.12 |
0.52 | 0.51 | 0.81 | 0.77 | 1.00 |
74 | 94 | 102 | 102 | 81 |
75
Harbor Fixed Income Funds Financial Highlights—Continued
Selected Data for a Share Outstanding for the Periods Presented
Selected Data for a Share Outstanding for the Periods Presented
HARBOR CORE BOND FUND | ||
Retirement Class | ||
Year Ended October 31, | 2019 | 2018g |
Net asset value beginning of period | $9.84 | $10.00 |
Income from Investment Operations | ||
Net investment income/(loss)a,e | 0.31 | 0.12 |
Net realized and unrealized gains/(losses) on investments | 0.79 | (0.19) |
Total from investment operations | 1.10 | (0.07) |
Less Distributions | ||
Dividends from net investment income | (0.30) | (0.09) |
Distributions from net realized capital gains | — | — |
Total distributions | (0.30) | (0.09) |
Net asset value end of period | 10.64 | 9.84 |
Net assets end of period (000s) | $5,298 | $3,061 |
Ratios and Supplemental Data (%) | ||
Total returnb | 11.34% | (0.73)%c |
Ratio of total expenses to average net assets^ | 0.45 | 0.77d |
Ratio of net expenses to average net assetsa | 0.37 | 0.37d |
Ratio of net investment income to average net assetsa | 2.98 | 2.98d |
Portfolio turnover | 61 | 97c |
See page 82 for notes to the Financial Highlights.
The accompanying notes are an integral part of the Financial Statements.
76
Institutional Class | |
2019 | 2018g |
$9.84 | $10.00 |
0.30 | 0.12 |
0.79 | (0.19) |
1.09 | (0.07) |
(0.29) | (0.09) |
— | — |
(0.29) | (0.09) |
10.64 | 9.84 |
$79,458 | $52,249 |
11.26% | (0.75)%c |
0.53 | 0.85d |
0.45 | 0.45d |
2.89 | 2.86d |
61 | 97c |
77
Harbor Fixed Income Funds Financial Highlights—Continued
Selected Data for a Share Outstanding for the Periods Presented
Selected Data for a Share Outstanding for the Periods Presented
HARBOR HIGH-YIELD BOND FUND | ||||
Retirement Class | ||||
Year Ended October 31, | 2019 | 2018 | 2017 | 2016f |
Net asset value beginning of period | $9.69 | $10.22 | $10.00 | $9.40 |
Income from Investment Operations | ||||
Net investment income/(loss)a,e | 0.54 | 0.54 | 0.55 | 0.36 |
Net realized and unrealized gains/(losses) on investments | 0.22 | (0.49) | 0.25 | 0.61 |
Total from investment operations | 0.76 | 0.05 | 0.80 | 0.97 |
Less Distributions | ||||
Dividends from net investment income | (0.57) | (0.58) | (0.58) | (0.37) |
Distributions from net realized capital gains | — | — | — | — |
Total distributions | (0.57) | (0.58) | (0.58) | (0.37) |
Proceeds from redemption fees | —* | —* | —* | —* |
Net asset value end of period | 9.88 | 9.69 | 10.22 | 10.00 |
Net assets end of period (000s) | $73,676 | $303,627 | $41,975 | $1,828 |
Ratios and Supplemental Data (%) | ||||
Total returnb | 8.13% | 0.54% | 8.23% | 10.49%c |
Ratio of total expenses to average net assets^ | 0.65 | 0.61 | 0.65 | 0.66d |
Ratio of net expenses to average net assetsa | 0.56 | 0.53 | 0.61 | 0.61d |
Ratio of net investment income to average net assetsa | 5.53 | 5.50 | 5.44 | 5.38d |
Portfolio turnover | 80 | 53 | 56 | 58 |
Administrative Class | |||||
Year Ended October 31, | 2019 | 2018 | 2017 | 2016 | 2015 |
Net asset value beginning of period | $9.71 | $10.25 | $10.01 | $10.02 | $10.87 |
Income from Investment Operations | |||||
Net investment income/(loss)a,e | 0.50 | 0.52 | 0.53 | 0.51 | 0.55 |
Net realized and unrealized gains/(losses) on investments | 0.25 | (0.51) | 0.25 | (0.02) | (0.67) |
Total from investment operations | 0.75 | 0.01 | 0.78 | 0.49 | (0.12) |
Less Distributions | |||||
Dividends from net investment income | (0.54) | (0.55) | (0.54) | (0.50) | (0.51) |
Distributions from net realized capital gains | — | — | — | — | (0.22) |
Total distributions | (0.54) | (0.55) | (0.54) | (0.50) | (0.73) |
Proceeds from redemption fees | —* | —* | —* | —* | —* |
Net asset value end of period | 9.92 | 9.71 | 10.25 | 10.01 | 10.02 |
Net assets end of period (000s) | $686 | $1,374 | $1,753 | $4,631 | $4,314 |
Ratios and Supplemental Data (%) | |||||
Total returnb | 7.91% | 0.10% | 7.98% | 5.18% | (1.03)% |
Ratio of total expenses to average net assets^ | 0.98 | 0.94 | 0.97 | 0.95 | 0.94 |
Ratio of net expenses to average net assetsa | 0.89 | 0.86 | 0.92 | 0.91 | 0.90 |
Ratio of net investment income to average net assetsa | 5.13 | 5.18 | 5.20 | 5.20 | 5.26 |
Portfolio turnover | 80 | 53 | 56 | 58 | 49 |
See page 82 for notes to the Financial Highlights.
The accompanying notes are an integral part of the Financial Statements.
78
Institutional Class | ||||
2019 | 2018 | 2017 | 2016 | 2015 |
$9.68 | $10.21 | $9.99 | $10.00 | $10.85 |
0.52 | 0.54 | 0.55 | 0.53 | 0.57 |
0.25 | (0.51) | 0.24 | (0.02) | (0.66) |
0.77 | 0.03 | 0.79 | 0.51 | (0.09) |
(0.57) | (0.57) | (0.57) | (0.52) | (0.54) |
— | — | — | — | (0.22) |
(0.57) | (0.57) | (0.57) | (0.52) | (0.76) |
—* | 0.01 | —* | —* | —* |
9.88 | 9.68 | 10.21 | 9.99 | 10.00 |
$398,320 | $470,204 | $1,387,213 | $1,817,902 | $1,460,808 |
8.16% | 0.45% | 8.16% | 5.46% | (0.79)% |
0.73 | 0.69 | 0.72 | 0.70 | 0.69 |
0.64 | 0.62 | 0.67 | 0.66 | 0.65 |
5.35 | 5.40 | 5.43 | 5.43 | 5.51 |
80 | 53 | 56 | 58 | 49 |
Investor Class | ||||
2019 | 2018 | 2017 | 2016 | 2015 |
$9.71 | $10.24 | $10.01 | $10.02 | $10.87 |
0.49 | 0.50 | 0.52 | 0.49 | 0.53 |
0.24 | (0.49) | 0.24 | (0.02) | (0.66) |
0.73 | 0.01 | 0.76 | 0.47 | (0.13) |
(0.53) | (0.54) | (0.53) | (0.48) | (0.50) |
— | — | — | — | (0.22) |
(0.53) | (0.54) | (0.53) | (0.48) | (0.72) |
—* | —* | —* | —* | —* |
9.91 | 9.71 | 10.24 | 10.01 | 10.02 |
$18,993 | $31,549 | $42,753 | $87,155 | $96,957 |
7.72% | 0.08% | 7.79% | 5.02% | (1.15)% |
1.10 | 1.06 | 1.09 | 1.07 | 1.06 |
1.01 | 0.98 | 1.04 | 1.03 | 1.02 |
5.00 | 5.05 | 5.08 | 5.09 | 5.14 |
80 | 53 | 56 | 58 | 49 |
79
Harbor Fixed Income Funds Financial Highlights—Continued
Selected Data for a Share Outstanding for the Periods Presented
Selected Data for a Share Outstanding for the Periods Presented
HARBOR HIGH-YIELD OPPORTUNITIES FUND | |||||
Retirement Class | Institutional Class | ||||
Year Ended October 31, | 2019 | 2018h | 2019 | 2018h | |
Net asset value beginning of period | $9.53 | $10.00 | $9.53 | $10.00 | |
Income from Investment Operations | |||||
Net investment income/(loss)a,e | 0.52 | 0.52 | 0.51 | 0.50 | |
Net realized and unrealized gains/(losses) on investments | 0.26 | (0.57) | 0.25 | (0.56) | |
Total from investment operations | 0.78 | (0.05) | 0.76 | (0.06) | |
Less Distributions | |||||
Dividends from net investment income | (0.53) | (0.42) | (0.52) | (0.41) | |
Distributions from net realized capital gains | — | — | — | — | |
Total distributions | (0.53) | (0.42) | (0.52) | (0.41) | |
Proceeds from redemption fees | — | —* | — | —* | |
Net asset value end of period | 9.78 | 9.53 | 9.77 | 9.53 | |
Net assets end of period (000s) | $259 | $250 | $76,566 | $71,361 | |
Ratios and Supplemental Data (%) | |||||
Total returnb | 8.46% | (0.53)% | 8.27% | (0.59)% | |
Ratio of total expenses to average net assets^ | 0.74 | 0.92 | 0.82 | 1.00 | |
Ratio of net expenses to average net assetsa | 0.65 | 0.65 | 0.73 | 0.73 | |
Ratio of net investment income to average net assetsa | 5.42 | 5.29 | 5.33 | 5.12 | |
Portfolio turnover | 94 | 56 | 94 | 56 |
See page 82 for notes to the Financial Highlights.
The accompanying notes are an integral part of the Financial Statements.
80
Administrative Class | Investor Class | |||
2019 | 2018h | 2019 | 2018h | |
$9.53 | $10.00 | $9.53 | $10.00 | |
0.49 | 0.47 | 0.47 | 0.46 | |
0.25 | (0.55) | 0.26 | (0.55) | |
0.74 | (0.08) | 0.73 | (0.09) | |
(0.50) | (0.39) | (0.49) | (0.38) | |
— | — | — | — | |
(0.50) | (0.39) | (0.49) | (0.38) | |
— | —* | — | —* | |
9.77 | 9.53 | 9.77 | 9.53 | |
$54 | $50 | $60 | $53 | |
8.00% | (0.82)% | 7.88% | (0.92)% | |
1.07 | 1.25 | 1.19 | 1.37 | |
0.98 | 0.98 | 1.10 | 1.10 | |
5.08 | 4.84 | 4.95 | 4.73 | |
94 | 56 | 94 | 56 |
81
Harbor Fixed Income Funds Financial Highlights—Continued
Selected Data for a Share Outstanding for the Periods Presented
Selected Data for a Share Outstanding for the Periods Presented
HARBOR MONEY MARKET FUND | |||||
Institutional Class | |||||
Year Ended October 31, | 2019 | 2018 | 2017 | 2016 | 2015 |
Net asset value beginning of period | $1.00 | $1.00 | $1.00 | $1.00 | $1.00 |
Income from Investment Operations | |||||
Net investment income/(loss)a,e | 0.02 | 0.01 | 0.01 | —* | —* |
Net realized and unrealized gains/(losses) on investments | — | — | — | — | — |
Total from investment operations | 0.02 | 0.01 | 0.01 | —* | —* |
Less Distributions | |||||
Dividends from net investment income | (0.02) | (0.01) | (0.01) | —* | —* |
Distributions from net realized capital gains | — | — | — | — | — |
Total distributions | (0.02) | (0.01) | (0.01) | —* | —* |
Net asset value end of period | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 |
Net assets end of period (000s) | $118,032 | $129,826 | $169,637 | $136,986 | $176,781 |
Ratios and Supplemental Data (%) | |||||
Total returnb | 2.02% | 1.44% | 0.73% | 0.30% | 0.08% |
Ratio of total expenses to average net assets^ | 0.35 | 0.35 | 0.35 | 0.36 | 0.32 |
Ratio of net expenses to average net assetsa | 0.28 | 0.20 | — | — | — |
Ratio of net investment income to average net assetsa | 2.01 | 1.42 | 0.72 | 0.27 | 0.08 |
* | Less than $0.01 |
^ | Percentage does not reflect reduction for credit balance arrangements (see the “Custodian” section in Note 2 of the accompanying Notes to Financial Statements) |
a | Reflects the Adviser’s waiver, if any, of its management fees and/or other operating expenses |
b | The total returns would have been lower had certain expenses not been waived during the periods shown. |
c | Unannualized |
d | Annualized |
e | Amounts are based on daily average shares outstanding during the period. |
f | For the period March 1, 2016 (inception) through October 31, 2016 |
g | For the period June 1, 2018 (inception) through October 31, 2018 |
h | The Fund inception was November 1, 2017. |
The accompanying notes are an integral part of the Financial Statements.
82
Administrative Class | ||||
2019 | 2018 | 2017 | 2016 | 2015 |
$1.00 | $1.00 | $1.00 | $1.00 | $1.00 |
0.02 | 0.01 | 0.01 | —* | —* |
— | — | — | — | — |
0.02 | 0.01 | 0.01 | —* | —* |
(0.02) | (0.01) | (0.01) | —* | —* |
— | — | — | — | — |
(0.02) | (0.01) | (0.01) | —* | —* |
1.00 | 1.00 | 1.00 | 1.00 | 1.00 |
$3,135 | $2,086 | $1,545 | $2,267 | $1,727 |
1.76% | 1.36% | 0.73% | 0.30% | 0.08% |
0.60 | 0.60 | 0.60 | 0.61 | 0.57 |
0.53 | 0.29 | — | — | — |
1.79 | 1.36 | 0.70 | 0.28 | 0.07 |
83
Harbor Fixed Income Funds
Notes to Financial Statements—October 31, 2019
Notes to Financial Statements—October 31, 2019
Note 1—Organizational Matters
Harbor Funds (the “Trust”) is registered under the Investment Company Act of 1940, as amended (the “Investment Company Act”), as an open-end management investment company. As of October 31, 2019, the Trust consists of 32 separate portfolios. The portfolios covered by this report are: Harbor Bond Fund, Harbor Convertible Securities Fund, Harbor Core Bond Fund, Harbor High-Yield Bond Fund, Harbor High-Yield Opportunities Fund, and Harbor Money Market Fund (individually or collectively referred to as a “Fund” or the “Funds," respectively). Harbor Capital Advisors, Inc. (the “Adviser” or “Harbor Capital”) is the investment adviser for the Funds.
The Funds currently offer up to four classes of shares, designated as Retirement Class, Institutional Class, Administrative Class and Investor Class. The shares of each class represent an interest in the same portfolio of investments of the Funds and have equal rights with respect to voting, redemptions, dividends, and liquidations, except that: (i) subject to the approval of the Trust’s Board of Trustees (the “Board of Trustees”), certain expenses may be applied differently to each class of shares in accordance with current regulations of the U.S. Securities and Exchange Commission (“SEC”) and the Internal Revenue Service; and (ii) shareholders of a class that bears distribution and service expenses under terms of a distribution plan have exclusive voting rights as to that distribution plan.
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. Each Fund follows the investment company reporting requirements under U.S. Generally Accepted Accounting Principles (“U.S. GAAP”), which includes the accounting and reporting guidelines under Accounting Standards Codification (“ASC”) Topic 946,Financial Services-Investment Companies. The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results may differ from those estimates.
Security Valuation
The Trust’s valuation procedures permit the Funds to use a variety of valuation methodologies, consider a number of subjective factors, analyze applicable facts and circumstances and, in general, exercise judgment, when valuing Fund investments. The methodology used for a specific type of investment may vary based on the circumstances and relevant considerations, including available market data.
Equity securities (including common stock, preferred stock, convertible preferred stock, and master limited partnerships), exchange-traded notes and financial derivative instruments (such as futures contracts, options contracts, including warrants and rights, and centrally cleared swap agreements) that are traded or cleared on a national securities exchange or system (except securities listed on the National Association of Securities Dealers Automated Quotation (“NASDAQ”) system and United Kingdom securities) are valued at the last sale price on a national exchange or system on which they are principally traded or cleared as of the valuation date. Securities listed on the NASDAQ system or a United Kingdom exchange are valued at the official closing price of those securities. In the case of securities for which there are no sales on the valuation day, (i) securities traded principally on a U.S. exchange, including NASDAQ, are valued at the mean between the closing bid and ask price; and (ii) securities traded principally on a foreign exchange, including United Kingdom securities, are valued at the official bid price determined as of the close of the primary exchange. Securities of open-end registered investment companies that are held by a Fund are valued at net asset value. To the extent these securities are actively traded and fair valuation adjustments are not applied, they are normally categorized as Level 1 in the fair value hierarchy. Equity securities traded on inactive markets or valued by reference to similar instruments are normally categorized as Level 2 in the fair value hierarchy. For more information on the fair value hierarchy, please refer to the Fair Value Measurements and Disclosures section.
Debt securities (including corporate bonds, municipal bonds and notes, U.S. government agencies, U.S. treasury obligations, mortgage-backed and asset-backed securities, foreign government obligations, bank loans, and convertible securities other than short-term securities with a remaining maturity of less than 60 days at the time of acquisition), are valued using evaluated prices furnished by a pricing vendor selected by the Board of Trustees. An evaluated price represents an assessment by the pricing vendor using various market inputs of what the pricing vendor believes is the fair value of a security at a particular point in time. The pricing vendor determines evaluated prices for debt securities that would be transacted at institutional-size quantities using inputs including, but not limited to, (i) recent transaction prices and dealer quotes, (ii) transaction prices for what the pricing vendor believes are securities with similar characteristics, (iii) the pricing vendor’s assessment of the risk
84
Harbor Fixed Income Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 2—Significant Accounting Policies—Continued
inherent in the security taking into account criteria such as credit quality, payment history, liquidity and market conditions, and (iv) various correlations and relationships between security price movements and other factors, such as interest rate changes, which are recognized by institutional traders. In the case of mortgage-backed and asset-backed securities, the inputs used by the pricing vendor may also include information about cash flows, prepayment rates, default rates, delinquency and loss assumption, collateral characteristics, credit enhancements and other specific information about the particular offering. Because many debt securities trade infrequently, the pricing vendor will often not have current transaction price information available as an input in determining an evaluated price for a particular security. When current transaction price information is available, it is one input into the pricing vendor’s evaluation process, which means that the evaluated price supplied by the pricing vendor will frequently differ from that transaction price. Securities held by Harbor Money Market Fund are valued at amortized cost, which the Adviser has determined, pursuant to the Board of Trustees’ authorization, approximates fair value. Under this method, investments purchased at a discount or premium are valued by accreting or amortizing the difference between the original purchase price and the maturity value of the issue over the period to effective maturity. Securities that use similar valuation techniques and inputs as described above are normally categorized as Level 2 in the fair value hierarchy.
Short-term securities with a remaining maturity of less than 60 days at the time of acquisition that are held by a Fund are valued at amortized cost to the extent amortized cost represents fair value. Such securities are normally categorized as Level 2 in the fair value hierarchy.
Over-the-counter financial derivative instruments, such as forward currency contracts, options contracts, and swap agreements, derive their value from underlying asset prices, indices, reference rates and other inputs, or a combination of these factors. These instruments are valued using evaluated prices furnished by a pricing vendor selected by the Board of Trustees. In certain cases, when a valuation is not readily available from a pricing vendor, the Fund’s subadviser provides a valuation, typically using its own proprietary models. Depending on the instrument and the terms of the transaction, the value of the derivative instrument can be determined by a pricing vendor or subadviser using a series of techniques, including simulation pricing models. The pricing models use inputs, such as issuer details, indices, spreads, interest rates, yield curves, dividends and exchange rates, that are observed from actively quoted markets. Derivative instruments that use valuation techniques and inputs similar to those described above are normally categorized as Level 2 in the fair value hierarchy.
A Fund may also use fair value pricing if the value of some or all of the Fund’s securities have been materially affected by events occurring before the Fund’s pricing time but after the close of the primary markets or exchanges on which the security is traded. This most commonly occurs with foreign securities, but may occur with other securities as well. In such cases, the Fund may apply a fair value factor supplied by the pricing vendor to a foreign security’s market close value to reflect changes in value that may have occurred between the close of the primary market or exchange on which the security is traded and the Fund’s pricing time. That factor may be derived using observable inputs such as a comparison of the trading patterns of a foreign security to intraday trading in the U.S. markets that are highly correlated to the foreign security or other information that becomes available after the close of the foreign market on which the security principally traded. When fair value pricing is employed, the prices of securities used by a Fund to calculate its net asset value may differ from market quotations, official closing prices or evaluated prices for the same securities, which means that the Fund may value those securities higher or lower than another given fund that uses market quotations, official closing prices or evaluated prices supplied by a pricing vendor in its calculation of net asset value. Securities valued using observable inputs, such as those described above, are normally categorized as Level 2 of the fair value hierarchy.
When reliable market quotations or evaluated prices supplied by a pricing vendor are not readily available or are not believed to accurately reflect fair value, securities are priced at their fair value as determined by the Trust’s Valuation Committee (the “Valuation Committee”) pursuant to procedures adopted, and subject to oversight, by the Board of Trustees. The Valuation Committee is comprised of a trustee and officers of the Trust and employees of Harbor Capital with relevant experience or responsibilities. Each security for which the Valuation Committee determines a fair value, including the basis for the fair value decision, is reviewed by the Board of Trustees at its regularly scheduled board meetings. Securities valued using fair valuation methods that incorporate significant unobservable inputs are normally categorized as Level 3 in the fair value hierarchy.
85
Harbor Fixed Income Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 2—Significant Accounting Policies—Continued
Fair Value Measurements and Disclosures
Various inputs may be used to determine the value of each Fund’s investments, which are summarized in three broad categories defined as Level 1, Level 2, and Level 3. The inputs or methodologies used for valuing securities are not necessarily indicative of the risk associated with investing in those securities. The assignment of an investment to Levels 1, 2, or 3 is based on the lowest level of significant inputs used to determine its fair value.
Level 1– | Quoted prices in active markets for identical securities. |
Level 2– | Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). |
Level 3– | Significant unobservable inputs are used in situations where quoted prices or other observable inputs are not available or are deemed unreliable. Significant unobservable inputs may include each Fund’s own assumptions. |
The categorization of investments into Levels 1, 2, or 3, and a summary of significant unobservable inputs used for Level 3 investments, when applicable, can be found at the end of each Fund’s Portfolio of Investments schedule. For fair valuations using significant unobservable inputs, if any, a reconciliation of the beginning to ending balances for reported fair values is provided at the end of each Fund’s Portfolio of Investments schedule that presents changes attributable to realized and unrealized gains and losses and purchases, sales, and transfers in/out of the Level 3 category during the year.
Each Fund used observable inputs in its valuation methodologies whenever they were available and deemed reliable.
Loan Participations and Assignments
Loan participations and loan assignments are direct debt instruments, which are interests in amounts owed by corporate, governmental, or other borrowers to lenders or lending syndicates. A Fund’s investments in loans may be in the form of participation in loans or assignments of all or a portion of loans from third parties. A loan is often administered by a bank or other financial institution (the “agent”) that acts as agent for all holders. The agent administers the terms of the loan, as specified in the loan agreement. When investing in a loan participation, the Fund has the right to receive payments of principal, interest and any fees to which it is entitled, only from the agent selling the loan agreement and only upon receipt by the agent of payments from the borrower. As a result, the Fund may be subject to the credit risk of both the borrower and the agent that is selling the loan agreement. When the Fund purchases assignments from the agent, it acquires direct rights against the borrower on the loan.
During the year, Harbor Bond Fund and Harbor High-Yield Bond Fund invested in loan participations and assignments.
Harbor High-Yield Bond Fund entered into unfunded loan commitments during the year, which are contractual obligations for future funding. Unfunded loan commitments may include revolving credit facilities, which may obligate the Fund to supply additional cash to the borrower on demand. Unfunded loan commitments represent a future obligation in full, even though a percentage of the notional loan amounts will never be utilized by the borrower. The funded portion of these credit agreements are presented on the Portfolio of Investments. Unfunded loan commitments are marked to market daily and any unrealized appreciation or depreciation is included in the Statement of Assets and Liabilities and the Statement of Operations.
Harbor High-Yield Bond Fund may receive a commitment fee based on the undrawn portion of the underlying line of credit portion of an unfunded loan commitment. In certain circumstances, a Fund that has entered into an unfunded loan commitment may receive a prepayment penalty fee upon the prepayment of a loan by a borrower. Fees earned are recorded as a component of interest income on the Statement of Operations.
As of October 31, 2019, Harbor High-Yield Bond Fund had no unfunded loan commitments outstanding.
Inflation-Indexed Bonds
Inflation-indexed bonds are fixed-income securities whose principal value is periodically adjusted based on the rate of inflation. The interest rate on these bonds is generally fixed at issuance at a rate lower than typical bonds. Over the life of an inflation-indexed bond, however, interest will be paid based on a principal value that is adjusted for inflation. Any increase in the principal amount of an inflation-indexed bond will be included as interest income even though investors do not receive the principal until maturity.
86
Harbor Fixed Income Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 2—Significant Accounting Policies—Continued
During the year, Harbor Bond Fund invested in inflation-indexed bonds.
Mortgage-Related and Other Asset-Backed Securities
Mortgage-backed or asset-backed securities include mortgage pass-through securities, collateralized mortgage obligations (“CMOs”), commercial mortgage-backed securities, CMO residuals, stripped mortgage-backed securities (“SMBSs”) and other securities that directly or indirectly represent a participation in, or are secured by and payable from, mortgage loans on real property. The value of some mortgage- or asset-backed securities may be particularly sensitive to changes in prevailing interest rates. Early repayment of principal on some mortgage-related securities may expose a Fund to a lower rate of return upon reinvestment of principal. The value of these securities may fluctuate in response to the market’s perception of the creditworthiness of the issuers. Additionally, although mortgages and mortgage-related securities are generally supported by some form of government or private guarantee and/or insurance, there is no assurance that private guarantors or insurers will meet their obligations.
During the year, Harbor Bond Fund, Harbor Core Bond Fund, and Harbor High-Yield Opportunities Fund invested in mortgage-related or other asset-backed securities.
U.S. Government Securities
U.S. government securities include securities issued by U.S. government agencies or government-sponsored enterprises that may not be guaranteed by the U.S. Treasury. The Government National Mortgage Association (“GNMA”), a wholly owned U.S. government corporation, is authorized to guarantee, with the full faith and credit of the U.S. government, the timely payment of principal and interest on securities issued by institutions approved by GNMA and backed by pools of mortgages insured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs. Government-related guarantors are not backed by the full faith and credit of the U.S. government and include the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation.
During the year, Harbor Bond Fund, Harbor Core Bond Fund, and Harbor Money Market Fund invested in U.S. government securities.
Forward Commitments and When-Issued Securities
Purchasing securities on a when-issued or forward commitment basis involves a risk of loss if the value of the security to be purchased declines prior to the settlement date. Although a Fund would generally purchase securities on a when-issued or forward commitment basis with the intention of acquiring securities for its portfolio, a Fund may dispose of a when-issued security or forward commitment prior to settlement if a subadviser deems it appropriate to do so. Each Fund may enter into a forward commitment sale to hedge its portfolio positions or to sell securities it owned under a delayed delivery arrangement. These transactions involve a commitment by a Fund to purchase or sell securities at a future date (ordinarily one or two months later). The price of the underlying securities (usually expressed in terms of yield) and the date when the securities will be delivered and paid for (the settlement date) are fixed at the time the transaction is negotiated. When-issued purchase and forward commitment transactions are negotiated directly with the other party, and such commitments are not traded on exchanges.
The value of securities purchased on a when-issued or forward commitment basis and any subsequent fluctuations in their value are reflected in the computation of a Fund’s net asset value starting on the date of the agreement to purchase the securities. A Fund does not earn interest on the securities it has committed to purchase until they are paid for and delivered on the settlement date. When a Fund makes a forward commitment to sell securities it owns, the proceeds to be received upon settlement are included in the Fund’s assets. Fluctuations in the fair value of the underlying securities are not reflected in a Fund’s net asset value as long as the commitment to sell remains in effect. Settlement of when-issued purchase and forward commitment transactions generally takes place within two months after the date of the transaction, but a Fund may agree to a longer settlement period.
A Fund will purchase securities on a when-issued basis, or purchase or sell securities on a forward commitment basis, only with the intention of completing the transaction and actually purchasing or selling the securities. If deemed advisable as a matter of investment strategy, however, a Fund may dispose of or renegotiate a commitment after it is entered into. A Fund also may sell securities it has committed to purchase before those securities are delivered to a Fund on the settlement date. A Fund may realize a capital gain or loss in connection with these transactions. When a Fund purchases securities on a when-issued
87
Harbor Fixed Income Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 2—Significant Accounting Policies—Continued
or forward commitment basis, the Fund will maintain in a segregated account with the Fund’s custodian, or set aside or restrict in the subadviser’s records or systems relating to the Fund, cash or liquid assets having a value (determined daily) at least equal to the amount of the Fund’s purchase commitments. In the case of a forward commitment to sell portfolio securities, portfolio holdings will be held in a segregated account with the Fund’s custodian, or set aside or restricted on the subadviser’s records or systems relating to the Fund, while the commitment is outstanding.
During the year, Harbor Bond Fund purchased and sold securities on a forward commitment basis, including “TBA” (to be announced) purchase and sale commitments.
Repurchase Agreements
In a repurchase agreement, a Fund buys a security at one price and simultaneously agrees to sell it back at a higher price. Such agreements must be adequately collateralized to cover the counterparty’s obligation to a Fund to close out the repurchase agreement. Each repurchase agreement counterparty must meet the minimum credit quality requirements applicable to the respective Fund and any other appropriate counterparty criteria as determined by a Fund’s subadviser. The minimum credit quality requirements are those applicable to a Fund’s purchase of securities such that if a Fund is permitted to only purchase securities that are rated investment-grade (or the equivalent if unrated), a Fund could only enter into repurchase agreements with counterparties that have debt outstanding that is rated investment-grade (or the equivalent if unrated). The securities are regularly monitored to ensure that the collateral is adequate. A Fund seeks to further mitigate its counterparty risk by entering into master repurchase agreements with its counterparties. The master repurchase agreements provide that, in the event of a counterparty’s default, including bankruptcy, a Fund may terminate any repurchase agreements with that counterparty, determine the net amount owned, and sell or retain the collateral up to the net amount owed to a Fund. A counterparty’s default may cause a Fund to suffer losses, including loss of interest on or principal of the securities and costs associated with delay and enforcement of the terms of the master repurchase agreement.
During the year, Harbor Bond Fund entered into repurchase agreements with domestic or foreign banks or with a member firm of the Financial Industry Regulatory Authority, Inc., or an affiliate of a member firm that is a primary dealer in U.S. government securities.
Reverse Repurchase Agreements
A reverse repurchase agreement involves the delivery of a portfolio security in exchange for cash by a Fund, coupled with an agreement to repurchase the same or substantially the same security at a specified time and price. Until the security is repurchased, a Fund is obligated to pay interest, based upon market rates of the time of issuance, on the value of the repurchase agreement. While a reverse repurchase agreement is outstanding, a Fund continues to receive principal and interest payments on the underlying security. Cash received in exchange for securities delivered plus accrued interest payments to be made by a Fund to counterparties is reflected as a liability on the Statements of Assets and Liabilities. Interest payments based upon the reverse repurchase agreement term made by a Fund to counterparties are recorded as a component of interest expense on the Statements of Operations. To cover its obligations under reverse repurchase agreements, a Fund will segregate cash or liquid securities, which are marked-to-market daily, with a Fund’s custodian, or set aside or restrict assets in the subadviser’s records or systems relating to a Fund, in an amount not less than the repurchase price, including accrued interest, of the underlying security. Reverse repurchase agreements involve the risk that the fair value of the securities delivered by a Fund may decline below the repurchase price of the securities and, if the proceeds from the reverse repurchase agreement are invested in securities, that the fair value of the securities purchased may decline below the repurchase price of the securities delivered. In periods of increased demand for the security, a Fund may receive a fee for use of the security by the counterparty, which may result in interest income to a Fund.
During the year, Harbor Bond Fund entered into reverse repurchase agreements. The average amount of borrowings outstanding for the Fund was $364,110,000 at a weighted average interest rate of 2.373%. Average debt outstanding and average interest rate during the year is calculated based on calendar days.
A table that includes the remaining maturity period for outstanding reverse repurchase agreements and the type of investment collateral pledged, if any, can be found subsequent to the Fund’s Portfolio of Investments schedule.
88
Harbor Fixed Income Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 2—Significant Accounting Policies—Continued
Sale-Buybacks
A “sale-buyback” financing transaction consists of a sale of a portfolio security by a Fund to a financial institution (the counterparty) with a simultaneous agreement to repurchase the same or substantially the same security at an agreed-upon price and date. A Fund is not entitled to receive principal and interest payments, if any, made on the security sold to the counterparty during the term of the agreement.
