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: April 30, 2020
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
Semi-Annual Report
April 30, 2020
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 Fund | HMCRX | HMCLX | HMCDX | HMCNX |
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 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:
The first half of the 2020 fiscal year has been remarkable in the range of positive and negative market sentiments expressed in this short six-month window. Investment markets started off the 2020 fiscal year continuing the positive momentum of the 2019 fiscal year. Equity markets across the globe generated modest positive returns during the first three months of the period while fixed income markets delivered steady returns. Market performance drivers were consistent with the prior period – stable positive economic growth and accommodative monetary and fiscal policies were the foundations of continued favorable investment conditions. Come February, however, the early negative implications of the pending global pandemic began to weigh on investment markets before the full effects of the global economic collapse took hold in March. The selloffs across equity markets were unprecedented, with few safe havens available to investors. As the heartbreaking effects of the pandemic progressed around the globe, governments and central banks implemented historic measures to attempt to protect their citizens and economies. The equity and credit markets responded to the massive stimulus measures favorably, bouncing off their March lows to partially recover through much of April.
Across most equity markets, growth stocks significantly outperformed value stocks and larger companies outperformed smaller companies, reflecting investors’ preferences in many cases for proven business models that are more likely to survive the economic challenges brought on by the global pandemic. U.S. government bonds proved to be a safe haven once again, delivering positive returns for the six-month period.
As you read through the comments from the portfolio managers of each Harbor fund included in this report, you may note their optimism for the future potential of their portfolios. The portfolio managers have responded in their own way to the challenges presented. We believe there are great opportunities for our portfolio managers to deliver attractive long-term investment results for our shareholders. During times of market stress, having a disciplined and proven actively managed investment approach allows our portfolio managers to weigh the risk and rewards that are available to them. While the long-term effects of the global pandemic on economies and markets are still unknown, we remain confident in the capabilities of our portfolio managers. At Harbor, we are actively engaged in dialogues with our subadviser partners as they navigate these challenging times.
We encourage our shareholders to take a long-term view and stay focused on their investment goals, particularly during periods of market uncertainty. While past performance is never a guarantee of future results, environments such as the last six months have often provided attractive opportunities for our fund investors to benefit from the skill of our portfolio managers.
I hope that you and your families remain safe and well during this unprecedented time. Thank you for your continued investment in Harbor Funds.
June 22, 2020
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
The six-month period saw two distinct environments. From November through mid-February, global equity markets advanced solidly, reflecting reaction to the U.S. Federal Reserve’s rate cut in October and the announcement of a framework agreement that brought relief from U.S.-China trade war anxiety. The U.S. economy was proceeding along a steady path of 1.5%-2.0% growth, with unemployment at record low levels. Stocks peaked at new highs on February 19, then dropped more than 30% in only 25 trading days, as the COVID-19 outbreak spread rapidly around the globe, disrupting markets and life virtually everywhere. Exacerbating the turmoil, Saudi Arabia and Russia declared an oil price war, causing energy prices to plummet. Policy makers responded to these events with historic monetary and fiscal actions. Markets regained ground in April although the ultimate magnitude and scale of the pandemic remain unknown, making the near-term and intermediate outlook highly uncertain.
PERFORMANCE
The Harbor Capital Appreciation Fund advanced 10.58% (Retirement Class), 10.54% (Institutional Class), 10.41% (Administrative Class), and 10.34% (Investor Class) in the six months ended April 30, 2020, outperforming the Russell 1000® Growth Index, which rose 6.09%.
In the benchmark index, the Information Technology, Consumer Discretionary, Health Care, and Communication Services sectors advanced. Energy declined more than 30%, while Industrials fell 15%.
Positions in the Fund’s heaviest-weighted sectors — Information Technology, Consumer Discretionary, and Communication Services — outperformed largely on favorable stock selection. Industrials holdings declined materially.
Netflix and Amazon were key positive contributors to Fund return. Both have secular growth profiles that we believe look even stronger, as social-distancing and shelter-in-place directives are drawing renewed attention to the value, utility, and resilience of ecommerce and video streaming business models. Recognition of the importance of digital commerce in times of restricted personal mobility also benefited Shopify, which provides cloud-based, easy-to-use infrastructure tools and an omni-channel ecommerce capability.
The COVID-19 pandemic has highlighted the prudence – and in many cases, the necessity – of working from home or at other offsite locations and by extension, the advantage of housing mission-critical software applications and services on the cloud. In addition to a strong and stable enterprise business, Microsoft has a differentiated hybrid cloud strategy that is leading to an increase in its share of technology capital spending. Coupa Software is a leader in cloud-based spend-management software that simplifies corporate procurement, invoicing, and expense management. The markets in which Coupa competes are large and well-established, and the company has added new customers at an accelerated rate over the past several years.
In our view, Nvidia is focused on key high-growth markets where it can leverage its graphics semiconductor expertise to offer high-value-added solutions. Strong growth in its data center business is likely to continue as increased demand for cloud storage prompts robust spending by Nvidia’s data center customers.
Payments processors saw mixed results. Adyen, a global digital payments company, has developed a single, dynamic, reliable, and secure payment platform that supports omni-channel commerce with end-to-end gateway, risk management, and processing services. FleetCor, which provides charge cards and payment-processing services for trucking fleets, fell on litigation related to
2
Harbor Capital Appreciation Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
TOTAL RETURNS
For the periods ended 04/30/2020
Unannualized | 1 Year | Annualized | |||||||||
6 Months | 5 Years | 10 Years | |||||||||
Harbor Capital Appreciation Fund | |||||||||||
Retirement Class1 | 10.58% | 10.81% | 13.49% | 14.36% | |||||||
Institutional Class | 10.54 | 10.73 | 13.43 | 14.33 | |||||||
Administrative Class | 10.41 | 10.45 | 13.15 | 14.04 | |||||||
Investor Class | 10.34 | 10.31 | 13.01 | 13.90 | |||||||
Comparative Indices | |||||||||||
Russell 1000® Growth | 6.09% | 10.84% | 13.34% | 14.41% | |||||||
S&P 500 | -3.16 | 0.86 | 9.12 | 11.69 |
As stated in the Fund’s prospectus dated March 1, 2020, the expense ratios were 0.59% (Net) and 0.64% (Gross) (Retirement Class); 0.67% (Net) and 0.72% (Gross) (Institutional Class); 0.92% (Net) and 0.97% (Gross) (Administrative Class); and 1.04% (Net) and 1.09% (Gross) (Investor Class). The net expense ratios reflect a contractual management fee waiver effective through 02/28/2021. 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.
its marketing and fee practices and on exposure to oil prices. We eliminated the position in Square based on its exposure to small business activity, which could be materially curtailed, and in some cases, permanently lost, by prolonged COVID-19-related business closures.
In Consumer Discretionary, Tesla, which had been controversial over much of the past year, surged early in 2020 on strong earnings, revenue, and free cash flow made possible by solid production, increased capacity, and strong execution. We eliminated the position in Adidas based on the company’s softer-than-expected gross margin, COVID-19-related sporting event cancellations, and an anticipated back-up in wholesale inventories. Marriott International declined on lackluster revenue per available room and exposure to COVID-19’s impact on global travel and tourism.
In Health Care, DexCom is a technological leader in continuous glucose monitoring (CGM) systems that eliminate the need for people with diabetes to test their blood glucose levels through finger sticks. As CGM penetration is in its nascent stages, the market has significant room to grow. In our view, Vertex Pharmaceuticals is growing through the expansion of its treatments for cystic fibrosis, a life-threatening genetic disease. Eli Lilly has diversified its core diabetes and central nervous system/psychiatric treatments business to include immunology and oncology products. Product mix shifts are expected to expand margins. We trimmed positions in Intuitive Surgical and Illumina, whose products and revenues are dependent on capital equipment expenditures or government funding.
In Industrials, the longer-than-anticipated 737 Max 8 jet recertification process weighed on Boeing early in the period. With the COVID-19 outbreak severely restricting air travel and compromising the financial health of airlines, we reduced the position. The positions in Airbus and Safran, which makes aircraft engines, were eliminated.
OUTLOOK & STRATEGY
As a fundamental investor, we examine company and industry prospects over the short and long term, working to understand how industries and businesses will change over time. Investing in companies with well-above-average long-term growth rates and unique, market-leading products and services remains our focus.
Spiraling COVID-19 infection rates, economic lockdowns, and social distancing initiatives have caused a spike in unemployment and a sharp drop in gross domestic product (GDP) worldwide. Historically massive fiscal and monetary stimulus measures have been implemented rapidly, but we believe that additional fiscal measures will likely be necessary and forthcoming. The ultimate magnitude and scale of the pandemic remain unknown, making the near-term and intermediate outlook highly uncertain. Greater clarity about the impact depends on progress in diagnostics, therapeutics, and vaccines.
Underlying conditions before the outbreak were largely solid, with fundamentally healthy economic structures. However, we do not expect recovery to be uniform, and unemployment may be higher than normal for some time.
The Fund includes the stocks of businesses that, in our view lead their industries and grow at faster rates than the market average. We believe that companies held in the Fund also generate significant cash flow, which may allow them to weather difficult times and sustain the competitive advantages necessary to create true economic value over the long term.
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—April 30, 2020 (Unaudited)
Portfolio of Investments—April 30, 2020 (Unaudited)
Sector Allocation(% of investments)
Portfolio of Investments
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—99.3% | |||
Shares | Value | ||
AEROSPACE & DEFENSE—0.9% | |||
2,004,542 | Boeing Co. | $282,681 | |
AUTOMOBILES—3.4% | |||
1,308,380 | Tesla Inc.* | 1,022,996 | |
BEVERAGES—0.7% | |||
1,344,090 | Constellation Brands Inc. | 221,358 | |
BIOTECHNOLOGY—2.2% | |||
2,462,252 | BioMarin Pharmaceutical Inc.* | 226,576 | |
1,785,633 | Vertex Pharmaceuticals Inc.* | 448,551 | |
675,127 | |||
CAPITAL MARKETS—2.3% | |||
1,547,311 | Goldman Sachs Group Inc. | 283,808 | |
1,429,650 | S&P Global Inc. | 418,716 | |
702,524 | |||
ENTERTAINMENT—4.6% | |||
3,340,702 | Netflix Inc.* | 1,402,594 | |
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—1.3% | |||
1,600,535 | American Tower Corp. | 380,927 | |
FOOD & STAPLES RETAILING—1.9% | |||
1,923,565 | Costco Wholesale Corp. | 582,840 | |
HEALTH CARE EQUIPMENT & SUPPLIES—2.6% | |||
6,441,181 | Boston Scientific Corp.* | 241,415 | |
1,242,242 | Danaher Corp. | 203,057 | |
691,377 | DexCom Inc.* | 231,750 | |
245,615 | Intuitive Surgical Inc.* | 125,480 | |
801,702 | |||
HEALTH CARE PROVIDERS & SERVICES—0.9% | |||
1,200,395 | Guardant Health Inc.* | 92,382 | |
440,074 | Humana Inc. | 168,029 | |
260,411 | |||
HOTELS, RESTAURANTS & LEISURE—1.1% | |||
368,637 | Chipotle Mexican Grill Inc.* | 323,866 | |
INTERACTIVE MEDIA & SERVICES—10.1% | |||
624,567 | Alphabet Inc. Class A* | 841,104 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
INTERACTIVE MEDIA & SERVICES—Continued | |||
615,702 | Alphabet Inc. Class C* | $830,373 | |
4,842,671 | Facebook Inc.* | 991,343 | |
7,989,126 | Tencent Holdings Ltd. (China) | 419,984 | |
3,082,804 | |||
INTERNET & DIRECT MARKETING RETAIL—11.2% | |||
4,908,448 | Alibaba Group Holding Ltd. ADR (China)*,1 | 994,795 | |
975,928 | Amazon.com Inc.* | 2,414,446 | |
3,409,241 | |||
IT SERVICES—11.6% | |||
446,961 | Adyen NV (Netherlands)*,2 | 441,866 | |
869,261 | FleetCor Technologies Inc.* | 209,709 | |
3,633,361 | Mastercard Inc. | 999,065 | |
2,669,848 | PayPal Holdings Inc.* | 328,392 | |
795,765 | Shopify Inc. (Canada)* | 503,154 | |
931,386 | Twilio Inc.* | 104,595 | |
5,208,398 | Visa Inc. | 930,845 | |
3,517,626 | |||
LIFE SCIENCES TOOLS & SERVICES—0.6% | |||
615,636 | Illumina Inc.* | 196,406 | |
PERSONAL PRODUCTS—1.4% | |||
2,399,783 | Estée Lauder Companies Inc. | 423,322 | |
PHARMACEUTICALS—4.6% | |||
13,342,508 | AstraZeneca plc ADR (United Kingdom)1 | 697,546 | |
4,472,469 | Eli Lilly and Co. | 691,623 | |
1,389,169 | |||
ROAD & RAIL—2.1% | |||
12,557,243 | Uber Technologies Inc.* | 380,108 | |
1,538,247 | Union Pacific Corp. | 245,796 | |
625,904 | |||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—4.7% | |||
2,121,479 | Advanced Micro Devices Inc.* | 111,144 | |
292,352 | Broadcom Inc. | 79,409 | |
3,694,475 | NVIDIA Corp. | 1,079,821 | |
1,938,378 | QUALCOMM Inc. | 152,492 | |
1,422,866 |
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 | ||
SOFTWARE—19.6% | |||
2,686,009 | Adobe Inc.* | $949,880 | |
969,984 | Atlassian Corp. plc (Australia)* | 150,823 | |
1,445,612 | Coupa Software Inc.* | 254,558 | |
2,470,559 | CrowdStrike Holdings Inc.* | 167,158 | |
11,326,258 | Microsoft Corp. | 2,029,779 | |
729,933 | RingCentral Inc.* | 166,812 | |
7,195,961 | salesforce.com Inc.* | 1,165,386 | |
822,447 | ServiceNow Inc.* | 289,123 | |
2,181,320 | Splunk Inc.* | 306,170 | |
582,054 | Trade Desk Inc.* | 170,297 | |
1,938,923 | Workday Inc.* | 298,400 | |
5,948,386 | |||
SPECIALTY RETAIL—1.7% | |||
2,384,916 | Home Depot Inc. | 524,276 | |
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS—4.9% | |||
5,058,423 | Apple Inc. | 1,486,165 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
TEXTILES, APPAREL & LUXURY GOODS—4.9% | |||
872,410 | Kering SA (France) | $443,799 | |
2,583,357 | Lululemon Athletica Inc. (Canada)* | 577,329 | |
5,333,406 | NIKE Inc. | 464,966 | |
1,486,094 | |||
TOTAL COMMON STOCKS | |||
(Cost $16,687,763) | 30,169,285 | ||
TOTAL INVESTMENTS—99.3% | |||
(Cost $16,687,763) | 30,169,285 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—0.7% | 198,782 | ||
TOTAL NET ASSETS—100.0% | $30,368,067 |
FAIR VALUE MEASUREMENTS
At April 30, 2020, the investments in Tencent Holdings Ltd., Ayden NV, 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 April 30, 2020 or October 31, 2019.
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 | Depository receipts such as American Depostiory Receipts (ADRs), Global Depository Receipts (GDRs) and other country specific depository receipts are certificates evidencing ownership of shares of a foreign issuer. These certificates are issued by depository banks and generally trade on an established market in the U.S. or elsewhere. |
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 April 30, 2020, the aggregate value of these securities was $441,866 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
While it was already clear to most investors that we were entering the later stages of the economic cycle, few could have predicted at the start of this year that large parts of the global economy would be brought to an abrupt halt. The ongoing outbreak of the COVID-19 pandemic and the precipitous drop in the price of oil, both of which adversely impacted equity markets, dominated headlines during the period. This unprecedented shock has required an unprecedented policy response on both fiscal and monetary fronts. In the U.S., central bankers have cut rates to near zero and have restarted and expanded asset purchasing programs. A substantial fiscal stimulus package was also agreed on, which aims to buffer the blow for both companies and individuals. Overall, stimulus measures have provided some relief to companies globally, as evidenced by the rebound in equity prices during the month of April, but further action may be required to deal with the fallout from this unparalleled shock to the global economy.
As we compose this commentary, the situation remains extremely fluid, with new information coming to light daily. What is clear is that many companies and individuals will be adversely impacted in the near term. How long the current environment lasts would essentially amount to guesswork, though we strongly believe that markets will eventually normalize as the global economy continues to progress, albeit slowly, towards a pre-crisis level of activity.
Performance
Harbor Large Cap Value Fund outperformed the benchmark Russell 1000® Value Index during the six-month period ended April 30, 2020. The Fund returned -8.27% (Retirement Class), -8.30% (Institutional Class), -8.44% (Administrative Class), and -8.47% (Investor Class) while the Russell 1000® Value Index returned -13.66%.
Stock selection was strongest in Information Technology, Consumer Discretionary and Energy. Within each of these sectors, Microsoft, Sony, and Cabot Oil & Gas, respectively, were the top contributors to relative return. An overweight in Information Technology also added to relative return. Relative performance was hurt by stock selection in Consumer Staples, Materials and Healthcare, and within each sector, Tyson Foods, Martin Marietta Materials and Alcon, respectively, were the main detractors. An underweight in Utilities also detracted from relative return. Relative weights are the result of bottom-up security selection decisions.
Global software and services company, Microsoft, was the top contributor during the period. Microsoft shares continued to produce strong relative performance as the company’s transition to a “productivity” and “platform” business marches on. CEO Satya Nadella’s transformation (which started in 2014) has, in our opinion, positioned Microsoft to benefit from a mobile-first, cloud-first world. Additionally, Microsoft has replaced its old Windows-centric model with one centered around the cloud and experiences. Microsoft Azure’s cloud-computing service offers existing (and new) clients the ability to remain in the Microsoft environment and experiment by moving only select workloads to the cloud. We believe Azure represents one of the largest total available market expansion opportunities in the company’s history. Lastly, the company’s Productivity and Business Processes segment, which offers business solutions such as Office, Office 365, Exchange, Microsoft Teams and other tools, has proven particularly useful during the current economic disconnect. In fact, Microsoft Teams celebrated its three-year anniversary in March with 44 million daily active users, more than doubling from November 2019.
Phillips 66, a diversified refiner, chemicals and midstream energy company, was the largest detractor during the period. The Saudi-Russia oil price war and a global demand shock resulting from governments’ efforts to contain COVID-19, has caused the price of oil to plummet to historic lows. In a clear example of the demand shock, the company has observed significant
6
Harbor Large Cap Value Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
TOTAL RETURNS
For the periods ended 04/30/2020
Unannualized | 1 Year | Annualized | |||||||||
6 Months | 5 Years | 10 Years | |||||||||
Harbor Large Cap Value Fund | |||||||||||
Retirement Class1 | -8.27% | -4.07% | 7.80% | 10.76% | |||||||
Institutional Class | -8.30 | -4.14 | 7.74 | 10.73 | |||||||
Administrative Class | -8.44 | -4.40 | 7.46 | 10.44 | |||||||
Investor Class | -8.47 | -4.47 | 7.35 | 10.31 | |||||||
Comparative Index | |||||||||||
Russell 1000® Value | -13.66% | -11.01% | 3.90% | 8.54% |
As stated in the Fund’s prospectus dated March 1, 2020, 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 02/28/2021. 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.
declines in gasoline consumption including approximately 20% decline in the U.S. and a 70% drop in some parts of Europe. In response to the market environment, the company has reduced capex, operating and administrative costs and paused its share repurchase program. Although the current conditions have significant impact, we believe the economy is currently far from “normal” and that Phillips 66’s normalized earnings power has not been affected.
In terms of portfolio activity, we sold our investments in Banco Bilbao Vizcaya Argentaria, PPG Industries and Halliburton and invested in Corteva Agriscience, Xylem, Elanco Animal Health, RPM and Qualcomm. Overall, these transactions did not materially alter the Fund’s composition on an absolute or relative basis as we entered and exited the period maintaining our largest overweight allocations to Information Technology and Industrials with our largest underweight allocations to Utilities and Communication Services.
Outlook & Strategy
Once again, we would like to emphasize that while the current market environment is certainly volatile, we view periods of heightened uncertainty as a time in which we ensure we remain focused on understanding businesses from a long-term perspective. While we do not wish to diminish the tragic impact of COVID-19, nor discount the economic impact it will have, we believe the competitive advantage of our investment process and our team lies in our ability to look beyond short-term events that are difficult (if not impossible) to quantify. We remain focused on what is analyzable and stay committed to our approach of buying what we believe to be quality companies whose current stock prices do not fully reflect our estimates of their intrinsic values.
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—April 30, 2020 (Unaudited)
Portfolio of Investments—April 30, 2020 (Unaudited)
Sector Allocation(% of investments)
Portfolio of Investments
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—97.1% | |||
Shares | Value | ||
AEROSPACE & DEFENSE—1.9% | |||
178,000 | General Dynamics Corp. | $23,250 | |
BANKS—11.3% | |||
1,450,000 | Bank of America Corp. | 34,872 | |
230,000 | BOK Financial Corp. | 11,912 | |
322,000 | Commerce Bancshares Inc. | 19,703 | |
185,000 | Cullen/Frost Bankers Inc. | 13,294 | |
500,000 | East West Bancorp Inc. | 17,535 | |
300,000 | JPMorgan Chase & Co. | 28,728 | |
3,240,000 | Mitsubishi UFJ Financial Group Inc. ADR (Japan)1 | 12,928 | |
138,972 | |||
BEVERAGES—2.7% | |||
717,000 | Coca-Cola Co. | 32,903 | |
BIOTECHNOLOGY—3.5% | |||
180,000 | Amgen Inc. | 43,060 | |
BUILDING PRODUCTS—4.4% | |||
310,000 | Allegion plc (Ireland) | 31,168 | |
793,000 | Johnson Controls International plc | 23,084 | |
54,252 | |||
CAPITAL MARKETS—2.1% | |||
230,000 | Ameriprise Financial Inc. | 26,436 | |
CHEMICALS—4.2% | |||
1,159,000 | Corteva Inc. | 30,354 | |
327,134 | RPM International Inc. | 21,725 | |
52,079 | |||
CONSTRUCTION MATERIALS—2.1% | |||
136,000 | Martin Marietta Materials Inc. | 25,871 | |
CONSUMER FINANCE—1.6% | |||
306,000 | Capital One Financial Corp. | 19,817 | |
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—3.3% | |||
328,000 | Equity Lifestyle Properties Inc. | 19,781 | |
157,000 | Sun Communities Inc. | 21,101 | |
40,882 | |||
FOOD & STAPLES RETAILING—1.2% | |||
348,000 | Walgreens Boots Alliance Inc. | 15,065 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
FOOD PRODUCTS—2.0% | |||
389,000 | Tyson Foods Inc. | $24,192 | |
HEALTH CARE EQUIPMENT & SUPPLIES—9.1% | |||
510,000 | Alcon Inc. (Switzerland)* | 26,933 | |
315,000 | Danaher Corp. | 51,490 | |
346,000 | Medtronic plc (Ireland) | 33,780 | |
112,203 | |||
HOUSEHOLD DURABLES—5.2% | |||
570,000 | Lennar Corp. Class A | 28,540 | |
7,120 | Lennar Corp. Class B | 271 | |
540,000 | Sony Corp. ADR (Japan)1 | 34,695 | |
63,506 | |||
INSURANCE—1.8% | |||
200,000 | Chubb Ltd. (Switzerland) | 21,602 | |
INTERACTIVE MEDIA & SERVICES—1.8% | |||
765,000 | Twitter Inc.* | 21,940 | |
IT SERVICES—3.0% | |||
301,000 | PayPal Holdings Inc.* | 37,023 | |
MACHINERY—6.8% | |||
420,000 | Oshkosh Corp. | 28,362 | |
175,000 | Parker-Hannifin Corp. | 27,671 | |
394,000 | Xylem Inc. | 28,329 | |
84,362 | |||
OIL, GAS & CONSUMABLE FUELS—6.1% | |||
1,790,000 | Cabot Oil & Gas Corp. | 38,700 | |
330,000 | Phillips 66 | 24,146 | |
138,000 | Pioneer Natural Resources Co. | 12,325 | |
75,171 | |||
PERSONAL PRODUCTS—0.3% | |||
87,190 | Unilever NV NY Registry Shares (United Kingdom) | 4,309 | |
PHARMACEUTICALS—3.8% | |||
819,912 | Elanco Animal Health Inc.* | 20,260 | |
316,000 | Novartis AG ADR (Switzerland)1 | 26,775 | |
47,035 |
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 | ||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—5.1% | |||
396,000 | Microchip Technology Inc. | $34,741 | |
355,000 | QUALCOMM Inc. | 27,928 | |
62,669 | |||
SOFTWARE—13.2% | |||
165,000 | Adobe Inc.* | 58,351 | |
176,000 | ANSYS Inc.* | 46,082 | |
325,000 | Microsoft Corp. | 58,243 | |
162,676 | |||
SPECIALTY RETAIL—0.6% | |||
31,570 | Home Depot Inc. | 6,940 | |
TOTAL COMMON STOCKS | |||
(Cost $1,028,432) | 1,196,215 | ||
TOTAL INVESTMENTS—97.1% | |||
(Cost $1,028,432) | 1,196,215 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—2.9% | 35,370 | ||
TOTAL NET ASSETS—100.0% | $1,231,585 |
FAIR VALUE MEASUREMENTS
All investments at April 30, 2020 (as disclosed in the preceding Portfolio of Investments) were classified as Level 1. There were no Level 3 investments at April 30, 2020 or October 31, 2019.
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 | Depository receipts such as American Depostiory Receipts (ADRs), Global Depository Receipts (GDRs) and other country specific depository receipts are certificates evidencing ownership of shares of a foreign issuer. These certificates are issued by depository banks and generally trade on an established market in the U.S. or elsewhere. |
The accompanying notes are an integral part of the Financial Statements.
9
Harbor Mid Cap 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 2019
Since 2019
EARNEST Partners, LLC has subadvised the Fund since 2019.
Investment Objective
The Fund seeks long-term total return.
Paul E. Viera
Management’s Discussion of
Fund Performance
Fund Performance
MARKET REVIEW
During the six months ending April 30, 2020, the U.S. mid cap market fell as the Russell Midcap® Index dropped nearly 15%. This period includes the end of 2019, as markets continued to hit new highs, only to be followed by a sharp decline spurred on by COVID-19 in March of 2020. The two major developments that drove investor sentiment during the period were the magnitude and the duration of the pandemic.
Capital markets reacted with caution at first to the coronavirus with equity markets reaching highs as late as February 19th. Then, as it became apparent that the risks presented by the virus were worldwide and far-reaching, markets dropped sharply resulting in one of the quickest descents from record highs to a bear market in history. Markets struggled to price the overflow of information and its potential impact on future earnings, and global equity markets experienced their most volatile swings since the financial crisis as investors exchanged equities for traditional safe haven assets such as precious metals and U.S. Treasuries. As it became apparent that the viral threat was not contained to China, governments attempted to stall its spread by shuttering many areas of the global economy and enacting emergency economic and enforcement measures. Oil demand was one of the many casualties of the slowdown, and compounding the problem, Saudi Arabia and Russia disagreed on the appropriate response and proceeded to enter a price and market share war. Both countries ramped up production right as demand was collapsing, and U.S. crude prices fell from over $60 a barrel to approximately $20 a barrel during the quarter. Historically, oil price declines have helped the U.S. economy, representing a cash windfall for consumers. However, with the growth of the U.S. shale industry, the Energy sector has become an important part of the U.S. economy and the price declines contributed to U.S. economic issues.
Although the U.S. Federal Reserve (Fed) entered the year forecasting unemployment to remain below 4% through 2022 and expecting no near-term rate policy changes, the Fed responded quickly to the economic threat posed by the virus with an emergency 50 basis point rate cut on March 3rd, followed by another 50 basis point cut on March 15th to bring the Fed’s benchmark rate to the range of 0% to 0.25%. This second-rate cut was accompanied by the restart of quantitative easing in the form of repurchases of $500 billion in Treasury’s and $200 billion in agency mortgage backed securities. Just over a week later, the Fed announced that it would adjust its quantitative easing program to purchase “in the amounts needed to support smooth market functioning and effective transmission of monetary policy to broader financial conditions and the economy,” effectively declining to set an upper limit on asset purchases. In conjunction with the Fed, Congress acted swiftly, approving a $2 trillion stimulus bill to arrive in the form of small business loans, mortgage forbearances, unemployment benefits and direct payments to households. Upon passage of the bill, equity markets rallied on the news that monetary and fiscal policy would cooperate and devote substantial resources to mitigate the economic consequences posed by the pandemic.
Performance
The Harbor Mid Cap Fund returned -11.15% (Retirement Class), -11.15% (Institutional Class), and -11.28% (Investor Class) for the five months ended April 30, 2020, strongly outperforming the broader Mid Cap market, as represented by the Russell Midcap® Index, which returned -14.68%.
Contributing to performance, Synopsys Inc. is a global leader in the supply and sale of electronic design automation (EDA) offerings. Appealing to engineers and software developers in the global electronics market, Synopsys offers software and hardware, intellectual property (IP) products, and technical support services vital in the design and manufacture of semiconductors and integrated circuits. Investors recognized the strength of Synopsys in the quarter for exceeding market expectations with its strong top-line growth, earnings and operating cash flow to drive the stock to outperform in the period. In the age of growing digital automation, Synopsys
10
Harbor Mid Cap Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
TOTAL RETURNS
For the periods ended 04/30/2020
6 Months | 1 Year | 5 Years | Unannualized | ||||||||
Life of Fund | |||||||||||
Harbor Mid Cap Fund | |||||||||||
Retirement Class1 | N/A | N/A | N/A | -11.15% | |||||||
Institutional Class1 | N/A | N/A | N/A | -11.15 | |||||||
Investor Class1 | N/A | N/A | N/A | -11.28 | |||||||
Comparative Index | |||||||||||
Russell Midcap®1 | N/A | N/A | N/A | -14.68% |
As stated in the Fund’s prospectus dated March 1, 2020, the expense ratios were 0.80% (Net) and 2.16% (Gross) (Retirement Class); 0.88% (Net) and 2.24% (Gross) (Institutional Class); 1.13% (Net) and 2.49% (Gross) (Administrative Class); and 1.25% (Net) and 2.61% (Gross) (Investor Class). The net expense ratios reflect an expense limitation agreement (excluding interest expense, if any) effective through 02/28/2021. 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.
has benefitted from strong customer demand for its complex EDA designs and solutions. Synopsys continues to benefit from its effective expansion into the software security field and consistent revenue growth in the IP division. Given the company’s loyal consumer base and proven ability to address growing demands for cloud storage and infrastructure protection, in our view, Synopsys is positioned to expand market share and drive earnings.
Detracting from performance, Reinsurance Group of America (RGA) is one of the largest and most sophisticated life reinsurers in the world. RGA focuses on growing its business by partnering with primary insurance companies and helping them underwrite difficult risk that they may not have the expertise to underwrite on their own. During the quarter, RGA shares underperformed due to concerns about mortality exposure and elevated claims due to coronavirus as well as possible credit losses in its investment portfolio. While the turmoil in the bond market did lower the value of the company’s investment portfolio, we do not expect its investment grade bond portfolio to suffer significant credit losses in the next few quarters. As far as the company’s mortality exposure, there is limited exposure to Italy, Spain, and China (all <1%). Due to high capital requirements and the long-term nature of potential clients' liabilities, there are only a handful of global competitors in the industry. RGA’s scale and growth strategy should continue drive earnings and gain market share, in our view.
OUTLOOK & STRATEGY
As of April 30, 2020, the Fund was overweight in the Industrials, Information Technology, and Financials sectors and was underweight in Energy, Utilities, Consumer Staples, and Consumer Discretionary. These weightings are an outgrowth of our fundamental, bottom-up stock selection process.
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 | The “Life of Fund” return as shown reflects the period 12/01/2019 through 04/30/2020. |
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 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 Fund
Portfolio of Investments—April 30, 2020 (Unaudited)
Portfolio of Investments—April 30, 2020 (Unaudited)
Sector Allocation(% of investments)
Portfolio of Investments
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—98.6% | |||
Shares | Value | ||
AEROSPACE & DEFENSE—1.1% | |||
761 | General Dynamics Corp. | $99 | |
AUTO COMPONENTS—0.8% | |||
2,537 | BorgWarner Inc. | 72 | |
BANKS—0.8% | |||
6,551 | KeyCorp | 76 | |
BUILDING PRODUCTS—1.9% | |||
4,219 | Masco Corp.* | 173 | |
CAPITAL MARKETS—8.0% | |||
6,135 | Eaton Vance Corp. | 225 | |
3,086 | Intercontinental Exchange Inc. | 276 | |
2,126 | Raymond James Financial Inc. | 140 | |
1,985 | Stifel Financial Corp. | 88 | |
729 | |||
CHEMICALS—3.6% | |||
1,443 | Albemarle Corp.* | 89 | |
1,595 | Eastman Chemical Co. | 96 | |
1,133 | Scotts Miracle-Gro Co. | 141 | |
326 | |||
COMMERCIAL SERVICES & SUPPLIES—4.4% | |||
3,143 | Republic Services Inc* | 246 | |
3,190 | Stericycle Inc.* | 156 | |
402 | |||
CONTAINERS & PACKAGING—2.2% | |||
1,234 | Packaging Corp. of America* | 119 | |
2,992 | Sealed Air Corp.* | 86 | |
205 | |||
ELECTRICAL EQUIPMENT—1.6% | |||
4,068 | Sensata Technologies Holding plc (United Kingdom)* | 148 | |
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—2.5% | |||
2,316 | Keysight Technologies Inc.* | 224 | |
ENTERTAINMENT—2.2% | |||
3,104 | Activision Blizzard Inc.* | 198 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—5.4% | |||
5,844 | Americold Realty Trust* | $179 | |
624 | Boston Properties Inc.* | 60 | |
866 | SBA Communications Corp.* | 251 | |
490 | |||
FOOD & STAPLES RETAILING—1.5% | |||
2,494 | Sysco Corp.* | 140 | |
HEALTH CARE EQUIPMENT & SUPPLIES—0.8% | |||
1,660 | Dentsply Sirona Inc.* | 70 | |
HEALTH CARE PROVIDERS & SERVICES—2.7% | |||
1,317 | AmerisourceBergen Corp.* | 118 | |
758 | Laboratory Corp. of America Holdings* | 125 | |
243 | |||
HOTELS, RESTAURANTS & LEISURE—2.0% | |||
2,450 | Darden Restaurants Inc.* | 181 | |
HOUSEHOLD DURABLES—2.3% | |||
4,504 | DR Horton Inc.* | 213 | |
INSURANCE—4.9% | |||
2,876 | Progressive Corp.* | 222 | |
1,079 | Reinsurance Group of America Inc. | 113 | |
779 | Renaissance Holdings Ltd. (Bermuda)* | 114 | |
449 | |||
IT SERVICES—7.7% | |||
1,275 | Akamai Technologies Inc.* | 125 | |
1,382 | Arrow Electronics Inc.* | 87 | |
2,685 | Black Knight Inc.* | 189 | |
1,812 | Global Payments Inc.* | 301 | |
702 | |||
LIFE SCIENCES TOOLS & SERVICES—5.7% | |||
2,194 | Agilent Technologies Inc. | 168 | |
480 | Bio-Rad Laboratories Inc.* | 211 | |
2,515 | Syneos Health Inc.* | 141 | |
520 | |||
MACHINERY—5.8% | |||
913 | Cummins Inc. | 149 | |
1,368 | Dover Corp. | 128 |
12
Harbor Mid Cap Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—Continued | |||
Shares | Value | ||
MACHINERY—Continued | |||
1,039 | Snap-on Inc. | $136 | |
1,862 | Woodward Inc. | 113 | |
526 | |||
MULTI-UTILITIES—2.1% | |||
2,093 | WEC Energy Group Inc.* | 190 | |
OIL, GAS & CONSUMABLE FUELS—0.9% | |||
1,162 | Cimarex Energy Co.* | 29 | |
3,162 | Continental Resources Inc.* | 52 | |
81 | |||
REAL ESTATE MANAGEMENT & DEVELOPMENT—2.0% | |||
4,299 | CBRE Group Inc.* | 185 | |
ROAD & RAIL—1.7% | |||
2,281 | CSX Corp.* | 151 | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—8.5% | |||
3,995 | Applied Materials Inc. | 199 | |
1,194 | Cabot Microelectronics Corp. | 146 | |
2,270 | Skyworks Solutions Inc.* | 236 | |
2,259 | Xilinx Inc. | 197 | |
778 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
SOFTWARE—11.1% | |||
1,010 | ANSYS Inc.* | $264 | |
1,494 | Autodesk Inc.* | 280 | |
656 | Intuit Inc. | 177 | |
1,826 | Synopsys Inc.* | 287 | |
1,008 | |||
SPECIALTY RETAIL—2.4% | |||
4,418 | TJX Companies Inc.* | 217 | |
TRADING COMPANIES & DISTRIBUTORS—2.0% | |||
3,021 | Air Lease Corp. | 79 | |
1,754 | GATX Corp. | 104 | |
183 | |||
TOTAL COMMON STOCKS | |||
(Cost $9,890) | 8,979 | ||
TOTAL INVESTMENTS—98.6% | |||
(Cost $9,890) | 8,979 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—1.4% | 127 | ||
TOTAL NET ASSETS—100.0% | $9,106 |
FAIR VALUE MEASUREMENTS
All investments at April 30, 2020 (as disclosed in the preceding Portfolio of Investments) were classified as Level 1. There were no Level 3 investments at April 30, 2020 or December 1, 2019 (inception).
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.
13
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
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
Mario E. Abularach, CFA, CMT
Management’s Discussion of
Fund Performance
Fund Performance
MARKET REVIEW
U.S. equities ended the first quarter sharply lower after achieving record highs in February following a strong fourth quarter as stocks benefitted from waning recession fears, improved trade sentiment, and accommodative U.S. Federal Reserve (Fed) policies. However, the markets fell sharply as the coronavirus spread rapidly throughout the country, causing unprecedented market disruptions and financial damage, and heightening fears of a severe economic downturn. Many states adopted extraordinary measures to fight the contagion, while companies shuttered stores and production, withdrew earnings guidance, and drew down credit lines at a record pace as borrowing costs soared. Volatility surged to extreme levels, and the S&P 500 Index suffered its fastest ever decline into a bear market. At the end of March, the index surged to its best weekly gain in 11 years, with emergency stimulus from the Fed and the U.S. government bolstering the market. The Fed introduced a massive package of policy measures to support financial markets and the economy, including a sharp reduction in interest rates to a range of 0% – 0.25%, open-ended asset purchases, and measures to improve liquidity and the flow of credit. President Trump signed into law the largest economic stimulus plan in U.S. history, which extends roughly $2 trillion in aid to consumers, businesses, states, and local governments. Lawmakers also discussed additional large-scale spending measures to stabilize the economy. On the political front, Joe Biden became the overwhelming favorite to win the Democratic nomination for president after a string of victories in primary elections.
Performance
For the six-month period ended April 30, 2020, Harbor Mid Cap Growth Fund outperformed the Russell Midcap® Growth Index. The Fund returned 3.79% (Retirement Class), 3.69% (Institutional Class), 3.49% (Administrative Class) and 3.53% (Investor Class) for the period, while the Russell Midcap® Growth Index finished down -1.78%.
Relative outperformance was driven by positive security selection, most notably within the Information Technology, Healthcare and Communication Services sectors. Unfavorable security selection within Consumer Discretionary partially offset positive returns. Sector allocation, a residual of the bottom-up stock selection process, also contributed to results. An overweight allocation to Healthcare and an underweight to Industrials contributed most to performance.
Advanced Micro Devices, a semiconductor company, was the Fund’s most significant contributor during the period. The stock rose over the period after the Trump administration announced a phase one trade deal with China, removing a big obstacle for the company. The company has also introduced new products that were well received by customers. Other notable contributors during the period were medical device manufacturer Dexcom, video-first communication platform Zoom Video Communications, and medical devices provider Insulet.
Marriot Vacations, a pure-play timeshare company, was the Fund’s most significant detractor during the period. Shares of Marriot Vacations fell after reporting a fourth quarter revenue miss and full-year earnings estimates that were below expectations as the global spread of COVID-19 meaningfully weighed on hotel, leisure, and travel companies due to a sharp decrease in demand for their services. Other notable detractors during the period were insurance services provider BRP, pinboard-style photo-sharing website Pinterest, and cruise business Norwegian Cruise Line.
14
Harbor Mid Cap Growth Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
TOTAL RETURNS
For the periods ended 04/30/2020
Unannualized | 1 Year | Annualized | |||||||||
6 Months | 5 Years | 10 Years | |||||||||
Harbor Mid Cap Growth Fund | |||||||||||
Retirement Class1 | 3.79% | 3.41% | 10.96% | 12.36% | |||||||
Institutional Class | 3.69 | 3.31 | 10.89 | 12.33 | |||||||
Administrative Class | 3.49 | 2.99 | 10.59 | 12.04 | |||||||
Investor Class | 3.53 | 2.90 | 10.48 | 11.92 | |||||||
Comparative Index | |||||||||||
Russell Midcap® Growth | -1.78% | 0.23% | 8.88% | 12.19% |
As stated in the Fund’s prospectus dated March 1, 2020, the expense ratios were 0.80% (Net) and 0.83% (Gross) (Retirement Class); 0.88% (Net) and 0.91% (Gross) (Institutional Class); 1.13% (Net) and 1.16% (Gross) (Administrative Class); and 1.25% (Net) and 1.28% (Gross) (Investor Class). The Adviser has contractually agreed to reduce the management fee to 0.72% through 02/28/2021. 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
The onset of COVID-19 has caused economic, social and market conditions to change dramatically in a very short period. The virus has created an almost complete economic standstill in affected countries. The impact extends to virtually every business in almost every sector. Given these developments, our focus has been on identifying those companies that we believe can withstand a protracted downturn and will be well positioned to accelerate when we come out the other side.
With that in mind, we are analyzing each company individually, stress testing our models with draconian revenue cuts and assumptions related to each company’s ability to cut costs. Additionally, we are assessing capital positions and the ability to meet cash needs during this period. We are leaning into growth areas that in our opinion can come out of this crisis strongly. We have reduced positions on the margin that have leverage and discretionary demand while using this time to upgrade the quality of the portfolio and take advantage of unusual dislocations that may present investment opportunities.
Our investment philosophy is based on four key underlying premises. We believe that changes in earnings expectations drive security prices and opportunities arise where our expectations differ significantly from consensus. In addition, we believe that human nature has an anchoring bias that can often miss transformational change, and early identification of this change can lead to excess returns. We view being flexible as a key tenant of our philosophy and recognize that growth exists in unexpected places across sectors of the market. Finally, we believe that our valuation discipline helps control portfolio risk by seeking to balance downside risk with potential upside reward.
We employ this philosophy, together with a bottom-up fundamental analysis and opportunistic investment approach, in managing the Fund. We consider a very broad universe of available stocks within the mid cap market, typically focusing on companies with accelerating earnings growth combined with a differentiated view relative to consensus.
The Fund is largely constructed without regard to benchmark weightings by sector. Bottom-up investment decisions resulted in increased exposure to the Healthcare sector during the period. This resulted in Healthcare becoming the Fund’s largest overweight by the end of the period, with Consumer Discretionary being the second largest overweight. As of the end of the period, the Fund’s largest underweight allocations were to the Industrials, Financials, and Real Estate sectors.
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.
15
Harbor Mid Cap Growth Fund
Portfolio of Investments—April 30, 2020 (Unaudited)
Portfolio of Investments—April 30, 2020 (Unaudited)
Sector Allocation(% of investments)
Portfolio of Investments
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—91.7% | |||
Shares | Value | ||
BEVERAGES—4.4% | |||
9,370 | Boston Beer Co. Inc.* | $4,371 | |
106,406 | Monster Beverage Corp.* | 6,577 | |
10,948 | |||
BIOTECHNOLOGY—8.0% | |||
35,331 | Apellis Pharmaceuticals Inc.* | 1,211 | |
9,549 | Argenx SE ADR (Netherlands)*,1 | 1,399 | |
9,129 | Ascendis Pharma AS ADR (Denmark)*,1 | 1,239 | |
87,871 | Exact Sciences Corp.* | 6,940 | |
16,805 | Galapagos NV (Belgium)* | 3,711 | |
2,168 | Galapagos NV ADR (Belgium)*,1 | 478 | |
34,108 | Ionis Pharmaceuticals Inc.* | 1,894 | |
11,898 | Kodiak Sciences Inc.* | 649 | |
17,552 | Seattle Genetics Inc.* | 2,408 | |
19,929 | |||
CAPITAL MARKETS—1.2% | |||
56,105 | Blackstone Group Inc. | 2,931 | |
COMMERCIAL SERVICES & SUPPLIES—1.6% | |||
50,214 | Copart Inc.* | 4,023 | |
DIVERSIFIED CONSUMER SERVICES—1.6% | |||
92,315 | Chegg Inc.* | 3,946 | |
ELECTRICAL EQUIPMENT—2.2% | |||
63,041 | Trane Technologies PLC (Ireland)* | 5,511 | |
ENTERTAINMENT—5.1% | |||
13,212 | Live Nation Entertainment Inc.* | 593 | |
25,658 | Roku Inc.* | 3,110 | |
58,203 | Spotify Technology SA (Sweden)* | 8,822 | |
12,525 | |||
HEALTH CARE EQUIPMENT & SUPPLIES—13.1% | |||
28,042 | ABIOMED Inc.* | 5,363 | |
29,343 | DexCom Inc.* | 9,836 | |
43,210 | Insulet Corp.* | 8,630 | |
17,498 | Novocure Ltd. (Jersey)* | 1,151 | |
94,352 | Tandem Diabetes Care Inc.* | 7,528 | |
32,508 | |||
HEALTH CARE TECHNOLOGY—2.2% | |||
28,348 | Veeva Systems Inc.* | 5,409 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
HOTELS, RESTAURANTS & LEISURE—5.5% | |||
95,215 | Aramark* | $2,600 | |
5,186 | Chipotle Mexican Grill Inc.* | 4,556 | |
69,383 | Planet Fitness Inc.* | 4,186 | |
12,623 | Vail Resorts Inc. | 2,159 | |
13,501 | |||
HOUSEHOLD DURABLES—1.0% | |||
51,219 | Lennar Corp. | 2,565 | |
INTERACTIVE MEDIA & SERVICES—0.7% | |||
21,445 | Match Group Inc.* | 1,650 | |
IT SERVICES—6.5% | |||
73,946 | GoDaddy Inc.* | 5,134 | |
24,688 | Leidos Holdings Inc.* | 2,440 | |
129,308 | Square Inc.* | 8,423 | |
15,997 | |||
LEISURE PRODUCTS—1.3% | |||
106,042 | Peloton Interactive Inc.* | 3,340 | |
LIFE SCIENCES TOOLS & SERVICES—1.1% | |||
34,396 | Agilent Technologies Inc. | 2,637 | |
PHARMACEUTICALS—1.9% | |||
144,201 | Elanco Animal Health Inc.* | 3,563 | |
7,119 | Reata Pharmaceuticals Inc.* | 1,126 | |
4,689 | |||
PROFESSIONAL SERVICES—2.6% | |||
9,998 | CoStar Group Inc.* | 6,481 | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—6.4% | |||
225,057 | Advanced Micro Devices Inc.* | 11,791 | |
155,353 | Marvell Technology Group Ltd. (Bermuda) | 4,154 | |
15,945 | |||
SOFTWARE—18.8% | |||
39,231 | 2U Inc.* | 932 | |
26,083 | Alteryx Inc.* | 2,952 | |
11,696 | Fair Isaac Corp.* | 4,128 | |
80,502 | Guidewire Software Inc.* | 7,313 | |
1,879 | Paycom Software Inc.* | 491 | |
8,744 | RingCentral Inc.* | 1,998 |
16
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 | ||
SOFTWARE—Continued | |||
221,594 | Slack Technologies Inc.* | $5,914 | |
80,566 | Splunk Inc.* | 11,308 | |
5,288 | Trade Desk Inc.* | 1,547 | |
51,402 | Workday Inc.* | 7,911 | |
15,966 | Zoom Video Communications Inc.* | 2,158 | |
46,652 | |||
SPECIALTY RETAIL—6.5% | |||
33,002 | Burlington Stores Inc.* | 6,029 | |
49,075 | Five Below Inc.* | 4,425 | |
59,679 | Floor & Decor Holdings Inc.* | 2,530 | |
48,576 | Williams-Sonoma Inc.* | 3,004 | |
15,988 | |||
TOTAL COMMON STOCKS | |||
(Cost $184,047) | 227,175 | ||
EXCHANGE-TRADED FUNDS—4.8% | |||
(Cost $10,400) | |||
CAPITAL MARKETS—4.8% | |||
84,244 | iShares Russell Mid-Cap Growth ETF | 11,851 | |
SHORT-TERM INVESTMENTS—4.7% | |||
(Cost $11,710) | |||
Principal Amount | Value | ||
REPURCHASE AGREEMENTS—4.7% | |||
$ | 11,710 | Repurchase agreement with Bank of America dated April 30, 2020 due May 01, 2020 at 0.010% collateralized by U.S. Treasury Bonds (value $11,771) | $11,710 |
TOTAL INVESTMENTS—101.2% | |||
(Cost $206,157) | 250,736 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—(1.2)% | (3,048) | ||
TOTAL NET ASSETS—100.0% | $247,688 |
FAIR VALUE MEASUREMENTS
At April 30, 2020, the repurchase agreement (as disclosed in the preceding Portfolio of Investments) was classified as Level 2 and all other investments were classified as Level 1. There were no Level 3 investments at April 30, 2020 or October 31, 2019.
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 | Depository receipts such as American Depostiory Receipts (ADRs), Global Depository Receipts (GDRs) and other country specific depository receipts are certificates evidencing ownership of shares of a foreign issuer. These certificates are issued by depository banks and generally trade on an established market in the U.S. or elsewhere. |
The accompanying notes are an integral part of the Financial Statements.
17
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
U.S. equities as measured by the S&P 500 Index declined just 3.2% over the six-month period ended April 30, 2020. However, this modest decline does not reflect the significant volatility in markets during the period. Global equity markets plummeted during February and March 2020 as the coronavirus outbreak shut down cities and economies across the globe. The public equity markets reacted to the spread of the virus swiftly and with heightened volatility. From February 19 through March 23, the S&P 500 Index fell nearly 34%. The S&P 500 Index had an average daily move of 5% in March (the next most volatile month in history was in November 1929 at nearly 4%) and had nine days of moves greater than 5%. However, markets rebounded strongly in late March and throughout April, in large part due to massive intervention by the U.S. Federal Reserve (Fed) and Congress which took aggressive measures to help mitigate the damage inflicted by the virus. The Fed cut interest rates 150 basis points in a two-week time frame and spent several trillion dollars to provide liquidity and shore up the financial system. Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act with approximately $2 trillion in support for the economy with potentially more to come.
The sell-off was particularly painful for value and smaller capitalization stocks. Over the trailing six months the Russell Midcap® Value Index was down 18.11% while the Russell Midcap® Growth Index declined just 1.8%. Smaller stocks also suffered bigger declines in the period as the Russell 2000® Index was down 15.5% while large caps as measured by the Russell 1000® Index were down just 3.6%. There were significant differences in sector returns in the period. Defensive sectors including Healthcare (+2.4%) and Consumer Staples (-3.7%) led among mid cap value stocks while Technology also held up relatively well falling only 6.8%. Cyclical sectors of the market suffered significant declines as Energy, Consumer Discretionary and Financial stocks declined between 25%-35% over the trailing six months. Real Estate Investment Trusts (REITs) which are typically more defensive due to their dividends also struggled in period.
Performance
The Harbor Mid Cap Value Fund returned -27.16% (Retirement Class), -27.24% (Institutional Class), -27.28% (Administrative Class) and -27.37% (Investor Class) compared to -18.11% for the Russell Midcap® Value Index for the six-month period ending April 30, 2020. The trailing six months proved to be a very difficult period for our deep value approach, particularly in the selloff over the first three months of 2020 as value stocks and smaller stocks were punished in the market decline. Cyclical sectors of the market, where we have found attractive investment opportunities, suffered more severe declines than more defensive and growth-oriented sectors during the market turmoil. While the Fund’s overweight to Consumer Discretionary and Financial stocks had a negative impact on results, this was offset by our underweight to Energy stocks which were down 35% and to Real Estate which also posted significant declines.
Stock selection detracted across several sectors and industries particularly in the Industrial, Financial and Real Estate sectors. Within Industrials, the Fund’s airline and aerospace and defense holdings struggled while among Financials exposure to regional banks, life and health insurers and mortgage REITs all contributed to the underperformance. Poor individual stock selection and an overweight to Hotel & Resort REITs had the most significant impact in the Real Estate sector. One of the few bright spots in the period was the Fund’s underweight to
18
Harbor Mid Cap Value Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
TOTAL RETURNS
For the periods ended 04/30/2020
Unannualized | 1 Year | Annualized | |||||||||
6 Months | 5 Years | 10 Years | |||||||||
Harbor Mid Cap Value Fund | |||||||||||
Retirement Class1 | -27.16% | -27.79% | -2.81% | 5.93% | |||||||
Institutional Class | -27.24 | -27.86 | -2.87 | 5.90 | |||||||
Administrative Class | -27.28 | -28.03 | -3.11 | 5.64 | |||||||
Investor Class | -27.37 | -28.13 | -3.23 | 5.51 | |||||||
Comparative Index | |||||||||||
Russell Midcap® Value | -18.11% | -16.74% | 1.99% | 8.09% |
As stated in the Fund’s prospectus dated March 1, 2020, 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 02/28/2021. 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.
Energy stocks. While the Fund’s exposure to refiners detracted in the Energy sector, this was more than offset by the underweight to oil and gas exploration and production and oil and gas equipment and services stocks, which suffered significant declines as oil prices were hit by both demand and supply shocks in the period.
Top individual contributors included long term holding Kroger in the Consumer Staples sector, Healthcare holdings Davita and Alexion Pharmaceuticals, Atlas Air Worldwide and Cummins Inc. in the Industrials sector, Consumer Discretionary holdings Big Lots and Best Buy, Diodes in the Technology sector and underweights to Real Estate stocks Welltower Inc. and Ventas.
The most significant detractors were concentrated in the Industrial and Financial sectors. Among Financials, mortgage REITs Invesco Mortgage Capital, PennyMac Mortgage Investment Trust and MFA Financial were down over 70%. Other Financials that struggled included regional banks Citizens Financial and CIT Group and credit card company Discover Financial. Within Industrials, the Fund’s airline holdings including United Airlines and JetBlue Airways declined as air travel was effectively halted. Aerospace and defense companies Spirit Aerosystems and Textron also struggled in the period. Other detractors included retailer Kohl’s Corp, Real Estate holdings Service Properties Trust and Xenia Hotels & Resorts in addition to the Fund’s underweight to Newmont Goldcorp which was up 50% in the period.
Outlook & Strategy
Sector positioning is 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 were to the Financial, Industrial and Consumer Discretionary sectors. Relative to the value benchmark, the Fund is overweight the Consumer Discretionary and Financial sectors while underweight Communication Services, Utilities and Real Estate. Among industries, the Fund is overweight construction machinery & heavy trucks, technology hardware, oil & gas refining and diversified chemicals while underweight multi-utilities, residential REITs and electric utilities.
Value stocks entered 2020 as inexpensive relative to growth stocks as they had been in the last 50 years with the exception of the Technology Bubble of the late 1990s. The arrival of COVID-19 widened the spread even further. The Fund’s portfolio continues to trade at a significant discount to the value benchmark on multiple measures. The Fund’s portfolio is trading at just 9.7x trailing earnings compared to 17.4x for the value benchmark, 1.1x book value compared to 1.6x for the benchmark and 5.5x cash flow compared to 9.3x for the Russell Midcap® Value Index.
Both in normal market periods and during large stock market downturns, we have followed our disciplined, diversified, value-oriented approach that patiently takes advantage of investors’ tendency to overreact to information about the prospects of each company’s long-term earnings and cash flows. While recent results for the Fund have been weak, we have weathered previous tough periods such as the Technology Bubble and the Global Financial Crisis. It has been our experience that difficult periods for value stocks have historically presented investors with attractive buying opportunities and, in our view, this episode seems to be providing such opportunities.
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.