The agreed-upon proceeds for securities to be repurchased by a Fund are reflected as a liability on the Statements of Assets and Liabilities. A Fund will recognize net income represented by the price differential between the price received for the transferred security and the agreed-upon repurchase price. This is commonly referred to as the “price drop.” A price drop consists of two components: (i) the foregone interest and inflationary income adjustments, if any, a Fund would have otherwise received had the security not been sold, and (ii) the negotiated financing terms between a Fund and counterparty. Foregone interest and inflationary income adjustments, if any, are recorded as components of interest income on the Statements of Operations. Interest payments based upon negotiated financing terms made by a Fund to counterparties are recorded as a component of interest expense on the Statements of Operations. To cover its obligations under sale-buyback transactions, a Fund will segregate cash or liquid securities, which are marked-to-market daily, with the Fund’s custodian, or set aside or restrict assets in the subadviser’s records or systems relating to a Fund, in an amount not less than the repurchase price, including accrued interest, of the underlying security. Sale-buyback transactions involve the risk that the fair value of the securities sold by a Fund may decline below the repurchase price of the securities and, if the proceeds from the sale-buyback transactions are invested in securities, that the fair value of the securities purchased may decline below the repurchase price of the securities sold. In periods of increased demand for a security, a Fund may receive a fee for use of the security by the counterparty, which may result in additional interest income to a Fund.
During the year, Harbor Bond Fund entered into sale-buyback transactions. The average amount of borrowings outstanding for the Fund was $68,514,000 at a weighted average interest rate of 2.486%. Average debt outstanding and average interest rate during the year is calculated based on calendar days.
A table that includes the remaining maturity period for outstanding sale-buyback transactions and the type of investment collateral pledged can be found at the end of the Fund’s Portfolio of Investments schedule.
Short Sales
Short-selling obligates a Fund to replace a borrowed security by purchasing it at the market price at the time of replacement. Until the security is replaced, such Fund is required to pay any accrued interest or dividends to the lender and also may be required to pay a premium. A Fund would realize a gain if the security declines in price between the date of the short sale and the date on which such Fund replaces the borrowed security. A Fund would incur a loss as a result of the short sale if the price of the security increases between those dates. Until a Fund replaces the borrowed security, subject to pre-arranged exposure levels, it will maintain cash or liquid securities sufficient to cover its short position in a segregated account with the Fund’s custodian or set aside or restricted in the subadviser’s records or systems relating to the Fund. Short sales involve the risk of an unlimited increase in the market price of the borrowed security.
During the year, Harbor Bond Fund engaged in short-selling.
Futures Contracts
A futures contract is an agreement between two parties to buy or sell a specified financial instrument at a set price on a future date. Futures contracts tend to increase or decrease a Fund’s exposure to the underlying instrument or can be used to hedge other Fund investments.
Upon entering into a futures 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, a Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract referred to as “variation margin.” Such receipts or payments are recorded by a Fund as unrealized gains or losses. When the contract is closed or expires, a 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. A Fund may suffer losses if it is unable to close out its position because of an illiquid secondary market. There is no assurance that a Fund will be able to close out its position when the
89
Harbor Fixed Income Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 2—Significant Accounting Policies—Continued
Fund considers it appropriate or desirable to do so. In the event of adverse price movements, a Fund may be required to continue making daily cash payments to maintain its required margin. If a Fund has insufficient cash, it may have to sell portfolio securities to meet daily margin requirements at a time when the Fund would not otherwise elect to do so. In addition, a Fund may be required to deliver or take delivery of instruments. 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. There is minimal counterparty risk with futures contracts as they are traded on an exchange and the exchange’s clearinghouse, as counterparty to all exchange-traded futures, guarantees the futures contracts against default.
During the year, Harbor Bond Fund used futures contracts to gain exposure to the fixed income asset class with greater efficiency and lower cost than was possible through direct investment, to add value when these securities were attractively priced, or to adjust the portfolio’s sensitivity to changes in interest rates or currency exchange rates.
Options
An option, including warrants and rights, is a contract that offers the buyer the right, but not the obligation, to buy (call) or sell (put) a security or other financial asset at an agreed-upon price (the strike price) during a certain period of time or on a specific date (exercise date). Purchased call options tend to increase a Fund’s exposure to the underlying instrument. Purchased put options tend to decrease a Fund’s exposure to the underlying instrument.
When a Fund purchases an option, it pays a premium. If a purchased option expires, a Fund realizes a loss in the amount of the premium. If a 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 a call option is exercised by a Fund, the cost of the securities acquired by exercising the call is increased by the premium paid to buy the call. If a put option is exercised by a Fund, 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 paid. A Fund’s maximum risk of loss from counterparty credit risk is also limited to the premium paid for the contract.
When a Fund writes an option, it receives a premium. If a written option expires on its stipulated expiration date, or if a 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, a 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 that a Fund purchases upon exercise of the option.
The risk in writing a call option is that a Fund relinquishes the opportunity to profit if the fair value of the underlying security increases and the option is exercised. In writing a put option, a Fund assumes the risk of incurring a loss if the fair value of the underlying security decreases and the option is exercised. In addition, there is a risk that a Fund may not be able to enter into a closing transaction because of an illiquid secondary market or if the counterparty does not perform under the contract’s terms.
Options on exchange-traded futures contracts are an option contract in which the underlying instrument is a single futures contract. A Fund may write or purchase options on exchange-traded futures contracts in which a Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract referred to as “variation margin.” Such receipts or payments are recorded by a Fund as unrealized gains or losses. When the contract is closed or expires, a 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.
During the year, Harbor Bond Fund purchased and wrote (sold) option contracts to manage its exposure to the bond markets and to fluctuations in interest rates and currency values.
90
Harbor Fixed Income Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 2—Significant Accounting Policies—Continued
Swap Agreements
A swap is a contract between two parties to exchange future cash flows at specified intervals (payment dates) based upon a notional principal amount during the agreed-upon life of the contract. Swaps are marked-to-market daily and changes in value are recorded as unrealized appreciation or depreciation.
Upon entering a swap agreement, any payments received or made at the beginning of the measurement period are reflected as such on the Statements of Assets and Liabilities and represent a reconciling value to compensate for differences between the stated terms of the swap agreement and prevailing market conditions (such as credit spreads, currency exchange rates, interest rates, and other relevant factors). These upfront payments are recorded as realized gains or losses on the Statements of Operations upon termination or maturity of the swap. If a liquidation payment is received or made at the termination of the swap, it is recorded as realized gain or loss on the Statements of Operations. Net periodic payments received or paid by a Fund are included as part of realized gains or losses on the Statements of Operations. A Fund will only enter into swap agreements with counterparties that meet the minimum credit quality requirements applicable to a Fund and any other appropriate counterparty criteria as determined by a Fund’s subadviser. The minimum credit quality requirements are similar to those applicable to a Fund’s purchase of securities, such that if a Fund is permitted to only purchase securities that are rated investment-grade (or the equivalent if unrated), a Fund could only enter into one of the below referenced transactions with counterparties that have debt outstanding that is rated investment-grade (or the equivalent if unrated). 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 Statements of Assets and Liabilities. Such risks include 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, or that there may be unfavorable changes in market conditions or interest rates. A Fund’s maximum risk of loss from counterparty credit risk is the discounted value of the net cash flows to be received from the counterparty over the contract’s remaining life or the value of the contract. This risk is typically mitigated by entering into swap agreements with highly-rated counterparties, the existence of a master netting arrangement between a Fund and the counterparty, and the posting of collateral by the counterparty.
Interest Rate Swaps are agreements between counterparties to exchange cash flows or an exchange of commitments to pay or receive interest with respect to the notional amount of principal. Changes in interest rates can have an effect on the value of bond holdings, the amount of interest income earned and the value of the interest rate swaps held.
During the year, Harbor Bond Fund used interest rate swap agreements to manage its exposure to interest rate changes.
Credit Default Swaps are agreements between counterparties to buy or sell protection on a debt security, a basket of securities, or an index of obligations against a defined credit event. Under the terms of a credit default swap, the buyer of protection receives credit protection in exchange for making periodic payments to the seller of protection based on a given percentage applied to a notional principal amount. In return for these payments, the seller acts as the guarantor of the creditworthiness of a reference entity, obligation or index. An issuer may represent either a single issuer, a “basket” of issuers, or a credit index. A credit index is a basket of credit instruments or exposures designed to be representative of some part of the credit market as a whole.
The buyer in a credit default contract is obligated to pay the seller a periodic stream of payments over the term of the contract provided that no credit event occurs. Credit events may include bankruptcy, failure to pay principal, maturity extension, rating downgrade, or write-down. As a seller, if an underlying credit event occurs, a Fund will either pay the buyer an amount equal to the notional amount of the swap and take delivery of the reference obligation (or underlying securities comprising an index), or pay a net settlement amount of cash equal to the notional amount of the swap less the recovery value of the reference obligation (or underlying securities comprising an index). As a buyer, if an underlying credit event occurs, a Fund will either receive from the seller an amount equal to the notional amount of the swap and deliver the reference obligation (or underlying securities comprising an index) or receive a net settlement.
During the year, Harbor Bond Fund used credit default swap agreements as a seller to gain credit exposure to an issuer or to simulate investments in long bond positions that were either unavailable or less attractively priced in the bond market; the Funds used credit default swap agreements as a buyer to provide a measure of protection against defaults of an issuer. At October 31, 2019, the maximum exposure to loss of the notional value as the seller of credit default swaps outstanding for the Fund was $51,176,000.
91
Harbor Fixed Income Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 2—Significant Accounting Policies—Continued
Forward Currency Contracts
A forward currency contract is an agreement between two parties to buy and sell currencies at a set price on a future date.
The forward currency contract is marked-to-market daily and the change in fair 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. Risk of 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.
During the year, Harbor Bond Fund used forward currency contracts to manage its exposure to changes in exchange rates or as a hedge against foreign exchange risk related to specific transactions or portfolio positions. The Fund entered into collateral agreements with certain counterparties to mitigate counterparty risk associated with forward currency contracts.
Foreign Currency Spot Contracts
A foreign currency spot contract is an agreement between two parties to buy and sell currencies at the current market rate for settlement within two business days.
The foreign currency spot contract is marked-to-market daily for settlements beyond one day, and any change in fair 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. Risk of 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.
During the year, Harbor Bond Fund used foreign currency spot contracts to facilitate transactions in foreign securities or to convert foreign currency receipts into U.S. dollars.
Foreign Currency Translations
Purchases and sales of securities are translated into U.S. dollars at the current exchange rate on the respective dates of the transactions. Income and withholding taxes are translated at the prevailing exchange rate when accrued or incurred. The accounting records of the Funds are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency, when applicable, are translated into U.S. dollars based on the current exchange rates at year end.
Reported net realized gains and losses on foreign currency transactions, when applicable, represent net gains and losses from sales and maturities of foreign 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, when applicable, are included in the net realized and unrealized gain or loss on investments in the Statements of Operations.
Investment Income
Dividends declared on portfolio securities are accrued on the ex-dividend date. For foreign securities held, certain dividends are recorded after the ex-dividend date, but as soon as the respective 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. Paydown gains and losses on mortgage-backed and asset-backed securities are recognized as a component of interest income. Consent fees relating to corporate actions from investments held are recorded as income upon receipt.
Distribution to Shareholders
Distributions on Fund shares are recorded on the ex-dividend date.
92
Harbor Fixed Income Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 2—Significant Accounting Policies—Continued
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.
Proceeds from Litigation
Each Fund may receive proceeds from shareholder litigation settlements involving current and/or previously held portfolio holdings. Any proceeds received from litigation involving portfolio holdings are reflected in the Statements of Operations in realized gain/(loss) if the security has been disposed of by a Fund, or in unrealized gain/(loss) if the security is still held by a Fund.
Expenses
Expenses incurred by the Trust are charged directly to the Fund that incurred such expense whenever possible. With respect to expenses incurred by any two or more Harbor Funds where amounts cannot be identified on a fund by fund basis, such expenses are generally allocated in proportion to the average net assets or the number of shareholders of each Fund.
Custodian
Each Fund has credit balance arrangements with its custodian whereby positive balances in demand deposit accounts used by the transfer and shareholder servicing agent for clearing shareholder transactions in the Fund generate credits that are applied against gross custody expenses. Such custodial expense reductions, if any, are reflected on the respective Fund’s accompanying Statement of Operations.
Class Allocations
Income, common expenses and realized and unrealized gains/(losses) are determined at the Fund level and allocated daily to each class of shares based on the applicable net assets of the respective classes. Distribution and service fees, if any, and transfer agent fees are calculated daily at the class level based on the applicable net assets of each class and the expense rate(s) applicable to each class.
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 of 1986, as amended (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 taxes on income and capital gains.
Each Fund may be subject to taxes imposed by countries in which they invest. 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.
Management has analyzed each Fund’s tax positions for all open tax years (in particular, U.S. federal income tax returns for the tax years ended October 31, 2016–2018), including all positions expected to be taken upon filing the 2019 tax return, in all material jurisdictions where each Fund operates, and has concluded that no provision for income tax is required in the Funds’ financial statements. Each Fund will recognize interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of Operations.
New Accounting Pronouncements
In March 2017, the FASB issued ASU 2017-08,Premium Amortization on Purchased Callable Debt Securities, which provides guidance related to the amortization period for certain purchased callable debt securities held at a premium. This ASU is effective for annual periods beginning after December 15, 2018, and interim periods within those annual periods, however,
93
Harbor Fixed Income Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 2—Significant Accounting Policies—Continued
early adoption is permitted. The amendments in this ASU should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. At this time, management is evaluating the implications of these changes on the financial statements.
Note 3—Investment Portfolio Transactions
Investment Portfolio Transactions
Purchases and sales of investments, other than short-term securities, for each Fund for the year ended October 31, 2019 are as follows:
Purchases (000s) | Sales (000s) | ||||||
U.S. Government | Other | U.S. Government | Other | ||||
Harbor Bond Fund | $19,579,963 | $492,169 | $19,732,956 | $626,490 | |||
Harbor Convertible Securities Fund | — | 103,755 | — | 91,735 | |||
Harbor Core Bond Fund | 55,171 | 19,683 | 40,235 | 6,461 | |||
Harbor High-Yield Bond Fund | — | 449,416 | — | 761,734 | |||
Harbor High-Yield Opportunities Fund | — | 71,758 | — | 67,203 |
Note 4—FEES AND OTHER Transactions with Affiliates
Investment Adviser
Harbor Capital is a wholly-owned subsidiary of ORIX Corporation (“ORIX”). Harbor Capital is the Funds’ investment adviser and is also responsible for administrative and other services.
Each Fund has a separate advisory agreement with Harbor Capital. The agreements provide for management fees based on an annual percentage rate of average daily net assets as follows:
Contractual Rate | Actual Rate | ||
Harbor Bond Fund | 0.48%a | 0.46% | |
Harbor Convertible Securities Fund | 0.65b | 0.60 | |
Harbor Core Bond Fund | 0.34 | 0.34 | |
Harbor High-Yield Bond Fund | 0.60c | 0.51 | |
Harbor High-Yield Opportunities Fund | 0.60 | 0.60 | |
Harbor Money Market Fund | 0.20d | 0.18 |
a | The Adviser has contractually agreed to reduce the management fee to 0.43% on assets between $1 billion and $3 billion and to 0.405% on assets over $3 billion through February 29, 2020. |
b | The Adviser has contractually agreed to reduce the management fee to 0.60% through February 29, 2020. |
c | The Adviser has contractually agreed to reduce the management fee to 0.508% through February 29, 2020. |
d | The Adviser has contractually agreed to reduce the management fee to 0.18% through February 29, 2020. |
Harbor Capital has from time to time voluntarily or contractually agreed not to impose a portion of its management fees and/or to bear a portion of the expenses incurred in the operation of certain Funds in order to limit Fund expenses. Such waivers, if any, are reflected on the accompanying Statements of Operations. Interest expense, if any, is excluded from contractual limitations. During the year, the following expense limitation agreements were in effect:
Retirement Class | Institutional Class | Administrative Class | Investor Class | Expense Limitation Agreement Expiration Date | |||||
Harbor Bond Fund | 0.43% | 0.51% | 0.76% | N/A | 02/29/2020 | ||||
Harbor Core Bond Fund | 0.37 | 0.45 | N/A | N/A | 02/29/2020 | ||||
Harbor High-Yield Opportunities Fund | 0.65 | 0.73 | 0.98 | 1.10% | 02/29/2020 | ||||
Harbor Money Market Fund | N/A | 0.28 | 0.53 | N/A | 02/29/2020 |
94
Harbor Fixed Income Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 4—FEES AND OTHER Transactions with Affiliates—Continued
All expense limitation agreements include the transfer agent fee waiver discussed in the Transfer Agent note.
Distributor
Harbor Funds Distributors, Inc. (the “Distributor”), a wholly-owned subsidiary of Harbor Capital, is the distributor for Harbor Funds’ shares. Under the Trust’s current distribution plan pursuant to Rule 12b-1 under the Investment Company Act with respect to each Fund’s Administrative and Investor Class shares (the “12b-1 Plan”) as applicable, each Fund pays the Distributor compensation at the annual rate of 0.25% of the average daily net assets of its Administrative and Investor Class shares. Pursuant to the 12b-1 Plan, the Distributor is compensated for financing any activity that is primarily intended to result in the sale of Administrative and Investor Class shares of each Fund or for recordkeeping services or the servicing of shareholder accounts in the Administrative and Investor Class shares of each Fund. Such activities include, but are not limited to: printing of prospectuses and statements of additional information and reports for prospective shareholders (i.e., other than existing shareholders); preparation and distribution of advertising material and sales literature; expenses of organizing and conducting sales seminars; supplemental payments to dealers or other institutions such as asset-based sales charges, payments of recordkeeping fees under recordkeeping arrangements, or payments of service fees under shareholder service arrangements; and costs of administering the 12b-1 Plan.
Amounts payable by a Fund under the 12b-1 Plan need not be directly related to the expenses actually incurred by the Distributor on behalf of each Fund. The 12b-1 Plan does not obligate each Fund to reimburse the Distributor for the actual expenses the Distributor may incur in fulfilling its obligations under the 12b-1 Plan. Thus, even if the Distributor’s actual expenses exceed the fee payable to the Distributor at any given time, each Fund will not be obligated to pay more than that fee. If the Distributor’s expenses are less than the fee it receives, the Distributor will retain the difference.
The fees attributable to each Fund’s respective class are shown on the accompanying Statements of Operations.
Transfer Agent
Harbor Services Group, Inc. (“Harbor Services Group”), a wholly-owned subsidiary of Harbor Capital, is the transfer and shareholder servicing agent for the Funds. The transfer agency and service agreement is reviewed and approved annually by the Board of Trustees and provides currently for compensation up to the following amounts per class of each Fund:
Transfer Agent Fees1 | |
Retirement Class | 0.02% of the average daily net assets of all Retirement Class shares |
Institutional Class | 0.10% of the average daily net assets of all Institutional Class shares |
Administrative Class | 0.10% of the average daily net assets of all Administrative Class shares |
Investor Class | 0.22% of the average daily net assets of all Investor Class shares |
1 | For the period November 1, 2018 through February 28, 2019, Harbor Services Group received compensation up to 0.01%, 0.09%, 0.09%, and 0.21% for the Retirement Class, Institutional Class, Administrative Class, and Investor Class, respectively. |
Harbor Services Group has voluntarily waived a portion of its transfer agent fees during the year ended October 31, 2019. Fees incurred for these transfer agent services are shown on each Fund’s Statement of Operations. The voluntary waiver may be discontinued at any time.
Affiliated Transactions
The Investment Company Act permits purchase and sale transactions among affiliated investment companies subject to an exemptive rule. Harbor Funds has adopted policies and procedures pursuant to such rule. During the year, the Funds did not enter into any transactions with any other Harbor fund.
95
Harbor Fixed Income Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 4—FEES AND OTHER Transactions with Affiliates—Continued
Shareholders
On October 31, 2019, Harbor Capital, and its wholly owned subsidiaries, collectively held the following shares of beneficial interest in each of the following Funds:
Number of Shares Owned by Harbor Capital and Subsidiaries | Percentage of Outstanding Shares | ||||||||||
Retirement Class | Institutional Class | Administrative Class | Investor Class | Total | |||||||
Harbor Bond Fund | 48,730 | — | — | — | 48,730 | 0.0% | |||||
Harbor Convertible Securities Fund | 37,572 | — | — | — | 37,572 | 0.3 | |||||
Harbor Core Bond Fund | 13,651 | 4,705,304 | — | — | 4,718,955 | 59.3 | |||||
Harbor High-Yield Bond Fund | 52,393 | — | — | — | 52,393 | 0.1 | |||||
Harbor High-Yield Opportunities Fund | 8,517 | 5,236,617 | 5,482 | 5,470 | 5,256,086 | 66.8 | |||||
Harbor Money Market Fund | — | 43,240,598 | 26,242 | — | 43,266,840 | 35.7 |
Independent Trustees
The fees and expenses of the Independent Trustees are included in “Trustees’ fees and expenses” on each Fund’s Statement of Operations.
The Board of Trustees has adopted a Deferred Compensation Plan for Independent Trustees (the “Plan”), which enables Trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from the Trust. For purposes of determining the amount owed to a Trustee under the Plan, deferred amounts are treated as though they had been invested in shares of the Fund(s) selected by the Trustee. While not required to do so, each Fund makes an investment equal to the Trustee’s investment election. The deferred compensation liability and the offsetting deferred compensation investment asset are included as a component of “Accrued expenses – Trustees’ fees and expenses” and “Other assets”, respectively, in the Statements of Assets and Liabilities. Such amounts fluctuate with changes in the value of the selected Fund(s). The deferred compensation and related mark-to-market impact liability and an offsetting investment asset will remain on each Fund’s Statement of Assets and Liabilities until distributed in accordance with the Plan.
Indemnification
Under the Trust’s organizational documents, its officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust. In addition, in the normal course of business the Trust enters into contracts that provide general indemnities to other parties. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote.
Redemption Fee
A 1% redemption fee is charged on shares of Harbor Convertible Securities Fund, Harbor High-Yield Bond Fund, and Harbor High-Yield Opportunities Fund that are redeemed within 90 days from their date of purchase. All redemption fees are recorded by the Fund as paid-in capital. For the year ended October 31, 2019 redemption fee proceeds are as follows:
Amount (000s) | |
Harbor Convertible Securities Fund | $1 |
Harbor High-Yield Bond Fund | 18 |
96
Harbor Fixed Income Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
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 U.S. GAAP. These differences are attributable to permanent book and tax accounting differences that were primarily due to the tax treatment of bonds in default and the use of equalization. Reclassifications, if any, are made to each Fund’s capital account to reflect income and net realized gains available for distribution (or available capital loss carryovers) under income tax rules and regulations. The amounts reclassified on the Statements of Assets and Liabilities for the year ended October 31, 2019 are as follows:
Total Distributable Earnings/(Loss) (000s) | Paid-In Capital (000s) | ||
Harbor Bond Fund | $— | $— | |
Harbor Convertible Securities Fund | (338) | 338 | |
Harbor Core Bond Fund | (67) | 67 | |
Harbor High-Yield Bond Fund | 88 | (88) | |
Harbor High-Yield Opportunities Fund | 11 | (11) | |
Harbor Money Market Fund | — | — |
The tax composition of each Fund’s distributions is as follows:
As of October 31, 2019 | As of October 31, 2018 | ||||||||||
Ordinary Income (000s) | Long-Term Capital Gains (000s) | Total (000s) | Ordinary Income (000s) | Long-Term Capital Gains (000s) | Total (000s) | ||||||
Harbor Bond Fund | $61,198 | $— | $61,198 | $72,195 | $— | $72,195 | |||||
Harbor Convertible Securities Fund | 6,185 | 1,520 | 7,705 | 10,828 | — | 10,828 | |||||
Harbor Core Bond Fund | 2,160 | — | 2,160 | 463 | — | 463 | |||||
Harbor High-Yield Bond Fund | 33,196 | — | 33,196 | 61,411 | — | 61,411 | |||||
Harbor High-Yield Opportunities Fund | 4,029 | — | 4,029 | 2,983 | — | 2,983 | |||||
Harbor Money Market Fund | 3,111 | — | 3,111 | 2,029 | — | 2,029 |
As of October 31, 2019, the components of each Fund’s distributable earnings on a tax basis are as follows:
Undistributed Ordinary Income (000s) | Undistributed Long-Term Capital Gains (000s) | Unrealized Appreciation/ (Depreciation) (000s) | |||
Harbor Bond Fund | $15,044 | $— | $25,168 | ||
Harbor Convertible Securities Fund | 2,943 | 1,454 | 4,219 | ||
Harbor Core Bond Fund | 480 | 434 | 4,181 | ||
Harbor High-Yield Bond Fund | 3,040 | — | 3,517 | ||
Harbor High-Yield Opportunities Fund | 456 | — | 1,793 | ||
Harbor Money Market Fund | 47 | — | — |
At October 31, 2019, the Funds in the following table had capital loss carryforwards for federal tax purposes which will reduce each Fund’s taxable income arising from future net realized gains on investments to the extent permitted by the Internal Revenue Code. Use of the capital loss carryforwards will reduce the amount of the distribution to shareholders which would otherwise be necessary to relieve each Fund of any federal tax liability. The capital loss carryforwards do not expire.
Capital Loss Carryforward | |||||
Short-Term (000s) | Long- Term (000s) | Total (000s) | |||
Harbor Bond Fund | $4,894 | $33,446 | $38,340 | ||
Harbor High-Yield Bond Fund | 916 | 82,527 | 83,443 | ||
Harbor High-Yield Opportunities Fund | 1,953 | 1,671 | 3,624 |
97
Harbor Fixed Income Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
NOTE 5—TAX INFORMATION—Continued
The identified cost for federal income tax purposes of investments owned by each Fund and its respective gross unrealized appreciation and depreciation at October 31, 2019 are as follows:
Identified Cost (000s) | Gross Unrealized | Net Unrealized Appreciation/ (Depreciation) (000s) | |||||
Appreciation (000s) | (Depreciation) (000s) | ||||||
Harbor Bond Fund* | $3,137,896 | $89,389 | $(64,221) | $25,168 | |||
Harbor Convertible Securities Fund | 129,406 | 7,431 | (3,212) | 4,219 | |||
Harbor Core Bond Fund | 79,897 | 4,201 | (20) | 4,181 | |||
Harbor High-Yield Bond Fund* | 469,292 | 13,596 | (10,079) | 3,517 | |||
Harbor High-Yield Opportunities Fund* | 72,329 | 2,638 | (845) | 1,793 | |||
Harbor Money Market Fund | 121,242 | — | — | — |
* | Capital loss carryforwards are available, which may reduce taxable income from future net realized gain on investments. |
Note 6—Derivatives
Each Fund’s derivative holdings do not qualify for hedge accounting treatment and as such are recorded at current fair value. For a discussion of risks related to these investments please refer to the descriptions of each type of derivative instrument in Note 2— Significant Accounting Policies.
Each Fund’s derivative instruments outstanding as of the year ended October 31, 2019, if any, as disclosed in the Portfolio of Investments, and the related amounts of realized and changes in net unrealized gains and losses on derivative instruments during the year as disclosed in the Statement of Operations, are indicators of the volume of derivative activity for each Fund.
Derivative Instruments
At October 31, 2019, the fair values of derivatives, by primary risk exposure, were reflected in the Statement of Assets and Liabilities as follows:
HARBOR BOND FUND
Statement of Assets and Liabilities Caption | Interest Rate Contracts (000s) | Foreign Exchange Contracts (000s) | Credit Contracts (000s) | Total (000s) | ||||||||
Assets | ||||||||||||
Unrealized appreciation on open forward currency contracts | $— | $6,000 | $— | $6,000 | ||||||||
Unrealized appreciation on OTC swap agreementsb | — | — | 427 | 427 | ||||||||
Variation margin on centrally cleared swap agreementsa,b | 8,360 | — | 943 | 9,303 | ||||||||
Variation margin on options and futures contracts (futures)a | 3,265 | — | — | 3,265 | ||||||||
Variation margin on options and futures contracts (options)a | 17 | — | — | 17 | ||||||||
Purchased options, at value | 5 | — | — | 5 | ||||||||
Liabilities | ||||||||||||
Unrealized depreciation on open forward currency contracts | $— | $(13,354) | $— | $(13,354) | ||||||||
Variation margin on centrally cleared swap agreementsa,b | (11,843) | — | (67) | (11,910) | ||||||||
Variation margin on options and futures contracts (futures)a | (4,666) | — | — | (4,666) | ||||||||
Written options, at value | (95) | — | — | (95) |
a | Includes cumulative appreciation/depreciation of contracts as reported in the Portfolio of Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities |
b | Net of premiums received of $441,000 |
98
Harbor Fixed Income Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 6—Derivatives—Continued
Net realized gain/(loss) and the change in net unrealized appreciation/(depreciation) on derivatives, by primary risk exposure, for the year ended October 31, 2019, were:
HARBOR BOND FUND
Net realized gain/(loss) on derivatives | Interest Rate Contracts (000s) | Foreign Exchange Contracts (000s) | Credit Contracts (000s) | Total (000s) | ||||
Forward currency contracts | $— | $6,497 | $— | $6,497 | ||||
Futures contracts | (26,470) | — | — | (26,470) | ||||
Purchased options | (256) | (9) | — | (265) | ||||
Written options | 902 | 2,686 | 78 | 3,666 | ||||
Swap agreements | (461) | 181 | (280) | |||||
Net realized gain/(loss) on derivatives | $(26,285) | $9,174 | $259 | $(16,852) |
Change in Net Unrealized Appreciation/(Depreciation) on Derivatives | Interest Rate Contracts (000s) | Foreign Exchange Contracts (000s) | Credit Contracts (000s) | Total (000s) | ||||
Forward currency contracts | $— | $(15,576) | $— | $(15,576) | ||||
Futures contracts | (4,033) | — | — | (4,033) | ||||
Purchased options | (160) | — | — | (160) | ||||
Written options | 296 | (278) | — | 18 | ||||
Swap agreements | (6,053) | — | (146) | (6,199) | ||||
Change in net unrealized appreciation/(depreciation) on derivatives | $(9,950) | $(15,854) | $(146) | $(25,950) |
Note 7—OFFSETTING ASSETS AND LIABILITIES
Master Netting Arrangements
As described in further detail below, each Fund may enter into Master Netting Arrangements that govern the terms of certain transactions. Master Netting Arrangements are designed to reduce the counterparty risk associated with relevant transactions by establishing credit protection mechanisms and providing standardization as a means of improving legal certainty. As Master Netting Arrangements are specific to the unique operations of different asset types, they allow a Fund to close out and net its total exposure to a counterparty in the event of a default with respect to all of the transactions governed under a single agreement with that counterparty. Master Netting Arrangements can also help reduce counterparty risk by specifying collateral posting requirements at pre-arranged exposure levels. Securities and cash pledged as collateral are reflected as assets in the Statements of Assets and Liabilities as either a component of investments at value (securities) or due from broker. Cash collateral received is not typically held in a segregated account and, as such, is reflected as a liability in the Statements of Assets and Liabilities as due to broker. The fair value of any securities received as collateral is not reflected as a component of net asset value.
For the year ended October 31, 2019, the following Master Netting Arrangements have been entered into by one or more of the Funds:
Master Repurchase Agreements and Global Master Repurchase Agreements, which govern repurchase and reverse repurchase transactions between the Fund and select counterparties. As of October 31, 2019, Harbor Bond Fund had investment exposures subject to the terms of these agreements.
Master Securities Forward Transaction Agreements, which govern the considerations and factors surrounding the settlement of certain forward settling transactions, such as delayed-delivery or sale-buyback transactions by and between the Fund and select counterparties. As of October 31, 2019, Harbor Bond Fund had investment exposures subject to the terms of these agreements.
International Swaps and Derivatives Association, Inc. Master Agreements and Credit Support Annexes, which govern over-the-counter market traded financial derivative transactions entered into by the Fund and select counterparties. As of October 31, 2019, Harbor Bond Fund had investment exposures subject to the terms of these agreements.
99
Harbor Fixed Income Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 7—OFFSETTING ASSETS AND LIABILITIES—Continued
The following is a summary by counterparty of the gross value of material Borrowings and Other Financing Transactions and collateral (received)/pledged as of October 31, 2019:
HARBOR BOND FUND
Counterparty | Payable for Reverse Repurchase Agreements (000s) | Payable for Sale-Buyback Transactions (000s) | Payable for Short Sale (000s) | Total Borrowings and Other Financing Transactions (000s) | Collateral (Received)/ Pledged (000s) | Net Exposure (000s) | ||||||||||||
Global/Master Repurchase Agreement | ||||||||||||||||||
Bank of America | $(15,145) | $— | $— | $(15,145) | $— | $(15,145) | ||||||||||||
Bank of Montreal | (34,117) | — | — | (34,117) | 34,117 | — | ||||||||||||
Bank of Nova Scotia | (238,112) | — | — | (238,112) | 155,849 | (82,263) | ||||||||||||
Barclays | (1,362) | — | — | (1,362) | 1,362 | — | ||||||||||||
BNP Paribas SA | (1,291) | — | — | (1,291) | 1,291 | — | ||||||||||||
Deutsche Bank | (4,665) | — | — | (4,665) | 4,665 | — | ||||||||||||
JP Morgan Chase | (9,497) | — | — | (9,497) | — | (9,497) | ||||||||||||
NatWest Markets plc | (57,193) | — | — | (57,193) | 3,170 | (54,023) | ||||||||||||
Societe Generale | (30,097) | — | — | (30,097) | 24,653 | (5,444) | ||||||||||||
Master Securities Forward Transactions Agreements | ||||||||||||||||||
BNP Paribus NY Branch | — | (119,775) | — | — | 110,489 | (9,286) | ||||||||||||
Credit Suisse AG | — | — | (4,707) | — | — | (4,707) | ||||||||||||
Goldman Sachs | — | — | (5,134) | — | — | (5,134) | ||||||||||||
JP Morgan Securities LLC | — | — | (32,599) | — | — | (32,599) | ||||||||||||
UBS Securities LLC | — | (92,521) | — | — | 39,531 | (52,990) | ||||||||||||
Total Borrowings and Other Financing Transactions | $(391,479) | $(212,296) | $(42,440) |
The following is a summary by counterparty of the value of OTC financial derivative instruments and collateral (received)/pledged as governed by International Swaps and Derivatives Association, Inc. master agreements as of October 31, 2019.
HARBOR BOND FUND
Financial Derivative Assets | Financial Derivative Liabilities | Net Value of OTC Derivatives (000s) | Collateral (Received)/ Pledged (000s) | Net Exposure (000s) | ||||||||||||||||||
Counterparty | Forward Currency Contracts (000s) | Purchased Options (000s) | Swap Agreements (000s) | Total Over-the- Counter (000s) | Forward Currency Contracts (000s) | Written Options (000s) | Swap Agreements (000s) | Total Over-the- Counter (000s) | ||||||||||||||
Barclays Bank plc | $1,391 | $— | $— | $1,391 | $(401) | $— | $— | $(401) | $990 | $— | $990 | |||||||||||
BNP Paribas SA | 1,544 | — | — | 1,544 | (3,443) | — | — | (3,443) | (1,899) | 1,678 | (221) | |||||||||||
Citibank NA | 692 | — | 94 | 786 | (1,802) | — | — | (1,802) | (1,016) | 891 | (125) | |||||||||||
Deutsche Bank AG | — | — | — | — | (427) | — | — | (427) | (427) | 317 | (110) | |||||||||||
Goldman Sachs Bank USA | 177 | 1 | — | 178 | (358) | — | — | (358) | (180) | — | (180) | |||||||||||
Goldman Sachs International | — | — | 43 | 43 | — | — | — | — | 43 | — | 43 | |||||||||||
HSBC Bank USA NA | 578 | — | 48 | 626 | (2,876) | — | — | (2,876) | (2,250) | 2,250 | — | |||||||||||
JP Morgan Chase Bank NA | 1,616 | — | 242 | 1,858 | (3,439) | (39) | — | (3,478) | (1,620) | 1,620 | — | |||||||||||
NatWest Markets plc | 2 | — | — | 2 | (608) | — | — | (608) | (606) | 582 | (24) | |||||||||||
Total Over-the-Counter Exposure | $6,000 | $1 | $427 | $6,428 | $(13,354) | $(39) | $— | $(13,393) |
Exchange traded and centrally cleared derivatives are not subject to master netting or similar arrangements.
Note 8—Subsequent Events
Through the date the financial statements were issued, there were no subsequent events or transactions that would have materially impacted the financial statements or related disclosures as presented herein.
100
Harbor Fixed Income Funds
Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
The Board of Trustees and Shareholders of
Harbor Funds
Harbor Funds
Opinions on the Financial Statements
We have audited the accompanying statements of assets and liabilities of Harbor Bond Fund, Harbor Convertible Securities Fund, Harbor Core Bond Fund, Harbor High-Yield Bond Fund, Harbor High-Yield Opportunities Fund and Harbor Money Market Fund (collectively referred to as the “Funds”), (six of the funds constituting the Harbor Funds (the “Trust”)), including the portfolios of investments, as of October 31, 2019, and the related statements of operations and changes in net assets, and the financial highlights for each of the periods indicated in the table below and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Funds, (six of the funds constituting the Harbor Funds), at October 31, 2019, the results of their operations, changes in net assets and financial highlights for each of the periods indicated in the table below, in conformity with U.S. generally accepted accounting principles.
Individual fund comprising the Harbor Funds | Statement of operations | Statement of changes in net assets | Financial highlights |
Harbor Bond Fund Harbor Convertible Securities Fund Harbor High-Yield Bond Fund Harbor Money Market Fund | For the year ended October 31, 2019 | For each of the two years in the period ended October 31, 2019 | For each of the five years in the period ended October 31, 2019 |
Harbor Core Bond Fund | For the year ended October 31, 2019 | For the year ended October 31, 2019 and the period from June 1, 2018 (inception) through October 31, 2018 | |
Harbor High-Yield Opportunities Fund | For the year ended October 31, 2019 | For the year ended October 31, 2019 and the period from November 1, 2017 (inception) through October 31, 2018 |
Basis for Opinion
These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on each of the Funds’ financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust’s internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2019, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Harbor Funds investment companies since 2000.
Chicago, Illinois
December 23, 2019
December 23, 2019
101
Harbor Fixed Income Funds
Fees and Expenses Example (Unaudited)
Fees and Expenses Example (Unaudited)
Example
As a shareholder of a Fund, you incur two types of costs: (1) transaction costs, including redemption fees (if any) and (2) ongoing costs, including management fees, distribution and service (12b-1) fees (if any), and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in a Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period May 1, 2019 through October 31, 2019.
Actual Expenses
The first line of the table below provides information about actual account values and actual expenses for each share class. You may use the information in the respective class line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line of the respective class under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table for each share class below provides information about hypothetical account values and hypothetical expenses based on the respective Fund/Class’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the respective Fund/Class’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in a Fund to other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as redemption fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Annualized Expense Ratios* | Expenses Paid During Period** | Beginning Account Value May 1, 2019 | Ending Account Value October 31, 2019 | |||||
Harbor Bond Fund | ||||||||
Retirement Class | 0.96% | |||||||
Actual | $4.14 | $1,000 | $1,057.61 | |||||
Hypothetical (5% return) | 4.89 | 1,000 | 1,015.36 | |||||
Institutional Class | 1.04% | |||||||
Actual | $5.39 | $1,000 | $1,057.14 | |||||
Hypothetical (5% return) | 5.29 | 1,000 | 1,019.83 | |||||
Administrative Class | 1.29% | |||||||
Actual | $6.68 | $1,000 | $1,055.58 | |||||
Hypothetical (5% return) | 6.56 | 1,000 | 1,018.54 | |||||
Harbor Convertible Securities Fund | ||||||||
Retirement Class | 0.69% | |||||||
Actual | $3.50 | $1,000 | $1,013.87 | |||||
Hypothetical (5% return) | 3.52 | 1,000 | 1,021.64 | |||||
Institutional Class | 0.77% | |||||||
Actual | $3.90 | $1,000 | $1,012.52 | |||||
Hypothetical (5% return) | 3.92 | 1,000 | 1,021.23 | |||||
Administrative Class | 1.02% | |||||||
Actual | $5.17 | $1,000 | $1,011.29 | |||||
Hypothetical (5% return) | 5.19 | 1,000 | 1,019.93 | |||||
Investor Class | 1.14% | |||||||
Actual | $5.78 | $1,000 | $1,010.61 | |||||
Hypothetical (5% return) | 5.80 | 1,000 | 1,019.31 |
102
Harbor Fixed Income Funds
Fees and Expenses Example—Continued
Fees and Expenses Example—Continued
Annualized Expense Ratios* | Expenses Paid During Period** | Beginning Account Value May 1, 2019 | Ending Account Value October 31, 2019 | |||||
Harbor Core Bond Fund | ||||||||
Retirement Class | 0.37% | |||||||
Actual | $1.92 | $1,000 | $1,056.92 | |||||
Hypothetical (5% return) | 1.89 | 1,000 | 1,023.29 | |||||
Institutional Class | 0.45% | |||||||
Actual | $2.33 | $1,000 | $1,056.52 | |||||
Hypothetical (5% return) | 2.29 | 1,000 | 1,022.88 | |||||
Harbor High-Yield Bond Fund | ||||||||
Retirement Class | 0.56% | |||||||
Actual | $2.86 | $1,000 | $1,031.69 | |||||
Hypothetical (5% return) | 2.85 | 1,000 | 1,022.31 | |||||
Institutional Class | 0.64% | |||||||
Actual | $3.28 | $1,000 | $1,031.28 | |||||
Hypothetical (5% return) | 3.26 | 1,000 | 1,021.90 | |||||
Administrative Class | 0.89% | |||||||
Actual | $4.56 | $1,000 | $1,029.66 | |||||
Hypothetical (5% return) | 4.53 | 1,000 | 1,020.61 | |||||
Investor Class | 1.01% | |||||||
Actual | $5.16 | $1,000 | $1,029.28 | |||||
Hypothetical (5% return) | 5.14 | 1,000 | 1,019.99 | |||||
Harbor High-Yield Opportunities Fund | ||||||||
Retirement Class | 0.65% | |||||||
Actual | $3.35 | $1,000 | $1,040.00 | |||||
Hypothetical (5% return) | 3.31 | 1,000 | 1,021.85 | |||||
Institutional Class | 0.73% | |||||||
Actual | $3.75 | $1,000 | $1,038.55 | |||||
Hypothetical (5% return) | 3.72 | 1,000 | 1,021.43 | |||||
Administrative Class | 0.98% | |||||||
Actual | $5.03 | $1,000 | $1,037.26 | |||||
Hypothetical (5% return) | 4.99 | 1,000 | 1,020.14 | |||||
Investor Class | 1.10% | |||||||
Actual | $5.65 | $1,000 | $1,037.74 | |||||
Hypothetical (5% return) | 5.60 | 1,000 | 1,019.52 | |||||
Harbor Money Market Fund | ||||||||
Institutional Class | 0.28% | |||||||
Actual | $1.42 | $1,000 | $1,009.65 | |||||
Hypothetical (5% return) | 1.43 | 1,000 | 1,023.76 | |||||
Administrative Class | 0.53% | |||||||
Actual | $2.68 | $1,000 | $1,008.38 | |||||
Hypothetical (5% return) | 2.70 | 1,000 | 1,022.47 |
* | Reflective of all fee waivers and expense reimbursements |
** | Expenses are equal to the Fund’s annualized net expense ratio, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
103
Harbor Fixed Income Funds
Additional Information (Unaudited)
Additional Information (Unaudited)
Additional Tax Information
The Funds designate the following portions of their distributions from investment company taxable income for the fiscal year ended October 31, 2019 as qualifying for the dividends received deduction for corporate shareholders.
Percentage of Distribution | |
Harbor Convertible Securities Fund | 9% |
Pursuant to Section 852 of the Internal Revenue Code, the Funds designate the following capital gain dividends for the fiscal year ended October 31, 2019:
Amount (000s) | |
Harbor Convertible Securities Fund | $1,611 |
Harbor Core Bond Fund | 10 |
For the fiscal year ended October 31, 2019, the Funds designate up to the maximum amount of such dividends allowable pursuant to the Internal Revenue Code as qualified dividend income eligible for reduced tax rates. These lower rates range from 0% to 20% depending on an individual’s tax bracket. If the Funds pay a distribution during calendar year 2019, complete information will be reported in conjunction with Form 1099-DIV.
Shareholders who own shares through a taxable Harbor Funds account and that received distributions from a Fund during calendar year 2019 will receive a Form 1099-DIV in January 2020 that will show the tax character of those distributions.
Proxy Voting
Harbor Funds has adopted Proxy Voting Policies and Procedures under which proxies relating to securities held by the Harbor funds are voted. In addition, Harbor Funds files Form N-PX, with its complete proxy voting record for the 12 months ended June 30th, no later than August 31st of each year. A description of Harbor Funds’ Proxy Voting Policies and Procedures and the proxy voting records (Form N-PX) are available (i) without charge, upon request, by calling Harbor Funds toll-free at 800-422-1050; (ii) on Harbor Funds’ website atharborfunds.com; and (iii) on the SEC’s website at sec.gov.
Householding
Harbor Funds has adopted a policy that allows it to send only one copy of a Fund’s prospectus, proxy materials, annual report and semi-annual report to certain shareholders residing at the same household. This reduces Fund expenses, which benefits you and other shareholders. If you need additional copies or do not want your mailings to be “householded,” please call the Shareholder Servicing Agent at 800-422-1050. Individual copies will be sent within thirty (30) days after the Shareholder Servicing Agent receives your instructions. Your consent to householding is considered valid until revoked.
Quarterly Portfolio Disclosures
In 2019, the Funds filed a complete portfolio of investments with the SEC for the first fiscal quarter on Form N-Q and the third fiscal quarter (excluding Harbor Money Market Fund) as an exhibit to Form N-PORT. The Funds’ Forms N-Q and N-PORT are available (i) without charge, upon request, by calling Harbor Funds toll-free at 800-422-1050, (ii) on Harbor Funds’ website atharborfunds.com, and (iii) on the SEC’s website at sec.gov.
104
Harbor Fixed Income Funds
Additional Information—Continued
Additional Information—Continued
ADVISORY AGREEMENT APPROVALS
Approval of Amended Subadvisory Agreements for Harbor Bond Fund, Harbor Convertible Securities Fund and Harbor High-Yield Bond Fund
At a meeting of the Board held on August 18-19, 2019, the Board, including the Independent Trustees voting separately, approved amended and restated Subadvisory Agreements (the “Amended Agreements”) with each of Pacific Investment Management Company LLC and Shenkman Capital Management, Inc. (each, a “Subadviser”) authorizing each Subadviser to vote proxies on behalf of the Fund(s) with respect to which they serve as Subadviser. The Trustees noted that the Amended Agreements would take effect October 1, 2019 in connection with the delegation of proxy voting responsibilities to the Subadvisers, subject to Harbor Capital’s oversight. It was considered that, although the Trustees were being asked to approve the Amended Agreements in order to implement the delegation of proxy voting responsibilities to the Subadvisers, they would have the opportunity to perform a full review of the Investment Advisory Agreement and Subadvisory Agreements for the Funds in connection with their annual review of investment advisory and subadvisory agreements, at which time the Trustees would consider the nature, extent and quality of services provided by Harbor Capital and the Subadvisers; investment performance, advisory fees and expense ratios; profitability; any “fall out” benefits; and economies of scale.
105
Harbor Fixed Income Funds
Additional Information—Continued
Additional Information—Continued
Trustees and Officers
As of December 2019
The business and affairs of the Trust shall be managed by or under the direction of the Trustees, and they shall have all powers necessary or desirable to carry out that responsibility. The Trustees shall have full power and authority to take or refrain from taking any action and to execute any contracts and instruments that they may consider necessary or desirable in the management of the Trust. Any determination made by the Trustees in good faith as to what is in the interests of the Trust shall be conclusive. Information pertaining to the Trustees and Officers of Harbor Funds is set forth below. The address of each Trustee and Officer is: [Name of Trustee or Officer] c/o Harbor Funds, 111 South Wacker Drive, 34th Floor, Chicago, IL 60606-4302.
Harbor Funds' Statement of Additional Information includes additional information about the Trust’s Trustees and is available without charge by calling 800-422-1050 or at the Trust’s website atharborfunds.com.
Name (Age) Position(s) with Fund | Term of Office and Length of Time Served1 | Principal Occupation(s) During Past Five Years | Number of Portfolios In Fund Complex Overseen By Trustee | Other Directorships Of Public Companies and Other Registered Investment Companies Held by Trustee During Past Five Years |
INDEPENDENT TRUSTEES | ||||
Scott M. Amero (56) Trustee | Since 2014 | Chairman (2015-Present) and Trustee (2011-2015), Rare (conservation nonprofit); Trustee, Berkshire School (2014-Present); Trustee, The Nature Conservancy, Massachusetts Chapter (2018-Present); Vice Chairman and Global Chief Investment Officer, Fixed Income (2010), Vice Chairman and Global Chief Investment Officer, Fixed Income, and Co-Head, Fixed Income Portfolio Management (2007-2010), BlackRock, Inc. (publicly traded investment management firm). | 39 | None |
Donna J. Dean (68) Trustee | Since 2010 | Chief Investment Officer of the Rockefeller Foundation (a private foundation) (1995-Present). | 39 | None |
Joseph L. Dowling III (55) Trustee | Since 2017 | Chief Executive Officer (2018-Present) and Chief Investment Officer, Brown University Investment Office (2013-2018); Advisory Board Member, Stage Point Capital (private mortgage specialist) (2016-2017); Advisory Board Member, Harbor Funds (2016-2017); and Founder and Managing Member, Narragansett Asset Management (private investment management firm) (1998-2013). | 39 | Director of Integrated Electrical Services (2012-Present). |
Randall A. Hack (72) Trustee | Since 2010 | Founder and Senior Managing Director of Capstone Capital LLC (private investment firm) (2003-Present); Director of Tower Development Corporation (cell tower developer) (2009-2016); Advisory Director of Berkshire Partners (private equity firm) (2002-2013); Founder and Senior Managing Director of Nassau Capital, LLC (private investment firm, investing solely on behalf of the Princeton Endowment) (1995-2001); and President of The Princeton University Investment Company (1990-1994). | 39 | None |
Robert Kasdin (61) Trustee | Since 2014 | Senior Vice President and Chief Operating Officer (2015-Present) and Chief Financial Officer (2018-Present), Johns Hopkins Medicine; Senior Executive Vice President, Columbia University (2002-2015); Trustee and Member of the Finance Committee, National September 11 Memorial & Museum at the World Trade Center (2005-Present); Director, Apollo Commercial Real Estate Finance, Inc. (2014-Present); Director and Executive Committee Member, The Y in Central Maryland (2018-Present); and Director, Noranda Aluminum Holdings Corp. (2007-2014). | 39 | Director of Noranda Aluminum Holdings Corporation (2007-2014); and Director of Apollo Commercial Real Estate Finance, Inc. (2014-Present). |
106
Harbor Fixed Income Funds
Additional Information—Continued
Additional Information—Continued
Trustees and Officers—Continued
Name (Age) Position(s) with Fund | Term of Office and Length of Time Served1 | Principal Occupation(s) During Past Five Years | Number of Portfolios In Fund Complex Overseen By Trustee | Other Directorships Of Public Companies and Other Registered Investment Companies Held by Trustee During Past Five Years |
INDEPENDENT TRUSTEES—Continued | ||||
Kathryn L. Quirk (67) Trustee | Since 2017 | Retired; Vice President, Senior Compliance Officer and Head, U.S. Regulatory Compliance, Goldman Sachs Asset Management (2013-2017); Deputy Chief Legal Officer, Asset Management, and Vice President and Corporate Counsel, Prudential Insurance Company of America (2010-2012); Co-Chief Legal Officer, Prudential Investment Management, Inc., and Chief Legal Officer, Prudential Investments and Prudential Mutual Funds (2008-2012); Vice President and Corporate Counsel and Chief Legal Officer, Mutual Funds, Prudential Insurance Company of America, and Chief Legal Officer, Prudential Investments (2005-2008); Vice President and Corporate Counsel and Chief Legal Officer, Mutual Funds, Prudential Insurance Company of America (2004-2005); Member, Management Committee (2000-2002), General Counsel and Chief Compliance Officer, Zurich Scudder Investments, Inc. (1997-2002). | 39 | None |
Ann M. Spruill (65) Trustee | Since 2014 | Partner (1993-2008), member of Executive Committee (1996-2008), Member Board of Directors (2002-2008), Grantham, Mayo, Van Otterloo & Co, LLC (private investment management firm) (with the firm since 1990); Member Investment Committee and Chair of Global Public Equities, Museum of Fine Arts, Boston (2000-Present); and Trustee, Financial Accounting Foundation (2014-Present). | 39 | None |
INTERESTED TRUSTEE | ||||
Charles F. McCain (50)* Chairman, Trustee and President | Since 2017 | Chief Executive Officer (2017-Present), Director (2007-Present), President and Chief Operating Officer (2017), Executive Vice President and General Counsel (2004-2017), and Chief Compliance Officer (2004-2014), Harbor Capital Advisors, Inc.; Director (2007-Present) and Chief Compliance Officer (2004-2017), Harbor Services Group, Inc.; Chief Executive Officer (2017-Present), Director (2007-Present), Chief Compliance Officer and Executive Vice President (2007-2017), Harbor Funds Distributors, Inc.; and Chief Compliance Officer, Harbor Funds (2004-2017). | 39 | None |
Name (Age) Position(s) with Fund | Term of Office and Length of Time Served1 | Principal Occupation(s) During Past Five Years |
FUND OFFICERS NOT LISTED ABOVE** | ||
Erik D. Ojala (44) Chief Compliance Officer | Since 2017 | Executive Vice President and General Counsel (2017-Present) and Secretary (2010-Present); Senior Vice President and Associate General Counsel (2007-2017), Harbor Capital Advisors, Inc.; Director and Secretary (2019-Present), Harbor Trust Company, Inc.; Director, Executive Vice President and Chief Compliance Officer (2017-Present), Harbor Funds Distributors, Inc.; Director (2017-Present) and Assistant Secretary (2014-Present), Harbor Services Group, Inc.; and AML Compliance Officer (2010-2017) and Vice President and Secretary (2007-2017), Harbor Funds. |
Anmarie S. Kolinski (48) Treasurer | Since 2007 | Executive Vice President and Chief Financial Officer (2007-Present), Harbor Capital Advisors, Inc.; Chief Financial Officer (2007-Present), Director and Treasurer (2019-Present), Harbor Trust Company, Inc.; Harbor Services Group, Inc.; and Chief Financial Officer (2015-Present) and Treasurer (2012-Present), Harbor Funds Distributors, Inc. |
Brian L. Collins (51) Vice President | Since 2005 | Executive Vice President and Chief Investment Officer (2004-Present), Harbor Capital Advisors, Inc. and Director and Chief Investment Officer (2019-Present), Harbor Trust Company, Inc. |
Kristof M. Gleich (40) Vice President | Since 2019 | President (2018-Present), Harbor Capital Advisors, Inc.; Director, Vice Chairperson, and President (2019-Present), Harbor Trust Company, Inc.; and Managing Director, Global Head of Manager Selection (2010-2018), JP Morgan Chase & Co. |
107
Harbor Fixed Income Funds
Additional Information—Continued
Additional Information—Continued
Trustees and Officers—Continued
Name (Age) Position(s) with Fund | Term of Office and Length of Time Served1 | Principal Occupation(s) During Past Five Years |
FUND OFFICERS NOT LISTED ABOVE**—Continued | ||
Gregg M. Boland (56) Vice President | Since 2019 | Vice President (2019-Present), Harbor Capital Advisors, Inc.; President (2019-Present), Senior Vice President – Operations (2016-2019), and Vice President – Operations (2007-2015), Harbor Services Group, Inc.; and Senior Vice President, AML Compliance Officer, and OFAC Officer (2019-Present), Harbor Funds Distributors, Inc. |
Diana R. Podgorny (40) Secretary | Since 2018 | Vice President and Assistant General Counsel, Harbor Capital Advisors, Inc. (2017-Present); Vice President and Counsel, AMG Funds LLC (2016-2017); Assistant Secretary, AMG Funds, AMG Funds I, AMG Funds II and AMG Funds III (2016-2017); Assistant Secretary, AMG Funds IV (2010-2017); and Vice President and Counsel, Aston Asset Management, LLC (2010-2016). |
Jodie L. Crotteau (47) Assistant Secretary | Since 2014 | Senior Vice President and Chief Compliance Officer, Harbor Capital Advisors, Inc. (2014-Present); Chief Compliance Officer and AML/OFAC Officer (2019-Present), Harbor Trust Company, Inc.; Chief Compliance Officer and Secretary (2017-present) and Assistant Secretary (2015-2016), Harbor Services Group, Inc.; Assistant Secretary (2016-present), Harbor Funds Distributors, Inc.; Vice President and Chief Compliance Officer, Grosvenor Registered Funds (2011-2014); and Vice President, Grosvenor Capital Management, L.P. (2010-2014). |
Lana M. Lewandowski (40) AML Compliance Officer and Assistant Secretary | Since 2017 | Legal & Compliance Manager (2016-Present) and Legal Specialist (2012-2015), Harbor Capital Advisors, Inc. |
Lora A. Kmieciak (55) Assistant Treasurer | Since 2017 | Senior Vice President – Fund Administration and Analysis (2017-Present) and Senior Vice President - Business Analysis (2015-2017), Harbor Capital Advisors, Inc.; and Assurance Executive Director, Ernst & Young LLP (1999-2015). |
John M. Paral (51) Assistant Treasurer | Since 2013 | Director of Fund Administration and Analysis (2017-Present), Vice President (2012-Present) and Financial Reporting Manager (2007-2017), Harbor Capital Advisors, Inc. |
1 | Each Trustee serves for an indefinite term, until his successor is elected. Each Officer is elected annually. |
* | Mr. McCain is deemed an “Interested Trustee” due to his affiliation with the Adviser and Distributor of Harbor Funds. |
** | Officers of the Funds are “interested persons” as defined in the Investment Company Act. |
108
This privacy statement is not part of this report
Harbor’s Privacy Statement
The following privacy statement (“Privacy Statement”) is issued by Harbor Funds and each series of Harbor Funds and its affiliates, Harbor Capital Advisors, Inc., Harbor Services Group, Inc. and Harbor Funds Distributors, Inc. (collectively, “Harbor” “we” or “us”). The measures described in this Privacy Statement reflect the commitments we make to protect the privacy of your personal information. We appreciate the confidence you have shown by entrusting us with your assets.
Personal Information
In the course of providing products and services, we collect personal information about you from the following sources: applications, forms, our website (including any information captured through our use of “cookies”), through mobile applications, by telephone and in correspondence and transactions with us, our affiliates or other parties, including when you contact Shareholder Services or establish an account with us. This Privacy Statement applies to personal information we collect from those sources unless we inform you otherwise.
The personal information collected may include name, address, email address, telephone/fax numbers, account number, social security or taxpayer identification number, investment activity, bank account information, location data (depending on your app settings and device permissions), and other information voluntarily provided by you.
We may also collect certain information automatically when you visit us through our website or a mobile application. For example, we may collect technical and navigational information, such as computer browser type, device type, device ID, Internet protocol address, pages visited average time spent on our website and searches performed on our website. We may use this information to alert you to software compatibility issues; to provide you with or improve or websites, applications, products or services; or to provide you with content that may be of interest to you. We use your IP address to help diagnose problems with our server and to administer our website. Your IP address is also used to gather broad demographic information. This information will be used for internal purposes only. We also collect information in the form of log files that record website and app activity and gather statistics about your browsing habits. These entries are generated automatically, and help us to troubleshoot errors, improve performance and maintain the security of our sites and apps. We use “cookies” and similar files that may be placed on your computer or device for security purposes, to facilitate site navigation and to personalize the appearance of our site. We provide more information regarding cookies and other tracking technologies below.
In addition, we may receive personal information about you that you authorize third parties to provide to us. We also may obtain personal information from third-party service providers to verify your identity, to prevent fraud, or to help us identify products and services that may be of interest to you.
The personal information we collect about you may be transferred to or stored by us or our service providers in the United States or elsewhere, as permitted by law.
If you do not wish to provide personal information to us, we may be unable to provide certain products or services to you.
Information Sharing
We disclose personal information with affiliated and non-affiliated parties: (1) as permitted or required by law or regulation; (2) if we believe that is necessary to: comply with applicable laws, regulations, or industry requirements; respond to requests from a legal, regulatory, or governmental authority; enforce legal terms; detect and resolve any fraud or security concerns, and protect the rights, property, and safety of us, our users, or others; (3) in the event of a merger, acquisition or sale of all or substantially all of our assets; or (4) as otherwise described in this Privacy Statement.
Personal information we collect may be shared with non-affiliated companies that perform support services on our behalf or to other firms that assist us in providing you with products and services (including, without limitation, completing transactions), such as custodians, transfer agents, broker-dealers and marketing service firms (to support our marketing to you), as well as with other financial institutions. We may also share information with affiliates that are engaged in a variety of financial services in order to better service your account(s).
When information is shared with third parties, they are not permitted to use the information for any purpose other than those purposes described in this Privacy Statement or as permitted by law.
If you close your account(s) or if we lose contact with you, we will continue to share information in accordance with our current privacy policy and practices.
If you close your account(s) or if we lose contact with you, we will continue to share information in accordance with our current privacy policy and practices.
109
Harbor’s Privacy Statement—Continued
Security
We maintain physical, electronic and procedural safeguards designed to protect your personal information; however, please be aware that no data security measures can guarantee 100% security.
For shareholders accessing information through our website or a mobile application, various forms of Internet security, such as data encryption firewall barriers, user names and passwords, two-factor authentication, and other tools are used. For additional information regarding our security measures, visit the terms and conditions of use on our website at harborfunds.com.
Linking to
Third Parties
Third Parties
When you visit our website and leave to go to another linked site, we are not responsible for the content or availability of the linked site. Please be advised that if you enter into a transaction on the third-party site, we do not represent either the third party or you. Further, the privacy and security policies of the linked site may differ from those practiced by us.
Cookies and Other Technologies
A cookie is a small text file that is stored on your computer, tablet, or device when you visit a website or a mobile application. Cookies usually store small bits of information about you and what you do on that site or application, which are then used to improve your browsing experience. Some cookies are only used during a single visit, while others are saved on your device until your next visit. Harbor Funds and our third-party providers use both types of cookies to make your visits more productive.
If you are concerned about cookies, they can be blocked from your device, or you can set your browser to notify you when they are being used. Use the Help feature of your browser to learn how.
Our website, mobile application, and emails may use a web beacon. A web beacon helps to measure usage and activity and reports that activity back to the system providers. In some cases, a web beacon triggers the placement of a cookie on your device.
We and our service providers use web beacons and cookies to determine things like if and when you open our emails, what type of device, operating system, email program, or web browser you are using, your IP address, and what links you click within our site or email. These things enable us to gauge the effectiveness, relevance, and value of our content and communications.
We use Google Analytics (which uses a web beacon) to collect information about use of our website and mobile application. For more information on opting out of being tracked by Google Analytics, visithttps://tools.google.com/dlpage/gaoptout. We also use Lucky Orange to collect information about how visitors interact with the content on our public website and mobile application pages. Lucky Orange doesnot track actions or behavior within the password-protected online account access systems. For more information about Lucky Orange, including how to opt out, please visit:https://www.luckyorange.com/privacy.php.
Do Not Track
Our third-party vendors may collect information about users across our website. We do not currently have the capability to respond to a web browser that does not track signals or other mechanisms that provide you with the ability to exercise choice regarding the collection of this information.
Changes to this
Privacy Statement
Privacy Statement
We reserve the right to change or revise this Privacy Statement at any time to reflect changes in the law or our data collection and use practices. New updates to the Privacy Statement will be posted to our website and are include in Harbor Funds’ annual reports to shareholders. Privacy Statement changes will apply to the information collected from the date we post our revised Privacy Statement, as well as to existing information we hold.
Contact Us
If you have any questions or concerns about how we maintain the privacy of your personal information or if you would like to update your personal information on file, please contact us at 800-422-1050 Monday through Friday, between the hours of 8:00 a.m. and 6:00 p.m. Eastern time. You may also write to us at the following postal address:
Harbor Funds
c/o Harbor Services Group, Inc.
PO Box 804660
Chicago, IL 60680-4108
c/o Harbor Services Group, Inc.
PO Box 804660
Chicago, IL 60680-4108
We recommend that you read and retain this notice for your personal files.
Last Updated: December 2018
110
111 South Wacker Drive, 34th Floor | Chicago, IL 60606-4302 | 800-422-1050 | harborfunds.com |
Trustees & Officers
Charles F. McCain
Chairman, President & Trustee
Chairman, President & Trustee
Scott M. Amero
Trustee
Trustee
Raymond J. Ball
Trustee
Trustee
Donna J. Dean
Trustee
Trustee
Joseph L. Dowling, III
Trustee
Trustee
Randall A. Hack
Trustee
Trustee
Robert Kasdin
Trustee
Trustee
Kathryn L. Quirk
Trustee
Trustee
Ann M. Spruill
Trustee
Trustee
Erik D. Ojala
Chief Compliance Officer
Chief Compliance Officer
Anmarie S. Kolinski
Treasurer
Treasurer
Brian L. Collins
Vice President
Vice President
Kristof M. Gleich
Vice President
Vice President
Gregg M. Boland
Vice President
Vice President
Diana R. Podgorny
Secretary
Secretary
Jodie L. Crotteau
Assistant Secretary
Assistant Secretary
Lana M. Lewandowski
AML Compliance Officer
& Assistant Secretary
AML Compliance Officer
& Assistant Secretary
Lora A. Kmieciak
Assistant Treasurer
Assistant Treasurer
John M. Paral
Assistant Treasurer
Assistant Treasurer
Investment Adviser
Harbor Capital Advisors, Inc.