19
Harbor Mid Cap Value Fund
Portfolio of Investments—April 30, 2020 (Unaudited)
Portfolio of Investments—April 30, 2020 (Unaudited)
Sector Allocation(% of investments)
Portfolio of Investments
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—100.4% | |||
Shares | Value | ||
AEROSPACE & DEFENSE—1.3% | |||
9,300 | Huntington Ingalls Industries Inc. | $1,780 | |
114,800 | Textron Inc. | 3,026 | |
4,806 | |||
AIR FREIGHT & LOGISTICS—0.6% | |||
74,217 | Atlas Air Worldwide Holdings Inc.* | 2,438 | |
AIRLINES—1.8% | |||
49,700 | Alaska Air Group Inc. | 1,616 | |
68,500 | American Airlines Group Inc. | 823 | |
224,500 | JetBlue Airways Corp.* | 2,187 | |
77,900 | United Airlines Holdings Inc.* | 2,304 | |
6,930 | |||
AUTO COMPONENTS—1.8% | |||
118,200 | American Axle & Manufacturing Holdings Inc.* | 510 | |
58,900 | BorgWarner Inc. | 1,683 | |
6,600 | Cooper-Standard Holdings Inc.* | 85 | |
196,900 | Goodyear Tire & Rubber Co. | 1,412 | |
31,300 | Lear Corp. | 3,056 | |
6,746 | |||
AUTOMOBILES—0.5% | |||
81,800 | Harley-Davidson Inc. | 1,786 | |
1,300 | Thor Industries Inc.* | 86 | |
1,872 | |||
BANKS—6.0% | |||
68,600 | CIT Group Inc. | 1,302 | |
231,000 | Citizens Financial Group Inc. | 5,172 | |
269,300 | Fifth Third Bancorp | 5,033 | |
169,600 | KeyCorp | 1,976 | |
437,800 | Regions Financial Corp. | 4,707 | |
147,400 | Zions Bancorporation | 4,659 | |
22,849 | |||
BEVERAGES—1.2% | |||
110,500 | Molson Coors Brewing Co. | 4,532 | |
BIOTECHNOLOGY—1.3% | |||
45,350 | Alexion Pharmaceuticals Inc.* | 4,874 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
BUILDING PRODUCTS—0.7% | |||
61,200 | Owens Corning | $2,654 | |
CAPITAL MARKETS—2.7% | |||
51,600 | Ameriprise Financial Inc. | 5,931 | |
120,600 | Ares Capital Corp. | 1,549 | |
45,400 | Lazard Ltd. (Bermuda) | 1,248 | |
329,374 | Prospect Capital Corp. | 1,429 | |
10,157 | |||
CHEMICALS—4.5% | |||
69,000 | Cabot Corp. | 2,338 | |
44,000 | Celanese Corp. | 3,655 | |
112,122 | Chemours Co. | 1,315 | |
79,800 | Eastman Chemical Co. | 4,829 | |
198,400 | Huntsman Corp. | 3,335 | |
70,400 | Trinseo SA (Luxembourg) | 1,440 | |
16,912 | |||
COMMERCIAL SERVICES & SUPPLIES—0.3% | |||
304,900 | Pitney Bowes Inc. | 1,076 | |
CONSUMER FINANCE—1.8% | |||
136,700 | Ally Financial Inc. | 2,241 | |
62,400 | Discover Financial Services | 2,681 | |
225,200 | Navient Corp. | 1,716 | |
6,638 | |||
CONTAINERS & PACKAGING—2.2% | |||
61,100 | Greif Inc.* | 2,071 | |
201,000 | O-I Glass Inc.* | 1,656 | |
55,200 | Silgan Holdings Inc. | 1,904 | |
83,600 | WestRock Co. | 2,691 | |
8,322 | |||
DIVERSIFIED FINANCIAL SERVICES—1.2% | |||
79,987 | Banco Latinoamericano de Comercio Exterior SA (Panama) | 913 | |
81,000 | Voya Financial Inc. | 3,659 | |
4,572 | |||
ELECTRIC UTILITIES—4.1% | |||
65,200 | Edison International | 3,828 |
20
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 | ||
ELECTRIC UTILITIES—Continued | |||
114,900 | FirstEnergy Corp. | $4,742 | |
277,800 | PPL Corp. | 7,061 | |
15,631 | |||
ELECTRICAL EQUIPMENT—0.6% | |||
30,700 | Regal Beloit Corp. | 2,180 | |
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—2.3% | |||
48,100 | Avnet Inc. | 1,444 | |
79,185 | Methode Electronics Inc. | 2,377 | |
13,988 | SYNNEX Corp. | 1,225 | |
161,700 | TTM Technologies Inc.* | 1,874 | |
105,000 | Vishay Intertechnology Inc. | 1,742 | |
8,662 | |||
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—9.5% | |||
213,903 | Brandywine Realty Trust | 2,387 | |
205,100 | Brixmor Property Group Inc. | 2,348 | |
464,916 | Franklin Street Properties Corp. | 2,529 | |
57,200 | Gaming and Leisure Properties Inc. | 1,615 | |
188,700 | Hersha Hospitality Trust | 987 | |
141,900 | Host Hotels & Resorts Inc. | 1,747 | |
96,600 | Industrial Logistics Properties Trust | 1,806 | |
71,600 | Iron Mountain Inc.* | 1,731 | |
87,600 | Lexington Realty Trust | 916 | |
52,750 | Office Properties Income Trust | 1,445 | |
97,200 | Omega Healthcare Investors Inc. | 2,833 | |
166,038 | Outfront Media Inc. | 2,605 | |
151,800 | Piedmont Office Realty Trust Inc. | 2,634 | |
30,543 | Retail Value Inc. | 442 | |
151,900 | RLJ Lodging Trust | 1,411 | |
138,200 | Sabra Health Care REIT Inc. | 1,772 | |
124,400 | Service Properties Trust | 862 | |
216,500 | SITE Centers Corp. | 1,312 | |
187,000 | Summit Hotel Properties Inc. | 1,133 | |
412,800 | VEREIT Inc. | 2,262 | |
134,500 | Xenia Hotels & Resorts Inc. | 1,305 | |
36,082 | |||
FOOD & STAPLES RETAILING—2.1% | |||
51,800 | Ingles Markets Inc. | 2,115 | |
183,700 | Kroger Co. | 5,807 | |
7,922 | |||
FOOD PRODUCTS—3.1% | |||
39,000 | Ingredion Inc. | 3,167 | |
37,700 | JM Smucker Co. | 4,332 | |
68,100 | Tyson Foods Inc. | 4,235 | |
11,734 | |||
GAS UTILITIES—1.4% | |||
130,000 | National Fuel Gas Co. | 5,330 | |
HEALTH CARE PROVIDERS & SERVICES—5.9% | |||
69,200 | Cardinal Health Inc. | 3,424 | |
65,900 | DaVita Inc.* | 5,207 | |
31,000 | HCA Healthcare Inc. | 3,406 | |
8,400 | Laboratory Corp. of America Holdings* | 1,382 | |
35,743 | McKesson Corp. | 5,049 | |
37,500 | Universal Health Services Inc. | 3,963 | |
22,431 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
HOTELS, RESTAURANTS & LEISURE—0.7% | |||
76,100 | Brinker International Inc. | $1,771 | |
30,500 | Wyndham Destinations Inc. | 780 | |
2,551 | |||
HOUSEHOLD DURABLES—3.2% | |||
101,478 | Ethan Allen Interiors Inc. | 1,148 | |
37,400 | Meritage Homes Corp.* | 1,966 | |
100,600 | PulteGroup Inc. | 2,844 | |
84,000 | Toll Brothers Inc. | 2,018 | |
38,300 | Whirlpool Corp. | 4,279 | |
12,255 | |||
INDEPENDENT POWER & RENEWABLE ELECTRICITY PRODUCERS—1.8% | |||
355,464 | Vistra Energy Corp. | 6,946 | |
INSURANCE—6.8% | |||
48,900 | Allstate Corp. | 4,974 | |
27,500 | American Financial Group Inc. | 1,822 | |
62,600 | Assured Guaranty Ltd. | 1,861 | |
97,100 | Hartford Financial Services Group Inc. | 3,689 | |
147,700 | Lincoln National Corp. | 5,239 | |
129,100 | Old Republic International Corp. | 2,059 | |
58,400 | Principal Financial Group Inc. | 2,126 | |
75,200 | Universal Insurance Holdings Inc. | 1,371 | |
139,000 | Unum Group | 2,425 | |
25,566 | |||
INTERNET & DIRECT MARKETING RETAIL—0.5% | |||
51,000 | eBay Inc.* | 2,031 | |
IT SERVICES—1.3% | |||
98,200 | DXC Technology Co. | 1,780 | |
164,100 | Western Union Co. | 3,130 | |
4,910 | |||
LEISURE PRODUCTS—0.5% | |||
40,300 | Brunswick Corp. | 1,923 | |
MACHINERY—6.3% | |||
42,500 | AGCO Corp. | 2,246 | |
100,600 | Allison Transmission Holdings Inc. | 3,656 | |
33,200 | Cummins Inc. | 5,428 | |
135,300 | Meritor Inc.* | 2,773 | |
43,100 | Oshkosh Corp. | 2,910 | |
20,600 | Snap-on Inc. | 2,684 | |
55,500 | Timken Co. | 2,086 | |
241,200 | Wabash National Corp. | 1,978 | |
23,761 | |||
MEDIA—1.3% | |||
82,500 | AMC Networks Inc.* | 1,968 | |
144,100 | TEGNA Inc. | 1,545 | |
87,672 | ViacomCBS Inc.* | 1,513 | |
5,026 | |||
METALS & MINING—1.2% | |||
50,200 | Reliance Steel & Aluminum Co. | 4,497 | |
MORTGAGE REAL ESTATE INVESTMENT TRUSTS (REITs)—0.9% | |||
166,600 | Annaly Capital Management Inc. | 1,041 | |
171,000 | Invesco Mortgage Capital Inc. | 520 |
21
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 | ||
MORTGAGE REAL ESTATE INVESTMENT TRUSTS (REITs)—Continued | |||
298,300 | MFA Financial Inc. | $522 | |
140,800 | PennyMac Mortgage Investment Trust | 1,464 | |
3,547 | |||
MULTILINE RETAIL—1.1% | |||
76,600 | Big Lots Inc. | 1,796 | |
76,300 | Kohl's Corp. | 1,408 | |
150,600 | Macy's Inc. | 883 | |
4,087 | |||
MULTI-UTILITIES—1.4% | |||
93,150 | MDU Resources Group Inc.* | 2,092 | |
62,100 | Public Service Enterprise Group Inc. | 3,149 | |
5,241 | |||
OIL, GAS & CONSUMABLE FUELS—3.0% | |||
142,300 | Devon Energy Corp. | 1,774 | |
120,100 | HollyFrontier Corp. | 3,968 | |
61,900 | Marathon Petroleum Corp. | 1,986 | |
58,700 | Valero Energy Corp. | 3,719 | |
11,447 | |||
PAPER & FOREST PRODUCTS—0.5% | |||
86,900 | Domtar Corp. | 2,030 | |
PHARMACEUTICALS—2.5% | |||
101,500 | Corcept Therapeutics Inc.* | 1,285 | |
49,900 | Jazz Pharmaceuticals plc (Ireland)* | 5,501 | |
110,150 | Lannett Co. Inc.* | 1,051 | |
93,493 | Mylan NV (Netherlands)* | 1,568 | |
9,405 | |||
PROFESSIONAL SERVICES—0.8% | |||
43,100 | ManpowerGroup Inc. | 3,200 | |
REAL ESTATE INVESTMENT TRUSTS (REITs)—0.4% | |||
139,000 | Paramount Group Inc.* | 1,341 | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—0.9% | |||
15,600 | Cirrus Logic Inc.* | 1,179 | |
46,500 | Diodes Inc.* | 2,367 | |
3,546 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
SPECIALTY RETAIL—3.9% | |||
92,800 | Bed Bath & Beyond Inc. | $574 | |
44,300 | Best Buy Co. Inc. | 3,399 | |
73,700 | Dick's Sporting Goods Inc. | 2,166 | |
81,800 | Foot Locker Inc. | 2,097 | |
166,100 | Gap Inc. | 1,349 | |
30,700 | Group 1 Automotive Inc. | 1,737 | |
677,800 | Office Depot Inc. | 1,505 | |
52,000 | Penske Automotive Group Inc. | 1,871 | |
14,698 | |||
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS—2.8% | |||
242,314 | HP Inc. | 3,758 | |
103,900 | Seagate Technology plc (Ireland) | 5,190 | |
93,900 | Xerox Holdings Corp. | 1,718 | |
10,666 | |||
TEXTILES, APPAREL & LUXURY GOODS—0.3% | |||
60,900 | Capri Holdings Ltd. (Virgin Islands)* | 929 | |
THRIFTS & MORTGAGE FINANCE—0.9% | |||
169,600 | MGIC Investment Corp. | 1,240 | |
136,700 | Radian Group Inc. | 2,048 | |
3,288 | |||
TRADING COMPANIES & DISTRIBUTORS—0.5% | |||
65,642 | Triton International Ltd. (Bermuda) | 2,034 | |
TOTAL COMMON STOCKS | |||
(Cost $522,723) | 380,275 | ||
TOTAL INVESTMENTS—100.4% | |||
(Cost $522,723) | 380,275 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—(0.4)% | (1,387) | ||
TOTAL NET ASSETS—100.0% | $378,888 |
FAIR VALUE MEASUREMENTS
All investments at April 30, 2020 (as disclosed in the preceding Portfolio of 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 period ended April 30, 2020.
Valuation Description | Beginning Balance as of 11/01/2019 (000s) | Purchases (000s) | Sales (000s) | Discount/ (Premium) (000s) | Total Realized Gain/(Loss) (000s) | Change in Unrealized Appreciation/ (Depreciation) (000s) | Transfers Into Level 3 (000s) | Transfers Out of Level 3 (000s) | Ending Balance as of 04/30/2020 (000s) | Unrealized Gain/(Loss) as of 04/30/2020 (000s) | ||||||||||
Common Stocks | ||||||||||||||||||||
Chemicals | $4 | $— | $(9) | $— | $5 | $— | $— | $— | $— | $— |
22
Harbor Mid Cap Value Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
* | Non-income producing security |
The accompanying notes are an integral part of the Financial Statements.
23
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 began with stocks making new all-time highs, driven by an economy operating at full employment, absent inflationary pressures, an accommodative U.S. Federal Reserve, and waning concerns over trade negotiations. However, markets turned sharply lower in February when it became apparent that COVID-19 had arrived in the U.S. and containment was no longer possible. The rise of the virus impaired the economic backdrop for global growth and precipitated the sharpest and fastest decline ever for the economy and the stock market. Deleveraging and forced liquidations of stocks and bonds resulted in extreme volatility as investors sought the safety of cash above all else. Oil demand dried up, credit spreads showed signs of stress, and massive stimulus measures were implemented across the world. The speed of the sell-off and ensuing liquidity crunch resulted in stock correlations spiking towards 1, providing little differentiation between businesses. Though any significant market drawdown is painful, they also provide opportunities to take advantage of price dislocations. Towards the end of March, variations in price action suggested that price discovery was once again taking place after a period where forced liquidations drove much of the market.
Performance
Harbor Small Cap Growth Fund returned -2.63% (Retirement Class), -2.64% (Institutional Class), -2.82% (Administrative Class) and -2.90% (Investor Class) for the six-months ending April 30, 2020, outperforming the Russell 2000® Growth Index, which returned -7.62%. The outperformance was broad based with eight sectors adding double digits to relative returns. Notable strength in Health Care and Industrials offset relative weakness in Energy.
Health Care was the top source of relative and absolute strength, adding 365 basis points (bps) to relative returns, with performance driven by strong stock selection. We believe Health Care is one of the best growth areas of the market and continue to find opportunities within the sector that offer exciting, innovation-driven growth. We remain constructive on the sector broadly as the sector has been largely insulated from the global macroeconomic and employment disruptions caused by COVID-19 and conversely is a beneficiary of some of the impacts from the pandemic. Furthermore, in this environment, we believe that high quality businesses supported by strong cash flows and healthy revenue streams should be better able to weather the storm. In particular, we are finding attractive opportunities across a variety of sub-sectors including health care tools and equipment, medical technology, and therapeutics. Medicines Company, a late-stage drug developer focused on cholesterol management therapies for cardiovascular disease and long-term high conviction holding for the portfolio, was the key driver for both the sector and the portfolio during the period. The stock was up meaningfully after the late November announcement that Novartis was acquiring the company at a premium.
Industrials was another strong contributor, adding 122 bps to relative results. This sector has been particularly impacted by slowing business activity and recession fears brought about by trade worries, slowing global growth and more recently COVID-19. Despite macroeconomic concerns, we believe exciting growth opportunities remain in the group, especially within certain segments, such as building products and domestic manufacturing. One notable investment within the sector is Trex Company, Inc, a manufacturer of non-wood decking alternatives, which held up better than sector peers during the period. Trex has a strong balance sheet
24
Harbor Small Cap Growth Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
TOTAL RETURNS
For the periods ended 04/30/2020
Unannualized | 1 Year | Annualized | |||||||||
6 Months | 5 Years | 10 Years | |||||||||
Harbor Small Cap Growth Fund | |||||||||||
Retirement Class1 | -2.63% | -0.21% | 6.95% | 10.80% | |||||||
Institutional Class | -2.64 | -0.29 | 6.88 | 10.77 | |||||||
Administrative Class | -2.82 | -0.58 | 6.54 | 10.48 | |||||||
Investor Class | -2.90 | -0.70 | 6.49 | 10.36 | |||||||
Comparative Index | |||||||||||
Russell 2000® Growth | -7.62% | -9.22% | 5.19% | 9.96% |
As stated in the Fund’s prospectus dated March 1, 2020, 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.
and has benefitted from the stay-at-home theme as consumers are shifting their expenses from experiences to home improvement. We continue to like the long-term trajectory for Trex given the quality balance sheet and strong organic growth.
Energy was the largest source of relative weakness, costing 158 bps of relative returns. An unprecedented combination of supply and demand issues led to a dramatic decline in Energy commodities and stocks within the Energy sector. The effects of COVID-19 are proving to be the most disruptive event ever for Energy companies, with the potential for global demand to be down nearly 25% in the second quarter. Contributing to the negative results in the Energy sector is the ongoing conflict between Russia and Saudi Arabia, introducing additional long-term concerns to industry supply discipline. Given the macro uncertainty facing the sector, we decided to exit our investments in the group during the quarter. We will continue to monitor the space and look to opportunistically reinvest in idiosyncratic growth stories that can benefit from future changes in supply or demand.
Outlook & Strategy
While headlines continue to show spikes in reported infections, and another move lower is certainly possible, we do believe that the brunt of the risk repricing has already occurred. We could also point to signs that are typically evident during a “bottoming” process like panic selling, forced liquidations, and deleveraging by quantitative strategies but acknowledge we are in uncharted territory. Our view, and hope, is that the policies enacted in the U.S. will help the economy bridge the gap from now until workers can safely return to their jobs. When that happens, our expectation remains for recovery in economic activity, albeit at a measured pace until a viable therapeutic agent and, ultimately, a vaccine is mass produced. We remain committed to a balanced approach within the portfolio and have exposure to both defensive stocks which we believe provides a ballast during turbulent times, as well as those more economically sensitive names that, in our view, will benefit most when activity resumes to pre-crisis levels. We have been encouraged by how our portfolio has acted during this environment and we remain committed to the pursuit of refining portfolio positioning as the path forward regarding the crisis comes into view.
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.
25
Harbor Small Cap Growth Fund
Portfolio of Investments—April 30, 2020 (Unaudited)
Portfolio of Investments—April 30, 2020 (Unaudited)
Sector Allocation(% of investments)
Portfolio of Investments
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—95.6% | |||
Shares | Value | ||
AEROSPACE & DEFENSE—1.6% | |||
33,309 | Teledyne Technologies Inc.* | $10,848 | |
BANKS—0.9% | |||
61,090 | Signature Bank* | 6,548 | |
BIOTECHNOLOGY—12.6% | |||
229,100 | ACADIA Pharmaceuticals Inc.* | 11,068 | |
121,213 | Acceleron Pharma Inc.* | 10,973 | |
127,710 | Ascendis Pharma AS ADR (Denmark)*,1 | 17,334 | |
220,656 | Blueprint Medicines Corp.* | 12,981 | |
175,160 | Fate Therapeutics Inc.* | 4,796 | |
69,870 | Global Blood Therapeutics Inc.* | 5,347 | |
1,308,979 | Ironwood Pharmaceuticals Inc.* | 13,090 | |
166,380 | Momenta Pharmaceuticals Inc.* | 5,274 | |
308,400 | Orchard Therapeutics plc ADR (United Kingdom)*,1 | 3,473 | |
76,690 | Turning Point Therapeutics Inc.* | 3,950 | |
88,286 | |||
BUILDING PRODUCTS—4.1% | |||
257,700 | Advanced Drainage Systems Inc.* | 10,447 | |
190,430 | Trex Co. Inc.* | 18,133 | |
28,580 | |||
CAPITAL MARKETS—2.7% | |||
123,484 | Hamilton Lane Inc. | 8,008 | |
175,162 | LPL Financial Holdings Inc. | 10,548 | |
18,556 | |||
COMMERCIAL SERVICES & SUPPLIES—2.7% | |||
80,590 | MSA Safety Inc. | 9,069 | |
60,440 | Unifirst Corp.* | 10,163 | |
19,232 | |||
COMMUNICATIONS EQUIPMENT—2.2% | |||
80,591 | Lumentum Holdings Inc.* | 6,521 | |
737,035 | Viavi Solutions Inc.* | 8,903 | |
15,424 | |||
CONSUMER FINANCE—1.3% | |||
125,440 | FirstCash Inc. | 9,012 | |
CONTAINERS & PACKAGING—1.8% | |||
317,500 | Berry Global Group Inc.* | 12,633 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
ENTERTAINMENT—3.5% | |||
41,528 | Madison Square Garden Entertainment Corp.* | $3,434 | |
41,528 | Madison Square Garden Sports Corp.* | 7,115 | |
1,857,850 | Zynga Inc.* | 14,008 | |
24,557 | |||
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—2.0% | |||
97,486 | CyrusOne Inc. | 6,839 | |
249,900 | National Storage Affiliates Trust* | 7,117 | |
13,956 | |||
FOOD & STAPLES RETAILING—1.2% | |||
262,898 | Grocery Outlet Holding Corp.* | 8,747 | |
HEALTH CARE EQUIPMENT & SUPPLIES—4.9% | |||
107,400 | Haemonetics Corp.* | 12,220 | |
63,371 | Masimo Corp.* | 13,556 | |
103,340 | Tandem Diabetes Care Inc.* | 8,244 | |
34,020 | |||
HEALTH CARE PROVIDERS & SERVICES—4.5% | |||
69,870 | Amedisys Inc.* | 12,868 | |
167,680 | Quest Diagnostics Inc.* | 18,463 | |
31,331 | |||
HEALTH CARE TECHNOLOGY—0.8% | |||
34,450 | Teladoc Health Inc.* | 5,670 | |
HOUSEHOLD DURABLES—4.6% | |||
378,260 | KB Home* | 9,926 | |
288,901 | Skyline Champion Corp.* | 5,694 | |
180,030 | Topbuild Corp.* | 16,777 | |
32,397 | |||
INSURANCE—4.6% | |||
158,911 | First American Financial Corp.* | 7,329 | |
237,225 | Palomar Holdings Inc.* | 13,878 | |
102,411 | Primerica Inc.* | 10,641 | |
31,848 | |||
IT SERVICES—3.9% | |||
288,245 | Repay Holdings Corp.* | 5,151 | |
113,740 | Science Applications International Corp.* | 9,288 |
26
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 | ||
IT SERVICES—Continued | |||
85,632 | WEX Inc.* | $11,331 | |
35,693 | WNS Holdings Ltd. ADR (India)*,1 | 1,743 | |
27,513 | |||
LIFE SCIENCES TOOLS & SERVICES—6.5% | |||
39,810 | Bio-Rad Laboratories Inc.* | 17,521 | |
127,874 | ICON plc (Ireland)* | 20,520 | |
62,973 | Repligen Corp.* | 7,314 | |
45,355 | |||
MACHINERY—3.8% | |||
150,140 | Lincoln Electric Holdings Inc. | 12,088 | |
380,541 | Timken Co. | 14,300 | |
26,388 | |||
MARINE—0.3% | |||
62,285 | Matson Inc. | 1,883 | |
PHARMACEUTICALS—6.0% | |||
205,501 | Catalent Inc.* | 14,210 | |
413,040 | Pacira BioSciences Inc.* | 17,054 | |
39,970 | Reata Pharmaceuticals Inc.* | 6,322 | |
290,200 | Rocket Pharmaceuticals Inc.* | 4,295 | |
41,881 | |||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—2.4% | |||
183,937 | Advanced Energy Industries Inc.* | 10,227 | |
294,420 | SiTime Corp.* | 6,377 | |
16,604 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
SOFTWARE—13.5% | |||
353,083 | 8x8 Inc.* | $5,988 | |
254,124 | ACI Worldwide Inc.* | 6,963 | |
189,780 | Bottomline Technologies de Inc.* | 7,901 | |
175,480 | Cerence Inc.* | 3,713 | |
77,670 | Envestnet Inc.* | 4,856 | |
25,278 | Fair Isaac Corp.* | 8,922 | |
365,914 | Mimecast Ltd. (Jersey)* | 14,966 | |
84,005 | NICE Ltd. ADR (Israel)*,1 | 13,802 | |
593,390 | Nuance Communications Inc.* | 11,986 | |
44,569 | Paylocity Holding Corp.* | 5,105 | |
84,650 | Proofpoint Inc.* | 10,304 | |
94,506 | |||
SPECIALTY RETAIL—1.5% | |||
113,410 | Five Below Inc.* | 10,225 | |
TRADING COMPANIES & DISTRIBUTORS—1.7% | |||
315,546 | Rush Enterprises Inc. | 11,833 | |
TOTAL COMMON STOCKS | |||
(Cost $583,924) | 667,833 | ||
TOTAL INVESTMENTS—95.6% | |||
(Cost $583,924) | 667,833 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—4.4% | 30,848 | ||
TOTAL NET ASSETS—100.0% | $698,681 |
FAIR VALUE MEASUREMENTS
All investments at April 30, 2020 (as disclosed in the preceding Portfolio of Investments) were classified as Level 1. There were no Level 3 investments at April 30, 2020 or October 31, 2019.
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 | Depository receipts such as American Depostiory Receipts (ADRs), Global Depository Receipts (GDRs) and other country specific depository receipts are certificates evidencing ownership of shares of a foreign issuer. These certificates are issued by depository banks and generally trade on an established market in the U.S. or elsewhere. |
The accompanying notes are an integral part of the Financial Statements.
27
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
Equities performed quite well in the final months of 2019, posting strong gains. Positive equity performance was broad as stocks across market capitalizations and sectors advanced significantly. The sector rotation that noticeably began in September 2019 continued through the end of the year, though it was more muted than during those several weeks following Labor Day.
Optimism over an agreement on a Chinese trade deal increased throughout November and December, and by the end of the year, the President was tweeting about a deal that he would sign in Beijing in mid-January. The status of a trade deal between the U.S. and China had been the market’s central concern for almost two years, so the possibility of an actual deal was received favorably by most market participants.
As one might expect given the returns generated in November and December, investor sentiment improved broadly, across many fronts. Domestic economic data and corporate earnings were generally viewed positively in the last months of the year. Optimism increased regarding global economic prospects, and the U.K. elections in December eased concerns regarding a hard Brexit that could possibly dampen European economies. Many investors viewed the U.S. Federal Reserve’s policies as an accommodative factor rather than an impediment to growth. Even at the sector level, healthcare investors became more confident that Medicare for All proposals from some Democratic Presidential candidates were less likely to happen, and the resulting change in sentiment contributed to positive performance for those stocks.
Then everything changed in the first four months of 2020. Equity markets across the globe sold off sharply during the first quarter of 2020. Though domestic markets were actually positive for the year until mid-February, the enormity of the coronavirus pandemic ultimately overwhelmed investors’ sentiment by the end of March.
Once-important fundamental factors like the initial trade agreement with China and corporate earnings were discarded as no longer relevant when the virus went global. New cases became one of the only relevant metrics for investors. As the virus spread, market participants were faced with conditions that had not previously been contemplated. How long would bars and restaurants be closed, and how would the resulting loss of hospitality employment impact the global economy?
As the spread of the virus accelerated, investors shifted their concerns to the rise in COVID-19 cases in this country. When it became apparent in March that the United States would also experience hospitality disruptions and shelter-in-place orders to combat the disease, investors sold dramatically. The domestic markets were temporarily halted because of limit-down conditions four times in eight trading days during March. As a comparison, the markets were halted once during the 2008 crisis. The large number of limit-down halts is indicative of the high level of fear that was apparent in the domestic equity markets.
Policy makers have responded to growing economic fears, and fiscal stimulus packages have been passed in both Federal and State jurisdictions. The Federal Reserve has also provided monetary stimulus, though many pundits believe that fiscal measures will be more crucial. With many states closing venues and businesses, policy makers are attempting to provide a financial bridge for individuals and businesses to get to a time when conditions return to a
* | The Board of Trustees approved the reorganization of the Harbor Small Cap Growth Opportunities Fund into the Harbor Small Cap Growth Fund. The reorganization occurred on the close of business on May 15, 2020. Additional information related to the reorganization can be found in the supplement to the Fund’s prospectus as filed with the Securities and Exchange Commission on March 30, 2020. |
28
Harbor Small Cap Growth Opportunities Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
TOTAL RETURNS
For the periods ended 04/30/2020
Unannualized | 1 Year | Annualized | |||||||||
6 Months | 5 Years | Life of Fund | |||||||||
Harbor Small Cap Growth Opportunities Fund | |||||||||||
Retirement Class1,2 | -8.10% | -15.91% | 3.00% | 3.98% | |||||||
Institutional Class1 | -8.13 | -15.95 | 2.94 | 3.93 | |||||||
Administrative Class1 | -8.12 | -16.02 | 2.82 | 3.79 | |||||||
Investor Class1 | -8.37 | -16.29 | 2.57 | 3.54 | |||||||
Comparative Index | |||||||||||
Russell 2000® Growth1 | -7.62% | -9.22% | 5.19% | 5.92% |
As stated in the Fund’s prospectus dated March 1, 2020, the expense ratios were 0.83% (Retirement Class); 0.91% (Institutional Class); 1.16% (Administrative Class); and 1.28% (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.
more normal state. A key element of investors’ angst is that nobody can say when a more normal state will occur. No policy makers or pundits have the answer for how long these restrictions will be in place to combat the spread of COVID-19.
Performance
For the six months ended April 30, 2020, Harbor Small Cap Growth Opportunities Fund returned -8.10% (Retirement Class), -8.13% (Institutional Class), -8.12% (Administrative Class), and -8.37% (Investor Class) underperforming its benchmark, the Russell 2000® Growth Index which was down 7.62% for the same period.
In April, the market rebounded as investors paused their indiscriminate selling and started trying to differentiate between the outlooks of each company in a post COVID-19 world. In March, we saw stocks of companies that treat cancer patients decline similarly to consumer-driven businesses that are directly impacted by the shelter-in-place orders and even had to temporarily cease operations. Our expectation is that almost every business is affected by the virus, yet we believe that some businesses will have more predictable and sustainable demand during these times of uncertainty than others. We would highlight Health Care as a segment with many companies providing essential products and services regardless of the economy. Unfortunately, patients get cancer and will need to be treated. Patients undergoing surgical procedures will need some form of pain therapy. Health Care service companies provide a multitude of essential services for the chronic and acute care of patients. The market rebound in April would indicate that other participants were also beginning to evaluate opportunities based on the outlook for demand in a post COVID-19 environment.
1 | The “Life of Fund” return as shown reflects the period 02/01/2014 through 04/30/2020. |
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.
29
Harbor Small Cap Growth Opportunities Fund
Portfolio of Investments—April 30, 2020 (Unaudited)
Portfolio of Investments—April 30, 2020 (Unaudited)
Sector Allocation(% of investments)
Portfolio of Investments
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—84.1% | |||
Shares | Value | ||
AEROSPACE & DEFENSE—1.4% | |||
178,341 | Maxar Technologies Inc. | $2,249 | |
AIR FREIGHT & LOGISTICS—1.3% | |||
31,486 | Atlas Air Worldwide Holdings Inc.* | 1,034 | |
60,589 | Echo Global Logistics Inc.* | 1,062 | |
2,096 | |||
BANKS—1.7% | |||
37,100 | FB Financial Corp. | 829 | |
39,651 | TCF Financial Corp. | 1,177 | |
51,185 | TriState Capital Holdings Inc.* | 728 | |
2,734 | |||
BEVERAGES—0.6% | |||
91,373 | Primo Water Corp. (Canada)* | 938 | |
BIOTECHNOLOGY—14.2% | |||
35,258 | Agios Pharmaceuticals Inc.* | 1,450 | |
197,537 | Amicus Therapeutics Inc.* | 2,333 | |
155,347 | Clovis Oncology Inc.* | 1,182 | |
18,172 | Global Blood Therapeutics Inc.* | 1,391 | |
129,670 | Halozyme Therapeutics Inc.* | 2,938 | |
107,267 | Heron Therapeutics Inc.* | 1,530 | |
22,012 | Intercept Pharmaceuticals Inc.* | 1,803 | |
48,789 | Intra-Cellular Therapies Inc.* | 862 | |
115,868 | Karyopharm Therapeutics Inc.* | 2,555 | |
46,659 | Ligand Pharmaceuticals Inc.* | 4,599 | |
140,425 | Portola Pharmaceuticals Inc.* | 994 | |
22,842 | PTC Therapeutics Inc.* | 1,163 | |
22,800 | |||
COMMERCIAL SERVICES & SUPPLIES—1.5% | |||
95,757 | Healthcare Services Group Inc. | 2,441 | |
COMMUNICATIONS EQUIPMENT—3.4% | |||
220,206 | Casa Systems Inc.* | 1,130 | |
573,979 | Infinera Corp.* | 3,539 | |
9,261 | Lumentum Holdings Inc.* | 749 | |
5,418 | |||
CONSTRUCTION & ENGINEERING—0.5% | |||
24,469 | MasTec Inc.* | 878 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
CONSUMER FINANCE—0.6% | |||
33,995 | Green Dot Corp.* | $1,037 | |
DIVERSIFIED CONSUMER SERVICES—2.3% | |||
70,573 | Adtalem Global Education Inc.* | 2,242 | |
43,537 | ServiceMaster Global Holdings Inc.* | 1,483 | |
3,725 | |||
DIVERSIFIED TELECOMMUNICATION SERVICES—1.6% | |||
114,877 | Iridium Communications Inc.* | 2,585 | |
ELECTRICAL EQUIPMENT—1.5% | |||
25,480 | EnerSys | 1,488 | |
86,914 | Power Solutions International Inc.* | 334 | |
34,800 | TPI Composites Inc.* | 610 | |
2,432 | |||
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—1.1% | |||
41,093 | Methode Electronics Inc. | 1,234 | |
26,842 | MTS Systems Corp. | 571 | |
1,805 | |||
FOOD & STAPLES RETAILING—1.0% | |||
49,263 | Grocery Outlet Holding Corp.* | 1,639 | |
FOOD PRODUCTS—1.0% | |||
21,575 | Freshpet Inc.* | 1,627 | |
HEALTH CARE EQUIPMENT & SUPPLIES—10.7% | |||
1,305,121 | Cerus Corp.* | 8,026 | |
85,429 | CryoLife Inc.* | 1,908 | |
59,690 | Cutera Inc.* | 803 | |
7,233 | ICU Medical Inc.* | 1,586 | |
394,273 | Invacare Corp. | 2,965 | |
111,177 | SmileDirectClub Inc.* | 858 | |
528,693 | ViewRay Inc.* | 1,100 | |
17,246 | |||
HEALTH CARE PROVIDERS & SERVICES—4.3% | |||
56,411 | Acadia Healthcare Co. Inc.* | 1,354 | |
57,528 | PetIQ Inc.* | 1,645 | |
142,364 | Surgery Partners Inc.* | 1,680 | |
239,893 | Tivity Health Inc.* | 2,152 | |
6,831 |
30
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 | ||
HEALTH CARE TECHNOLOGY—4.0% | |||
128,961 | Allscripts Healthcare Solutions Inc.* | $838 | |
405,365 | Evolent Health Inc.* | 2,923 | |
109,951 | NextGen Healthcare Inc.* | 1,160 | |
75,707 | Vocera Communications Inc.* | 1,435 | |
6,356 | |||
HOTELS, RESTAURANTS & LEISURE—4.1% | |||
79,585 | Accel Entertainment Inc.* | 774 | |
17,626 | Churchill Downs Inc. | 1,767 | |
28,880 | Eldorado Resorts Inc.* | 619 | |
100,222 | Everi Holdings Inc.* | 496 | |
311,970 | Noodles & Co.* | 1,950 | |
373,207 | Playa Hotels & Resorts NV (Netherlands)* | 922 | |
6,528 | |||
INSURANCE—1.9% | |||
10,264 | Kinsale Capital Group Inc. | 1,115 | |
100,440 | National General Holdings Corp. | 1,911 | |
3,026 | |||
INTERNET & DIRECT MARKETING RETAIL—4.1% | |||
686,892 | Quotient Technology Inc.* | 4,932 | |
9,901 | Stamps.com Inc.* | 1,567 | |
6,499 | |||
IT SERVICES—2.3% | |||
36,089 | Cardtronics plc (United Kingdom)* | 826 | |
46,984 | EVO Payments Inc.* | 935 | |
94,847 | Verra Mobility Corp.* | 850 | |
21,571 | WNS Holdings Ltd. ADR (India)*,1 | 1,054 | |
3,665 | |||
LEISURE PRODUCTS—1.0% | |||
59,737 | Yeti Holdings Inc.* | 1,649 | |
LIFE SCIENCES TOOLS & SERVICES—0.8% | |||
34,619 | Luminex Corp. | 1,248 | |
MACHINERY—4.6% | |||
23,768 | CIRCOR International Inc.* | 355 | |
65,699 | Enerpac Tool Group Corp.* | 1,121 | |
64,659 | Harsco Corp.* | 645 | |
88,758 | Meritor Inc.* | 1,820 | |
274,643 | NN Inc. | 948 | |
107,035 | REV Group Inc. | 569 | |
71,658 | Rexnord Corp. | 1,954 | |
7,412 | |||
MARINE—0.4% | |||
120,660 | Star Bulk Carriers Corp. (Marshall Islands)* | 684 | |
OIL, GAS & CONSUMABLE FUELS—0.7% | |||
214,451 | Callon Petroleum Co.* | 202 | |
79,156 | Matador Resources Co.* | 557 | |
28,787 | PDC Energy Inc.* | 374 | |
1,133 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
PHARMACEUTICALS—1.3% | |||
48,770 | Pacira BioSciences Inc.* | $2,014 | |
ROAD & RAIL—0.7% | |||
192,605 | Daseke Inc.* | 328 | |
9,431 | Saia Inc.* | 873 | |
1,201 | |||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—2.2% | |||
15,429 | Inphi Corp.* | 1,489 | |
120,603 | MaxLinear Inc.* | 1,989 | |
3,478 | |||
SOFTWARE—3.8% | |||
193,124 | OneSpan Inc.* | 3,245 | |
805,352 | Synchronoss Technologies Inc.* | 2,778 | |
6,023 | |||
SPECIALTY RETAIL—1.5% | |||
36,827 | Boot Barn Holdings Inc.* | 680 | |
40,664 | Guess? Inc. | 380 | |
53,024 | National Vision Holdings Inc.* | 1,405 | |
2,465 | |||
THRIFTS & MORTGAGE FINANCE—1.5% | |||
48,165 | Essent Group Ltd. (Bermuda) | 1,316 | |
57,280 | Meta Financial Group Inc. | 1,055 | |
2,371 | |||
WIRELESS TELECOMMUNICATION SERVICES—0.5% | |||
460,595 | Gogo Inc.* | 751 | |
TOTAL COMMON STOCKS | |||
(Cost $158,516) | 134,984 | ||
EXCHANGE-TRADED FUNDS—10.5% | |||
CAPITAL MARKETS—10.5% | |||
63,333 | iShares Russell 2000 ETF | 8,253 | |
47,399 | iShares Russell 2000 Growth ETF | 8,643 | |
TOTAL EXCHANGE-TRADED FUNDS | |||
(Cost $12,688) | 16,896 | ||
TOTAL INVESTMENTS—94.6% | |||
(Cost $171,204) | 151,880 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—5.4% | 8,605 | ||
TOTAL NET ASSETS—100.0% | $160,485 |
31
Harbor Small Cap Growth Opportunities Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
FAIR VALUE MEASUREMENTS
All investments at April 30, 2020 (as disclosed in the preceding Portfolio of Investments) were classified as Level 1. There were no Level 3 investments at April 30, 2020 or October 31, 2019.
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 | Depository receipts such as American Depostiory Receipts (ADRs), Global Depository Receipts (GDRs) and other country specific depository receipts are certificates evidencing ownership of shares of a foreign issuer. These certificates are issued by depository banks and generally trade on an established market in the U.S. or elsewhere. |
The accompanying notes are an integral part of the Financial Statements.
32
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
During the six months ending April 30, 2020, the U.S. small cap value market fell as the Russell 2000® Value Index dropped nearly 24%. This period includes the end of 2019, as markets continued to hit new highs, only to be followed by a sharp decline spurred on by COVID-19 in March 2020. The two major developments that drove investor sentiment during the period were the magnitude and the duration of the pandemic.
Capital markets reacted with caution at first to the coronavirus with equity markets reaching highs as late as February 19. Then, as it became apparent that the risks presented by the virus were worldwide and far-reaching, markets dropped sharply resulting in one of the quickest descents from record highs to a bear market in history. Markets struggled to price the overflow of information and its potential impact on future earnings, and global equity markets experienced their most volatile swings since the financial crisis as investors exchanged equities for traditional safe haven assets such as precious metals and U.S. Treasuries. As it became apparent that the viral threat was not contained to China, governments attempted to stall its spread by shuttering many areas of the global economy and enacting emergency economic and enforcement measures. Oil demand was one of the many casualties of the slowdown, and compounding the problem, Saudi Arabia and Russia disagreed on the appropriate response and proceeded to enter a price and market share war. Both countries ramped up production right as demand was collapsing, and U.S. crude prices fell from over $60 a barrel to approximately $20 a barrel during the quarter. Historically, oil price declines have helped the U.S. economy, representing a cash windfall for consumers. However, with the growth of the U.S. shale industry, the Energy sector has become an important part of the U.S. economy and the price declines contributed to U.S. economic issues.
Although the U.S. Federal Reserve (Fed) entered the year forecasting unemployment to remain below 4% through 2022 and expecting no near-term rate policy changes, the Fed responded quickly to the economic threat posed by the virus with an emergency 50 basis point rate cut on March 3, followed by another 50 basis point cut on March 15 to bring the Fed’s benchmark rate to the range of 0% to 0.25%. This second-rate cut was accompanied by the restart of quantitative easing in the form of repurchases of $500 billion in Treasurys and $200 billion in agency mortgage backed securities. Just over a week later, the Fed announced that it would adjust its quantitative easing program to purchase “in the amounts needed to support smooth market functioning and effective transmission of monetary policy to broader financial conditions and the economy,” effectively declining to set an upper limit on asset purchases. In conjunction with the Fed, Congress acted swiftly, approving a $2 trillion stimulus bill to arrive in the form of small business loans, mortgage forbearances, unemployment benefits and direct payments to households. Upon passage of the bill, equity markets rallied on the news that monetary and fiscal policy would cooperate and devote substantial resources to mitigate the economic consequences posed by the pandemic.
Performance
Harbor Small Cap Value Fund returned -16.47% (Retirement Class), -16.49% (Institutional Class), -16.60% (Administrative Class), and -16.65% (Investor Class) for the six months ended April 30, 2020, strongly outperforming the broader Small Cap Value market, as represented by Russell 2000® Value Index, which returned -23.44%.
Contributing to performance, Monolithic Power Systems (MPS) provides small, highly energy efficient, easy-to-use power solutions for systems found in industrial applications, telecom infrastructures, cloud computing, automotive, and consumer applications. Monolithic has announced a number of design wins in its compute power and battery management solutions divisions which we believe should provide further support for the top-line and margins through
33
Harbor Small Cap Value Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
TOTAL RETURNS
For the periods ended 04/30/2020
Unannualized | 1 Year | Annualized | |||||||||
6 Months | 5 Years | 10 Years | |||||||||
Harbor Small Cap Value Fund | |||||||||||
Retirement Class1 | -16.47% | -15.85% | 4.03% | 8.41% | |||||||
Institutional Class | -16.49 | -15.88 | 3.97 | 8.38 | |||||||
Administrative Class | -16.60 | -16.12 | 3.70 | 8.10 | |||||||
Investor Class | -16.65 | -16.21 | 3.58 | 7.97 | |||||||
Comparative Index | |||||||||||
Russell 2000® Value | -23.44% | -23.84% | 0.30% | 5.30% |
As stated in the Fund’s prospectus dated March 1, 2020, 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.
2020 and beyond. During the period, shares protected in a down market as the company continues to beat sales and earnings targets driven by strong demand from the telecom and automotive industries for its products that are used in lighting modules, ignition systems, and rearview camera components.
Detracting from performance, Eaton Vance is one of the oldest investment management firms headquartered in the U.S. and has been providing financial and advisory services for over 90 years. With offices worldwide, Eaton Vance manages a broad array of investment strategies and wealth management solutions to both high-net-worth individuals and institutional clients. Despite Eaton Vance experiencing slight outflows in some business segments, fiscal 2019 was still a record year for the company. We view the wavering investor sentiment and recent outflows from equity funds as cyclical and not an indicator of long-term market conditions. Given the firm’s success in growing both its higher-fee actively managed strategies and its lower-fee passive business segments, in our view, Eaton Vance is well positioned to continue to improve margins and grow earnings moving forward.
Outlook & Strategy
As of April 30, 2020, the Fund was overweight in the Industrials, Health Care, Information Technology and was underweight in Financials, Energy, Utilities, Consumer Staples, and Consumer Discretionary. These weightings are an outgrowth of our fundamental, bottom-up stock selection process.
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.
34
Harbor Small Cap Value Fund
Portfolio of Investments—April 30, 2020 (Unaudited)
Portfolio of Investments—April 30, 2020 (Unaudited)
Sector Allocation(% of investments)
Portfolio of Investments
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—96.4% | |||
Shares | Value | ||
AEROSPACE & DEFENSE—6.9% | |||
733,878 | Hexcel Corp. | $25,385 | |
258,282 | Moog Inc. | 12,779 | |
182,875 | Teledyne Technologies Inc.* | 59,557 | |
97,721 | |||
BANKS—8.1% | |||
551,002 | Enterprise Financial Services Corp. | 16,938 | |
841,347 | First Merchants Corp. | 23,819 | |
442,345 | Heartland Financial USA Inc. | 15,026 | |
344,970 | South State Corp. | 19,953 | |
710,128 | Trustmark Corp. | 18,896 | |
663,222 | United Bankshares Inc. | 19,870 | |
114,502 | |||
BIOTECHNOLOGY—5.2% | |||
751,691 | Emergent BioSolutions Inc.* | 55,588 | |
1,152,474 | Myriad Genetics Inc.* | 17,817 | |
73,405 | |||
CAPITAL MARKETS—4.9% | |||
585,583 | Eaton Vance Corp. | 21,491 | |
321,814 | Raymond James Financial Inc. | 21,214 | |
622,648 | Stifel Financial Corp. | 27,571 | |
70,276 | |||
CHEMICALS—4.1% | |||
616,909 | Cabot Corp. | 20,907 | |
307,564 | Scotts Miracle-Gro Co. | 38,147 | |
59,054 | |||
COMMERCIAL SERVICES & SUPPLIES—4.8% | |||
928,035 | Casella Waste Systems Inc.* | 43,042 | |
2,265,167 | Steelcase Inc. | 24,804 | |
67,846 | |||
CONSUMER FINANCE—2.6% | |||
524,283 | FirstCash Inc. | 37,664 | |
ELECTRICAL EQUIPMENT—1.9% | |||
456,596 | EnerSys | 26,661 | |
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—7.4% | |||
155,563 | Coherent Inc.* | 19,892 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—Continued | |||
571,784 | FLIR Systems Inc. | $24,816 | |
175,750 | Littelfuse Inc. | 25,526 | |
1,257,568 | Sanmina Corp.* | 34,872 | |
105,106 | |||
ENERGY EQUIPMENT & SERVICES—1.0% | |||
340,220 | Core Laboratories NV (Netherlands) | 6,672 | |
298,063 | DMC Global Inc. | 7,693 | |
14,365 | |||
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—4.7% | |||
1,173,849 | Corporate Office Properties Trust | 31,013 | |
745,753 | Pebblebrook Hotel Trust | 8,830 | |
1,052,723 | STAG Industrial Inc. | 27,634 | |
67,477 | |||
FOOD PRODUCTS—2.4% | |||
1,627,476 | Darling Ingredients Inc.* | 33,510 | |
HEALTH CARE PROVIDERS & SERVICES—2.4% | |||
204,251 | Molina Healthcare Inc.* | 33,491 | |
HOUSEHOLD DURABLES—1.4% | |||
377,033 | Meritage Homes Corp.* | 19,817 | |
INSURANCE—6.3% | |||
1,231,028 | American Equity Investment Life Holding Co. | 25,876 | |
710,308 | Horace Mann Educators Corp. | 24,974 | |
245,813 | Reinsurance Group of America Inc. | 25,732 | |
470,846 | United Fire Group Inc. | 13,466 | |
90,048 | |||
IT SERVICES—3.3% | |||
479,158 | ManTech International Corp. | 35,726 | |
1,501,159 | Sabre Corp.* | 10,913 | |
46,639 | |||
MACHINERY—7.6% | |||
472,033 | Albany International Corp. | 24,140 | |
743,972 | Altra Industrial Motion Corp. | 20,764 | |
690,534 | Franklin Electric Co. Inc. | 35,079 |
35
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 | ||
MACHINERY—Continued | |||
608,003 | Timken Co. | $22,849 | |
1,045,598 | Welbilt Inc.* | 5,155 | |
107,987 | |||
PHARMACEUTICALS—4.2% | |||
868,660 | Catalent Inc.* | 60,068 | |
ROAD & RAIL—0.7% | |||
281,599 | Ryder System Inc. | 9,969 | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—13.6% | |||
277,876 | Advanced Energy Industries Inc.* | 15,450 | |
356,845 | Cabot Microelectronics Corp. | 43,727 | |
887,660 | Entegris Inc. | 48,138 | |
1,521,195 | FormFactor Inc.* | 35,444 | |
251,157 | Monolithic Power Systems Inc. | 50,209 | |
192,968 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
TEXTILES, APPAREL & LUXURY GOODS—1.3% | |||
909,035 | Wolverine World Wide Inc. | $18,626 | |
TRADING COMPANIES & DISTRIBUTORS—1.6% | |||
385,345 | GATX Corp. | 22,851 | |
TOTAL COMMON STOCKS | |||
(Cost $1,170,777) | 1,370,051 | ||
TOTAL INVESTMENTS—96.4% | |||
(Cost $1,170,777) | 1,370,051 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—3.6% | 51,085 | ||
TOTAL NET ASSETS—100.0% | $1,421,136 |
FAIR VALUE MEASUREMENTS
All investments at April 30, 2020 (as disclosed in the preceding Portfolio of Investments) were classified as Level 1. There were no Level 3 investments at April 30, 2020 or October 31, 2019.
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.
36
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 six-month period ended April 30, 2020, the Russell 1000® Growth Index was up 6.10%. In the wake of the Coronavirus outbreak, financial markets dissolved from ebullient optimism to abject fear in a matter of weeks. Only to bounce back in the month of April, posting their best monthly gain in thirty-three years driven by optimism around economic reopening and Coronavirus treatment progress. The pandemic caused an abrupt global economic recession, ending the longest bull market on record. Business production was halted resulting in millions of American workers filing for unemployment. The unprecedented societal disruption caused equities to experience a record breaking 35% peak-to-trough decline in the first three months of 2020. The central bank’s pledge to save our virus ravaged economy has provided financial reassurance for equity and credit markets. The unprecedented intervention by monetary and fiscal policies are supporting asset prices during the worst economic decline since the Great Depression.
PERFORMANCE
For the six-month period ended April 30, 2020, Harbor Strategic Growth Fund returned -1.64% (Retirement Class), -1.66% (Institutional Class), -1.85% (Administrative Class) and -1.84% (Investor Class) while the Russell 1000® Growth Index returned 6.09%. Stock selection and relative outperformance in Real Estate as well as an underweight in Energy contributed to the Fund’s returns, while Financials, Information Technology and Industrials detracted the most from short-term results. Positive contributors to performance included Amazon.com, Adobe, Microsoft, Apple and Johnson & Johnson. The largest detractors for the period included Markel, TransDigm Group, Oracle, US Bancorp and Honeywell International.
The market decline placed a growing number of durable franchises on sale. We deployed capital into several long-admired businesses that offer sufficient discounts to intrinsic values. At the same time, we exited lower conviction investments with higher idiosyncratic risk. We maintain a healthy level of cash that can be deployed quickly as additional investments materialize. Purchases included Comcast, Nike, Starbucks, Amphenol, SalesForce.com, Microsoft and SAP. We exited our positions in Booking Holdings, CarMax, Sensata and Oracle.
Our Technology weight increased on an absolute and relative basis during the six-month period as a result of our purchases as well as the Technology sector performing better than the overall market. Similarly, our consumer discretionary weight increased due to the purchase of Nike and Starbucks, which more than offset the sale of CarMax. Within Industrials, the sale of Sensata, combined with the underperformance of the sector decreased our Industrial sector weight.
OUTLOOK & STRATEGY
The extent of the virus-induced recession is unknown, but navigating the uncertainty with well-financed, wide-moat businesses with proven capital allocators at the helm is reassuring. We believe our time-tested investment process is purposely designed to stimulate rational decision making in bear markets. It enables us to maintain investment optimism during excessive
* | 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. |
37
Harbor Strategic Growth Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
TOTAL RETURNS
For the periods ended 04/30/2020
Unannualized | 1 Year | Annualized | |||||||||
6 Months | 5 Years | Life of Class | |||||||||
Harbor Strategic Growth Fund | |||||||||||
Retirement Class1 | -1.64% | 2.21% | N/A | 10.70% | |||||||
Institutional Class2 | -1.66 | 2.14 | 9.36 | 12.95 | |||||||
Administrative Class1 | -1.85 | 1.81 | N/A | 10.32 | |||||||
Investor Class1 | -1.84 | 1.74 | N/A | 9.73 | |||||||
Comparative Index | |||||||||||
Russell 1000® Growth2 | 6.09% | 10.84% | 13.34% | 15.42% |
As stated in the Fund’s prospectus dated March 1, 2020, the expense ratios were 0.63% (Net) and 0.72% (Gross) (Retirement Class); 0.71% (Net) and 0.80% (Gross) (Institutional Class); 0.96% (Net) and 1.05% (Gross) (Administrative Class); and 1.08% (Net) and 1.17% (Gross) (Investor Class). The net expense ratios reflect an expense limitation agreement (excluding interest expense, if any) effective through 02/28/2021. 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.
pessimism. We naturally worry about the worst-case scenario, but we believe the pandemic is unlikely to permanently impair the underlying business values of our investments. The impact on investor psychology will likely be far greater than financial reality. At times when everything is down, we look to own more of our highest conviction serial compounders in our investable universe. Any time the market allows us to put capital to work at attractive prices, it is our responsibility to capitalize on those opportunities.
Mar Vista’s investment team has been investing over the last several years with an opportunity set that provided only modest discounts to fair values. While the material decline in stock prices is psychologically uncomfortable, we believe lower prices provide opportunities to increase portfolio returns and reduce risk. Market volatility is a friend of the patient investor. We embrace the opportunity to invest in stock prices that are dislocated from intrinsic value.
1 | The “Life of Class” return as shown reflects the period 03/06/2017 through 04/30/2020. |
2 | The “Life of Class” return as shown reflects the period 11/01/2011 through 04/30/2020. |
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.
38
Harbor Strategic Growth Fund
Portfolio of Investments—April 30, 2020 (Unaudited)
Portfolio of Investments—April 30, 2020 (Unaudited)
Sector Allocation(% of investments)
Portfolio of Investments
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—99.9% | |||
Shares | Value | ||
AEROSPACE & DEFENSE—2.1% | |||
6,027 | TransDigm Group Inc.* | $2,188 | |
BANKS—5.4% | |||
37,652 | First Republic Bank | 3,927 | |
43,903 | U.S. Bancorp. | 1,602 | |
5,529 | |||
BEVERAGES—2.3% | |||
17,699 | PepsiCo Inc. | 2,341 | |
CAPITAL MARKETS—6.0% | |||
68,206 | Charles Schwab Corp. | 2,573 | |
14,393 | Moody's Corp. | 3,510 | |
6,083 | |||
CHEMICALS—3.5% | |||
9,035 | Ecolab Inc. | 1,748 | |
9,970 | Linde plc (Ireland) | 1,835 | |
3,583 | |||
DIVERSIFIED FINANCIAL SERVICES—4.8% | |||
26,119 | Berkshire Hathaway Inc. Class B* | 4,894 | |
ELECTRICAL EQUIPMENT—1.6% | |||
18,541 | Amphenol Corp.* | 1,636 | |
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—3.0% | |||
12,981 | American Tower Corp. | 3,089 | |
HEALTH CARE EQUIPMENT & SUPPLIES—3.7% | |||
11,121 | Teleflex Inc. | 3,730 | |
HOTELS, RESTAURANTS & LEISURE—1.1% | |||
14,845 | Starbucks Corp.* | 1,139 | |
INDUSTRIAL CONGLOMERATES—6.5% | |||
23,594 | Honeywell International Inc. | 3,348 | |
9,449 | Roper Technologies Inc. | 3,222 | |
6,570 | |||
INSURANCE—3.7% | |||
4,361 | Markel Corp.* | 3,776 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
INTERACTIVE MEDIA & SERVICES—6.6% | |||
3,126 | Alphabet Inc. Class C* | $4,216 | |
12,183 | Facebook Inc.* | 2,494 | |
6,710 | |||
INTERNET & DIRECT MARKETING RETAIL—4.6% | |||
1,884 | Amazon.com Inc.* | 4,661 | |
IT SERVICES—3.2% | |||
18,204 | Visa Inc. | 3,253 | |
LIFE SCIENCES TOOLS & SERVICES—1.9% | |||
2,695 | Mettler-Toledo International Inc.* | 1,940 | |
MACHINERY—2.7% | |||
43,091 | Fortive Corp. | 2,758 | |
MEDIA—1.9% | |||
52,009 | Comcast Corp.* | 1,957 | |
PERSONAL PRODUCTS—2.5% | |||
51,893 | Unilever NV NY Registry Shares (Netherlands) | 2,565 | |
PHARMACEUTICALS—5.5% | |||
6,118 | Allergan plc (Ireland) | 1,146 | |
29,835 | Johnson & Johnson | 4,477 | |
5,623 | |||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—2.2% | |||
25,809 | Microchip Technology Inc. | 2,264 | |
SOFTWARE—16.8% | |||
12,182 | Adobe Inc.* | 4,308 | |
15,288 | Intuit Inc. | 4,125 | |
19,972 | Microsoft Corp. | 3,579 | |
13,235 | salesforce.com Inc.* | 2,144 | |
24,761 | SAP SE ADR (Germany)1 | 2,935 | |
17,091 | |||
SPECIALTY RETAIL—1.6% | |||
4,115 | O'Reilly Automotive Inc.* | 1,590 | |
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS—4.5% | |||
15,686 | Apple Inc. | 4,609 |
39
Harbor Strategic Growth Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—Continued | |||
Shares | Value | ||
TEXTILES, APPAREL & LUXURY GOODS—2.2% | |||
25,636 | NIKE Inc. | $2,235 | |
TOTAL COMMON STOCKS | |||
(Cost $81,792) | 101,814 | ||
TOTAL INVESTMENTS—99.9% | |||
(Cost $81,792) | 101,814 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—0.1% | 87 | ||
TOTAL NET ASSETS—100.0% | $101,901 |
FAIR VALUE MEASUREMENTS
All investments at April 30, 2020 (as disclosed in the preceding Portfolio of Investments) were classified as Level 1. There were no Level 3 investments at April 30, 2020 or October 31, 2019.
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 | Depository receipts such as American Depostiory Receipts (ADRs), Global Depository Receipts (GDRs) and other country specific depository receipts are certificates evidencing ownership of shares of a foreign issuer. These certificates are issued by depository banks and generally trade on an established market in the U.S. or elsewhere. |
The accompanying notes are an integral part of the Financial Statements.
40
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41
Harbor Domestic Equity Funds
StatementS of Assets and Liabilities—April 30, 2020 (Unaudited)
StatementS of Assets and Liabilities—April 30, 2020 (Unaudited)
(All amounts in thousands, except per share amounts)
Harbor Capital Appreciation Fund | Harbor Large Cap Value Fund | Harbor Mid Cap 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 Strategic Growth Fund | ||||||||||
ASSETS | ||||||||||||||||||
Investments, at identified cost | $16,687,763 | $1,028,432 | $9,890 | $206,157* | $522,723 | $583,924 | $171,204 | $1,170,777 | $81,792 | |||||||||
Investments, at value | $30,169,285 | $1,196,215 | $8,979 | $239,026 | $380,275 | $667,833 | $151,880 | $1,370,051 | $101,814 | |||||||||
Repurchase agreements | — | — | — | 11,710 | — | — | — | — | — | |||||||||
Cash | 77,311 | 34,008 | 84 | — | 3,907 | 18,907 | 8,961 | 59,862 | 440 | |||||||||
Receivables for: | ||||||||||||||||||
Investments sold | 220,013 | 6,890 | — | 2,857 | 4 | 17,639 | — | 7,128 | — | |||||||||
Capital shares sold | 35,599 | 3,291 | — | 562 | 176 | 638 | 55 | 7,369 | 160 | |||||||||
Dividends | 3,018 | 254 | 5 | 29 | 492 | — | 10 | 508 | 12 | |||||||||
Withholding tax | 1,722 | 465 | — | 12 | — | — | — | — | 1 | |||||||||
Prepaid registration fees | 108 | 37 | 29 | 22 | 28 | 18 | 2 | 47 | 26 | |||||||||
Prepaid fund insurance | 159 | 7 | — | 2 | 4 | 4 | — | 9 | 1 | |||||||||
Other assets | 2,855 | 139 | 15 | 64 | 68 | 79 | 18 | 132 | 20 | |||||||||
Total Assets | 30,510,070 | 1,241,306 | 9,112 | 254,284 | 384,954 | 705,118 | 160,926 | 1,445,106 | 102,474 | |||||||||
LIABILITIES | ||||||||||||||||||
Payables for: | ||||||||||||||||||
Investments purchased | 78,098 | 7,223 | — | 6,036 | 170 | 4,210 | — | 20,435 | — | |||||||||
Capital shares reacquired | 43,590 | 1,665 | — | 302 | 5,458 | 1,646 | 191 | 2,293 | 496 | |||||||||
Accrued expenses: | ||||||||||||||||||
Management fees | 12,759 | 558 | 5 | 133 | 223 | 391 | 95 | 789 | 49 | |||||||||
12b-1 fees | 268 | 7 | — | 4 | 8 | 2 | — | 10 | — | |||||||||
Transfer agent fees | 1,966 | 68 | 1 | 17 | 30 | 37 | 11 | 95 | 5 | |||||||||
Trustees' fees and expenses | 3,568 | 95 | — | 71 | 86 | 97 | 23 | 169 | 6 | |||||||||
Other | 1,754 | 105 | — | 33 | 91 | 54 | 121 | 179 | 17 | |||||||||
Total Liabilities | 142,003 | 9,721 | 6 | 6,596 | 6,066 | 6,437 | 441 | 23,970 | 573 | |||||||||
NET ASSETS | $30,368,067 | $1,231,585 | $9,106 | $247,688 | $378,888 | $698,681 | $160,485 | $1,421,136 | $101,901 | |||||||||
Net Assets Consist of: | ||||||||||||||||||
Paid-in capital | $14,937,836 | $1,052,840 | $10,191 | $192,203 | $510,521 | $623,588 | $198,580 | $1,307,790 | $79,565 | |||||||||
Total distributable earnings/(loss) | 15,430,231 | 178,745 | (1,085) | 55,485 | (131,633) | 75,093 | (38,095) | 113,346 | 22,336 | |||||||||
$30,368,067 | $1,231,585 | $9,106 | $247,688 | $378,888 | $698,681 | $160,485 | $1,421,136 | $101,901 | ||||||||||
NET ASSET VALUE PER SHARE BY CLASS | ||||||||||||||||||
Retirement Class | ||||||||||||||||||
Net assets | $7,262,288 | $465,983 | $4,297 | $45,796 | $53,231 | $264,156 | $33,715 | $238,898 | $5,082 | |||||||||
Shares of beneficial interest1 | 94,543 | 31,255 | 484 | 4,986 | 3,624 | 21,305 | 3,904 | 8,651 | 236 | |||||||||
Net asset value per share2 | $76.81 | $14.91 | $8.88 | $9.19 | $14.69 | $12.40 | $8.64 | $27.61 | $21.55 | |||||||||
Institutional Class | ||||||||||||||||||
Net assets | $21,694,759 | $728,315 | $4,431 | $181,258 | $283,016 | $425,307 | $126,273 | $1,130,300 | $96,263 | |||||||||
Shares of beneficial interest1 | 282,335 | 48,848 | 499 | 19,815 | 19,262 | 34,445 | 14,674 | 40,945 | 4,471 | |||||||||
Net asset value per share2 | $76.84 | $14.91 | $8.88 | $9.15 | $14.69 | $12.35 | $8.61 | $27.61 | $21.53 | |||||||||
Administrative Class | ||||||||||||||||||
Net assets | $359,065 | $10,403 | N/A | $2,588 | $6,542 | $523 | $192 | $10,530 | $18 | |||||||||
Shares of beneficial interest1 | 4,788 | 698 | N/A | 305 | 441 | 46 | 23 | 384 | 1 | |||||||||
Net asset value per share2 | $75.00 | $14.91 | N/A | $8.49 | $14.85 | $11.21 | $8.51 | $27.44 | $21.50 | |||||||||
Investor Class | ||||||||||||||||||
Net assets | $1,051,955 | $26,884 | $378 | $18,046 | $36,099 | $8,695 | $305 | $41,408 | $538 | |||||||||
Shares of beneficial interest1 | 14,389 | 1,787 | 43 | 2,228 | 2,457 | 827 | 37 | 1,542 | 25 | |||||||||
Net asset value per share2 | $73.11 | $15.05 | $8.87 | $8.10 | $14.69 | $10.52 | $8.34 | $26.85 | $21.16 |
* | Including repurchase agreements |
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—Six Months Ended April 30, 2020 (Unaudited)
StatementS of Operations—Six Months Ended April 30, 2020 (Unaudited)
(All amounts in thousands)
Harbor Capital Appreciation Fund | Harbor Large Cap Value Fund | Harbor Mid Cap Funda | 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 Strategic Growth Fund | |
Investment Income | |||||||||
Dividends | $97,524 | $10,982 | $53 | $473 | $9,232 | $2,166 | $288 | $10,714 | $619 |
Interest | 709 | 174 | 1 | 62 | 19 | 149 | 16 | 371 | 31 |
Foreign taxes withheld | (565) | (220) | — | (1) | (10) | (1) | — | (13) | (3) |
Total Investment Income | 97,668 | 10,936 | 54 | 534 | 9,241 | 2,314 | 304 | 11,072 | 647 |
Operating Expenses | |||||||||
Management fees | 90,808 | 3,731 | 29 | 931 | 2,120 | 2,732 | 711 | 5,871 | 329 |
12b-1 fees: | |||||||||
Administrative Class | 441 | 15 | N/A | 3 | 17 | 1 | 2 | 9 | — |
Investor Class | 1,349 | 41 | — | 24 | 64 | 9 | 1 | 69 | 1 |
Shareholder communications | 457 | 35 | 3 | 11 | 36 | 16 | 7 | 64 | 3 |
Custodian fees | 290 | 12 | 5 | 17 | 21 | 26 | 10 | 13 | 5 |
Transfer agent fees: | |||||||||
Retirement Class | 718 | 47 | 1 | 3 | 8 | 28 | 4 | 25 | — |
Institutional Class | 10,830 | 364 | 2 | 96 | 209 | 220 | 75 | 628 | 52 |
Administrative Class | 176 | 6 | N/A | 1 | 7 | — | 1 | 4 | — |
Investor Class | 1,187 | 36 | — | 21 | 57 | 8 | — | 61 | — |
Professional fees | 775 | 32 | 20 | 7 | 19 | 20 | 101 | 42 | 3 |
Trustees' fees and expenses | 741 | 30 | — | 6 | 16 | 18 | 5 | 40 | 3 |
Registration fees | 78 | 45 | 27 | 35 | 39 | 44 | 55 | 51 | 34 |
Miscellaneous | 225 | 13 | 4 | 6 | 9 | 10 | 6 | 16 | 5 |
Total expenses | 108,075 | 4,407 | 91 | 1,161 | 2,622 | 3,132 | 978 | 6,893 | 435 |
Management fees waived | (7,611) | — | — | (37) | (54) | — | — | — | — |
Transfer agent fees waived | (309) | (12) | — | (3) | (6) | (8) | (2) | (16) | (1) |
Other expenses reimbursed | — | (216) | (58) | — | — | — | — | — | (46) |
Custodian fees reduction | (12) | (2) | — | — | (1) | — | — | (1) | — |
Net expenses | 100,143 | 4,177 | 33 | 1,121 | 2,561 | 3,124 | 976 | 6,876 | 388 |
Net Investment Income/(Loss) | (2,475) | 6,759 | 21 | (587) | 6,680 | (810) | (672) | 4,196 | 259 |
Realized and Change in Net Unrealized Gain/(Loss) on Investment Transactions | |||||||||
Net realized gain/(loss) on: | |||||||||
Investments | 1,958,424 | 11,242 | (190) | 14,283 | 4,441 | (279) | (3,940) | (86,390) | 2,430 |
In-kind Redemption | 132,216 | — | — | — | — | — | — | — | — |
Foreign currency transactions | (1,479) | — | — | (3) | — | — | — | — | — |
Change in net unrealized appreciation/(depreciation) on: | |||||||||
Investments | 938,578 | (102,618) | (911) | (3,918) | (167,473) | (17,096) | (8,536) | (198,985) | (4,347) |
Translations of assets and liabilities in foreign currencies | (11) | — | — | — | — | — | — | — | — |
Net gain/(loss) on investment transactions | 3,027,728 | (91,376) | (1,101) | 10,362 | (163,032) | (17,375) | (12,476) | (285,375) | (1,917) |
Net Increase/(Decrease) in Net Assets Resulting from Operations | $3,025,253 | $(84,617) | $(1,080) | $9,775 | $(156,352) | $(18,185) | $(13,148) | $(281,179) | $(1,658) |
a | For the period December 1, 2019 (inception) through April 30, 2020 |
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 Fund | Harbor Mid Cap Growth Fund | |||||||
November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | December 1, 2019a through April 30, 2020 | November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | ||||
INCREASE/(DECREASE) IN NET ASSETS | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||
Operations: | ||||||||||
Net investment income/(loss) | $(2,475) | $31,800 | $6,759 | $12,286 | $21 | $(587) | $(1,399) | |||
Net realized gain/(loss) on investments | 2,089,161 | 2,821,316 | 11,242 | (1,877) | (190) | 14,280 | 61,125 | |||
Change in net unrealized appreciation/(depreciation) of investments | 938,567 | 877,252 | (102,618) | 159,031 | (911) | (3,918) | 5,571 | |||
Net increase/(decrease) in assets resulting from operations | 3,025,253 | 3,730,368 | (84,617) | 169,440 | (1,080) | 9,775 | 65,297 | |||
Distributions to Shareholders | ||||||||||
Retirement Class | (618,547) | (502,294) | (2,391) | (8,957) | (3) | (6,194) | (25,016) | |||
Institutional Class | (1,854,118) | (2,034,649) | (3,528) | (16,546) | (2) | (39,105) | (26,702) | |||
Administrative Class | (30,561) | (41,111) | (36) | (368) | — | (555) | (2,326) | |||
Investor Class | (98,181) | (121,068) | (85) | (947) | — | (4,732) | (2,988) | |||
Total distributions to shareholders | (2,601,407) | (2,699,122) | (6,040) | (26,818) | (5) | (50,586) | (57,032) | |||
Net Increase/(Decrease) Derived from Capital Share Transactions | 232,571 | (855,516) | 55,255 | 144,596 | 10,191 | 35,112 | (101,560) | |||
Net increase/(decrease) in net assets | 656,417 | 175,730 | (35,402) | 287,218 | 9,106 | (5,699) | (93,295) | |||
Net Assets | ||||||||||
Beginning of period | 29,711,650 | 29,535,920 | 1,266,987 | 979,769 | — | 253,387 | 346,682 | |||
End of period | $30,368,067 | $29,711,650 | $1,231,585 | $1,266,987 | $9,106 | $247,688 | $253,387 |
a | Inception |
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 Strategic Growth Fund | |||||||||
November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | ||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||
$6,680 | $19,254 | $(810) | $(1,229) | $(672) | $(1,146) | $4,196 | $8,678 | $259 | $488 | ||||
4,441 | 1,296 | (279) | 23,936 | (3,940) | 2,507 | (86,390) | 15,233 | 2,430 | 1,660 | ||||
(167,473) | 17,301 | (17,097) | 82,988 | (8,536) | (16,920) | (198,985) | 129,521 | (4,347) | 12,686 | ||||
(156,352) | 37,851 | (18,185) | 105,695 | (13,148) | (15,559) | (281,179) | 153,432 | (1,658) | 14,834 | ||||
(3,052) | (6,960) | (10,182) | (58,115) | (1,280) | (7,893) | (4,051) | (11,611) | (98) | (104) | ||||
(15,499) | (49,842) | (15,950) | (76,800) | (4,993) | (43,633) | (19,292) | (99,888) | (1,932) | (1,821) | ||||
(490) | (2,796) | (17) | (157) | (56) | (357) | (89) | (638) | — | (1) | ||||
(1,654) | (5,150) | (295) | (1,469) | (14) | (142) | (633) | (5,986) | (6) | (9) | ||||
(20,695) | (64,748) | (26,444) | (136,541) | (6,343) | (52,025) | (24,065) | (118,123) | (2,036) | (1,935) | ||||
(145,075) | (215,050) | 14,089 | 45,807 | (14,900) | (23,302) | 84,953 | 223,153 | (6,455) | 29,032 | ||||
(322,122) | (241,947) | (30,540) | 14,961 | (34,391) | (90,886) | (220,291) | 258,462 | (10,149) | 41,931 | ||||
701,010 | 942,957 | 729,221 | 714,260 | 194,876 | 285,762 | 1,641,427 | 1,382,965 | 112,050 | 70,119 | ||||
$378,888 | $701,010 | $698,681 | $729,221 | $160,485 | $194,876 | $1,421,136 | $1,641,427 | $101,901 | $112,050 |
45
Harbor Domestic Equity Funds
Statements of Changes in Net Assets—Capital Stock Activity
Statements of Changes in Net Assets—Capital Stock Activity
(All amounts in thousands)
Harbor Capital Appreciation Fund | Harbor Large Cap Value Fund | Harbor Mid Cap Fund | Harbor Mid Cap Growth Fund | |||||||
November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | December 1, 2019a through April 30, 2020 | November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | ||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||
AMOUNT ($) | ||||||||||
Retirement Class | ||||||||||
Net proceeds from sale of shares | $775,834 | $2,120,682 | $150,856 | $142,086 | $4,864 | $15,349 | $33,252 | |||
Reinvested distributions | 551,856 | 474,879 | 1,921 | 8,374 | 3 | 6,194 | 25,016 | |||
Cost of shares reacquired | (1,133,668) | (1,293,167) | (112,212) | (56,492) | (27) | (5,568) | (171,764) | |||
Net increase/(decrease) in net assets | $194,022 | $1,302,394 | $40,565 | $93,968 | $4,840 | $15,975 | $(113,496) | |||
Institutional Class | ||||||||||
Net proceeds from sale of shares | $1,955,652 | $2,848,926 | $272,021 | $296,956 | $4,977 | $39,387 | $67,981 | |||
Reinvested distributions | 1,758,584 | 1,856,429 | 2,763 | 14,891 | 2 | 27,491 | 19,729 | |||
Cost of shares reacquired | (3,429,943) | (6,481,485) | (253,452) | (240,786) | (5) | (49,248) | (55,847) | |||
Shares reacquired through in-kind redemption | (212,592) | — | — | — | — | — | — | |||
Net increase/(decrease) in net assets | $71,701 | $(1,776,130) | $21,332 | $71,061 | $4,974 | $17,630 | $31,863 | |||
Administrative Class | ||||||||||
Net proceeds from sale of shares | $38,638 | $78,686 | $188 | $628 | N/A | $141 | $690 | |||
Reinvested distributions | 28,968 | 39,641 | 36 | 367 | N/A | 542 | 2,321 | |||
Cost of shares reacquired | (58,628) | (228,371) | (1,009) | (6,315) | N/A | (317) | (26,644) | |||
Net increase/(decrease) in net assets | $8,978 | $(110,044) | $(785) | $(5,320) | N/A | $366 | $(23,633) | |||
Investor Class | ||||||||||
Net proceeds from sale of shares | $99,721 | $130,741 | $2,642 | $7,391 | $378 | $5,597 | $12,290 | |||
Reinvested distributions | 96,627 | 119,520 | 83 | 939 | — | 4,641 | 2,958 | |||
Cost of shares reacquired | (238,478) | (521,997) | (8,582) | (23,443) | (1) | (9,097) | (11,542) | |||
Net increase/(decrease) in net assets | $(42,130) | $(271,736) | $(5,857) | $(15,113) | $377 | $1,141 | $3,706 |
a | Inception |
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 Strategic Growth Fund | |||||||||
November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | ||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||
$27,254 | $36,603 | $28,380 | $45,531 | $2,229 | $6,892 | $88,248 | $140,043 | $1,190 | $1,564 | ||||
3,047 | 6,960 | 9,807 | 56,734 | 1,280 | 7,893 | 2,583 | 6,760 | 98 | 104 | ||||
(55,183) | (42,938) | (38,583) | (113,847) | (3,390) | (6,396) | (36,592) | (80,276) | (1,168) | (766) | ||||
$(24,882) | $625 | $(396) | $(11,582) | $119 | $8,389 | $54,239 | $66,527 | $120 | $902 | ||||
$59,972 | $140,350 | $51,779 | $75,466 | $24,367 | $42,933 | $263,223 | $467,716 | $7,927 | $47,025 | ||||
14,724 | 47,820 | 15,322 | 73,911 | 4,992 | 43,627 | 16,697 | 86,451 | 1,836 | 1,758 | ||||
(180,359) | (359,812) | (55,240) | (91,745) | (43,404) | (118,386) | (250,254) | (384,397) | (16,463) | (20,699) | ||||
— | — | — | — | — | — | — | — | — | — | ||||
$(105,663) | $(171,642) | $11,861 | $57,632 | $(14,045) | $(31,826) | $29,666 | $169,770 | $(6,700) | $28,084 | ||||
$1,859 | $7,271 | $236 | $301 | $155 | $678 | $5,133 | $1,624 | $1 | $— | ||||
459 | 2,759 | 17 | 157 | 56 | 357 | 86 | 620 | — | — | ||||
(10,684) | (32,849) | (89) | (788) | (1,173) | (742) | (489) | (2,944) | — | — | ||||
$(8,366) | $(22,819) | $164 | $(330) | $(962) | $293 | $4,730 | $(700) | $1 | $— | ||||
$5,958 | $18,709 | $3,879 | $1,073 | $89 | $107 | $16,863 | $15,106 | $125 | $78 | ||||
1,601 | 4,997 | 294 | 1,447 | 14 | 142 | 621 | 5,903 | 6 | 8 | ||||
(13,723) | (44,920) | (1,713) | (2,433) | (115) | (407) | (21,166) | (33,453) | (7) | (40) | ||||
$(6,164) | $(21,214) | $2,460 | $87 | $(12) | $(158) | $(3,682) | $(12,444) | $124 | $46 |
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 Fund | Harbor Mid Cap Growth Fund | |||||||
November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | December 1, 2019a through April 30, 2020 | November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | ||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||
SHARES | ||||||||||
Retirement Class | ||||||||||
Shares sold | 10,416 | 29,405 | 10,007 | 9,352 | 487 | 2,071 | 3,229 | |||
Shares issued due to reinvestment of distributions | 7,402 | 7,633 | 111 | 606 | — | 662 | 2,954 | |||
Shares reacquired | (15,253) | (17,963) | (6,899) | (3,757) | (3) | (612) | (16,564) | |||
Net increase/(decrease) in shares outstanding | 2,565 | 19,075 | 3,219 | 6,201 | 484 | 2,121 | (10,381) | |||
Institutional Class | ||||||||||
Shares sold | 26,394 | 39,971 | 17,700 | 19,742 | 500 | 4,346 | 6,704 | |||
Shares issued due to reinvestment of distributions | 23,574 | 29,827 | 160 | 1,078 | — | 2,950 | 2,335 | |||
Shares reacquired | (46,201) | (90,937) | (15,624) | (16,319) | (1) | (5,727) | (5,408) | |||
Shares reacquired through in-kind redemption | (2,673) | — | — | — | — | — | — | |||
Net increase/(decrease) in shares outstanding | 1,094 | (21,139) | 2,236 | 4,501 | 499 | 1,569 | 3,631 | |||
Administrative Class | ||||||||||
Shares sold | 536 | 1,141 | 11 | 43 | N/A | 16 | 73 | |||
Shares issued due to reinvestment of distributions | 398 | 649 | 2 | 27 | N/A | 63 | 291 | |||
Shares reacquired | (806) | (3,309) | (63) | (398) | N/A | (36) | (2,701) | |||
Net increase/(decrease) in shares outstanding | 128 | (1,519) | (50) | (328) | N/A | 43 | (2,337) | |||
Investor Class | ||||||||||
Shares sold | 1,416 | 1,916 | 163 | 487 | 43 | 624 | 1,271 | |||
Shares issued due to reinvestment of distributions | 1,359 | 2,001 | 5 | 68 | — | 561 | 384 | |||
Shares reacquired | (3,341) | (7,625) | (543) | (1,537) | — | (1,071) | (1,223) | |||
Net increase/(decrease) in shares outstanding | (566) | (3,708) | (375) | (982) | 43 | 114 | 432 |
a | Inception |
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 Strategic Growth Fund | |||||||||
November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | ||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||
1,404 | 1,837 | 2,260 | 3,726 | 248 | 696 | 2,898 | 4,533 | 54 | 78 | ||||
144 | 385 | 714 | 5,519 | 123 | 881 | 75 | 243 | 4 | 6 | ||||
(2,867) | (2,120) | (3,032) | (9,154) | (374) | (648) | (1,203) | (2,509) | (53) | (36) | ||||
(1,319) | 102 | (58) | 91 | (3) | 929 | 1,770 | 2,267 | 5 | 48 | ||||
3,760 | 7,050 | 4,198 | 6,036 | 3,357 | 4,309 | 9,115 | 14,992 | 376 | 2,290 | ||||
696 | 2,644 | 1,120 | 7,211 | 483 | 4,880 | 482 | 3,109 | 80 | 99 | ||||
(10,201) | (18,090) | (4,419) | (7,596) | (5,195) | (11,766) | (8,801) | (12,202) | (762) | (984) | ||||
— | — | — | — | — | — | — | — | — | — | ||||
(5,745) | (8,396) | 899 | 5,651 | (1,355) | (2,577) | 796 | 5,899 | (306) | 1,405 | ||||
101 | 361 | 20 | 26 | 16 | 71 | 201 | 51 | — | — | ||||
22 | 151 | 1 | 17 | 6 | 40 | 3 | 22 | — | — | ||||
(564) | (1,607) | (8) | (67) | (173) | (74) | (16) | (94) | — | — | ||||
(441) | (1,095) | 13 | (24) | (151) | 37 | 188 | (21) | — | — | ||||
321 | 945 | 370 | 115 | 9 | 11 | 539 | 496 | 6 | 4 | ||||
76 | 276 | 25 | 164 | 2 | 16 | 18 | 218 | — | 1 | ||||
(776) | (2,258) | (160) | (240) | (12) | (43) | (794) | (1,102) | — | (2) | ||||
(379) | (1,037) | 235 | 39 | (1) | (16) | (237) | (388) | 6 | 3 |
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 | |||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | ||||
2019 | 2018 | 2017 | 2016f | ||
(Unaudited) | |||||
Net asset value beginning of period | $75.79 | $73.98 | $75.34 | $60.37 | $55.79 |
Income from Investment Operations | |||||
Net investment income/(loss)a,e | 0.02 | 0.13 | 0.23 | 0.16 | 0.05 |
Net realized and unrealized gains/(losses) on investments | 7.79 | 8.54 | 6.50 | 18.40 | 4.53 |
Total from investment operations | 7.81 | 8.67 | 6.73 | 18.56 | 4.58 |
Less Distributions | |||||
Dividends from net investment income | (0.12) | (0.21) | (0.17) | (0.10) | — |
Distributions from net realized capital gains | (6.67) | (6.65) | (7.92) | (3.49) | — |
Total distributions | (6.79) | (6.86) | (8.09) | (3.59) | — |
Net asset value end of period | 76.81 | 75.79 | 73.98 | 75.34 | 60.37 |
Net assets end of period (000s) | $7,262,288 | $6,970,617 | $5,393,675 | $2,892,484 | $1,022,839 |
Ratios and Supplemental Data (%) | |||||
Total returnb | 10.58%c | 13.73% | 9.50% | 32.62% | 8.21%c |
Ratio of total expenses to average net assets^ | 0.64d | 0.63 | 0.62 | 0.63 | 0.65d |
Ratio of net expenses to average net assetsa | 0.58d | 0.58 | 0.57 | 0.59 | 0.59d |
Ratio of net investment income to average net assetsa | 0.06d | 0.18 | 0.30 | 0.23 | 0.13d |
Portfolio turnover | 27c | 40 | 40 | 52 | 34c |
Administrative Class | ||||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | |||||
2019 | 2018 | 2017 | 2016 | 2015 | ||
(Unaudited) | ||||||
Net asset value beginning of period | $74.15 | $72.54 | $74.08 | $59.50 | $64.51 | $61.39 |
Income from Investment Operations | ||||||
Net investment income/(loss)a,e | (0.10) | (0.09) | (0.01) | (0.04) | (0.06) | (0.08) |
Net realized and unrealized gains/(losses) on investments | 7.62 | 8.35 | 6.39 | 18.11 | (0.84) | 6.97 |
Total from investment operations | 7.52 | 8.26 | 6.38 | 18.07 | (0.90) | 6.89 |
Less Distributions | ||||||
Dividends from net investment income | — | — | — | — | — | — |
Distributions from net realized capital gains | (6.67) | (6.65) | (7.92) | (3.49) | (4.11) | (3.77) |
Total distributions | (6.67) | (6.65) | (7.92) | (3.49) | (4.11) | (3.77) |
Net asset value end of period | 75.00 | 74.15 | 72.54 | 74.08 | 59.50 | 64.51 |
Net assets end of period (000s) | $359,065 | $345,550 | $448,241 | $493,860 | $555,665 | $620,910 |
Ratios and Supplemental Data (%) | ||||||
Total returnb | 10.41%c | 13.35% | 9.16% | 32.20% | (1.48)% | 11.88% |
Ratio of total expenses to average net assets^ | 0.97d | 0.96 | 0.95 | 0.96 | 0.94 | 0.93 |
Ratio of net expenses to average net assetsa | 0.91d | 0.91 | 0.90 | 0.90 | 0.89 | 0.89 |
Ratio of net investment income to average net assetsa | (0.27)d | (0.13) | (0.01) | (0.06) | (0.11) | (0.13) |
Portfolio turnover | 27c | 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 | |||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | ||||
2019 | 2018 | 2017 | 2016 | 2015 | |
(Unaudited) | |||||
$75.78 | $73.97 | $75.32 | $60.36 | $65.27 | $61.97 |
(0.01) | 0.08 | 0.18 | 0.13 | 0.09 | 0.07 |
7.79 | 8.53 | 6.50 | 18.38 | (0.84) | 7.05 |
7.78 | 8.61 | 6.68 | 18.51 | (0.75) | 7.12 |
(0.05) | (0.15) | (0.11) | (0.06) | (0.05) | (0.05) |
(6.67) | (6.65) | (7.92) | (3.49) | (4.11) | (3.77) |
(6.72) | (6.80) | (8.03) | (3.55) | (4.16) | (3.82) |
76.84 | 75.78 | 73.97 | 75.32 | 60.36 | 65.27 |
$21,694,759 | $21,311,587 | $22,366,214 | $23,896,840 | $21,608,221 | $24,669,740 |
10.54%c | 13.63% | 9.44% | 32.52% | (1.23)% | 12.16% |
0.72d | 0.71 | 0.70 | 0.71 | 0.69 | 0.68 |
0.66d | 0.66 | 0.65 | 0.65 | 0.64 | 0.64 |
(0.02)d | 0.11 | 0.23 | 0.20 | 0.15 | 0.12 |
27c | 40 | 40 | 52 | 34 | 37 |
Investor Class | |||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | ||||
2019 | 2018 | 2017 | 2016 | 2015 | |
(Unaudited) | |||||
$72.48 | $71.15 | $72.88 | $58.66 | $63.73 | $60.76 |
(0.14) | (0.17) | (0.10) | (0.11) | (0.13) | (0.16) |
7.44 | 8.15 | 6.29 | 17.82 | (0.83) | 6.90 |
7.30 | 7.98 | 6.19 | 17.71 | (0.96) | 6.74 |
— | — | — | — | — | — |
(6.67) | (6.65) | (7.92) | (3.49) | (4.11) | (3.77) |
(6.67) | (6.65) | (7.92) | (3.49) | (4.11) | (3.77) |
73.11 | 72.48 | 71.15 | 72.88 | 58.66 | 63.73 |
$1,051,955 | $1,083,896 | $1,327,790 | $1,531,809 | $1,540,557 | $2,214,518 |
10.34%c | 13.21% | 9.03% | 32.04% | (1.60)% | 11.75% |
1.09d | 1.08 | 1.07 | 1.08 | 1.06 | 1.05 |
1.03d | 1.03 | 1.02 | 1.02 | 1.01 | 1.01 |
(0.39)d | (0.25) | (0.13) | (0.17) | (0.22) | (0.25) |
27c | 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 | |||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | ||||
2019 | 2018 | 2017 | 2016f | ||
(Unaudited) | |||||
Net asset value beginning of period | $16.33 | $14.37 | $14.87 | $12.32 | $10.94 |
Income from Investment Operations | |||||
Net investment income/(loss)a,e | 0.09 | 0.18 | 0.17 | 0.12 | 0.12 |
Net realized and unrealized gains/(losses) on investments | (1.43) | 2.17 | (0.13) | 3.00 | 1.33 |
Total from investment operations | (1.34) | 2.35 | 0.04 | 3.12 | 1.45 |
Less Distributions | |||||
Dividends from net investment income | (0.08) | (0.16) | (0.13) | (0.14) | (0.07) |
Distributions from net realized capital gains | — | (0.23) | (0.41) | (0.43) | — |
Total distributions | (0.08) | (0.39) | (0.54) | (0.57) | (0.07) |
Net asset value end of period | 14.91 | 16.33 | 14.37 | 14.87 | 12.32 |
Net assets end of period (000s) | $465,983 | $457,908 | $313,721 | $143,966 | $3,822 |
Ratios and Supplemental Data (%) | |||||
Total returnb | (8.27)%c | 16.92% | 0.18% | 26.08% | 13.24%c |
Ratio of total expenses to average net assets^ | 0.65d | 0.65 | 0.64 | 0.64 | 0.67d |
Ratio of net expenses to average net assetsa | 0.61d | 0.61 | 0.60 | 0.60 | 0.63d |
Ratio of net investment income to average net assetsa | 1.13d | 1.19 | 1.12 | 0.83 | 1.46d |
Portfolio turnover | 19c | 11 | 15 | 16 | 34c |
Administrative Class | ||||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | |||||
2019 | 2018 | 2017 | 2016 | 2015 | ||
(Unaudited) | ||||||
Net asset value beginning of period | $16.33 | $14.36 | $14.84 | $12.30 | $12.15 | $12.23 |
Income from Investment Operations | ||||||
Net investment income/(loss)a,e | 0.07 | 0.14 | 0.13 | 0.10 | 0.13 | 0.12 |
Net realized and unrealized gains/(losses) on investments | (1.44) | 2.17 | (0.15) | 2.99 | 0.63 | 0.70 |
Total from investment operations | (1.37) | 2.31 | (0.02) | 3.09 | 0.76 | 0.82 |
Less Distributions | ||||||
Dividends from net investment income | (0.05) | (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 | (0.05) | (0.34) | (0.46) | (0.55) | (0.61) | (0.90) |
Net asset value end of period | 14.91 | 16.33 | 14.36 | 14.84 | 12.30 | 12.15 |
Net assets end of period (000s) | $10,403 | $12,195 | $15,460 | $53,006 | $9,361 | $24,690 |
Ratios and Supplemental Data (%) | ||||||
Total returnb | (8.44)%c | 16.60% | (0.23)% | 25.77% | 6.77% | 7.02% |
Ratio of total expenses to average net assets^ | 0.98d | 0.98 | 0.97 | 0.97 | 0.96 | 0.95 |
Ratio of net expenses to average net assetsa | 0.94d | 0.94 | 0.93 | 0.93 | 0.93 | 0.93 |
Ratio of net investment income to average net assetsa | 0.83d | 0.91 | 0.84 | 0.70 | 1.09 | 1.00 |
Portfolio turnover | 19c | 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 | |||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | ||||
2019 | 2018 | 2017 | 2016 | 2015 | |
(Unaudited) | |||||
$16.33 | $14.37 | $14.87 | $12.32 | $12.16 | $12.24 |
0.09 | 0.17 | 0.16 | 0.15 | 0.16 | 0.15 |
(1.44) | 2.17 | (0.13) | 2.97 | 0.64 | 0.70 |
(1.35) | 2.34 | 0.03 | 3.12 | 0.80 | 0.85 |
(0.07) | (0.15) | (0.12) | (0.14) | (0.13) | (0.14) |
— | (0.23) | (0.41) | (0.43) | (0.51) | (0.79) |
(0.07) | (0.38) | (0.53) | (0.57) | (0.64) | (0.93) |
14.91 | 16.33 | 14.37 | 14.87 | 12.32 | 12.16 |
$728,315 | $761,262 | $605,040 | $498,360 | $310,127 | $231,033 |
(8.30)%c | 16.83% | 0.11% | 26.00% | 7.14% | 7.29% |
0.73d | 0.73 | 0.72 | 0.72 | 0.72 | 0.70 |
0.69d | 0.69 | 0.68 | 0.68 | 0.68 | 0.68 |
1.08d | 1.12 | 1.05 | 1.10 | 1.32 | 1.25 |
19c | 11 | 15 | 16 | 34 | 24 |
Investor Class | |||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | ||||
2019 | 2018 | 2017 | 2016 | 2015 | |
(Unaudited) | |||||
$16.48 | $14.49 | $14.99 | $12.42 | $12.25 | $12.33 |
0.06 | 0.12 | 0.11 | 0.10 | 0.11 | 0.11 |
(1.45) | 2.19 | (0.14) | 2.99 | 0.66 | 0.70 |
(1.39) | 2.31 | (0.03) | 3.09 | 0.77 | 0.81 |
(0.04) | (0.09) | (0.06) | (0.09) | (0.09) | (0.10) |
— | (0.23) | (0.41) | (0.43) | (0.51) | (0.79) |
(0.04) | (0.32) | (0.47) | (0.52) | (0.60) | (0.89) |
15.05 | 16.48 | 14.49 | 14.99 | 12.42 | 12.25 |
$26,884 | $35,622 | $45,548 | $71,374 | $57,716 | $29,745 |
(8.47)%c | 16.39% | (0.27)% | 25.52% | 6.80% | 6.87% |
1.10d | 1.10 | 1.09 | 1.09 | 1.09 | 1.07 |
1.06d | 1.06 | 1.05 | 1.05 | 1.05 | 1.05 |
0.72d | 0.79 | 0.70 | 0.75 | 0.94 | 0.89 |
19c | 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 FUND | |||||
Retirement Class | Institutional Class | Investor Class | |||
6-Month Period Ended April 30, 2020i | 6-Month Period Ended April 30, 2020i | 6-Month Period Ended April 30, 2020i | |||
(Unaudited) | (Unaudited) | (Unaudited) | |||
Net asset value beginning of period | $10.00 | $10.00 | $10.00 | ||
Income from Investment Operations | |||||
Net investment income/(loss)a,e | 0.02 | 0.02 | 0.01 | ||
Net realized and unrealized gains/(losses) on investments | (1.13) | (1.13) | (1.14) | ||
Total from investment operations | (1.11) | (1.11) | (1.13) | ||
Less Distributions | |||||
Dividends from net investment income | (0.01) | (0.01) | —* | ||
Distributions from net realized capital gains | — | — | — | ||
Total distributions | (0.01) | (0.01) | —* | ||
Net asset value end of period | 8.88 | 8.88 | 8.87 | ||
Net assets end of period (000s) | $4,297 | $4,431 | $378 | ||
Ratios and Supplemental Data (%) | |||||
Total returnb | (11.15)%c | (11.15)%c | (11.28)%c | ||
Ratio of total expenses to average net assets^ | 2.30d | 2.38d | 2.75d | ||
Ratio of net expenses to average net assetsa | 0.80d | 0.88d | 1.25d | ||
Ratio of net investment income to average net assetsa | 0.60d | 0.52d | 0.16d | ||
Portfolio turnover | 5c | 5c | 5c |
See page 68 for notes to the Financial Highlights.
The accompanying notes are an integral part of the Financial Statements.
54
[THIS PAGE INTENTIONALLY LEFT BLANK]
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 GROWTH FUND | |||||
Retirement Class | |||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | ||||
2019 | 2018 | 2017 | 2016f | ||
(Unaudited) | |||||
Net asset value beginning of period | $10.91 | $10.88 | $11.25 | $8.58 | $7.76 |
Income from Investment Operations | |||||
Net investment income/(loss)a,e | (0.02) | (0.04) | (0.03) | 0.01 | (0.03) |
Net realized and unrealized gains/(losses) on investments | 0.47 | 1.85 | 0.88 | 2.66 | 0.85 |
Total from investment operations | 0.45 | 1.81 | 0.85 | 2.67 | 0.82 |
Less Distributions | |||||
Dividends from net investment income | — | — | — | — | — |
Distributions from net realized capital gains | (2.17) | (1.78) | (1.22) | — | — |
Total distributions | (2.17) | (1.78) | (1.22) | — | — |
Net asset value end of period | 9.19 | 10.91 | 10.88 | 11.25 | 8.58 |
Net assets end of period (000s) | $45,796 | $31,265 | $144,137 | $127,446 | $2,718 |
Ratios and Supplemental Data (%) | |||||
Total returnb | 3.79%c | 21.38% | 8.02% | 31.12% | 10.57%c |
Ratio of total expenses to average net assets^ | 0.84d | 0.82 | 0.80 | 0.81 | 0.81d |
Ratio of net expenses to average net assetsa | 0.80d | 0.81 | 0.80 | 0.81 | 0.80d |
Ratio of net investment income to average net assetsa | (0.38)d | (0.37) | (0.28) | 0.07 | (0.45)d |
Portfolio turnover | 62c | 70 | 85 | 87 | 84c |
Administrative Class | ||||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | |||||
2019 | 2018 | 2017 | 2016 | 2015 | ||
(Unaudited) | ||||||
Net asset value beginning of period | $10.26 | $10.37 | $10.81 | $8.27 | $9.45 | $11.15 |
Income from Investment Operations | ||||||
Net investment income/(loss)a,e | (0.03) | (0.06) | (0.06) | (0.04) | (0.05) | (0.06) |
Net realized and unrealized gains/(losses) on investments | 0.43 | 1.73 | 0.84 | 2.58 | (0.03) | 0.19 |
Total from investment operations | 0.40 | 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 | (2.17) | (1.78) | (1.22) | — | (1.06) | (1.83) |
Total distributions | (2.17) | (1.78) | (1.22) | — | (1.10) | (1.83) |
Net asset value end of period | 8.49 | 10.26 | 10.37 | 10.81 | 8.27 | 9.45 |
Net assets end of period (000s) | $2,588 | $2,687 | $26,936 | $110,114 | $175,211 | $366,121 |
Ratios and Supplemental Data (%) | ||||||
Total returnb | 3.49%c | 21.04% | 7.68% | 30.71% | (0.91)% | 1.29% |
Ratio of total expenses to average net assets^ | 1.17d | 1.15 | 1.13 | 1.13 | 1.10 | 1.09 |
Ratio of net expenses to average net assetsa | 1.13d | 1.14 | 1.12 | 1.12 | 1.10 | 1.09 |
Ratio of net investment income to average net assetsa | (0.70)d | (0.66) | (0.55) | (0.45) | (0.57) | (0.58) |
Portfolio turnover | 62c | 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.
56
Institutional Class | |||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | ||||
2019 | 2018 | 2017 | 2016 | 2015 | |
(Unaudited) | |||||
$10.88 | $10.86 | $11.24 | $8.58 | $9.76 | $11.43 |
(0.02) | (0.05) | (0.04) | (0.01) | (0.03) | (0.04) |
0.46 | 1.85 | 0.88 | 2.67 | (0.03) | 0.20 |
0.44 | 1.80 | 0.84 | 2.66 | (0.06) | 0.16 |
— | — | — | — | (0.06) | — |
(2.17) | (1.78) | (1.22) | — | (1.06) | (1.83) |
(2.17) | (1.78) | (1.22) | — | (1.12) | (1.83) |
9.15 | 10.88 | 10.86 | 11.24 | 8.58 | 9.76 |
$181,258 | $198,544 | $158,680 | $145,914 | $303,802 | $194,308 |
3.69%c | 21.32% | 7.94% | 31.00% | (0.60)% | 1.55% |
0.92d | 0.90 | 0.88 | 0.88 | 0.86 | 0.84 |
0.88d | 0.89 | 0.87 | 0.87 | 0.85 | 0.84 |
(0.45)d | (0.48) | (0.36) | (0.14) | (0.31) | (0.35) |
62c | 70 | 85 | 87 | 84 | 82 |
Investor Class | |||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | ||||
2019 | 2018 | 2017 | 2016 | 2015 | |
(Unaudited) | |||||
$9.88 | $10.07 | $10.54 | $8.07 | $9.24 | $10.95 |
(0.04) | (0.08) | (0.08) | (0.04) | (0.05) | (0.07) |
0.43 | 1.67 | 0.83 | 2.51 | (0.04) | 0.19 |
0.39 | 1.59 | 0.75 | 2.47 | (0.09) | 0.12 |
— | — | — | — | (0.02) | — |
(2.17) | (1.78) | (1.22) | — | (1.06) | (1.83) |
(2.17) | (1.78) | (1.22) | — | (1.08) | (1.83) |
8.10 | 9.88 | 10.07 | 10.54 | 8.07 | 9.24 |
$18,046 | $20,891 | $16,929 | $20,121 | $17,167 | $24,647 |
3.53%c | 20.83% | 7.57% | 30.61% | (1.05)% | 1.21% |
1.29d | 1.27 | 1.25 | 1.25 | 1.22 | 1.21 |
1.25d | 1.26 | 1.24 | 1.24 | 1.22 | 1.21 |
(0.82)d | (0.85) | (0.72) | (0.48) | (0.68) | (0.71) |
62c | 70 | 85 | 87 | 84 | 82 |
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 MID CAP VALUE FUND | |||||
Retirement Class | |||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | ||||
2019 | 2018 | 2017 | 2016f | ||
(Unaudited) | �� | ||||
Net asset value beginning of period | $20.82 | $21.39 | $23.33 | $20.17 | $18.36 |
Income from Investment Operations | |||||
Net investment income/(loss)a,e | 0.23 | 0.48 | 0.50 | 0.40 | 0.28 |
Net realized and unrealized gains/(losses) on investments | (5.67) | 0.47 | (1.52) | 3.43 | 1.53 |
Total from investment operations | (5.44) | 0.95 | (1.02) | 3.83 | 1.81 |
Less Distributions | |||||
Dividends from net investment income | (0.54) | (0.37) | (0.33) | (0.36) | — |
Distributions from net realized capital gains | (0.15) | (1.15) | (0.59) | (0.31) | — |
Total distributions | (0.69) | (1.52) | (0.92) | (0.67) | — |
Net asset value end of period | 14.69 | 20.82 | 21.39 | 23.33 | 20.17 |
Net assets end of period (000s) | $53,231 | $102,945 | $103,552 | $89,942 | $14,999 |
Ratios and Supplemental Data (%) | |||||
Total returnb | (27.16)%c | 5.53% | (4.75)% | 19.22% | 9.86%c |
Ratio of total expenses to average net assets^ | 0.82d | 0.80 | 0.79 | 0.80 | 0.82d |
Ratio of net expenses to average net assetsa | 0.80d | 0.77 | 0.76 | 0.77 | 0.79d |
Ratio of net investment income to average net assetsa | 2.49d | 2.39 | 2.15 | 1.79 | 2.11d |
Portfolio turnover | 4c | 11 | 24 | 22 | 18c |
Administrative Class | ||||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | |||||
2019 | 2018 | 2017 | 2016 | 2015 | ||
(Unaudited) | ||||||
Net asset value beginning of period | $20.98 | $21.52 | $23.47 | $20.30 | $20.40 | $20.47 |
Income from Investment Operations | ||||||
Net investment income/(loss)a,e | 0.20 | 0.42 | 0.43 | 0.34 | 0.40 | 0.29 |
Net realized and unrealized gains/(losses) on investments | (5.74) | 0.48 | (1.54) | 3.45 | 0.07 | (0.07) |
Total from investment operations | (5.54) | 0.90 | (1.11) | 3.79 | 0.47 | 0.22 |
Less Distributions | ||||||
Dividends from net investment income | (0.44) | (0.29) | (0.25) | (0.31) | (0.22) | (0.16) |
Distributions from net realized capital gains | (0.15) | (1.15) | (0.59) | (0.31) | (0.35) | (0.13) |
Total distributions | (0.59) | (1.44) | (0.84) | (0.62) | (0.57) | (0.29) |
Net asset value end of period | 14.85 | 20.98 | 21.52 | 23.47 | 20.30 | 20.40 |
Net assets end of period (000s) | $6,542 | $18,508 | $42,557 | $48,809 | $40,992 | $28,929 |
Ratios and Supplemental Data (%) | ||||||
Total returnb | (27.28)%c | 5.19% | (5.06)% | 18.84% | 2.54% | 1.05% |
Ratio of total expenses to average net assets^ | 1.15d | 1.13 | 1.12 | 1.12 | 1.11 | 1.11 |
Ratio of net expenses to average net assetsa | 1.13d | 1.10 | 1.08 | 1.09 | 1.09 | 1.11 |
Ratio of net investment income to average net assetsa | 2.07d | 2.08 | 1.83 | 1.51 | 2.03 | 1.41 |
Portfolio turnover | 4c | 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.
58
Institutional Class | |||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | ||||
2019 | 2018 | 2017 | 2016 | 2015 | |
(Unaudited) | |||||
$20.82 | $21.38 | $23.33 | $20.17 | $20.27 | $20.32 |
0.22 | 0.47 | 0.49 | 0.39 | 0.44 | 0.34 |
(5.69) | 0.47 | (1.54) | 3.43 | 0.08 | (0.07) |
(5.47) | 0.94 | (1.05) | 3.82 | 0.52 | 0.27 |
(0.51) | (0.35) | (0.31) | (0.35) | (0.27) | (0.19) |
(0.15) | (1.15) | (0.59) | (0.31) | (0.35) | (0.13) |
(0.66) | (1.50) | (0.90) | (0.66) | (0.62) | (0.32) |
14.69 | 20.82 | 21.38 | 23.33 | 20.17 | 20.27 |
$283,016 | $520,629 | $714,309 | $739,122 | $600,800 | $484,078 |
(27.24)%c | 5.48% | (4.85)% | 19.16% | 2.81% | 1.32% |
0.90d | 0.88 | 0.87 | 0.87 | 0.86 | 0.86 |
0.88d | 0.85 | 0.83 | 0.84 | 0.84 | 0.86 |
2.39d | 2.33 | 2.09 | 1.76 | 2.28 | 1.66 |
4c | 11 | 24 | 22 | 18 | 12 |
Investor Class | |||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | ||||
2019 | 2018 | 2017 | 2016 | 2015 | |
(Unaudited) | |||||
$20.78 | $21.31 | $23.23 | $20.09 | $20.19 | $20.27 |
0.19 | 0.39 | 0.40 | 0.31 | 0.37 | 0.27 |
(5.70) | 0.48 | (1.53) | 3.41 | 0.08 | (0.08) |
(5.51) | 0.87 | (1.13) | 3.72 | 0.45 | 0.19 |
(0.43) | (0.25) | (0.20) | (0.27) | (0.20) | (0.14) |
(0.15) | (1.15) | (0.59) | (0.31) | (0.35) | (0.13) |
(0.58) | (1.40) | (0.79) | (0.58) | (0.55) | (0.27) |
14.69 | 20.78 | 21.31 | 23.23 | 20.09 | 20.19 |
$36,099 | $58,928 | $82,539 | $110,094 | $152,358 | $165,642 |
(27.37)%c | 5.08% | (5.20)% | 18.71% | 2.45% | 0.93% |
1.27d | 1.25 | 1.24 | 1.24 | 1.23 | 1.23 |
1.25d | 1.22 | 1.20 | 1.21 | 1.21 | 1.23 |
2.03d | 1.95 | 1.71 | 1.40 | 1.92 | 1.29 |
4c | 11 | 24 | 22 | 18 | 12 |
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 FUND | |||||
Retirement Class | |||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | ||||
2019 | 2018 | 2017 | 2016f | ||
(Unaudited) | |||||
Net asset value beginning of period | $13.18 | $14.39 | $15.08 | $11.95 | $10.72 |
Income from Investment Operations | |||||
Net investment income/(loss)a,e | (0.01) | (0.01) | (0.05) | (0.04) | (0.02) |
Net realized and unrealized gains/(losses) on investments | (0.29) | 1.56 | 0.82 | 3.23 | 1.25 |
Total from investment operations | (0.30) | 1.55 | 0.77 | 3.19 | 1.23 |
Less Distributions | |||||
Dividends from net investment income | — | — | — | — | — |
Distributions from net realized capital gains | (0.48) | (2.76) | (1.46) | (0.06) | — |
Total distributions | (0.48) | (2.76) | (1.46) | (0.06) | — |
Net asset value end of period | 12.40 | 13.18 | 14.39 | 15.08 | 11.95 |
Net assets end of period (000s) | $264,156 | $281,603 | $306,026 | $189,516 | $54,634 |
Ratios and Supplemental Data (%) | |||||
Total returnb | (2.63)%c | 16.23% | 5.11% | 26.78% | 11.47%c |
Ratio of total expenses to average net assets^ | 0.81d | 0.80 | 0.79 | 0.79 | 0.81d |
Ratio of net expenses to average net assetsa | 0.80d | 0.80 | 0.79 | 0.79 | 0.80d |
Ratio of net investment income to average net assetsa | (0.17)d | (0.12) | (0.33) | (0.26) | (0.27)d |
Portfolio turnover | 53c | 74 | 99 | 83 | 89c |
Administrative Class | ||||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | |||||
2019 | 2018 | 2017 | 2016 | 2015 | ||
(Unaudited) | ||||||
Net asset value beginning of period | $11.98 | $13.39 | $14.17 | $11.30 | $13.04 | $14.89 |
Income from Investment Operations | ||||||
Net investment income/(loss)a,e | (0.03) | (0.05) | (0.09) | (0.07) | (0.05) | (0.07) |
Net realized and unrealized gains/(losses) on investments | (0.26) | 1.40 | 0.77 | 3.00 | (0.11) | 0.54 |
Total from investment operations | (0.29) | 1.35 | 0.68 | 2.93 | (0.16) | 0.47 |
Less Distributions | ||||||
Dividends from net investment income | — | — | — | — | — | — |
Distributions from net realized capital gains | (0.48) | (2.76) | (1.46) | (0.06) | (1.58) | (2.32) |
Total distributions | (0.48) | (2.76) | (1.46) | (0.06) | (1.58) | (2.32) |
Net asset value end of period | 11.21 | 11.98 | 13.39 | 14.17 | 11.30 | 13.04 |
Net assets end of period (000s) | $523 | $395 | $769 | $719 | $686 | $877 |
Ratios and Supplemental Data (%) | ||||||
Total returnb | (2.82)%c | 15.87% | 4.76% | 26.02% | (1.29)% | 3.12% |
Ratio of total expenses to average net assets^ | 1.14d | 1.13 | 1.12 | 1.11 | 1.10 | 1.09 |
Ratio of net expenses to average net assetsa | 1.13d | 1.12 | 1.11 | 1.10 | 1.10 | 1.08 |
Ratio of net investment income to average net assetsa | (0.51)d | (0.44) | (0.65) | (0.56) | (0.46) | (0.47) |
Portfolio turnover | 53c | 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.
60
Institutional Class | |||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | ||||
2019 | 2018 | 2017 | 2016 | 2015 | |
(Unaudited) | |||||
$13.13 | $14.35 | $15.06 | $11.94 | $13.65 | $15.45 |
(0.02) | (0.03) | (0.06) | (0.04) | (0.02) | (0.03) |
(0.28) | 1.57 | 0.81 | 3.22 | (0.11) | 0.55 |
(0.30) | 1.54 | 0.75 | 3.18 | (0.13) | 0.52 |
— | — | — | — | — | — |
(0.48) | (2.76) | (1.46) | (0.06) | (1.58) | (2.32) |
(0.48) | (2.76) | (1.46) | (0.06) | (1.58) | (2.32) |
12.35 | 13.13 | 14.35 | 15.06 | 11.94 | 13.65 |
$425,307 | $440,553 | $400,389 | $509,889 | $523,888 | $587,761 |
(2.64)%c | 16.18% | 4.97% | 26.72% | (0.99)% | 3.35% |
0.89d | 0.88 | 0.87 | 0.86 | 0.85 | 0.84 |
0.88d | 0.87 | 0.86 | 0.85 | 0.85 | 0.83 |
(0.25)d | (0.20) | (0.40) | (0.30) | (0.21) | (0.22) |
53c | 74 | 99 | 83 | 89 | 78 |
Investor Class | |||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | ||||
2019 | 2018 | 2017 | 2016 | 2015 | |
(Unaudited) | |||||
$11.28 | $12.79 | $13.62 | $10.84 | $12.59 | $14.47 |
(0.04) | (0.06) | (0.11) | (0.08) | (0.06) | (0.08) |
(0.24) | 1.31 | 0.74 | 2.92 | (0.11) | 0.52 |
(0.28) | 1.25 | 0.63 | 2.84 | (0.17) | 0.44 |
— | — | — | — | — | — |
(0.48) | (2.76) | (1.46) | (0.06) | (1.58) | (2.32) |
(0.48) | (2.76) | (1.46) | (0.06) | (1.58) | (2.32) |
10.52 | 11.28 | 12.79 | 13.62 | 10.84 | 12.59 |
$8,695 | $6,670 | $7,076 | $7,913 | $8,401 | $11,660 |
(2.90)%c | 15.81% | 4.58% | 26.29% | (1.44)% | 2.98% |
1.26d | 1.25 | 1.24 | 1.23 | 1.22 | 1.21 |
1.25d | 1.24 | 1.23 | 1.22 | 1.22 | 1.20 |
(0.63)d | (0.57) | (0.77) | (0.67) | (0.58) | (0.59) |
53c | 74 | 99 | 83 | 89 | 78 |
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 GROWTH OPPORTUNITIES FUND | |||||
Retirement Class | |||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | ||||
2019 | 2018 | 2017 | 2016f | ||
(Unaudited) | |||||
Net asset value beginning of period | $9.70 | $13.14 | $12.61 | $10.24 | $9.04 |
Income from Investment Operations | |||||
Net investment income/(loss)a,e | (0.03) | (0.05) | (0.07) | (0.07) | (0.04) |
Net realized and unrealized gains/(losses) on investments | (0.70) | (0.72) | 1.35 | 2.44 | 1.24 |
Total from investment operations | (0.73) | (0.77) | 1.28 | 2.37 | 1.20 |
Less Distributions | |||||
Dividends from net investment income | — | — | — | — | — |
Distributions from net realized capital gains | (0.33) | (2.67) | (0.75) | — | — |
Total distributions | (0.33) | (2.67) | (0.75) | — | — |
Net asset value end of period | 8.64 | 9.70 | 13.14 | 12.61 | 10.24 |
Net assets end of period (000s) | $33,715 | $37,884 | $39,139 | $47,569 | $20,230 |
Ratios and Supplemental Data (%) | |||||
Total returnb | (8.10)%c | (4.17)% | 10.53% | 23.14% | 13.27%c |
Ratio of total expenses to average net assets^ | 0.96d | 0.83 | 0.80 | 0.81 | 0.85d |
Ratio of net expenses to average net assetsa | 0.96d | 0.82 | 0.80 | 0.81 | 0.84d |
Ratio of net investment income to average net assetsa | (0.64)d | (0.47) | (0.55) | (0.57) | (0.60)d |
Portfolio turnover | 24c | 68 | 71 | 67 | 85c |
Administrative Class | ||||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | |||||
2019 | 2018 | 2017 | 2016 | 2015 | ||
(Unaudited) | ||||||
Net asset value beginning of period | $9.56 | $13.03 | $12.54 | $10.22 | $10.27 | $10.75 |
Income from Investment Operations | ||||||
Net investment income/(loss)a,e | (0.05) | (0.08) | (0.11) | (0.12) | (0.07) | (0.09) |
Net realized and unrealized gains/(losses) on investments | (0.67) | (0.72) | 1.35 | 2.44 | 0.37 | (0.34) |
Total from investment operations | (0.72) | (0.80) | 1.24 | 2.32 | 0.30 | (0.43) |
Less Distributions | ||||||
Dividends from net investment income | — | — | — | — | — | — |
Distributions from net realized capital gains | (0.33) | (2.67) | (0.75) | — | (0.35) | (0.05) |
Total distributions | (0.33) | (2.67) | (0.75) | — | (0.35) | (0.05) |
Net asset value end of period | 8.51 | 9.56 | 13.03 | 12.54 | 10.22 | 10.27 |
Net assets end of period (000s) | $192 | $1,667 | $1,792 | $1,308 | $143 | $3,006 |
Ratios and Supplemental Data (%) | ||||||
Total returnb | (8.12)%c | (4.50)% | 10.26% | 22.70% | 2.94% | (3.98)% |
Ratio of total expenses to average net assets^ | 1.29d | 1.16 | 1.12 | 1.13 | 1.14 | 1.15 |
Ratio of net expenses to average net assetsa | 1.29d | 1.15 | 1.11 | 1.13 | 1.13 | 1.15 |
Ratio of net investment income to average net assetsa | (0.99)d | (0.80) | (0.86) | (0.96) | (0.69) | (0.80) |
Portfolio turnover | 24c | 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.