111 South Wacker Drive, 34th Floor
Chicago, IL 60606-4302
312-443-4400
111 South Wacker Drive, 34th Floor
Chicago, IL 60606-4302
312-443-4400
Distributor
Harbor Funds Distributors, Inc.
111 South Wacker Drive, 34th Floor
Chicago, IL 60606-4302
312-443-4600
111 South Wacker Drive, 34th Floor
Chicago, IL 60606-4302
312-443-4600
Shareholder Services
Harbor Services Group, Inc.
P.O. Box 804660
Chicago, IL 60680-4108
800-422-1050
P.O. Box 804660
Chicago, IL 60680-4108
800-422-1050
FD.AR.FI.1019
Table of Contents
Annual Report
October 31, 2019
Target Retirement Funds
Institutional Class | |
Harbor Target Retirement Income Fund | HARAX |
Harbor Target Retirement 2020 Fund | HARJX |
Harbor Target Retirement 2025 Fund | HARMX |
Harbor Target Retirement 2030 Fund | HARPX |
Harbor Target Retirement 2035 Fund | HARUX |
Harbor Target Retirement 2040 Fund | HARYX |
Harbor Target Retirement 2045 Fund | HACCX |
Harbor Target Retirement 2050 Fund | HAFFX |
Harbor Target Retirement 2055 Fund | HATRX |
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Funds’ annual and semi-annual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on the Funds’ website (harborfunds.com), and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from a Fund electronically anytime by contacting your financial intermediary (such as a broker-dealer or bank) or, if you invest directly with Harbor Funds, by calling 800-422-1050.
You may elect to receive all future reports in paper free of charge. If you invest through a financial intermediary (such as a broker-dealer or bank), you can contact your financial intermediary to request that you continue to receive paper copies of the Funds’ shareholder reports. If you invest directly, you can call 800-422-1050 to request that you continue to receive paper copies of the Funds’ shareholder reports. Your election to receive reports in paper will apply to all Harbor Funds held in your account.
Table of Contents
This document must be preceded or accompanied by a Prospectus.
Letter from the Chairman
Charles F. McCain Chairman |
Dear Fellow Shareholder:
After a challenging start early in the fiscal year, the equity markets recovered and performed well for much of the remainder of the year ending October 31, 2019. U.S. equity markets performed well compared to most other markets around the globe, lead by the strong performance of global technology and internet related stocks. Overseas, there were minimal differences between the returns of developed markets and emerging markets, though within regions there was greater dispersion. Concerns about the impact of rising geopolitical tensions and trade wars weighed on equity and fixed income markets. Steady though modest economic growth in the U.S. more than offset these concerns, leading to solid investment results across asset classes. The U.S. bond markets performed well, with the actions of an accommodative Federal Reserve leading to lower interest rates and higher returns for Government bonds as well as most corporate bonds that were supported by solid earnings.
Within the U.S. equity markets and across most overseas markets, larger cap stocks significantly outperformed smaller cap stocks, continuing a pattern observed in prior years. Also persisting was the dominance of growth over value. Outside of a few brief periods when value stocks rallied relative to growth stocks, it was a year generally dominated by larger cap growth stocks.
A commentary from the portfolio managers of the Harbor Target Retirement Funds is included in the following pages. Their comments highlight the attractive performance of the markets and the Funds during the past year.
One thing that should stand out as you read the comments of our portfolio managers is their strong commitment to active management. We believe that actively managed portfolios, led by skilled practitioners of the art and science of investing, are well positioned to take advantage of the various opportunities that arise over time to deliver attractive long-term investment results.
Since the launch of the first Harbor funds in 1986, we have served as a gateway for shareholders to access talented, institutional caliber asset management through active, cost-aware investments. We identify specialists in each asset class to manage portfolios, and apply a comprehensive oversight program to monitor their performance and ensure their decisions are in the best interest of shareholders. We offer our shareholders the benefit of institutional caliber portfolio managers, in addition to serving as professional adviser to maintain portfolio manager accountability.
The ending of a calendar year always marks a good time to evaluate your financial goals and investments. We encourage shareholders to take a long-term prospective with their investments. While past performance is never a guarantee of future results, over the long-term, the returns of equities and fixed income securities have historically helped investors achieve their financial objectives. We believe investors should maintain a diversified portfolio of equities, fixed income and cash in an allocation consistent with their long-term financial goas and comfort with risk.
Harbor Funds is proud to offer a variety of equity and fixed income funds to help you achieve your financial goals.
Thank you for your confidence in Harbor Funds. We will do our best to continue to earn your trust in 2020 and the years ahead.
December 23, 2019
Charles F. McCain |
Chairman |
1
Harbor Target Retirement Funds
Manager’s Commentary (Unaudited)
Manager’s Commentary (Unaudited)
Adviser
Harbor Capital Advisors, Inc.
111 South Wacker Dr. 34th Floor
Chicago, IL 60606
Portfolio Managers
Brian L. Collins, CFA
Since Inception
Since Inception
Paul C. Herbert, CFA, CAIA
Since Inception
Linda M. Molenda
Since Inception
Since Inception
Harbor Capital has managed the Funds since inception.
Market Review
Securities markets delivered strong gains during the year ended October 31, 2019. Stocks in the U.S. and abroad delivered double-digit returns while both investment grade and below investment grade bonds also ended the period meaningfully higher.
U.S. stocks, as measured by the Russell 3000® Index, returned 13.49% for the period. Continuing a longer-term trend, growth stocks outperformed value stocks. Large-, mid-, and small-cap indices generated positive returns, though small cap stocks failed to keep up with larger cap stocks. Turning to sector performance, 10 out of the S&P 500 Index’s 11 sectors gained ground. The index’s two most interest-rate sensitive sectors, Real Estate and Utilities, led the pack as U.S. interest rates rallied. The Energy sector declined by 11.06%, as oil prices were weak, particularly in the second half of the fiscal year.
Developed non-U.S. stocks turned in a positive result as well, with the MSCI EAFE (ND) Index, a measure of stock market performance in 21 developed countries, gaining 11.04%. Here, as in the U.S., growth led value and large cap stocks topped small cap stocks. Returns for the major regions were led by Asia ex Japan, which gained 16.33%. The pattern of sector returns for the EAFE Index largely mirrored the pattern in the U.S., with the Energy sector being the only group losing ground on a total return basis. The MSCI Emerging Markets Index, which tracks the performance of 26 non-developed countries, returned 11.86% (slightly better than developed non-U.S. stocks) led by Consumer sector and Information Technology sector gains.
Fixed income markets delivered attractive returns during the fiscal year. The Bloomberg Barclays U.S. Aggregate Bond Index of U.S. investment grade corporate, mortgage and government bonds gained a robust 11.51%. U.S. interest rates fell sharply due to risk aversion early in the period, and general geopolitical and economic uncertainty bolstered bonds’ appeal as the year went on. As evidenced by the ICE BofAML U.S. High Yield (H0A0) Index, high-yield bonds climbed 8.32% during the fiscal year, helped along by a generally benign default environment.
Performance
Harbor Target Retirement Funds fared well in an absolute sense in this environment. As expected, given their relatively larger holdings in stock funds, the Target Funds designed for investors further from retirement delivered higher absolute returns than those intended for investors approaching retirement. Please see the data later in this section for each of the Funds’ total returns. Each of the Funds also outperformed its Composite Index for the fiscal year. Total returns for these indices are also included in a table in this section.
The equity funds underlying the Target Funds made meaningful contributions to their returns during the fiscal year. Several of them delivered outsized excess returns relative to their respective benchmarks. Harbor International Growth Fund gained 18.73% while the MSCI All Country World Ex. U.S. (ND) Index rose by 11.27% (all Fund returns presented in this section are for the Institutional Class of each underlying fund). The Fund was helped by strong positive stock selection across several areas, such as within the Consumer Staples, Information Technology, Industrials, and Health Care sectors. Harbor Small Cap Growth Fund and Harbor Small Cap Value Fund also delivered large excess returns during the period. Harbor Small Cap Growth Fund outperformed the Russell 2000® Growth Index by 9.78% and Harbor Small Cap Value Fund outperformed its benchmark by 7.69%.
The underlying fixed income funds delivered attractive absolute returns but lagged their benchmarks during the period. Harbor Bond Fund gained 10.74%, trailing the Bloomberg Barclays U.S. Aggregate Bond Index by 0.77%. The Fund’s interest-rate strategies outside of the U.S. detracted from relative performance. Specifically, it had been positioned to benefit from rising interest rates in certain markets, while yields in each fell. Harbor High-Yield Bond Fund gained 8.16% and also lagged its benchmark, the ICE BofAML U.S. Non-Distressed High Yield Index, by 1.79%, due to industry positioning, an underweight in bonds rated CCC and an off-benchmark position in bank loans.
2
Harbor Target Retirement Funds
Manager’s Commentary—Continued
Manager’s Commentary—Continued
HARBOR TARGET RETIREMENT FUNDS | Total Return Year Ended October 31, 2019 |
Harbor Target Retirement Income Fund | 10.31% |
Harbor Target Retirement 2020 Fund | 11.04 |
Harbor Target Retirement 2025 Fund | 12.09 |
Harbor Target Retirement 2030 Fund | 12.21 |
Harbor Target Retirement 2035 Fund | 12.83 |
Harbor Target Retirement 2040 Fund | 13.43 |
Harbor Target Retirement 2045 Fund | 13.48 |
Harbor Target Retirement 2050 Fund | 13.92 |
Harbor Target Retirement 2055 Fund | 14.24 |
COMMONLY USED MARKET INDICES | Total Return Year Ended October 31, 2019 |
Bloomberg Barclays U.S. Aggregate Bond (domestic bonds) | 11.51% |
MSCI EAFE (ND) (foreign stocks) | 11.04 |
Russell 3000® (entire U.S. stock market) | 13.49 |
HARBOR TARGET RETIREMENT FUND COMPOSITE INDICES | Total Return Year Ended October 31, 2019 |
Composite Index Income | 10.19% |
Composite Index 2020 | 10.59 |
Composite Index 2025 | 11.28 |
Composite Index 2030 | 11.38 |
Composite Index 2035 | 11.49 |
Composite Index 2040 | 11.64 |
Composite Index 2045 | 11.61 |
Composite Index 2050 | 11.60 |
Composite Index 2055 | 11.75 |
Outlook
It is certainly pleasing that the markets, and the Funds, have just experienced a period of relatively sound performance, though there remain concerns about the period ahead. Valuations for stocks and bonds appear elevated to some investors. For example, at the end of the fiscal year, the S&P 500 Index’s price/earnings ratio was 21.2x and the 10-year U.S. Treasury note’s yield was 1.69%; both measures are near the maximum of their respective historical ranges. We remain committed to maintaining a long-term perspective allowing investors to capitalize on markets’ abilities to compound wealth and to building diversified portfolios to help weather inevitable episodes of volatility.
3
Harbor Target Retirement Funds
Manager’s Commentary—Continued
Manager’s Commentary—Continued
Underlying Harbor Funds Performance (Institutional Class Shares)
Total Return for the Year Ended October 31, 2019 | |||||||||||||||||
EQUITY | One Year | Five Yearsa | Ten Yearsa | Since Inceptiona | Current 7-Day SEC Yield | Inception Date | Expense Ratios* | ||||||||||
Subsidizedb | Unsubsidizedc | Net | Gross | ||||||||||||||
Harbor Capital Appreciation Fund | 13.63% | 12.79% | 14.56% | 11.72% | N/A | N/A | 12/29/1987 | 0.66%d | 0.71% | ||||||||
Harbor Large Cap Value Fund | 16.83 | 11.12 | 12.98 | 10.08 | N/A | N/A | 12/29/1987 | 0.69e | 0.73 | ||||||||
Harbor Mid Cap Growth Fund | 21.32 | 11.61 | 14.39 | 5.60 | N/A | N/A | 11/01/2000 | 0.86f | 0.89 | ||||||||
Harbor Mid Cap Value Fund | 5.48 | 4.49 | 11.60 | 7.39 | N/A | N/A | 03/01/2002 | 0.84d | 0.88 | ||||||||
Harbor Small Cap Growth Fund | 16.18 | 9.60 | 14.16 | 8.88 | N/A | N/A | 11/01/2000 | 0.88 | 0.88 | ||||||||
Harbor Small Cap Value Fund | 10.91 | 8.62 | 12.91 | 10.12 | N/A | N/A | 12/14/2001 | 0.88 | 0.88 | ||||||||
Harbor Strategic Growth Fund | 16.91 | 11.02 | N/A | 14.04 | N/A | N/A | 11/01/2011g | 0.71e | 0.85 | ||||||||
Harbor Diversified International All Cap Fund | 11.90 | N/A | N/A | 5.15 | N/A | N/A | 11/02/2015 | 0.80d,e | 0.99 | ||||||||
Harbor Global Leaders Fund | 23.63 | 10.90 | 13.34 | 17.24 | N/A | N/A | 03/01/2009 | 0.86h | 1.05 | ||||||||
Harbor International Fund | 10.18 | 1.85 | 4.73 | 9.98 | N/A | N/A | 12/29/1987 | 0.77e | 0.89 | ||||||||
Harbor International Growth Fund | 18.73 | 6.04 | 6.04 | 3.89 | N/A | N/A | 11/01/1993 | 0.85e | 0.90 | ||||||||
FIXED INCOME | |||||||||||||||||
Harbor Bond Fund | 10.74% | 3.51% | 4.10% | 6.91% | N/A | N/A | 12/29/1987 | 0.80%d,e | 0.91% | ||||||||
Harbor Core Bond Fund | 11.26 | N/A | N/A | 7.24 | N/A | N/A | 06/01/2018 | 0.45e | 0.54 | ||||||||
Harbor High-Yield Bond Fund | 8.16 | 4.22 | 6.25 | 6.79 | N/A | N/A | 12/01/2002 | 0.61d | 0.70 | ||||||||
Harbor High-Yield Opportunities Fund | 8.27 | N/A | N/A | 3.75 | N/A | N/A | 11/01/2017 | 0.73e | 1.01 | ||||||||
MONEY MARKET | |||||||||||||||||
Harbor Money Market Fund | 2.02% | 0.91% | 0.51% | 3.11% | 1.54% | 1.42% | 12/29/1987 | 0.28%d,e | 0.36% |
Performance data shown represents past performance and is no guarantee of future results. Past performance is net of management fees and expenses and reflects reinvested dividends and distributions, but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Past performance reflects the beneficial effect of any expense waivers or reimbursements, without which returns would have been lower. Investment returns and principal value will fluctuate and when redeemed may be worth more or less than their original cost. Returns for periods less than one year are not annualized. Current performance may be higher or lower and is available through the most recent month end atharborfunds.com or by calling 800-422-1050.
The Funds invest in a variety of underlying Harbor funds that are subject to risks associated with their particular investment strategies. By investing in several underlying funds, the Funds have partial exposure to the risks of many different areas of the market. Investments in the Funds are not guaranteed. An investor may experience losses. There is no guarantee that the Funds will provide adequate income through retirement. For information on the different share classes and the risks associated with an investment in the Funds, please refer to the current prospectus.
This report contains the current opinions of Harbor Capital Advisors, Inc. as of the date of this report and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Such opinions are subject to change without notice and securities described herein may no longer be included in, or may at any time be removed from, the Fund’s portfolio. This report is distributed for informational purposes only. Information contained herein has been obtained from sources believed reliable, but not guaranteed.
* | All mutual funds have expense ratios which represent what shareholders pay for operating expenses and management fees. Expense ratios are expressed as an annualized percentage of a fund’s average net assets paid out in expenses. Net expense ratios reflect adjustments due to voluntary or contractual fee waivers or expense reimbursements. Expense ratio information is as of the fund’s current prospectus, as revised and supplemented to date. |
a | Annualized |
b | Reflects reimbursements or waivers in effect during the period |
c | Does not reflect reimbursements or waivers currently in effect |
d | Reflects a contractual management fee waiver effective through February 29, 2020 |
e | Reflects an expense limitation agreement (excluding interest expense, if any) effective through February 29, 2020 |
f | Reflects a contractual management fee waiver effective through June 30, 2020 |
g | For the period November 1, 2011 (inception of the Predecessor Fund) to January 20, 2015, Mar Vista Investment Partners, LLC served as the Predecessor Fund’s subadviser and for the period January 20, 2015 to March 6, 2017, Mar Vista Investment Partners, LLC served as investment adviser to the Predecessor Fund. |
h | Reflects a contractual management fee waiver and an expense limitation agreement (excluding interest expense, if any) effective through May 31, 2020 |
4
Harbor Target Retirement Funds
Asset Allocation Framework (Unaudited)
Asset Allocation Framework (Unaudited)
Target Asset Allocation (glide path)
Harbor Target Retirement Funds - Target Asset Allocation
Over time, the allocation to asset classes and underlying Harbor funds will change in a predetermined manner as shown in the glide path above. The glide path shows the shifting of the asset allocations over time and illustrates how each Target Retirement Fund’s (except Harbor Target Retirement Income Fund) asset mix becomes more conservative as time elapses.
The principal value of the Funds is not guaranteed at any time, including the target retirement date.
Investment Styles
The Harbor Target Retirement Funds are constructed based on Harbor Capital Advisors’ investment experience that, over the long term, stocks generally provide greater growth opportunities and greater risk than bonds, and bonds generally provide more income and lower volatility than stocks. The year in the Fund name refers to the approximate year (the target date) when an investor in the Fund would leave the work force and enter retirement and likely stop making new investments in the Fund. The Harbor Target Retirement Income Fund is designed for investors currently in retirement. The year-specific Target Retirement Funds strive to produce more income and lower volatility as the target year approaches.
Harbor Capital Advisors allocates each Fund’s assets among the underlying Harbor funds based on the Fund’s investment objectives and policies. The asset allocation for each Fund (other than the Harbor Target Retirement Income Fund) will change over time as the target date indicated in the Fund’s name draws closer.
HARBOR TARGET RETIREMENT FUNDS - ACTUAL ALLOCATION AS OF October 31, 2019 | |||||||||||||||||
2055 Fund | 2050 Fund | 2045 Fund | 2040 Fund | 2035 Fund | 2030 Fund | 2025 Fund | 2020 Fund | Income Fund | |||||||||
Equity | |||||||||||||||||
Harbor Capital Appreciation Fund | 8% | 7% | 6% | 6% | 5% | 4% | 3% | 2% | 1% | ||||||||
Harbor Large Cap Value Fund | 14 | 12 | 11 | 10 | 9 | 7 | 6 | 5 | 3 | ||||||||
Harbor Mid Cap Growth Fund | 6 | 6 | 5 | 5 | 4 | 4 | 3 | 2 | 1 | ||||||||
Harbor Mid Cap Value Fund | 9 | 8 | 7 | 7 | 6 | 5 | 4 | 3 | 2 | ||||||||
Harbor Small Cap Growth Fund | 5 | 5 | 5 | 4 | 4 | 3 | 3 | 2 | 1 | ||||||||
Harbor Small Cap Value Fund | 7 | 6 | 5 | 5 | 4 | 4 | 3 | 3 | 1 | ||||||||
Harbor Strategic Growth Fund | 4 | 3 | 3 | 3 | 2 | 2 | 3 | 2 | 1 | ||||||||
Harbor Diversified International All Cap Fund | 11 | 11 | 9 | 9 | 7 | 6 | 5 | 4 | 3 | ||||||||
Harbor Global Leaders Fund | 5 | 4 | 4 | 3 | 3 | 3 | 2 | 2 | 1 | ||||||||
Harbor International Fund | 12 | 11 | 9 | 9 | 8 | 6 | 5 | 4 | 3 | ||||||||
Harbor International Growth Fund | 12 | 11 | 10 | 9 | 8 | 6 | 6 | 4 | 3 | ||||||||
Total Equity | 93 | 84 | 74 | 70 | 60 | 50 | 43 | 33 | 20 | ||||||||
Fixed Income | |||||||||||||||||
Harbor Bond Fund | 4% | 6% | 10% | 9% | 12% | 15% | 18% | 21% | 26% | ||||||||
Harbor Core Bond Fund | 0 | 3 | 5 | 9 | 11 | 15 | 18 | 21 | 26 | ||||||||
Harbor High-Yield Bond Fund | 0 | 0 | 7 | 7 | 10 | 12 | 13 | 11 | 11 | ||||||||
Harbor High-Yield Opportunities Fund | 3 | 7 | 4 | 5 | 7 | 8 | 8 | 7 | 7 | ||||||||
Total Fixed Income | 7 | 16 | 26 | 30 | 40 | 50 | 57 | 60 | 70 | ||||||||
Money Market | |||||||||||||||||
Harbor Money Market Fund | 0% | 0% | 0% | 0% | 0% | 0% | 0% | 7% | 10% | ||||||||
100% | 100% | 100% | 100% | 100% | 100% | 100% | 100% | 100% |
5
Harbor Target Retirement Income Fund
Fund Summary —October 31, 2019 (Unaudited)
Fund Summary —October 31, 2019 (Unaudited)
Asset Allocation(% of investments)
FUND PERFORMANCE
The graph compares a $10,000 investment in the Institutional Class shares of the Fund with the performance of the broad based market indices. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
CHANGE IN A $10,000 INVESTMENT
For the period 11/01/2009 through 10/31/2019
TOTAL RETURNS For the periods ended 10/31/2019 | 1 Year | Annualized | Inception Date | ||||||||
5 Years | 10 Years | ||||||||||
Harbor Target Retirement Income Fund | |||||||||||
Institutional Class | 10.31% | 4.06% | 5.21% | 01/02/2009 | |||||||
Comparative Indices | |||||||||||
Bloomberg Barclays U.S. Aggregate Bond | 11.51% | 3.24% | 3.73% | — | |||||||
MSCI EAFE (ND) | 11.04 | 4.31 | 5.41 | — | |||||||
Russell 3000® | 13.49 | 10.31 | 13.62 | — | |||||||
Composite Index Income | 10.19 | 4.06 | 5.16 | — |
As stated in the Fund’s prospectus dated March 1, 2019, the expense ratio was 0.70%. The Adviser has contractually agreed to limit the Fund’s operating expenses to: (i) the amount of the acquired funds’ fees and expenses; (ii) compensation of the Independent Trustees; and (iii) certain other expenses such as extraordinary items. The expense ratio in the prospectus may differ from the actual expense ratio for the period disclosed within this report. The expense ratio shown in the prospectus is based on the prior fiscal year, adjusted to reflect changes, if any, in contractual arrangements that occurred prior to the date of the prospectus (or supplement thereto, if applicable).
Performance data shown represents past performance and is no guarantee of future results. Past performance is net of management fees and expenses and reflects reinvested dividends and distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or upon the redemption of Fund shares. Past performance reflects the beneficial effect of any expense waivers or reimbursements, without which returns would have been lower. Investment returns and principal value will fluctuate so that Fund shares, when redeemed, may be worth more or less than their original cost. Returns for periods less than one year are not annualized. Current performance may be higher or lower and is available through the most recent month end atharborfunds.com or by calling 800-422-1050. See the Benchmark Descriptions at the end of this report for a description of the Composite Index.
6
Harbor Target Retirement Income Fund
Portfolio of Investments—October 31, 2019
Portfolio of Investments—October 31, 2019
Value and Cost in Thousands
EQUITY FUNDS—20.0% | ||||
Shares | Value | |||
2,923 | Harbor Capital Appreciation Fund | $221 | ||
32,057 | Harbor Large Cap Value Fund | 524 | ||
20,869 | Harbor Mid Cap Growth Fund | 227 | ||
16,331 | Harbor Mid Cap Value Fund | 340 | ||
15,538 | Harbor Small Cap Growth Fund | 204 | ||
7,432 | Harbor Small Cap Value Fund | 249 | ||
9,940 | Harbor Strategic Growth Fund | 222 | ||
39,217 | Harbor Diversified International All Cap Fund | 438 | ||
6,085 | Harbor Global Leaders Fund | 187 | ||
11,195 | Harbor International Fund | 438 | ||
27,218 | Harbor International Growth Fund | 439 | ||
TOTAL EQUITY FUNDS | ||||
(Cost $3,335) | 3,489 | |||
FIXED INCOME FUNDS—70.0% | |||
| Shares | Value | |
384,687 | Harbor Bond Fund | $4,582 | |
430,603 | Harbor Core Bond Fund | 4,581 | |
184,820 | Harbor High-Yield Bond Fund | 1,826 | |
124,612 | Harbor High-Yield Opportunities Fund | 1,217 | |
TOTAL FIXED INCOME FUNDS | |||
(Cost $11,935) | 12,206 | ||
MONEY MARKET FUND—10.0% | |||
(Cost $1,746) | |||
1,745,652 | Harbor Money Market Fund | 1,746 | |
TOTAL INVESTMENTS—100.0% | |||
(Cost $17,016) | 17,441 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—0.0% | —a | ||
TOTAL NET ASSETS—100.0% | $17,441 |
AFFILIATED TRANSACTIONS
The Underlying Funds are considered to be affiliated with the Fund. The following table shows investment transactions and earnings from investments in the affiliated Funds during the period November 1, 2018 through October 31, 2019.
Underlying Funds | Beginning Balance as of 11/01/2018 (000s) | Purchases of Affiliated Funds (000s) | Sales of Affiliated Funds (000s) | Change in Net Unrealized Gain/(Loss) from Affiliated Funds (000s) | Net Realized Gain/(Loss) | Investment Income from Affiliated Funds (000s) | ||||||||
Sale of Affiliated Funds (000s) | Distributions Received from Affiliated Funds (000s) | |||||||||||||
Harbor Capital Appreciation Fund | $164 | $130 | $(81) | $(2) | $10 | $15 | $— | |||||||
Harbor Large Cap Value Fund | 385 | 245 | (161) | 14 | 41 | 6 | 4 | |||||||
Harbor Mid Cap Growth Fund | 169 | 151 | (101) | (7) | 15 | 27 | — | |||||||
Harbor Mid Cap Value Fund | 251 | 197 | (106) | (9) | 7 | 13 | 4 | |||||||
Harbor Small Cap Growth Fund | 148 | 139 | (78) | (9) | 4 | 29 | — | |||||||
Harbor Small Cap Value Fund | 183 | 149 | (89) | (13) | 19 | 16 | 1 | |||||||
Harbor Strategic Growth Fund | 162 | 98 | (62) | 20 | 4 | 4 | 1 | |||||||
Harbor Diversified International All Cap Fund | 319 | 182 | (89) | 22 | 4 | 9 | 4 | |||||||
Harbor Global Leaders Fund | 137 | 80 | (58) | 11 | 17 | 3 | — | |||||||
Harbor International Fund | 319 | 292 | (86) | (42) | (45) | 116 | 5 | |||||||
Harbor International Growth Fund | 323 | 188 | (130) | 32 | 26 | — | 2 | |||||||
Harbor Bond Fund | 4,913 | 3,518 | (4,012) | 407 | (244) | — | 106 | |||||||
Harbor Core Bond Fund | — | 4,878 | (514) | 199 | 18 | — | 71 | |||||||
Harbor High-Yield Bond Fund | 983 | 1,027 | (200) | 11 | 5 | — | 64 | |||||||
Harbor High-Yield Opportunities Fund | 655 | 682 | (133) | 19 | (6) | — | 40 | |||||||
Harbor Real Return Fund | 2,194 | 518 | (2,855) | 148 | (5) | — | 47 | |||||||
Harbor Money Market Fund | 1,256 | 737 | (247) | — | — | — | 27 | |||||||
Total | $12,561 | $13,211 | $(9,002) | $801 | $(130) | $238 | $376 |
a | Rounds to less than $1,000 |
The accompanying notes are an integral part of the Financial Statements.
7
Harbor Target Retirement 2020 Fund
Fund Summary —October 31, 2019 (Unaudited)
Fund Summary —October 31, 2019 (Unaudited)
Asset Allocation(% of investments)
FUND PERFORMANCE
The graph compares a $10,000 investment in the Institutional Class shares of the Fund with the performance of the broad based market indices. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
CHANGE IN A $10,000 INVESTMENT
For the period 11/01/2009 through 10/31/2019
TOTAL RETURNS For the periods ended 10/31/2019 | 1 Year | Annualized | Inception Date | ||||||||
5 Years | 10 Years | ||||||||||
Harbor Target Retirement 2020 Fund | |||||||||||
Institutional Class | 11.04% | 4.75% | 6.50% | 01/02/2009 | |||||||
Comparative Indices | |||||||||||
Bloomberg Barclays U.S. Aggregate Bond | 11.51% | 3.24% | 3.73% | — | |||||||
MSCI EAFE (ND) | 11.04 | 4.31 | 5.41 | — | |||||||
Russell 3000® | 13.49 | 10.31 | 13.62 | — | |||||||
Composite Index 2020 | 10.59 | 4.76 | 6.46 | — |
As stated in the Fund’s prospectus dated March 1, 2019, the expense ratio was 0.71%. The Adviser has contractually agreed to limit the Fund’s operating expenses to: (i) the amount of the acquired funds’ fees and expenses; (ii) compensation of the Independent Trustees; and (iii) certain other expenses such as extraordinary items. The expense ratio in the prospectus may differ from the actual expense ratio for the period disclosed within this report. The expense ratio shown in the prospectus is based on the prior fiscal year, adjusted to reflect changes, if any, in contractual arrangements that occurred prior to the date of the prospectus (or supplement thereto, if applicable).
Performance data shown represents past performance and is no guarantee of future results. Past performance is net of management fees and expenses and reflects reinvested dividends and distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or upon the redemption of Fund shares. Past performance reflects the beneficial effect of any expense waivers or reimbursements, without which returns would have been lower. Investment returns and principal value will fluctuate so that Fund shares, when redeemed, may be worth more or less than their original cost. Returns for periods less than one year are not annualized. Current performance may be higher or lower and is available through the most recent month end atharborfunds.com or by calling 800-422-1050. See the Benchmark Descriptions at the end of this report for a description of the Composite Index.
8
Harbor Target Retirement 2020 Fund
Portfolio of Investments—October 31, 2019
Portfolio of Investments—October 31, 2019
Value and Cost in Thousands
EQUITY FUNDS—32.8% | ||||
Shares | Value | |||
6,648 | Harbor Capital Appreciation Fund | $504 | ||
72,466 | Harbor Large Cap Value Fund | 1,183 | ||
49,758 | Harbor Mid Cap Growth Fund | 541 | ||
38,203 | Harbor Mid Cap Value Fund | 795 | ||
37,668 | Harbor Small Cap Growth Fund | 495 | ||
17,650 | Harbor Small Cap Value Fund | 592 | ||
22,535 | Harbor Strategic Growth Fund | 502 | ||
91,765 | Harbor Diversified International All Cap Fund | 1,025 | ||
13,017 | Harbor Global Leaders Fund | 400 | ||
26,317 | Harbor International Fund | 1,030 | ||
64,348 | Harbor International Growth Fund | 1,038 | ||
TOTAL EQUITY FUNDS | ||||
(Cost $7,688) | 8,105 | |||
FIXED INCOME FUNDS—60.3% | |||
| Shares | Value | |
435,664 | Harbor Bond Fund | $5,189 | |
487,504 | Harbor Core Bond Fund | 5,187 | |
276,242 | Harbor High-Yield Bond Fund | 2,729 | |
186,355 | Harbor High-Yield Opportunities Fund | 1,821 | |
TOTAL FIXED INCOME FUNDS | |||
(Cost $14,546) | 14,926 | ||
MONEY MARKET FUND—6.9% | |||
(Cost $1,712) | |||
1,712,048 | Harbor Money Market Fund | 1,712 | |
TOTAL INVESTMENTS—100.0% | |||
(Cost $23,946) | 24,743 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—0.0% | —a | ||
TOTAL NET ASSETS—100.0% | $24,743 |
AFFILIATED TRANSACTIONS
The Underlying Funds are considered to be affiliated with the Fund. The following table shows investment transactions and earnings from investments in the affiliated Funds during the period November 1, 2018 through October 31, 2019.
Underlying Funds | Beginning Balance as of 11/01/2018 (000s) | Purchases of Affiliated Funds (000s) | Sales of Affiliated Funds (000s) | Change in Net Unrealized Gain/(Loss) from Affiliated Funds (000s) | Net Realized Gain/(Loss) | Investment Income from Affiliated Funds (000s) | ||||||||
Sale of Affiliated Funds (000s) | Distributions Received from Affiliated Funds (000s) | |||||||||||||
Harbor Capital Appreciation Fund | $543 | $232 | $(293) | $(6) | $28 | $49 | $1 | |||||||
Harbor Large Cap Value Fund | 1,274 | 351 | (604) | 20 | 142 | 20 | 13 | |||||||
Harbor Mid Cap Growth Fund | 584 | 320 | (384) | (30) | 51 | 94 | — | |||||||
Harbor Mid Cap Value Fund | 843 | 342 | (382) | (21) | 13 | 46 | 13 | |||||||
Harbor Small Cap Growth Fund | 523 | 283 | (287) | (24) | — | 104 | — | |||||||
Harbor Small Cap Value Fund | 638 | 277 | (334) | (46) | 57 | 56 | 2 | |||||||
Harbor Strategic Growth Fund | 537 | 137 | (239) | 56 | 11 | 13 | 2 | |||||||
Harbor Diversified International All Cap Fund | 1,079 | 198 | (328) | 63 | 13 | 30 | 13 | |||||||
Harbor Global Leaders Fund | 431 | 101 | (211) | 23 | 56 | 10 | — | |||||||
Harbor International Fund | 1,079 | 567 | (311) | (137) | (168) | 390 | 16 | |||||||
Harbor International Growth Fund | 1,091 | 207 | (435) | 94 | 81 | — | 8 | |||||||
Harbor Bond Fund | 8,426 | 3,596 | (7,090) | 581 | (324) | — | 174 | |||||||
Harbor Core Bond Fund | — | 6,337 | (1,492) | 283 | 59 | — | 111 | |||||||
Harbor High-Yield Bond Fund | 2,417 | 1,006 | (733) | 38 | 1 | — | 139 | |||||||
Harbor High-Yield Opportunities Fund | 1,611 | 659 | (480) | 49 | (18) | — | 87 | |||||||
Harbor Real Return Fund | 3,052 | 731 | (3,974) | 138 | 53 | — | 65 | |||||||
Harbor Money Market Fund | 1,426 | 730 | (444) | — | — | — | 33 | |||||||
Total | $25,554 | $16,074 | $(18,021) | $1,081 | $55 | $812 | $677 |
a | Rounds to less than $1,000 |
The accompanying notes are an integral part of the Financial Statements.
9
Harbor Target Retirement 2025 Fund
Fund Summary —October 31, 2019 (Unaudited)
Fund Summary —October 31, 2019 (Unaudited)
Asset Allocation(% of investments)
FUND PERFORMANCE
The graph compares a $10,000 investment in the Institutional Class shares of the Fund with the performance of the broad based market indices. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
CHANGE IN A $10,000 INVESTMENT
For the period 11/01/2009 through 10/31/2019
TOTAL RETURNS For the periods ended 10/31/2019 | 1 Year | Annualized | Inception Date | ||||||||
5 Years | 10 Years | ||||||||||
Harbor Target Retirement 2025 Fund | |||||||||||
Institutional Class | 12.09% | 5.10% | 6.96% | 01/02/2009 | |||||||
Comparative Indices | |||||||||||
Bloomberg Barclays U.S. Aggregate Bond | 11.51% | 3.24% | 3.73% | — | |||||||
MSCI EAFE (ND) | 11.04 | 4.31 | 5.41 | — | |||||||
Russell 3000® | 13.49 | 10.31 | 13.62 | — | |||||||
Composite Index 2025 | 11.28 | 5.14 | 6.97 | — |
As stated in the Fund’s prospectus dated March 1, 2019, the expense ratio was 0.74%. The Adviser has contractually agreed to limit the Fund’s operating expenses to: (i) the amount of the acquired funds’ fees and expenses; (ii) compensation of the Independent Trustees; and (iii) certain other expenses such as extraordinary items. The expense ratio in the prospectus may differ from the actual expense ratio for the period disclosed within this report. The expense ratio shown in the prospectus is based on the prior fiscal year, adjusted to reflect changes, if any, in contractual arrangements that occurred prior to the date of the prospectus (or supplement thereto, if applicable).
Performance data shown represents past performance and is no guarantee of future results. Past performance is net of management fees and expenses and reflects reinvested dividends and distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or upon the redemption of Fund shares. Past performance reflects the beneficial effect of any expense waivers or reimbursements, without which returns would have been lower. Investment returns and principal value will fluctuate so that Fund shares, when redeemed, may be worth more or less than their original cost. Returns for periods less than one year are not annualized. Current performance may be higher or lower and is available through the most recent month end atharborfunds.com or by calling 800-422-1050. See the Benchmark Descriptions at the end of this report for a description of the Composite Index.
10
Harbor Target Retirement 2025 Fund
Portfolio of Investments—October 31, 2019
Portfolio of Investments—October 31, 2019
Value and Cost in Thousands
EQUITY FUNDS—42.7% | |||
Shares | Value | ||
7,054 | Harbor Capital Appreciation Fund | $535 | |
76,333 | Harbor Large Cap Value Fund | 1,247 | |
53,407 | Harbor Mid Cap Growth Fund | 581 | |
40,039 | Harbor Mid Cap Value Fund | 834 | |
40,242 | Harbor Small Cap Growth Fund | 528 | |
18,716 | Harbor Small Cap Value Fund | 628 | |
23,988 | Harbor Strategic Growth Fund | 534 | |
96,894 | Harbor Diversified International All Cap Fund | 1,082 | |
13,731 | Harbor Global Leaders Fund | 422 | |
27,754 | Harbor International Fund | 1,086 | |
67,841 | Harbor International Growth Fund | 1,094 | |
TOTAL EQUITY FUNDS | |||
(Cost $8,217) | 8,571 | ||
FIXED INCOME FUNDS—57.3% | |||
| Shares | Value | |
302,867 | Harbor Bond Fund | $3,607 | |
338,986 | Harbor Core Bond Fund | 3,607 | |
261,614 | Harbor High-Yield Bond Fund | 2,585 | |
176,280 | Harbor High-Yield Opportunities Fund | 1,722 | |
TOTAL FIXED INCOME FUNDS | |||
(Cost $11,267) | 11,521 | ||
TOTAL INVESTMENTS—100.0% | |||
(Cost $19,484) | 20,092 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—0.0% | —a | ||
TOTAL NET ASSETS—100.0% | $20,092 |
AFFILIATED TRANSACTIONS
The Underlying Funds are considered to be affiliated with the Fund. The following table shows investment transactions and earnings from investments in the affiliated Funds during the period November 1, 2018 through October 31, 2019.
Underlying Funds | Beginning Balance as of 11/01/2018 (000s) | Purchases of Affiliated Funds (000s) | Sales of Affiliated Funds (000s) | Change in Net Unrealized Gain/(Loss) from Affiliated Funds (000s) | Net Realized Gain/(Loss) | Investment Income from Affiliated Funds (000s) | ||||||||
Sale of Affiliated Funds (000s) | Distributions Received from Affiliated Funds (000s) | |||||||||||||
Harbor Capital Appreciation Fund | $471 | $255 | $(219) | $15 | $13 | $42 | $1 | |||||||
Harbor Large Cap Value Fund | 1,100 | 392 | (412) | 78 | 89 | 18 | 12 | |||||||
Harbor Mid Cap Growth Fund | 511 | 323 | (284) | 2 | 29 | 82 | — | |||||||
Harbor Mid Cap Value Fund | 732 | 382 | (280) | 9 | (9) | 40 | 12 | |||||||
Harbor Small Cap Growth Fund | 458 | 281 | (201) | (1) | (9) | 91 | — | |||||||
Harbor Small Cap Value Fund | 556 | 293 | (241) | (2) | 22 | 49 | 2 | |||||||
Harbor Strategic Growth Fund | 464 | 160 | (160) | 58 | 12 | 11 | 1 | |||||||
Harbor Diversified International All Cap Fund | 935 | 307 | (239) | 66 | 13 | 26 | 12 | |||||||
Harbor Global Leaders Fund | 367 | 129 | (152) | 35 | 43 | 9 | — | |||||||
Harbor International Fund | 935 | 629 | (225) | (129) | (124) | 341 | 14 | |||||||
Harbor International Growth Fund | 947 | 312 | (339) | 120 | 54 | — | 7 | |||||||
Harbor Bond Fund | 5,090 | 2,631 | (4,285) | 304 | (133) | — | 111 | |||||||
Harbor Core Bond Fund | — | 4,449 | (1,078) | 185 | 51 | — | 75 | |||||||
Harbor High-Yield Bond Fund | 2,040 | 1,119 | (611) | 64 | (27) | — | 126 | |||||||
Harbor High-Yield Opportunities Fund | 1,359 | 735 | (402) | 45 | (15) | — | 79 | |||||||
Harbor Real Return Fund | 1,686 | 559 | (2,361) | 84 | 32 | — | 37 | |||||||
Total | $17,651 | $12,956 | $(11,489) | $933 | $41 | $709 | $489 |
a | Rounds to less than $1,000 |
The accompanying notes are an integral part of the Financial Statements.
11
Harbor Target Retirement 2030 Fund
Fund Summary —October 31, 2019 (Unaudited)
Fund Summary —October 31, 2019 (Unaudited)
Asset Allocation(% of investments)
FUND PERFORMANCE
The graph compares a $10,000 investment in the Institutional Class shares of the Fund with the performance of the broad based market indices. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
CHANGE IN A $10,000 INVESTMENT
For the period 11/01/2009 through 10/31/2019
TOTAL RETURNS For the periods ended 10/31/2019 | 1 Year | Annualized | Inception Date | ||||||||
5 Years | 10 Years | ||||||||||
Harbor Target Retirement 2030 Fund | |||||||||||
Institutional Class | 12.21% | 5.39% | 7.49% | 01/02/2009 | |||||||
Comparative Indices | |||||||||||
Bloomberg Barclays U.S. Aggregate Bond | 11.51% | 3.24% | 3.73% | — | |||||||
MSCI EAFE (ND) | 11.04 | 4.31 | 5.41 | — | |||||||
Russell 3000® | 13.49 | 10.31 | 13.62 | — | |||||||
Composite Index 2030 | 11.38 | 5.39 | 7.50 | — |
As stated in the Fund’s prospectus dated March 1, 2019, the expense ratio was 0.75%. The Adviser has contractually agreed to limit the Fund’s operating expenses to: (i) the amount of the acquired funds’ fees and expenses; (ii) compensation of the Independent Trustees; and (iii) certain other expenses such as extraordinary items. The expense ratio in the prospectus may differ from the actual expense ratio for the period disclosed within this report. The expense ratio shown in the prospectus is based on the prior fiscal year, adjusted to reflect changes, if any, in contractual arrangements that occurred prior to the date of the prospectus (or supplement thereto, if applicable).
Performance data shown represents past performance and is no guarantee of future results. Past performance is net of management fees and expenses and reflects reinvested dividends and distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or upon the redemption of Fund shares. Past performance reflects the beneficial effect of any expense waivers or reimbursements, without which returns would have been lower. Investment returns and principal value will fluctuate so that Fund shares, when redeemed, may be worth more or less than their original cost. Returns for periods less than one year are not annualized. Current performance may be higher or lower and is available through the most recent month end atharborfunds.com or by calling 800-422-1050. See the Benchmark Descriptions at the end of this report for a description of the Composite Index.
12
Harbor Target Retirement 2030 Fund
Portfolio of Investments—October 31, 2019
Portfolio of Investments—October 31, 2019
Value and Cost in Thousands
EQUITY FUNDS—50.0% | |||
Shares | Value | ||
16,307 | Harbor Capital Appreciation Fund | $1,236 | |
137,531 | Harbor Large Cap Value Fund | 2,246 | |
98,156 | Harbor Mid Cap Growth Fund | 1,068 | |
71,603 | Harbor Mid Cap Value Fund | 1,491 | |
72,641 | Harbor Small Cap Growth Fund | 954 | |
34,055 | Harbor Small Cap Value Fund | 1,142 | |
31,301 | Harbor Strategic Growth Fund | 697 | |
174,180 | Harbor Diversified International All Cap Fund | 1,945 | |
24,613 | Harbor Global Leaders Fund | 757 | |
49,775 | Harbor International Fund | 1,947 | |
122,052 | Harbor International Growth Fund | 1,969 | |
TOTAL EQUITY FUNDS | |||
(Cost $14,491) | 15,452 | ||
FIXED INCOME FUNDS—50.0% | |||
| Shares | Value | |
377,447 | Harbor Bond Fund | $4,495 | |
422,333 | Harbor Core Bond Fund | 4,494 | |
390,835 | Harbor High-Yield Bond Fund | 3,862 | |
263,592 | Harbor High-Yield Opportunities Fund | 2,575 | |
TOTAL FIXED INCOME FUNDS | |||
(Cost $15,117) | 15,426 | ||
TOTAL INVESTMENTS—100.0% | |||
(Cost $29,608) | 30,878 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—0.0% | —a | ||
TOTAL NET ASSETS—100.0% | $30,878 |
AFFILIATED TRANSACTIONS
The Underlying Funds are considered to be affiliated with the Fund. The following table shows investment transactions and earnings from investments in the affiliated Funds during the period November 1, 2018 through October 31, 2019.
Underlying Funds | Beginning Balance as of 11/01/2018 (000s) | Purchases of Affiliated Funds (000s) | Sales of Affiliated Funds (000s) | Change in Net Unrealized Gain/(Loss) from Affiliated Funds (000s) | Net Realized Gain/(Loss) | Investment Income from Affiliated Funds (000s) | ||||||||
Sale of Affiliated Funds (000s) | Distributions Received from Affiliated Funds (000s) | |||||||||||||
Harbor Capital Appreciation Fund | $1,150 | $487 | $(452) | $(30) | $81 | $104 | $2 | |||||||
Harbor Large Cap Value Fund | 2,008 | 584 | (637) | 153 | 138 | 32 | 22 | |||||||
Harbor Mid Cap Growth Fund | 942 | 467 | (385) | (25) | 69 | 152 | — | |||||||
Harbor Mid Cap Value Fund | 1,342 | 608 | (446) | (23) | 10 | 74 | 23 | |||||||
Harbor Small Cap Growth Fund | 847 | 452 | (317) | (38) | 10 | 170 | — | |||||||
Harbor Small Cap Value Fund | 1,021 | 477 | (382) | (47) | 73 | 91 | 4 | |||||||
Harbor Strategic Growth Fund | 568 | 219 | (181) | 81 | 10 | 14 | 2 | |||||||
Harbor Diversified International All Cap Fund | 1,725 | 502 | (418) | 121 | 15 | 49 | 21 | |||||||
Harbor Global Leaders Fund | 669 | 173 | (223) | 86 | 52 | 15 | — | |||||||
Harbor International Fund | 1,726 | 1,101 | (396) | (238) | (246) | 637 | 25 | |||||||
Harbor International Growth Fund | 1,745 | 431 | (516) | 228 | 81 | — | 13 | |||||||
Harbor Bond Fund | 7,081 | 1,884 | (4,777) | 520 | (213) | — | 166 | |||||||
Harbor Core Bond Fund | — | 4,918 | (655) | 203 | 28 | — | 81 | |||||||
Harbor High-Yield Bond Fund | 3,116 | 1,432 | (742) | 67 | (11) | — | 197 | |||||||
Harbor High-Yield Opportunities Fund | 2,076 | 943 | (490) | 66 | (20) | — | 123 | |||||||
Harbor Real Return Fund | 1,957 | 606 | (2,698) | 82 | 53 | — | 43 | |||||||
Total | $27,973 | $15,284 | $(13,715) | $1,206 | $130 | $1,338 | $722 |
a | Rounds to less than $1,000 |
The accompanying notes are an integral part of the Financial Statements.
13
Harbor Target Retirement 2035 Fund
Fund Summary —October 31, 2019 (Unaudited)
Fund Summary —October 31, 2019 (Unaudited)
Asset Allocation(% of investments)
FUND PERFORMANCE
The graph compares a $10,000 investment in the Institutional Class shares of the Fund with the performance of the broad based market indices. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
CHANGE IN A $10,000 INVESTMENT
For the period 11/01/2009 through 10/31/2019
TOTAL RETURNS For the periods ended 10/31/2019 | 1 Year | Annualized | Inception Date | ||||||||
5 Years | 10 Years | ||||||||||
Harbor Target Retirement 2035 Fund | |||||||||||
Institutional Class | 12.83% | 5.84% | 8.10% | 01/02/2009 | |||||||
Comparative Indices | |||||||||||
Bloomberg Barclays U.S. Aggregate Bond | 11.51% | 3.24% | 3.73% | — | |||||||
MSCI EAFE (ND) | 11.04 | 4.31 | 5.41 | — | |||||||
Russell 3000® | 13.49 | 10.31 | 13.62 | — | |||||||
Composite Index 2035 | 11.49 | 5.70 | 8.05 | — |
As stated in the Fund’s prospectus dated March 1, 2019, the expense ratio was 0.76%. The Adviser has contractually agreed to limit the Fund’s operating expenses to: (i) the amount of the acquired funds’ fees and expenses; (ii) compensation of the Independent Trustees; and (iii) certain other expenses such as extraordinary items. The expense ratio in the prospectus may differ from the actual expense ratio for the period disclosed within this report. The expense ratio shown in the prospectus is based on the prior fiscal year, adjusted to reflect changes, if any, in contractual arrangements that occurred prior to the date of the prospectus (or supplement thereto, if applicable).
Performance data shown represents past performance and is no guarantee of future results. Past performance is net of management fees and expenses and reflects reinvested dividends and distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or upon the redemption of Fund shares. Past performance reflects the beneficial effect of any expense waivers or reimbursements, without which returns would have been lower. Investment returns and principal value will fluctuate so that Fund shares, when redeemed, may be worth more or less than their original cost. Returns for periods less than one year are not annualized. Current performance may be higher or lower and is available through the most recent month end atharborfunds.com or by calling 800-422-1050. See the Benchmark Descriptions at the end of this report for a description of the Composite Index.
14
Harbor Target Retirement 2035 Fund
Portfolio of Investments—October 31, 2019
Portfolio of Investments—October 31, 2019
Value and Cost in Thousands
EQUITY FUNDS—59.7% | |||
Shares | Value | ||
13,053 | Harbor Capital Appreciation Fund | $989 | |
106,007 | Harbor Large Cap Value Fund | 1,731 | |
74,444 | Harbor Mid Cap Growth Fund | 810 | |
55,376 | Harbor Mid Cap Value Fund | 1,153 | |
56,215 | Harbor Small Cap Growth Fund | 738 | |
26,231 | Harbor Small Cap Value Fund | 880 | |
22,278 | Harbor Strategic Growth Fund | 496 | |
134,875 | Harbor Diversified International All Cap Fund | 1,507 | |
18,974 | Harbor Global Leaders Fund | 583 | |
38,519 | Harbor International Fund | 1,507 | |
93,731 | Harbor International Growth Fund | 1,512 | |
TOTAL EQUITY FUNDS | |||
(Cost $11,159) | 11,906 | ||
FIXED INCOME FUNDS—40.3% | |||
| Shares | Value | |
193,988 | Harbor Bond Fund | $2,310 | |
216,889 | Harbor Core Bond Fund | 2,308 | |
207,636 | Harbor High-Yield Bond Fund | 2,052 | |
139,998 | Harbor High-Yield Opportunities Fund | 1,368 | |
TOTAL FIXED INCOME FUNDS | |||
(Cost $7,857) | 8,038 | ||
TOTAL INVESTMENTS—100.0% | |||
(Cost $19,016) | 19,944 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—0.0% | —a | ||
TOTAL NET ASSETS—100.0% | $19,944 |
AFFILIATED TRANSACTIONS
The Underlying Funds are considered to be affiliated with the Fund. The following table shows investment transactions and earnings from investments in the affiliated Funds during the period November 1, 2018 through October 31, 2019.
Underlying Funds | Beginning Balance as of 11/01/2018 (000s) | Purchases of Affiliated Funds (000s) | Sales of Affiliated Funds (000s) | Change in Net Unrealized Gain/(Loss) from Affiliated Funds (000s) | Net Realized Gain/(Loss) | Investment Income from Affiliated Funds (000s) | ||||||||
Sale of Affiliated Funds (000s) | Distributions Received from Affiliated Funds (000s) | |||||||||||||
Harbor Capital Appreciation Fund | $758 | $389 | $(207) | $11 | $38 | $70 | $1 | |||||||
Harbor Large Cap Value Fund | 1,326 | 467 | (281) | 153 | 66 | 22 | 15 | |||||||
Harbor Mid Cap Growth Fund | 626 | 391 | (246) | (9) | 48 | 102 | — | |||||||
Harbor Mid Cap Value Fund | 889 | 493 | (233) | (3) | 7 | 51 | 16 | |||||||
Harbor Small Cap Growth Fund | 553 | 374 | (183) | (17) | 11 | 114 | — | |||||||
Harbor Small Cap Value Fund | 668 | 388 | (206) | (12) | 42 | 61 | 3 | |||||||
Harbor Strategic Growth Fund | 376 | 132 | (74) | 56 | 6 | 9 | 1 | |||||||
Harbor Diversified International All Cap Fund | 1,140 | 453 | (189) | 95 | 8 | 33 | 14 | |||||||
Harbor Global Leaders Fund | 444 | 134 | (95) | 76 | 24 | 10 | — | |||||||
Harbor International Fund | 1,139 | 871 | (191) | (199) | (113) | 428 | 17 | |||||||
Harbor International Growth Fund | 1,150 | 373 | (237) | 191 | 35 | — | 9 | |||||||
Harbor Bond Fund | 3,113 | 1,292 | (2,246) | 226 | (75) | — | 78 | |||||||
Harbor Core Bond Fund | — | 2,483 | (290) | 103 | 12 | — | 40 | |||||||
Harbor High-Yield Bond Fund | 1,403 | 921 | (304) | 40 | (8) | — | 98 | |||||||
Harbor High-Yield Opportunities Fund | 936 | 601 | (195) | 34 | (8) | — | 61 | |||||||
Harbor Real Return Fund | 603 | 338 | (990) | 28 | 21 | — | 14 | |||||||
Total | $15,124 | $10,100 | $(6,167) | $773 | $114 | $900 | $367 |
a | Rounds to less than $1,000 |
The accompanying notes are an integral part of the Financial Statements.
15
Harbor Target Retirement 2040 Fund
Fund Summary —October 31, 2019 (Unaudited)
Fund Summary —October 31, 2019 (Unaudited)
Asset Allocation(% of investments)
FUND PERFORMANCE
The graph compares a $10,000 investment in the Institutional Class shares of the Fund with the performance of the broad based market indices. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
CHANGE IN A $10,000 INVESTMENT
For the period 11/01/2009 through 10/31/2019
TOTAL RETURNS For the periods ended 10/31/2019 | 1 Year | Annualized | Inception Date | ||||||||
5 Years | 10 Years | ||||||||||
Harbor Target Retirement 2040 Fund | |||||||||||
Institutional Class | 13.43% | 6.35% | 8.70% | 01/02/2009 | |||||||
Comparative Indices | |||||||||||
Bloomberg Barclays U.S. Aggregate Bond | 11.51% | 3.24% | 3.73% | — | |||||||
MSCI EAFE (ND) | 11.04 | 4.31 | 5.41 | — | |||||||
Russell 3000® | 13.49 | 10.31 | 13.62 | — | |||||||
Composite Index 2040 | 11.64 | 6.07 | 8.62 | — |
As stated in the Fund’s prospectus dated March 1, 2019, the expense ratio was 0.75%. The Adviser has contractually agreed to limit the Fund’s operating expenses to: (i) the amount of the acquired funds’ fees and expenses; (ii) compensation of the Independent Trustees; and (iii) certain other expenses such as extraordinary items. The expense ratio in the prospectus may differ from the actual expense ratio for the period disclosed within this report. The expense ratio shown in the prospectus is based on the prior fiscal year, adjusted to reflect changes, if any, in contractual arrangements that occurred prior to the date of the prospectus (or supplement thereto, if applicable).
Performance data shown represents past performance and is no guarantee of future results. Past performance is net of management fees and expenses and reflects reinvested dividends and distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or upon the redemption of Fund shares. Past performance reflects the beneficial effect of any expense waivers or reimbursements, without which returns would have been lower. Investment returns and principal value will fluctuate so that Fund shares, when redeemed, may be worth more or less than their original cost. Returns for periods less than one year are not annualized. Current performance may be higher or lower and is available through the most recent month end atharborfunds.com or by calling 800-422-1050. See the Benchmark Descriptions at the end of this report for a description of the Composite Index.
16
Harbor Target Retirement 2040 Fund
Portfolio of Investments—October 31, 2019
Portfolio of Investments—October 31, 2019
Value and Cost in Thousands
EQUITY FUNDS—70.3% | |||
Shares | Value | ||
21,661 | Harbor Capital Appreciation Fund | $1,641 | |
176,896 | Harbor Large Cap Value Fund | 2,889 | |
123,505 | Harbor Mid Cap Growth Fund | 1,344 | |
93,137 | Harbor Mid Cap Value Fund | 1,939 | |
93,053 | Harbor Small Cap Growth Fund | 1,222 | |
43,524 | Harbor Small Cap Value Fund | 1,459 | |
36,794 | Harbor Strategic Growth Fund | 820 | |
224,616 | Harbor Diversified International All Cap Fund | 2,509 | |
31,625 | Harbor Global Leaders Fund | 973 | |
64,400 | Harbor International Fund | 2,520 | |
157,428 | Harbor International Growth Fund | 2,539 | |
TOTAL EQUITY FUNDS | |||
(Cost $18,379) | 19,855 | ||
FIXED INCOME FUNDS—29.7% | |||
| Shares | Value | |
209,479 | Harbor Bond Fund | $2,495 | |
234,251 | Harbor Core Bond Fund | 2,492 | |
206,496 | Harbor High-Yield Bond Fund | 2,040 | |
138,567 | Harbor High-Yield Opportunities Fund | 1,354 | |
TOTAL FIXED INCOME FUNDS | |||
(Cost $8,152) | 8,381 | ||
TOTAL INVESTMENTS—100.0% | |||
(Cost $26,531) | 28,236 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—0.0% | — | ||
TOTAL NET ASSETS—100.0% | $28,236 |
AFFILIATED TRANSACTIONS
The Underlying Funds are considered to be affiliated with the Fund. The following table shows investment transactions and earnings from investments in the affiliated Funds during the period November 1, 2018 through October 31, 2019.
Underlying Funds | Beginning Balance as of 11/01/2018 (000s) | Purchases of Affiliated Funds (000s) | Sales of Affiliated Funds (000s) | Change in Net Unrealized Gain/(Loss) from Affiliated Funds (000s) | Net Realized Gain/(Loss) | Investment Income from Affiliated Funds (000s) | ||||||||
Sale of Affiliated Funds (000s) | Distributions Received from Affiliated Funds (000s) | |||||||||||||
Harbor Capital Appreciation Fund | $1,422 | $528 | $(394) | $(8) | $93 | $128 | $3 | |||||||
Harbor Large Cap Value Fund | 2,459 | 497 | (442) | 176 | 199 | 40 | 27 | |||||||
Harbor Mid Cap Growth Fund | 1,159 | 508 | (394) | (8) | 79 | 185 | — | |||||||
Harbor Mid Cap Value Fund | 1,633 | 662 | (354) | (101) | 99 | 90 | 28 | |||||||
Harbor Small Cap Growth Fund | 1,030 | 482 | (272) | (7) | (11) | 204 | — | |||||||
Harbor Small Cap Value Fund | 1,234 | 491 | (310) | (24) | 68 | 110 | 5 | |||||||
Harbor Strategic Growth Fund | 699 | 139 | (125) | 99 | 8 | 17 | 2 | |||||||
Harbor Diversified International All Cap Fund | 2,100 | 459 | (226) | 165 | 11 | 60 | 27 | |||||||
Harbor Global Leaders Fund | 842 | 143 | (193) | 137 | 44 | 19 | — | |||||||
Harbor International Fund | 2,098 | 1,221 | (217) | (417) | (165) | 780 | 31 | |||||||
Harbor International Growth Fund | 2,134 | 330 | (322) | 347 | 50 | — | 15 | |||||||
Harbor Bond Fund | 4,250 | 1,024 | (2,976) | 288 | (91) | — | 102 | |||||||
Harbor Core Bond Fund | — | 2,810 | (468) | 128 | 22 | — | 49 | |||||||
Harbor High-Yield Bond Fund | 1,799 | 623 | (422) | 39 | 1 | — | 114 | |||||||
Harbor High-Yield Opportunities Fund | 1,191 | 405 | (273) | 42 | (11) | — | 71 | |||||||
Total | $24,050 | $10,322 | $(7,388) | $856 | $396 | $1,633 | $474 |
The accompanying notes are an integral part of the Financial Statements.
17
Harbor Target Retirement 2045 Fund
Fund Summary —October 31, 2019 (Unaudited)
Fund Summary —October 31, 2019 (Unaudited)
Asset Allocation(% of investments)
FUND PERFORMANCE
The graph compares a $10,000 investment in the Institutional Class shares of the Fund with the performance of the broad based market indices. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
CHANGE IN A $10,000 INVESTMENT
For the period 11/01/2009 through 10/31/2019
TOTAL RETURNS For the periods ended 10/31/2019 | 1 Year | Annualized | Inception Date | ||||||||
5 Years | 10 Years | ||||||||||
Harbor Target Retirement 2045 Fund | |||||||||||
Institutional Class | 13.48% | 6.71% | 9.18% | 01/02/2009 | |||||||
Comparative Indices | |||||||||||
Bloomberg Barclays U.S. Aggregate Bond | 11.51% | 3.24% | 3.73% | — | |||||||
MSCI EAFE (ND) | 11.04 | 4.31 | 5.41 | — | |||||||
Russell 3000® | 13.49 | 10.31 | 13.62 | — | |||||||
Composite Index 2045 | 11.61 | 6.39 | 9.12 | — |
As stated in the Fund’s prospectus dated March 1, 2019, the expense ratio was 0.76%. The Adviser has contractually agreed to limit the Fund’s operating expenses to: (i) the amount of the acquired funds’ fees and expenses; (ii) compensation of the Independent Trustees; and (iii) certain other expenses such as extraordinary items. The expense ratio in the prospectus may differ from the actual expense ratio for the period disclosed within this report. The expense ratio shown in the prospectus is based on the prior fiscal year, adjusted to reflect changes, if any, in contractual arrangements that occurred prior to the date of the prospectus (or supplement thereto, if applicable).
Performance data shown represents past performance and is no guarantee of future results. Past performance is net of management fees and expenses and reflects reinvested dividends and distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or upon the redemption of Fund shares. Past performance reflects the beneficial effect of any expense waivers or reimbursements, without which returns would have been lower. Investment returns and principal value will fluctuate so that Fund shares, when redeemed, may be worth more or less than their original cost. Returns for periods less than one year are not annualized. Current performance may be higher or lower and is available through the most recent month end atharborfunds.com or by calling 800-422-1050. See the Benchmark Descriptions at the end of this report for a description of the Composite Index.
18
Harbor Target Retirement 2045 Fund
Portfolio of Investments—October 31, 2019
Portfolio of Investments—October 31, 2019
Value and Cost in Thousands
EQUITY FUNDS—74.2% | |||
Shares | Value | ||
12,249 | Harbor Capital Appreciation Fund | $928 | |
99,855 | Harbor Large Cap Value Fund | 1,631 | |
68,550 | Harbor Mid Cap Growth Fund | 746 | |
51,944 | Harbor Mid Cap Value Fund | 1,082 | |
51,429 | Harbor Small Cap Growth Fund | 675 | |
24,159 | Harbor Small Cap Value Fund | 810 | |
20,767 | Harbor Strategic Growth Fund | 463 | |
125,278 | Harbor Diversified International All Cap Fund | 1,399 | |
18,216 | Harbor Global Leaders Fund | 560 | |
35,877 | Harbor International Fund | 1,404 | |
87,730 | Harbor International Growth Fund | 1,415 | |
TOTAL EQUITY FUNDS | |||
(Cost $10,622) | 11,113 | ||
FIXED INCOME FUNDS—25.8% | |||
| Shares | Value | |
126,989 | Harbor Bond Fund | $1,512 | |
71,005 | Harbor Core Bond Fund | 756 | |
96,801 | Harbor High-Yield Bond Fund | 956 | |
64,794 | Harbor High-Yield Opportunities Fund | 633 | |
TOTAL FIXED INCOME FUNDS | |||
(Cost $3,747) | 3,857 | ||
TOTAL INVESTMENTS—100.0% | |||
(Cost $14,369) | 14,970 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—0.0% | —a | ||
TOTAL NET ASSETS—100.0% | $14,970 |
AFFILIATED TRANSACTIONS
The Underlying Funds are considered to be affiliated with the Fund. The following table shows investment transactions and earnings from investments in the affiliated Funds during the period November 1, 2018 through October 31, 2019.