62
Institutional Class | |||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | ||||
2019 | 2018 | 2017 | 2016 | 2015 | |
(Unaudited) | |||||
$9.67 | $13.12 | $12.59 | $10.23 | $10.31 | $10.77 |
(0.03) | (0.05) | (0.08) | (0.07) | (0.05) | (0.06) |
(0.70) | (0.73) | 1.36 | 2.43 | 0.32 | (0.35) |
(0.73) | (0.78) | 1.28 | 2.36 | 0.27 | (0.41) |
— | — | — | — | — | — |
(0.33) | (2.67) | (0.75) | — | (0.35) | (0.05) |
(0.33) | (2.67) | (0.75) | — | (0.35) | (0.05) |
8.61 | 9.67 | 13.12 | 12.59 | 10.23 | 10.31 |
$126,273 | $154,965 | $244,140 | $254,925 | $169,718 | $205,007 |
(8.13)%c | (4.27)% | 10.55% | 23.07% | 2.62% | (3.78)% |
1.04d | 0.91 | 0.88 | 0.88 | 0.89 | 0.90 |
1.04d | 0.90 | 0.87 | 0.88 | 0.89 | 0.90 |
(0.72)d | (0.53) | (0.62) | (0.61) | (0.48) | (0.55) |
24c | 68 | 71 | 67 | 85 | 103 |
Investor Class | |||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | ||||
2019 | 2018 | 2017 | 2016 | 2015 | |
(Unaudited) | |||||
$9.40 | $12.87 | $12.41 | $10.12 | $10.24 | $10.74 |
(0.05) | (0.09) | (0.13) | (0.11) | (0.09) | (0.09) |
(0.68) | (0.71) | 1.34 | 2.40 | 0.32 | (0.36) |
(0.73) | (0.80) | 1.21 | 2.29 | 0.23 | (0.45) |
— | — | — | — | — | — |
(0.33) | (2.67) | (0.75) | — | (0.35) | (0.05) |
(0.33) | (2.67) | (0.75) | — | (0.35) | (0.05) |
8.34 | 9.40 | 12.87 | 12.41 | 10.12 | 10.24 |
$305 | $360 | $691 | $1,167 | $871 | $599 |
(8.37)%c | (4.58)% | 10.12% | 22.63% | 2.24% | (4.17)% |
1.41d | 1.28 | 1.25 | 1.25 | 1.26 | 1.27 |
1.41d | 1.27 | 1.24 | 1.25 | 1.26 | 1.27 |
(1.09)d | (0.91) | (0.99) | (0.99) | (0.87) | (0.86) |
24c | 68 | 71 | 67 | 85 | 103 |
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 FUND | |||||
Retirement Class | |||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | ||||
2019 | 2018 | 2017 | 2016f | ||
(Unaudited) | |||||
Net asset value beginning of period | $33.55 | $33.60 | $36.16 | $27.29 | $23.91 |
Income from Investment Operations | |||||
Net investment income/(loss)a,e | 0.10 | 0.21 | 0.17 | 0.06 | 0.05 |
Net realized and unrealized gains/(losses) on investments | (5.52) | 2.84 | (1.98) | 8.94 | 3.33 |
Total from investment operations | (5.42) | 3.05 | (1.81) | 9.00 | 3.38 |
Less Distributions | |||||
Dividends from net investment income | (0.20) | (0.15) | (0.06) | (0.13) | — |
Distributions from net realized capital gains | (0.32) | (2.95) | (0.69) | — | — |
Total distributions | (0.52) | (3.10) | (0.75) | (0.13) | — |
Net asset value end of period | 27.61 | 33.55 | 33.60 | 36.16 | 27.29 |
Net assets end of period (000s) | $238,898 | $230,861 | $155,036 | $57,196 | $2,529 |
Ratios and Supplemental Data (%) | |||||
Total returnb | (16.47)%c | 10.98% | (5.18)% | 33.06% | 14.14%c |
Ratio of total expenses to average net assets^ | 0.80d | 0.80 | 0.79 | 0.81 | 0.82d |
Ratio of net expenses to average net assetsa | 0.80d | 0.80 | 0.79 | 0.81 | 0.81d |
Ratio of net investment income to average net assetsa | 0.62d | 0.67 | 0.45 | 0.17 | 0.27d |
Portfolio turnover | 6c | 27 | 22 | 8 | 10c |
Administrative Class | ||||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | |||||
2019 | 2018 | 2017 | 2016 | 2015 | ||
(Unaudited) | ||||||
Net asset value beginning of period | $33.30 | $33.36 | $35.97 | $27.16 | $26.07 | $27.05 |
Income from Investment Operations | ||||||
Net investment income/(loss)a,e | 0.03 | 0.11 | 0.06 | (0.02) | 0.05 | 0.06 |
Net realized and unrealized gains/(losses) on investments | (5.47) | 2.82 | (1.98) | 8.88 | 1.93 | (0.13) |
Total from investment operations | (5.44) | 2.93 | (1.92) | 8.86 | 1.98 | (0.07) |
Less Distributions | ||||||
Dividends from net investment income | (0.10) | (0.04) | — | (0.05) | — | — |
Distributions from net realized capital gains | (0.32) | (2.95) | (0.69) | — | (0.89) | (0.91) |
Total distributions | (0.42) | (2.99) | (0.69) | (0.05) | (0.89) | (0.91) |
Net asset value end of period | 27.44 | 33.30 | 33.36 | 35.97 | 27.16 | 26.07 |
Net assets end of period (000s) | $10,530 | $6,537 | $7,253 | $4,462 | $1,360 | $1,144 |
Ratios and Supplemental Data (%) | ||||||
Total returnb | (16.60)%c | 10.59% | (5.50)% | 32.67% | 7.93% | (0.28)% |
Ratio of total expenses to average net assets^ | 1.13d | 1.13 | 1.12 | 1.13 | 1.11 | 1.10 |
Ratio of net expenses to average net assetsa | 1.13d | 1.12 | 1.11 | 1.12 | 1.11 | 1.10 |
Ratio of net investment income to average net assetsa | 0.21d | 0.35 | 0.16 | (0.05) | 0.21 | 0.21 |
Portfolio turnover | 6c | 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.
64
Institutional Class | |||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | ||||
2019 | 2018 | 2017 | 2016 | 2015 | |
(Unaudited) | |||||
$33.53 | $33.57 | $36.14 | $27.27 | $26.21 | $27.17 |
0.08 | 0.19 | 0.15 | 0.08 | 0.12 | 0.10 |
(5.50) | 2.84 | (2.00) | 8.90 | 1.92 | (0.09) |
(5.42) | 3.03 | (1.85) | 8.98 | 2.04 | 0.01 |
(0.18) | (0.12) | (0.03) | (0.11) | (0.09) | (0.06) |
(0.32) | (2.95) | (0.69) | — | (0.89) | (0.91) |
(0.50) | (3.07) | (0.72) | (0.11) | (0.98) | (0.97) |
27.61 | 33.53 | 33.57 | 36.14 | 27.27 | 26.21 |
$1,130,300 | $1,346,098 | $1,149,857 | $1,081,412 | $738,705 | $827,423 |
(16.49)%c | 10.91% | (5.28)% | 33.00% | 8.18% | 0.01% |
0.88d | 0.88 | 0.87 | 0.88 | 0.86 | 0.85 |
0.88d | 0.87 | 0.86 | 0.87 | 0.86 | 0.85 |
0.54d | 0.60 | 0.40 | 0.24 | 0.48 | 0.38 |
6c | 27 | 22 | 8 | 10 | 17 |
Investor Class | |||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | ||||
2019 | 2018 | 2017 | 2016 | 2015 | |
(Unaudited) | |||||
$32.56 | $32.68 | $35.29 | $26.65 | $25.63 | $26.63 |
0.03 | 0.08 | 0.01 | (0.05) | 0.03 | 0.01 |
(5.37) | 2.75 | (1.93) | 8.71 | 1.88 | (0.10) |
(5.34) | 2.83 | (1.92) | 8.66 | 1.91 | (0.09) |
(0.05) | — | — | (0.02) | — | — |
(0.32) | (2.95) | (0.69) | — | (0.89) | (0.91) |
(0.37) | (2.95) | (0.69) | (0.02) | (0.89) | (0.91) |
26.85 | 32.56 | 32.68 | 35.29 | 26.65 | 25.63 |
$41,408 | $57,931 | $70,819 | $37,548 | $17,775 | $16,797 |
(16.65)%c | 10.48% | (5.60)% | 32.49% | 7.79% | (0.37)% |
1.25d | 1.25 | 1.24 | 1.25 | 1.23 | 1.22 |
1.25d | 1.24 | 1.23 | 1.24 | 1.23 | 1.22 |
0.19d | 0.24 | 0.03 | (0.16) | 0.10 | 0.02 |
6c | 27 | 22 | 8 | 10 | 17 |
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 | ||||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | Year Ended June 30, | ||||
2019 | 2018 | 2017h | 2017g | |||
(Unaudited) | ||||||
Net asset value beginning of period | $22.31 | $19.65 | $18.86 | $17.67 | $16.76 | |
Income from Investment Operations | ||||||
Net investment income/(loss)a,e | 0.07 | 0.12 | 0.07 | 0.05 | 0.03 | |
Net realized and unrealized gains/(losses) on investments | (0.41) | 3.10 | 1.11 | 1.14 | 0.88 | |
Total from investment operations | (0.34) | 3.22 | 1.18 | 1.19 | 0.91 | |
Less Distributions | ||||||
Dividends from net investment income | (0.11) | (0.08) | (0.04) | — | — | |
Distributions from net realized capital gains | (0.31) | (0.48) | (0.35) | — | — | |
Total distributions | (0.42) | (0.56) | (0.39) | — | — | |
Proceeds from redemption fees | N/A | N/A | N/A | N/A | N/A | |
Net asset value end of period | 21.55 | 22.31 | 19.65 | 18.86 | 17.67 | |
Net assets end of period (000s) | $5,082 | $5,152 | $3,584 | $435 | $316 | |
Ratios and Supplemental Data (%) | ||||||
Total returnb | (1.64)%c | 17.04% | 6.34% | 6.73%c | 5.43%c | |
Ratio of total expenses to average net assets^ | 0.72d | 0.71 | 0.76 | 1.10d | 1.52d | |
Ratio of net expenses to average net assetsa | 0.63d | 0.63 | 0.62 | 0.62d | 0.62d | |
Ratio of net investment income to average net assetsa | 0.64d | 0.60 | 0.33 | 0.42d | 0.58d | |
Portfolio turnover | 17c | 26 | 15 | 9c | 21c |
Administrative Class | ||||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | Year Ended June 30, | ||||
2019 | 2018 | 2017h | 2017g | |||
(Unaudited) | ||||||
Net asset value beginning of period | $22.24 | $19.58 | $18.82 | $17.65 | $16.76 | |
Income from Investment Operations | ||||||
Net investment income/(loss)a,e | 0.03 | 0.05 | 0.01 | 0.01 | 0.01 | |
Net realized and unrealized gains/(losses) on investments | (0.42) | 3.10 | 1.10 | 1.16 | 0.88 | |
Total from investment operations | (0.39) | 3.15 | 1.11 | 1.17 | 0.89 | |
Less Distributions | ||||||
Dividends from net investment income | (0.04) | (0.01) | — | — | — | |
Distributions from net realized capital gains | (0.31) | (0.48) | (0.35) | — | — | |
Total distributions | (0.35) | (0.49) | (0.35) | — | — | |
Net asset value end of period | 21.50 | 22.24 | 19.58 | 18.82 | 17.65 | |
Net assets end of period (000s) | $18 | $18 | $16 | $12 | $11 | |
Ratios and Supplemental Data (%) | ||||||
Total returnb | (1.85)%c | 16.70% | 5.96% | 6.63%c | 5.31%c | |
Ratio of total expenses to average net assets^ | 1.05d | 1.04 | 1.09 | 1.43d | 1.93d | |
Ratio of net expenses to average net assetsa | 0.96d | 0.96 | 0.95 | 0.95d | 0.95d | |
Ratio of net investment income to average net assetsa | 0.30d | 0.26 | 0.03 | 0.10d | 0.19d | |
Portfolio turnover | 17c | 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 | |||||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | Year Ended June 30, | |||||
2019 | 2018 | 2017h | 2017 | 2016 | 2015 | ||
(Unaudited) | |||||||
$22.28 | $19.63 | $18.85 | $17.66 | $15.54 | $15.39 | $15.41 | |
0.06 | 0.11 | 0.06 | 0.03 | 0.12 | 0.03 | 0.04 | |
(0.41) | 3.08 | 1.11 | 1.16 | 2.22 | 0.63 | 1.11 | |
(0.35) | 3.19 | 1.17 | 1.19 | 2.34 | 0.66 | 1.15 | |
(0.09) | (0.06) | (0.04) | — | (0.11) | (0.01) | (0.06) | |
(0.31) | (0.48) | (0.35) | — | (0.11) | (0.50) | (1.11) | |
(0.40) | (0.54) | (0.39) | — | (0.22) | (0.51) | (1.17) | |
N/A | N/A | N/A | N/A | —* | —* | —* | |
21.53 | 22.28 | 19.63 | 18.85 | 17.66 | 15.54 | 15.39 | |
$96,263 | $106,463 | $66,197 | $56,026 | $31,866 | $25,388 | $20,540 | |
(1.66)%c | 16.91% | 6.26% | 6.74% | 15.21% | 4.44% | 7.67% | |
0.80d | 0.79 | 0.84 | 1.18 | 1.48 | 1.74 | 2.23 | |
0.71d | 0.71 | 0.70 | 0.70 | 0.83 | 0.90 | 0.90 | |
0.56d | 0.51 | 0.28 | 0.29 | 0.71 | 0.19 | 0.18 | |
17c | 26 | 15 | 9 | 21 | 40 | 33 |
Investor Class | |||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | Year Ended June 30, | |||
2019 | 2018 | 2017h | 2017g | ||
(Unaudited) | |||||
$21.87 | $19.54 | $18.81 | $17.64 | $16.76 | |
0.02 | 0.03 | (0.02) | 0.02 | 0.01 | |
(0.41) | 2.79 | 1.10 | 1.15 | 0.87 | |
(0.39) | 2.82 | 1.08 | 1.17 | 0.88 | |
(0.01) | (0.01) | — | — | — | |
(0.31) | (0.48) | (0.35) | — | — | |
(0.32) | (0.49) | (0.35) | — | — | |
21.16 | 21.87 | 19.54 | 18.81 | 17.64 | |
$538 | $417 | $322 | $75 | $22 | |
(1.84)%c | 14.99% | 5.80% | 6.63%c | 5.25%c | |
1.17d | 1.16 | 1.21 | 1.55d | 2.03d | |
1.08d | 1.08 | 1.07 | 1.07d | 1.07d | |
0.14d | 0.14 | (0.11) | 0.05d | 0.13d | |
17c | 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 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 March 6, 2017 (commencement of operations) through June 30, 2017 |
h | For the period July 1, 2017 through October 31, 2017 |
i | For the period December 1, 2019 (inception) through April 30, 2020 |
The accompanying notes are an integral part of the Financial Statements.
68
Harbor Domestic Equity Funds
Notes to Financial Statements—April 30, 2020 (Unaudited)
Notes to Financial Statements—April 30, 2020 (Unaudited)
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 April 30, 2020, the Trust consists of 38 separate portfolios. The portfolios covered by this report are: Harbor Capital Appreciation Fund, Harbor Large Cap Value Fund, Harbor Mid Cap 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, 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) certain expenses, subject to the approval of the Trust’s Board of Trustees (the “Board of Trustees”), may be applied differently to each class of shares in accordance with current regulations of the 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, and convertible preferred stock), exchange-traded funds and financial derivative instruments (such as futures contracts, options contracts, including rights and warrants 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 period.
Each Fund used observable inputs in its valuation methodologies whenever they were available and deemed reliable.
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
70
Harbor Domestic Equity Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 2—Significant Accounting Policies—Continued
(except for premiums on certain callable debt securities that are amortized to the earliest call date) 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.
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.
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.
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.
Distribution to Shareholders
Distributions on Fund shares are recorded on the ex-dividend date.
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 (if applicable), 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.
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.
71
Harbor Domestic Equity Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 2—Significant Accounting Policies—Continued
Foreign Currency 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. A forward currency contract is an agreement between two parties to buy and sell currencies at a set price on a future date.
Foreign currency contracts are marked-to-market daily 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 period, Harbor Capital Appreciation Fund and Harbor Mid Cap Growth 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 period 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.
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.
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 period, 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.
72
Harbor Domestic Equity Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 3—Investment Portfolio Transactions
Investment Portfolio Transactions
Purchases and sales of investments, other than short-term securities, for each Fund for the six-month period ended April 30, 2020 are as follows:
Purchases (000s) | Sales (000s) | ||
Harbor Capital Appreciation Fund | $8,149,040 | $10,533,058* | |
Harbor Large Cap Value Fund | 280,372 | 231,525 | |
Harbor Mid Cap Fund | 10,548 | 469 | |
Harbor Mid Cap Growth Fund | 150,277 | 172,166 | |
Harbor Mid Cap Value Fund | 19,904 | 174,920 | |
Harbor Small Cap Growth Fund | 373,954 | 410,419 | |
Harbor Small Cap Growth Opportunities Fund | 43,999 | 68,920 | |
Harbor Small Cap Value Fund | 165,561 | 91,226 | |
Harbor Strategic Growth Fund | 20,402 | 17,378 |
* | Sales for this Fund include $202,061 in connection with in-kind redemptions of the Fund’s capital shares. |
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 six-month period ended April 30, 2020, Harbor Capital Appreciation Fund realized gains of $132,216,000 upon the disposition of portfolio securities in connection with in-kind redemptions of the Fund’s shares. There were no in-kind redemptions from the Funds for the year ended October 31, 2019.
Note 4—FEES AND OTHER Transactions with Affiliates
Investment Adviser
Harbor Capital is a wholly-owned subsidiary of ORIX Corporation. 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 | 0.60b | 0.60 | |
Harbor Mid Cap Fund | 0.75 | 0.75 | |
Harbor Mid Cap Growth Fund | 0.75c | 0.72 | |
Harbor Mid Cap Value Fund | 0.75d | 0.73 | |
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 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 28, 2021. |
b | For the period November 1, 2019 through February 29, 2020, the management fee was 0.60%. Effective March 1, 2020, the management fee is 0.60% on assets up to $4 billion and 0.55% on assets over $4 billion. |
c | The Adviser has contractually agreed to reduce the management fee to 0.72% through February 28, 2021. |
d | 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 28, 2021. |
73
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 period, 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 Fund | 0.61% | 0.69% | 0.94% | 1.06% | 02/28/2021 | ||||
Harbor Mid Cap Fund | 0.80 | 0.88 | 1.13 | 1.25 | 02/28/2021 | ||||
Harbor Strategic Growth Fund | 0.63 | 0.71 | 0.96 | 1.08 | 02/28/2021 |
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 (each, a “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 each 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 a 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 each 12b-1 Plan.
Amounts payable by a Fund under each 12b-1 Plan need not be directly related to the expenses actually incurred by the Distributor on behalf of each Fund. Each 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 each 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 Fees | |
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 |
Harbor Services Group has voluntarily waived a portion of its transfer agent fees during the six-month period ended April 30, 2020. 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.
74
Harbor Domestic Equity Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 4—FEES AND OTHER Transactions with Affiliates—Continued
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 six-month period, the Funds did not enter into any transactions with any other Harbor fund.
Shareholders
On April 30, 2020, 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 Aprreciation Fund | 36,905 | — | — | — | 36,905 | 0.0% | |||||
Harbor Large Cap Value Fund | 79,788 | — | — | — | 79,788 | 0.1 | |||||
Harbor Mid Cap Fund | 473,776 | 473,745 | — | 3,001 | 956,627 | 93.3 | |||||
Harbor Mid Cap Growth Fund | 144,185 | — | — | — | 144,185 | 0.5 | |||||
Harbor Mid Cap Value Fund | 62,180 | — | — | — | 62,180 | 0.2 | |||||
Harbor Small Cap Growth Fund | 78,143 | — | — | — | 78,143 | 0.1 | |||||
Harbor Small Cap Growth Opportunities Fund | 24,179 | — | — | — | 24,179 | 0.1 | |||||
Harbor Small Cap Value Fund | 35,385 | — | — | — | 35,385 | 0.1 | |||||
Harbor Strategic Growth Fund | 42,713 | 494,220 | 640 | — | 537,573 | 11.4 |
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.
75
Harbor Domestic Equity Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
NOTE 5—TAX INFORMATION
The identified cost for federal income tax purposes of investments owned by each Fund and its respective gross unrealized appreciation and depreciation at April 30, 2020 are as follows:
Identified Cost (000s) | Gross Unrealized | Net Unrealized Appreciation/ (Depreciation) (000s) | |||||
Appreciation (000s) | (Depreciation) (000s) | ||||||
Harbor Capital Appreciation Fund | $16,687,765 | $13,724,028 | $(242,504) | $13,481,524 | |||
Harbor Large Cap Value Fund | 1,028,432 | 227,617 | (59,834) | 167,783 | |||
Harbor Mid Cap Fund | 9,890 | 320 | (1,231) | (911) | |||
Harbor Mid Cap Growth Fund | 206,157 | 50,794 | (6,215) | 44,579 | |||
Harbor Mid Cap Value Fund | 522,723 | 33,482 | (175,930) | (142,448) | |||
Harbor Small Cap Growth Fund | 583,924 | 122,801 | (38,892) | 83,909 | |||
Harbor Small Cap Growth Opportunities Fund | 171,204 | 22,937 | (42,261) | (19,324) | |||
Harbor Small Cap Value Fund | 1,170,777 | 359,633 | (160,359) | 199,274 | |||
Harbor Strategic Growth Fund | 81,792 | 22,014 | (1,992) | 20,022 |
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. Plaintiffs filed a motion for rehearing and rehearing en banc on January 2, 2020. The motion was denied on February 6, 2020.
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
76
Harbor Domestic Equity Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 6—Legal Proceedings—Continued
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 Federal Rule of Civil Procedure 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 filed an opening brief on January 7, 2020. The shareholder defendants’ brief was filed on April 27, 2020. Plaintiff’s reply brief was filed on May 18, 2020.
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
The Board of Trustees approved the reorganization of the Harbor Small Cap Growth Opportunities Fund (the “Target Fund”) into the Harbor Small Cap Growth Fund (the “Acquiring Fund”). The reorganization occurred on the close of business May 15, 2020, and as a result, shareholders of the Target Fund became shareholders of the Acquiring Fund. Additional information related to the reorganization can be found in the supplement to the Fund’s prospectus filed with the SEC on March 30, 2020.
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.
77
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 November 1, 2019 through April 30, 2020.
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 November 1, 2019 | Ending Account Value April 30, 2020 | |||||
Harbor Capital Appreciation Fund | ||||||||
Retirement Class | 0.58% | |||||||
Actual | $3.03 | $1,000 | $1,105.80 | |||||
Hypothetical (5% return) | 2.92 | 1,000 | 1,021.91 | |||||
Institutional Class | 0.66% | |||||||
Actual | $3.45 | $1,000 | $1,105.40 | |||||
Hypothetical (5% return) | 3.32 | 1,000 | 1,021.50 | |||||
Administrative Class | 0.91% | |||||||
Actual | $4.77 | $1,000 | $1,104.10 | |||||
Hypothetical (5% return) | 4.57 | 1,000 | 1,020.23 | |||||
Investor Class | 1.03% | |||||||
Actual | $5.38 | $1,000 | $1,103.40 | |||||
Hypothetical (5% return) | 5.17 | 1,000 | 1,019.61 |
78
Harbor Domestic Equity Funds
Fees and Expenses Example—Continued
Fees and Expenses Example—Continued
Annualized Expense Ratios* | Expenses Paid During Period** | Beginning Account Value November 1, 2019 | Ending Account Value April 30, 2020 | |||||
Harbor Large Cap Value Fund | ||||||||
Retirement Class | 0.61% | |||||||
Actual | $2.90 | $1,000 | $917.30 | |||||
Hypothetical (5% return) | 3.07 | 1,000 | 1,021.75 | |||||
Institutional Class | 0.69% | |||||||
Actual | $3.29 | $1,000 | $917.00 | |||||
Hypothetical (5% return) | 3.47 | 1,000 | 1,021.35 | |||||
Administrative Class | 0.94% | |||||||
Actual | $4.47 | $1,000 | $915.60 | |||||
Hypothetical (5% return) | 4.72 | 1,000 | 1,020.07 | |||||
Investor Class | 1.06% | |||||||
Actual | $5.05 | $1,000 | $915.30 | |||||
Hypothetical (5% return) | 5.32 | 1,000 | 1,019.46 | |||||
Harbor Mid Cap Fund*** | ||||||||
Retirement Class | 0.80% | |||||||
Actual | $3.13 | $1,000 | $888.52 | |||||
Hypothetical (5% return) | 3.33 | 1,000 | 1,017.26 | |||||
Institutional Class | 0.88% | |||||||
Actual | $3.45 | $1,000 | $888.46 | |||||
Hypothetical (5% return) | 3.66 | 1,000 | 1,016.92 | |||||
Investor Class | 1.25% | |||||||
Actual | $4.90 | $1,000 | $887.20 | |||||
Hypothetical (5% return) | 5.20 | 1,000 | 1,015.36 | |||||
Harbor Mid Cap Growth Fund | ||||||||
Retirement Class | 0.80% | |||||||
Actual | $4.06 | $1,000 | $1,037.90 | |||||
Hypothetical (5% return) | 4.02 | 1,000 | 1,020.79 | |||||
Institutional Class | 0.88% | |||||||
Actual | $4.46 | $1,000 | $1,036.90 | |||||
Hypothetical (5% return) | 4.42 | 1,000 | 1,020.38 | |||||
Administrative Class | 1.13% | |||||||
Actual | $5.72 | $1,000 | $1,034.90 | |||||
Hypothetical (5% return) | 5.67 | 1,000 | 1,019.10 | |||||
Investor Class | 1.25% | |||||||
Actual | $6.33 | $1,000 | $1,035.30 | |||||
Hypothetical (5% return) | 6.27 | 1,000 | 1,018.49 | |||||
Harbor Mid Cap Value Fund | ||||||||
Retirement Class | 0.80% | |||||||
Actual | $3.44 | $1,000 | $728.40 | |||||
Hypothetical (5% return) | 4.02 | 1,000 | 1,020.79 | |||||
Institutional Class | 0.88% | |||||||
Actual | $3.78 | $1,000 | $727.60 | |||||
Hypothetical (5% return) | 4.42 | 1,000 | 1,020.38 | |||||
Administrative Class | 1.13% | |||||||
Actual | $4.85 | $1,000 | $727.20 | |||||
Hypothetical (5% return) | 5.67 | 1,000 | 1,019.10 | |||||
Investor Class | 1.25% | |||||||
Actual | $5.37 | $1,000 | $726.30 | |||||
Hypothetical (5% return) | 6.27 | 1,000 | 1,018.49 |
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Harbor Domestic Equity Funds
Fees and Expenses Example—Continued
Fees and Expenses Example—Continued
Annualized Expense Ratios* | Expenses Paid During Period** | Beginning Account Value November 1, 2019 | Ending Account Value April 30, 2020 | |||||
Harbor Small Cap Growth Fund | ||||||||
Retirement Class | 0.80% | |||||||
Actual | $3.93 | $1,000 | $973.70 | |||||
Hypothetical (5% return) | 4.02 | 1,000 | 1,020.79 | |||||
Institutional Class | 0.88% | |||||||
Actual | $4.32 | $1,000 | $973.60 | |||||
Hypothetical (5% return) | 4.42 | 1,000 | 1,020.38 | |||||
Administrative Class | 1.13% | |||||||
Actual | $5.54 | $1,000 | $971.80 | |||||
Hypothetical (5% return) | 5.67 | 1,000 | 1,019.10 | |||||
Investor Class | 1.25% | |||||||
Actual | $6.13 | $1,000 | $971.00 | |||||
Hypothetical (5% return) | 6.27 | 1,000 | 1,018.49 | |||||
Harbor Small Cap Growth Opportunities Fund | ||||||||
Retirement Class | 0.96% | |||||||
Actual | $4.58 | $1,000 | $919.00 | |||||
Hypothetical (5% return) | 4.82 | 1,000 | 1,019.97 | |||||
Institutional Class | 1.04% | |||||||
Actual | $4.96 | $1,000 | $918.70 | |||||
Hypothetical (5% return) | 5.22 | 1,000 | 1,019.56 | |||||
Administrative Class | 1.29% | |||||||
Actual | $6.15 | $1,000 | $918.80 | |||||
Hypothetical (5% return) | 6.47 | 1,000 | 1,018.29 | |||||
Investor Class | 1.41% | |||||||
Actual | $6.72 | $1,000 | $916.30 | |||||
Hypothetical (5% return) | 7.07 | 1,000 | 1,017.68 | |||||
Harbor Small Cap Value Fund | ||||||||
Retirement Class | 0.80% | |||||||
Actual | $3.65 | $1,000 | $835.30 | |||||
Hypothetical (5% return) | 4.02 | 1,000 | 1,020.79 | |||||
Institutional Class | 0.88% | |||||||
Actual | $4.02 | $1,000 | $835.10 | |||||
Hypothetical (5% return) | 4.42 | 1,000 | 1,020.38 | |||||
Administrative Class | 1.13% | |||||||
Actual | $5.15 | $1,000 | $834.00 | |||||
Hypothetical (5% return) | 5.67 | 1,000 | 1,019.10 | |||||
Investor Class | 1.25% | |||||||
Actual | $5.70 | $1,000 | $833.50 | |||||
Hypothetical (5% return) | 6.27 | 1,000 | 1,018.49 |
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Harbor Domestic Equity Funds
Fees and Expenses Example—Continued
Fees and Expenses Example—Continued
Annualized Expense Ratios* | Expenses Paid During Period** | Beginning Account Value November 1, 2019 | Ending Account Value April 30, 2020 | |||||
Harbor Strategic Growth Fund | ||||||||
Retirement Class | 0.63% | |||||||
Actual | $3.10 | $1,000 | $983.60 | |||||
Hypothetical (5% return) | 3.17 | 1,000 | 1,021.65 | |||||
Institutional Class | 0.71% | |||||||
Actual | $3.50 | $1,000 | $983.40 | |||||
Hypothetical (5% return) | 3.57 | 1,000 | 1,021.25 | |||||
Administrative Class | 0.96% | |||||||
Actual | $4.73 | $1,000 | $981.50 | |||||
Hypothetical (5% return) | 4.82 | 1,000 | 1,019.97 | |||||
Investor Class | 1.08% | |||||||
Actual | $5.32 | $1,000 | $981.60 | |||||
Hypothetical (5% return) | 5.42 | 1,000 | 1,019.36 |
* | 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 182/366 (to reflect the one-half year period). |
*** | Fund has less than six months of operating history. Expenses are equal to the Class’ annualized net expense ratio, multiplied by the average account value over the period, multiplied by 152/366 (to reflect the period since inception). |
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Harbor Domestic Equity Funds
Additional Information (Unaudited)
Additional Information (Unaudited)
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
The Funds file a complete portfolio of investments with the SEC as an exhibit to Form N-PORT. The Funds’ Form N-PORT-EX is 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
FACTORS CONSIDERED BY THE TRUSTEES IN APPROVING THE INVESTMENT ADVISORY AGREEMENTS AND SUBADVISORY AGREEMENTS OF THE DOMESTIC EQUITY FUNDS
The Investment Company Act 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 Trust’s 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 February 16 and 17, 2020 (the “Meeting”), the Board, including the Independent Trustees voting separately, considered and approved the continuation of each Investment Advisory Agreement with Harbor Capital, the adviser to each Fund, and each Subadvisory Agreement with each Fund’s subadviser (each, a “Subadviser”) with respect to 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 and Harbor Strategic Growth Fund (each a “Fund” and, collectively, the “Funds”).
In evaluating each Investment Advisory Agreement and each Subadvisory Agreement, the Trustees reviewed materials furnished by Harbor Capital and each Subadviser, including information about their respective affiliates, personnel, and operations, and also relied upon their knowledge of Harbor Capital and the Subadvisers 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 continuation of the Investment Advisory Agreements and Subadvisory Agreements, and at prior meetings, the Trustees, including the Independent Trustees, requested and received materials and presentations relating to Fund performance and the services rendered by Harbor Capital and each Subadviser. These materials included a comprehensive written response from Harbor Capital to a 15(c) request letter prepared by legal counsel to the Independent Trustees in consultation with the Independent Trustees. The Trustees also discussed with representatives of Harbor Capital, at the Meeting and at prior meetings, Harbor Funds’ operations and Harbor Capital’s ability, consistent with the “manager-of-managers” structure of Harbor Funds, to (i) identify and recommend to the Trustees a subadviser for each Fund, (ii) monitor and oversee the performance and investment capabilities of each subadviser, and (iii) recommend the replacement of a subadviser where appropriate. The Trustees specifically considered Harbor Capital’s history as a manager-of-managers, including its history of replacing subadvisers for particular Funds in circumstances in which the Board and Harbor Capital 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 Harbor Capital were to identify another subadviser believed to better serve the shareholders than the existing subadviser.
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Additional Information—Continued
Additional Information—Continued
ADVISORY AGREEMENT APPROVALS—Continued
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 each Investment Advisory Agreement and each Subadvisory Agreement were fair and reasonable and approved the continuation for a one-year period of each such Investment Advisory Agreement and Subadvisory Agreement as being in the best interests of each Fund and its shareholders.
In their deliberations, the Independent Trustees had the opportunity to meet privately without representatives of Harbor Capital or any Subadviser present and were represented throughout the process by legal counsel to the Independent Trustees and the Funds.
In considering the approval of each Fund’s 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 Investment Advisory Agreements and Subadvisory Agreements were the following:
• | The nature, extent, and quality of the services provided by Harbor Capital and each Subadviser, including the background, education, expertise and experience of the investment professionals of Harbor Capital and each Subadviser providing services to the Funds; |
• | The favorable history, reputation, qualifications and background of Harbor Capital and each Subadviser, as well as the qualifications of their respective personnel; |
• | The profitability of Harbor Capital with respect to each Fund, including the effect of revenues of Harbor Services Group, Inc. (“Harbor Services Group”), the Funds’ transfer agent, and Harbor Funds Distributors, Inc. (“Harbor Funds Distributors”), the Funds’ principal underwriter, on such profitability; |
• | The fees charged by Harbor Capital and Subadvisers for investment advisory and subadvisory services, respectively, including, in each case, the portion of the fee to be retained by Harbor Capital, after payment of the Subadviser’s fee, for the investment advisory and related services, including investment, business, legal, compliance, financial and administrative services, that Harbor Capital provides; |
• | The extent to which economies of scale might be realized as each Fund grows, and the extent to which each Fund’s advisory fee level reflects any economies of scale for the benefit of Fund investors; |
• | The fees and expense ratios of each Fund relative to the quality of services provided and the fees and expense ratios of similar investment companies; |
• | The short- and long-term investment performance of each Fund in comparison to peer groups and certain relevant benchmark indices and Harbor Capital’s efforts to address circumstances of underperformance where applicable; |
• | The compensation received by Harbor Services Group and Harbor Funds Distributors in consideration of the services each provides to the Funds; |
• | Any “fall out” benefits that might inure to Harbor Capital and its affiliates as a result of their relationship with the Funds; |
• | Information received at regular meetings throughout the year related to Fund performance and services rendered by Harbor Capital, as well as each of the Subadvisers, and research arrangements with brokers who execute transactions on behalf of each Subadviser; |
• | Information contained in materials provided by Harbor Capital and compiled by Broadridge as to the investment returns, advisory fees and total expense ratios of the Institutional Class of each Fund (and, in certain cases, total expense ratios of the Investor Class) relative to those of other investment companies with similar objectives and strategies managed by other investment advisers, consisting both of a peer group of funds as well as a broader universe of funds compiled by Broadridge; and |
• | Information contained in materials compiled by Morningstar as to the investment returns of the Institutional Class of each Fund relative to those of other investment companies with similar objectives and strategies managed by other investment advisers. |
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Harbor Domestic Equity Funds
Additional Information—Continued
Additional Information—Continued
ADVISORY AGREEMENT APPROVALS—Continued
Nature, Extent, and Quality of Services
The Trustees separately considered the nature, extent, and quality of the services provided by Harbor Capital and each Subadviser. In their deliberations as to the approval of each Fund’s Investment Advisory Agreement and Subadvisory Agreement, the Trustees were mindful of the fact that, by choosing to invest in a Fund, the shareholders had entrusted Harbor Capital with the responsibility, subject to the approval of the Trustees, for selecting each 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 favorable history, reputation, qualifications and background of Harbor Capital and each Subadviser, as well as the qualifications of their respective personnel.
The Adviser’s Services. The Board evaluated the nature, extent, and quality of Harbor Capital’s services in light of the Board’s experience with Harbor Capital, as well as materials provided by Harbor Capital concerning the financial and other resources devoted by Harbor Capital to Harbor Funds, including the breadth and depth of experience and expertise of the investment, accounting, administrative, legal and compliance professionals dedicated to Harbor Funds’ operations. The Trustees determined that Harbor Capital has the expertise and resources to identify, select, oversee and monitor each Subadviser and to operate effectively as the “manager-of-managers” for the Funds.
The Subadvisers’ Services. The Trustees’ consideration of the services provided by the Subadvisers included a review of each Subadviser’s portfolio managers, investment philosophy, style and processes and record of consistency therewith, the volatility of its results, its approach to controlling risk, and the quality and extent of its investment capabilities and resources, including the nature and extent of research it receives from broker-dealers (to the extent applicable) and other sources. In their deliberations with respect to each Fund, the Trustees considered the history of Harbor Funds’ relationship with each Subadviser and Harbor Funds’ experience with each Subadviser in this capacity.
The Trustees also considered each Subadviser’s breadth and depth of experience and investment results in managing other accounts similar to the respective Fund. The Trustees had received presentations by investment professionals from the Subadvisers for each Fund at meetings of the Board held in 2019. The Trustees reviewed information concerning each Subadviser’s historical investment results in managing accounts and/or funds, as applicable, in a manner substantially similar to the relevant Fund.
Investment Performance, Advisory Fees and Expense Ratios
In considering each Fund’s performance, advisory fees and expense ratio, the Trustees requested and received from Harbor Capital data compiled by Broadridge and Morningstar. The Trustees also received information explaining the methodology for compilation of certain of this information and what it was intended to demonstrate. The Trustees analyzed the Institutional Class performance of each Fund, the advisory fees of each Fund, and the Institutional Class expenses of each Fund (after giving effect to waivers and/or reimbursements, if applicable, that reduced the fees or expenses of the Fund or its peer funds) and made certain observations and findings as to each Fund as noted below. The Trustees also reviewed certain Investor Class comparative fee and expense information they considered relevant to their deliberations. In evaluating performance, the Trustees recognized that the performance data reflects a snapshot of a period as of a particular date and that selecting a different performance period could produce significantly different results.
Harbor Capital Appreciation Fund. The Trustees considered Harbor Capital Appreciation Fund (inception date December 29, 1987) and its Institutional Class performance in relation to its Broadridge universe and group for the one-, three- and five-year periods ended December 31, 2019, noting that according to the Broadridge data, Harbor Capital Appreciation Fund had underperformed its group median for the one-, three- and five-year periods and its universe median for the one-year period ended December 31, 2019. The Fund had outperformed its universe median for the three- and five-year periods ended December 31, 2019. The Fund’s one-, three- and five-year rolling returns as of December 31, 2019 ranked in the second, first and first quartiles, respectively, according to Morningstar. The Trustees also considered that the Fund had outperformed its primary benchmark, the Russell 1000® Growth Index, for the three-year period and underperformed its benchmark index for the one- and five-year periods ended December 31, 2019.
The Trustees considered the expertise of Jennison Associates LLC (“Jennison”) in managing assets generally and specifically with respect to the Fund’s asset class, noting that Jennison managed approximately $60.4 billion in assets in this asset class, out of a firm-wide total of approximately $173.2 billion in assets under management. The Trustees also noted the experience of the Fund’s portfolio managers in this asset class, noting that one was a founding member of Jennison.
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Harbor Domestic Equity Funds
Additional Information—Continued
Additional Information—Continued
ADVISORY AGREEMENT APPROVALS—Continued
The Trustees observed that the Broadridge comparison of contractual management fees for the Fund’s expense group, assuming an asset level of $29.73 billion, showed that the Fund’s contractual management fee was above the group median for the Institutional Class. The actual total expense ratio for the Institutional Class of the Fund, however, was below both the group and universe medians. The Trustees also considered that Harbor Capital had agreed to continue the Fund’s existing contractual fee waiver/expense reimbursement arrangement until at least February 28, 2021. The Trustees noted that Harbor Capital’s profitability in operating the Fund was not excessive.
Harbor Large Cap Value Fund.The Trustees considered Harbor Large Cap Value Fund (inception date December 29, 1987), noting the Fund’s Institutional Class outperformance relative to both its group and universe medians for the one-, three- and five-year periods ended December 31, 2019, according to Broadridge data. The Morningstar data presented showed that the Fund’s one-, three- and five-year rolling returns each ranked in the first quartile for the period ended December 31, 2019. The Trustees also noted that the Fund had outperformed its benchmark, the Russell 1000® Value Index, for the one-, three- and five-year periods ended December 31, 2019.
The Trustees considered the expertise of Aristotle Capital Management, LLC (“Aristotle”) in managing assets generally and in the large cap value asset class specifically, noting that Aristotle managed approximately $28.7 billion in assets in the value equity strategy used by the Fund, out of a firm-wide total of approximately $31.3 billion in assets under management. The Trustees also noted the experience of the Fund’s portfolio managers in this asset class.
The Trustees noted that the Broadridge comparison of contractual management fees for the Fund’s expense group, assuming an asset level of $1.28 billion, showed the Fund’s management fee was below the group median for the Institutional Class, and the actual total expense ratio for the Fund’s Institutional Class was below its group and universe median expense ratios. The Trustees also considered that Harbor Capital had agreed to continue the Fund’s contractual fee waiver/expense reimbursement arrangement until at least February 28, 2021 and to add a breakpoint to the advisory fee schedule. The Trustees noted that Harbor Capital’s profitability in managing the Fund was not excessive.
Harbor Mid Cap Growth Fund. The Trustees considered Harbor Mid Cap Growth Fund (inception date November 1, 2000), noting that, according to the Broadridge report, the Fund’s Institutional Class had outperformed its Broadridge group and universe medians for the one-, three- and five-year periods ended December 31, 2019. The Trustees considered the fact that, in comparison to its universe of other mid cap growth funds, as identified by Morningstar, the Fund’s one-, three- and five-year rolling returns each ranked in the first quartile as of December 31, 2019. The Trustees also considered that the Fund had outperformed its benchmark, the Russell Midcap® Growth Index, for the one-, three- and five-year periods ended December 31, 2019.
The Trustees considered the expertise of Wellington Management Company LLP (“Wellington”) in managing assets generally and in the mid cap growth asset class specifically, noting that Wellington managed approximately $2.7 billion in assets in this asset class, out of a firm-wide total of approximately $1.2 trillion in assets under management. The Trustees noted the experience of the Fund’s portfolio managers in this asset class and an upcoming departure from the portfolio management team.
The Trustees observed that the Broadridge comparison of contractual management fees for the Fund’s expense group, assuming an asset level of $275 million, showed that the Fund’s contractual management fee was below the group median for the Institutional Class. The Broadridge data also showed that the actual total expense ratio for the Fund’s Institutional Class was below the group median and above the universe median. The Trustees also considered that Harbor Capital had agreed to continue the Fund’s existing contractual fee waiver/expense reimbursement arrangement until at least February 28, 2021. The Trustees noted that Harbor Capital’s profitability in managing the Fund was not excessive.
Harbor Mid Cap Value Fund.The Trustees considered Harbor Mid Cap Value Fund (inception date March 1, 2002), noting the Fund’s Institutional Class performance was below its Broadridge group and universe medians for the one-, three- and five-year periods ended December 31, 2019. The Morningstar data presented showed that the Fund’s one-, three- and five-year rolling returns each ranked in the fourth quartile for the periods ended December 31, 2019. The Trustees considered the fact that the Fund had underperformed its benchmark, the Russell Midcap® Value Index, for the one-, three- and five-year periods ended December 31, 2019.
The Trustees considered the expertise of LSV Asset Management (“LSV”) in managing assets generally and in the mid cap value asset class specifically, noting that LSV managed approximately $2.7 billion in assets in this asset class, out of a firm-wide total of approximately $120.6 billion in assets under management. The Trustees also noted the experience of the Fund’s portfolio managers in this asset class, noting that one of the portfolio managers was a founding partner of LSV.
The Trustees noted that the Broadridge comparison of contractual management fees for the Fund’s expense group, assuming an asset level of $725 million, showed the Fund’s management fee was below the group median for the Institutional Class. The Broadridge data also showed that the actual total expense ratio for the Fund’s Institutional Class was below the group
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Additional Information—Continued
Additional Information—Continued
ADVISORY AGREEMENT APPROVALS—Continued
median and above the universe median. The Trustees also considered that Harbor Capital had agreed to continue the Fund’s existing contractual fee waiver/expense reimbursement arrangement until at least February 28, 2021. The Trustees noted that Harbor Capital’s profitability in managing the Fund was not excessive.
Harbor Small Cap Growth Fund.The Trustees considered Harbor Small Cap Growth Fund (inception date November 1, 2000), noting that according to the Broadridge report, the Fund’s Institutional Class outperformed its group median for the one- and three-year periods and its universe median for the one-, three- and five-year periods ended December 31, 2019. The Fund underperformed its group median for the five-year period ended December 31, 2019. The Morningstar data presented ranked the Fund’s one-, three- and five-year rolling returns as of December 31, 2019 in the first, second and second quartiles, respectively. The Trustees also considered the fact that Harbor Small Cap Growth Fund had outperformed its benchmark, the Russell 2000® Growth Index, for the one-, three- and five-year periods ended December 31, 2019.
The Trustees considered the expertise of Westfield Capital Management Company, L.P. (“Westfield”) in managing assets generally and in the small cap growth asset class specifically, noting that Westfield managed approximately $1.9 billion in assets in this asset class, out of a firm-wide total of approximately $14.5 billion in assets under management. The Trustees also noted the experience of the Fund’s portfolio managers in this asset class.
The Trustees observed that the Broadridge comparison of contractual management fees for the Fund’s expense group, assuming an asset level of $750 million, showed the Fund’s contractual management fee was below the group median for the Institutional Class. The Trustees also noted that the Fund’s actual total expense ratio for the Institutional Class was below the Broadridge group and universe median expense ratios. The Trustees noted that Harbor Capital’s profitability in operating the Fund was not excessive.
Harbor Small Cap Growth Opportunities Fund.The Trustees considered Harbor Small Cap Growth Opportunities Fund (inception date February 1, 2014), noting that according to the Broadridge report, the Fund’s Institutional Class underperformed both its group and universe medians for the one-, three- and five-year periods ended December 31, 2019. The Morningstar data presented ranked the Fund’s one-, three- and five-year rolling returns as of December 31, 2019 in the third, third and fourth quartiles, respectively. The Trustees also considered the fact that Harbor Small Cap Growth Opportunities Fund had underperformed its benchmark, the Russell 2000® Growth Index, for the one-, three- and five-year periods ended December 31, 2019.
The Trustees considered the expertise of the Fund’s Subadviser, Elk Creek Partners, LLC (“Elk Creek”), in managing assets generally and in the small cap growth asset class specifically, noting that Elk Creek managed approximately $896.5 million in assets in this asset class, out of a firm-wide total of approximately $896.8 million in assets under management. The Trustees noted the experience of the Fund’s portfolio managers in this asset class. The Trustees also considered that Harbor Capital had recommended, and the Board had approved, the reorganization of the Fund with and into Harbor Small Cap Growth Fund, and that the investment subadvisory agreement with respect to the Fund would be terminated in connection with the reorganization.
The Trustees observed that the Broadridge comparison of contractual management fees for the Fund’s expense group, assuming an asset level of $200 million, showed the Fund’s contractual management fee was below the group median for the Institutional Class. The Trustees also noted that the Fund’s actual total expense ratio for the Institutional Class was also below the Broadridge group and universe median expense ratios. The Trustees noted that Harbor Capital’s profitability in operating the Fund was not excessive.
Harbor Small Cap Value Fund. The Trustees considered Harbor Small Cap Value Fund (inception date December 14, 2001), noting the Fund’s outperformance relative to its Broadridge group and universe medians for the one-, three- and five-year periods ended December 31, 2019. According to the Morningstar data presented, the Fund’s one-, three- and five-year rolling returns each ranked in the first quartile for the periods ended December 31, 2019. The Trustees also considered the fact that the Fund outperformed its benchmark, the Russell 2000® Value Index, for the one-, three- and five-year periods ended December 31, 2019.
The Trustees considered the expertise of EARNEST Partners LLC (“EARNEST”) in managing assets generally and in the small cap value asset class specifically, noting that EARNEST managed approximately $5.0 billion in assets in this asset class, out of a firm-wide total of approximately $24.3 billion in assets under management. The Trustees also noted the experience of the Fund’s portfolio manager in this asset class, noting that he is the founder of EARNEST.
The Trustees observed that the Broadridge comparison of contractual management fees for the Fund’s expense group, assuming an asset level of $1.65 billion, showed the Fund’s management fee was below the group median for the Institutional Class. The actual total expense ratio for the Fund’s Institutional Class was below the group and universe median expense ratios. The Trustees noted that Harbor Capital’s profitability in operating the Fund was not excessive.
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Additional Information—Continued
Additional Information—Continued
ADVISORY AGREEMENT APPROVALS—Continued
Harbor Strategic Growth Fund.The Trustees considered Harbor Strategic Growth Fund (inception date March 1, 2017) and its Institutional Class performance (including predecessor fund performance) in relation to its Broadridge universe and group for the one-, three- and five-year periods ended December 31, 2019, noting that according to the Broadridge data, Harbor Strategic Growth Fund had underperformed its group and universe medians for those periods. The Fund’s one-, three- and five-year rolling returns as of December 31, 2019 each ranked in the third quartile, according to Morningstar. The Trustees also considered that the Fund had underperformed its benchmark, the Russell 1000® Growth Index, for the one-, three- and five-year periods ended December 31, 2019.
The Trustees considered the expertise of Mar Vista Investment Partners, LLC (“Mar Vista”) in managing assets generally and specifically with respect to the Fund’s asset class, noting that Mar Vista had approximately $5.2 billion in assets under advisement in this asset class, out of a firm-wide total of approximately $6.0 billion in assets under advisement. The Trustees also noted the experience of the Fund’s portfolio managers in this asset class, noting that Mar Vista had also managed the predecessor fund since 2011, prior to its reorganization into Harbor Strategic Growth Fund.
The Trustees observed that the Broadridge comparison of contractual management fees for the Fund’s expense group, assuming an asset level of $125 million, showed that the Fund’s contractual management fee was below the group median for the Institutional Class. The actual total expense ratio for the Institutional Class of the Fund was also below both the group and universe medians. The Trustees also considered that Harbor Capital had agreed to continue the Fund’s existing contractual fee waiver/expense reimbursement arrangement until at least February 28, 2021. The Trustees noted that Harbor Capital’s profitability in operating the Fund was not excessive.
The Trustees also separately considered the allocation between Harbor Capital and each Subadviser of the relevant Fund’s investment advisory fee (i.e., the amount of the advisory fee retained by Harbor Capital relative to that paid to the relevant Subadviser as a subadvisory fee). They determined in each case that the allocation was reasonable and the product of arm’s length negotiation between Harbor Capital and the Subadviser.
Profitability
The Trustees also considered Harbor Capital’s profitability in operating each of the Funds (as well as on a fund complex-wide basis) as presented by Harbor Capital, and the allocation methodology used by Harbor Capital to compute such profitability. The Trustees concluded that the methodology was reasonable and that a reasonable level of profitability was important to provide suitable incentives for Harbor Capital to continue to attract and maintain high-quality personnel and to invest in infrastructure and other resources to support and enhance the Funds’ operations. In considering Harbor Capital’s profitability generally, the Trustees also reviewed the compensation received by Harbor Services Group and Harbor Funds Distributors in consideration of the transfer agency and distribution services, respectively, that are provided to Harbor Funds and any other benefits enjoyed by Harbor Capital and its affiliates as a result of their relationship with Harbor Funds.
The Trustees also considered that profitability calculations with respect to advisory, transfer agency and distribution operations vary significantly depending on whether revenues on which the calculation is based are taken gross or net of amounts paid to third parties, such as subadvisory fee expenses and certain transfer agency expenses, and noted that subadvisory fee expenses are a direct expense of Harbor Capital. The Trustees also noted that Harbor Capital was, in certain cases, waiving a portion of its advisory fee and/or paying or reimbursing a portion of Fund expenses. The Trustees determined that Harbor Capital’s profitability in operating each Fund was not excessive.
Economies of Scale
The Trustees also considered the extent to which economies of scale might be realized as each Fund grows, and the extent to which each Fund’s advisory fee level reflects these economies of scale for the benefit of Fund investors. The Trustees specifically considered whether any advisory fee reduction “breakpoints” should be added to the advisory fee payable by any Fund. As noted above, the Trustees concluded that Harbor Capital’s profitability in each case was not excessive. They concluded that the Funds’ fee structures reflected economies of scale to date and that breakpoints in these fee structures were not required at the present time, except in the case of Harbor Large Cap Value Fund, for which Harbor Capital agreed to add a breakpoint to the advisory fee schedule as noted above. The Trustees noted they intend to monitor each Fund’s asset growth in connection with future reviews of each Fund’s Investment Advisory Agreement to determine whether breakpoints may be appropriate at such time.
87
Harbor Domestic Equity Funds
Additional Information—Continued
Additional Information—Continued
ADVISORY AGREEMENT APPROVALS—Continued
FACTORS CONSIDERED BY THE TRUSTEES IN APPROVING THE INVESTMENT ADVISORY AGREEMENT AND SUBADVISORY AGREEMENT OF HARBOR MID CAP 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 held on August 18 and 19, 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 (“Harbor Capital”), and a Subadvisory Agreement with EARNEST Partners LLC (“EARNEST” or the “Subadviser”) with respect to Harbor Mid Cap 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 Harbor Capital and the Subadviser, including information about their respective affiliates, personnel, and operations, and also relied upon their knowledge of Harbor Capital 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 Harbor Capital and the Subadviser. The Trustees also discussed with representatives of Harbor Capital, at the Meeting and at prior meetings, Harbor Funds’ operations and Harbor Capital’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 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 the 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 Harbor Capital 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 Harbor Capital and EARNEST, including the background, education, expertise and experience of the investment professionals of Harbor Capital and EARNEST to provide services to the Fund; |
• | the favorable history, reputation, qualifications and background of Harbor Capital and EARNEST, as well as the qualifications of their personnel; |
• | the fees proposed to be charged by Harbor Capital and EARNEST for investment advisory and subadvisory services, respectively, including the portion of the fee to be retained by Harbor Capital, after payment of EARNEST’s fee, for investment advisory and related services including investment, business, legal, compliance, financial and administrative services, that Harbor Capital 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 EARNEST 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; |
• | information received at regular meetings throughout the year related to services rendered by Harbor Capital; |
• | the compensation to be received by Harbor Services Group, Inc. and Harbor Funds Distributors, Inc. in consideration of the services each would provide to the Fund; |
• | any “fall out” benefits that might inure to Harbor Capital and its affiliates or EARNEST and its affiliates as a result of their relationship with the Fund; |
88
Harbor Domestic Equity Funds
Additional Information—Continued
Additional Information—Continued
ADVISORY AGREEMENT APPROVALS—Continued
• | information received at regular meetings throughout the year related to Harbor Capital’s profitability; |
• | the expected profitability of Harbor Capital with respect to the Fund; 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 Harbor Capital, the reasonableness of the overall compensation provided under the proposed Investment Advisory Agreement and other considerations, the Trustees considered Harbor Capital’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 Harbor Capital’s history as a manager-of-managers, including its history of replacing subadvisers for particular Harbor funds in circumstances in which the Board and Harbor Capital had determined that a change in subadviser was in the best interests of a Harbor 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 Harbor Capital were to identify another subadviser believed to better serve the shareholders than the existing subadviser.
The Board evaluated the nature, extent, and quality of Harbor Capital’s proposed services in light of the Board’s actual experience with Harbor Capital, as well as materials provided by Harbor Capital concerning the financial and other resources devoted by Harbor Capital to the Harbor funds generally, including the breadth and depth of experience and expertise of the investment, administrative, legal and compliance professionals dedicated to Harbor funds’ operations. The Trustees determined that Harbor Capital 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 EARNEST, the Trustees considered the collective expertise and experience of the professionals at EARNEST and the favorable record they had generated in the mid cap equity asset class. The Trustees also noted the experience of the proposed portfolio manager of the Fund in this asset class and the favorable record generated by such portfolio manager at EARNEST. In considering EARNEST’s performance, the Trustees noted that EARNEST’s record in its mid cap core 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 slightly above the average, but equal to the median, management fees of the peer group of funds compiled using Morningstar data. The Trustees also reviewed and determined to be reasonable, in relation to the services to be provided by each party, the split between the advisory fee to be paid to Harbor Capital and the subadvisory fee to be paid to EARNEST and specifically the net advisory fee to be retained by Harbor Capital at various asset levels.