Underlying Funds | Beginning Balance as of 11/01/2018 (000s) | Purchases of Affiliated Funds (000s) | Sales of Affiliated Funds (000s) | Change in Net Unrealized Gain/(Loss) from Affiliated Funds (000s) | Net Realized Gain/(Loss) | Investment Income from Affiliated Funds (000s) | ||||||||
Sale of Affiliated Funds (000s) | Distributions Received from Affiliated Funds (000s) | |||||||||||||
Harbor Capital Appreciation Fund | $793 | $298 | $(204) | $4 | $37 | $74 | $2 | |||||||
Harbor Large Cap Value Fund | 1,392 | 374 | (341) | 132 | 74 | 23 | 15 | |||||||
Harbor Mid Cap Growth Fund | 631 | 297 | (215) | (7) | 40 | 105 | — | |||||||
Harbor Mid Cap Value Fund | 918 | 432 | (263) | (9) | 4 | 52 | 16 | |||||||
Harbor Small Cap Growth Fund | 556 | 298 | (164) | (21) | 6 | 115 | — | |||||||
Harbor Small Cap Value Fund | 681 | 329 | (222) | (18) | 40 | 63 | 2 | |||||||
Harbor Strategic Growth Fund | 394 | 111 | (101) | 56 | 3 | 10 | 1 | |||||||
Harbor Diversified International All Cap Fund | 1,182 | 383 | (262) | 85 | 11 | 34 | 14 | |||||||
Harbor Global Leaders Fund | 482 | 110 | (133) | 68 | 33 | 11 | — | |||||||
Harbor International Fund | 1,178 | 819 | (255) | (180) | (158) | 447 | 18 | |||||||
Harbor International Growth Fund | 1,188 | 268 | (260) | 174 | 45 | — | 9 | |||||||
Harbor Bond Fund | 1,761 | 645 | (1,000) | 133 | (27) | — | 51 | |||||||
Harbor Core Bond Fund | — | 904 | (193) | 39 | 6 | — | 15 | |||||||
Harbor High-Yield Bond Fund | 755 | 425 | (243) | 28 | (9) | — | 51 | |||||||
Harbor High-Yield Opportunities Fund | 499 | 277 | (159) | 22 | (6) | — | 32 | |||||||
Total | $12,410 | $5,970 | $(4,015) | $506 | $99 | $934 | $226 |
a | Rounds to less than $1,000 |
The accompanying notes are an integral part of the Financial Statements.
19
Harbor Target Retirement 2050 Fund
Fund Summary —October 31, 2019 (Unaudited)
Fund Summary —October 31, 2019 (Unaudited)
Asset Allocation(% of investments)
FUND PERFORMANCE
The graph compares a $10,000 investment in the Institutional Class shares of the Fund with the performance of the broad based market indices. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
CHANGE IN A $10,000 INVESTMENT
For the period 11/01/2009 through 10/31/2019
TOTAL RETURNS For the periods ended 10/31/2019 | 1 Year | Annualized | Inception Date | ||||||||
5 Years | 10 Years | ||||||||||
Harbor Target Retirement 2050 Fund | |||||||||||
Institutional Class | 13.92% | 7.14% | 9.62% | 01/02/2009 | |||||||
Comparative Indices | |||||||||||
Bloomberg Barclays U.S. Aggregate Bond | 11.51% | 3.24% | 3.73% | — | |||||||
MSCI EAFE (ND) | 11.04 | 4.31 | 5.41 | — | |||||||
Russell 3000® | 13.49 | 10.31 | 13.62 | — | |||||||
Composite Index 2050 | 11.60 | 6.74 | 9.52 | — |
As stated in the Fund’s prospectus dated March 1, 2019, the expense ratio was 0.78%. The Adviser has contractually agreed to limit the Fund’s operating expenses to: (i) the amount of the acquired funds’ fees and expenses; (ii) compensation of the Independent Trustees; and (iii) certain other expenses such as extraordinary items. The expense ratio in the prospectus may differ from the actual expense ratio for the period disclosed within this report. The expense ratio shown in the prospectus is based on the prior fiscal year, adjusted to reflect changes, if any, in contractual arrangements that occurred prior to the date of the prospectus (or supplement thereto, if applicable).
Performance data shown represents past performance and is no guarantee of future results. Past performance is net of management fees and expenses and reflects reinvested dividends and distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or upon the redemption of Fund shares. Past performance reflects the beneficial effect of any expense waivers or reimbursements, without which returns would have been lower. Investment returns and principal value will fluctuate so that Fund shares, when redeemed, may be worth more or less than their original cost. Returns for periods less than one year are not annualized. Current performance may be higher or lower and is available through the most recent month end atharborfunds.com or by calling 800-422-1050. See the Benchmark Descriptions at the end of this report for a description of the Composite Index.
20
Harbor Target Retirement 2050 Fund
Portfolio of Investments—October 31, 2019
Portfolio of Investments—October 31, 2019
Value and Cost in Thousands
EQUITY FUNDS—84.2% | |||
Shares | Value | ||
23,870 | Harbor Capital Appreciation Fund | $1,809 | |
195,089 | Harbor Large Cap Value Fund | 3,186 | |
132,613 | Harbor Mid Cap Growth Fund | 1,443 | |
101,203 | Harbor Mid Cap Value Fund | 2,107 | |
99,452 | Harbor Small Cap Growth Fund | 1,306 | |
46,919 | Harbor Small Cap Value Fund | 1,573 | |
40,572 | Harbor Strategic Growth Fund | 904 | |
243,932 | Harbor Diversified International All Cap Fund | 2,724 | |
35,840 | Harbor Global Leaders Fund | 1,102 | |
69,721 | Harbor International Fund | 2,728 | |
169,732 | Harbor International Growth Fund | 2,738 | |
TOTAL EQUITY FUNDS | |||
(Cost $19,817) | 21,620 | ||
FIXED INCOME FUNDS—15.8% | |||
| Shares | Value | |
125,682 | Harbor Bond Fund | $1,497 | |
70,314 | Harbor Core Bond Fund | 748 | |
186,985 | Harbor High-Yield Opportunities Fund | 1,827 | |
TOTAL FIXED INCOME FUNDS | |||
(Cost $3,961) | 4,072 | ||
TOTAL INVESTMENTS—100.0% | |||
(Cost $23,778) | 25,692 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—0.0% | —a | ||
TOTAL NET ASSETS—100.0% | $25,692 |
AFFILIATED TRANSACTIONS
The Underlying Funds are considered to be affiliated with the Fund. The following table shows investment transactions and earnings from investments in the affiliated Funds during the period November 1, 2018 through October 31, 2019.
Underlying Funds | Beginning Balance as of 11/01/2018 (000s) | Purchases of Affiliated Funds (000s) | Sales of Affiliated Funds (000s) | Change in Net Unrealized Gain/(Loss) from Affiliated Funds (000s) | Net Realized Gain/(Loss) | Investment Income from Affiliated Funds (000s) | ||||||||
Sale of Affiliated Funds (000s) | Distributions Received from Affiliated Funds (000s) | |||||||||||||
Harbor Capital Appreciation Fund | $1,703 | $438 | $(406) | $(11) | $85 | $152 | $3 | |||||||
Harbor Large Cap Value Fund | 2,973 | 407 | (607) | 177 | 236 | 47 | 31 | |||||||
Harbor Mid Cap Growth Fund | 1,341 | 517 | (478) | — | 63 | 214 | — | |||||||
Harbor Mid Cap Value Fund | 1,944 | 558 | (378) | (120) | 103 | 105 | 32 | |||||||
Harbor Small Cap Growth Fund | 1,173 | 487 | (318) | (3) | (33) | 233 | — | |||||||
Harbor Small Cap Value Fund | 1,435 | 448 | (350) | (35) | 75 | 125 | 5 | |||||||
Harbor Strategic Growth Fund | 845 | 130 | (188) | 109 | 8 | 20 | 3 | |||||||
Harbor Diversified International All Cap Fund | 2,524 | 496 | (482) | 174 | 12 | 69 | 30 | |||||||
Harbor Global Leaders Fund | 1,044 | 123 | (269) | 150 | 54 | 23 | — | |||||||
Harbor International Fund | 2,509 | 1,400 | (487) | (345) | (349) | 905 | 36 | |||||||
Harbor International Growth Fund | 2,529 | 271 | (494) | 370 | 62 | — | 18 | |||||||
Harbor Bond Fund | 1,860 | 572 | (1,045) | 131 | (21) | — | 51 | |||||||
Harbor Core Bond Fund | — | 851 | (149) | 39 | 7 | — | 15 | |||||||
Harbor High-Yield Opportunities Fund | 1,511 | 718 | (446) | 63 | (19) | — | 93 | |||||||
Total | $23,391 | $7,416 | $(6,097) | $699 | $283 | $1,893 | $317 |
a | Rounds to less than $1,000 |
The accompanying notes are an integral part of the Financial Statements.
21
Harbor Target Retirement 2055 Fund
Fund Summary —October 31, 2019 (Unaudited)
Fund Summary —October 31, 2019 (Unaudited)
Asset Allocation(% of investments)
FUND PERFORMANCE
The graph compares a $10,000 investment in the Institutional Class shares of the Fund with the performance of the broad based market indices. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
CHANGE IN A $10,000 INVESTMENT
For the period 11/01/2014 through 10/31/2019
TOTAL RETURNS For the periods ended 10/31/2019 | 1 Year | Annualized | Inception Date | ||||||||
5 Years | Life of Fund | ||||||||||
Harbor Target Retirement 2055 Fund | |||||||||||
Institutional Class | 14.24% | 7.38% | 7.38% | 11/01/2014 | |||||||
Comparative Indices | |||||||||||
Bloomberg Barclays U.S. Aggregate Bond | 11.51% | 3.24% | 3.24% | — | |||||||
MSCI EAFE (ND) | 11.04 | 4.31 | 4.31 | — | |||||||
Russell 3000® | 13.49 | 10.31 | 10.31 | — | |||||||
Composite Index 2055 | 11.75 | 6.89 | 6.89 | — |
As stated in the Fund’s prospectus dated March 1, 2019, the expense ratio was 0.79%. The Adviser has contractually agreed to limit the Fund’s operating expenses to: (i) the amount of the acquired funds’ fees and expenses; (ii) compensation of the Independent Trustees; and (iii) certain other expenses such as extraordinary items. The expense ratio in the prospectus may differ from the actual expense ratio for the period disclosed within this report. The expense ratio shown in the prospectus is based on the prior fiscal year, adjusted to reflect changes, if any, in contractual arrangements that occurred prior to the date of the prospectus (or supplement thereto, if applicable).
Performance data shown represents past performance and is no guarantee of future results. Past performance is net of management fees and expenses and reflects reinvested dividends and distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or upon the redemption of Fund shares. Past performance reflects the beneficial effect of any expense waivers or reimbursements, without which returns would have been lower. Investment returns and principal value will fluctuate so that Fund shares, when redeemed, may be worth more or less than their original cost. Returns for periods less than one year are not annualized. Current performance may be higher or lower and is available through the most recent month end atharborfunds.com or by calling 800-422-1050. See the Benchmark Descriptions at the end of this report for a description of the Composite Index.
22
Harbor Target Retirement 2055 Fund
Portfolio of Investments—October 31, 2019
Portfolio of Investments—October 31, 2019
Value and Cost in Thousands
EQUITY FUNDS—93.0% | |||
Shares | Value | ||
6,376 | Harbor Capital Appreciation Fund | $483 | |
52,119 | Harbor Large Cap Value Fund | 851 | |
35,139 | Harbor Mid Cap Growth Fund | 382 | |
26,761 | Harbor Mid Cap Value Fund | 557 | |
26,111 | Harbor Small Cap Growth Fund | 343 | |
12,383 | Harbor Small Cap Value Fund | 415 | |
10,864 | Harbor Strategic Growth Fund | 242 | |
64,795 | Harbor Diversified International All Cap Fund | 724 | |
9,712 | Harbor Global Leaders Fund | 299 | |
18,506 | Harbor International Fund | 724 | |
45,225 | Harbor International Growth Fund | 730 | |
TOTAL EQUITY FUNDS | |||
(Cost $5,621) | 5,750 | ||
FIXED INCOME FUNDS—7.0% | |||
| Shares | Value | |
20,087 | Harbor Bond Fund | $239 | |
19,883 | Harbor High-Yield Opportunities Fund | 194 | |
TOTAL FIXED INCOME FUNDS | |||
(Cost $421) | 433 | ||
TOTAL INVESTMENTS—100.0% | |||
(Cost $6,042) | 6,183 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—0.0% | —a | ||
TOTAL NET ASSETS—100.0% | $6,183 |
AFFILIATED TRANSACTIONS
The Underlying Funds are considered to be affiliated with the Fund. The following table shows investment transactions and earnings from investments in the affiliated Funds during the period November 1, 2018 through October 31, 2019.
Underlying Funds | Beginning Balance as of 11/01/2018 (000s) | Purchases of Affiliated Funds (000s) | Sales of Affiliated Funds (000s) | Change in Net Unrealized Gain/(Loss) from Affiliated Funds (000s) | Net Realized Gain/(Loss) | Investment Income from Affiliated Funds (000s) | ||||||||
Sale of Affiliated Funds (000s) | Distributions Received from Affiliated Funds (000s) | |||||||||||||
Harbor Capital Appreciation Fund | $296 | $218 | $(53) | $17 | $5 | $28 | $1 | |||||||
Harbor Large Cap Value Fund | 518 | 315 | (77) | 80 | 15 | 9 | 7 | |||||||
Harbor Mid Cap Growth Fund | 233 | 182 | (48) | 9 | 6 | 40 | — | |||||||
Harbor Mid Cap Value Fund | 338 | 279 | (62) | 4 | (2) | 20 | 6 | |||||||
Harbor Small Cap Growth Fund | 209 | 164 | (27) | (2) | (1) | 44 | — | |||||||
Harbor Small Cap Value Fund | 252 | 197 | (47) | 8 | 5 | 24 | 1 | |||||||
Harbor Strategic Growth Fund | 147 | 93 | (24) | 25 | 1 | 4 | — | |||||||
Harbor Diversified International All Cap Fund | 438 | 307 | (65) | 44 | — | 13 | 5 | |||||||
Harbor Global Leaders Fund | 182 | 103 | (31) | 37 | 8 | 4 | — | |||||||
Harbor International Fund | 439 | 471 | (66) | (81) | (39) | 169 | 7 | |||||||
Harbor International Growth Fund | 442 | 258 | (67) | 90 | 7 | — | 4 | |||||||
Harbor Bond Fund | 145 | 147 | (66) | 14 | (1) | — | 6 | |||||||
Harbor High-Yield Opportunities Fund | 117 | 113 | (40) | 6 | (2) | — | 8 | |||||||
Total | $3,756 | $2,847 | $(673) | $251 | $2 | $355 | $45 |
a | Rounds to less than $1,000 |
The accompanying notes are an integral part of the Financial Statements.
23
Harbor Target Retirement Funds
StatementS of Assets and Liabilities—October 31, 2019
StatementS of Assets and Liabilities—October 31, 2019
(All amounts in thousands, except per share amounts)
Harbor Target Retirement Income Fund | Harbor Target Retirement 2020 Fund | Harbor Target Retirement 2025 Fund | Harbor Target Retirement 2030 Fund | Harbor Target Retirement 2035 Fund | Harbor Target Retirement 2040 Fund | Harbor Target Retirement 2045 Fund | Harbor Target Retirement 2050 Fund | Harbor Target Retirement 2055 Fund | ||||||||||
ASSETS | ||||||||||||||||||
Investments, at identified cost | $17,016 | $23,946 | $19,484 | $29,608 | $19,016 | $26,531 | $14,369 | $23,778 | $6,042 | |||||||||
Investments in affiliated funds, at value | $17,441 | $24,743 | $20,092 | $30,878 | $19,944 | $28,236 | $14,970 | $25,692 | $6,183 | |||||||||
Receivables for: | ||||||||||||||||||
Investments in affiliated funds sold | — | — | — | 6 | — | — | — | 24 | — | |||||||||
Capital shares sold | 160 | 15 | — | — | — | — | — | — | — | |||||||||
Distributions from affiliated funds | 2 | 2 | — | — | — | — | — | — | — | |||||||||
Total Assets | 17,603 | 24,760 | 20,092 | 30,884 | 19,944 | 28,236 | 14,970 | 25,716 | 6,183 | |||||||||
LIABILITIES | ||||||||||||||||||
Payables for: | ||||||||||||||||||
Investments in affiliated funds purchased | 162 | 17 | — | — | — | — | — | — | — | |||||||||
Capital shares reacquired | — | — | — | 6 | — | — | — | 24 | — | |||||||||
Total Liabilities | 162 | 17 | — | 6 | — | — | — | 24 | — | |||||||||
NET ASSETS | $17,441 | $24,743 | $20,092 | $30,878 | $19,944 | $28,236 | $14,970 | $25,692 | $6,183 | |||||||||
Net Assets Consist of: | ||||||||||||||||||
Paid-in capital | $17,459 | $23,744 | $18,827 | $28,334 | $18,101 | $24,604 | $13,368 | $21,712 | $5,706 | |||||||||
Total distributable earnings/(loss) | (18) | 999 | 1,265 | 2,544 | 1,843 | 3,632 | 1,602 | 3,980 | 477 | |||||||||
$17,441 | $24,743 | $20,092 | $30,878 | $19,944 | $28,236 | $14,970 | $25,692 | $6,183 | ||||||||||
NET ASSET VALUE PER SHARE BY CLASS | ||||||||||||||||||
Institutional Class | ||||||||||||||||||
Net assets | $17,441 | $24,743 | $20,092 | $30,878 | $19,944 | $28,236 | $14,970 | $25,692 | $6,183 | |||||||||
Shares of beneficial interest1 | 1,888 | 2,494 | 1,592 | 3,352 | 1,362 | 3,087 | 968 | 2,527 | 518 | |||||||||
Net asset value per share2 | $9.24 | $9.92 | $12.62 | $9.21 | $14.64 | $9.15 | $15.46 | $10.17 | $11.94 |
1 | Par value $0.01 (unlimited authorizations) |
2 | Per share amounts can be recalculated to the amounts disclosed herein when total net assets and shares of beneficial interest are not rounded to thousands. |
The accompanying notes are an integral part of the Financial Statements.
24
Harbor Target Retirement Funds
StatementS of Operations—Year Ended October 31, 2019
StatementS of Operations—Year Ended October 31, 2019
(All amounts in thousands)
Harbor Target Retirement Income Fund | Harbor Target Retirement 2020 Fund | Harbor Target Retirement 2025 Fund | Harbor Target Retirement 2030 Fund | Harbor Target Retirement 2035 Fund | Harbor Target Retirement 2040 Fund | Harbor Target Retirement 2045 Fund | Harbor Target Retirement 2050 Fund | Harbor Target Retirement 2055 Fund | |
Investment Income | |||||||||
Dividends from affiliated funds | $376 | $677 | $489 | $722 | $367 | $474 | $226 | $317 | $45 |
Total Investment Income | 376 | 677 | 489 | 722 | 367 | 474 | 226 | 317 | 45 |
Net Investment Income/(Loss) | 376 | 677 | 489 | 722 | 367 | 474 | 226 | 317 | 45 |
Realized and Change in Net Unrealized Gain/(Loss) on Investment Transactions | |||||||||
Net realized gain/(loss) on: | |||||||||
Sale of affiliated funds | (130) | 55 | 41 | 130 | 114 | 396 | 99 | 283 | 2 |
Distributions received from affiliated funds | 238 | 812 | 709 | 1,338 | 900 | 1,633 | 934 | 1,893 | 355 |
Change in net unrealized appreciation/(depreciation) on: | |||||||||
Affiliated funds | 801 | 1,081 | 933 | 1,206 | 773 | 856 | 506 | 699 | 251 |
Net gain/(loss) on investment transactions | 909 | 1,948 | 1,683 | 2,674 | 1,787 | 2,885 | 1,539 | 2,875 | 608 |
Net Increase/(Decrease) in Net Assets Resulting from Operations | $1,285 | $2,625 | $2,172 | $3,396 | $2,154 | $3,359 | $1,765 | $3,192 | $653 |
The accompanying notes are an integral part of the Financial Statements.
25
Harbor Target Retirement Funds
Statements of Changes In Net Assets
Statements of Changes In Net Assets
(All amounts in thousands)
Harbor Target Retirement Income Fund | Harbor Target Retirement 2020 Fund | Harbor Target Retirement 2025 Fund | Harbor Target Retirement 2030 Fund | ||||||||
November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | ||||
INCREASE/(DECREASE) IN NET ASSETS | |||||||||||
Operations: | |||||||||||
Net investment income/(loss) | $376 | $417 | $677 | $780 | $489 | $588 | $722 | $770 | |||
Net realized gain/(loss) on sale of affiliated funds | (130) | 17 | 55 | 327 | 41 | 472 | 130 | 525 | |||
Realized gain distributions received from affiliated funds | 238 | 127 | 812 | 444 | 709 | 402 | 1,338 | 647 | |||
Change in net unrealized appreciation/(depreciation) on affiliated funds | 801 | (687) | 1,081 | (1,869) | 933 | (1,699) | 1,206 | (2,378) | |||
Net increase/(decrease) in assets resulting from operations | 1,285 | (126) | 2,625 | (318) | 2,172 | (237) | 3,396 | (436) | |||
Distributions to Shareholders | |||||||||||
Institutional Class | (618) | (512) | (1,480) | (775) | (1,339) | (585) | (1,951) | (844) | |||
Total distributions to shareholders | (618) | (512) | (1,480) | (775) | (1,339) | (585) | (1,951) | (844) | |||
Net Increase/(Decrease) Derived from Capital Share Transactions | 4,213 | (547) | (1,956) | (1,095) | 1,608 | (2,745) | 1,460 | 635 | |||
Net increase/(decrease) in net assets | 4,880 | (1,185) | (811) | (2,188) | 2,441 | (3,567) | 2,905 | (645) | |||
Net Assets | |||||||||||
Beginning of period | 12,561 | 13,746 | 25,554 | 27,742 | 17,651 | 21,218 | 27,973 | 28,618 | |||
End of period | $17,441 | $12,561 | $24,743 | $25,554 | $20,092 | $17,651 | $30,878 | $27,973 |
The accompanying notes are an integral part of the Financial Statements.
26
Harbor Target Retirement 2035 Fund | Harbor Target Retirement 2040 Fund | Harbor Target Retirement 2045 Fund | Harbor Target Retirement 2050 Fund | Harbor Target Retirement 2055 Fund | |||||||||
November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | ||||
$367 | $356 | $474 | $494 | $226 | $181 | $317 | $294 | $45 | $31 | ||||
114 | 276 | 396 | 779 | 99 | 313 | 283 | 752 | 2 | 161 | ||||
900 | 418 | 1,633 | 803 | 934 | 368 | 1,893 | 946 | 355 | 124 | ||||
773 | (1,357) | 856 | (2,502) | 506 | (1,180) | 699 | (2,530) | 251 | (459) | ||||
2,154 | (307) | 3,359 | (426) | 1,765 | (318) | 3,192 | (538) | 653 | (143) | ||||
(955) | (350) | (2,079) | (780) | (894) | (311) | (1,977) | (913) | (311) | (76) | ||||
(955) | (350) | (2,079) | (780) | (894) | (311) | (1,977) | (913) | (311) | (76) | ||||
3,621 | 776 | 2,906 | 316 | 1,689 | 3,176 | 1,086 | 2,021 | 2,085 | 1,247 | ||||
4,820 | 119 | 4,186 | (890) | 2,560 | 2,547 | 2,301 | 570 | 2,427 | 1,028 | ||||
15,124 | 15,005 | 24,050 | 24,940 | 12,410 | 9,863 | 23,391 | 22,821 | 3,756 | 2,728 | ||||
$19,944 | $15,124 | $28,236 | $24,050 | $14,970 | $12,410 | $25,692 | $23,391 | $6,183 | $3,756 |
27
Harbor Target Retirement Funds
Statements of Changes in Net Assets—Capital Stock Activity
Statements of Changes in Net Assets—Capital Stock Activity
(All amounts in thousands)
Harbor Target Retirement Income Fund | Harbor Target Retirement 2020 Fund | Harbor Target Retirement 2025 Fund | Harbor Target Retirement 2030 Fund | ||||||||
November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | ||||
AMOUNT ($) | |||||||||||
Institutional Class | |||||||||||
Net proceeds from sale of shares | $6,194 | $1,484 | $3,456 | $3,554 | $4,684 | $3,363 | $6,413 | $4,732 | |||
Reinvested distributions | 618 | 512 | 1,480 | 775 | 1,339 | 585 | 1,951 | 844 | |||
Cost of shares reacquired | (2,599) | (2,543) | (6,892) | (5,424) | (4,415) | (6,693) | (6,904) | (4,941) | |||
Net increase/(decrease) in net assets | $4,213 | $(547) | $(1,956) | $(1,095) | $1,608 | $(2,745) | $1,460 | $635 | |||
SHARES | |||||||||||
Institutional Class | |||||||||||
Shares sold | 683 | 164 | 365 | 361 | 389 | 265 | 739 | 515 | |||
Shares issued due to reinvestment of distributions | 72 | 56 | 169 | 80 | 122 | 47 | 244 | 93 | |||
Shares reacquired | (294) | (279) | (729) | (554) | (365) | (529) | (797) | (535) | |||
Net increase/(decrease) in shares outstanding | $461 | $(59) | $(195) | $(113) | $146 | $(217) | $186 | $73 |
The accompanying notes are an integral part of the Financial Statements.
28
Harbor Target Retirement 2035 Fund | Harbor Target Retirement 2040 Fund | Harbor Target Retirement 2045 Fund | Harbor Target Retirement 2050 Fund | Harbor Target Retirement 2055 Fund | |||||||||
November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | November 1, 2018 through October 31, 2019 | November 1, 2017 through October 31, 2018 | ||||
$5,670 | $3,194 | $5,000 | $4,380 | $3,935 | $4,685 | $3,823 | $4,395 | $2,489 | $2,096 | ||||
955 | 350 | 2,079 | 780 | 894 | 311 | 1,977 | 913 | 311 | 75 | ||||
(3,004) | (2,768) | (4,173) | (4,844) | (3,140) | (1,820) | (4,714) | (3,287) | (715) | (924) | ||||
$3,621 | $776 | $2,906 | $316 | $1,689 | $3,176 | $1,086 | $2,021 | $2,085 | $1,247 | ||||
411 | 220 | 580 | 468 | 270 | 301 | 396 | 418 | 221 | 171 | ||||
76 | 24 | 268 | 85 | 68 | 21 | 233 | 89 | 32 | 6 | ||||
(216) | (192) | (478) | (517) | (215) | (116) | (487) | (313) | (65) | (75) | ||||
$271 | $52 | $370 | $36 | $123 | $206 | $142 | $194 | $188 | $102 |
29
Harbor Target Retirement Funds Financial Highlights
Selected Data for a Share Outstanding for the Periods Presented
Selected Data for a Share Outstanding for the Periods Presented
HARBOR TARGET RETIREMENT INCOME FUND
Institutional Class | |||||
Year Ended October 31, | 2019 | 2018 | 2017 | 2016 | 2015 |
Net asset value beginning of period | $8.80 | $9.25 | $8.93 | $9.19 | $9.75 |
Income from Investment Operations | |||||
Net investment income/(loss)a | 0.25 | 0.28 | 0.22 | 0.25 | 0.34 |
Net realized and unrealized gains/(losses) on investments | 0.62 | (0.38) | 0.40 | 0.08 | (0.30) |
Total from investment operations | 0.87 | (0.10) | 0.62 | 0.33 | 0.04 |
Less Distributions | |||||
Dividends from net investment income | (0.27) | (0.29) | (0.27) | (0.29) | (0.35) |
Distributions from net realized capital gains | (0.16) | (0.06) | (0.03) | (0.30) | (0.25) |
Total distributions | (0.43) | (0.35) | (0.30) | (0.59) | (0.60) |
Net asset value end of period | 9.24 | 8.80 | 9.25 | 8.93 | 9.19 |
Net assets end of period (000s) | $17,441 | $12,561 | $13,746 | $13,805 | $15,124 |
Ratios and Supplemental Data (%) | |||||
Total return | 10.31% | (1.14)% | 7.17% | 3.91% | 0.46% |
Ratio of total expenses to average net assetsb | — | — | — | — | — |
Ratio of net investment income to average net assetsb | 2.85 | 3.13 | 2.46 | 2.87 | 3.57 |
Portfolio turnoverc | 67 | 28 | 16 | 26 | 24 |
HARBOR TARGET RETIREMENT 2020 FUND
Institutional Class | |||||
Year Ended October 31, | 2019 | 2018 | 2017 | 2016 | 2015 |
Net asset value beginning of period | $9.50 | $9.90 | $9.29 | $9.94 | $10.63 |
Income from Investment Operations | |||||
Net investment income/(loss)a | 0.25 | 0.28 | 0.23 | 0.26 | 0.32 |
Net realized and unrealized gains/(losses) on investments | 0.73 | (0.40) | 0.73 | 0.04 | (0.30) |
Total from investment operations | 0.98 | (0.12) | 0.96 | 0.30 | 0.02 |
Less Distributions | |||||
Dividends from net investment income | (0.28) | (0.28) | (0.24) | (0.32) | (0.34) |
Distributions from net realized capital gains | (0.28) | — | (0.11) | (0.63) | (0.37) |
Total distributions | (0.56) | (0.28) | (0.35) | (0.95) | (0.71) |
Net asset value end of period | 9.92 | 9.50 | 9.90 | 9.29 | 9.94 |
Net assets end of period (000s) | $24,743 | $25,554 | $27,742 | $25,419 | $27,290 |
Ratios and Supplemental Data (%) | |||||
Total return | 11.04% | (1.29)% | 10.77% | 3.56% | 0.30% |
Ratio of total expenses to average net assetsb | — | — | — | — | — |
Ratio of net investment income to average net assetsb | 2.69 | 2.89 | 2.44 | 2.83 | 3.19 |
Portfolio turnoverc | 64 | 31 | 29 | 33 | 28 |
See page 34 for notes to the Financial Highlights.
The accompanying notes are an integral part of the Financial Statements.
30
HARBOR TARGET RETIREMENT 2025 FUND
Institutional Class | |||||
Year Ended October 31, | 2019 | 2018 | 2017 | 2016 | 2015 |
Net asset value beginning of period | $12.21 | $12.76 | $11.78 | $12.32 | $13.48 |
Income from Investment Operations | |||||
Net investment income/(loss)a | 0.31 | 0.37 | 0.29 | 0.31 | 0.37 |
Net realized and unrealized gains/(losses) on investments | 1.03 | (0.57) | 1.12 | 0.05 | (0.36) |
Total from investment operations | 1.34 | (0.20) | 1.41 | 0.36 | 0.01 |
Less Distributions | |||||
Dividends from net investment income | (0.38) | (0.35) | (0.28) | (0.37) | (0.41) |
Distributions from net realized capital gains | (0.55) | — | (0.15) | (0.53) | (0.76) |
Total distributions | (0.93) | (0.35) | (0.43) | (0.90) | (1.17) |
Net asset value end of period | 12.62 | 12.21 | 12.76 | 11.78 | 12.32 |
Net assets end of period (000s) | $20,092 | $17,651 | $21,218 | $14,293 | $11,487 |
Ratios and Supplemental Data (%) | |||||
Total return | 12.09% | (1.63)% | 12.38% | 3.39% | 0.11% |
Ratio of total expenses to average net assetsb | — | — | — | — | — |
Ratio of net investment income to average net assetsb | 2.57 | 2.92 | 2.42 | 2.69 | 2.91 |
Portfolio turnoverc | 61 | 36 | 24 | 25 | 25 |
HARBOR TARGET RETIREMENT 2030 FUND
Institutional Class | |||||
Year Ended October 31, | 2019 | 2018 | 2017 | 2016 | 2015 |
Net asset value beginning of period | $8.84 | $9.25 | $8.60 | $9.19 | $10.04 |
Income from Investment Operations | |||||
Net investment income/(loss)a | 0.21 | 0.24 | 0.20 | 0.21 | 0.24 |
Net realized and unrealized gains/(losses) on investments | 0.77 | (0.38) | 0.96 | 0.01 | (0.23) |
Total from investment operations | 0.98 | (0.14) | 1.16 | 0.22 | 0.01 |
Less Distributions | |||||
Dividends from net investment income | (0.25) | (0.25) | (0.21) | (0.26) | (0.28) |
Distributions from net realized capital gains | (0.36) | (0.02) | (0.30) | (0.55) | (0.58) |
Total distributions | (0.61) | (0.27) | (0.51) | (0.81) | (0.86) |
Net asset value end of period | 9.21 | 8.84 | 9.25 | 8.60 | 9.19 |
Net assets end of period (000s) | $30,878 | $27,973 | $28,618 | $24,634 | $25,084 |
Ratios and Supplemental Data (%) | |||||
Total return | 12.21% | (1.57)% | 14.18% | 2.96% | 0.13% |
Ratio of total expenses to average net assetsb | — | — | — | — | — |
Ratio of net investment income to average net assetsb | 2.41 | 2.62 | 2.30 | 2.54 | 2.55 |
Portfolio turnoverc | 46 | 31 | 29 | 31 | 24 |
The accompanying notes are an integral part of the Financial Statements.
31
Harbor Target Retirement Funds Financial Highlights—Continued
Selected Data for a Share Outstanding for the Periods Presented
Selected Data for a Share Outstanding for the Periods Presented
HARBOR TARGET RETIREMENT 2035 FUND
Institutional Class | |||||
Year Ended October 31, | 2019 | 2018 | 2017 | 2016 | 2015 |
Net asset value beginning of period | $13.86 | $14.44 | $12.93 | $13.56 | $14.92 |
Income from Investment Operations | |||||
Net investment income/(loss)a | 0.28 | 0.33 | 0.28 | 0.27 | 0.30 |
Net realized and unrealized gains/(losses) on investments | 1.36 | (0.58) | 1.75 | 0.04 | (0.26) |
Total from investment operations | 1.64 | (0.25) | 2.03 | 0.31 | 0.04 |
Less Distributions | |||||
Dividends from net investment income | (0.35) | (0.33) | (0.28) | (0.35) | (0.36) |
Distributions from net realized capital gains | (0.51) | — | (0.24) | (0.59) | (1.04) |
Total distributions | (0.86) | (0.33) | (0.52) | (0.94) | (1.40) |
Net asset value end of period | 14.64 | 13.86 | 14.44 | 12.93 | 13.56 |
Net assets end of period (000s) | $19,944 | $15,124 | $15,005 | $11,496 | $9,007 |
Ratios and Supplemental Data (%) | |||||
Total return | 12.83% | (1.79)% | 16.31% | 2.70% | 0.34% |
Ratio of total expenses to average net assetsb | — | — | — | — | — |
Ratio of net investment income to average net assetsb | 2.05 | 2.26 | 2.06 | 2.17 | 2.17 |
Portfolio turnoverc | 35 | 29 | 26 | 26 | 22 |
HARBOR TARGET RETIREMENT 2040 FUND
Institutional Class | |||||
Year Ended October 31, | 2019 | 2018 | 2017 | 2016 | 2015 |
Net asset value beginning of period | $8.85 | $9.30 | $8.42 | $9.05 | $9.84 |
Income from Investment Operations | |||||
Net investment income/(loss)a | 0.15 | 0.18 | 0.15 | 0.17 | 0.18 |
Net realized and unrealized gains/(losses) on investments | 0.90 | (0.34) | 1.30 | (0.01) | (0.10) |
Total from investment operations | 1.05 | (0.16) | 1.45 | 0.16 | 0.08 |
Less Distributions | |||||
Dividends from net investment income | (0.20) | (0.19) | (0.17) | (0.20) | (0.22) |
Distributions from net realized capital gains | (0.55) | (0.10) | (0.40) | (0.59) | (0.65) |
Total distributions | (0.75) | (0.29) | (0.57) | (0.79) | (0.87) |
Net asset value end of period | 9.15 | 8.85 | 9.30 | 8.42 | 9.05 |
Net assets end of period (000s) | $28,236 | $24,050 | $24,940 | $19,448 | $19,805 |
Ratios and Supplemental Data (%) | |||||
Total return | 13.43% | (1.84)% | 18.26% | 2.36% | 0.94% |
Ratio of total expenses to average net assetsb | — | — | — | — | — |
Ratio of net investment income to average net assetsb | 1.77 | 1.90 | 1.78 | 2.03 | 1.96 |
Portfolio turnoverc | 28 | 30 | 21 | 30 | 18 |
See page 34 for notes to the Financial Highlights.
The accompanying notes are an integral part of the Financial Statements.
32
HARBOR TARGET RETIREMENT 2045 FUND
Institutional Class | |||||
Year Ended October 31, | 2019 | 2018 | 2017 | 2016 | 2015 |
Net asset value beginning of period | $14.69 | $15.43 | $13.51 | $14.25 | $15.17 |
Income from Investment Operations | |||||
Net investment income/(loss)a | 0.24 | 0.23 | 0.21 | 0.21 | 0.23 |
Net realized and unrealized gains/(losses) on investments | 1.56 | (0.49) | 2.42 | 0.01 | (0.06) |
Total from investment operations | 1.80 | (0.26) | 2.63 | 0.22 | 0.17 |
Less Distributions | |||||
Dividends from net investment income | (0.29) | (0.28) | (0.22) | (0.27) | (0.29) |
Distributions from net realized capital gains | (0.74) | (0.20) | (0.49) | (0.69) | (0.80) |
Total distributions | (1.03) | (0.48) | (0.71) | (0.96) | (1.09) |
Net asset value end of period | 15.46 | 14.69 | 15.43 | 13.51 | 14.25 |
Net assets end of period (000s) | $14,970 | $12,410 | $9,863 | $7,211 | $5,523 |
Ratios and Supplemental Data (%) | |||||
Total return | 13.48% | (1.83)% | 20.37% | 1.91% | 1.23% |
Ratio of total expenses to average net assetsb | — | — | — | — | — |
Ratio of net investment income to average net assetsb | 1.62 | 1.49 | 1.50 | 1.58 | 1.56 |
Portfolio turnoverc | 29 | 22 | 32 | 24 | 15 |
HARBOR TARGET RETIREMENT 2050 FUND
Institutional Class | |||||
Year Ended October 31, | 2019 | 2018 | 2017 | 2016 | 2015 |
Net asset value beginning of period | $9.81 | $10.42 | $9.23 | $10.39 | $11.40 |
Income from Investment Operations | |||||
Net investment income/(loss)a | 0.12 | 0.13 | 0.12 | 0.12 | 0.14 |
Net realized and unrealized gains/(losses) on investments | 1.08 | (0.33) | 1.81 | (0.03) | 0.05 |
Total from investment operations | 1.20 | (0.20) | 1.93 | 0.09 | 0.19 |
Less Distributions | |||||
Dividends from net investment income | (0.17) | (0.16) | (0.13) | (0.17) | (0.19) |
Distributions from net realized capital gains | (0.67) | (0.25) | (0.61) | (1.08) | (1.01) |
Total distributions | (0.84) | (0.41) | (0.74) | (1.25) | (1.20) |
Net asset value end of period | 10.17 | 9.81 | 10.42 | 9.23 | 10.39 |
Net assets end of period (000s) | $25,692 | $23,391 | $22,821 | $18,728 | $19,221 |
Ratios and Supplemental Data (%) | |||||
Total return | 13.92% | (2.06)% | 22.40% | 1.51% | 1.83% |
Ratio of total expenses to average net assetsb | — | — | — | — | — |
Ratio of net investment income to average net assetsb | 1.28 | 1.20 | 1.27 | 1.34 | 1.35 |
Portfolio turnoverc | 25 | 22 | 33 | 24 | 24 |
The accompanying notes are an integral part of the Financial Statements.
33
Harbor Target Retirement Funds Financial Highlights—Continued
Selected Data for a Share Outstanding for the Periods Presented
Selected Data for a Share Outstanding for the Periods Presented
HARBOR TARGET RETIREMENT 2055 FUND
Institutional Class | |||||
Year Ended October 31, | 2019 | 2018 | 2017 | 2016 | 2015 |
Net asset value beginning of period | $11.39 | $11.97 | $10.02 | $10.08 | $10.00 |
Income from Investment Operations | |||||
Net investment income/(loss)a | 0.10 | 0.11 | 0.10 | 0.11 | 0.05 |
Net realized and unrealized gains/(losses) on investments | 1.34 | (0.37) | 2.17 | 0.01 | 0.18 |
Total from investment operations | 1.44 | (0.26) | 2.27 | 0.12 | 0.23 |
Less Distributions | |||||
Dividends from net investment income | (0.16) | (0.16) | (0.12) | (0.14) | (0.15) |
Distributions from net realized capital gains | (0.73) | (0.16) | (0.20) | (0.04) | — |
Total distributions | (0.89) | (0.32) | (0.32) | (0.18) | (0.15) |
Net asset value end of period | 11.94 | 11.39 | 11.97 | 10.02 | 10.08 |
Net assets end of period (000s) | $6,183 | $3,756 | $2,728 | $1,240 | $762 |
Ratios and Supplemental Data (%) | |||||
Total return | 14.24% | (2.31)% | 23.34% | 1.38% | 2.28% |
Ratio of total expenses to average net assetsb | — | — | — | — | — |
Ratio of net investment income to average net assetsb | 0.90 | 0.91 | 0.95 | 1.13 | 0.52 |
Portfolio turnoverc | 14 | 29 | 32 | 33 | 15 |
a | Amounts are based on average daily shares outstanding during the period. |
b | Ratios of income and expenses to average net assets represents the expenses paid by the Fund but does not include the acquired fund fees and expenses from underlying funds. |
c | Amounts do not include the activity of the underlying funds. |
The accompanying notes are an integral part of the Financial Statements.
34
Harbor Target Retirement Funds
Notes to Financial Statements—October 31, 2019
Notes to Financial Statements—October 31, 2019
Note 1—Organizational Matters
Harbor Funds (the “Trust”) is registered under the Investment Company Act of 1940, as amended (the “Investment Company Act”), as an open-end management investment company. As of October 31, 2019, the Trust consists of 32 separate portfolios. The portfolios covered by this report are: Harbor Target Retirement Income Fund, Harbor Target Retirement 2020 Fund, Harbor Target Retirement 2025 Fund, Harbor Target Retirement 2030 Fund, Harbor Target Retirement 2035 Fund, Harbor Target Retirement 2040 Fund, Harbor Target Retirement 2045 Fund, Harbor Target Retirement 2050 Fund and Harbor Target Retirement 2055 Fund (individually referred to as a “Fund” and collectively referred to as the “Funds” or “Target Retirement Funds”). The Funds invest in a combination of other funds of the Trust (the “Underlying Funds”). Harbor Capital Advisors, Inc. (the “Adviser” or “Harbor Capital”) is the investment adviser for the Funds and the Underlying Funds. The Underlying Funds are managed by subadvisers, none of which is affiliated with the Adviser.
The Funds currently offer one class of shares, designated as Institutional Class.
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. Each Fund follows the investment company reporting requirements under U.S. Generally Accepted Accounting Principles (“U.S. GAAP”), which includes the accounting and reporting guidelines under Accounting Standards Codification (“ASC”) Topic 946,Financial Services-Investment Companies. The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results may differ from those estimates.
Security Valuation
The holdings of each Target Retirement Fund consist entirely of Institutional Class shares of the Underlying Funds, which are valued at their respective net asset values.
Fair Value Measurements and Disclosures
Various inputs may be used to determine the value of each Fund’s investments, which are summarized in three broad categories defined as Level 1, Level 2, and Level 3. The inputs or methodologies used for valuing securities are not necessarily indicative of the risk associated with investing in those securities. The assignment of an investment to Levels 1, 2, or 3 is based on the lowest level of significant inputs used to determine its fair value.
Level 1– | Quoted prices in active markets for identical securities. |
Level 2– | Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). |
Level 3– | Significant unobservable inputs are used in situations where quoted prices or other observable inputs are not available or are deemed unreliable. Significant unobservable inputs may include each Fund’s own assumptions. |
Each Fund used observable inputs in its valuation methodologies whenever they were available and deemed reliable. At October 31, 2019, all investments held by each Fund (as disclosed in the Portfolio of Investments) were classified as Level 1. There were no Level 3 investments at October 31, 2019 or 2018.
Description of the Underlying Funds
In pursuing its investment objectives and strategies, each of the Underlying Funds is permitted to engage in a wide range of investment practices. Further information about the Underlying Funds is contained in the Target Retirement Funds’ prospectus and statement of additional information, as well as the prospectus of each of the Underlying Funds. The accounting policies of each of the Underlying Funds are disclosed in each Underlying Fund’s respective shareholder report. Because each Fund invests in the Underlying Funds, shareholders of each Fund will be affected by the investment practices of the Underlying Funds in direct proportion to the amount of assets each Fund allocates to the Underlying Funds.
35
Harbor Target Retirement Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 2—Significant Accounting Policies—Continued
Investment Transactions and Income
Securities transactions are accounted for on the trade date (the date the order to buy or sell is executed). Income and capital gain distributions received from the Underlying Funds are recorded on the ex-dividend date. Gains and losses on securities sold are determined on the basis of identified cost.
Distribution to Shareholders
Distributions on Fund shares are recorded on the ex-dividend date.
Expenses
Expenses incurred by the Trust are charged directly to the Fund that incurred such expense whenever possible. With respect to expenses incurred by any two or more Harbor Funds where amounts cannot be identified on a fund by fund basis, such expenses are generally allocated in proportion to the average net assets or the number of shareholders of each Fund.
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 taxes on income and capital gains.
Management has analyzed each Fund’s tax positions for all open tax years (in particular, U.S. federal income tax returns for the tax years ended October 31, 2016–2018), including all positions expected to be taken upon filing the 2019 tax return, in all material jurisdictions where the Funds operate, and has concluded that no provision for income tax is required in any Fund’s financial statements. The Funds will recognize interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statements of Operations.
Related Parties
The Funds do not invest in the Underlying Funds for the purpose of exercising management or control; however, investments by the Funds may represent a significant portion of an Underlying Fund’s net assets. At October 31, 2019, each Fund held less than 25% of the outstanding shares of any Underlying Fund. In aggregate, the Funds held 29% of Harbor Core Bond Fund.
Note 3—FEES AND OTHER Transactions with Affiliates
Investment Adviser
Harbor Capital is a wholly-owned subsidiary of ORIX Corporation (“ORIX”). Harbor Capital is the Funds’ investment adviser and is also responsible for administrative and other services. The Funds do not pay any fees for the services of Harbor Capital.
Each Fund has a separate advisory agreement with Harbor Capital. Pursuant to this agreement, Harbor Capital pays all expenses of each Fund, excluding: (i) the amount of acquired funds’ fees and expenses; (ii) compensation of the Independent Trustees; and (iii) certain other expenses such as extraordinary items.
Distributor
Harbor Funds Distributors, Inc. (the “Distributor”), a wholly-owned subsidiary of Harbor Capital, is the distributor for Harbor Funds’ shares. The Funds do not pay any fees for the services of the Distributor.
36
Harbor Target Retirement Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 3—FEES AND OTHER Transactions with Affiliates—Continued
Transfer Agent
Harbor Services Group, Inc. (“Harbor Services Group”), a wholly-owned subsidiary of Harbor Capital, is the transfer and shareholder servicing agent for the Funds. The Funds do not pay any fees for the services of Harbor Services Group.
Shareholders
On October 31, 2019, Harbor Capital, and its wholly owned subsidiaries, collectively held the following shares of beneficial interest in each of the following Funds:
Number of Shares Owned by Harbor Capital and Subsidiaries | Percentage of Outstanding Shares | ||
Institutional Class | |||
Harbor Target Retirement 2025 Fund | 2,758 | 0.2% | |
Harbor Target Retirement 2030 Fund | 142,516 | 4.3 | |
Harbor Target Retirement 2035 Fund | 26,454 | 1.9 | |
Harbor Target Retirement 2040 Fund | 2,716 | 0.1 | |
Harbor Target Retirement 2045 Fund | 11,722 | 1.2 | |
Harbor Target Retirement 2050 Fund | 13,059 | 0.5 | |
Harbor Target Retirement 2055 Fund | 7,172 | 1.4 |
Independent Trustees
The Independent Trustees’ received no remuneration from the Target Retirement Funds for the year ended October 31, 2019.
Indemnification
Under the Trust’s organizational documents, its officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust. In addition, in the normal course of business the Trust enters into contracts that provide general indemnities to other parties. The Trust’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Trust that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote.
37
Harbor Target Retirement Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
NOTE 4—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 U.S. GAAP. Reclassifications, if any, are made to each Fund’s capital account to reflect income and net realized gains available for distribution (or available capital loss carryovers) under income tax rules and regulations. There were no reclassification amounts on the Statements of Assets and Liabilities between total distributable earnings/(loss) and paid-in capital for the year ended October 31, 2019.
The tax composition of each Fund’s distributions is as follows:
As of October 31, 2019 | As of October 31, 2018 | ||||||||||
Ordinary Income (000s) | Long-Term Capital Gains (000s) | Total (000s) | Ordinary Income (000s) | Long-Term Capital Gains (000s) | Total (000s) | ||||||
Harbor Target Retirement Income Fund | $394 | $224 | $618 | $430 | $82 | $512 | |||||
Harbor Target Retirement 2020 Fund | 762 | 718 | 1,480 | 775 | — | 775 | |||||
Harbor Target Retirement 2025 Fund | 572 | 767 | 1,339 | 585 | — | 585 | |||||
Harbor Target Retirement 2030 Fund | 812 | 1,139 | 1,951 | 806 | 38 | 844 | |||||
Harbor Target Retirement 2035 Fund | 398 | 557 | 955 | 350 | — | 350 | |||||
Harbor Target Retirement 2040 Fund | 556 | 1,523 | 2,079 | 528 | 252 | 780 | |||||
Harbor Target Retirement 2045 Fund | 250 | 644 | 894 | 198 | 113 | 311 | |||||
Harbor Target Retirement 2050 Fund | 391 | 1,586 | 1,977 | 376 | 537 | 913 | |||||
Harbor Target Retirement 2055 Fund | 59 | 252 | 311 | 42 | 34 | 76 |
As of October 31, 2019, the components of each Fund’s distributable earnings on a tax basis are as follows:
Undistributed Ordinary Income (000s) | Undistributed Long-Term Capital Gains (000s) | Unrealized Appreciation/ (Depreciation) (000s) | |||
Harbor Target Retirement Income Fund | $26 | $— | $143 | ||
Harbor Target Retirement 2020 Fund | 457 | 248 | 294 | ||
Harbor Target Retirement 2025 Fund | 348 | 728 | 189 | ||
Harbor Target Retirement 2030 Fund | 457 | 1,369 | 717 | ||
Harbor Target Retirement 2035 Fund | 233 | 1,035 | 575 | ||
Harbor Target Retirement 2040 Fund | 266 | 2,046 | 1,321 | ||
Harbor Target Retirement 2045 Fund | 117 | 1,146 | 339 | ||
Harbor Target Retirement 2050 Fund | 131 | 2,392 | 1,457 | ||
Harbor Target Retirement 2055 Fund | 14 | 386 | 77 |
At October 31, 2019, the Fund in the following table had capital loss carryforwards for federal tax purposes which will reduce the Fund’s taxable income arising from future net realized gains on investments to the extent permitted by the Internal Revenue Code. Use of the capital loss carryforwards will reduce the amount of the distribution to shareholders which would otherwise be necessary to relieve the Fund of any federal tax liability. The capital loss carryforwards do not expire.
Capital Loss Carryforward | |||||
Short-Term (000s) | Long- Term (000s) | Total (000s) | |||
Harbor Target Retirement Income Fund | $— | $186 | $186 |
38
Harbor Target Retirement Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
NOTE 4—TAX INFORMATION—Continued
The identified cost for federal income tax purposes of investments owned by each Fund and its respective gross unrealized appreciation and depreciation at October 31, 2019 are as follows:
Identified Cost (000s) | Gross Unrealized | Net Unrealized Appreciation/ (Depreciation) (000s) | |||||
Appreciation (000s) | (Depreciation) (000s) | ||||||
Harbor Target Retirement Income Fund* | $17,298 | $215 | $(72) | $143 | |||
Harbor Target Retirement 2020 Fund | 24,449 | 532 | (238) | 294 | |||
Harbor Target Retirement 2025 Fund | 19,903 | 436 | (247) | 189 | |||
Harbor Target Retirement 2030 Fund | 30,161 | 1,119 | (402) | 717 | |||
Harbor Target Retirement 2035 Fund | 19,369 | 870 | (295) | 575 | |||
Harbor Target Retirement 2040 Fund | 26,915 | 1,931 | (610) | 1,321 | |||
Harbor Target Retirement 2045 Fund | 14,631 | 649 | (310) | 339 | |||
Harbor Target Retirement 2050 Fund | 24,235 | 2,026 | (569) | 1,457 | |||
Harbor Target Retirement 2055 Fund | 6,106 | 229 | (152) | 77 |
* | Capital loss carryforwards are available, which may reduce taxable income from future net realized gain on investments. |
Note 5—Subsequent Events
Through the date the financial statements were issued, there were no subsequent events or transactions that would have materially impacted the financial statements or related disclosures as presented herein.
39
Harbor Target Retirement Funds
Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
Opinion on the Financial Statements
We have audited the accompanying statements of assets and liabilities of Harbor Target Retirement Income Fund, Harbor Target Retirement 2020 Fund, Harbor Target Retirement 2025 Fund, Harbor Target Retirement 2030 Fund, Harbor Target Retirement 2035 Fund, Harbor Target Retirement 2040 Fund, Harbor Target Retirement 2045 Fund, Harbor Target Retirement 2050 Fund and Harbor Target Retirement 2055 Fund (collectively referred to as the “Funds”), (nine of the funds constituting Harbor Funds (the “Trust”)), including the portfolios of investments, as of October 31, 2019, and the related statements of operations and changes in net assets, and the financial highlights for each of the periods indicated in the table below and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Funds (nine of the funds constituting Harbor Funds), at October 31, 2019, the results of their operations, changes in net assets and financial highlights for each of the periods indicated in the table below, in conformity with U.S. generally accepted accounting principles.
Individual fund constituting the Harbor Funds | Statement of operations | Statement of changes in net assets | Financial highlights |
Harbor Target Retirement Income Fund Harbor Target Retirement 2020 Fund Harbor Target Retirement 2025 Fund Harbor Target Retirement 2030 Fund Harbor Target Retirement 2035 Fund Harbor Target Retirement 2040 Fund Harbor Target Retirement 2045 Fund Harbor Target Retirement 2050 Fund | For the year ended October 31, 2019 | For each of the two years in the period ended October 31, 2019 | For each of the five years in the period ended October 31, 2019 |
Harbor Target Retirement 2055 Fund | For the year ended October 31, 2019 | For each of the two years in the period ended October 31, 2019 | For the four years in the period ended October 31, 2019 and the period from November 1, 2014 (inception) through October 31, 2015 |
Basis for Opinion
These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on each of the Funds’ financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust’s internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2019, by correspondence with the custodian and the shareholder servicing agent. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Harbor Funds investment companies since 2000.
Chicago, Illinois
December 23, 2019
December 23, 2019
40
Harbor Target Retirement Funds
Fees and Expenses Example (Unaudited)
Fees and Expenses Example (Unaudited)
Example
As a shareholder of a Fund, you incur two types of costs: (1) transaction costs, including redemption fees (if any) and (2) ongoing costs, including management fees, distribution and service (12b-1) fees (if any), and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in a Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The expense ratios reflected below do not include the acquired fund fees and expenses from Underlying Funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period May 1, 2019 through October 31, 2019.
Actual Expenses
The first line of the table below provides information about actual account values and actual expenses for each share class. You may use the information in the respective class line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line of the respective class under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table for each share class below provides information about hypothetical account values and hypothetical expenses based on the respective Fund/Class’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the respective Fund/Class’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in a Fund to other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as redemption fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Annualized Expense Ratios | Expenses Paid During Period* | Beginning Account Value May 1, 2019 | Ending Account Value October 31, 2019 | |||||
Harbor Target Retirement Income Fund | ||||||||
Institutional Class | 0.00% | |||||||
Actual | $0.00 | $1,000 | $1,040.64 | |||||
Hypothetical (5% return) | 0.00 | 1,000 | 1,025.21 | |||||
Harbor Target Retirement 2020 Fund | ||||||||
Institutional Class | 0.00% | |||||||
Actual | $0.00 | $1,000 | $1,038.74 | |||||
Hypothetical (5% return) | 0.00 | 1,000 | 1,025.21 | |||||
Harbor Target Retirement 2025 Fund | ||||||||
Institutional Class | 0.00% | |||||||
Actual | $0.00 | $1,000 | $1,037.83 | |||||
Hypothetical (5% return) | 0.00 | 1,000 | 1,025.21 | |||||
Harbor Target Retirement 2030 Fund | ||||||||
Institutional Class | 0.00% | |||||||
Actual | $0.00 | $1,000 | $1,036.00 | |||||
Hypothetical (5% return) | 0.00 | 1,000 | 1,025.21 | |||||
Harbor Target Retirement 2035 Fund | ||||||||
Institutional Class | 0.00% | |||||||
Actual | $0.00 | $1,000 | $1,033.17 | |||||
Hypothetical (5% return) | 0.00 | 1,000 | 1,025.21 |
41
Harbor Target Retirement Funds
Fees and Expenses Example—Continued
Fees and Expenses Example—Continued
Annualized Expense Ratios | Expenses Paid During Period* | Beginning Account Value May 1, 2019 | Ending Account Value October 31, 2019 | |||||
Harbor Target Retirement 2040 Fund | ||||||||
Institutional Class | 0.00% | |||||||
Actual | $0.00 | $1,000 | $1,032.73 | |||||
Hypothetical (5% return) | 0.00 | 1,000 | 1,025.21 | |||||
Harbor Target Retirement 2045 Fund | ||||||||
Institutional Class | 0.00% | |||||||
Actual | $0.00 | $1,000 | $1,029.98 | |||||
Hypothetical (5% return) | 0.00 | 1,000 | 1,025.21 | |||||
Harbor Target Retirement 2050 Fund | ||||||||
Institutional Class | 0.00% | |||||||
Actual | $0.00 | $1,000 | $1,027.27 | |||||
Hypothetical (5% return) | 0.00 | 1,000 | 1,025.21 | |||||
Harbor Target Retirement 2055 Fund | ||||||||
Institutional Class | 0.00% | |||||||
Actual | $0.00 | $1,000 | $1,024.89 | |||||
Hypothetical (5% return) | 0.00 | 1,000 | 1,025.21 |
* | Expenses are equal to the Fund’s annualized expense ratio, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
42
Harbor Target Retirement Funds
Additional Information (Unaudited)
Additional Information (Unaudited)
Additional Tax Information
Pursuant to Section 852 of the Internal Revenue Code, the Funds designate the following capital gain dividends for the year ended October 31, 2019:
Amount (000s) | |
Harbor Target Retirement Income Fund | $224 |
Harbor Target Retirement 2020 Fund | 718 |
Harbor Target Retirement 2025 Fund | 767 |
Harbor Target Retirement 2030 Fund | 1,139 |
Harbor Target Retirement 2035 Fund | 557 |
Harbor Target Retirement 2040 Fund | 1,523 |
Harbor Target Retirement 2045 Fund | 644 |
Harbor Target Retirement 2050 Fund | 1,586 |
Harbor Target Retirement 2055 Fund | 252 |
Proxy Voting
Harbor Funds has adopted Proxy Voting Policies and Procedures under which proxies relating to securities held by the Harbor funds are voted. In addition, Harbor Funds files Form N-PX, with its complete proxy voting record for the 12 months ended June 30th, no later than August 31st of each year. A description of Harbor Funds’ Proxy Voting Policies and Procedures and the proxy voting records (Form N-PX) are available (i) without charge, upon request, by calling Harbor Funds toll-free at 800-422-1050; (ii) on Harbor Funds’ website atharborfunds.com; and (iii) on the SEC’s website at sec.gov.
Householding
Harbor Funds has adopted a policy that allows it to send only one copy of a Fund’s prospectus, proxy materials, annual report and semi-annual report to certain shareholders residing at the same household. This reduces Fund expenses, which benefits you and other shareholders. If you need additional copies or do not want your mailings to be “householded,” please call the Shareholder Servicing Agent at 800-422-1050. Individual copies will be sent within thirty (30) days after the Shareholder Servicing Agent receives your instructions. Your consent to householding is considered valid until revoked.
Quarterly Portfolio Disclosures
In 2019, the Funds filed a complete portfolio of investments with the SEC for the first fiscal quarter on Form N-Q and the third fiscal quarter as an exhibit to Form N-PORT. The Funds’ Forms N-Q and N-PORT are available (i) without charge, upon request, by calling Harbor Funds toll-free at 800-422-1050, (ii) on Harbor Funds’ website atharborfunds.com, and (iii) on the SEC’s website at sec.gov.
43
Harbor Target Retirement Funds
Additional Information—Continued
Additional Information—Continued
Trustees and Officers
As of December 2019
The business and affairs of the Trust shall be managed by or under the direction of the Trustees, and they shall have all powers necessary or desirable to carry out that responsibility. The Trustees shall have full power and authority to take or refrain from taking any action and to execute any contracts and instruments that they may consider necessary or desirable in the management of the Trust. Any determination made by the Trustees in good faith as to what is in the interests of the Trust shall be conclusive. Information pertaining to the Trustees and Officers of Harbor Funds is set forth below. The address of each Trustee and Officer is: [Name of Trustee or Officer] c/o Harbor Funds, 111 South Wacker Drive, 34th Floor, Chicago, IL 60606-4302.
Harbor Funds' Statement of Additional Information includes additional information about the Trust’s Trustees and is available without charge by calling 800-422-1050 or at the Trust’s website atharborfunds.com.