It was further noted that the Fund’s proposed Institutional Class net expense ratio was below the average and median expense ratios, and the Fund’s proposed Retirement Class net expense ratio was slightly above the average and slightly below the median expense ratios, of the peer group of funds compiled 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.
Profitability
The Trustees also noted that Harbor Capital 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 EARNEST its fee).
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, Harbor Capital’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 EARNEST 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 Harbor funds.
89
Harbor Domestic Equity Funds
Additional Information—Continued
Additional Information—Continued
Review of Liqudity Risk Management Program
The Trust has adopted pursuant to Rule 22e-4 under the Investment Company Act (“Rule 22e-4”) a Liquidity Risk Management Program (the “Program”) for the Funds. The Board has designated a committee of Harbor Capital employees as the Program Administrator.
The Program is designed to assess and manage each Fund’s liquidity risk. For purposes of Rule 22e-4, “liquidity risk” is defined as the risk that a Fund is unable to satisfy redemption requests without significantly diluting remaining investors’ interests in the Fund. Components of the Program include: (i) periodic assessment of each Fund’s liquidity risk based on certain factors; (ii) classification of each Fund’s holdings into one of four liquidity categories (Highly Liquid, Moderately Liquid, Less Liquid and Illiquid) that reflect an estimate of liquidity under current market conditions; (iii) to the extent a Fund does not invest primarily in Highly Liquid investments, establishment of an appropriate Highly Liquid Investment Minimum (“HLIM”) (as defined in Rule 22e-4) for such Fund and ongoing monitoring of the Fund’s net assets to assess compliance with the Fund’s HLIM; (iv) a limit on the ability of a Fund to acquire illiquid investments in excess of 15% of the Fund’s net assets; and (v) periodic reporting to the Board
At a meeting held on November 7, 2019, the Board of Trustees reviewed the operation and effectiveness of the Program for the period beginning June 1, 2019 (the date the Board formally adopted the Program) and ending September 30, 2019 (the “period”). The Board had previously received interim updates on the implementation of the Program at meetings held on February 12, 2019 and May 14, 2019. At the November 7, 2019 meeting, the Board reviewed a report prepared by, and received a presentation from, the Program Administrator regarding the operation of the Program, its adequacy, and the effectiveness of its implementation during the period. The Program Administrator’s report included, among other things, a review of: (i) the operation of the Program overall; (ii) the level of portfolio investments classified into each of the four liquidity categories and the services provided by the third-party vendor engaged by the Trust to facilitate such classification with respect to certain of the Funds; and (iii) the most recent liquidity risk assessment for the Funds conducted by the Program Administrator in accordance with Rule 22e-4. Based upon its review, the Program Administrator determined that the Program was adequate and effective in facilitating the Funds’ compliance with Rule 22e-4 during the period.
90
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
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
Douglas J. Skinner
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.SAR.DE.0420
Table of Contents
Semi-Annual Report
April 30, 2020
Harbor Robeco Funds
Retirement Class | Institutional Class | Administrative Class | Investor Class | |
CONSERVATIVE EQUITY | ||||
Harbor Robeco Emerging Markets Conservative Equities Fund | HRERX | HRETX | HREAX | HRENX |
Harbor Robeco Global Conservative Equities Fund | HRGTX | HRGIX | HRGDX | HRGNX |
Harbor Robeco International Conservative Equities Fund | HRIRX | HRIEX | HRIMX | HRIVX |
Harbor Robeco US Conservative Equities Fund | HRURX | HRUNX | HRUAX | HRUVX |
CORE EQUITY | ||||
Harbor Robeco Emerging Markets Active Equities Fund | HRMEX | HRMTX | HRMNX | HRMOX |
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:
The first half of the 2020 fiscal year has been remarkable in the range of positive and negative market sentiments expressed in this short six-month window. Investment markets started off the 2020 fiscal year continuing the positive momentum of the 2019 fiscal year. Equity markets across the globe generated modest positive returns during the first three months of the period while fixed income markets delivered steady returns. Market performance drivers were consistent with the prior period – stable positive economic growth and accommodative monetary and fiscal policies were the foundations of continued favorable investment conditions. Come February, however, the early negative implications of the pending global pandemic began to weigh on investment markets before the full effects of the global economic collapse took hold in March. The selloffs across equity markets were unprecedented, with few safe havens available to investors. As the heartbreaking effects of the pandemic progressed around the globe, governments and central banks implemented historic measures to attempt to protect their citizens and economies. The equity and credit markets responded to the massive stimulus measures favorably, bouncing off their March lows to partially recover through much of April.
Across most equity markets, growth stocks significantly outperformed value stocks and larger companies outperformed smaller companies, reflecting investors’ preferences in many cases for proven business models that are more likely to survive the economic challenges brought on by the global pandemic. U.S. government bonds proved to be a safe haven once again, delivering positive returns for the six-month period.
As you read through the comments from the portfolio managers of each Harbor fund included in this report, you may note their optimism for the future potential of their portfolios. The portfolio managers have responded in their own way to the challenges presented. We believe there are great opportunities for our portfolio managers to deliver attractive long-term investment results for our shareholders. During times of market stress, having a disciplined and proven actively managed investment approach allows our portfolio managers to weigh the risk and rewards that are available to them. While the long-term effects of the global pandemic on economies and markets are still unknown, we remain confident in the capabilities of our portfolio managers. At Harbor, we are actively engaged in dialogues with our subadviser partners as they navigate these challenging times.
We encourage our shareholders to take a long-term view and stay focused on their investment goals, particularly during periods of market uncertainty. While past performance is never a guarantee of future results, environments such as the last six months have often provided attractive opportunities for our fund investors to benefit from the skill of our portfolio managers.
I hope that you and your families remain safe and well during this unprecedented time. Thank you for your continued investment in Harbor Funds.
June 22, 2020
Charles F. McCain |
Chairman |
1
Harbor Conservative Equity Funds
Manager’s Commentary (Unaudited)
Manager’s Commentary (Unaudited)
Subadviser
Robeco Institutional Asset Management US Inc.
230 Park Avenue
Suite 3330
Suite 3330
New York, NY 10169
Portfolio Managers
Pim van Vliet, PhD
Since 2019
Since 2019
Arlette van Ditshuizen
Since 2019
Since 2019
Maarten Polfliet, CEFA
Since 2019
Since 2019
Jan Sytze Mosselaar, CFA
Since 2019
Arnoud Klep
Since 2019
Since 2019
Yaowei Xu*
Since 2019
Since 2019
Robeco Institutional Asset Management US Inc. has subadvised the Funds since 2019.
Investment Objective
The Funds seek long-term growth of capital.
Pim van Vliet, PhD
Arlette van Ditshuizen
Maarten Polfliet, CEFA
Jan Sytze Mosselaar, CFA
Arnoud Klep
Yaowei Xu
Management’s Discussion of
Fund Performance
Fund Performance
Market Review
Global equities experienced a strong rally in the last month of 2019, concluding a year (and decade) of solid returns. The MSCI World Index rose 3% in U.S. Dollar terms, as cheap energy stocks, most notably Schlumberger and ConocoPhillips, profited from the double-digit rise in oil prices. Moreover, Apple rose another 10% in December, bringing its meteoric 2019 rise to 89%. The Industrials sector was hit by the 11% decline in Boeing’s stock price as the company remained under siege. Emerging markets (EM) outperformed developed markets as the South Korean and Chinese equity markets had a good month, mainly in the Information Technology sector, making it, once again, the strongest sector in EM. The Canadian and Australian indices, which are very similar in their tilt towards Financials and commodity-related stocks, lagged the market as the large banking stocks showed a modest setback.
The first quarter of 2020 is one for the history books, mainly due to the steep sell-off in March and a weak second half of February. The MSCI World Index experienced its worst first quarter of the year since the index started in 1969, making it the third worst quarter ever for the index. Sector return dispersion was high. Growth-like Health Care and Information Technology fared much better than the value-like Financials and Energy sectors, hit by a decline in interest rates and a collapse in oil prices, respectively. The MSCI Emerging Markets Index experienced its worst first quarter of the year since the index started in 1988 and its fourth weakest quarter overall. China was the best major market, with a 10% decline in local returns, as index heavyweights Tencent and Alibaba fared relatively well. Contrarily, commodity-heavy markets such as Brazil declined, also under the pressure of a weaker currency.
March 2020 is a month that will not quickly be forgotten by investors. Not only did equity markets suffer substantial losses, but the speed at which they dropped was unprecedented. The last time we witnessed such a fast pace of value descent was in 1929. The CBOE Volatility Index (VIX), a measure that reflects the uncertainty of the equity markets, reached 84 – almost four times the “normal” value. The downturn was not limited to equity markets: few assets were able to deliver a positive return this month. Markets recovered in the second half of the month, resulting in the return of MSCI World Index of 13.2% in the month of March. Sector return dispersion was high: The Health Care sector fell only 3.7%, as all large pharmaceutical companies contained losses or even rose in value, and the Consumer Staples sector dropped only 5.5%, helped by a positive return for Nestle and Walmart. On the negative side, value-like Energy stocks were impacted by the collapse in oil prices, while banking stocks were hurt by falling interest rates and their high economic sensitivity. On the other hand, the high-beta Facebook, Amazon, Apple, and Alphabet stocks performed relatively well, with Amazon (seeing an increase in online shopping and usage of its Amazon Web Services) rising 4% in value, Microsoft (benefiting from high usage of its cloud services) losing just 3% of its market cap, and Apple falling 7%.
April 2020 entered the top 5 of the best monthly returns for the MSCI World Index. The S&P 500 Index experienced its best month since 1987 with a return of 12.8%. Within the global equity index, the best returns were posted, again, for the big tech stocks such as Amazon (27%), Apple (16%), Facebook (23%), and Alphabet (16%). Moreover, the U.S. oil giants
* | Yaowei Xu Co-Manages the Harbor Robeco Emerging Markets Conservative Equities Fund only |
2
Harbor Conservative Equity Funds
Manager’s Commentary—Continued
Manager’s Commentary—Continued
Exxon Mobil and Chevron recovered some of their steep losses last month, while the European equivalents such as BP and Royal Dutch Shell fell further in value. Utilities were surprisingly weak in the April recovery, with negative returns for large companies such as NextEra Energy and Enel, making it the weakest sector last month. Contrarily, big pharma stocks such as Johnson & Johnson, Pfizer, and Abbott showed double-digit returns. As Information Technology and Health Care contained losses in March and experienced a strong April, both growth-like sectors show a virtually flat year-to-date return. On the negative side, we still saw steep losses for the value-like Energy and Financials sectors.
Performance
Emerging Markets Conservative Equities
Since inception on December 1, 2019 until April 30, 2020, Harbor Robeco Emerging Markets Conservative Equities Fund returned -13.89% (Retirement Class), -13.90% (Institutional Class) and -14.02% (Investor Class) while the MSCI Emerging Markets (ND) Index returned -10.38%. Regrettably, the Fund did not provide risk reduction in the negative market environment. The main reason has been the overall underweight in China, mainly by not holding Tencent and having an underweight in Alibaba. Both index heavyweights outperformed the broader market index as both companies saw an increase in their products and services (video games, online shopping, working-from-home platforms). In addition, several low-beta stocks were directly impacted by the global lockdown or by adverse currency movements as a result of falling commodity prices. Examples are Mexican airport stocks, South African real estate stocks, and Brazilian utility companies. Moreover, the general tilt of the strategy towards attractively valued stocks with high and stable dividend yield, as well as a modest allocation towards small capitalization stocks, detracted from relative performance. On the positive side, the strategy profited from positive stock selection effects within the Financials sector, through holding Chinese banking stocks while avoiding the weak performance of South African and Indian banks.
Global Conservative Equities
Since inception on December 1, 2019 until April 30, 2020, Harbor Robeco Global Conservative Equities Fund returned -14.68% (Retirement Class), -14.79% (Institutional Class) and -14.92% (Investor Class) while the MSCI World (ND) Index returned -9.80%. Regrettably, the Fund did not provide risk reduction in the negative market environment. We see four main reasons for this. First, the strategy holds several stocks that normally would qualify as low-risk stocks, but were impacted by the global lockdown, which impacted financial markets in March 2020. Examples are retail REITs, airport stocks, restaurant stocks, and several retailers such as car dealer groups. Second, the strategy hardly profited from the good performance of the large American technology companies, most notably Amazon and Microsoft, which saw an increase in their services and products in this global lockdown. Most of these stocks exhibit a high beta and a high valuation and are hence underrepresented in the strategy. Third, the strategy has an underweight in the Health Care and Consumer Staples sectors, which were the strongest sectors in the March sell-off. Most large names in these sectors already traded at elevated valuations and were therefore underrepresented in the strategy. Fourth, the general tilt of the Fund towards attractively valued stocks with a high and stable dividend yield, as well as a modest allocation towards small capitalization stocks detracted from relative performance.
International Conservative Equities
Since inception on December 1, 2019 until April 30, 2020, Harbor Robeco International Conservative Equities Fund returned -15.64% (Retirement Class), -15.65% (Institutional Class) and -15.77% (Investor Class) while the MSCI EAFE (ND) Index returned -15.17%. Regrettably, the Fund did not provide risk reduction in the negative market environment. On the positive side, holding several stable telecom companies such as NTT DoCoMo (Japan), KDDI (Japan) and Elisa (Finland) contributed positively, as did avoiding the weak performance of cyclical industrial stocks such as Airbus, Safran and Vinci (France). Negative contributions mainly came from not holding several well-performing health care stocks such as AstraZeneca (UK) and Novo Nordisk (Denmark), while holding several real estate stocks that were impacted by the global lockdown. Examples are Eurocommercial Properties (Netherlands), Stockland (Australia) and Deutsche EuroShop (Germany). From a factor perspective, the good performance of the low-risk factor was neutralized by the weak value factor.
US Conservative Equities
Since inception on December 1, 2019 until April 30, 2020, Harbor Robeco US Conservative Equities Fund returned -14.52% (Retirement Class), -14.53% (Institutional Class) and -14.65% (Investor Class) while the S&P 500 Index returned -6.55%. Regrettably, the Fund did not provide risk reduction in the negative market environment. We see four main reasons for this. First, the strategy holds several stocks that normally would qualify as low-risk stocks, but were impacted by the global lockdown. Examples are several retailers such as car dealer groups and several insurance stocks with low volatility and high dividend. Second, the strategy hardly profited from the good performance of the large American technology companies, most notably Amazon and Microsoft, which saw an increase in their services and products in this global lockdown. Most of these stocks exhibit a high beta and a high valuation and are hence underrepresented in the strategy. Third, the strategy has an underweight in the Health
3
Harbor Conservative Equity Funds
Manager’s Commentary—Continued
Manager’s Commentary—Continued
Care and Consumer Staples sectors, which were the strongest sectors in the March sell-off. Most large names in these sectors already traded at elevated valuations and were therefore underrepresented in the strategy. Fourth, the general tilt of the strategy towards attractively valued stocks with high and stable dividend yield, as well as a modest allocation towards small caps, detracted from relative performance.
Outlook
The coronavirus outbreak continues to spread globally. What the cumulative impact of the outbreak will be, and the subsequent measures are taken to contain it remain uncertain. In China, the outbreak seems to be contained, but this is not the case yet in Europe and the U.S. The good news is that globally, central banks and governments have acted swiftly to provide support. What the shape of the recovery (V-, U- or L-shaped) will eventually be is uncertain. Yet, as investors, we are not rewarded for waiting until the dust has settled and the macroeconomic view is all clear. We believe that in confusing times like these, market technicals trump fundamentals in market pricing behavior.
In our view, support measures by central banks and government are important, but what we believe really matters for the economic outlook is how long social distancing and the lockdowns will remain in place. The first indication we are getting from China is that these extreme measures are indeed effective. All eyes are now on Europe and the U.S. to get confirmation that these measures are bearing fruit. The question, however, is to what extent this is a good blueprint for the U.S., as there seems to be less willingness or tolerance for social distancing and lockdowns there.
Low visibility on the macro front, a state of denial in investor sentiment, unpredictable return bounces, and stretched ex-ante U.S. valuation levels are important clues that we might not be out of the woods yet, in our view. The risk is that they are waiting for a trough that already happened. There is an obvious two-way risk for equity investors at this juncture.
This report contains the current opinions of Robeco Institutional Asset Management US 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, a 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.
The Fund focuses on defensive-oriented (conservative) stocks, which typically lag the stock market during strong market rallies. In addition, such stocks may underperform the market during periods of rising interest rates. There is no guarantee that the investment process will be successful in lowering volatility of the Fund’s returns or protecting the Fund from market declines.
4
Harbor Robeco Emerging Markets Conservative Equities Fund
Fund Summary —April 30, 2020 (Unaudited)
Fund Summary —April 30, 2020 (Unaudited)
REGION BREAKDOWN(% of investments)
FUND PERFORMANCE
TOTAL RETURNS For the periods ended 04/30/2020 | 6 Months | 1 Year | 5 Years | Unannualized | |||||||
Life of Fund | |||||||||||
Harbor Robeco Emerging Markets Conservative Equities Fund | |||||||||||
Retirement Class1 | N/A | N/A | N/A | -13.89% | |||||||
Institutional Class1 | N/A | N/A | N/A | -13.90 | |||||||
Investor Class1 | N/A | N/A | N/A | -14.02 | |||||||
Comparative Index | |||||||||||
MSCI Emerging Markets (ND)1 | N/A | N/A | N/A | -10.38% |
As stated in the Fund’s prospectus dated March 1, 2020, the expense ratios were 0.75% (Net) and 6.31% (Gross) Retirement Class; 0.83% (Net) and 6.39% (Gross) Institutional Class; and 1.20% (Net) and 6.76% (Gross) Investor Class. The net expense ratios reflect an expense limitation agreement (excluding interest expense, if any) effective through 02/28/2021. 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.
1 | The “Life of Fund” return as shown reflects the period 12/01/2019 through 04/30/2020. |
5
Harbor Robeco Emerging Markets Conservative Equities Fund
Portfolio of Investments—April 30, 2020 (Unaudited)
Portfolio of Investments—April 30, 2020 (Unaudited)
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—97.5% | |||
Shares | Value | ||
AUTO COMPONENTS—1.0% | |||
76 | Hyundai Mobis Co. Ltd. (South Korea)* | $11 | |
5,275 | Shandong Linglong Tyre Co. Ltd. (China)* | 16 | |
27 | |||
AUTOMOBILES—2.0% | |||
766 | KIA Motors Corp. (South Korea)* | 19 | |
10,785 | Tofas Turk Otomobil Fabrikasi AS (Turkey)* | 34 | |
53 | |||
BANKS—21.9% | |||
73,000 | Agricultural Bank of China Ltd. (China)* | 30 | |
18,700 | Bank of Beijing Co. Ltd. (China)* | 13 | |
99,000 | Bank of China Ltd. (China)* | 38 | |
40,000 | Bank of Communications Co. Ltd. (China)* | 25 | |
28,000 | Chang Hwa Commercial Bank Ltd. (Taiwan)* | 18 | |
47,000 | China Citic Bank Corp. Ltd. (China)* | 23 | |
56,000 | China Construction Bank Corp. (China) | 45 | |
29,000 | China Everbright Bank Co. Ltd. (China)* | 12 | |
7,000 | China Merchants Bank Co. Ltd. (China) | 33 | |
55,500 | China Minsheng Banking Corp. Ltd. (China)* | 41 | |
36,000 | CTBC Financial Holding Co. Ltd. (Taiwan)* | 24 | |
27,000 | E.Sun Financial Holding Co. Ltd. (Taiwan)* | 25 | |
30,000 | First Financial Holding Co. Ltd. (Taiwan)* | 22 | |
500 | Hana Financial Group Inc. (South Korea) | 12 | |
28,000 | Hua Nan Financial Holdings Co Ltd. (Taiwan)* | 18 | |
18,000 | Huaxia Bank Co. Ltd. (China)* | 17 | |
409 | KB Financial Group Inc. (South Korea)* | 12 | |
9,800 | Kiatnakin Bank PCL NVDR (Thailand)*,1 | 13 | |
6,300 | Malayan Banking BHD (Malaysia)* | 11 | |
4,229 | Moneta Money Bank AS (Czech Republic)* | 9 | |
628 | OTP Bank plc (Hungary)* | 19 | |
49,000 | Postal Savings Bank of China (China)* | 29 | |
484 | Shinhan Financial Group Co. Ltd. (South Korea) | 12 | |
32,000 | SinoPac Financial Holdings Co. Ltd. (Taiwan)* | 13 | |
43,000 | Taishin Financial Holding Co. Ltd. (Taiwan)* | 18 | |
27,000 | Taiwan Cooperative Financial Holding Co. Ltd. (Taiwan)* | 18 | |
11,700 | Thanachart Capital PCL NVDR (Thailand)*,1 | 13 | |
7,500 | Tisco Financial Group PCL NVDR (Thailand)*,1 | 17 | |
580 | |||
BEVERAGES—0.7% | |||
38,000 | Thai Beverage PCL (Thailand) | 18 | |
CAPITAL MARKETS—0.6% | |||
30,000 | Yuanta Financial Holding Co. Ltd. (Taiwan)* | 17 | |
CHEMICALS—0.5% | |||
9,000 | Taiwan Fertilizer Co. Ltd. (Taiwan)* | 14 | |
COMMERCIAL SERVICES & SUPPLIES—1.4% | |||
8,000 | Country Garden Services Holdings Co. Ltd. (China)* | 37 | |
COMPUTERS & PERIPHERALS—0.6% | |||
17,000 | Wistron Corp. (Taiwan)* | 16 | |
CONSTRUCTION & ENGINEERING—1.4% | |||
17,400 | China National Chemical Engineering Co. Ltd. (China)* | 15 | |
12,000 | Shenzhen International Holdings Ltd. (China)* | 23 | |
38 | |||
CONSTRUCTION MATERIALS—4.7% | |||
4,500 | Anhui Conch Cement Co. Ltd. (China) | 35 | |
12,000 | Asia Cement Corp. (Taiwan)* | 18 | |
22,000 | China Resources Cement Holdings Ltd. (China)* | 30 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
CONSTRUCTION MATERIALS—Continued | |||
17,000 | Taiwan Cement Corp. (Taiwan)* | $24 | |
30,600 | Tipco Asphalt PCL NVDR (Thailand)*,1 | 17 | |
124 | |||
DIVERSIFIED TELECOMMUNICATION SERVICES—5.4% | |||
7,000 | Chunghwa Telecom Co. Ltd. (Taiwan)* | 26 | |
31,700 | Digital Telecommunications Infrastructure Fund (Thailand)* | 15 | |
1,715 | Hellenic Telecommunications Organization SA (Greece)* | 23 | |
2,097 | KT Corp. ADR (South Korea)1 | 21 | |
3,186 | Telefonica Brasil SA ADR (Brazil)*,1 | 27 | |
48,200 | Telekomunikasi Indonesia Persero Tbk PT (Indonesia)* | 11 | |
20,330 | Turk Telekomunikasyon AS (Turkey)* | 21 | |
144 | |||
ELECTRIC UTILITIES—3.0% | |||
1,667 | Cia Paranaense de Energia ADR (Brazil)*,1 | 17 | |
5,200 | EDP - Energias do Brasil SA (Brazil)* | 16 | |
5,400 | Equatorial Energia SA (Brazil)* | 18 | |
5,700 | Transmissora Alianca de Energia Eletrica SA (Brazil)* | 29 | |
80 | |||
ELECTRICAL EQUIPMENT—1.0% | |||
3,700 | WEG SA (Brazil)* | 27 | |
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—1.6% | |||
7,000 | Foxconn Technology Co. Ltd. (Taiwan)* | 13 | |
7,000 | Hon Hai Precision Industry Co. Ltd. (Taiwan)* | 18 | |
9,000 | Synnex Technology International Corp. (Taiwan)* | 12 | |
43 | |||
ENTERTAINMENT—1.5% | |||
112 | NetEase Inc. ADR (China)*,1 | 39 | |
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—1.1% | |||
8,900 | Fibra Uno Administracion SA de CV (Mexico)* | 8 | |
15,023 | Fortress REIT Ltd. (South Africa)* | 8 | |
17,101 | Growthpoint Properties Ltd. (South Africa)* | 13 | |
184 | Resilient REIT Ltd. (South Africa)* | — | |
29 | |||
FOOD & STAPLES RETAILING—1.8% | |||
1,000 | Raia Drogasil SA (Brazil)* | 19 | |
11,400 | Wal-Mart de Mexico SAB de CV (Mexico)* | 28 | |
47 | |||
FOOD PRODUCTS—1.3% | |||
1,185 | Gruma SAB de CV (Mexico)* | 11 | |
30,000 | Want Want China Holdings Ltd. (China) | 22 | |
33 | |||
GAS UTILITIES—0.5% | |||
4,200 | Infraestructura Energetica Nova SAB de CV (Mexico)* | 14 | |
HEALTH CARE EQUIPMENT & SUPPLIES—0.8% | |||
8,000 | Shandong Weigao Group Medical Polymer Co Ltd. (China)* | 12 | |
5,500 | Top Glove Corp. Bhd (Malaysia)* | 9 | |
21 | |||
HEALTH CARE PROVIDERS & SERVICES—0.4% | |||
2,200 | Qualicorp Consultoria e Corretora de Seguros SA (Brazil)* | 10 |
6
Harbor Robeco Emerging Markets Conservative Equities Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—Continued | |||
Shares | Value | ||
HOTELS, RESTAURANTS & LEISURE—0.4% | |||
456 | Saudi Airlines Catering Co. (Saudi Arabia)* | $10 | |
HOUSEHOLD DURABLES—0.3% | |||
2,300 | Cyrela Brazil Realty SA Empreendimentos e Participacoes (Brazil)* | 7 | |
HOUSEHOLD PRODUCTS—0.4% | |||
8,000 | Kimberly-Clark de Mexico SAB de CV (Mexico)* | 11 | |
INDEPENDENT POWER & RENEWABLE ELECTRICITY PRODUCERS—2.0% | |||
5,100 | AES Tiete Energia SA (Brazil)* | 14 | |
2,200 | Electricity Generating PCL NVDR (Thailand)*,1 | 19 | |
10,500 | Ratch Group PCL NVDR (Thailand)*,1 | 21 | |
54 | |||
INDUSTRIAL CONGLOMERATES—1.6% | |||
22,000 | CITIC Ltd. (China)* | 23 | |
73,845 | Dogan Sirketler Grubu Holding AS (Turkey)* | 19 | |
42 | |||
INSURANCE—1.5% | |||
3,300 | BB Seguridade Participacoes SA (Brazil)* | 16 | |
17,000 | Fubon Financial Holding Co. Ltd. (Taiwan)* | 24 | |
40 | |||
INTERACTIVE MEDIA & SERVICES—0.6% | |||
116 | Kakao Corp. (South Korea)* | 17 | |
INTERNET & DIRECT MARKETING RETAIL—2.3% | |||
299 | Alibaba Group Holding Ltd. ADR (China)*,1 | 61 | |
IT SERVICES—2.4% | |||
4,214 | Infosys Ltd. ADR (India)1 | 39 | |
510 | WNS Holdings Ltd. ADR (India)*,1 | 25 | |
64 | |||
MARINE—1.3% | |||
2,950 | Atlas Corp. (Marshall Islands)* | 22 | |
2,246 | Costamare Inc. (Greece)* | 11 | |
33 | |||
METALS & MINING—4.8% | |||
5,384 | Harmony Gold Mining Co. Ltd. (South Africa)* | 20 | |
32 | Korea Zinc Co. Ltd. (South Korea)* | 10 | |
�� | 1,876 | Koza Altin Isletmeleri AS (Turkey)* | 19 |
1,228 | MMC Norilsk Nickel PJSC ADR (Russia)*,1 | 34 | |
410 | Polyus PJSC GDR (Russia)*,1 | 33 | |
907 | Severstal PJSC GDR (Russia)*,1 | 11 | |
127 | |||
OIL, GAS & CONSUMABLE FUELS—6.7% | |||
14,000 | China Shenhua Energy Co. Ltd. (China) | 25 | |
32,000 | CNOOC Ltd. (China)* | 35 | |
1,300 | Cosan SA (Brazil)* | 15 | |
5,792 | Gazprom PJSC ADR (Russia)*,1 | 29 | |
454 | LUKOIL PJSC ADR (Russia)1 | 29 | |
168 | Novatek PJSC GDR (Russia)*,1 | 24 | |
477 | Tatneft PJSC ADR (Russia)*,1 | 21 | |
178 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
REAL ESTATE MANAGEMENT & DEVELOPMENT—0.9% | |||
8,000 | Highwealth Construction Corp. (Taiwan)* | $12 | |
3,058 | NEPI Rockcastle PLC (South Africa)* | 13 | |
25 | |||
ROAD & RAIL—1.4% | |||
56,600 | BTS Group Holdings PCL NVDR (Thailand)*,1 | 20 | |
17,800 | Daqin Railway Co. Ltd. (China)* | 18 | |
38 | |||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—4.2% | |||
5,000 | Powertech Technology Inc. (Taiwan)* | 17 | |
11,000 | Quanta Computer Inc. (Taiwan)* | 24 | |
5,000 | Taiwan Semiconductor Manufacturing Co. Ltd. (Taiwan) | 50 | |
36,000 | United Microelectronics Corp. (Taiwan)* | 19 | |
110 | |||
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS—4.7% | |||
2,000 | Asustek Computer Inc. (Taiwan)* | 14 | |
4,000 | Chicony Electronics Co. Ltd. (Taiwan)* | 11 | |
32,000 | Compal Electronics Inc. (Taiwan)* | 20 | |
11,000 | Lite-On Technology Corp. (Taiwan)* | 17 | |
8,000 | Pegatron Corp. (Taiwan)* | 18 | |
4,000 | Radiant Opto-Electronics Corp. (Taiwan)* | 13 | |
778 | Samsung Electronics Co. Ltd. (South Korea) | 32 | |
125 | |||
TRANSPORTATION INFRASTRUCTURE—0.6% | |||
2,000 | Grupo Aeroportuario del Centro Norte SAB de CV (Mexico)* | 7 | |
8,000 | Jiangsu Expressway Co Ltd. (China)* | 10 | |
17 | |||
WATER UTILITIES—1.0% | |||
12,000 | Guangdong Investment Ltd. (China)* | 25 | |
WIRELESS TELECOMMUNICATION SERVICES—7.2% | |||
3,900 | Advanced Info Service PCL NVDR (Thailand)*,1 | 24 | |
6,500 | China Mobile Ltd. (China)* | 52 | |
7,000 | Far EasTone Telecommunications Co Ltd. (Taiwan)* | 15 | |
1,137 | SK Telecom Co. Ltd. ADR (South Korea)*,1 | 22 | |
6,000 | Taiwan Mobile Co. Ltd. (Taiwan)* | 22 | |
16,486 | Turkcell Iletisim Hizmetleri AS (Turkey)* | 33 | |
3,277 | Vodacom Group Ltd. (South Africa)* | 22 | |
190 | |||
TOTAL COMMON STOCKS | |||
(Cost $2,953) | 2,585 | ||
PREFERRED STOCKS—0.6% | |||
(Cost $32) | |||
BANKS—0.6% | |||
10,000 | Itausa - Investimentos Itau SA (Brazil) | 17 | |
TOTAL INVESTMENTS—98.1% | |||
(Cost $2,985) | 2,602 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—1.9% | 50 | ||
TOTAL NET ASSETS—100.0% | $2,652 |
7
Harbor Robeco Emerging Markets Conservative Equities Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
RIGHTS/WARRANTS
Description | No. of Contracts | Strike Price | Expiration Date | Cost (000s) | Value (000s) | |||||
BTS Group Holdings PCL | 5,660 | THB 14.00 | 2/16/2021 | $ — | $— |
FAIR VALUE MEASUREMENTS
The following table summarizes the Fund’s investments as of April 30, 2020 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 | $— | $76 | $— | $76 | ||||
Europe | 192 | 177 | — | 369 | ||||
Latin America | 149 | 145 | — | 294 | ||||
Middle East/Central Asia | 64 | 10 | — | 74 | ||||
Pacific Basin | 165 | 1,607 | — | 1,772 | ||||
Preferred Stocks | ||||||||
Latin America | 17 | — | — | 17 | ||||
Total Investments in Securities | $587 | $2,015 | $— | $2,602 | ||||
Financial Derivatives Instruments - Assets | ||||||||
Rights/Warrants | $— | $— | $— | $— | ||||
Total Investments | $587 | $2,015 | $— | $2,602 |
There were no Level 3 Investments at April 30, 2020 or December 1, 2019 (inception).
For more information on valuation inputs and their aggregation into the levels 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 | Depository receipts such as American Depostiory Receipts (ADRs), Global Depository Receipts (GDRs) and other country specific depository receipts are certificates evidencing ownership of shares of a foreign issuer. These certificates are issued by depository banks and generally trade on an established market in the U.S. or elsewhere. |
THB | Thai Baht |
The accompanying notes are an integral part of the Financial Statements.
8
Harbor Robeco Global Conservative Equities Fund
Fund Summary —April 30, 2020 (Unaudited)
Fund Summary —April 30, 2020 (Unaudited)
REGION BREAKDOWN(% of investments)
FUND PERFORMANCE
TOTAL RETURNS For the periods ended 04/30/2020 | 6 Months | 1 Year | 5 Years | Unannualized | |||||||
Life of Fund | |||||||||||
Harbor Robeco Global Conservative Equities Fund | |||||||||||
Retirement Class1 | N/A | N/A | N/A | -14.68% | |||||||
Institutional Class1 | N/A | N/A | N/A | -14.79 | |||||||
Investor Class1 | N/A | N/A | N/A | -14.92 | |||||||
Comparative Index | |||||||||||
MSCI World (ND) Index1 | N/A | N/A | N/A | -9.80% |
As stated in the Fund’s prospectus dated March 1, 2020, the expense ratios were 0.40% (Net) and 4.47% (Gross) Retirement Class; 0.48% (Net) and 4.55% (Gross) Institutional Class; and 0.85% (Net) and 4.92% (Gross) Investor Class. The net expense ratios reflect an expense limitation agreement (excluding interest expense, if any) effective through 02/28/2021. 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.
1 | The “Life of Fund” return as shown reflects the period 12/01/2019 through 04/30/2020. |
9
Harbor Robeco Global Conservative Equities Fund
Portfolio of Investments—April 30, 2020 (Unaudited)
Portfolio of Investments—April 30, 2020 (Unaudited)
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—98.2% | |||
Shares | Value | ||
AEROSPACE & DEFENSE—1.8% | |||
110 | Lockheed Martin Corp. (United States)* | $43 | |
44 | Teledyne Technologies Inc. (United States)* | 14 | |
57 | |||
AUTO COMPONENTS—0.8% | |||
336 | Canadian Tire Corp. (Canada)* | 24 | |
AUTOMOBILES—0.4% | |||
200 | Toyota Motor Corp. (Japan) | 12 | |
BANKS—5.2% | |||
170 | BNP Paribas SA (France) | 5 | |
3,108 | Investors Bancorp Inc. (United States)* | 29 | |
588 | JPMorgan Chase & Co. (United States) | 56 | |
668 | National Bank of Canada (Canada)* | 27 | |
144 | PNC Financial Services Group Inc. (United States)* | 16 | |
2,219 | Skandinaviska Enskilda Banken AB (Sweden)* | 18 | |
561 | Sydbank AS (Denmark)* | 9 | |
160 | |||
BEVERAGES—1.4% | |||
2,697 | Coca-Cola Amatil Ltd. (Australia) | 15 | |
229 | PepsiCo Inc. (United States) | 30 | |
45 | |||
BIOTECHNOLOGY—1.1% | |||
145 | Amgen Inc. (United States) | 35 | |
CAPITAL MARKETS—4.2% | |||
580 | Artisan Partners Asset Management Inc. (United States) | 17 | |
340 | ASX Ltd. (Australia)* | 18 | |
1,165 | CI Financial Corp. (Canada)* | 12 | |
1,221 | IGM Financial Inc. (Canada)* | 26 | |
4,500 | Nomura Holdings Inc. (Japan) | 19 | |
2,800 | Singapore Exchange Ltd. (Singapore) | 19 | |
749 | Virtu Financial Inc. (United States)* | 18 | |
129 | |||
CONSTRUCTION & ENGINEERING—0.9% | |||
1,532 | Skanska AB (Sweden)* | 29 | |
DISTRIBUTORS—0.4% | |||
276 | D'ieteren SA (Belgium)* | 14 | |
DIVERSIFIED FINANCIAL SERVICES—1.0% | |||
268 | T Rowe Price Group Inc. (United States)* | 31 | |
DIVERSIFIED TELECOMMUNICATION SERVICES—5.0% | |||
983 | AT&T Inc. (United States)* | 30 | |
1,307 | Deutsche Telekom AG (Germany) | 19 | |
12,000 | HKT Trust & HKT Ltd Stapled Security (Hong Kong)* | 19 | |
6,295 | Spark New Zealand Ltd. (New Zealand) | 17 | |
39 | Swisscom AG (Switzerland)* | 20 | |
4,315 | Telia Co. AB (Sweden)* | 15 | |
585 | Verizon Communications Inc. (United States)* | 34 | |
154 | |||
ELECTRIC UTILITIES—7.8% | |||
231 | American Electric Power Co. Inc. (United States)* | 19 | |
419 | Duke Energy Corp. (United States)* | 35 | |
685 | Endesa SA (Spain)* | 15 | |
2,082 | Enel SpA (Italy) | 14 | |
70 | Entergy Corp. (United States) | 7 | |
518 | Evergy Inc. (United States)* | 30 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
ELECTRIC UTILITIES—Continued | |||
415 | FirstEnergy Corp. (United States) | $17 | |
981 | Hydro One Ltd. (Canada)* | 18 | |
2,295 | Iberdrola SA (Spain) | 23 | |
627 | Southern Co. (United States)* | 36 | |
1,790 | SSE PLC (United Kingdom)* | 28 | |
242 | |||
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—0.4% | |||
517 | Benchmark Electronics Inc. (United States)* | 11 | |
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—7.0% | |||
242 | Agree Realty Corp. (United States)* | 16 | |
10,000 | CapitaLand Mall Trust (Singapore)* | 13 | |
992 | Easterly Government Properties Inc. (United States)* | 27 | |
1,177 | Independence Realty Trust Inc. (United States)* | 12 | |
201 | Investors Real Estate Trust (United States)* | 13 | |
3 | Japan Real Estate Investment Corp. (Japan)* | 16 | |
1,308 | Lexington Realty Trust (United States) | 14 | |
187 | Life Storage Inc. (United States)* | 16 | |
6,700 | Mapletree Industrial Trust (Singapore)* | 12 | |
7 | Nippon ProLogis REIT Inc. (Japan)* | 19 | |
1,472 | Piedmont Office Realty Trust Inc. (United States) | 25 | |
1,740 | RioCan Real Estate Investment Trust (Canada)* | 20 | |
311 | Terreno Realty Corp. (United States)* | 17 | |
220 | |||
FOOD & STAPLES RETAILING—5.0% | |||
1,546 | Koninklijke Ahold Delhaize NV (Netherlands) | 38 | |
610 | Kroger Co. (United States) | 19 | |
428 | Metro Inc. (Canada)* | 18 | |
839 | Sprouts Farmers Market Inc. (United States)* | 17 | |
400 | Sundrug Co. Ltd. (Japan) | 14 | |
250 | Walmart Inc. (United States)* | 30 | |
759 | Woolworths Ltd. (Australia)* | 18 | |
154 | |||
FOOD PRODUCTS—4.9% | |||
666 | B&G Foods Inc. (United States)* | 13 | |
811 | Flowers Foods Inc. (United States)* | 18 | |
359 | General Mills Inc. (United States)* | 21 | |
404 | Hormel Foods Corp. (United States)* | 19 | |
163 | JM Smucker Co. (United States) | 19 | |
200 | Nissin Foods Holdings Co. Ltd. (Japan)* | 16 | |
3,989 | Orkla ASA (Norway)* | 36 | |
302 | Tootsie Roll Industries Inc. (United States)* | 11 | |
153 | |||
GAS UTILITIES—0.5% | |||
3,797 | Snam SpA (Italy)* | 17 | |
HEALTH CARE EQUIPMENT & SUPPLIES—1.4% | |||
453 | Medtronic plc (Ireland) | 44 | |
HEALTH CARE PROVIDERS & SERVICES—0.7% | |||
288 | DaVita Inc. (United States)* | 23 | |
HOUSEHOLD DURABLES—4.6% | |||
1,000 | Casio Computer Co. Ltd. (Japan) | 16 | |
193 | Garmin Ltd. (Switzerland)* | 16 | |
173 | Helen of Troy Ltd. (United States)* | 29 | |
909 | Persimmon plc (United Kingdom)* | 25 | |
471 | PulteGroup Inc. (United States) | 13 |
10
Harbor Robeco Global Conservative Equities Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—Continued | |||
Shares | Value | ||
HOUSEHOLD DURABLES—Continued | |||
1,700 | Sekisui House Ltd. (Japan)* | $29 | |
161 | Topbuild Corp. (United States)* | 15 | |
143 | |||
HOUSEHOLD PRODUCTS—2.3% | |||
105 | Clorox Co. (United States)* | 19 | |
438 | Procter & Gamble Co. (United States)* | 52 | |
71 | |||
INDEPENDENT POWER & RENEWABLE ELECTRICITY PRODUCERS—0.5% | |||
6,304 | Meridian Energy Ltd. (New Zealand)* | 17 | |
INSURANCE—8.0% | |||
312 | Ageas (Belgium) | 11 | |
104 | Allianz SE (Germany) | 19 | |
327 | Allstate Corp. (United States) | 33 | |
200 | AMERISAFE Inc. (United States)* | 13 | |
283 | First American Financial Corp. (United States)* | 13 | |
1,665 | Gjensidige Forsikring ASA (Norway)* | 29 | |
774 | Great-West Lifeco Inc. (Canada)* | 13 | |
186 | Hannover Rueck SE (Germany) | 30 | |
132 | Hanover Insurance Group Inc. (United States)* | 13 | |
114 | Intact Financial Corp. (Canada)* | 11 | |
139 | Muenchener Rueckversicherungs-Gesellschaft AG in Muenchen (Germany)* | 30 | |
437 | Sun Life Financial Inc. (Canada)* | 15 | |
56 | Zurich Insurance Group AG (Switzerland)* | 18 | |
248 | |||
IT SERVICES—7.5% | |||
218 | Akamai Technologies Inc. (United States)* | 21 | |
503 | Amdocs Ltd. (United States)* | 32 | |
134 | CACI International Inc. (United States)* | 34 | |
300 | Fujitsu Ltd. (Japan)* | 29 | |
174 | Jack Henry + Associates Inc. (United States)* | 28 | |
208 | Leidos Holdings Inc. (United States)* | 21 | |
228 | ManTech International Corp. (United States) | 17 | |
900 | Nomura Research Institute Ltd. (Japan) | 22 | |
1,457 | Western Union Co. (United States) | 28 | |
232 | |||
LEISURE PRODUCTS—0.5% | |||
500 | Sankyo Co. Ltd. (Japan)* | 14 | |
MULTILINE RETAIL—1.9% | |||
132 | Dollar General Corp. (United States) | 23 | |
178 | Target Corp. (United States)* | 20 | |
707 | Wesfarmers Ltd. (Australia)* | 17 | |
60 | |||
MULTI-UTILITIES—3.0% | |||
1,346 | AGL Energy Ltd. (Australia)* | 15 | |
274 | Dominion Energy Inc. (United States)* | 21 | |
4,113 | Hera SpA (Italy) | 15 | |
619 | MDU Resources Group Inc. (United States)* | 14 | |
938 | National Grid plc (United Kingdom) | 11 | |
141 | Sempra Energy (United States)* | 17 | |
93 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
PHARMACEUTICALS—4.6% | |||
1,229 | GlaxoSmithKline plc (United Kingdom)* | $26 | |
382 | Merck & Co. Inc. (United States)* | 30 | |
848 | Pfizer Inc. (United States)* | 33 | |
154 | Roche Holding AG (Switzerland) | 53 | |
142 | |||
PROFESSIONAL SERVICES—0.6% | |||
270 | Thomson Reuters Corp. (Canada)* | 19 | |
REAL ESTATE MANAGEMENT & DEVELOPMENT—1.5% | |||
3,000 | Hulic Co. Ltd. (Japan)* | 30 | |
174 | Swiss Prime Site AG (Switzerland)* | 16 | |
46 | |||
ROAD & RAIL—0.4% | |||
4,694 | Aurizon Holdings Ltd. (Australia)* | 14 | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—1.2% | |||
614 | Intel Corp. (United States)* | 37 | |
SOFTWARE—2.4% | |||
364 | Microsoft Corp. (United States) | 65 | |
63 | Zoom Video Communications Inc. (United States)* | 9 | |
74 | |||
SPECIALTY RETAIL—3.2% | |||
23 | AutoZone Inc. (United States)* | 24 | |
439 | Best Buy Co. Inc. (United States) | 34 | |
486 | Buckle Inc. (United States)* | 7 | |
711 | JB Hi-Fi Ltd. (Australia)* | 16 | |
171 | Murphy USA Inc. (United States)* | 18 | |
99 | |||
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS—3.3% | |||
220 | Apple Inc. (United States) | 65 | |
718 | Seagate Technology plc (Ireland) | 36 | |
101 | |||
TRADING COMPANIES & DISTRIBUTORS—0.6% | |||
900 | ITOCHU Corp. (Japan)* | 18 | |
WIRELESS TELECOMMUNICATION SERVICES—2.2% | |||
1,300 | KDDI Corp. (Japan) | 38 | |
1,000 | NTT DoCoMo Inc. (Japan) | 29 | |
67 | |||
TOTAL COMMON STOCKS | |||
(Cost $3,394) | 3,049 | ||
TOTAL INVESTMENTS—98.2% | |||
(Cost $3,394) | 3,049 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—1.8% | 56 | ||
TOTAL NET ASSETS—100.0% | $3,105 |
11
Harbor Robeco Global Conservative Equities Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
FAIR VALUE MEASUREMENTS
The following table summarizes the Fund’s investments as of April 30, 2020 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 | $— | $583 | $— | $583 | ||||
North America | 1,732 | 203 | — | 1,935 | ||||
Pacific Basin | — | 531 | — | 531 | ||||
Total Investments in Securities | $1,732 | $1,317 | $— | $3,049 |
There were no Level 3 investments at April 30, 2020 or December 1, 2019 (inception).
For more information on valuation inputs and their aggregation into the levels 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 |
The accompanying notes are an integral part of the Financial Statements.
12
Harbor Robeco International Conservative Equities Fund
Fund Summary —April 30, 2020 (Unaudited)
Fund Summary —April 30, 2020 (Unaudited)
REGION BREAKDOWN(% of investments)
FUND PERFORMANCE
TOTAL RETURNS For the periods ended 04/30/2020 | 6 Months | 1 Year | 5 Years | Unannualized | |||||||
Life of Fund | |||||||||||
Harbor Robeco International Conservative Equities Fund | |||||||||||
Retirement Class1 | N/A | N/A | N/A | -15.64% | |||||||
Institutional Class1 | N/A | N/A | N/A | -15.65 | |||||||
Investor Class1 | N/A | N/A | N/A | -15.77 | |||||||
Comparative Index | |||||||||||
MSCI EAFE (ND)1 | N/A | N/A | N/A | -15.17% |
As stated in the Fund’s prospectus dated March 1, 2020, the expense ratios were 0.45% (Net) and 4.58% (Gross) Retirement Class; 0.53% (Net) and 4.66% (Gross) Institutional Class; and 0.90% (Net) and 5.03% (Gross) Investor Class. The net expense ratios reflect an expense limitation agreement (excluding interest expense, if any) effective through 02/28/2021. 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.
1 | The “Life of Fund” return as shown reflects the period 12/01/2019 through 04/30/2020. |
13
Harbor Robeco International Conservative Equities Fund
Portfolio of Investments—April 30, 2020 (Unaudited)
Portfolio of Investments—April 30, 2020 (Unaudited)
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—97.8% | |||
Shares | Value | ||
AEROSPACE & DEFENSE—0.7% | |||
2,839 | BAE Systems plc (United Kingdom) | $18 | |
AIR FREIGHT & LOGISTICS—0.7% | |||
1,384 | Bpost SA (Belgium)* | 10 | |
3,475 | CTT-Correios de Portugal SA (Portugal)* | 8 | |
18 | |||
AUTOMOBILES—1.7% | |||
700 | Toyota Motor Corp. (Japan) | 43 | |
BANKS—3.8% | |||
557 | BNP Paribas SA (France) | 18 | |
1,202 | DNB ASA (Norway) | 15 | |
10,223 | Intesa Sanpaolo SpA (Italy)* | 16 | |
16,700 | Mizuho Financial Group Inc. (Japan) | 19 | |
2,454 | Skandinaviska Enskilda Banken AB (Sweden)* | 20 | |
563 | Sydbank AS (Denmark)* | 9 | |
97 | |||
BEVERAGES—1.6% | |||
147 | Carlsberg AS (Denmark) | 18 | |
4,081 | Coca-Cola Amatil Ltd. (Australia) | 23 | |
41 | |||
BIOTECHNOLOGY—0.9% | |||
200 | Chugai Pharmaceutical Co. Ltd. (Japan)* | 24 | |
BUILDING PRODUCTS—0.7% | |||
41 | Geberit AG (Switzerland) | 18 | |
CAPITAL MARKETS—4.8% | |||
368 | ASX Ltd. (Australia)* | 19 | |
1,154 | CI Financial Corp. (Canada)* | 12 | |
630 | Flow Traders (Netherlands)* | 21 | |
2,285 | IG Group Holdings plc (United Kingdom) | 22 | |
628 | IGM Financial Inc. (Canada)* | 13 | |
3,000 | Singapore Exchange Ltd. (Singapore) | 21 | |
900 | Yamazaki Baking Co. Ltd. (Japan)* | 16 | |
124 | |||
CHEMICALS—1.3% | |||
8 | Givaudan SA (Switzerland)* | 27 | |
554 | Kemira OYJ (Finland)* | 7 | |
34 | |||
COMMERCIAL SERVICES & SUPPLIES—1.0% | |||
300 | Secom Co. Ltd. (Japan) | 25 | |
CONSTRUCTION & ENGINEERING—2.7% | |||
1,500 | Kandenko Co. Ltd. (Japan)* | 13 | |
800 | Kinden Corp. (Japan)* | 13 | |
1,800 | Obayashi Corp. (Japan) | 16 | |
1,494 | Skanska AB (Sweden)* | 28 | |
70 | |||
DISTRIBUTORS—0.5% | |||
277 | D'ieteren SA (Belgium)* | 14 | |
DIVERSIFIED FINANCIAL SERVICES—1.6% | |||
1,312 | Plus500 Ltd. (Israel)* | 21 | |
83 | Sofina SA (Belgium)* | 19 | |
40 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
DIVERSIFIED TELECOMMUNICATION SERVICES—6.9% | |||
1,776 | Deutsche Telekom AG (Germany) | $26 | |
367 | Elisa OYJ (Finland)* | 22 | |
13,000 | HKT Trust & HKT Ltd Stapled Security (Hong Kong)* | 21 | |
35,000 | PCCW Ltd. (Hong Kong)* | 21 | |
635 | Proximus SADP (Belgium)* | 14 | |
6,575 | Spark New Zealand Ltd. (New Zealand) | 18 | |
40 | Swisscom AG (Switzerland)* | 21 | |
6,163 | Telefonica Deutschland Holding AG (Germany)* | 18 | |
4,713 | Telia Co. AB (Sweden)* | 16 | |
177 | |||
ELECTRIC UTILITIES—6.5% | |||
156 | BKW AG (Switzerland)* | 13 | |
732 | Endesa SA (Spain)* | 16 | |
4,089 | Enel SpA (Italy) | 28 | |
858 | Fortum OYJ (Finland)* | 14 | |
962 | Hydro One Ltd. (Canada)* | 17 | |
3,162 | Iberdrola SA (Spain) | 32 | |
3,000 | Power Assets Holdings Ltd. (Hong Kong)* | 20 | |
1,791 | SSE PLC (United Kingdom)* | 28 | |
168 | |||
ELECTRICAL EQUIPMENT—0.5% | |||
1,200 | Ushio Inc. (Japan) | 13 | |
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—0.5% | |||
177 | Landis+Gyr Group AG (Switzerland)* | 12 | |
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—7.3% | |||
6 | Advance Residence Investment Corp. (Japan)* | 18 | |
3,888 | BWP Trust (Australia)* | 9 | |
10,400 | CapitaLand Mall Trust (Singapore)* | 14 | |
21,581 | Cromwell Property Group (Australia)* | 11 | |
520 | Deutsche EuroShop AG (Germany)* | 8 | |
11 | Industrial & Infrastructure Fund Investment Corp. (Japan)* | 15 | |
3 | Japan Real Estate Investment Corp. (Japan)* | 16 | |
16,200 | Mapletree Industrial Trust (Singapore)* | 29 | |
14,600 | Mapletree Logistics Trust (Singapore)* | 19 | |
10 | Mori Trust Sogo Inc. (Japan)* | 11 | |
3 | Nippon Building Fund Inc. (Japan)* | 18 | |
7 | Nippon ProLogis REIT Inc. (Japan)* | 19 | |
187 | |||
FOOD & STAPLES RETAILING—7.3% | |||
2,118 | Coles Group Ltd. (Australia)* | 21 | |
453 | ICA Gruppen AB (Sweden)* | 20 | |
1,064 | Kesko OYJ (Finland)* | 17 | |
940 | Koninklijke Ahold Delhaize NV (Netherlands) | 23 | |
300 | Lawson Inc. (Japan) | 16 | |
371 | Loblaw Cos. Ltd. (Canada) | 18 | |
412 | Metro Inc. (Canada)* | 17 | |
300 | Sugi Holdings Co. Ltd. (Japan) | 18 | |
500 | Sundrug Co. Ltd. (Japan) | 17 | |
937 | Woolworths Ltd. (Australia)* | 22 | |
189 | |||
FOOD PRODUCTS—3.2% | |||
3 | Chocoladefabriken Lindt & Spruengli AG (Switzerland)* | 23 | |
300 | Nissin Foods Holdings Co. Ltd. (Japan)* | 25 | |
3,893 | Orkla ASA (Norway)* | 35 | |
83 |
14
Harbor Robeco International Conservative Equities Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—Continued | |||
Shares | Value | ||
GAS UTILITIES—0.7% | |||
4,095 | Snam SpA (Italy)* | $18 | |
HEALTH CARE EQUIPMENT & SUPPLIES—0.7% | |||
1,009 | Fisher & Paykel Healthcare Corp. Ltd. (New Zealand) | 17 | |
HEALTH CARE PROVIDERS & SERVICES—1.3% | |||
222 | Galenica AG (Switzerland)* | 16 | |
977 | Sonic Healthcare Ltd. (Australia)* | 17 | |
33 | |||
HOUSEHOLD DURABLES—2.3% | |||
295 | Berkeley Group Holdings plc (United Kingdom) | 15 | |
1,000 | Casio Computer Co. Ltd. (Japan) | 16 | |
1,700 | Sekisui House Ltd. (Japan)* | 29 | |
60 | |||
INDEPENDENT POWER & RENEWABLE ELECTRICITY PRODUCERS—3.1% | |||
703 | Atlantica Yield PLC (United Kingdom)* | 17 | |
10,309 | Ausnet Services (Australia)* | 13 | |
1,143 | Encavis AG (Germany)* | 14 | |
6,507 | Meridian Energy Ltd. (New Zealand)* | 18 | |
1,602 | TransAlta Renewables Inc (Canada)* | 17 | |
79 | |||
INSURANCE—9.0% | |||
338 | Ageas (Belgium) | 12 | |
164 | Allianz SE (Germany) | 30 | |
1,114 | Assicurazioni Generali SpA (Italy) | 16 | |
368 | AXA SA (France) | 7 | |
1,586 | Gjensidige Forsikring ASA (Norway)* | 28 | |
110 | Hannover Rueck SE (Germany) | 17 | |
150 | Muenchener Rueckversicherungs-Gesellschaft AG in Muenchen (Germany)* | 33 | |
669 | Poste Italiane SpA (Italy)* | 6 | |
398 | Sun Life Financial Inc. (Canada)* | 14 | |
230 | Swiss RE AG (Switzerland)* | 17 | |
380 | Talanx AG (Germany)* | 13 | |
6,200 | Unipolsai Assicurazioni SpA (Italy) | 15 | |
77 | Zurich Insurance Group AG (Switzerland)* | 24 | |
232 | |||
IT SERVICES—0.9% | |||
900 | Nomura Research Institute Ltd. (Japan) | 22 | |
LEISURE PRODUCTS—1.0% | |||
900 | Sankyo Co. Ltd. (Japan)* | 25 | |
MACHINERY—1.6% | |||
458 | Alstom SA (France)* | 19 | |
360 | Kone OYJ (Finland) | 22 | |
41 | |||
MEDIA—0.6% | |||
15,300 | Singapore Press Holdings Ltd. (Singapore)* | 16 | |
METALS & MINING—0.9% | |||
3,022 | Fortescue Metals Group Ltd. (Australia) | 23 | |
MULTILINE RETAIL—0.8% | |||
867 | Wesfarmers Ltd. (Australia)* | 21 | |
MULTI-UTILITIES—2.8% | |||
1,442 | AGL Energy Ltd. (Australia)* | 16 | |
4,129 | Hera SpA (Italy) | 15 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
MULTI-UTILITIES—Continued | |||
2,099 | National Grid plc (United Kingdom) | $25 | |
817 | Veolia Environnement SA (France)* | 17 | |
73 | |||
PAPER & FOREST PRODUCTS—0.7% | |||
597 | Holmen AB Class B (Sweden)* | 17 | |
PHARMACEUTICALS—4.1% | |||
1,400 | Astellas Pharma Inc. (Japan)* | 23 | |
1,682 | GlaxoSmithKline plc (United Kingdom)* | 35 | |
139 | Roche Holding AG (Switzerland) | 48 | |
106 | |||
REAL ESTATE MANAGEMENT & DEVELOPMENT—1.7% | |||
600 | Goldcrest Co. Ltd. (Japan)* | 9 | |
139 | PSP Swiss Property AG (Switzerland)* | 16 | |
186 | Swiss Prime Site AG (Switzerland)* | 18 | |
43 | |||
ROAD & RAIL—0.6% | |||
4,989 | Aurizon Holdings Ltd. (Australia)* | 15 | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—0.7% | |||
163 | ASM International NV (Netherlands)* | 18 | |
SPECIALTY RETAIL—4.1% | |||
1,124 | Bilia AB (Sweden)* | 8 | |
1,400 | EDION Corp. (Japan)* | 12 | |
229 | Fielmann AG (Germany)* | 15 | |
1,111 | Hennes & Mauritz AB Class B (Sweden)* | 15 | |
714 | JB Hi-Fi Ltd. (Australia)* | 16 | |
1,500 | K's Holdings Corp. (Japan)* | 17 | |
600 | Shimachu Co. Ltd. (Japan)* | 15 | |
700 | World Co. Ltd. (Japan)* | 8 | |
106 | |||
TELECOMMUNICATION SERVICES—0.9% | |||
1,448 | Telenor ASA (Norway)* | 22 | |
THRIFTS & MORTGAGE FINANCE—0.3% | |||
1,193 | Deutsche Pfandbriefbank AG (Germany)* | 9 | |
TRADING COMPANIES & DISTRIBUTORS—0.9% | |||
1,100 | ITOCHU Corp. (Japan)* | 22 | |
WIRELESS TELECOMMUNICATION SERVICES—3.9% | |||
775 | Freenet AG (Germany)* | 15 | |
1,200 | KDDI Corp. (Japan) | 35 | |
1,300 | NTT DoCoMo Inc. (Japan) | 38 | |
9,652 | Vodafone Group plc (United Kingdom) | 13 | |
101 | |||
TOTAL COMMON STOCKS | |||
(Cost $2,843) | 2,514 | ||
TOTAL INVESTMENTS—97.8% | |||
(Cost $2,843) | 2,514 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—2.2% | 57 | ||
TOTAL NET ASSETS—100.0% | $2,571 |
15
Harbor Robeco International Conservative Equities Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
FAIR VALUE MEASUREMENTS
The following table summarizes the Fund’s investments as of April 30, 2020 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 | $17 | $1,323 | $— | $1,340 | ||||
North America | 18 | 90 | — | 108 | ||||
Pacific Basin | — | 1,066 | — | 1,066 | ||||
Total Investments in Securities | $35 | $2,479 | $— | $2,514 |
There were no Level 3 investments at April 30, 2020 or December 1, 2019 (inception).
For more information on valuation inputs and their aggregation into the levels 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 |
The accompanying notes are an integral part of the Financial Statements.
16
Harbor Robeco US Conservative Equities Fund
Fund Summary —April 30, 2020 (Unaudited)
Fund Summary —April 30, 2020 (Unaudited)
Sector Allocation(% of investments)
FUND PERFORMANCE
TOTAL RETURNS For the periods ended 04/30/2020 | 6 Months | 1 Year | 5 Years | Unannualized | |||||||
Life of Fund | |||||||||||
Harbor Robeco US Conservative Equities Fund | |||||||||||
Retirement Class1 | N/A | N/A | N/A | -14.52% | |||||||
Institutional Class1 | N/A | N/A | N/A | -14.53 | |||||||
Investor Class1 | N/A | N/A | N/A | -14.65 | |||||||
Comparative Index | |||||||||||
S&P 5001 | N/A | N/A | N/A | -6.55% |
As stated in the Fund’s prospectus dated March 1, 2020, the expense ratios were 0.35% (Net) and 4.12% (Gross) Retirement Class; 0.43% (Net) and 4.20% (Gross) Institutional Class; and 0.80% (Net) and 4.57% (Gross) Investor Class. The net expense ratios reflect an expense limitation agreement (excluding interest expense, if any) effective through 02/28/2021. 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.
1 | The “Life of Fund” return as shown reflects the period 12/01/2019 through 04/30/2020. |
17
Harbor Robeco US Conservative Equities Fund
Portfolio of Investments—April 30, 2020 (Unaudited)
Portfolio of Investments—April 30, 2020 (Unaudited)
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—98.8% | |||
Shares | Value | ||
AEROSPACE & DEFENSE—1.7% | |||
86 | Lockheed Martin Corp.* | $33 | |
245 | Raytheon Technologies Corp.* | 16 | |
49 | |||
BANKS—5.4% | |||
810 | Citigroup Inc.* | 39 | |
3,353 | Investors Bancorp Inc.* | 31 | |
455 | JPMorgan Chase & Co. | 44 | |
198 | PNC Financial Services Group Inc.* | 21 | |
539 | U.S. Bancorp. | 20 | |
155 | |||
BEVERAGES—1.5% | |||
326 | PepsiCo Inc. | 43 | |
BIOTECHNOLOGY—2.6% | |||
165 | Amgen Inc. | 39 | |
423 | Gilead Sciences Inc.* | 36 | |
75 | |||
BUILDING PRODUCTS—1.0% | |||
616 | Johnson Controls International plc | 18 | |
137 | Simpson Manufacturing Co. Inc.* | 10 | |
28 | |||
CAPITAL MARKETS—2.0% | |||
213 | Cohen & Steers Inc.* | 12 | |
573 | Federated Investors Inc.* | 13 | |
1,402 | Virtu Financial Inc.* | 33 | |
58 | |||
COMMERCIAL SERVICES & SUPPLIES—0.8% | |||
276 | Copart Inc.* | 22 | |
DIVERSIFIED TELECOMMUNICATION SERVICES—4.2% | |||
1,952 | AT&T Inc.* | 60 | |
1,084 | Verizon Communications Inc.* | 62 | |
122 | |||
ELECTRIC UTILITIES—7.6% | |||
303 | American Electric Power Co. Inc.* | 25 | |
316 | Avangrid Inc.* | 14 | |
339 | Duke Energy Corp.* | 29 | |
216 | Entergy Corp. | 21 | |
382 | Evergy Inc.* | 22 | |
309 | Eversource Energy* | 25 | |
534 | FirstEnergy Corp. | 22 | |
152 | NextEra Energy Inc.* | 35 | |
483 | Southern Co.* | 27 | |
220 | |||
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—1.3% | |||
183 | CDW Corp.* | 20 | |
255 | Plexus Corp.* | 16 | |
36 | |||
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—8.8% | |||
301 | Agree Realty Corp.* | 20 | |
1,350 | Easterly Government Properties Inc.* | 36 | |
165 | EastGroup Properties Inc.* | 17 | |
1,023 | Equity Commonwealth* | 35 | |
304 | Equity Residential* | 20 | |
2,030 | Lexington Realty Trust | 21 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—Continued | |||
205 | Life Storage Inc.* | $18 | |
178 | Mid-America Apartment Communities Inc.* | 20 | |
805 | Piedmont Office Realty Trust Inc. | 14 | |
88 | ProLogis Inc.* | 8 | |
429 | Spirit Realty Capital Inc. | 13 | |
552 | STORE Capital Corp.* | 11 | |
390 | Terreno Realty Corp.* | 21 | |
254 | |||
FOOD & STAPLES RETAILING—4.5% | |||
78 | Casey's General Stores Inc.* | 12 | |
1,255 | Kroger Co. | 40 | |
1,650 | Sprouts Farmers Market Inc.* | 34 | |
352 | Walmart Inc.* | 43 | |
129 | |||
FOOD PRODUCTS—6.0% | |||
1,309 | B&G Foods Inc.* | 26 | |
594 | Campbell Soup Co.* | 30 | |
931 | Flowers Foods Inc.* | 21 | |
169 | Hershey Co.* | 22 | |
670 | Hormel Foods Corp.* | 31 | |
302 | JM Smucker Co. | 35 | |
113 | John B Sanfilippo & Son Inc.* | 9 | |
174 | |||
HEALTH CARE EQUIPMENT & SUPPLIES—1.2% | |||
356 | Medtronic plc (Ireland) | 35 | |
HEALTH CARE PROVIDERS & SERVICES—2.0% | |||
52 | Chemed Corp.* | 22 | |
457 | DaVita Inc.* | 36 | |
58 | |||
HOUSEHOLD DURABLES—4.3% | |||
247 | Garmin Ltd. (Switzerland)* | 20 | |
236 | Helen of Troy Ltd.* | 39 | |
4 | NVR Inc.* | 13 | |
827 | PulteGroup Inc. | 23 | |
204 | Topbuild Corp.* | 19 | |
82 | Whirlpool Corp. | 9 | |
123 | |||
HOUSEHOLD PRODUCTS—3.4% | |||
204 | Kimberly-Clark Corp.* | 28 | |
582 | Procter & Gamble Co.* | 69 | |
�� | 97 | ||
INSURANCE—6.0% | |||
495 | Aflac Inc. | 19 | |
358 | Allstate Corp. | 36 | |
228 | Cincinnati Financial Corp.* | 15 | |
88 | Everest Re Group Ltd. (Bermuda)* | 15 | |
353 | First American Financial Corp.* | 16 | |
165 | Hanover Insurance Group Inc.* | 17 | |
405 | Hartford Financial Services Group Inc. | 15 | |
106 | Marsh & McLennan Companies* | 10 | |
542 | MetLife Inc.* | 20 | |
150 | RLI Corp.* | 11 | |
174 | |||
INTERNET & DIRECT MARKETING RETAIL—0.4% | |||
294 | PetMed Express Inc.* | 12 |
18
Harbor Robeco US Conservative Equities Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—Continued | |||
Shares | Value | ||
IT SERVICES—7.3% | |||
277 | Akamai Technologies Inc.* | $27 | |
510 | Amdocs Ltd.* | 33 | |
94 | CACI International Inc.* | 23 | |
553 | Genpact Ltd. | 19 | |
263 | Leidos Holdings Inc.* | 26 | |
404 | ManTech International Corp. | 30 | |
491 | Perficient Inc.* | 17 | |
1,877 | Western Union Co. | 36 | |
211 | |||
MEDIA—2.3% | |||
15 | Cable One Inc.* | 29 | |
646 | Omnicom Group Inc.* | 37 | |
66 | |||
METALS & MINING—0.6% | |||
191 | Reliance Steel & Aluminum Co. | 17 | |
MULTILINE RETAIL—1.9% | |||
172 | Dollar General Corp. | 30 | |
239 | Target Corp.* | 26 | |
56 | |||
MULTI-UTILITIES—3.7% | |||
396 | Avista Corp.* | 17 | |
365 | Dominion Energy Inc.* | 28 | |
774 | MDU Resources Group Inc.* | 17 | |
437 | Public Service Enterprise Group Inc. | 22 | |
184 | Sempra Energy* | 23 | |
107 | |||
OIL, GAS & CONSUMABLE FUELS—0.6% | |||
283 | Valero Energy Corp. | 18 | |
PHARMACEUTICALS—3.2% | |||
552 | Merck & Co. Inc.* | 44 | |
1,219 | Pfizer Inc.* | 47 | |
91 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
PROFESSIONAL SERVICES—0.9% | |||
206 | FTI Consulting Inc.* | $26 | |
ROAD & RAIL—0.7% | |||
159 | Kansas City Southern* | 21 | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—2.7% | |||
157 | Cirrus Logic Inc.* | 12 | |
896 | Intel Corp.* | 53 | |
50 | Lam Research Corp. | 13 | |
78 | |||
SOFTWARE—4.2% | |||
396 | Microsoft Corp. | 71 | |
362 | Oracle Corp. | 19 | |
236 | Zoom Video Communications Inc.* | 32 | |
122 | |||
SPECIALTY RETAIL—3.4% | |||
475 | Best Buy Co. Inc. | 37 | |
602 | Buckle Inc.* | 9 | |
191 | Murphy USA Inc.* | 20 | |
60 | O'Reilly Automotive Inc.* | 23 | |
175 | TJX Companies Inc.* | 9 | |
98 | |||
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS—2.6% | |||
253 | Apple Inc. | 74 | |
TOTAL COMMON STOCKS | |||
(Cost $3,139) | 2,849 | ||
TOTAL INVESTMENTS—98.8% | |||
(Cost $3,139) | 2,849 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—1.2% | 35 | ||
TOTAL NET ASSETS—100.0% | $2,884 |
FAIR VALUE MEASUREMENTS
All investments at April 30, 2020 (as disclosed in the preceding Portfolio of Investments) were classified as Level 1. There were no Level 3 investments at April 30, 2020 or December 1, 2019 (inception).
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.
19
Harbor Core Equity Funds
Manager’s Commentary (Unaudited)
Manager’s Commentary (Unaudited)
Subadviser
Robeco Institutional Asset Management US Inc.
230 Park Avenue
Suite 3330
Suite 3330
New York, NY 10169
Portfolio Managers
Wilma de Groot, PhD, CFA
Since 2019
Tim Dröge
Since 2019
Since 2019
Machiel Zwanenburg
Since 2019
Since 2019
Jan de Koning, CFA, CAIA
Since 2019
Han van der Boon
Since 2019
Since 2019
Thijs van der Valk
Since 2019
Since 2019
Yaowei Xu
Since 2019
Since 2019
Robeco Institutional Asset Management US Inc. (“RIAM US”) has subadvised the Fund since 2019.
Investment Objective
The Fund seeks long-term growth of capital.
Wilma de Groot, PhD,
CFA
CFA
Tim Dröge
Machiel Zwanenburg
Jan de Koning, CFA,
CAIA
CAIA
Han van der Boon
Thijs van der Valk
Yaowei Xu
Management’s Discussion of
Fund Performance
Fund Performance
Market Review
The dynamics of emerging markets over the last five months followed the following volatile progression: reach of the all-time highs, sell-off due to the coronavirus outbreak, and a bounce back from this sell-off.
Equities around the globe experienced a strong rally in the last month of 2019, concluding a year (and decade) of solid returns. The MSCI Emerging Markets Index rose 7.5%, as all eleven sectors showed positive returns, and emerging markets outperformed developed markets. Tech giants such as Samsung and Tencent drove markets higher, making the Information Technology sector, once again, the strongest sector in emerging markets.
However, the first quarter of 2020, showed a completely different story and is one for the history books. Hit by the coronavirus outbreak, the MSCI Emerging Markets Index experienced its worst first quarter of the year since the index started in 1988 and its fourth weakest quarter overall. China was the best performing major market, with a 10% decline in local returns, as index heavyweights Tencent and Alibaba fared relatively well. Contrarily, commodity-heavy markets such as Brazil declined, also under the pressure of a weaker currency. Sector return dispersion was high. Growth-like Health Care and Information Technology fared better than the value-like Financials and Energy sectors, hit by a decline in interest rates and a collapse in oil prices, respectively. Governments and central banks in both emerging and developed markets reacted quickly to the crises by providing substantial fiscal and monetary stimulus.
Most emerging market stocks recovered in April 2020. The Indian and South African markets, which were heavily impacted by the March sell-off, showed double-digit returns. The large Chinese market, still the best performing index year-to-date with a loss of just 4.6%, showed a modest return of 6.2% in April. In terms of sector returns, we see a mixed picture, with strong returns for Materials and Health Care, while Real Estate and Financials lagged the market once again. Together with the Energy sector, the latter two sectors have been the weakest sectors this year. The large Chinese banks did not move much, however, the index heavyweights Alibaba and Tencent continued to increase in value, while most stocks showed a modestly positive return. A notable outlier was South Africa’s largest chemicals producer, Sasol, which rose 145% after losing 84% of its market value in March. Uncertainty around the company and its American projects remains extremely high, in our view.
Performance
Since inception on December 1, 2019 until April 30, 2020, Harbor Robeco Emerging Markets Active Equities Fund returned -13.02% (Retirement Class), -13.12% (Institutional Class) and -13.25% (Investor Class) while the MSCI Emerging Markets (ND) Index returned -10.38%. Broadly speaking, our exposure to the value factor contributed the most to the underperformance of the Fund, the analyst revisions factor also had a slightly negative impact, while the quality, momentum, and the short-term timing model all contributed positively. The positive impact of the non-value factors diversified some, but not all, of the severe underperformance of value, resulting in an overall underperformance of the Fund.
20
Harbor Core Equity Funds
Manager’s Commentary—Continued
Manager’s Commentary—Continued
Given the small country and sector deviations and our bottom-up stock selection process, selection effects within these segments typically dominate allocation effects. In terms of sectors, good selection within Financials and Materials was more than offset by poor selection within most other sectors, particularly Consumer Discretionary and Health Care. The largest detractor from relative performance was Smiles Fidelidade SA. This customer loyalty program provider scored attractively on value and quality factors but took a hit when air traffic came to a halt. The largest positive contribution to relative performance came from New Hope Liuhe Co. This leading enterprise in agricultural industrialization in China was able to profit from the coronavirus outbreak and gained more than 60% year to date.
Country allocation had a negligible impact on performance. Poor selection within China and Korea had the largest negative impact on performance.
Outlook
The coronavirus outbreak continues to spread globally. What the cumulative impact of the outbreak will be, and the subsequent measures are taken to contain it remain uncertain. In China, the outbreak seems to be contained, but this is not the case yet in Europe and the U.S. The good news is that globally, central banks and governments have acted swiftly to provide support. What the shape of the recovery (V-, U- or L-shaped) will eventually be is uncertain. Yet, as investors, we are not rewarded for waiting until the dust has settled and the macroeconomic view is all clear. We believe that in confusing times like these, market technical trump fundamentals in market pricing behavior.
In our view, support measures by central banks and government are important, but what we believe really matters for the economic outlook is how long social distancing and the lockdowns will remain in place. The first indication we are getting from China is that these extreme measures are indeed effective. All eyes are now on Europe and the U.S. to get confirmation that these measures are bearing fruit. The question, however, is to what extent this is a good blueprint for the U.S., as there seems to be less willingness or tolerance for social distancing and lockdowns there.
Low visibility on the macro front, a state of denial in investor sentiment, unpredictable return bounces, and stretched ex-ante U.S. valuation levels are important clues that we might not be out of the woods yet, in our view. The risk is that they are waiting for a trough that already happened. There is an obvious two-way risk for equity investors at this juncture.
This report contains the current opinions of Robeco Institutional Asset Management US 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.
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.
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 Robeco Emerging Markets Active Equities Fund
Fund Summary —April 30, 2020 (Unaudited)
Fund Summary —April 30, 2020 (Unaudited)
REGION BREAKDOWN(% of investments)
FUND PERFORMANCE
TOTAL RETURNS For the periods ended 04/30/2020 | 6 Months | 1 Year | 5 Years | Unannualized | |||||||
Life of Fund | |||||||||||
Harbor Robeco Emerging Markets Active Equities Fund | |||||||||||
Retirement Class1 | N/A | N/A | N/A | -13.02% | |||||||
Institutional Class1 | N/A | N/A | N/A | -13.12 | |||||||
Investor Class1 | N/A | N/A | N/A | -13.25 | |||||||
Comparative Index | |||||||||||
MSCI Emerging Markets (ND)1 | N/A | N/A | N/A | -10.38% |
As stated in the Fund’s prospectus dated March 1, 2020, the expense ratios were 0.79% (Net) and 6.62% (Gross) Retirement Class; 0.87% (Net) and 6.70% (Gross) Institutional Class; and 1.24% (Net) and 7.07% (Gross) Investor Class. The net expense ratios reflect an expense limitation agreement (excluding interest expense, if any) effective through 02/28/2021. 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.
1 | The “Life of Fund” return as shown reflects the period 12/01/2019 through 04/30/2020. |
22
Harbor Robeco Emerging Markets Active Equities Fund
Portfolio of Investments—April 30, 2020 (Unaudited)
Portfolio of Investments—April 30, 2020 (Unaudited)
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—95.2% | |||
Shares | Value | ||
AEROSPACE & DEFENSE—0.4% | |||
451 | Hanwha Aerospace Co. Ltd. (South Korea)* | $10 | |
AUTO COMPONENTS—1.7% | |||
545 | Hankook Tire & Technology Co. Ltd. (South Korea) | 10 | |
84 | Hyundai Mobis Co. Ltd. (South Korea)* | 12 | |
177 | Hyundai Wia Corp. (South Korea)* | 5 | |
25,100 | Nemak SAB de CV (Mexico)1 | 5 | |
47 | S&T Motiv Co Ltd. (South Korea)* | 1 | |
4,369 | Shandong Linglong Tyre Co. Ltd. (China)* | 13 | |
46 | |||
AUTOMOBILES—1.9% | |||
16,500 | Baic Motor Corp. Ltd. (China)1 | 7 | |
1,000 | China Motor Corp. (Taiwan)* | 1 | |
20,500 | Great Wall Motor Co. Ltd. (China)* | 14 | |
523 | KIA Motors Corp. (South Korea)* | 13 | |
950 | Mahindra & Mahindra Ltd. GDR (India)*,2 | 5 | |
1,448 | Tata Motors Ltd. ADR (India)*,2 | 8 | |
861 | Tofas Turk Otomobil Fabrikasi AS (Turkey)* | 3 | |
51 | |||
BANKS—14.6% | |||
1,840 | Absa Group Ltd. (South Africa)* | 9 | |
48,000 | Agricultural Bank of China Ltd. (China)* | 20 | |
3,002 | Alinma Bank (Saudi Arabia)* | 13 | |
6,700 | AMMB Holdings Bhd (Malaysia)* | 5 | |
1,000 | Arab National Bank (Saudi Arabia)* | 5 | |
700 | Banco Do Brasil SA (Brazil)* | 4 | |
1,203 | Banco Santander Brasil SA ADR (Brazil)*,2 | 6 | |
8,900 | Bank of Chengdu Co. Ltd. (China)* | 10 | |
72,000 | Bank of China Ltd. (China)* | 27 | |
26,000 | Bank of Communications Co. Ltd. (China)* | 16 | |
15,500 | Bank of Jiangsu Co. Ltd. (China)* | 13 | |
3,200 | Bank of Shanghai Co. Ltd. (China)* | 4 | |
1,614 | BNK Financial Group Inc. (South Korea)* | 7 | |
31,000 | China Citic Bank Corp. Ltd. (China)* | 15 | |
53,000 | China Construction Bank Corp. (China) | 43 | |
15,000 | China Everbright Bank Co. Ltd. (China)* | 6 | |
20,500 | China Minsheng Banking Corp. Ltd. (China)* | 15 | |
25,000 | Chongqing Rural Commercial Bank Co. Ltd. (China)* | 11 | |
4,442 | Commercial Bank PSQC (Qatar)* | 5 | |
30,000 | CTBC Financial Holding Co. Ltd. (Taiwan)* | 20 | |
630 | Hana Financial Group Inc. (South Korea) | 14 | |
500 | ICICI Bank Ltd. ADR (India)2 | 5 | |
33,000 | Industrial & Commercial Bank of China Ltd. (China) | 22 | |
674 | KB Financial Group Inc. (South Korea)* | 19 | |
4,700 | Kiatnakin Bank PCL NVDR (Thailand)*,2 | 6 | |
10,889 | Masraf Al Rayan Q.S.C (Qatar)* | 11 | |
2,283 | Moneta Money Bank AS (Czech Republic)* | 5 | |
1,200 | Regional SAB de CV (Mexico)* | 3 | |
6,700 | RHB Bank BHD (Malaysia)* | 7 | |
618 | Shinhan Financial Group Co. Ltd. (South Korea) | 16 | |
26,000 | SinoPac Financial Holdings Co. Ltd. (Taiwan)* | 11 | |
120 | State Bank of India GDR (India)*,2 | 3 | |
6,600 | Thanachart Capital PCL NVDR (Thailand)*,2 | 7 | |
58,920 | Turkiye Sinai Kalkinma Bankasi AS (Turkey)* | 9 | |
836 | VTB Bank PJSC GDR (Russia)*,2 | 1 | |
393 | |||
BEVERAGES—0.9% | |||
5,300 | Carabao Group PCL NVDR (Thailand)*,2 | 13 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
BEVERAGES—Continued | |||
315 | Hite Jinro Co. Ltd. (South Korea)* | $9 | |
200 | Sichuan Swellfun Co. Ltd. (China)* | 1 | |
23 | |||
BIOTECHNOLOGY—0.1% | |||
28,000 | Sihuan Pharmaceutical Holdings Ltd. (China)* | 3 | |
CAPITAL MARKETS—0.7% | |||
2,553 | Investec Ltd. (South Africa)* | 5 | |
22,000 | Yuanta Financial Holding Co. Ltd. (Taiwan)* | 13 | |
18 | |||
CHEMICALS—0.6% | |||
101 | LOTTE Fine Chemical Co. Ltd. (South Korea)* | 3 | |
191 | Soulbrain Co. Ltd. (South Korea)* | 12 | |
15 | |||
COMMERCIAL SERVICES & SUPPLIES—0.5% | |||
3,000 | Country Garden Services Holdings Co. Ltd. (China)* | 14 | |
COMPUTERS & PERIPHERALS—0.6% | |||
17,000 | Wistron Corp. (Taiwan)* | 16 | |
CONSTRUCTION & ENGINEERING—1.9% | |||
13,600 | China National Chemical Engineering Co. Ltd. (China)* | 12 | |
12,500 | China Railway Construction Corp. Ltd. (China)* | 14 | |
19 | Daelim Industrial Co. Ltd. (South Korea)* | 1 | |
4,270 | Gamuda BHD (Malaysia)* | 3 | |
364 | HDC Hyundai Development Co-Engineering & Construction (South Korea)* | 6 | |
400 | Larsen & Toubro Ltd. GDR (India)*,2 | 5 | |
9,000 | Metallurgical Corp. of China Ltd. (China)* | 1 | |
1,001 | Samsung Engineering Co. Ltd. (South Korea)* | 9 | |
51 | |||
CONSTRUCTION MATERIALS—2.2% | |||
1,500 | Anhui Conch Cement Co. Ltd. (China) | 12 | |
1,500 | Asia Cement China Holdings Corp. (China)* | 2 | |
10,000 | Asia Cement Corp. (Taiwan)* | 15 | |
12,000 | China National Building Material Co. Ltd. (China)* | 15 | |
355 | Qassim Cement Co. (Saudi Arabia)* | 5 | |
14,900 | Tipco Asphalt PCL NVDR (Thailand)*,2 | 8 | |
16,000 | West China Cement Ltd. (China)* | 3 | |
60 | |||
CONSUMER FINANCE—0.2% | |||
4,700 | Gentera SAB de CV (Mexico) | 2 | |
169 | Samsung Card Co. Ltd. (South Korea)* | 4 | |
6 | |||
DIVERSIFIED TELECOMMUNICATION SERVICES—1.8% | |||
1,442 | KT Corp. ADR (South Korea)2 | 14 | |
2,841 | Ooredoo QPSC (Qatar)* | 5 | |
6,200 | Telekom Malaysia BHD (Malaysia)* | 6 | |
495 | Telekomunikasi Indonesia Persero Tbk PT ADR (Indonesia)*,2 | 11 | |
12,462 | Turk Telekomunikasyon AS (Turkey)* | 13 | |
49 | |||
ELECTRIC UTILITIES—1.3% | |||
855 | Cia Paranaense de Energia ADR (Brazil)*,2 | 9 | |
158,548 | ENEL Chile SA (Chile)* | 13 | |
1,285 | Engie Energia Chile SA (Chile)* | 1 |
23
Harbor Robeco Emerging Markets Active Equities Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—Continued | |||
Shares | Value | ||
ELECTRIC UTILITIES—Continued | |||
919 | Saudi Electricity Co. (Saudi Arabia)* | $4 | |
1,400 | Transmissora Alianca de Energia Eletrica SA (Brazil)* | 7 | |
34 | |||
ELECTRICAL EQUIPMENT—0.4% | |||
8,000 | Shanghai Electric Group Co. Ltd. (China)* | 3 | |
8,000 | TECO Electric and Machinery Co. Ltd. (Taiwan) | 7 | |
10 | |||
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—2.5% | |||
7,000 | Compeq Manufacturing Co. Ltd. (Taiwan)* | 9 | |
10,000 | Hon Hai Precision Industry Co. Ltd. (Taiwan)* | 26 | |
3,500 | Kingboard Holdings Ltd. (China)* | 8 | |
131 | LG Innotek Co. Ltd. (South Korea)* | 14 | |
3,000 | Tripod Technology Corp. (Taiwan)* | 11 | |
68 | |||
ENERGY EQUIPMENT & SERVICES—0.3% | |||
10,000 | China Oilfield Services Ltd. (China) | 8 | |
ENTERTAINMENT—2.2% | |||
1,000 | International Games System Co. Ltd. (Taiwan)* | 18 | |
2,500 | NetDragon Websoft Holdings Ltd. (China)* | 7 | |
73 | NetEase Inc. ADR (China)*,2 | 25 | |
1,900 | Wuhu Sanqi Interactive Entertainment Network Technology Group Co. Ltd. Class A (China)* | 10 | |
60 | |||
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—0.3% | |||
11,300 | Fibra Uno Administracion SA de CV (Mexico)* | 9 | |
FOOD & STAPLES RETAILING—0.9% | |||
7,114 | Cencosud SA (Chile)* | 9 | |
1,002 | Clicks Group Ltd. (South Africa)* | 12 | |
426 | Eurocash SA (Poland)* | 2 | |
23 | |||
FOOD PRODUCTS—2.8% | |||
186 | Astral Foods Ltd. (South Africa)* | 2 | |
8,100 | Charoen Pokphand Foods PCL NVDR (Thailand)*,2 | 7 | |
600 | Chongqing Brewery Co. Ltd. (China)* | 5 | |
3,900 | Fujian Sunner Development Co. Ltd. (China)* | 12 | |
600 | JBS SA (Brazil)* | 3 | |
5,400 | Marfrig Global Foods SA (Brazil)* | 13 | |
4,100 | Minerva SA (Brazil)* | 9 | |
3,500 | New Hope Liuhe Co. Ltd. (China)* | 16 | |
17 | NongShim Co. Ltd. (South Korea)* | 4 | |
18 | Samyang Foods Co. Ltd. (South Korea)* | 1 | |
80 | Saudia Dairy & Foodstuff Co. (Saudi Arabia)* | 3 | |
75 | |||
GAS UTILITIES—0.1% | |||
65,400 | Perusahaan Gas Negara TBK PT (Indonesia)* | 4 | |
HEALTH CARE EQUIPMENT & SUPPLIES—0.3% | |||
3,900 | Top Glove Corp. Bhd (Malaysia)* | 7 | |
HEALTH CARE PROVIDERS & SERVICES—0.5% | |||
34,500 | Chularat Hospital PCL NVDR (Thailand)*,2 | 3 | |
2,100 | Qualicorp Consultoria e Corretora de Seguros SA (Brazil)* | 10 | |
13 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
HOTELS, RESTAURANTS & LEISURE—0.1% | |||
122 | Saudi Airlines Catering Co. (Saudi Arabia)* | $3 | |
HOUSEHOLD DURABLES—1.4% | |||
1,700 | Construtora Tenda SA (Brazil)* | 7 | |
3,000 | Even Construtora e Incorporadora SA (Brazil)* | 4 | |
2,500 | Hangzhou Robam Appliances Co. Ltd. (China)* | 11 | |
2,000 | Nien Made Enterprise Co. Ltd. (Taiwan)* | 15 | |
37 | |||
INDEPENDENT POWER & RENEWABLE ELECTRICITY PRODUCERS—1.0% | |||
34,592 | Colbun SA (Chile)* | 5 | |
1,000 | Electricity Generating PCL NVDR (Thailand)*,2 | 9 | |
6,600 | Ratch Group PCL NVDR (Thailand)*,2 | 13 | |
27 | |||
INDUSTRIAL CONGLOMERATES—1.2% | |||
16,000 | CITIC Ltd. (China)* | 17 | |
12,000 | Fosun International Ltd. (Hong Kong)* | 15 | |
32 | |||
INSURANCE—3.2% | |||
2,200 | BB Seguridade Participacoes SA (Brazil)* | 11 | |
13,000 | Fubon Financial Holding Co. Ltd. (Taiwan)* | 18 | |
246 | Korean Reinsurance Co. (South Korea)* | 2 | |
831 | Liberty Holdings Ltd. (South Africa)* | 3 | |
5,451 | Momentum Metropolitan Holdings (South Africa)* | 5 | |
1,400 | New China Life Insurance Co Ltd. (China)* | 5 | |
14,164 | Old Mutual Ltd. (South Africa)* | 10 | |
16,000 | PICC Property & Casualty Co. Ltd. (China)* | 15 | |
1,000 | Ping An Insurance Group Co. of China Ltd. (China) | 10 | |
1,600 | Qualitas Controladora SAB de CV (Mexico)* | 7 | |
86 | |||
INTERACTIVE MEDIA & SERVICES—4.9% | |||
2,500 | Tencent Holdings Ltd. (China) | 131 | |
INTERNET & CATALOG RETAIL—0.6% | |||
1,035 | Vipshop Holdings Ltd. ADR (China)*,2 | 16 | |
INTERNET & DIRECT MARKETING RETAIL—7.2% | |||
777 | Alibaba Group Holding Ltd. ADR (China)*,2 | 157 | |
25 | Hyundai Home Shopping Network Corp. (South Korea)* | 2 | |
221 | Naspers Ltd. (South Africa) | 34 | |
193 | |||
IT SERVICES—1.6% | |||
3,500 | Infosys Ltd. ADR (India)2 | 32 | |
250 | WNS Holdings Ltd. ADR (India)*,2 | 12 | |
44 | |||
MACHINERY—0.2% | |||
800 | Iochpe Maxion SA (Brazil)* | 2 | |
11,000 | Lonking Holdings Ltd. (China)* | 4 | |
6 | |||
MARINE—1.1% | |||
1,223 | Atlas Corp. (Marshall Islands)* | 9 | |
1,623 | Costamare Inc. (Greece)* | 8 | |
6,400 | MISC BHD (Malaysia)* | 12 | |
29 |
24
Harbor Robeco Emerging Markets Active Equities Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—Continued | |||
Shares | Value | ||
MEDIA—0.3% | |||
6,600 | Astro Malaysia Holdings BHD (Malaysia)* | $1 | |
132,200 | Media Nusantara Citra TBK PT (Indonesia) | 8 | |
9 | |||
METALS & MINING—4.0% | |||
1,064 | African Rainbow Minerals Ltd. (South Africa)* | 8 | |
208 | Anglo American Platinum Ltd. (South Africa) | 11 | |
3,812 | Harmony Gold Mining Co. Ltd. (South Africa)* | 14 | |
1,015 | Impala Platinum Holdings Ltd. (South Africa)* | 6 | |
8,000 | Jiangxi Copper Co. Ltd. (China)* | 8 | |
71 | KGHM Polska Miedz SA (Poland)* | 1 | |
1,150 | Koza Altin Isletmeleri AS (Turkey)* | 12 | |
7,664 | Koza Anadolu Metal Madencilik Isletmeleri AS (Turkey)* | 13 | |
559 | MMC Norilsk Nickel PJSC ADR (Russia)*,2 | 15 | |
8,000 | Shougang Fushan Resources Group Ltd. (Hong Kong)* | 2 | |
2,000 | Tata Steel Ltd. GDR (India)*,2 | 8 | |
2,112 | Vedanta Ltd. ADR (India)*,2 | 9 | |
107 | |||
OIL, GAS & CONSUMABLE FUELS—6.4% | |||
47,800 | Adaro Energy TBK PT (Indonesia)* | 3 | |
9,000 | China Coal Energy Co. Ltd. (China)* | 2 | |
7,500 | China Shenhua Energy Co. Ltd. (China) | 13 | |
16,000 | CNOOC Ltd. (China)* | 18 | |
1,000 | Cosan SA (Brazil)* | 11 | |
12,000 | COSCO SHIPPING Energy Transportation Co. Ltd. (China)* | 8 | |
1,400 | Enauta Participacoes SA (Brazil)* | 2 | |
260 | GS Holdings Corp. (South Korea)* | 8 | |
3,300 | Indo Tambangraya Megah TBK PT (Indonesia)* | 2 | |
245 | LUKOIL PJSC ADR (Russia)2 | 16 | |
2,898 | Petroleo Brasileiro SA ADR (Brazil)*,2 | 20 | |
4,400 | PTT Exploration & Production PCL NVDR (Thailand)*,2 | 11 | |
763 | Reliance Industries Ltd. GDR (India)*,2 | 29 | |
18,100 | Shanxi Xishan Coal & Electricity Power Co. Ltd. (China)* | 12 | |
91 | Tatneft PJSC ADR (Russia)*,2 | 4 | |
18,000 | Yanzhou Coal Mining Co. Ltd. (China)* | 14 | |
173 | |||
PHARMACEUTICALS—1.4% | |||
400 | Dr. Reddy's Laboratories Ltd. ADR (India)*,2 | 21 | |
1,600 | Livzon Pharmaceutical Group Inc. (China)* | 7 | |
19,500 | Luye Pharma Group Ltd. (China)* | 9 | |
37 | |||
REAL ESTATE MANAGEMENT & DEVELOPMENT—2.8% | |||
7,855 | Aldar Properties PJSC (United Arab Emirates)* | 4 | |
13,700 | Beijing Capital Development Co. Ltd. (China)* | 13 | |
11,000 | China Aoyuan Group Ltd. (China)* | 13 | |
11,000 | China Overseas Grand Oceans Group Ltd. (China) | 7 | |
10,300 | Financial Street Holdings Co. Ltd. Class A (China)* | 10 | |
9,000 | KWG Group Holdings Ltd. (China)* | 13 | |
8,000 | Logan Property Holdings Co. Ltd. (China)* | 13 | |
6,000 | Poly Property Group Co. Ltd. (Hong Kong)* | 2 | |
75 | |||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—7.2% | |||
378 | DB Hitek Co. Ltd. (South Korea)* | 8 | |
4,000 | Powertech Technology Inc. (Taiwan)* | 14 | |
276 | SK Hynix Inc. (South Korea) | 19 | |
13,000 | Taiwan Semiconductor Manufacturing Co. Ltd. (Taiwan) | 131 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—Continued | |||
2,000 | Topco Scientific Co. Ltd. (Taiwan)* | $7 | |
25,000 | United Microelectronics Corp. (Taiwan)* | 13 | |
192 | |||
SOFTWARE—0.1% | |||
166 | Asseco Poland SA (Poland)* | 3 | |
SPECIALTY RETAIL—0.6% | |||
5,000 | HLA Corp. Ltd. (China)* | 4 | |
1,000 | Petrobras Distribuidora SA (Brazil)* | 4 | |
21,300 | PTG Energy PCL NVDR (Thailand)*,2 | 9 | |
17 | |||
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS—5.7% | |||
5,000 | Chicony Electronics Co. Ltd. (Taiwan)* | 14 | |
9,000 | Lite-On Technology Corp. (Taiwan)* | 14 | |
5,000 | Pegatron Corp. (Taiwan)* | 11 | |
2,707 | Samsung Electronics Co. Ltd. (South Korea) | 111 | |
12,000 | V.S. Industry Bhd (Malaysia)* | 3 | |
153 | |||
TELECOMMUNICATION SERVICES—0.3% | |||
73,300 | Jasmine International PCL NVDR (Thailand)*,2 | 9 | |
TEXTILES, APPAREL & LUXURY GOODS—0.9% | |||
22 | F&F Co. Ltd. (South Korea)* | 2 | |
192 | H.S. Industries Co. Ltd. (South Korea)* | 1 | |
74 | Handsome Co. Ltd. (South Korea)* | 1 | |
5,000 | Li Ning Co. Ltd. (China)* | 16 | |
177 | Youngone Corp. (South Korea)* | 4 | |
24 | |||
TRADING COMPANIES & DISTRIBUTORS—0.2% | |||
25 | POSCO International Corp. (South Korea)* | — | |
949 | SK Networks Co. Ltd. (South Korea)* | 4 | |
4 | |||
TRANSPORTATION INFRASTRUCTURE—0.3% | |||
973 | Saudi Ground Services Co. (Saudi Arabia)* | 7 | |
WIRELESS TELECOMMUNICATION SERVICES—2.8% | |||
2,600 | Advanced Info Service PCL NVDR (Thailand)*,2 | 16 | |
4,000 | China Mobile Ltd. (China)* | 32 | |
1,564 | Etihad Etisalat Co. (Saudi Arabia)* | 11 | |
90 | Globe Telecom Inc. (Philippines)* | 4 | |
1,018 | PLAY Communications SA (Poland)* | 8 | |
152 | PLDT Inc. ADR (Philippines)*,2 | 4 | |
75 | |||
TOTAL COMMON STOCKS | |||
(Cost $2,901) | 2,555 | ||
EXCHANGE-TRADED FUNDS—1.3% | |||
(Cost $45) | |||
CAPITAL MARKETS—1.3% | |||
1,296 | iShares MSCI India ETF (United States) | 35 | |
25
Harbor Robeco Emerging Markets Active Equities Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
PREFERRED STOCKS—1.3% | |||
Shares | Value | ||
BANKS—0.7% | |||
2,100 | Banco Estado Rio Grande do Sul SA (Brazil)* | $5 | |
7,000 | Itausa - Investimentos Itau SA (Brazil) | 12 | |
17 | |||
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS—0.5% | |||
415 | Samsung Electronics Co Ltd. (South Korea)* | 14 | |
WATER UTILITIES—0.1% | |||
2,400 | Cia de Saneamento do Parana (Brazil)* | 2 | |
TOTAL PREFERRED STOCKS | |||
(Cost $50) | 33 | ||
TOTAL INVESTMENTS—97.8% | |||
(Cost $2,996) | 2,623 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—2.2% | 60 | ||
TOTAL NET ASSETS—100.0% | $2,683 |
FAIR VALUE MEASUREMENTS
The following table summarizes the Fund’s investments as of April 30, 2020 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 | $— | $119 | $— | $119 | ||||
Europe | 44 | 69 | — | 113 | ||||
Latin America | 69 | 107 | — | 176 | ||||
Middle East/Central Asia | 137 | 76 | — | 213 | ||||
Pacific Basin | 236 | 1,698 | — | 1,934 | ||||
Exchange-Traded Funds | ||||||||
Middle East/Central Asia | 35 | — | — | 35 | ||||
Preferred Stocks | ||||||||
Latin America | 12 | 7 | — | 19 | ||||
Pacific Basin | — | 14 | — | 14 | ||||
Total Investments in Securities | $533 | $2,090 | $— | $2,623 |
There were no Level 3 investments at April 30, 2020 or December 1, 2019 (inception).
For more information on valuation inputs and their aggregation into the levels 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 April 30, 2020, the aggregate value of these securities was $12 or 1% of net assets. |
2 | Depository receipts such as American Depostiory Receipts (ADRs), Global Depository Receipts (GDRs) and other country specific depository receipts are certificates evidencing ownership of shares of a foreign issuer. These certificates are issued by depository banks and generally trade on an established market in the U.S. or elsewhere. |
The accompanying notes are an integral part of the Financial Statements.
26
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27
Harbor Robeco Funds
StatementS of Assets and Liabilities—April 30, 2020 (Unaudited)
StatementS of Assets and Liabilities—April 30, 2020 (Unaudited)
(All amounts in thousands, except per share amounts)
Harbor Robeco Emerging Markets Conservative Equities Fund | Harbor Robeco Global Conservative Equities Fund | Harbor Robeco International Conservative Equities Fund | Harbor Robeco US Conservative Equities Fund | Harbor Robeco Emerging Markets Active Equities Fund | ||||||
ASSETS | ||||||||||
Investments, at identified cost | $2,985 | $3,394 | $2,843 | $3,139 | $2,996 | |||||
Investments, at value | $2,602 | $3,049 | $2,514 | $2,849 | $2,623 | |||||
Cash | 14 | 18 | — | 14 | 13 | |||||
Foreign currency, at value (cost: $6,$6,$19,$0 and $7) | 6 | 6 | 19 | — | 7 | |||||
Receivables for: | ||||||||||
Investments sold | — | — | 34 | — | 7 | |||||
Foreign currency spot contracts | — | — | 17 | — | — | |||||
Capital shares sold | — | — | — | 2 | — | |||||
Dividends | 6 | 8 | 13 | 3 | 7 | |||||
Withholding tax | — | 1 | 3 | — | — | |||||
Prepaid registration fees | 34 | 33 | 33 | 33 | 33 | |||||
Other assets | 10 | 5 | 5 | — | 17 | |||||
Total Assets | 2,672 | 3,120 | 2,638 | 2,901 | 2,707 | |||||
LIABILITIES | ||||||||||
Payables for: | ||||||||||
Due to custodian | — | — | 20 | — | — | |||||
Investments purchased | — | — | 16 | — | — | |||||
Foreign currency spot contracts | — | — | 17 | — | — | |||||
Capital shares reacquired | — | — | — | 1 | — | |||||
Accrued expenses: | ||||||||||
Management fees | 2 | 1 | 1 | 1 | 2 | |||||
Other | 18 | 14 | 13 | 15 | 22 | |||||
Total Liabilities | 20 | 15 | 67 | 17 | 24 | |||||
NET ASSETS | $2,652 | $3,105 | $2,571 | $2,884 | $2,683 | |||||
Net Assets Consist of: | ||||||||||
Paid-in capital | $3,086 | $3,818 | $3,072 | $3,334 | $3,096 | |||||
Total distributable earnings/(loss) | (434) | (713) | (501) | (450) | (413) | |||||
$2,652 | $3,105 | $2,571 | $2,884 | $2,683 | ||||||
NET ASSET VALUE PER SHARE BY CLASS | ||||||||||
Retirement Class | ||||||||||
Net assets | $1,306 | $1,593 | $1,260 | $1,350 | $1,299 | |||||
Shares of beneficial interest1 | 152 | 187 | 149 | 158 | 150 | |||||
Net asset value per share2 | $8.59 | $8.52 | $8.43 | $8.53 | $8.67 | |||||
Institutional Class | ||||||||||
Net assets | $1,303 | $1,487 | $1,286 | $1,473 | $1,358 | |||||
Shares of beneficial interest1 | 152 | 175 | 152 | 173 | 157 | |||||
Net asset value per share2 | $8.59 | $8.51 | $8.43 | $8.53 | $8.66 | |||||
Investor Class | ||||||||||
Net assets | $43 | $25 | $25 | $61 | $26 | |||||
Shares of beneficial interest1 | 5 | 3 | 3 | 7 | 3 | |||||
Net asset value per share2 | $8.58 | $8.50 | $8.42 | $8.52 | $8.65 |
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.
28
Harbor Robeco Funds
StatementS of Operations—Six Months Ended April 30, 2020 (Unaudited)
StatementS of Operations—Six Months Ended April 30, 2020 (Unaudited)
(All amounts in thousands)
Harbor Robeco Emerging Markets Conservative Equities Funda | Harbor Robeco Global Conservative Equities Funda | Harbor Robeco International Conservative Equities Funda | Harbor Robeco US Conservative Equities Funda | Harbor Robeco Emerging Markets Active Equities Funda | |
Investment Income | |||||
Dividends | $35 | $42 | $43 | $29 | $39 |
Interest | — | 1 | — | — | — |
Foreign taxes withheld | (4) | (3) | (5) | — | (4) |
Total Investment Income | 31 | 40 | 38 | 29 | 35 |
Operating Expenses | |||||
Management fees | 8 | 5 | 5 | 4 | 9 |
12b-1 fees: | |||||
Investor Class | — | — | — | — | — |
Shareholder communications | 8 | 9 | 7 | 9 | 10 |
Custodian fees | 13 | 12 | 14 | 4 | 18 |
Transfer agent fees: | |||||
Retirement Class | — | — | — | — | — |
Institutional Class | 1 | 1 | 1 | 1 | — |
Investor Class | — | — | — | — | — |
Professional fees | 15 | 9 | 9 | 8 | 15 |
Registration fees | 23 | 23 | 23 | 23 | 23 |
Miscellaneous | 4 | 3 | 5 | 3 | 4 |
Total expenses | 72 | 62 | 64 | 52 | 79 |
Transfer agent fees waived | — | — | — | — | — |
Other expenses reimbursed | (62) | (56) | (56) | (47) | (69) |
Net expenses | 10 | 6 | 8 | 5 | 10 |
Net Investment Income/(Loss) | 21 | 34 | 30 | 24 | 25 |
Realized and Change in Net Unrealized Gain/(Loss) on Investment Transactions | |||||
Net realized gain/(loss) on: | |||||
Investments | (63) | (397) | (203) | (178) | (53) |
Foreign currency transactions | (2) | (1) | 3 | — | (1) |
Change in net unrealized appreciation/(depreciation) on: | |||||
Investments | (382) | (345) | (329) | (290) | (374) |
Net gain/(loss) on investment transactions | (447) | (743) | (529) | (468) | (428) |
Net Increase/(Decrease) in Net Assets Resulting from Operations | $(426) | $(709) | $(499) | $(444) | $(403) |
a | For the period December 1, 2019 (inception) through April 30, 2020 |
The accompanying notes are an integral part of the Financial Statements.
29
Harbor Robeco Funds
Statements of Changes In Net Assets
Statements of Changes In Net Assets
(All amounts in thousands)
Harbor Robeco Emerging Markets Conservative Equities Fund | Harbor Robeco Global Conservative Equities Fund | ||
December 1, 2019a through April 30, 2020 | December 1, 2019a through April 30, 2020 | ||
INCREASE/(DECREASE) IN NET ASSETS | (Unaudited) | (Unaudited) | |
Operations: | |||
Net investment income/(loss) | $21 | $34 | |
Net realized gain/(loss) on investments | (65) | (398) | |
Change in net unrealized appreciation/(depreciation) of investments | (382) | (345) | |
Net increase/(decrease) in assets resulting from operations | (426) | (709) | |
Distributions to Shareholders | |||
Retirement Class | (4) | (2) | |
Institutional Class | (4) | (2) | |
Investor Class | — | — | |
Total distributions to shareholders | (8) | (4) | |
Net Increase/(Decrease) Derived from Capital Share Transactions | 3,086 | 3,818 | |
Net increase/(decrease) in net assets | 2,652 | 3,105 | |
Net Assets | |||
Beginning of period | — | — | |
End of period | $2,652 | $3,105 |
a | Inception |
The accompanying notes are an integral part of the Financial Statements.
30
Harbor Robeco International Conservative Equities Fund | Harbor Robeco US Conservative Equities Fund | Harbor Robeco Emerging Markets Active Equities Fund | ||
December 1, 2019a through April 30, 2020 | December 1, 2019a through April 30, 2020 | December 1, 2019a through April 30, 2020 | ||
(Unaudited) | (Unaudited) | (Unaudited) | ||
$30 | $24 | $25 | ||
(200) | (178) | (54) | ||
(329) | (290) | (374) | ||
(499) | (444) | (403) | ||
(1) | (3) | (5) | ||
(1) | (3) | (5) | ||
— | — | — | ||
(2) | (6) | (10) | ||
3,072 | 3,334 | 3,096 | ||
2,571 | 2,884 | 2,683 | ||
— | — | — | ||
$2,571 | $2,884 | $2,683 |
31
Harbor Robeco Funds
Statements of Changes in Net Assets—Capital Stock Activity
Statements of Changes in Net Assets—Capital Stock Activity
(All amounts in thousands)
Harbor Robeco Emerging Markets Conservative Equities Fund | Harbor Robeco Global Conservative Equities Fund | ||
December 1, 2019a through April 30, 2020 | December 1, 2019a through April 30, 2020 | ||
(Unaudited) | (Unaudited) | ||
AMOUNT ($) | |||
Retirement Class | |||
Net proceeds from sale of shares | $1,516 | $2,656 | |
Reinvested distributions | 4 | 2 | |
Cost of shares reacquired | — | (615) | |
Net increase/(decrease) in net assets | $1,520 | $2,043 | |
Institutional Class | |||
Net proceeds from sale of shares | $1,513 | $1,757 | |
Reinvested distributions | 3 | 2 | |
Cost of shares reacquired | — | (15) | |
Net increase/(decrease) in net assets | $1,516 | $1,744 | |
Investor Class | |||
Net proceeds from sale of shares | $51 | $30 | |
Reinvested distributions | — | — | |
Cost of shares reacquired | — | — | |
Net increase/(decrease) in net assets | $51 | $30 | |
SHARES | |||
Retirement Class | |||
Shares sold | 152 | 263 | |
Shares issued due to reinvestment of distributions | — | — | |
Shares reacquired | — | (76) | |
Net increase/(decrease) in shares outstanding | 152 | 187 | |
Institutional Class | |||
Shares sold | 152 | 177 | |
Shares issued due to reinvestment of distributions | — | — | |
Shares reacquired | — | (2) | |
Net increase/(decrease) in shares outstanding | 152 | 175 | |
Investor Class | |||
Shares sold | 5 | 3 | |
Shares issued due to reinvestment of distributions | — | — | |
Shares reacquired | — | — | |
Net increase/(decrease) in shares outstanding | 5 | 3 |
a | Inception |
The accompanying notes are an integral part of the Financial Statements.
32
Harbor Robeco International Conservative Equities Fund | Harbor Robeco US Conservative Equities Fund | Harbor Robeco Emerging Markets Active Equities Fund | ||
December 1, 2019a through April 30, 2020 | December 1, 2019a through April 30, 2020 | December 1, 2019a through April 30, 2020 | ||
(Unaudited) | (Unaudited) | (Unaudited) | ||
$1,621 | $1,561 | $1,494 | ||
1 | 3 | 5 | ||
(104) | — | — | ||
$1,518 | $1,564 | $1,499 | ||
$1,523 | $1,701 | $1,562 | ||
1 | 3 | 5 | ||
— | (2) | — | ||
$1,524 | $1,702 | $1,567 | ||
$30 | $73 | $30 | ||
— | — | — | ||
— | (5) | — | ||
$30 | $68 | $30 | ||
162 | 158 | 149 | ||
— | — | 1 | ||
(13) | — | — | ||
149 | 158 | 150 | ||
152 | 173 | 156 | ||
— | — | 1 | ||
— | — | — | ||
152 | 173 | 157 | ||
3 | 8 | 3 | ||
— | — | — | ||
— | (1) | — | ||
3 | 7 | 3 |
33
Harbor Robeco Funds Financial Highlights
Selected Data for a Share Outstanding for the Periods Presented
Selected Data for a Share Outstanding for the Periods Presented
HARBOR ROBECO EMERGING MARKETS CONSERVATIVE EQUITIES FUND | |||||
Retirement Class | Institutional Class | Investor Class | |||
6-Month Period Ended April 30, 2020f | 6-Month Period Ended April 30, 2020f | 6-Month Period Ended April 30, 2020f | |||
(Unaudited) | (Unaudited) | (Unaudited) | |||
Net asset value beginning of period | $10.00 | $10.00 | $10.00 | ||
Income from Investment Operations | |||||
Net investment income/(loss)a,e | 0.07 | 0.07 | 0.06 | ||
Net realized and unrealized gains/(losses) on investments | (1.46) | (1.46) | (1.46) | ||
Total from investment operations | (1.39) | (1.39) | (1.40) | ||
Less Distributions | |||||
Dividends from net investment income | (0.02) | (0.02) | (0.02) | ||
Distributions from net realized capital gains | — | — | — | ||
Total distributions | (0.02) | (0.02) | (0.02) | ||
Net asset value end of period | 8.59 | 8.59 | 8.58 | ||
Net assets end of period (000s) | $1,306 | $1,303 | $43 | ||
Ratios and Supplemental Data (%) | |||||
Total returnb | (13.89)%c | (13.90)%c | (14.02)%c | ||
Ratio of total expenses to average net assets^ | 5.95d | 6.03d | 6.40d | ||
Ratio of net expenses to average net assetsa | 0.75d | 0.83d | 1.20d | ||
Ratio of net investment income to average net assetsa | 1.83d | 1.75d | 1.49d | ||
Portfolio turnover | 9c | 9c | 9c |
HARBOR ROBECO GLOBAL CONSERVATIVE EQUITIES FUND | |||||
Retirement Class | Institutional Class | Investor Class | |||
6-Month Period Ended April 30, 2020f | 6-Month Period Ended April 30, 2020f | 6-Month Period Ended April 30, 2020f | |||
(Unaudited) | (Unaudited) | (Unaudited) | |||
Net asset value beginning of period | $10.00 | $10.00 | $10.00 | ||
Income from Investment Operations | |||||
Net investment income/(loss)a,e | 0.10 | 0.09 | 0.08 | ||
Net realized and unrealized gains/(losses) on investments | (1.57) | (1.57) | (1.57) | ||
Total from investment operations | (1.47) | (1.48) | (1.49) | ||
Less Distributions | |||||
Dividends from net investment income | (0.01) | (0.01) | (0.01) | ||
Distributions from net realized capital gains | — | — | — | ||
Total distributions | (0.01) | (0.01) | (0.01) | ||
Net asset value end of period | 8.52 | 8.51 | 8.50 | ||
Net assets end of period (000s) | $1,593 | $1,487 | $25 | ||
Ratios and Supplemental Data (%) | |||||
Total returnb | (14.68)%c | (14.79)%c | (14.92)%c | ||
Ratio of total expenses to average net assets^ | 4.50d | 4.58d | 4.95d | ||
Ratio of net expenses to average net assetsa | 0.40d | 0.48d | 0.85d | ||
Ratio of net investment income to average net assetsa | 2.58d | 2.43d | 2.02d | ||
Portfolio turnover | 25c | 25c | 25c |
See page 38 for notes to the Financial Highlights.
The accompanying notes are an integral part of the Financial Statements.