Name (Age) Position(s) with Fund | Term of Office and Length of Time Served1 | Principal Occupation(s) During Past Five Years | Number of Portfolios In Fund Complex Overseen By Trustee | Other Directorships Of Public Companies and Other Registered Investment Companies Held by Trustee During Past Five Years |
INDEPENDENT TRUSTEES | ||||
Scott M. Amero (56) Trustee | Since 2014 | Chairman (2015-Present) and Trustee (2011-2015), Rare (conservation nonprofit); Trustee, Berkshire School (2014-Present); Trustee, The Nature Conservancy, Massachusetts Chapter (2018-Present); Vice Chairman and Global Chief Investment Officer, Fixed Income (2010), Vice Chairman and Global Chief Investment Officer, Fixed Income, and Co-Head, Fixed Income Portfolio Management (2007-2010), BlackRock, Inc. (publicly traded investment management firm). | 39 | None |
Donna J. Dean (68) Trustee | Since 2010 | Chief Investment Officer of the Rockefeller Foundation (a private foundation) (1995-Present). | 39 | None |
Joseph L. Dowling III (55) Trustee | Since 2017 | Chief Executive Officer (2018-Present) and Chief Investment Officer, Brown University Investment Office (2013-2018); Advisory Board Member, Stage Point Capital (private mortgage specialist) (2016-2017); Advisory Board Member, Harbor Funds (2016-2017); and Founder and Managing Member, Narragansett Asset Management (private investment management firm) (1998-2013). | 39 | Director of Integrated Electrical Services (2012-Present). |
Randall A. Hack (72) Trustee | Since 2010 | Founder and Senior Managing Director of Capstone Capital LLC (private investment firm) (2003-Present); Director of Tower Development Corporation (cell tower developer) (2009-2016); Advisory Director of Berkshire Partners (private equity firm) (2002-2013); Founder and Senior Managing Director of Nassau Capital, LLC (private investment firm, investing solely on behalf of the Princeton Endowment) (1995-2001); and President of The Princeton University Investment Company (1990-1994). | 39 | None |
Robert Kasdin (61) Trustee | Since 2014 | Senior Vice President and Chief Operating Officer (2015-Present) and Chief Financial Officer (2018-Present), Johns Hopkins Medicine; Senior Executive Vice President, Columbia University (2002-2015); Trustee and Member of the Finance Committee, National September 11 Memorial & Museum at the World Trade Center (2005-Present); Director, Apollo Commercial Real Estate Finance, Inc. (2014-Present); Director and Executive Committee Member, The Y in Central Maryland (2018-Present); and Director, Noranda Aluminum Holdings Corp. (2007-2014). | 39 | Director of Noranda Aluminum Holdings Corporation (2007-2014); and Director of Apollo Commercial Real Estate Finance, Inc. (2014-Present). |
44
Harbor Target Retirement Funds
Additional Information—Continued
Additional Information—Continued
Trustees and Officers—Continued
Name (Age) Position(s) with Fund | Term of Office and Length of Time Served1 | Principal Occupation(s) During Past Five Years | Number of Portfolios In Fund Complex Overseen By Trustee | Other Directorships Of Public Companies and Other Registered Investment Companies Held by Trustee During Past Five Years |
INDEPENDENT TRUSTEES—Continued | ||||
Kathryn L. Quirk (67) Trustee | Since 2017 | Retired; Vice President, Senior Compliance Officer and Head, U.S. Regulatory Compliance, Goldman Sachs Asset Management (2013-2017); Deputy Chief Legal Officer, Asset Management, and Vice President and Corporate Counsel, Prudential Insurance Company of America (2010-2012); Co-Chief Legal Officer, Prudential Investment Management, Inc., and Chief Legal Officer, Prudential Investments and Prudential Mutual Funds (2008-2012); Vice President and Corporate Counsel and Chief Legal Officer, Mutual Funds, Prudential Insurance Company of America, and Chief Legal Officer, Prudential Investments (2005-2008); Vice President and Corporate Counsel and Chief Legal Officer, Mutual Funds, Prudential Insurance Company of America (2004-2005); Member, Management Committee (2000-2002), General Counsel and Chief Compliance Officer, Zurich Scudder Investments, Inc. (1997-2002). | 39 | None |
Ann M. Spruill (65) Trustee | Since 2014 | Partner (1993-2008), member of Executive Committee (1996-2008), Member Board of Directors (2002-2008), Grantham, Mayo, Van Otterloo & Co, LLC (private investment management firm) (with the firm since 1990); Member Investment Committee and Chair of Global Public Equities, Museum of Fine Arts, Boston (2000-Present); and Trustee, Financial Accounting Foundation (2014-Present). | 39 | None |
INTERESTED TRUSTEE | ||||
Charles F. McCain (50)* Chairman, Trustee and President | Since 2017 | Chief Executive Officer (2017-Present), Director (2007-Present), President and Chief Operating Officer (2017), Executive Vice President and General Counsel (2004-2017), and Chief Compliance Officer (2004-2014), Harbor Capital Advisors, Inc.; Director (2007-Present) and Chief Compliance Officer (2004-2017), Harbor Services Group, Inc.; Chief Executive Officer (2017-Present), Director (2007-Present), Chief Compliance Officer and Executive Vice President (2007-2017), Harbor Funds Distributors, Inc.; and Chief Compliance Officer, Harbor Funds (2004-2017). | 39 | None |
Name (Age) Position(s) with Fund | Term of Office and Length of Time Served1 | Principal Occupation(s) During Past Five Years |
FUND OFFICERS NOT LISTED ABOVE** | ||
Erik D. Ojala (44) Chief Compliance Officer | Since 2017 | Executive Vice President and General Counsel (2017-Present) and Secretary (2010-Present); Senior Vice President and Associate General Counsel (2007-2017), Harbor Capital Advisors, Inc.; Director and Secretary (2019-Present), Harbor Trust Company, Inc.; Director, Executive Vice President and Chief Compliance Officer (2017-Present), Harbor Funds Distributors, Inc.; Director (2017-Present) and Assistant Secretary (2014-Present), Harbor Services Group, Inc.; and AML Compliance Officer (2010-2017) and Vice President and Secretary (2007-2017), Harbor Funds. |
Anmarie S. Kolinski (48) Treasurer | Since 2007 | Executive Vice President and Chief Financial Officer (2007-Present), Harbor Capital Advisors, Inc.; Chief Financial Officer (2007-Present), Director and Treasurer (2019-Present), Harbor Trust Company, Inc.; Harbor Services Group, Inc.; and Chief Financial Officer (2015-Present) and Treasurer (2012-Present), Harbor Funds Distributors, Inc. |
Brian L. Collins (51) Vice President | Since 2005 | Executive Vice President and Chief Investment Officer (2004-Present), Harbor Capital Advisors, Inc. and Director and Chief Investment Officer (2019-Present), Harbor Trust Company, Inc. |
Kristof M. Gleich (40) Vice President | Since 2019 | President (2018-Present), Harbor Capital Advisors, Inc.; Director, Vice Chairperson, and President (2019-Present), Harbor Trust Company, Inc.; and Managing Director, Global Head of Manager Selection (2010-2018), JP Morgan Chase & Co. |
45
Harbor Target Retirement Funds
Additional Information—Continued
Additional Information—Continued
Trustees and Officers—Continued
Name (Age) Position(s) with Fund | Term of Office and Length of Time Served1 | Principal Occupation(s) During Past Five Years |
FUND OFFICERS NOT LISTED ABOVE**—Continued | ||
Gregg M. Boland (56) Vice President | Since 2019 | Vice President (2019-Present), Harbor Capital Advisors, Inc.; President (2019-Present), Senior Vice President – Operations (2016-2019), and Vice President – Operations (2007-2015), Harbor Services Group, Inc.; and Senior Vice President, AML Compliance Officer, and OFAC Officer (2019-Present), Harbor Funds Distributors, Inc. |
Diana R. Podgorny (40) Secretary | Since 2018 | Vice President and Assistant General Counsel, Harbor Capital Advisors, Inc. (2017-Present); Vice President and Counsel, AMG Funds LLC (2016-2017); Assistant Secretary, AMG Funds, AMG Funds I, AMG Funds II and AMG Funds III (2016-2017); Assistant Secretary, AMG Funds IV (2010-2017); and Vice President and Counsel, Aston Asset Management, LLC (2010-2016). |
Jodie L. Crotteau (47) Assistant Secretary | Since 2014 | Senior Vice President and Chief Compliance Officer, Harbor Capital Advisors, Inc. (2014-Present); Chief Compliance Officer and AML/OFAC Officer (2019-Present), Harbor Trust Company, Inc.; Chief Compliance Officer and Secretary (2017-present) and Assistant Secretary (2015-2016), Harbor Services Group, Inc.; Assistant Secretary (2016-present), Harbor Funds Distributors, Inc.; Vice President and Chief Compliance Officer, Grosvenor Registered Funds (2011-2014); and Vice President, Grosvenor Capital Management, L.P. (2010-2014). |
Lana M. Lewandowski (40) AML Compliance Officer and Assistant Secretary | Since 2017 | Legal & Compliance Manager (2016-Present) and Legal Specialist (2012-2015), Harbor Capital Advisors, Inc. |
Lora A. Kmieciak (55) Assistant Treasurer | Since 2017 | Senior Vice President – Fund Administration and Analysis (2017-Present) and Senior Vice President - Business Analysis (2015-2017), Harbor Capital Advisors, Inc.; and Assurance Executive Director, Ernst & Young LLP (1999-2015). |
John M. Paral (51) Assistant Treasurer | Since 2013 | Director of Fund Administration and Analysis (2017-Present), Vice President (2012-Present) and Financial Reporting Manager (2007-2017), Harbor Capital Advisors, Inc. |
1 | Each Trustee serves for an indefinite term, until his successor is elected. Each Officer is elected annually. |
* | Mr. McCain is deemed an “Interested Trustee” due to his affiliation with the Adviser and Distributor of Harbor Funds. |
** | Officers of the Funds are “interested persons” as defined in the Investment Company Act. |
46
This privacy statement is not part of this report
Harbor’s Privacy Statement
The following privacy statement (“Privacy Statement”) is issued by Harbor Funds and each series of Harbor Funds and its affiliates, Harbor Capital Advisors, Inc., Harbor Services Group, Inc. and Harbor Funds Distributors, Inc. (collectively, “Harbor” “we” or “us”). The measures described in this Privacy Statement reflect the commitments we make to protect the privacy of your personal information. We appreciate the confidence you have shown by entrusting us with your assets.
Personal Information
In the course of providing products and services, we collect personal information about you from the following sources: applications, forms, our website (including any information captured through our use of “cookies”), through mobile applications, by telephone and in correspondence and transactions with us, our affiliates or other parties, including when you contact Shareholder Services or establish an account with us. This Privacy Statement applies to personal information we collect from those sources unless we inform you otherwise.
The personal information collected may include name, address, email address, telephone/fax numbers, account number, social security or taxpayer identification number, investment activity, bank account information, location data (depending on your app settings and device permissions), and other information voluntarily provided by you.
We may also collect certain information automatically when you visit us through our website or a mobile application. For example, we may collect technical and navigational information, such as computer browser type, device type, device ID, Internet protocol address, pages visited average time spent on our website and searches performed on our website. We may use this information to alert you to software compatibility issues; to provide you with or improve or websites, applications, products or services; or to provide you with content that may be of interest to you. We use your IP address to help diagnose problems with our server and to administer our website. Your IP address is also used to gather broad demographic information. This information will be used for internal purposes only. We also collect information in the form of log files that record website and app activity and gather statistics about your browsing habits. These entries are generated automatically, and help us to troubleshoot errors, improve performance and maintain the security of our sites and apps. We use “cookies” and similar files that may be placed on your computer or device for security purposes, to facilitate site navigation and to personalize the appearance of our site. We provide more information regarding cookies and other tracking technologies below.
In addition, we may receive personal information about you that you authorize third parties to provide to us. We also may obtain personal information from third-party service providers to verify your identity, to prevent fraud, or to help us identify products and services that may be of interest to you.
The personal information we collect about you may be transferred to or stored by us or our service providers in the United States or elsewhere, as permitted by law.
If you do not wish to provide personal information to us, we may be unable to provide certain products or services to you.
Information Sharing
We disclose personal information with affiliated and non-affiliated parties: (1) as permitted or required by law or regulation; (2) if we believe that is necessary to: comply with applicable laws, regulations, or industry requirements; respond to requests from a legal, regulatory, or governmental authority; enforce legal terms; detect and resolve any fraud or security concerns, and protect the rights, property, and safety of us, our users, or others; (3) in the event of a merger, acquisition or sale of all or substantially all of our assets; or (4) as otherwise described in this Privacy Statement.
Personal information we collect may be shared with non-affiliated companies that perform support services on our behalf or to other firms that assist us in providing you with products and services (including, without limitation, completing transactions), such as custodians, transfer agents, broker-dealers and marketing service firms (to support our marketing to you), as well as with other financial institutions. We may also share information with affiliates that are engaged in a variety of financial services in order to better service your account(s).
When information is shared with third parties, they are not permitted to use the information for any purpose other than those purposes described in this Privacy Statement or as permitted by law.
If you close your account(s) or if we lose contact with you, we will continue to share information in accordance with our current privacy policy and practices.
If you close your account(s) or if we lose contact with you, we will continue to share information in accordance with our current privacy policy and practices.
47
Harbor’s Privacy Statement—Continued
Security
We maintain physical, electronic and procedural safeguards designed to protect your personal information; however, please be aware that no data security measures can guarantee 100% security.
For shareholders accessing information through our website or a mobile application, various forms of Internet security, such as data encryption firewall barriers, user names and passwords, two-factor authentication, and other tools are used. For additional information regarding our security measures, visit the terms and conditions of use on our website at harborfunds.com.
Linking to
Third Parties
Third Parties
When you visit our website and leave to go to another linked site, we are not responsible for the content or availability of the linked site. Please be advised that if you enter into a transaction on the third-party site, we do not represent either the third party or you. Further, the privacy and security policies of the linked site may differ from those practiced by us.
Cookies and Other Technologies
A cookie is a small text file that is stored on your computer, tablet, or device when you visit a website or a mobile application. Cookies usually store small bits of information about you and what you do on that site or application, which are then used to improve your browsing experience. Some cookies are only used during a single visit, while others are saved on your device until your next visit. Harbor Funds and our third-party providers use both types of cookies to make your visits more productive.
If you are concerned about cookies, they can be blocked from your device, or you can set your browser to notify you when they are being used. Use the Help feature of your browser to learn how.
Our website, mobile application, and emails may use a web beacon. A web beacon helps to measure usage and activity and reports that activity back to the system providers. In some cases, a web beacon triggers the placement of a cookie on your device.
We and our service providers use web beacons and cookies to determine things like if and when you open our emails, what type of device, operating system, email program, or web browser you are using, your IP address, and what links you click within our site or email. These things enable us to gauge the effectiveness, relevance, and value of our content and communications.
We use Google Analytics (which uses a web beacon) to collect information about use of our website and mobile application. For more information on opting out of being tracked by Google Analytics, visithttps://tools.google.com/dlpage/gaoptout. We also use Lucky Orange to collect information about how visitors interact with the content on our public website and mobile application pages. Lucky Orange doesnot track actions or behavior within the password-protected online account access systems. For more information about Lucky Orange, including how to opt out, please visit:https://www.luckyorange.com/privacy.php.
Do Not Track
Our third-party vendors may collect information about users across our website. We do not currently have the capability to respond to a web browser that does not track signals or other mechanisms that provide you with the ability to exercise choice regarding the collection of this information.
Changes to this
Privacy Statement
Privacy Statement
We reserve the right to change or revise this Privacy Statement at any time to reflect changes in the law or our data collection and use practices. New updates to the Privacy Statement will be posted to our website and are include in Harbor Funds’ annual reports to shareholders. Privacy Statement changes will apply to the information collected from the date we post our revised Privacy Statement, as well as to existing information we hold.
Contact Us
If you have any questions or concerns about how we maintain the privacy of your personal information or if you would like to update your personal information on file, please contact us at 800-422-1050 Monday through Friday, between the hours of 8:00 a.m. and 6:00 p.m. Eastern time. You may also write to us at the following postal address:
Harbor Funds
c/o Harbor Services Group, Inc.
PO Box 804660
Chicago, IL 60680-4108
c/o Harbor Services Group, Inc.
PO Box 804660
Chicago, IL 60680-4108
We recommend that you read and retain this notice for your personal files.
Last Updated: December 2018
48
Benchmark Descriptions
Composite Index Income—The Composite Index Income is derived by applying the Harbor Target Retirement Fund’s (the “Income Fund”) target asset allocation to the results of the underlying funds’ benchmarks: Russell 1000® Growth Index, Russell Midcap® Growth Index, Russell 2000® Growth Index, Russell 1000® Value Index, Russell Midcap® Value Index, Russell 2000® Value Index, MSCI EAFE (ND) Index, MSCI All Country World Ex. U.S. (ND) Index (with respect to Harbor International Growth Fund weightings, prior to May 28, 2013, the MSCI EAFE Growth (ND) Index), MSCI All Country World (ND) Index, ICE BofAML U.S. High Yield Index (H0A0), ICE BofAML U.S. Non-Distressed High Yield Index (with respect to the Harbor High-Yield Bond Fund; prior to March 31, 2015, the ICE BofAML U.S. High Yield Index (H0A0) was this fund’s benchmark and a component of the Composite Index), Bloomberg Barclays U.S. Aggregate Bond Index, Bloomberg Barclays U.S. TIPS Index, ICE BofAML U.S. 3-Month Treasury Bill Index. The weights of the Composite Index Income match the Income Fund’s historical target asset allocation and are adjusted as changes are made to this asset allocation. Refer to the Target Retirement Funds Prospectus for the Income Fund’s target asset allocation. This unmanaged index does not reflect fees and expenses and is not available for direct investment.
Composite Index 2020—The Composite Index 2020 is derived by applying the Harbor Target Retirement 2020 Fund’s (the “2020 Fund”) target asset allocation to the results of the underlying funds’ benchmarks: Russell 1000® Growth Index, Russell Midcap® Growth Index, Russell 2000® Growth Index, Russell 1000® Value Index, Russell Midcap® Value Index, Russell 2000® Value Index, MSCI EAFE (ND) Index, MSCI All Country World Ex. U.S. (ND) Index (with respect to Harbor International Growth Fund weightings, prior to May 28, 2013, the MSCI EAFE Growth (ND) Index), MSCI All Country World (ND) Index, ICE BofAML U.S. High Yield Index (H0A0), ICE BofAML U.S. Non-Distressed High Yield Index (with respect to the Harbor High-Yield Bond Fund; prior to March 31, 2015, the ICE BofAML U.S. High Yield Index (H0A0) was this fund’s benchmark and a component of the Composite Index), Bloomberg Barclays U.S. Aggregate Bond Index, Bloomberg Barclays U.S. TIPS Index, ICE BofAML U.S. 3-Month Treasury Bill Index. The weights of the Composite Index 2020 match the 2020 Fund’s historical target asset allocation and are adjusted as changes are made to this asset allocation. Refer to the Target Retirement Funds Prospectus for the 2020 Fund’s target asset allocation. This unmanaged index does not reflect fees and expenses and is not available for direct investment.
Composite Index 2025—The Composite Index 2025 is derived by applying the Harbor Target Retirement 2025 Fund’s (the “2025 Fund”) target asset allocation to the results of the underlying funds’ benchmarks: Russell 1000® Growth Index, Russell Midcap® Growth Index, Russell 2000® Growth Index, Russell 1000® Value Index, Russell Midcap® Value Index, Russell 2000® Value Index, MSCI EAFE (ND) Index, MSCI All Country World Ex. U.S. (ND) Index (with respect to Harbor International Growth Fund weightings, prior to May 28, 2013, the MSCI EAFE Growth (ND) Index), MSCI All Country World (ND) Index, ICE BofAML U.S. High Yield Index (H0A0), ICE BofAML U.S. Non-Distressed High Yield Index (with respect to the Harbor High-Yield Bond Fund; prior to March 31, 2015, the ICE BofAML U.S. High Yield Index (H0A0) was this fund’s benchmark and a component of the Composite Index), Bloomberg Barclays U.S. Aggregate Bond Index, Bloomberg Barclays U.S. TIPS Index. The weights of the Composite Index 2025 match the 2025 Fund’s historical target asset allocation and are adjusted as changes are made to this asset allocation. Refer to the Target Retirement Funds Prospectus for the 2025 Fund’s target asset allocation. This unmanaged index does not reflect fees and expenses and is not available for direct investment.
Composite Index 2030—The Composite Index 2030 is derived by applying the Harbor Target Retirement 2030 Fund’s (the “2030 Fund”) target asset allocation to the results of the underlying funds’ benchmarks: Russell 1000® Growth Index, Russell Midcap® Growth Index, Russell 2000® Growth Index, Russell 1000® Value Index, Russell Midcap® Value Index, Russell 2000® Value Index, MSCI EAFE (ND) Index, MSCI All Country World Ex. U.S. (ND) Index (with respect to Harbor International Growth Fund weightings, prior to May 28, 2013, the MSCI EAFE Growth (ND) Index), MSCI All Country World (ND) Index, ICE BofAML U.S. High Yield Index (H0A0), ICE BofAML U.S. Non-Distressed High Yield Index (with respect to the Harbor High-Yield Bond Fund; prior to March 31, 2015, the ICE BofAML U.S. High Yield Index (H0A0) was this fund’s benchmark and a component of the Composite Index), Bloomberg Barclays U.S. Aggregate Bond Index, Bloomberg Barclays U.S. TIPS Index. The weights of the Composite Index 2030 match the 2030 Fund’s historical target asset allocation and are adjusted as changes are made to this asset allocation. Refer to the Target Retirement Funds Prospectus for the 2030 Fund’s target asset allocation. This unmanaged index does not reflect fees and expenses and is not available for direct investment.
Composite Index 2035—The Composite Index 2035 is derived by applying the Harbor Target Retirement 2035 Fund’s (the “2035 Fund”) target asset allocation to the results of the underlying funds’ benchmarks: Russell 1000® Growth Index, Russell Midcap® Growth Index, Russell 2000® Growth Index, Russell 1000® Value Index, Russell Midcap® Value Index, Russell 2000® Value Index, MSCI EAFE (ND) Index, MSCI All Country World Ex. U.S. (ND) Index (with respect to Harbor International Growth Fund weightings, prior to May 28, 2013, the MSCI EAFE Growth (ND) Index), MSCI All Country World (ND) Index, ICE BofAML U.S. High Yield Index (H0A0), ICE BofAML U.S. Non-Distressed High Yield Index (with respect to the Harbor High-Yield Bond Fund; prior to March 31, 2015, the ICE BofAML U.S. High Yield Index (H0A0) was this fund’s benchmark and a component of the Composite Index), Bloomberg Barclays U.S. Aggregate Bond Index, Bloomberg Barclays U.S. TIPS
49
Benchmark Descriptions—Continued
Index. The weights of the Composite Index 2035 match the 2035 Fund’s historical target asset allocation and are adjusted as changes are made to this asset allocation. Refer to the Target Retirement Funds Prospectus for the 2035 Fund’s target asset allocation. This unmanaged index does not reflect fees and expenses and is not available for direct investment.
Composite Index 2040—The Composite Index 2040 is derived by applying the Harbor Target Retirement 2040 Fund’s (the “2040 Fund”) target asset allocation to the results of the underlying funds’ benchmarks: Russell 1000® Growth Index, Russell Midcap® Growth Index, Russell 2000® Growth Index, Russell 1000® Value Index, Russell Midcap® Value Index, Russell 2000® Value Index, MSCI EAFE (ND) Index, MSCI All Country World Ex. U.S. (ND) Index (with respect to Harbor International Growth Fund weightings, prior to May 28, 2013, the MSCI EAFE Growth (ND) Index), MSCI All Country World (ND) Index, ICE BofAML U.S. High Yield Index (H0A0), ICE BofAML U.S. Non-Distressed High Yield Index (with respect to the Harbor High-Yield Bond Fund; prior to March 31, 2015, the ICE BofAML U.S. High Yield Index (H0A0) was this fund’s benchmark and a component of the Composite Index), Bloomberg Barclays U.S. Aggregate Bond Index. The weights of the Composite Index 2040 match the 2040 Fund’s historical target asset allocation and are adjusted as changes are made to this asset allocation. Refer to the Target Retirement Funds Prospectus for the 2040 Fund’s target asset allocation. This unmanaged index does not reflect fees and expenses and is not available for direct investment.
Composite Index 2045—The Composite Index 2045 is derived by applying the Harbor Target Retirement 2045 Fund’s (the “2045 Fund”) target asset allocation to the results of the underlying funds’ benchmarks: Russell 1000® Growth Index, Russell Midcap® Growth Index, Russell 2000® Growth Index, Russell 1000® Value Index, Russell Midcap® Value Index, Russell 2000® Value Index, MSCI EAFE (ND) Index, MSCI All Country World Ex. U.S. (ND) Index (with respect to Harbor International Growth Fund weightings, prior to May 28, 2013, the MSCI EAFE Growth (ND) Index), MSCI All Country World (ND) Index, ICE BofAML U.S. High Yield Index (H0A0), ICE BofAML U.S. Non-Distressed High Yield Index (with respect to the Harbor High-Yield Bond Fund; prior to March 31, 2015, the ICE BofAML U.S. High Yield Index (H0A0) was this fund’s benchmark and a component of the Composite Index), Bloomberg Barclays U.S. Aggregate Bond Index. The weights of the Composite Index 2045 match the 2045 Fund’s historical target asset allocation and are adjusted as changes are made to this asset allocation. Refer to the Target Retirement Funds Prospectus for the 2045 Fund’s target asset allocation. This unmanaged index does not reflect fees and expenses and is not available for direct investment.
Composite Index 2050—The Composite Index 2050 is derived by applying the Harbor Target Retirement 2050 Fund’s (the “2050 Fund”) target asset allocation to the results of the underlying funds’ benchmarks: Russell 1000® Growth Index, Russell Midcap® Growth Index, Russell 2000® Growth Index, Russell 1000® Value Index, Russell Midcap® Value Index, Russell 2000® Value Index, MSCI EAFE (ND) Index, MSCI All Country World Ex. U.S. (ND) Index (with respect to Harbor International Growth Fund weightings, prior to May 28, 2013, the MSCI EAFE Growth (ND) Index), MSCI All Country World (ND) Index, ICE BofAML U.S. High Yield Index (H0A0), Bloomberg Barclays U.S. Aggregate Bond Index. The weights of the Composite Index 2050 match the 2050 Fund’s historical target asset allocation and are adjusted as changes are made to this asset allocation. Refer to the Target Retirement Funds Prospectus for the 2050 Fund’s target asset allocation. This unmanaged index does not reflect fees and expenses and is not available for direct investment.
Composite Index 2055—The Composite Index 2055 is derived by applying the Harbor Target Retirement 2055 Fund’s (the “2055 Fund”) target asset allocation to the results of the underlying funds’ benchmarks: Russell 1000® Growth Index, Russell Midcap® Growth Index, Russell 2000® Growth Index, Russell 1000® Value Index, Russell Midcap® Value Index, Russell 2000® Value Index, MSCI EAFE (ND) Index, MSCI All Country World Ex. U.S. (ND) Index (with respect to Harbor International Growth Fund weightings, prior to May 28, 2013, the MSCI EAFE Growth (ND) Index), MSCI All Country World (ND) Index, ICE BofAML U.S. High Yield Index (H0A0), Bloomberg Barclays U.S. Aggregate Bond Index. The weights of the Composite Index 2055 match the 2055 Fund’s historical target asset allocation and are adjusted as changes are made to this asset allocation. Refer to the Target Retirement Funds Prospectus for the 2055 Fund’s target asset allocation. This unmanaged index does not reflect fees and expenses and is not available for direct investment.
50
111 South Wacker Drive, 34th Floor | Chicago, IL 60606-4302 | 800-422-1050 | harborfunds.com |
Trustees & Officers
Charles F. McCain
Chairman, President & Trustee
Chairman, President & Trustee
Scott M. Amero
Trustee
Trustee
Raymond J. Ball
Trustee
Trustee
Donna J. Dean
Trustee
Trustee
Joseph L. Dowling, III
Trustee
Trustee
Randall A. Hack
Trustee
Trustee
Robert Kasdin
Trustee
Trustee
Kathryn L. Quirk
Trustee
Trustee
Ann M. Spruill
Trustee
Trustee
Erik D. Ojala
Chief Compliance Officer
Chief Compliance Officer
Anmarie S. Kolinski
Treasurer
Treasurer
Brian L. Collins
Vice President
Vice President
Kristof M. Gleich
Vice President
Vice President
Gregg M. Boland
Vice President
Vice President
Diana R. Podgorny
Secretary
Secretary
Jodie L. Crotteau
Assistant Secretary
Assistant Secretary
Lana M. Lewandowski
AML Compliance Officer
& Assistant Secretary
AML Compliance Officer
& Assistant Secretary
Lora A. Kmieciak
Assistant Treasurer
Assistant Treasurer
John M. Paral
Assistant Treasurer
Assistant Treasurer
Investment Adviser
Harbor Capital Advisors, Inc.
111 South Wacker Drive, 34th Floor
Chicago, IL 60606-4302
312-443-4400
111 South Wacker Drive, 34th Floor
Chicago, IL 60606-4302
312-443-4400
Distributor
Harbor Funds Distributors, Inc.
111 South Wacker Drive, 34th Floor
Chicago, IL 60606-4302
312-443-4600
111 South Wacker Drive, 34th Floor
Chicago, IL 60606-4302
312-443-4600
Shareholder Services
Harbor Services Group, Inc.
P.O. Box 804660
Chicago, IL 60680-4108
800-422-1050
P.O. Box 804660
Chicago, IL 60680-4108
800-422-1050
FD.AR.TR.1019
Table of Contents
ITEM 2 – CODE OF ETHICS
(a) | The Registrant has adopted a code of ethics that applies to the Registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the Registrant or a third party (the “Code of Ethics”). |
(c) | The Registrant has not amended its Code of Ethics during the period covered by this report. |
(d) | The Registrant has not granted any waivers, including an implicit waiver, from any provisions of its Code of Ethics during the period covered by this report. |
ITEM 3 – AUDIT COMMITTEE FINANCIAL EXPERT
The Registrant’s Board has determined that Raymond J. Ball, a member of the Audit Committee of the Board of Trustees, is an audit committee financial expert as defined by the Securities and Exchange Commission (the “SEC”). Mr. Ball is the Sidney Davidson Distinguished Service Professor of Accounting at the University of Chicago Booth School of Business and a frequent lecturer and researcher on accounting, financial market and related business matters. Mr. Ball is deemed “independent” as defined by the SEC for purposes of audit committee financial expert determinations.
ITEM 4 – PRINCIPAL ACCOUNTANT FEES AND SERVICES
Items 4(a)—4(d): Audit, Audit-Related, Tax and All Other Fees
Fees billed by Ernst & Young:
Fiscal Year Ended October 31, 2019 | Fiscal Year Ended October 31, 2018 | ||||||||||
All fees and services to the Trust that were pre-approved | All fees and services to service affiliates that were pre-approved | All other fees and services to service affiliates that did not require pre-approval | All fees and services to the Trust that were pre-approved | All fees and services to service affiliates that were pre-approved | All other fees and services to service affiliates that did not require pre-approval | ||||||
(a) Audit Fees. | $850,089 | N/A | N/A | $816,992 | N/A | N/A | |||||
(b) Audit-Related Fees. | $3,0001 | $52,8002 | N/A | $6,0001 | $52,8002 | N/A | |||||
(c) Tax Fees. | $444,4313 | $— | N/A | $417,4043 | $— | N/A | |||||
(d) All Other Fees. | $88,3504 | $4,6155 | N/A | $61,0004 | $2,7555 | N/A |
1 | Includes fees related to the issuance of consents for N-1A filings. |
2 | Includes fees related to the procedures performed for Harbor Services Group, Inc. required by Rule 17Ad-13(a)(3) of the Securities Exchange Act of 1934. |
3 | Includes fees related to tax compliance, including foreign tax reclaim filings and tax research and equalization. |
4 | Includes fees billed in connection with the Registrant’s subscription to the Ernst & Young PFIC Analyzer, a database used to determine whether foreign equity securities are passive foreign investment companies. |
5 | Includes fees billed in connection with the Adviser’s subscription to Ernst & Young Online, a database of accounting rules and regulations. |
(e) | (1) | Pre-Approval Policies. |
The policy of the Registrant’s Audit Committee is to consider and, if appropriate, approve before the principal accountant is engaged for such services, all specific audit, review and non-audit services (other than certain de minimis non-audit services) provided to the Registrant. In making a determination, the Audit Committee considers whether the services are consistent with maintaining the principal accountant’s independence.
In the event of a contingency situation in which the principal accountant is needed to provide services in between scheduled Audit Committee meetings, the Audit Committee is authorized to delegate one or more members of the Committee the responsibility for considering and, if appropriate, pre-approving audit or permitted non-audit services in an amount sufficient to complete services and to determine if such services would be consistent with maintaining the accountant’s independence. Such member(s) are required to report to the full Audit Committee as to the nature and amount of such services and fees pre-approved at the next scheduled Audit Committee meeting. The Audit Committee would again consider whether such services and fees are consistent with maintaining the principal accountant’s independence.
The Registrant’s Audit Committee is informed at least annually of all audit and non-audit services provided by the principal accountant to the Registrant.
(2) | None of the principal accountant’s fees or services rendered to the Registrant, the Adviser or Harbor Services Group, Inc. were approved pursuant to the waiver provision of paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. |
(f) | Not applicable. |
(g) | Aggregate Non-Audit Fees. |
Aggregate Non-Audit Fees of the Registrant | |
Fiscal Year Ended October 31, 2019: $535,781 | |
Fiscal Year Ended October 31, 2018: $484,404 | |
Aggregate Non-Audit Fees of Other Entities Required to be Pre-approved Pursuant to Paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X | |
Fiscal Year Ended October 31, 2019: $57,415 | |
Fiscal Year Ended October 31, 2018: $55,555 | |
(h) | For the most recent fiscal year, the Audit Committee has determined that the provision of all non-audit services to service affiliates was compatible with maintaining the principal accountant’s independence. |
ITEM 5 – AUDIT COMMITTEE OF LISTED REGISTRANTS
Not applicable.
ITEM 6 – INVESTMENTS
(a) | The Registrant has elected to include the schedule of investments in securities of unaffiliated issuers as part of the report to shareholders filed under Item 1 of this report on Form N-CSR. |
(b) | Not applicable. |
ITEM 7 – DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES
Not applicable.
ITEM 8 – PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES
Not applicable.
ITEM 9 – PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS
Not applicable.
ITEM 10 – SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no material changes to the procedures by which shareholders may recommend nominees to the Registrant’s Board of Trustees since the date of the Registrant’s prior report on Form N-CSR.
ITEM 11 – CONTROLS AND PROCEDURES
(a) | The Registrant’s Principal Executive and Principal Financial Officers concluded that the Registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the 1940 Act) are effective, based on the evaluation of these disclosure controls and procedures as of a date within 90 days of the filing of this report. |
(b) | There was no change in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting. |
ITEM 12 – DISCLOSURE OF SECURITIES LENDING ACTIVITIES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES
Not applicable.
ITEM 13 – EXHIBITS
(a)(1) | Code of Ethics referred to in Item 2 is attached hereto. |
(a)(2) | A separate certification for each principal executive officer and principal financial officer of the Registrant as required by Rule 30a-2(a) under the 1940 Act (17 CFR 270.30a-2(a)) is attached hereto. |
(b) | Certification as required by Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350) is attached hereto. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed December 27, 2019 on its behalf by the undersigned, thereunto duly authorized.
HARBOR FUNDS
By: /s/ Charles F. McCain
Charles F. McCain
Chairman, President and Trustee
(Principal Executive Officer)
Chairman, President and Trustee
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
By: | /s/ Charles F. McCain Charles F. McCain | Chairman, President and Trustee (Principal Executive Officer) | December 27, 2019 |
By: | /s/ Anmarie S. Kolinski Anmarie S. Kolinski | Treasurer (Principal Financial and Accounting Officer) | December 27, 2019 |
Exhibit Index
Number | Description | |
99.CODE ETH | Code of Business Conduct and Ethics. | |
99.CERT1 | Certification for each principal executive officer and principal financial officer of the Registrant as required by Rule 30a-2(a) under the 1940 Act (17 CFR 270.30a-2(a)). | |
99.CERT2 | Certification for each principal executive officer and principal financial officer of the Registrant as required by Rule 30a-2(a) under the 1940 Act (17 CFR 270.30a-2(a)). | |
99.906CERT | Certification as required by Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350). |