34
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35
Harbor Robeco 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 ROBECO INTERNATIONAL CONSERVATIVE EQUITIES FUND | |||||
Retirement Class | Institutional Class | Investor Class | |||
6-Month Period Ended April 30, 2020f | 6-Month Period Ended April 30, 2020f | 6-Month Period Ended April 30, 2020f | |||
(Unaudited) | (Unaudited) | (Unaudited) | |||
Net asset value beginning of period | $10.00 | $10.00 | $10.00 | ||
Income from Investment Operations | |||||
Net investment income/(loss)a,e | 0.10 | 0.10 | 0.08 | ||
Net realized and unrealized gains/(losses) on investments | (1.66) | (1.66) | (1.66) | ||
Total from investment operations | (1.56) | (1.56) | (1.58) | ||
Less Distributions | |||||
Dividends from net investment income | (0.01) | (0.01) | —* | ||
Distributions from net realized capital gains | — | — | — | ||
Total distributions | (0.01) | (0.01) | —* | ||
Net asset value end of period | 8.43 | 8.43 | 8.42 | ||
Net assets end of period (000s) | $1,260 | $1,286 | $25 | ||
Ratios and Supplemental Data (%) | |||||
Total returnb | (15.64)%c | (15.65)%c | (15.77)%c | ||
Ratio of total expenses to average net assets^ | 5.22d | 5.30d | 5.67d | ||
Ratio of net expenses to average net assetsa | 0.45d | 0.53d | 0.90d | ||
Ratio of net investment income to average net assetsa | 2.57d | 2.50d | 2.11d | ||
Portfolio turnover | 12c | 12c | 12c |
HARBOR ROBECO US CONSERVATIVE EQUITIES FUND | |||||
Retirement Class | Institutional Class | Investor Class | |||
6-Month Period Ended April 30, 2020f | 6-Month Period Ended April 30, 2020f | 6-Month Period Ended April 30, 2020f | |||
(Unaudited) | (Unaudited) | (Unaudited) | |||
Net asset value beginning of period | $10.00 | $10.00 | $10.00 | ||
Income from Investment Operations | |||||
Net investment income/(loss)a,e | 0.08 | 0.08 | 0.06 | ||
Net realized and unrealized gains/(losses) on investments | (1.53) | (1.53) | (1.54) | ||
Total from investment operations | (1.45) | (1.45) | (1.48) | ||
Less Distributions | |||||
Dividends from net investment income | (0.02) | (0.02) | — | ||
Distributions from net realized capital gains | — | — | — | ||
Total distributions | (0.02) | (0.02) | — | ||
Net asset value end of period | 8.53 | 8.53 | 8.52 | ||
Net assets end of period (000s) | $1,350 | $1,473 | $61 | ||
Ratios and Supplemental Data (%) | |||||
Total returnb | (14.52)%c | (14.53)%c | (14.65)%c | ||
Ratio of total expenses to average net assets^ | 4.23d | 4.31d | 4.68d | ||
Ratio of net expenses to average net assetsa | 0.35d | 0.43d | 0.80d | ||
Ratio of net investment income to average net assetsa | 2.01d | 1.93d | 1.55d | ||
Portfolio turnover | 13c | 13c | 13c |
See page 38 for notes to the Financial Highlights.
The accompanying notes are an integral part of the Financial Statements.
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37
Harbor Robeco 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 ROBECO EMERGING MARKETS ACTIVE EQUITIES FUND | |||||
Retirement Class | Institutional Class | Investor Class | |||
6-Month Period Ended April 30, 2020f | 6-Month Period Ended April 30, 2020f | 6-Month Period Ended April 30, 2020f | |||
(Unaudited) | (Unaudited) | (Unaudited) | |||
Net asset value beginning of period | $10.00 | $10.00 | $10.00 | ||
Income from Investment Operations | |||||
Net investment income/(loss)a,e | 0.08 | 0.08 | 0.07 | ||
Net realized and unrealized gains/(losses) on investments | (1.38) | (1.39) | (1.39) | ||
Total from investment operations | (1.30) | (1.31) | (1.32) | ||
Less Distributions | |||||
Dividends from net investment income | (0.03) | (0.03) | (0.03) | ||
Distributions from net realized capital gains | — | — | — | ||
Total distributions | (0.03) | (0.03) | (0.03) | ||
Net asset value end of period | 8.67 | 8.66 | 8.65 | ||
Net assets end of period (000s) | $1,299 | $1,358 | $26 | ||
Ratios and Supplemental Data (%) | |||||
Total returnb | (13.02)%c | (13.12)%c | (13.25)%c | ||
Ratio of total expenses to average net assets^ | 6.51d | 6.59d | 6.96d | ||
Ratio of net expenses to average net assetsa | 0.79d | 0.87d | 1.24d | ||
Ratio of net investment income to average net assetsa | 2.10d | 2.03d | 1.65d | ||
Portfolio turnover | 19c | 19c | 19c |
* | 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 December 1, 2019 (inception) through April 30, 2020 |
The accompanying notes are an integral part of the Financial Statements.
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39
Harbor Robeco Funds
Notes to Financial Statements—April 30, 2020 (Unaudited)
Notes to Financial Statements—April 30, 2020 (Unaudited)
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 April 30, 2020, the Trust consists of 38 separate portfolios. The portfolios covered by this report are Harbor Robeco Emerging Markets Conservative Equities Fund, Harbor Robeco Global Conservative Equities Fund, Harbor Robeco International Conservative Equities Fund, Harbor Robeco US Conservative Equities Fund, and Harbor Robeco Emerging Markets Active Equities 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. There is no current investment in the Administrative 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) certain expenses, subject to the approval of the Trust’s Board of Trustees (the “Board of Trustees”), may be applied differently to each class of shares in accordance with current regulations of the 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, and convertible preferred stock), exchange-traded funds and financial derivative instruments (such as futures contracts, options contracts, including rights and warrants 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
40
Harbor Robeco 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 period.
Each Fund used observable inputs in its valuation methodologies whenever they were available and deemed reliable.
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
41
Harbor Robeco Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 2—Significant Accounting Policies—Continued
(except for premiums on certain callable debt securities that are amortized to the earliest call date) 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.
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.
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.
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.
Distribution to Shareholders
Distributions on Fund shares are recorded on the ex-dividend date.
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 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.
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.
Foreign Currency 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. A forward currency contract is an agreement between two parties to buy and sell currencies at a set price on a future date.
42
Harbor Robeco Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 2—Significant Accounting Policies—Continued
Foreign currency contracts are marked-to-market daily 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 period, Harbor Robeco Emerging Markets Conservative Equities Fund, Harbor Robeco Global Conservative Equities Fund, Harbor Robeco International Conservative Equities Fund, and Harbor Robeco Emerging Markets Active Equities 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 period 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.
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.
Rights and Warrants
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 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 and warrants are typically written by the issuer of the security underlying the right or warrant. Although some rights and warrants may be non-transferable, others may be traded over-the-counter or on an exchange.
A Fund may acquire rights or warrants 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 right or warrant may not necessarily change with the value of the underlying securities. When a Fund acquires rights or warrants, it runs the risk that it will lose its entire investment in the rights or warrants, unless the Fund exercises the right or warrant, acquires the underlying securities, or enters into a closing transaction before expiration. Rights and warrants 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 rights or other warrants 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 rights or warrants.
43
Harbor Robeco Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 2—Significant Accounting Policies—Continued
Rights or warrants outstanding at the end of the period, 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 period are included in “Purchased options” in the Statements of Operations.
During the period, Harbor Robeco Emerging Markets Conservative Equities Fund, Harbor Robeco International Conservative Equities Fund, Harbor Robeco Global Conservative Equities Fund, and Harbor Robeco Emerging Markets Active Equities Fund held rights/warrants as a result of their investments in underlying securities.
Note 3—Investment Portfolio Transactions
Investment Portfolio Transactions
Purchases and sales of investments, other than short-term securities, for each Fund for the period ended April 30, 2020 are as follows:
Purchases (000s) | Sales (000s) | ||
CONSERVATIVE EQUITY | |||
Harbor Robeco Emerging Markets Conservative Equities Fund | $3,288 | $241 | |
Harbor Robeco Global Conservative Equities Fund | 4,577 | 825 | |
Harbor Robeco International Conservative Equities Fund | 3,396 | 350 | |
Harbor Robeco US Conservative Equities Fund | 3,690 | 373 | |
CORE EQUITY | |||
Harbor Robeco Emerging Markets Active Equities Fund | $3,593 | $543 |
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 | ||
CONSERVATIVE EQUITY | |||
Harbor Robeco Emerging Markets Conservative Equities Fund | 0.68% | 0.68% | |
Harbor Robeco Global Conservative Equities Fund | 0.35 | 0.35 | |
Harbor Robeco International Conservative Equities Fund | 0.40 | 0.40 | |
Harbor Robeco US Conservative Equities Fund | 0.30 | 0.30 | |
CORE EQUITY | |||
Harbor Robeco Emerging Markets Active Equities Fund | 0.72 | 0.72 |
44
Harbor Robeco 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 period, the following expense limitation agreements were in effect:
Retirement Class | Institutional Class | Administrative Class | Investor Class | Expense Limitation Agreement Expiration Date | |||||
CONSERVATIVE EQUITY | |||||||||
Harbor Robeco Emerging Markets Conservative Equities Fund | 0.75% | 0.83% | 1.08% | 1.20% | 02/28/2021 | ||||
Harbor Robeco Gobal Conservative Equities Fund | 0.40 | 0.48 | 0.73 | 0.85 | 02/28/2021 | ||||
Harbor Robeco International Conservative Equities Fund | 0.45 | 0.53 | 0.78 | 0.90 | 02/28/2021 | ||||
Harbor Robeco US Conservative Equities Fund | 0.35 | 0.43 | 0.68 | 0.80 | 02/28/2021 | ||||
CORE EQUITY | |||||||||
Harbor Robeco Emerging Markets Active Equities Fund | 0.79 | 0.87 | 1.12 | 1.24 | 02/28/2021 |
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 (each, a “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 each 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 a 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 each 12b-1 Plan.
Amounts payable by a Fund under each 12b-1 Plan need not be directly related to the expenses actually incurred by the Distributor on behalf of each Fund. Each 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 each 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.
Subadviser
Robeco Institutional Asset Management US Inc. (“RIAM US”) serves as Subadviser to each of the Harbor Robeco Funds. RIAM US is a wholly-owned subsidiary of ORIX and an affiliate of Harbor Capital. There were no affiliated transactions between the Funds and the subadviser during the period. The subadvisory fees are paid by Harbor Capital to RIAM US.
45
Harbor Robeco 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 Fees | |
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 |
Harbor Services Group has voluntarily waived a portion of its transfer agent fees during the period ended April 30, 2020. 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 period, the Funds did not enter into any transactions with any other Harbor fund.
Shareholders
On April 30, 2020, 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 | Investor Class | Total | ||||||
CONSERVATIVE EQUITY | |||||||||
Harbor Robeco Emerging Markets Conservative Equities Fund | 148,857 | 148,847 | 3,006 | 300,710 | 97.4% | ||||
Harbor Robeco Global Conservative Equities Fund | 170,197 | 148,692 | 3,003 | 321,892 | 88.3 | ||||
Harbor Robeco International Conservative Equities Fund | 148,599 | 148,590 | 3,001 | 300,190 | 98.5 | ||||
Harbor Robeco US Conservative Equities Fund | 150,163 | 148,799 | 3,005 | 301,967 | 89.3 | ||||
CORE EQUITY | |||||||||
Harbor Robeco Emerging Markets Active Equities Fund | 148,984 | 148,975 | 3,008 | 300,967 | 97.2% |
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.
46
Harbor Robeco 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 identified cost for federal income tax purposes of investments owned by each Fund and its respective gross unrealized appreciation and depreciation at April 30, 2020 are as follows:
Identified Cost (000s) | Gross Unrealized | Net Unrealized Appreciation/ (Depreciation) (000s) | |||||
Appreciation (000s) | (Depreciation) (000s) | ||||||
CONSERVATIVE EQUITY | |||||||
Harbor Robeco Emerging Markets Conservative Equities Fund | $2,991 | $65 | $(448) | $(383) | |||
Harbor Robeco Global Conservative Equities Fund | 3,400 | 57 | (402) | (345) | |||
Harbor Robeco International Conservative Equities Fund | 2,862 | 53 | (382) | (329) | |||
Harbor Robeco US Conservative Equities Fund | 3,139 | 65 | (355) | (290) | |||
CORE EQUITY | |||||||
Harbor Robeco Emerging Markets Active Equities Fund | $3,003 | $81 | $(454) | $(373) |
Note 6—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.
47
Harbor Robeco 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 December 1, 2019 (inception) through April 30, 2020.
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 December 1, 2019 | Ending Account Value April 30, 2020 | |||||
Harbor Robeco Emerging Markets Conservative Equities Fund** | ||||||||
Retirement Class | 0.75% | |||||||
Actual | $2.89 | $1,000 | $861.06 | |||||
Hypothetical (5% return) | 3.14 | 1,000 | 1,017.59 | |||||
Institutional Class | 0.83% | |||||||
Actual | $3.21 | $1,000 | $861.01 | |||||
Hypothetical (5% return) | 3.48 | 1,000 | 1,017.25 | |||||
Investor Class | 1.20% | |||||||
Actual | $4.63 | $1,000 | $859.75 | |||||
Hypothetical (5% return) | 5.02 | 1,000 | 1,015.68 | |||||
Harbor Robeco Global Conservative Equities Fund** | ||||||||
Retirement Class | 0.40% | |||||||
Actual | $1.54 | $1,000 | $853.16 | |||||
Hypothetical (5% return) | 1.68 | 1,000 | 1,019.07 | |||||
Institutional Class | 0.48% | |||||||
Actual | $1.84 | $1,000 | $852.10 | |||||
Hypothetical (5% return) | 2.01 | 1,000 | 1,018.73 | |||||
Investor Class | 0.85% | |||||||
Actual | $3.27 | $1,000 | $850.84 | |||||
Hypothetical (5% return) | 3.56 | 1,000 | 1,017.16 |
48
Harbor Robeco Funds
Fees and Expenses Example—Continued
Fees and Expenses Example—Continued
Annualized Expense Ratios* | Expenses Paid During Period** | Beginning Account Value December 1, 2019 | Ending Account Value April 30, 2020 | |||||
Harbor Robeco International Conservative Equities Fund** | ||||||||
Retirement Class | 0.45% | |||||||
Actual | $1.72 | $1,000 | $843.56 | |||||
Hypothetical (5% return) | 1.89 | 1,000 | 1,018.86 | |||||
Institutional Class | 0.53% | |||||||
Actual | $2.03 | $1,000 | $843.51 | |||||
Hypothetical (5% return) | 2.22 | 1,000 | 1,018.52 | |||||
Investor Class | 0.90% | |||||||
Actual | $3.45 | $1,000 | $842.26 | |||||
Hypothetical (5% return) | 3.77 | 1,000 | 1,016.95 | |||||
Harbor Robeco US Conservative Equities Fund** | ||||||||
Retirement Class | 0.35% | |||||||
Actual | $1.34 | $1,000 | $854.77 | |||||
Hypothetical (5% return) | 1.47 | 1,000 | 1,019.28 | |||||
Institutional Class | 0.43% | |||||||
Actual | $1.66 | $1,000 | $854.72 | |||||
Hypothetical (5% return) | 1.80 | 1,000 | 1,018.94 | |||||
Investor Class | 0.80% | |||||||
Actual | $3.08 | $1,000 | $853.45 | |||||
Hypothetical (5% return) | 3.35 | 1,000 | 1,017.37 | |||||
Harbor Robeco Emerging Markets Active Equities Fund** | ||||||||
Retirement Class | 0.79% | |||||||
Actual | $3.07 | $1,000 | $869.83 | |||||
Hypothetical (5% return) | 3.31 | 1,000 | 1,017.42 | |||||
Institutional Class | 0.87% | |||||||
Actual | $3.37 | $1,000 | $868.77 | |||||
Hypothetical (5% return) | 3.64 | 1,000 | 1,017.08 | |||||
Investor Class | 1.24% | |||||||
Actual | $4.81 | $1,000 | $867.51 | |||||
Hypothetical (5% return) | 5.19 | 1,000 | 1,015.51 |
* | 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 152/366 (to reflect the one-half year period). |
49
Harbor Robeco Funds
Additional Information (Unaudited)
Additional Information (Unaudited)
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
The Funds file a complete portfolio of investments with the SEC as an exhibit to Form N-PORT. The Funds’ Form N-PORT-EX is 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
FACTORS CONSIDERED BY THE TRUSTEES IN APPROVING THE INVESTMENT ADVISORY AGREEMENTS AND SUBADVISORY AGREEMENTS OF THE Harbor Robeco FUNDS
The Investment Company Act 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 held on August 18 and 19, 2019 (the “Meeting”), the Board, including the Independent Trustees voting separately, considered and approved an Investment Advisory Agreement with Harbor Capital., the adviser to the series of Harbor Funds, and a Subadvisory Agreement with Robeco Institutional Asset Management US Inc. (“RIAM US” or the “Subadviser”), an affiliate of Harbor Capital, with respect to Harbor Robeco Emerging Markets Conservative Equities Fund, Harbor Robeco Global Conservative Equities Fund, Harbor Robeco International Conservative Equities Fund, Harbor Robeco US Conservative Equities Fund and Harbor Robeco Emerging Markets Active Equities Fund (each a “Fund” and, collectively, the “Funds”), each a newly formed series of Harbor Funds.
In evaluating the Investment Advisory Agreement and the Subadvisory Agreement, the Trustees reviewed materials furnished by Harbor Capital and the Subadviser, including information about their respective affiliates, personnel, and operations, and also relied upon their knowledge of Harbor Capital 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 Harbor Capital and the Subadviser. The Trustees also discussed with representatives of Harbor Capital, at the Meeting and at prior meetings, Harbor Funds’ operations and Harbor Capital’s ability, consistent with the “manager-of-managers” structure of Harbor Funds, to (i) identify and recommend to the Trustees a subadviser for the Funds, (ii) monitor and oversee the performance and investment capabilities of the subadviser, and (iii) recommend the replacement of a subadviser where appropriate.
The Trustees’ deliberations at the Meeting were the culmination of a process that began at the May 19-20, 2019 Board meeting when a potential proposal to launch the Funds was discussed at some length with the Board. The Board considered that it had requested and received extensive information from Harbor Capital regarding the investment philosophy and processes of RIAM US and its participating affiliates (collectively, “Robeco”), Harbor Capital’s due diligence of Robeco, and the rationale for Harbor Capital’s proposal to hire an affiliated subadviser. In the weeks leading up to the Meeting, the Trustees held a conference call to discuss the proposal with members of Harbor Capital’s executive team, and the Independent Trustees separately
50
Harbor Robeco Funds
Additional Information—Continued
Additional Information—Continued
ADVISORY AGREEMENT APPROVALS—Continued
held a conference call with only legal counsel to the Independent Trustees also participating to discuss the proposal. The Independent Trustees also received a memorandum from legal counsel to the Independent Trustees discussing the legal standard applicable to approval of the subadvisory agreement with RIAM US and considerations in light of the affiliation between RIAM US and Harbor Capital.
At the Meeting, the Trustees, including 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 each 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 Funds and their future shareholders.
In their deliberations, the Independent Trustees had the opportunity to meet privately without representatives of Harbor Capital 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 each 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 Harbor Capital and Robeco, including the background, education, expertise and experience of the investment professionals of Harbor Capital and Robeco to provide services to each Fund; |
• | the favorable history, reputation, qualifications and background of Harbor Capital and Robeco, as well as the qualifications of their personnel; |
• | the fees proposed to be charged by Harbor Capital and RIAM US for investment advisory and subadvisory services, respectively, including the portion of the fees to be retained by Harbor Capital, after payment of RIAM US’s fees, for investment advisory and related services including investment, business, legal, compliance, financial and administrative services, that Harbor Capital would provide; |
• | the proposed fees and expense ratios of each Fund relative to the fees and expense ratios of similar investment companies; |
• | with respect to performance: (i) for certain Funds, the investment performance of Robeco 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 (ii) for the remaining Funds, simulated performance for the relevant strategy or performance reflecting a carve out from existing performance data of the isolated record of investments in certain countries, together with consideration of the limitations of such simulated or “carved out” performance information; |
• | information received at regular meetings throughout the year related to services rendered by Harbor Capital; |
• | the compensation to be received by Harbor Services Group, Inc. and Harbor Funds Distributors, Inc. in consideration of the services each would provide to the Funds; |
• | any “fall out” benefits that might inure to Harbor Capital, RIAM US and their affiliates as a result of their relationship with the Funds; |
• | information received at regular meetings throughout the year related to Harbor Capital’s profitability; |
• | the expected profitability of Harbor Capital and Robeco, both separately and in the aggregate, with respect to the Funds; and |
• | the extent to which economies of scale might be realized as each 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 Harbor Capital, the reasonableness of the overall compensation provided under the proposed Investment Advisory Agreement and other considerations, the Trustees considered Harbor Capital’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
51
Harbor Robeco Funds
Additional Information—Continued
Additional Information—Continued
ADVISORY AGREEMENT APPROVALS—Continued
subadviser, and to recommend the replacement of a subadviser when appropriate. The Trustees specifically considered Harbor Capital’s history as a manager-of-managers, including its history of replacing subadvisers for particular Harbor funds in circumstances in which the Board and Harbor Capital had determined that a change in subadviser was in the best interests of a Harbor 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 Harbor Capital were to identify another subadviser believed to better serve the shareholders than the existing subadviser.
The Board evaluated the nature, extent, and quality of Harbor Capital’s proposed services in light of the Board’s actual experience with Harbor Capital, as well as materials provided by Harbor Capital concerning the financial and other resources devoted by Harbor Capital to the Harbor funds generally, including the breadth and depth of experience and expertise of the investment, administrative, legal and compliance professionals dedicated to Harbor funds’ operations. The Trustees determined that Harbor Capital has the expertise and resources to identify, select, oversee and monitor subadvisers and to operate effectively as the manager-of-managers for the Funds.
In evaluating the nature and quality of the services to be provided by Robeco, the Trustees considered the collective expertise and experience of the professionals at Robeco and the favorable records they had generated in the conservative equity and active emerging markets equity investment strategies. The Trustees also noted the experience of the proposed portfolio managers of the Funds in the respective asset classes and the favorable records generated by them at Robeco. In considering Robeco’s performance, the Trustees noted that Robeco’s records in its global developed and emerging markets conservative equities strategies and more traditional, active, emerging markets strategy were favorable compared to their respective benchmarks and peers.
The Board also discussed the affiliation that exists between Harbor Capital and Robeco as result of their common ownership and the potential conflicts of interest resulting from Harbor Capital’s recommendation of an affiliated entity to serve as subadviser to series of Harbor Funds. The Trustees sought and received assurances from Harbor Capital that ORIX, the ultimate parent of both Harbor Capital and RIAM US, had not sought to influence the recommendation. The Trustees acknowledged that potential conflicts of interest exist and would continue were RIAM US to be retained as subadviser, and also acknowledged that these conflicts were the same as those that exist in any fund complex employing affiliated investment managers, whether they are the primary adviser or subadviser. The Trustees also discussed how such conflicts could be mitigated consistent with industry mitigation practices involving independent trustee review of comparative data and other processes. After discussion, the Trustees determined that Harbor Capital’s recommendation of RIAM US to serve as subadviser to the proposed Funds satisfied the same standards applied to proposals involving unaffiliated subadvisers.
Advisory Fees and Expense Ratios
The Trustees observed that the data available concerning comparative fees and expense ratios showed the following with respect to the Funds’ proposed advisory fees and Institutional Class and Retirement Class net expense ratios relative to those of peer groups of funds compiled using Morningstar data:
Harbor Robeco US Conservative Equities Fund. The Fund’s proposed management fee was below the averages and medians of certain of the peer groups of funds presented to the Board for comparison purposes and below the average and slightly above the median of another peer group of funds presented to the Board for comparison purposes. The Fund’s Institutional Class net expense ratio was below the averages and medians of certain of the peer groups of funds presented to the Board for comparison purposes and above the average and median of another peer group of funds presented to the Board for comparison purposes. The Fund’s Retirement Class net expense ratio was below the average and median of one peer group of funds presented to the Board for comparison purposes and above the average and median of another peer group of funds presented to the Board for comparison purposes.
Harbor Robeco Global Conservative Equities Fund. The Fund’s proposed management fee was below the averages and medians of the peer groups of funds presented to the Board for comparison purposes. The Fund’s Institutional Class net expense ratio was below the averages and medians of the peer groups of funds presented to the Board for comparison purposes. The Fund’s Retirement Class net expense ratio was below the average and median of the peer group of funds presented to the Board for comparison purposes.
52
Harbor Robeco Funds
Additional Information—Continued
Additional Information—Continued
ADVISORY AGREEMENT APPROVALS—Continued
Harbor Robeco International Conservative Equities Fund. The Fund’s proposed management fee was below the average and median of a peer group of funds presented to the Board for comparison purposes and below the average and equal to the median of another peer group of funds presented to the Board for comparison purposes. The Fund’s Institutional Class and Retirement Class net expense ratios were below the average and median of a peer group of funds presented to the Board for comparison purposes and above the average and median of another peer group of funds presented to the Board for comparison purposes.
Harbor Robeco Emerging Markets Conservative Equities Fund. The Fund’s proposed management fee was below the average and median of the peer group of funds presented to the Board for comparison purposes. The Fund’s Institutional Class and Retirement Class net expense ratios were below the average and median of the peer group of funds presented to the Board for comparison purposes.
Harbor Robeco Emerging Markets Active Equities Fund. The Fund’s proposed management fee was below the average and median of the peer group of funds presented to the Board for comparison purposes. The Fund’s Institutional Class and Retirement Class net expense ratios were below the average and median of the peer group of funds presented to the Board for comparison purposes.
The Trustees also reviewed and determined to be reasonable, in relation to the services to be provided by each party, the split between the advisory fee to be paid to Harbor Capital and the subadvisory fee to be paid to RIAM US and specifically the net advisory fee to be retained by Harbor Capital. 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.
Profitability
The Trustees reviewed the expected profitability of Harbor Capital and Robeco, both separately and in the aggregate, with respect to each Fund. The Trustees noted that Harbor Capital expected to operate each Fund initially at a loss (both on a standalone basis and on an aggregated basis with Robeco).
Economies of Scale
The Trustees also concluded that breakpoints in the Funds’ advisory fees were not necessary at the present time in light of, among other things, Harbor Capital’s forward-looking approach to setting the contractual advisory fees, its absorbing fund expenses during the initial period of the Funds’ operations while paying RIAM US its full subadvisory fee and the uncertainty surrounding the aspects of the Funds’ future asset growth. It was agreed, however, that the Board would consider the issue of breakpoints in the Funds’ advisory fee schedules at least annually after the initial two-year contract term as part of its annual investment contract review process for all of the Harbor funds.
Review of Liqudity Risk Management Program
The Trust has adopted pursuant to Rule 22e-4 under the Investment Company Act (“Rule 22e-4”) a Liquidity Risk Management Program (the “Program”) for the Funds. The Board has designated a committee of Harbor Capital employees as the Program Administrator.
The Program is designed to assess and manage each Fund’s liquidity risk. For purposes of Rule 22e-4, “liquidity risk” is defined as the risk that a Fund is unable to satisfy redemption requests without significantly diluting remaining investors’ interests in the Fund. Components of the Program include: (i) periodic assessment of each Fund’s liquidity risk based on certain factors; (ii) classification of each Fund’s holdings into one of four liquidity categories (Highly Liquid, Moderately Liquid, Less Liquid and Illiquid) that reflect an estimate of liquidity under current market conditions; (iii) to the extent a Fund does not invest primarily in Highly Liquid investments, establishment of an appropriate Highly Liquid Investment Minimum (“HLIM”) (as defined in Rule 22e-4) for such Fund and ongoing monitoring of the Fund’s net assets to assess compliance with the Fund’s HLIM; (iv) a limit on the ability of a Fund to acquire illiquid investments in excess of 15% of the Fund’s net assets; and (v) periodic reporting to the Board
At a meeting held on November 7, 2019, the Board of Trustees reviewed the operation and effectiveness of the Program for the period beginning June 1, 2019 (the date the Board formally adopted the Program) and ending September 30, 2019 (the “period”). The Board had previously received interim updates on the implementation of the Program at meetings held on February 12, 2019 and May 14, 2019. At the November 7, 2019 meeting, the Board reviewed a report prepared by, and received a presentation from, the Program Administrator regarding the operation of the Program, its adequacy, and the effectiveness
53
Harbor Robeco Funds
Additional Information—Continued
Additional Information—Continued
Review of Liqudity Risk Management Program—Continued
of its implementation during the period. The Program Administrator’s report included, among other things, a review of: (i) the operation of the Program overall; (ii) the level of portfolio investments classified into each of the four liquidity categories and the services provided by the third-party vendor engaged by the Trust to facilitate such classification with respect to certain of the Funds; and (iii) the most recent liquidity risk assessment for the Funds conducted by the Program Administrator in accordance with Rule 22e-4. Based upon its review, the Program Administrator determined that the Program was adequate and effective in facilitating the Funds’ compliance with Rule 22e-4 during the period.
54
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
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
Douglas J. Skinner
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.SAR.HR.0420
Table of Contents
Semi-Annual Report
April 30, 2020
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:
The first half of the 2020 fiscal year has been remarkable in the range of positive and negative market sentiments expressed in this short six-month window. Investment markets started off the 2020 fiscal year continuing the positive momentum of the 2019 fiscal year. Equity markets across the globe generated modest positive returns during the first three months of the period while fixed income markets delivered steady returns. Market performance drivers were consistent with the prior period – stable positive economic growth and accommodative monetary and fiscal policies were the foundations of continued favorable investment conditions. Come February, however, the early negative implications of the pending global pandemic began to weigh on investment markets before the full effects of the global economic collapse took hold in March. The selloffs across equity markets were unprecedented, with few safe havens available to investors. As the heartbreaking effects of the pandemic progressed around the globe, governments and central banks implemented historic measures to attempt to protect their citizens and economies. The equity and credit markets responded to the massive stimulus measures favorably, bouncing off their March lows to partially recover through much of April.
Across most equity markets, growth stocks significantly outperformed value stocks and larger companies outperformed smaller companies, reflecting investors’ preferences in many cases for proven business models that are more likely to survive the economic challenges brought on by the global pandemic. U.S. government bonds proved to be a safe haven once again, delivering positive returns for the six-month period.
As you read through the comments from the portfolio managers of each Harbor fund included in this report, you may note their optimism for the future potential of their portfolios. The portfolio managers have responded in their own way to the challenges presented. We believe there are great opportunities for our portfolio managers to deliver attractive long-term investment results for our shareholders. During times of market stress, having a disciplined and proven actively managed investment approach allows our portfolio managers to weigh the risk and rewards that are available to them. While the long-term effects of the global pandemic on economies and markets are still unknown, we remain confident in the capabilities of our portfolio managers. At Harbor, we are actively engaged in dialogues with our subadviser partners as they navigate these challenging times.
We encourage our shareholders to take a long-term view and stay focused on their investment goals, particularly during periods of market uncertainty. While past performance is never a guarantee of future results, environments such as the last six months have often provided attractive opportunities for our fund investors to benefit from the skill of our portfolio managers.
I hope that you and your families remain safe and well during this unprecedented time. Thank you for your continued investment in Harbor Funds.
June 22, 2020
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 (operating as Marathon-London in the U.S.) 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
Market enthusiasm for what appeared to be easing trade tensions between the U.S. and China towards the end of 2019 drifted deep into memory as the onslaught of the novel coronavirus epidemic began to take center stage and rock the foundations of societies, economies and equity markets across the world during the first quarter of 2020. The pandemic outbreak and countermeasures to contain COVID-19 triggered panic amongst investors, which in turn instigated a dramatic equity market sell-off. Subsequently investor nerves began to calm, with equity markets reversing course dramatically, following an unprecedented level of monetary and fiscal response measures globally.
During the downturn, there were significant divergences in various countries’ equity markets’ performance across the world, largely attributable to differing levels of social and economic impact and differing governments’ social, monetary and fiscal policy responses to the outbreak. This led to an abnormal level of influence of country allocation to the Fund’s relative performance. In addition, positioning relative to the index in sectors caught in the crosshairs of the outbreak (such as Travel and Leisure, Financials, cyclical industries that are correlated with business cycles) or those perceived as more insulated from the outbreak (such as Health Care, Information Technology, and Consumer Staples) was also an abnormally large ‘swing factor’. While past performance is not a guarantee of future results, history suggests that this performance divergence dissipates over time towards longer-term trends and that more idiosyncratic considerations at the stock-specific level will determine the longer-term success of an investment.
Given these turbulent times the MSCI All Country World Ex. U.S. (ND) Index entered bear market territory and returned -13.22% U.S. Dollar over the six-month period ended April 30th. On a regional basis, the developed Asian ex-Japan markets collectively (Australia, Hong Kong, Singapore and New Zealand), which constituted 7.80% of the Index on average over the period, led the broad equity market downturn during the six-month period returning -16.93% U.S. Dollar within the MSCI All Country World Ex. U.S. (ND) Index), with European markets following behind returning -15.47% U.S. Dollar and averaging 41.18% of the Index. The Canadian, Emerging Markets and Japanese exposure within the MSCI All Country World Ex. U.S. (ND) Index were also in negative territory, returning -14.42% (and averaging 6.65% of the Index), -10.50% (and averaging 27.48% of the Index) and -9.97% (and averaging 16.50% of the Index) over the period, respectively.
Performance
Harbor Diversified International All Cap Fund underperformed the MSCI All Country World Ex. U.S. (ND) Index over the six-month period ended April 30, 2020, returning -17.05% (Retirement Class), -17.02% (Institutional Class) -17.15% (Administrative Class) and -17.15% (Investor Class), while the Index returned -13.22%. In aggregate, stock selection, the Fund’s regional allocation and the currency impact on the Fund all weighed on relative returns. Specifically, stock selection in the emerging markets had a negative impact on relative returns as did the underweight exposure to China within that region (a market that held up remarkably considering it was the epicenter of the initial coronavirus outbreak). Stock selection in Europe, most notably the U.K. (and overweight exposure to this market) also contributed negatively to the relative performance of the Fund over the period. Conversely stock selection in Canada was a notable positive contributor to relative returns as was the marginal overweight exposure to this market.
From a sector standpoint, the Fund’s aggregate underweight exposure to both the Energy and Real Estate sectors (both of which underperformed the overall MSCI All Country World Ex. U.S. (ND) Index return over the period) contributed positively to relative returns. Stock selection in the Health Care sector was also a positive contributor to the relative performance
2
Harbor Diversified International All Cap Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
TOTAL RETURNS
For the periods ended 04/30/2020
Unannualized | 1 Year | 5 Years | Annualized | ||||||||
6 Months | Life of Fund | ||||||||||
Harbor Diversified International All Cap Fund | |||||||||||
Retirement Class1,2 | -17.05% | -14.99% | N/A | 0.36% | |||||||
Institutional Class1 | -17.02 | -14.96 | N/A | 0.32 | |||||||
Administrative Class1 | -17.15 | -15.25 | N/A | 0.06 | |||||||
Investor Class1 | -17.15 | -15.31 | N/A | -0.05 | |||||||
Comparative Index | |||||||||||
MSCI All Country World Ex. U.S. (ND)1 | -13.22% | -11.51% | N/A | 2.10% |
As stated in the Fund’s prospectus dated March 1, 2020, the expense ratios were 0.72% (Net) and 0.87% (Gross) (Retirement Class); 0.80% (Net) and 0.95% (Gross) (Institutional Class); 1.05% (Net) and 1.20% (Gross) (Administrative Class); 1.17% (Net) and 1.32% (Gross) (Investor Class). The net expense ratios reflect an expense limitation agreement (excluding interest expense, if any) effective through 02/28/2021. 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.
of the Fund (although this was outweighed by the Fund’s aggregate underweight exposure to the sector). Conversely, stock selection in the Communication Services and Consumer Discretionary sectors weighed on relative returns of the Fund.
At the stock level, and within Europe most notably, Health Care stocks were a positive feature, particularly Coloplast and Novo Nordisk in Denmark, as well as Roche in Switzerland. Updated full year guidance from Coloplast reflected the business’s stable growth profile in the face of the global pandemic, while Novo Nordisk demonstrated a stable earnings profile. Roche benefitted from news that it had developed a faster COVID-19 test and the possible application of its anti-inflammation drug Actemra for coronavirus patients. HelloFresh, the German meal-kit provider, announced better than expected earnings during 2019, as well as accelerating first quarter sales and profits for 2020 as increased demand for home cooking caused the stock price to surge. Outside of Europe, Barrick Gold of Canada was a standout performer as it benefitted from a rising gold price in reaction to negative real interest rates and unprecedented monetary and fiscal stimulus globally.
At the other end of the performance tables, within emerging markets, not owning Alibaba and Tencent exerted a negative influence. Additionally, reflecting the unavoidable (and unquantifiable) economic consequences of the pandemic outbreak, shares in Greek’s Eurobank and Mexico’s Gentera (the largest microfinance bank in Latin America) more than halved over the first quarter of 2020 and therefore, were notable underperformers over the six-month reporting period, while Canada’s Fairfax Financial declined with other insurers due to declining interest rates and the potential for claims relating to the coronavirus.
Outlook & Strategy
Times like now can test resolve; however, our focus remains committed to the implementation of our bottom-up analytical efforts within the capital cycle investment framework and, therefore, seeking to invest in companies that exhibit favorable supply side dynamics with management teams that have a track record of allocating capital efficiently. Developments over the last few months should highlight the shortfalls of spending too much energy on forecasted outlooks; our portfolio managers are not looking to become epidemiologists or react to market volatility. Rather they continue to focus on and trust the longstanding investment process that they have been committed to in our 30 plus year history.
1 | The “Life of Fund” return as shown reflects the period 11/02/2015 through 04/30/2020. |
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—April 30, 2020 (Unaudited)
Portfolio of Investments—April 30, 2020 (Unaudited)
REGION BREAKDOWN(% of investments)
(Excludes short-term investments)
Portfolio of Investments
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—95.3% | |||
Shares | Value | ||
AEROSPACE & DEFENSE—0.9% | |||
31,248 | Airbus SE (France)* | $1,979 | |
362,799 | BAE Systems plc (United Kingdom) | 2,314 | |
143,676 | Embraer SA (Brazil)* | 229 | |
293,419 | Rolls-Royce Holdings plc (United Kingdom)* | 1,214 | |
12,432 | Thales SA (France) | 941 | |
6,677 | |||
AIR FREIGHT & LOGISTICS—0.1% | |||
28,399 | Oesterreichische Post AG (Austria) | 1,070 | |
AIRLINES—0.1% | |||
136,190 | EasyJet plc (United Kingdom) | 1,032 | |
AUTO COMPONENTS—1.0% | |||
47,800 | Bridgestone Corp. (Japan) | 1,488 | |
194,589 | Gestamp Automocion SA (Spain)1 | 487 | |
198,713 | GUD Holdings Ltd. (Australia) | 1,180 | |
38,270 | Hankook Tire & Technology Co. Ltd. (South Korea) | 671 | |
15,200 | Koito Manufacturing Co. Ltd. (Japan) | 573 | |
33,833 | Magna International Inc. (Canada) | 1,318 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
AUTO COMPONENTS—Continued | |||
2,689,114 | Nemak SAB de CV (Mexico)1 | $497 | |
39,600 | Sumitomo Electric Industries Ltd. (Japan) | 407 | |
11,700 | Toyota Industries Corp. (Japan) | 589 | |
7,210 | |||
AUTOMOBILES—1.2% | |||
1,427,931 | Baic Motor Corp. Ltd. (China)1 | 625 | |
32,303 | Bayerische Motoren Werke AG (Germany) | 1,900 | |
16,941 | Hyundai Motor Co. (South Korea) | 1,309 | |
108,205 | Mahindra & Mahindra Ltd. (India) | 523 | |
69,300 | Toyota Motor Corp. (Japan) | 4,285 | |
8,642 | |||
BANKS—5.7% | |||
398,716 | Axis Bank Ltd. (India)* | 2,325 | |
62,363 | Bancolombia SA ADR (Colombia)2 | 1,628 | |
404,324 | Bank of Ireland Group plc (Ireland)* | 830 | |
663,703 | Bankia SA (Spain) | 675 | |
1,778,741 | Barclays plc (United Kingdom) | 2,375 | |
77,620 | BNP Paribas SA (France) | 2,439 |
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 | |||
42,725 | Close Brothers Group plc (United Kingdom) | $586 | |
25,335 | Danske Bank AS (Denmark) | 301 | |
42,617 | DBS Group Holdings Ltd. (Singapore) | 600 | |
81,820 | DNB ASA (Norway) | 991 | |
9,243,920 | Eurobank Ergasias SA (Greece)* | 3,734 | |
27,000 | Fukuoka Financial Group Inc. (Japan) | 386 | |
3,944,657 | Grupo Financiero Inbursa SAB de CV (Mexico) | 2,355 | |
53,159 | Hana Financial Group Inc. (South Korea) | 1,214 | |
475,465 | HSBC Holdings plc (Hong Kong) | 2,453 | |
306,848 | Intesa Sanpaolo SpA (Italy)* | 479 | |
724,700 | Kasikornbank PCL (Thailand) | 1,904 | |
37,943 | Komercni Banka AS (Czech Republic)* | 803 | |
4,171,169 | Lloyds Banking Group plc (United Kingdom) | 1,688 | |
62,837 | Nordea Bank ABP (Sweden) | 403 | |
793,400 | Resona Holdings Inc. (Japan) | 2,478 | |
70,021 | Shinhan Financial Group Co. Ltd. (South Korea) | 1,775 | |
390,911 | Standard Chartered plc (United Kingdom) | 1,997 | |
68,400 | Sumitomo Mitsui Financial Group Inc. (Japan) | 1,799 | |
16,000 | Sumitomo Mitsui Trust Holdings Inc. (Japan) | 466 | |
261,239 | Svenska Handelsbanken AB (Sweden) | 2,384 | |
206,038 | UniCredit SpA (Italy)* | 1,591 | |
90,582 | United Overseas Bank Ltd. (Singapore) | 1,294 | |
41,953 | |||
BEVERAGES—3.7% | |||
1,113,638 | AmBev SA (Brazil)* | 2,322 | |
42,425 | Anheuser-Busch InBev SA (Belgium) | 1,976 | |
12,500 | Asahi Group Holdings Ltd. (Japan) | 430 | |
19,825 | Carlsberg AS (Denmark) | 2,501 | |
34,785 | Cia Cervecerias Unidas SA (Chile) | 250 | |
367,774 | Coca-Cola Amatil Ltd. (Australia) | 2,048 | |
25,995 | Coca-Cola European Partners plc (United States) | 1,030 | |
149,819 | Davide Campari-Milano SpA (Italy) | 1,164 | |
126,074 | Diageo plc (United Kingdom) | 4,341 | |
926,134 | East African Breweries Ltd. (Kenya) | 1,510 | |
49,766 | Heineken NV (Netherlands) | 4,236 | |
217,100 | Kirin Holdings Co. Ltd. (Japan) | 4,190 | |
14,200 | Suntory Beverage & Food Ltd. (Japan) | 535 | |
148,000 | Tsingtao Brewery Co. Ltd. (China) | 899 | |
27,432 | |||
BUILDING PRODUCTS—1.6% | |||
293,571 | Assa Abloy AB Class B (Sweden) | 5,255 | |
11,748 | Geberit AG (Switzerland) | 5,254 | |
281,367 | GWA Group Ltd. (Australia) | 505 | |
57,100 | LIXIL Group Corp. (Japan) | 685 | |
11,699 | |||
CAPITAL MARKETS—2.4% | |||
359,569 | 3i Group plc (United Kingdom) | 3,532 | |
207,614 | Brookfield Asset Management Inc. (Canada) | 7,016 | |
76,600 | Daiwa Securities Group Inc. (Japan)* | 319 | |
57,801 | Georgia Capital plc (United Kingdom)* | 305 | |
177,833 | IG Group Holdings plc (United Kingdom) | 1,686 | |
23,700 | JAFCO Co. Ltd. (Japan) | 759 | |
30,300 | Japan Exchange Group Inc. (Japan) | 564 | |
247,550 | Jupiter Fund Management plc (United Kingdom) | 680 | |
290,900 | Nomura Holdings Inc. (Japan) | 1,207 | |
19,668 | Rathbone Brothers plc (United Kingdom) | 374 | |
93,010 | St. James's Place plc (United Kingdom) | 990 | |
36,577 | UBS Group AG (Switzerland)* | 392 | |
17,824 |
COMMON STOCKS—Continued | |||
�� Shares | Value | ||
CHEMICALS—1.8% | |||
11,200 | Air Water Inc. (Japan)* | $151 | |
63,830 | BASF SE (Germany) | 3,267 | |
62,395 | Enaex SA (Chile) | 462 | |
14,700 | Nippon Shokubai Co. Ltd. (Japan) | 694 | |
35,600 | Nissan Chemical Corp. (Japan) | 1,366 | |
8,900 | Nitto Denko Corp. (Japan) | 445 | |
235,503 | Orica Ltd. (Australia) | 2,729 | |
80,807 | PhosAgro PJSC GDR (Russia)2 | 976 | |
9,300 | Shin-Etsu Chemical Co. Ltd. (Japan) | 1,026 | |
88,131 | Tikkurila OYJ (Finland) | 1,153 | |
22,300 | Tokyo Ohka Kogyo Co. Ltd. (Japan) | 959 | |
13,228 | |||
COMMERCIAL SERVICES & SUPPLIES—2.8% | |||
9,100 | AEON Delight Co. Ltd. (Japan) | 261 | |
351,662 | Brambles Ltd. (Australia) | 2,514 | |
2,405,561 | Cleanaway Waste Management Ltd. (Australia) | 2,902 | |
49,324 | Elis SA (France)* | 608 | |
880,684 | G4S plc (United Kingdom) | 1,209 | |
367,978 | HomeServe plc (United Kingdom) | 5,154 | |
79,131 | Ritchie Bros Auctioneers Inc. (Canada) | 3,406 | |
14,677 | S-1 Corp. (South Korea) | 1,044 | |
14,200 | Secom Co. Ltd. (Japan) | 1,182 | |
1,309,901 | Serco Group plc (United Kingdom)* | 2,120 | |
11,200 | Sohgo Security Services Co. Ltd. (Japan) | 534 | |
20,934 | |||
CONSTRUCTION & ENGINEERING—0.9% | |||
53,881 | Boskalis Westminster NV (Netherlands)3 | 934 | |
23,421 | Ferrovial SA (Spain) | 587 | |
91,300 | Maeda Corp. (Japan) | 732 | |
197,000 | Obayashi Corp. (Japan) | 1,722 | |
162,700 | Penta-Ocean Construction Co. Ltd. (Japan) | 822 | |
912,354 | Raubex Group Ltd. (South Africa)3 | 844 | |
68,400 | Shimizu Corp. (Japan) | 525 | |
7,800 | SHO-BOND Holdings Co. Ltd. (Japan) | 313 | |
6,479 | |||
CONSTRUCTION MATERIALS—0.6% | |||
18,673 | CRH plc (Ireland) | 563 | |
259,403 | Fletcher Building Ltd. (New Zealand) | 581 | |
6,056 | Imerys SA (France) | 190 | |
66,300 | Taiheiyo Cement Corp. (Japan) | 1,302 | |
10,150 | Vicat SA (France) | 285 | |
91,197 | Wienerberger AG (Austria) | 1,708 | |
4,629 | |||
CONSUMER FINANCE—0.6% | |||
40,900 | AEON Financial Service Co. Ltd. (Japan) | 425 | |
5,424,953 | Gentera SAB de CV (Mexico) | 2,181 | |
364,768 | International Personal Finance plc (United Kingdom) | 257 | |
329,768 | Non-Standard Finance plc (United Kingdom)1 | 54 | |
166,254 | Provident Financial plc (United Kingdom)* | 406 | |
131,593 | Shriram Transport Finance Co. Ltd. (India) | 1,365 | |
4,688 | |||
CONTAINERS & PACKAGING—0.4% | |||
549,374 | DS Smith plc (United Kingdom) | 2,154 | |
63,500 | Toyo Seikan Group Holdings Ltd. (Japan) | 644 | |
2,798 | |||
DISTRIBUTORS—0.2% | |||
181,719 | Inchcape plc (United Kingdom) | 1,145 |
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—0.0% | |||
1,358,000 | First Pacific Co. Ltd. (Hong Kong) | $281 | |
DIVERSIFIED TELECOMMUNICATION SERVICES—1.9% | |||
46,563 | BCE Inc. (Canada) | 1,883 | |
151,275 | Deutsche Telekom AG (Germany) | 2,212 | |
819,163 | Koninklijke KPN NV (Netherlands) | 1,887 | |
208,986 | KT Corp. ADR (South Korea)2 | 2,050 | |
194,900 | Nippon Telegraph & Telephone Corp. (Japan) | 4,439 | |
297,430 | Spark New Zealand Ltd. (New Zealand) | 805 | |
530,760 | Telkom SA SOC Ltd. (South Africa) | 588 | |
13,864 | |||
ELECTRIC UTILITIES—0.5% | |||
60,600 | Kansai Electric Power Co. (Japan) | 621 | |
31,850 | Orsted AS (Denmark)1 | 3,217 | |
3,838 | |||
ELECTRICAL EQUIPMENT—2.5% | |||
70,103 | Legrand SA (France) | 4,700 | |
8,000 | Mabuchi Motor Co. Ltd. (Japan) | 248 | |
43,397 | Schneider Electric SE (France) | 4,010 | |
1,986,850 | TECO Electric and Machinery Co. Ltd. (Taiwan) | 1,788 | |
12,800 | Ushio Inc. (Japan) | 135 | |
83,833 | Vestas Wind Systems AS (Denmark) | 7,199 | |
18,080 | |||
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—2.0% | |||
26,300 | Azbil Corp. (Japan) | 692 | |
286,000 | Chroma ATE Inc. (Taiwan)* | 1,318 | |
565,735 | Delta Electronics Inc. (Taiwan) | 2,639 | |
160,500 | Hitachi Ltd. (Japan) | 4,763 | |
27,400 | Kyocera Corp. (Japan) | 1,464 | |
9,800 | Omron Corp. (Japan) | 576 | |
15,200 | Shimadzu Corp. (Japan) | 378 | |
70,908 | Spectris plc (United Kingdom) | 2,391 | |
10,000 | TDK Corp. (Japan) | 862 | |
15,083 | |||
ENERGY EQUIPMENT & SERVICES—0.3% | |||
145,658 | John Wood Group plc (United Kingdom) | 369 | |
50,640 | Petrofac Ltd. (United Kingdom) | 125 | |
649,218 | Saipem SpA (Italy) | 1,666 | |
33,112 | TechnipFMC plc (France) | 290 | |
2,450 | |||
ENTERTAINMENT—0.6% | |||
27,511 | CTS Eventim AG & Co. KGaA (Germany) | 1,144 | |
11,300 | Konami Holdings Corp. (Japan) | 355 | |
2,183,200 | Major Cineplex Group (Thailand) | 977 | |
15,900 | Makita Corp. (Japan) | 518 | |
41,315 | Modern Times Group MTG AB Class B (Sweden)* | 416 | |
20,800 | Nexon Co. Ltd. (Japan) | 336 | |
900 | Nintendo Co. Ltd. (Japan) | 371 | |
8,600 | Toho Co. Ltd. (Japan) | 281 | |
4,398 | |||
FOOD & STAPLES RETAILING—2.8% | |||
127,310 | Alimentation Couche-Tard Inc. (Canada) | 3,552 | |
56,800 | Dairy Farm International Holdings Ltd. (Hong Kong) | 272 | |
39,636 | Eurocash SA (Poland)* | 206 | |
118,602 | Koninklijke Ahold Delhaize NV (Netherlands) | 2,880 | |
75,774 | Loblaw Cos. Ltd. (Canada) | 3,729 | |
22,056 | Magnit PJSC (Russia) | 1,093 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
FOOD & STAPLES RETAILING—Continued | |||
15,400 | Matsumotokiyoshi Holdings Co. Ltd. (Japan) | $530 | |
437,847 | Metcash Ltd. (Australia) | 706 | |
30,065 | PriceSmart Inc. (United States) | 1,910 | |
92,600 | Seven & I Holdings Co. Ltd. (Japan) | 3,067 | |
11,600 | Sundrug Co. Ltd. (Japan) | 397 | |
743,617 | Tesco plc (United Kingdom) | 2,199 | |
20,541 | |||
FOOD PRODUCTS—3.0% | |||
10,400 | Calbee Inc. (Japan) | 315 | |
257,000 | China Mengniu Dairy Co. Ltd. (China)* | 910 | |
3,240,000 | Delfi Ltd. (Singapore) | 1,551 | |
227,557 | Devro plc (United Kingdom) | 455 | |
17,800 | Fuji Oil Holdings Inc. (Japan)* | 415 | |
2,203,934 | Grupo Lala SAB de CV (Mexico) | 1,038 | |
217,273 | Industrias Bachoco SAB de CV (Mexico) | 634 | |
28,300 | Megmilk Snow Brand Co. Ltd. (Japan) | 646 | |
7,500 | Meiji Holdings Co. Ltd. (Japan) | 521 | |
92,000 | Nippon Suisan Kaisha Ltd. (Japan) | 409 | |
441,406 | Tiger Brands Ltd. (South Africa) | 4,298 | |
1,732,255 | Tingyi Cayman Islands Holding Corp. (China) | 3,075 | |
41,400 | Toyo Suisan Kaisha Ltd. (Japan) | 1,991 | |
269,765 | Ulker Biskuvi Sanayi AS (Turkey) | 916 | |
32,173 | Viscofan SA (Spain) | 2,062 | |
4,006,000 | Want Want China Holdings Ltd. (China) | 2,855 | |
22,091 | |||
GAS UTILITIES—0.1% | |||
23,800 | Tokyo Gas Co. Ltd. (Japan) | 522 | |
HEALTH CARE EQUIPMENT & SUPPLIES—4.0% | |||
64,056 | Coloplast AS (Denmark) | 10,103 | |
1,323,321 | ConvaTec Group plc (United Kingdom)1 | 3,534 | |
113,296 | Demant AS (Denmark)* | 2,709 | |
67,901 | Getinge AB Class B (Sweden) | 1,301 | |
102,383 | GN Store Nord AS (Denmark) | 4,672 | |
11,000 | Hoya Corp. (Japan) | 1,003 | |
18,700 | Japan Lifeline Co. Ltd. (Japan) | 220 | |
68,193 | Koninklijke Philips NV (Netherlands) | 2,973 | |
34,700 | Olympus Corp. (Japan) | 551 | |
39,487 | Smith & Nephew plc (United Kingdom) | 773 | |
8,358 | Sonova Holding AG (Switzerland) | 1,510 | |
29,349 | |||
HEALTH CARE PROVIDERS & SERVICES—1.2% | |||
64,200 | Alfresa Holdings Corp. (Japan) | 1,280 | |
42,609 | Amplifon SpA (Italy) | 976 | |
66,496 | Fresenius Medical Care AG & Co. KGaA (Germany) | 5,211 | |
62,400 | MediPAL Holdings Corp. (Japan) | 1,204 | |
497,455 | Sigma Healthcare Ltd. (Australia) | 195 | |
8,866 | |||
HOTELS, RESTAURANTS & LEISURE—3.1% | |||
1,609,000 | Ajisen China Holdings Ltd. (China) | 358 | |
47,448 | Carnival plc (United Kingdom) | 654 | |
329,467 | Compass Group plc (United Kingdom) | 5,544 | |
45,230 | Flutter Entertainment plc (United Kingdom) | 5,562 | |
1,381,600 | Genting Singapore Ltd. (Singapore) | 767 | |
283,353 | GVC Holdings plc (United Kingdom) | 2,690 | |
641,641 | Hongkong & Shanghai Hotels Ltd. (Hong Kong) | 583 | |
8,119 | InterContinental Hotels Group PLC (United Kingdom)* | 370 | |
82,664 | Playtech plc (United Kingdom) | 242 | |
464,071 | SSP Group plc (United Kingdom) | 1,640 |
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 | |||
397,958 | Tsogo Sun Gaming Ltd. (South Africa) | $56 | |
361,584 | Tsogo Sun Hotels Ltd. (South Africa)* | 36 | |
180,236 | TUI AG (Germany) | 732 | |
74,671 | Yum China Holdings Inc. (China) | 3,619 | |
22,853 | |||
HOUSEHOLD DURABLES—0.8% | |||
101,741 | Barratt Developments plc (United Kingdom) | 663 | |
52,500 | Casio Computer Co. Ltd. (Japan) | 829 | |
221,308 | McCarthy & Stone plc (United Kingdom)1 | 197 | |
658,000 | MRV Engenharia e Participacoes SA (Brazil) | 1,833 | |
7,700 | Rinnai Corp. (Japan) | 583 | |
48,600 | Sekisui Chemical Co. Ltd. (Japan) | 616 | |
23,800 | Sony Corp. (Japan) | 1,532 | |
6,253 | |||
HOUSEHOLD PRODUCTS—0.8% | |||
12,200 | Lion Corp. (Japan) | 257 | |
68,445 | Reckitt Benckiser Group plc (United Kingdom) | 5,701 | |
5,958 | |||
INDEPENDENT POWER & RENEWABLE ELECTRICITY PRODUCERS—0.0% | |||
1,793,400 | Lopez Holdings Corp. (Philippines) | 93 | |
INDUSTRIAL CONGLOMERATES—2.1% | |||
426,500 | CK Hutchison Holdings Ltd. (Hong Kong) | 3,161 | |
38,907 | DCC plc (United Kingdom) | 2,767 | |
92,300 | Jardine Matheson Holdings Ltd. (Hong Kong) | 4,043 | |
47,138 | LG Corp. (South Korea) | 2,399 | |
1,303,018 | Quinenco SA (Chile) | 1,898 | |
2,058,500 | Sime Darby Berhad (Malaysia) | 953 | |
15,221 | |||
INSURANCE—4.6% | |||
95,402 | Admiral Group plc (United Kingdom) | 2,784 | |
118,078 | AXA SA (France) | 2,099 | |
222,000 | Dai-ichi Life Holdings Inc. (Japan) | 2,782 | |
18,593 | Fairfax Financial Holdings Ltd. (Canada) | 5,041 | |
118,100 | Great Eastern Holdings Ltd. (Singapore) | 1,563 | |
6,582 | Hannover Rueck SE (Germany) | 1,049 | |
5,834 | Helvetia Holding AG (Switzerland) | 532 | |
233,800 | Japan Post Holdings Co. Ltd. (Japan) | 1,870 | |
26,200 | MS&AD Insurance Group Holdings Inc. (Japan) | 755 | |
242,916 | Porto Seguro SA (Brazil) | 2,023 | |
44,455 | Prudential plc (United Kingdom)* | 627 | |
314,365 | QBE Insurance Group Ltd. (Australia) | 1,702 | |
18,507 | Qualitas Controladora SAB de CV (Mexico) | 76 | |
123,724 | Sampo OYJ (Finland) | 4,101 | |
15,575 | Samsung Fire & Marine Insurance Co. Ltd. (South Korea) | 2,443 | |
51,100 | Sompo Holdings Inc. (Japan) | 1,657 | |
11,700 | Sony Financial Holdings Inc. (Japan) | 222 | |
53,400 | T&D Holdings Inc. (Japan) | 462 | |
��� 44,500 | Tokio Marine Holdings Inc. (Japan) | 2,088 | |
33,876 | |||
INTERACTIVE MEDIA & SERVICES—2.5% | |||
49,103 | Adevinta ASA (Norway)* | 408 | |
282,043 | Auto Trader Group plc (United Kingdom)1 | 1,624 | |
52,069 | Baidu Inc. ADR (China)*,2 | 5,255 | |
198,550 | Carsales.com Ltd. (Australia) | 1,816 | |
340,195 | Domain Holdings Australia Ltd. (Australia) | 576 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
INTERACTIVE MEDIA & SERVICES—Continued | |||
1,102,315 | Rightmove plc (United Kingdom) | $6,892 | |
59,354 | Yandex NV (Russia)* | 2,243 | |
18,814 | |||
INTERNET & DIRECT MARKETING RETAIL—1.6% | |||
4,773 | GS Home Shopping Inc. (South Korea) | 500 | |
143,715 | HelloFresh SE (Germany)* | 5,122 | |
27,742 | Just Eat Takeaway.com NV (Netherlands)*,1 | 2,843 | |
47,861 | MoneySuperMarket.com Group plc (United Kingdom) | 191 | |
346,520 | PChome Online Inc. (Taiwan) | 1,144 | |
30,784 | Trip.Com Group Ltd. ADR (China)*,2 | 793 | |
3,224 | Zooplus AG (Germany)* | 399 | |
37,300 | ZOZO Inc. (Japan) | 602 | |
11,594 | |||
IT SERVICES—1.9% | |||
16,632 | Alten SA (France) | 1,197 | |
1,132,870 | Capita plc (United Kingdom)* | 555 | |
84,686 | Edenred (France) | 3,411 | |
61,054 | Genpact Ltd. (United States) | 2,102 | |
11,800 | ITOCHU Techno-Solutions Corp. (Japan) | 361 | |
34,300 | NEC Corp. (Japan) | 1,316 | |
41,900 | NET One Systems Co. Ltd. (Japan) | 1,208 | |
16,500 | Nomura Research Institute Ltd. (Japan) | 404 | |
233,100 | NTT Data Corp. (Japan) | 2,379 | |
9,500 | Otsuka Corp. (Japan) | 430 | |
16,200 | SCSK Corp. (Japan) | 733 | |
14,096 | |||
LEISURE PRODUCTS—1.3% | |||
42,100 | Bandai Namco Holdings Inc. (Japan) | 2,104 | |
429,386 | Giant Manufacturing Co. Ltd. (Taiwan) | 2,531 | |
846,000 | Goodbaby International Holdings Ltd. (Hong Kong)* | 87 | |
321,611 | Merida Industry Co. Ltd. (Taiwan) | 1,642 | |
88,300 | Sega Sammy Holdings Inc. (Japan) | 1,069 | |
2,000 | Shimano Inc. (Japan) | 295 | |
111,825 | Spin Master Corp. (Canada)*,1 | 1,618 | |
9,346 | |||
LIFE SCIENCES TOOLS & SERVICES—0.5% | |||
6,021 | Eurofins Scientific SE (France)3 | 3,331 | |
8,486 | Gerresheimer AG (Germany) | 675 | |
4,006 | |||
MACHINERY—1.9% | |||
17,495 | Andritz AG (Austria) | 575 | |
428,650 | CNH Industrial NV (Italy) | 2,681 | |
12,200 | Daifuku Co. Ltd. (Japan) | 854 | |
16,996 | GEA Group AG (Germany) | 390 | |
9,000 | Hoshizaki Corp. (Japan) | 686 | |
36,929 | IMI plc (United Kingdom) | 384 | |
35,000 | Mitsui E&S Holdings Co. Ltd. (Japan)* | 198 | |
151,527 | Rotork plc (United Kingdom) | 472 | |
170,293 | Sandvik AB (Sweden) | 2,620 | |
32,015 | Stabilus SA (Germany) | 1,368 | |
112,853 | Wartsila OYJ Abp (Finland) | 828 | |
1,504,000 | Yungtay Engineering Co. Ltd. (Taiwan) | 3,027 | |
14,083 |
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 | ||
MARINE—0.3% | |||
44,468,923 | Cia Sud Americana de Vapores SA (Chile)* | $1,065 | |
232,236 | Irish Continental Group plc (Ireland) | 878 | |
1,943 | |||
MEDIA—1.8% | |||
53,671 | Daily Mail & General Trust plc (United Kingdom) | 477 | |
47,892 | Euromoney Institutional Investor plc (United Kingdom) | 498 | |
122,400 | Fuji Media Holdings Inc. (Japan) | 1,216 | |
194,971 | Grupo Televisa SAB ADR (Mexico)2 | 1,043 | |
86,218 | Informa plc (United Kingdom) | 476 | |
1,500,181 | ITV plc (United Kingdom) | 1,440 | |
36,695 | JCDecaux SA (France)* | 760 | |
24,632,421 | Media Nusantara Citra TBK PT (Indonesia) | 1,502 | |
843,954 | Nine Entertainment Co. Holdings Ltd. (Australia) | 776 | |
131,220 | Nippon Television Holdings Inc. (Japan) | 1,466 | |
41,412 | Nordic Entertainment Group AB (Sweden) | 981 | |
26,750 | Schibsted ASA Class A (Norway)* | 567 | |
22,747 | Schibsted ASA Class B (Norway) | 442 | |
361,013 | Sky Network Television Ltd. (New Zealand)* | 62 | |
358,600 | Television Broadcasts Ltd. (Hong Kong) | 495 | |
178,884 | WPP plc (United Kingdom) | 1,388 | |
13,589 | |||
METALS & MINING—4.6% | |||
97,616 | Acerinox SA (Spain) | 735 | |
1,653,630 | Alrosa PJSC (Russia) | 1,384 | |
1,129,424 | Alumina Ltd. (Australia) | 1,253 | |
75,564 | Anglo American Platinum Ltd. (South Africa) | 3,966 | |
75,811 | Anglo American plc (South Africa) | 1,350 | |
133,464 | ArcelorMittal SA (France) | 1,458 | |
265,245 | Barrick Gold Corp. (Canada) | 6,828 | |
54,356 | BHP Group Ltd. (Australia) | 1,110 | |
205,535 | BlueScope Steel Ltd. (Australia) | 1,341 | |
86,666 | Cia de Minas Buenaventura SAA ADR (Peru)2 | 649 | |
22,943 | Franco-Nevada Corp. (Canada) | 3,035 | |
258,155 | Freeport-McMoRan Inc. (United States) | 2,280 | |
1,234,765 | Glencore plc (United Kingdom)* | 2,313 | |
127,875 | Newcrest Mining Ltd. (Australia) | 2,310x | |
50,100 | Nippon Steel Corp. (Japan)* | 422 | |
72,232 | Rio Tinto plc (United Kingdom) | 3,353 | |
12,400 | Sumitomo Metal Mining Co. Ltd. (Japan) | 309 | |
34,096 | |||
MULTILINE RETAIL—0.1% | |||
35,800 | Marui Group Co. Ltd. (Japan) | 586 | |
OIL, GAS & CONSUMABLE FUELS—2.3% | |||
1,498,548 | BP plc (United Kingdom) | 5,905 | |
39,883 | Caltex Australia Ltd. (Australia) | 642 | |
178,005 | Canadian Natural Resources Ltd. (Canada) | 2,981 | |
176,076 | Equinor ASA (Norway) | 2,438 | |
131,800 | INPEX Corp. (Japan) | 851 | |
111,657 | Inter Pipeline Ltd. (Canada)3 | 934 | |
17,071 | LUKOIL PJSC ADR (Russia)2 | 1,102 | |
162,110 | PrairieSky Royalty Ltd. (Canada)3 | 1,186 | |
976,940 | United Tractors Tbk PT (Indonesia) | 1,065 | |
17,104 | |||
PAPER & FOREST PRODUCTS—0.1% | |||
170,200 | Oji Holdings Corp. (Japan) | 864 | |
PERSONAL PRODUCTS—1.8% | |||
40,491 | AMOREPACIFIC Group (South Korea) | 1,938 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
PERSONAL PRODUCTS—Continued | |||
736,267 | Asaleo Care Ltd. (Australia) | $493 | |
31,800 | Kao Corp. (Japan) | 2,452 | |
2,500 | Kose Corp. (Japan) | 313 | |
345,709 | L'Occitane International SA (Hong Kong) | 533 | |
14,800 | Mandom Corp. (Japan) | 284 | |
416,336 | Natura & Co Holding SA (Brazil)* | 2,719 | |
93,868 | Unilever plc (United Kingdom) | 4,833 | |
13,565 | |||
PHARMACEUTICALS—4.2% | |||
39,400 | Astellas Pharma Inc. (Japan)* | 652 | |
4,801,161 | Genomma Lab Internacional SAB de CV (Mexico)* | 3,825 | |
86,707 | Haw Par Corp. Ltd. (Singapore) | 628 | |
130,617 | Novo Nordisk AS (Denmark) | 8,332 | |
46,900 | Otsuka Holdings Co. Ltd. (Japan) | 1,843 | |
37,533 | Roche Holding AG (Switzerland) | 12,998 | |
5,700 | Sawai Pharmaceutical Co. Ltd. (Japan) | 311 | |
26,300 | Takeda Pharmaceutical Co. Ltd. (Japan) | 948 | |
43,800 | Tsumura & Co. (Japan) | 1,212 | |
30,749 | |||
PROFESSIONAL SERVICES—3.5% | |||
63,971 | Adecco Group AG (Switzerland) | 2,799 | |
356,006 | ALS Ltd. (Australia) | 1,555 | |
127,375 | Experian plc (United Kingdom) | 3,825 | |
1,036,704 | Hays plc (United Kingdom) | 1,412 | |
118,815 | Intertek Group plc (United Kingdom) | 7,091 | |
154,804 | IPH Ltd. (Australia) | 740 | |
48,000 | Nomura Co. Ltd. (Japan) | 364 | |
140,833 | PageGroup plc (United Kingdom) | 667 | |
28,500 | Persol Holdings Co. Ltd. (Japan) | 328 | |
12,485 | Randstad NV (Netherlands)* | 502 | |
195,873 | RELX plc (United Kingdom) | 4,419 | |
6,000 | TechnoPro Holdings Inc. (Japan) | 342 | |
7,762 | Teleperformance (France) | 1,739 | |
25,783 | |||
REAL ESTATE MANAGEMENT & DEVELOPMENT—0.5% | |||
23,600 | Daiwa House Industry Co. Ltd. (Japan) | 598 | |
73,518 | LOG Commercial Properties e Participacoes SA (Brazil) | 310 | |
164,012 | LPS Brasil Consultoria de Imoveis SA (Brazil)* | 118 | |
128,200 | Mitsubishi Estate Co. Ltd. (Japan) | 2,074 | |
65,419 | New World Development Co. Ltd. (Hong Kong) | 77 | |
90,976 | United Industrial Corp. Ltd. (Singapore) | 145 | |
3,322 | |||
ROAD & RAIL—1.2% | |||
17,013 | Canadian Pacific Railway Ltd. (Canada) | 3,867 | |
28,500 | East Japan Railway Co. (Japan) | 2,081 | |
100,540 | Globaltrans Investment plc GDR (Russia)2 | 569 | |
115,209 | National Express Group plc (United Kingdom) | 397 | |
50,100 | Senko Group Holdings Co. Ltd. (Japan) | 408 | |
21,300 | West Japan Railway Co. (Japan) | 1,316 | |
8,638 | |||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—2.1% | |||
5,099 | ASML Holding NV (Netherlands) | 1,489 | |
148,500 | Renesas Electronics Corp. (Japan)* | 784 | |
17,200 | ROHM Co. Ltd. (Japan) | 1,088 | |
38,766 | SK Hynix Inc. (South Korea) | 2,668 | |
903,000 | Taiwan Semiconductor Manufacturing Co. Ltd. (Taiwan) | 9,109 | |
15,138 |
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—1.2% | |||
433,322 | Blackberry Ltd. (Canada)* | $1,849 | |
4,250 | Constellation Software Inc. (Canada) | 4,087 | |
2,900 | Oracle Corp. Japan (Japan) | 299 | |
238,500 | TOTVS SA (Brazil) | 2,594 | |
8,829 | |||
SPECIALTY RETAIL—0.9% | |||
5,900 | ABC-Mart Inc. (Japan) | 300 | |
4,667,000 | Esprit Holdings Ltd. (Hong Kong)* | 447 | |
224,554 | Fourlis Holdings SA (Greece)* | 880 | |
145,168 | JUMBO SA (Greece) | 2,272 | |
257,432 | Pets at Home Group plc (United Kingdom) | 824 | |
34,600 | USS Co. Ltd. (Japan) | 548 | |
94,227 | WH Smith plc (United Kingdom) | 1,487 | |
6,758 | |||
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS—1.5% | |||
15,584 | King Slide Works Co. Ltd. (Taiwan) | 162 | |
43,459 | Logitech International SA (Switzerland) | 2,093 | |
21,392 | Quadient SAS (France) | 296 | |
215,211 | Samsung Electronics Co. Ltd. (South Korea) | 8,849 | |
11,400 | |||
TEXTILES, APPAREL & LUXURY GOODS—2.1% | |||
16,851 | Adidas AG (Germany) | 3,858 | |
82,700 | ASICS Corp. (Japan) | 784 | |
45,935 | Cie Financiere Richemont SA (Switzerland) | 2,606 | |
199,660 | Cie Financiere Richemont SA ADR (South Africa)2 | 1,127 | |
34,635 | EssilorLuxottica SA (France) | 4,302 | |
59,414 | Gildan Activewear Inc. (Canada) | 829 | |
87,700 | Onward Holdings Co. Ltd. (Japan) | 274 | |
1,363,246 | Stella International Holdings Ltd. (Hong Kong) | 1,372 | |
110,000 | Texwinca Holdings Ltd. (Hong Kong) | 19 | |
15,171 | |||
TOBACCO—0.4% | |||
16,512 | British American Tobacco plc (United Kingdom) | 636 | |
27,500 | Japan Tobacco Inc. (Japan) | 512 | |
29,687 | Swedish Match AB (Sweden) | 1,835 | |
2,983 | |||
TRADING COMPANIES & DISTRIBUTORS—1.1% | |||
55,918 | Brenntag AG (Germany) | 2,532 | |
153,765 | Bunzl plc (United Kingdom) | 3,337 | |
109,631 | Finning International Inc. (Canada)* | 1,392 | |
31,900 | ITOCHU Corp. (Japan) | 625 | |
1,400 | Mitsubishi Corp. (Japan) | 30 | |
7,916 | |||
TRANSPORTATION INFRASTRUCTURE—0.5% | |||
117,571 | Getlink SE (France) | 1,499 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
TRANSPORTATION INFRASTRUCTURE—Continued | |||
515,802 | Global Ports Investments plc GDR (Russia)*,2 | $1,238 | |
3,193,884 | Grindrod Ltd. (South Africa) | 600 | |
32,300 | Mitsubishi Logistics Corp. (Japan) | 713 | |
4,050 | |||
WIRELESS TELECOMMUNICATION SERVICES—1.1% | |||
416,429 | Bharti Airtel Ltd. (India)* | 2,837 | |
72,300 | KDDI Corp. (Japan) | 2,094 | |
39,200 | NTT DoCoMo Inc. (Japan) | 1,155 | |
38,057 | Rogers Communications Inc. (Canada) | 1,594 | |
189,248 | SmarTone Telecommunications Holdings Ltd. (Hong Kong) | 120 | |
8,285,827 | Vodafone Idea Ltd. (India) | 459 | |
8,259 | |||
TOTAL COMMON STOCKS | |||
(Cost $811,982) | 703,739 | ||
PREFERRED STOCKS—1.2% | |||
AUTOMOBILES—0.3% | |||
15,900 | Volkswagen AG (Germany) | 2,212 | |
BANKS—0.3% | |||
224,773 | Banco Bradesco SA (Brazil)* | 791 | |
2,073,578 | Grupo Aval Acciones y Valores SA (Colombia) | 443 | |
535,742 | Itausa - Investimentos Itau SA (Brazil) | 887 | |
2,121 | |||
PERSONAL PRODUCTS—0.0% | |||
3,088 | AMOREPACIFIC Group (South Korea)* | 98 | |
TEXTILES, APPAREL & LUXURY GOODS—0.6% | |||
801,167 | Alpargatas SA (Brazil)* | 4,035 | |
TOTAL PREFERRED STOCKS | |||
(Cost $8,951) | 8,466 | ||
SHORT-TERM INVESTMENTS—0.2% | |||
(Cost $1,705) | |||
INVESTMENT COMPANY-SECURITIES LENDING INVESTMENT FUND—0.2% | |||
1,704,970 | State Street Navigator Securities Lending Government Money Market Portfolio (1-day yield of 0.190%)4 | 1,705 | |
TOTAL INVESTMENTS—96.7% | |||
(Cost $822,638) | 713,910 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—3.3% | 24,280 | ||
TOTAL NET ASSETS—100.0% | $738,190 |
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 April 30, 2020 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 | $— | $14,375 | $— | $14,375 | ||||
Europe | 8,605 | 335,788 | — | 344,393 | ||||
Latin America | 26,954 | 2,795 | — | 29,749 | ||||
Middle East/Central Asia | — | 7,509 | — | 7,509 | ||||
North America | 63,467 | — | — | 63,467 | ||||
Pacific Basin | 13,621 | 228,315 | 2,310 | 244,246 | ||||
Preferred Stocks | ||||||||
Europe | — | 2,212 | — | 2,212 | ||||
Latin America | 6,156 | — | — | 6,156 | ||||
Pacific Basin | — | 98 | — | 98 | ||||
Short-Term Investments | ||||||||
Investment Company-Securities Lending Investment Fund | 1,705 | — | — | 1,705 | ||||
Total Investments in Securities | $120,508 | $591,092 | $2,310 | $713,910 |
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 April 30, 2020. 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 occured.
Valuation Description | Beginning Balance as of 11/01/2019 (000s) | Purchases (000s) | Sales (000s) | Discount/ (Premium) (000s) | Total Realized Gain/(Loss) (000s) | Change in Unrealized Appreciation/ (Depreciation) (000s) | Transfers Into Level 3 (000s)h | Transfers Out of Level 3 (000s) | Ending Balance as of 04/30/2020 (000s) | Unrealized Gain/(Loss) as of 04/30/2020 (000s) | ||||||||||
Common Stocks | $— | $— | $— | $— | $(1,632) | $1,919 | $2,023 | $— | $2,310 | $287 | ||||||||||
Preferred Stocks | 15 | — | (15) | — | — | — | — | — | — | — | ||||||||||
$15 | $— | $(15) | $— | $(1,632) | $1,919 | $2,023 | $— | $2,310 | $287 |
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 04/30/2020 (000s) | Valuation Technique | Unobservable Input(s) | Input Value(s) | ||||
Investments in Securities | ||||||||
Common Stocks | ||||||||
Newcrest Mining Ltd. (Australia) | $ 2,310 | Market Approach | Last Price Adjusted for Share Dilution Factor | AUD 27.72 |
* | 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 April 30, 2020, the aggregate value of these securities was $12,426 or 2% of net assets. |
2 | Depository receipts such as American Depostiory Receipts (ADRs), Global Depository Receipts (GDRs) and other country specific depository receipts are certificates evidencing ownership of shares of a foreign issuer. These certificates are issued by depository banks and generally trade on an established market in the U.S. or elsewhere. |
3 | All or a portion of this security was out on loan as of April 30, 2020. |
4 | Represents the investment of collateral received from securities lending activities |
h | Transferred from Level 2 to Level 3 due to the unavailability of observable market data for pricing |
x | Fair valued in accordance with Harbor Funds' Valuation Procedures. |
AUD | Australian Dollar |
The accompanying notes are an integral part of the Financial Statements.
10
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
Janet L. Wang
Since 2020
Since 2020
Oaktree has subadvised the Fund since 2013.
Investment Objective
The Fund seeks long-term growth of capital.
Frank J. Carroll
Timothy D. Jensen
Janet L. Wang
Management’s Discussion of
Fund Performance
Fund Performance
Market Review
Emerging markets equities generated a loss during the six months ended April 30, 2020. Performance was uneven during the period and markets experienced tremendous volatility. In mid-2019, we laid out a “wish list” of positive developments we hoped would materialize: a truce on the U.S.-China trade war, a continuation of the U.S. Federal Reserve (Fed) easing, higher levels of liquidity, and a weaker dollar. The asset class performed well through the end of 2019, and we were very pleased when these factors played out favorably as we entered 2020.
In mid-January, the COVID-19 virus broke out in Wuhan, and China put the brakes on travel and the economy to contain the disease. However, by late-February, global markets began to sell off as the virus spread globally. The rout accelerated in March as governments around the world enacted widespread lockdowns and social-distancing measures. These measures have created a deep global recession, and markets have priced in a weak earnings outlook along with plunging demand for oil and other commodities. Global equity and credit markets exhibited extraordinary levels of volatility during March, and central banks, led by the Fed, responded with aggressive and unprecedented measures to prevent a global financial crisis. Emerging markets rebounded in April after many nations announced plans to remove lockdowns, and progress was made on an antiviral drug.
Most regions and sectors within the Fund generated negative returns during the period. Brazil was the worst-performing market, driven by currency depreciation and commodity price weakness. China was the best performer, generating a positive return and outperforming developed markets, including the U.S. Although China was hit by the virus first, the implementation of draconian measures contained it, and officials moved ahead to restart the economy. Oil plunged after the Organization of the Petroleum Exporting Countries talks collapsed and a price war emerged between Russia and Saudi Arabia, even as global demand plunged due to virus-related shelter-in-place policies. Value names underperformed growth stocks by a wide margin. Value included an overrepresentation of Financials, Energy and other cyclicals, and these sectors are particularly vulnerable to recession. Emerging markets currencies struggled during the period, as foreign investors withdrew capital from local-currency fixed income markets once the virus hit. Currency weakness negatively affected our positions in Brazil, Russia and South Africa.
Performance
Harbor Emerging Markets Equity Fund returned -15.86% (Retirement Class), -15.93% (Institutional Class), -15.98% (Administrative Class), and -15.94% (Investor Class) for the six-month period ended April 30, 2020, compared to the -10.50% return of the MSCI Emerging Markets (ND) Index.
The Fund’s underperformance was driven by poor stock selection in a number of countries including Brazil, China, Korea, Mexico, Greece, South Africa and Russia. Our overweight allocation to Brazil also hurt relative performance. Stock selection in Thailand and India contributed positively. By sector, stock selection among Industrials, Consumer Discretionary, Consumer Staples and Financials detracted from relative performance, while stock selection among Materials had a positive effect. Our overweight exposure to Energy and Financials hurt relative performance, as did our underweights to Communication Services and Consumer Discretionary.
11
Harbor Emerging Markets Equity Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
TOTAL RETURNS
For the periods ended 04/30/2020
Unannualized | 1 Year | Annualized | |||||||||
6 Months | 5 Years | Life of Fund | |||||||||
Harbor Emerging Markets Equity Fund | |||||||||||
Retirement Class1,2 | -15.86% | -15.01% | -0.69% | -0.44% | |||||||
Institutional Class1 | -15.93 | -15.08 | -0.75 | -0.48 | |||||||
Administrative Class1 | -15.98 | -15.22 | -0.73 | -0.53 | |||||||
Investor Class1 | -15.94 | -15.33 | -1.10 | -0.84 | |||||||
Comparative Index | |||||||||||
MSCI Emerging Markets (ND)1 | -10.50% | -12.00% | -0.10% | 0.62% |
As stated in the Fund’s prospectus dated March 1, 2020, the expense ratios were 0.93% (Net) and 1.22% (Gross) (Retirement Class); 1.01% (Net) and 1.30% (Gross) (Institutional Class); 1.26% (Net) and 1.55% (Gross) (Administrative Class); and 1.38% (Net) and 1.67% (Gross) (Investor Class). The net expense ratios reflect an expense limitation agreement (excluding interest expense, if any) effective through 02/28/2021. 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 took the COVID-19 outbreak very seriously in January and February as it spread in China and Asia, but we did not anticipate its rapid transmission to Europe and North America; nor did we anticipate the depth of the global economic slowdown. As bottom-up stock pickers, we normally welcome market volatility. Relative price movements create opportunities to rotate exposures in the Fund. We have been patiently redeploying capital as relative valuations shift. Higher quality companies moved towards the cheaper end of their historical ranges during March, which gave us the chance to invest in several companies which we previously considered too expensive. The Information Technology sector was hit hard, which allowed us to increase our exposure there by adding to existing positions and initiating several new ones. We also added to our Chinese internet exposure during March. We liquidated some positions, including several Energy and cyclical names and a few companies with leveraged balance sheets. The new economic environment altered our forecasts, and we wanted to focus our Energy and cyclical exposure on companies with the strongest balance sheets and most-defensible cash flows.
Several East Asian countries have strong public health systems and handled the first wave of the pandemic very well. Some other emerging market countries in Latin America, Europe, the Middle East and Africa were affected by the pandemic later and have weaker health systems. Several of these markets declined significantly in anticipation of a negative economic impact. Countries like Brazil experienced 50% corrections in the first quarter of 2020. We are patiently and selectively adding to some names given the magnitude of the pullback. India, like Brazil, is in the early stages of the virus impact. Traditionally a very expensive market, India indices pulled back over 30% during the first quarter of 2020. India has several large and dense population centers and a poor health system. As a result, we are more cautious about the development of the virus and its potential economic impact there, but we are closely tracking a few interesting investment opportunities.
We now expect the following:
• | Companies will take advantage of the virus to “kitchen sink” the first quarter of 2020 and blame the virus. “The deeper the V, the sharper the recovery” will be the rationale. Most sell-side consensus 2020 earnings estimates are stale; we expect significant further estimate cuts across developed and emerging markets after first-quarter earnings are released. |
• | Given the virus-related shutdowns in developed economies, second quarter of 2020 expectations for exporters serving these markets have been or will be downgraded. |
• | Governments will roll out stimulus programs as needed, including lower interest rates, incremental fixed-asset investment and income support. However, we do not expect China to implement a massive spending binge like it did after the Global Financial Crisis. Instead, we believe they will ramp up multiple smaller programs as needed. |
• | Long-term trends we expect include more work-at-home, less business travel, more investment in public health, and more supply-chain diversification. |
• | The advances in biotech have been remarkable. The virus was identified and sequenced months faster than SARS. Many companies are working on vaccines and treatments. We expect China will continue to support the development of a world-class biotech industry. |
• | Now that the virus has gone global, we expect reduced international travel by Chinese tourists this year and consequently a down year for luxury goods consumption. |
• | We do not seek markets to “hide in” at this stage. Our markets are pricing in a developed world recession, and the commodity and export sectors have been hit hard. |
1 | The “Life of Fund” return as shown reflects the period 11/01/2013 through 04/30/2020. |
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. |
12
Harbor Emerging Markets Equity Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
• | The Fed has been extremely aggressive in its efforts to stabilize U.S. credit markets. If U.S. credit stabilizes, emerging market credit should follow. |
The Fund is overweight, Russia, Hong Kong and Brazil and is underweight China and Taiwan. China performed relatively well after containing the COVID-19 pandemic, thus we reduced some exposure and redeployed to other markets. We have no exposure to Turkey, Malaysia or Saudi Arabia. By sector, the Fund is overweight Information Technology, Materials and Financials, while underweight Communication Services, Consumer Discretionary, and Industrials.
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—April 30, 2020 (Unaudited)
Portfolio of Investments—April 30, 2020 (Unaudited)
REGION BREAKDOWN(% of investments)
Portfolio of Investments
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—96.1% | |||
Shares | Value | ||
AIRLINES—0.6% | |||
60,773 | Azul SA ADR (Brazil)*,1 | $581 | |
AUTOMOBILES—1.4% | |||
916,000 | Geely Automobile Holdings Ltd. (China) | 1,425 | |
BANKS—15.4% | |||
757,096 | Alpha Bank AE (Greece)* | 553 | |
264,816 | Banco Bradesco SA ADR (Brazil)*,1 | 932 | |
8,210,600 | Bank Rakyat Indonesia Persero Tbk PT (Indonesia) | 1,493 | |
662,000 | China Construction Bank Corp. (China) | 531 | |
260,500 | China Merchants Bank Co. Ltd. (China) | 1,233 | |
258,937 | Grupo Financiero Banorte SAB de CV (Mexico) | 709 | |
63,732 | Hana Financial Group Inc. (South Korea) | 1,455 | |
180,835 | ICICI Bank Ltd. ADR (India)1 | 1,765 | |
311,531 | Itau Unibanco Holding SA ADR (Brazil)1 | 1,312 | |
32,445 | KB Financial Group Inc. (South Korea) | 928 | |
30,073 | OTP Bank plc (Hungary)* | 891 | |
550,400 | Ping An Bank Co. Ltd. (China) | 1,074 | |
230,515 | Sberbank of Russia PJSC ADR (Russia)1 | 2,447 | |
241,145 | United Bank Ltd. (Pakistan) | 160 | |
15,483 | |||
BEVERAGES—2.3% | |||
407,570 | Budweiser Brewing Co. Apac Ltd. (China)2 | 1,107 | |
85,195 | Jiangsu Yanghe Brewery Joint-Stock Co. Ltd. (China)* | 1,181 | |
2,288 | |||
CHEMICALS—1.9% | |||
4,434 | LG Chem Ltd. (South Korea) | 1,378 | |
21,668 | Sociedad Quimica y Minera de Chile SA ADR (Chile)1 | 494 | |
2,684,000 | Tianhe Chemicals Group Ltd. (China)*,2 | —x | |
1,872 | |||
CONSTRUCTION & ENGINEERING—1.1% | |||
1,792,000 | China Railway Group Ltd. (China) | 1,071 | |
CONSTRUCTION MATERIALS—5.0% | |||
228,500 | Anhui Conch Cement Co. Ltd. (China) | 1,802 | |
455,479 | Cemex SAB de CV ADR (Mexico)1 | 966 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
CONSTRUCTION MATERIALS—Continued | |||
2,342,700 | Semen Indonesia Persero TBK PT (Indonesia) | $1,243 | |
22,870 | UltraTech Cement Ltd. (India) | 1,064 | |
5,075 | |||
DIVERSIFIED CONSUMER SERVICES—1.9% | |||
66,826 | Afya Ltd. (Brazil)* | 1,453 | |
481,650 | Cogna Educacao (Brazil) | 490 | |
1,943 | |||
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—2.0% | |||
200,797 | Hangzhou Hikvision Digital Technology Co. Ltd. (China) | 901 | |
3,000 | Largan Precision Co. Ltd. (Taiwan)* | 409 | |
12,100 | Murata Manufacturing Co. Ltd. (Japan) | 682 | |
1,992 | |||
FOOD & STAPLES RETAILING—0.9% | |||
158,209 | ShopRite Holdings Ltd. (South Africa) | 916 | |
FOOD PRODUCTS—3.7% | |||
2,998,700 | Charoen Pokphand Foods PCL (Thailand) | 2,484 | |
1,681,000 | Want Want China Holdings Ltd. (China) | 1,198 | |
3,682 | |||
HOTELS, RESTAURANTS & LEISURE—1.9% | |||
291,000 | Galaxy Entertainment Group Ltd. (China)* | 1,872 | |
HOUSEHOLD DURABLES—0.8% | |||
311,992 | Suofeiya Home Collection Co. Ltd. (China) | 822 | |
INDEPENDENT POWER & RENEWABLE ELECTRICITY PRODUCERS—0.9% | |||
1,821,100 | China Longyuan Power Group Corp. Ltd. (China) | 910 | |
INSURANCE—7.4% | |||
253,600 | AIA Group Ltd. (Hong Kong) | 2,327 | |
220,600 | China Pacific Insurance Group Co. Ltd. (China) | 730 | |
106,623 | ICICI Prudential Life Insurance Co. Ltd. (India)2 | 580 | |
377,000 | Ping An Insurance Group Co. of China Ltd. (China) | 3,836 | |
7,473 |
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 | ||
INTERACTIVE MEDIA & SERVICES—6.1% | |||
13,777 | Baidu Inc. ADR (China)*,1 | $1,391 | |
90,700 | Tencent Holdings Ltd. (China) | 4,768 | |
6,159 | |||
INTERNET & DIRECT MARKETING RETAIL—4.2% | |||
103,000 | Alibaba Group Holding Ltd. (China)* | 2,614 | |
4,045 | Alibaba Group Holding Ltd. ADR (China)*,1 | 820 | |
1,400 | MercadoLibre Inc. (Argentina)* | 817 | |
4,251 | |||
LEISURE PRODUCTS—0.3% | |||
51,086 | Giant Manufacturing Co. Ltd. (Taiwan) | 301 | |
LIFE SCIENCES TOOLS & SERVICES—4.0% | |||
95,199 | Hangzhou Tigermed Consulting Co. Ltd. (China) | 1,020 | |
197,069 | Pharmaron Beijing Co. Ltd. (China) | 1,550 | |
100,825 | WuXi AppTec Co. Ltd. (China)2 | 1,422 | |
3,992 | |||
METALS & MINING—3.9% | |||
111,507 | AngloGold Ashanti Ltd. ADR (South Africa)1 | 2,720 | |
36,648 | MMC Norilsk Nickel PJSC ADR (Russia)1 | 1,016 | |
1,188,800 | MMG Ltd. (China)* | 206 | |
3,942 | |||
OIL, GAS & CONSUMABLE FUELS—8.2% | |||
7,214 | CNOOC Ltd. ADR (China)1 | 811 | |
32,504 | Lukoil PJSC ADR (Russia)1 | 2,120 | |
202,826 | Petroleo Brasileiro SA ADR (Brazil)*,1 | 1,388 | |
199,713 | Reliance Industries Ltd. (India) | 3,878 | |
8,197 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
PHARMACEUTICALS—0.5% | |||
110,008 | Glenmark Pharmaceuticals Ltd. (India) | $487 | |
REAL ESTATE MANAGEMENT & DEVELOPMENT—1.8% | |||
442,000 | Shimao Property Holdings Ltd. (China) | 1,797 | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—13.4% | |||
755,000 | Ase Technology Holding Co. (Taiwan)* | 1,682 | |
183,000 | MediaTek Inc. (Taiwan)* | 2,527 | |
36,250 | SK Hynix Inc. (South Korea) | 2,494 | |
127,179 | Taiwan Semiconductor Manufacturing Co. Ltd. ADR (Taiwan)1 | 6,757 | |
13,460 | |||
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS—6.5% | |||
158,642 | Samsung Electronics Co. Ltd. (South Korea) | 6,523 | |
TOTAL COMMON STOCKS | |||
(Cost $96,086) | 96,514 | ||
TOTAL INVESTMENTS—96.1% | |||
(Cost $96,086) | 96,514 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—3.9% | 3,932 | ||
TOTAL NET ASSETS—100.0% | $100,446 |
FAIR VALUE MEASUREMENTS
The following table summarizes the Fund’s investments as of April 30, 2020 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 | $2,720 | $916 | $— | $3,636 | ||||
Europe | — | 7,027 | — | 7,027 | ||||
Latin America | 8,652 | 490 | — | 9,142 | ||||
Middle East/Central Asia | 2,345 | 5,589 | — | 7,934 | ||||
Pacific Basin | 12,263 | 56,512 | — | 68,775 | ||||
Total Investments in Securities | $25,980 | $70,534 | $— | $96,514 |
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.
15
Harbor Emerging Markets Equity 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 period ended April 30, 2020.
Valuation Description | Beginning Balance as of 11/01/2019 (000s) | Purchases (000s) | Sales (000s) | Discount/ (Premium) (000s) | Total Realized Gain/(Loss) (000s) | Change in Unrealized Appreciation/ (Depreciation) (000s) | Transfers Into Level 3 (000s) | Transfers Out of Level 3 (000s) | Ending Balance as of 04/30/2020 (000s) | Unrealized Gain/(Loss) as of 04/30/2020 (000s) | ||||||||||
Common Stocks | $— | $— | $— | $— | $— | $— | $— | $— | $— | $(512) |
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 04/30/2020 (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 | Depository receipts such as American Depostiory Receipts (ADRs), Global Depository Receipts (GDRs) and other country specific depository receipts are certificates evidencing ownership of shares of a foreign issuer. These certificates are issued by depository banks and generally trade on an established market in the U.S. or elsewhere. |
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 April 30, 2020, the aggregate value of these securities was $3,109 or 3% of net assets. |
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
Laure Négiar, CFA
Since 2019
Since 2019
Zak Smerczak, CFA
Since 2019
Since 2019
Alexandre Narboni
Since 2019
Since 2019
Richard Mercado, CFA
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.
Laure Négiar, CFA
Zak Smerczak, CFA
Alexandre Narboni
Richard Mercado, CFA
Management’s Discussion of
Fund Performance
Fund Performance
Market Review
Over the six-month period ending April 30, 2020, financial markets experienced one of their most volatile episodes in history. International equity markets were not immune from the broad impacts, both socially and economically, of the COVID-19 pandemic. Between February 19 and March 19, international markets collapsed by 31.51% in U.S. Dollars (as shown by the MSCI All Country World Ex. U.S. Index), a move not seen since the 1980’s. The MSCI All Country World Ex. U.S. Index ultimately finished the six-month period under review down 13.75%.
It is potentially more illustrative to separate the six-month period into the three months prior to markets being impacted by COVID-19 and the three months during which the full force of social lockdowns were absorbed. The first three months were relatively benign, with International markets finishing the November 1 – January 31 period up 1.80%. The next three months saw a far different story, with markets dropping 15.27% on concerns around the economic impacts from synchronized social lockdowns.
The confinement measures implemented globally were unprecedented, with nearly three billion people around the world estimated to be in some form of lockdown during the past six months. The full extent of the impacts to corporate balance sheets, business models, supply chains and consumer trends remain uncertain and will only become clearer with time. Governments globally are responding with various attempts to stimulate their economies, offering a band-aid of sorts for households to remain liquid while the lockdown measures persist.
Performance
Harbor Focused International Fund returned -5.25% (Retirement Class), -5.30% (Institutional Class) and -5.41% (Investor Class) while the MSCI All Country World Ex. U.S. (ND) returned -13.22% during the six-month period ended April 30. The Fund continued to reflect our assessment of the highest quality, growth companies best positioned to weather uncertainty. In our view, companies held in the Fund have strong competitive advantages, structural growth drivers, good corporate cultures and robust balance sheets. We believe many of our holdings will emerge even stronger as they take share from their weaker and indebted competitors and that these characteristics have been, and should continue to be, favored by the market amidst the uncertain outlook. In our view, Fund portfolio companies are well-positioned to defend and grow their market share, meaning strong earnings growth should follow when normalcy resumes.
The performance of the Fund has been more resilient and less volatile than the markets during the period under review. The Fund performed better than the benchmark in all regions, with strong outperformance in Europe and the emerging markets. Performance was aided by an overweight to Health Care and underexposure to sectors that are typically less visible and of lower quality, including Energy, Materials and Financials. Stock selection within most sectors was also a meaningful contributor to outperformance. Among the Fund’s top contributors were Roche – one of the world’s largest pharmaceutical companies, Japanese company Hamamatsu Photonics – a leading manufacturer of high-tech components and Pan Pacific International Holdings – a Japanese discount retailer. Perhaps unsurprisingly, Amadeus, a leading platform that facilitates travel-related bookings, was the largest detractor given its ties to the travel and hospitality industry.
The Fund’s largest sector overweights remain Consumer Staples and Information Technology. The largest underweights remain the Financials and Energy sectors. Our views on the relative attractiveness, or lack thereof, in these sectors remain unchanged. We continue to believe that the Fund’s Consumer Staples holdings are excellent earnings compounders and believe
17
Harbor Focused International Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
TOTAL RETURNS
For the periods ended 04/30/2020
Unannualized | 1 Year | 5 Years | Unannualized | ||||||||
6 Months | Life of Fund | ||||||||||
Harbor Focused International Fund | |||||||||||
Retirement Class1 | -5.25% | N/A | N/A | 2.14% | |||||||
Institutional Class1 | -5.30 | N/A | N/A | 2.09 | |||||||
Investor Class1 | -5.41 | N/A | N/A | 1.78 | |||||||
Comparative Index | |||||||||||
MSCI All Country World Ex. U.S. (ND)1 | -13.22% | N/A | N/A | -6.49% |
As stated in the Fund’s prospectus dated March 1, 2020, the expense ratios were 0.77% (Net) and 1.11% (Gross) (Retirement Class); 0.85% (Net) and 1.19% (Gross) (Institutional Class); 1.10% (Net) and 1.44% (Gross) (Administrative Class); 1.22% (Net) and 1.56% (Gross) (Investor Class). The net expense ratios reflect an expense limitation agreement (excluding interest expense, if any) effective through 02/28/2021. 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 durability of their earnings remains paramount. Fund exposures within Information Technology are focused on strong business models with platform or network characteristics. We believe these companies will improve their competitive positions while benefiting from strong secular tailwinds. E-commerce and online gaming are an area that should benefit from the ongoing changes to daily life in confinement. We remain underweight the Financials sector, focusing Fund exposure on life insurance companies in emerging markets and more recently, a mortgage company in India. We hold zero exposure to the Energy sector and limited exposure to the Materials sector, as we continue to lack conviction in the specific business models offered there. The unpredictability of oil prices and oil supply and demand was on full display during the period under review, reinforcing our thesis that the Energy sector lacks the visibility we prefer.
Outlook & Strategy
The ongoing impacts of the coronavirus on financial markets has made areas of the market appear cheaper; however, the reporting of earnings will ultimately determine the true attractiveness of these opportunities. There is a high level of uncertainty at the market level which confirms the importance of conviction at the stock-specific level. We believe that companies with structurally advantaged business models, sound competitive positions and solid balance sheets can be resilient to uncertain macroeconomic conditions and may even emerge from uncertainty with stronger competitive positions.
At Comgest, we endeavor to deeply study such companies from a bottom-up perspective. This often means following the fundamentals of specific stocks for years before an opportunity arises to purchase a long-term compounder at an attractive valuation. We will continue to follow such companies closely and aim to opportunistically capitalize on uncertainty so that the Fund remains comprised of what we assess to be quality growth companies capable of delivering attractive long-term returns.
1 | The “Life of Fund” return as shown reflects the period 06/01/2019 through 04/30/2020. |
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—April 30, 2020 (Unaudited)
Portfolio of Investments—April 30, 2020 (Unaudited)
REGION BREAKDOWN(% of investments)
Portfolio of Investments
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—93.3% | |||
Shares | Value | ||
AEROSPACE & DEFENSE—1.2% | |||
2,470 | MTU Aero Engines AG (Germany)* | $336 | |
BEVERAGES—7.8% | |||
8,915 | Heineken NV (Netherlands) | 759 | |
3,436 | Kweichow Moutai Co. Ltd. Class A (China) | 612 | |
5,068 | Pernod Ricard SA (France) | 774 | |
2,145 | |||
BUILDING PRODUCTS—2.0% | |||
4,300 | Daikin Industries Ltd. (Japan) | 552 | |
CHEMICALS—3.0% | |||
7,400 | Shin-Etsu Chemical Co. Ltd. (Japan) | 816 | |
ELECTRICAL EQUIPMENT—2.0% | |||
9,600 | Nidec Corp. (Japan) | 559 | |
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—5.2% | |||
17,500 | Hamamatsu Photonics KK (Japan) | 765 | |
1,900 | Keyence Corp. (Japan) | 678 | |
1,443 | |||
ENTERTAINMENT—2.4% | |||
1,942 | NetEase Inc. ADR (China)*,1 | 670 | |
FOOD PRODUCTS—4.4% | |||
294,138 | Inner Mongolia Yili Industrial Group Co. Ltd. Class A (China) | 1,206 | |
HEALTH CARE EQUIPMENT & SUPPLIES—6.3% | |||
12,800 | Hoya Corp. (Japan) | 1,167 | |
741 | Straumann Holding AG (Switzerland) | 564 | |
1,731 | |||
INSURANCE—8.6% | |||
92,345 | AIA Group Ltd. (Hong Kong) | 848 | |
151,266 | Ping An Insurance Group Co. of China Ltd. (China) | 1,539 | |
2,387 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
INTERACTIVE MEDIA & SERVICES—5.5% | |||
8,811 | Autohome Inc. ADR Class A (China)1 | $724 | |
15,308 | Tencent Holdings Ltd. (China) | 804 | |
1,528 | |||
INTERNET & DIRECT MARKETING RETAIL—2.4% | |||
3,284 | Alibaba Group Holding Ltd. ADR (China)*,1 | 666 | |
IT SERVICES—2.7% | |||
15,800 | Amadeus IT Group SA Class A (Spain) | 754 | |
MULTILINE RETAIL—2.5% | |||
35,300 | Pan Pacific International Holdings Corp. (Japan) | 684 | |
PERSONAL PRODUCTS—7.5% | |||
4,291 | L'Oreal SA (France) | 1,247 | |
15,996 | Unilever plc (United Kingdom) | 824 | |
2,071 | |||
PHARMACEUTICALS—7.5% | |||
10,124 | Novo Nordisk AS (Denmark) | 646 | |
4,129 | Roche Holding AG (Switzerland) | 1,430 | |
2,076 | |||
PROFESSIONAL SERVICES—3.2% | |||
29,407 | Experian plc (United Kingdom) | 883 | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—3.2% | |||
16,566 | Taiwan Semiconductor Manufacturing Co. Ltd. ADR (Taiwan)1 | 880 | |
SOFTWARE—4.1% | |||
9,545 | SAP SE (Germany) | 1,137 | |
SPECIALTY RETAIL—6.7% | |||
1,600 | Fast Retailing Co. Ltd. (Japan) | 759 | |
5,600 | Hikari Tsushin Inc. (Japan) | 1,084 | |
1,843 |
19
Harbor Focused International Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—Continued | |||
Shares | Value | ||
TEXTILES, APPAREL & LUXURY GOODS—3.5% | |||
6,052 | EssilorLuxottica SA (France) | $752 | |
570 | LVMH Moet Hennessy Louis Vuitton SE (France) | 220 | |
972 | |||
THRIFTS & MORTGAGE FINANCE—1.6% | |||
17,885 | Housing Development Finance Corp. Ltd. (India) | 452 | |
TOTAL COMMON STOCKS | |||
(Cost $25,729) | 25,791 | ||
TOTAL INVESTMENTS—93.3% | |||
(Cost $25,729) | 25,791 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—6.7% | 1,839 | ||
TOTAL NET ASSETS—100.0% | $27,630 |
FAIR VALUE MEASUREMENTS
The following table summarizes the Fund’s investments as of April 30, 2020 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 | $— | $10,326 | $— | $10,326 | ||||
Middle East/Central Asia | — | 452 | — | 452 | ||||
Pacific Basin | 2,940 | 12,073 | — | 15,013 | ||||
Total Investments in Securities | $2,940 | $22,851 | $— | $25,791 |
There were no Level 3 investments at April 30, 2020 or October 31, 2019.
For more information on valuation inputs and their aggregation into the levels 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 | Depository receipts such as American Depostiory Receipts (ADRs), Global Depository Receipts (GDRs) and other country specific depository receipts are certificates evidencing ownership of shares of a foreign issuer. These certificates are issued by depository banks and generally trade on an established market in the U.S. or elsewhere. |
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
Global equities, as measured by the MSCI All Country World (ND) Index, traded lower during the six-month period, as the COVID-19 crisis erased the market’s strong 2019 momentum. The market ended 2019 on a high note, with global equities posting their best year since 2009, bolstered by dovish central bank positioning, improving U.S. trade policy, and Brexit progress. The environment shifted with the turning of the calendar as the COVID-19 pandemic swept the globe. Equity market volatility surpassed levels seen in 2008, and most countries adopted social distancing measures to slow the virus’s spread, which in turn resulted in contracting economic activity. All regions declined, led lower by Latin America. From a sector perspective, Information Technology and Health Care were relative bright spots, positively contributing to the index’s return. Energy was the largest sector detractor as oil prices collapsed, followed by Financials, given extreme easing measures by global central banks.
Performance
Over the six-month period ending April 30, 2020, Harbor Global Leaders Fund returned -2.39 (Retirement Class), -2.45% (Institutional Class), -2.57% (Administrative Class), and -2.64% (Investor Class) versus the -7.68% return for the MSCI All Country World (ND) Index. The Fund’s excess return for the period was driven largely by security selection, as well as by positive allocation and currency effects. Developed Asia was the top regional contributor to relative results, while Emerging Asia was the sole regional detractor. From a sector perspective, Financials and Information Technology contributed most to relative results, while Communication Services and Consumer Discretionary were the top relative detractors.
On an absolute basis, the largest individual contributors to the Fund’s investment results were Adobe, Microsoft, Keyence, Sea, and MonotaRO.
Sea’s business continues to track our long-term investment case. Its stock was bolstered during the period as its core gaming and ecommerce businesses delivered strong results and were relatively unaffected by the social distancing measures spurred by the COVID-19 outbreak. If anything, the gaming business was likely a marginal beneficiary, given the additional free time to play online/mobile games. Garena (gaming) revenues grew 167 percent in 2019, largely driven by its self-developed hit game Free Fire. We believe growth will normalize in the mid-to-high teens going forward, with upside potential from other self-developed and/or partnered games. Shopee (ecommerce) continues to cement its leadership across Southeast Asia, with quarterly gross merchandise volume of $5.6 billion (up 65% year-over-year), 70% customer retention, and positive monetization trends. Driven by very strong business momentum, robust cash flow, and a healthy balance sheet, Shopee is now increasingly pressuring competitors and further expanding its market share in key markets. Importantly, we believe Shopee’s revenue will account for nearly half of Sea’s total in 2020, which we believe will continue to de-risk the overall business, given the relatively volatile nature of gaming revenue. The secular shift from brick-and-mortar to ecommerce retailing continues and may actually accelerate coming out of this COVID-19 crisis, benefiting Sea’s ecommerce business over the long-run.
The largest absolute individual detractors from investment results were Safran, HDFC Bank, TransDigm, Live Nation, and Bank Central Asia.
HDFC Bank is India’s largest private-sector bank, with a customer base of approximately 40 million. Shares sold off during the period amid the COVID-19 outbreak. The disruptions created by the pandemic and high degree of uncertainty on its trajectory poses a unique challenge, in our view, for HDFC Bank given its role as a key financial intermediary. We expect more near-term pressure as infection rates peak and as forced liquidations/redemptions
21
Harbor Global Leaders Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
TOTAL RETURNS
For the periods ended 04/30/2020
Unannualized | 1 Year | Annualized | |||||||||
6 Months | 5 Years | 10 Years | |||||||||
Harbor Global Leaders Fund | |||||||||||
Retirement Class1 | -2.39% | 3.35% | 9.57% | 11.73% | |||||||
Institutional Class | -2.45 | 3.26 | 9.50 | 11.69 | |||||||
Administrative Class | -2.57 | 3.00 | 9.23 | 11.42 | |||||||
Investor Class | -2.64 | 2.86 | 9.10 | 11.28 | |||||||
Comparative Index | |||||||||||
MSCI All Country World (ND) | -7.68% | -4.96% | 4.37% | 6.94% |
As stated in the Fund’s prospectus dated March 1, 2020, the expense ratios were 0.78% (Net) and 0.92% (Gross) (Retirement Class); 0.86% (Net) and 1.00% (Institutional Class); 1.11% (Net) and 1.25% (Gross) (Administrative Class); and 1.23% (Net) and 1.37% (Gross) (Investor Class). The Adviser has contractually agreed to waive 0.05% of its management fee and to limit the Total Annual Fund Operating Expenses, excluding interest expense (if any), effective through 02/28/2021. 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.
lead to indiscriminate selling of Indian stocks. Specific to HDFC Bank, we are monitoring the 10 to 15 percent of its loan book consisting of unsecured loans to micro/small/medium enterprises and non-salaried customers. However, we believe the bank has ample capacity to absorb losses even in a scenario where a third of these customers default with no recovery. Importantly, the remainder of the unsecured loan book is to prime salaried employees, most of whom we expect to keep their jobs amid the government-mandated lockdown. In our view, the bank’s balance sheet remains well capitalized and sufficiently liquid, given its strong funding franchise and direct access to central bank funds. While the short term will be challenging, our view on HDFC Bank’s long-term growth drivers and earnings potential remains intact.
Outlook & Strategy
During the period, there was very little transaction activity or repositioning in the Fund, and, on a relative basis, investment results have remained strong. These two points together reflect what we believe is the underlying durability and quality of the franchises in which the Fund invests. To us, these points serve as a testament to the power of Sands Capital’s investment criteria to simultaneously serve as a wealth-creation tool as well as an effective risk-mitigation tool. This dual nature of our criteria illustrates the “with prudence” part of our mission.
The market remains highly volatile, as it attempts to make sense of rapidly changing information. In our view, transactions during this time tend to add little value. For now, our recipe is to sit tight, double-check any known vulnerabilities, and look for any blind spots. Once we see signposts of a path forward—which in this case may be the second derivative of the number of new cases—we will begin leaning into relative weakness and executing on our shopping list.
Below is what we shared with clients in the depths of the Great Financial Crisis in 2008, which we believe still rings true today:
History suggests that stock market recoveries occur well before economic recoveries. As we like to say at Sands Capital, you have to “be there,” not “getting there.” In other words, investors need to be positioned in the right companies before the market turns, not after. Having adhered assiduously to our investment philosophy and strategy, we believe our clients are already “there” and uniquely positioned to benefit from this recovery.
The market at this moment is gripped by fear, panic, and severe risk aversion. This too shall pass. Looking forward, we believe that patience will be rewarded—and so too will our concentrated portfolio of high-quality growth businesses.
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—April 30, 2020 (Unaudited)
Portfolio of Investments—April 30, 2020 (Unaudited)
REGION BREAKDOWN(% of investments)
Portfolio of Investments
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—98.4% | |||
Shares | Value | ||
AEROSPACE & DEFENSE—4.7% | |||
23,613 | Safran SA (France) | $2,195 | |
8,686 | TransDigm Group Inc. (United States)* | 3,154 | |
5,349 | |||
AUTO COMPONENTS—2.0% | |||
33,613 | Aptiv plc (United States) | 2,338 | |
BANKS—4.3% | |||
1,055,000 | Bank Central Asia TBK PT (Indonesia) | 1,828 | |
71,420 | HDFC Bank Ltd. ADR (India)1 | 3,096 | |
4,924 | |||
BIOTECHNOLOGY—3.7% | |||
21,294 | CSL Ltd. (Australia) | 4,244 | |
CAPITAL MARKETS—4.3% | |||
34,338 | Intercontinental Exchange Inc. (United States) | 3,071 | |
7,765 | Moody's Corp. (United States) | 1,894 | |
4,965 | |||
COMMERCIAL SERVICES & SUPPLIES—2.7% | |||
517,151 | Rentokil Initial plc (United Kingdom) | 3,077 | |
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—3.9% | |||
12,560 | Keyence Corp. (Japan) | 4,484 | |
ENTERTAINMENT—3.8% | |||
36,696 | Live Nation Entertainment Inc. (United States)* | 1,646 | |
48,466 | Sea Ltd. ADR (Singapore)*,1 | 2,694 | |
4,340 | |||
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—2.9% | |||
4,888 | Equinix Inc. (United States) | 3,300 | |
FOOD & STAPLES RETAILING—3.7% | |||
152,200 | Alimentation Couche-Tard Inc. (Canada) | 4,247 | |
HEALTH CARE EQUIPMENT & SUPPLIES—3.1% | |||
95,134 | Boston Scientific Corp. (United States)* | 3,566 | |
HEALTH CARE PROVIDERS & SERVICES—2.5% | |||
9,754 | UnitedHealth Group Inc. (United States) | 2,853 | |
INDUSTRIAL CONGLOMERATES—3.2% | |||
10,790 | Roper Technologies Inc. (United States) | 3,680 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
INSURANCE—3.7% | |||
464,500 | AIA Group Ltd. (Hong Kong) | $4,263 | |
INTERACTIVE MEDIA & SERVICES—1.2% | |||
214,873 | Rightmove plc (United Kingdom) | 1,343 | |
IT SERVICES—4.2% | |||
26,867 | Visa Inc. (United States) | 4,802 | |
LIFE SCIENCES TOOLS & SERVICES—5.3% | |||
22,456 | Iqvia Holdings Inc. (United States)* | 3,202 | |
6,620 | Lonza Group AG (Switzerland) | 2,891 | |
6,093 | |||
MEDIA—2.9% | |||
6,799 | Charter Communications Inc. (United States)* | 3,367 | |
MULTILINE RETAIL—4.3% | |||
17,558 | Dollar General Corp. (United States) | 3,078 | |
93,600 | Pan Pacific International Holdings Corp. (Japan) | 1,813 | |
4,891 | |||
PHARMACEUTICALS—3.7% | |||
32,704 | Zoetis Inc. (United States) | 4,229 | |
PROFESSIONAL SERVICES—4.7% | |||
97,250 | Recruit Holdings Co. Ltd. (Japan) | 2,837 | |
16,665 | Verisk Analytics Inc. (United States) | 2,547 | |
5,384 | |||
ROAD & RAIL—1.4% | |||
9,685 | Union Pacific Corp. (United States) | 1,548 | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—6.0% | |||
53,211 | Taiwan Semiconductor Manufacturing Co. Ltd. ADR (Taiwan)1 | 2,827 | |
34,874 | Texas Instruments Inc. (United States) | 4,048 | |
6,875 | |||
SOFTWARE—12.5% | |||
8,074 | Adobe Inc. (United States)* | 2,855 | |
12,422 | Dassault Systemes SE (France) | 1,819 | |
13,546 | Intuit Inc. (United States) | 3,655 |
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 | ||
SOFTWARE—Continued | |||
20,704 | Microsoft Corp. (United States) | $3,710 | |
17,306 | Temenos AG (Switzerland)* | 2,243 | |
14,282 | |||
SPECIALTY RETAIL—1.7% | |||
21,010 | Ross Stores Inc. (United States) | 1,919 | |
TRADING COMPANIES & DISTRIBUTORS—2.0% | |||
71,600 | Monotaro Co. Ltd. (Japan) | 2,301 | |
TOTAL COMMON STOCKS | |||
(Cost $100,495) | 112,664 | ||
TOTAL INVESTMENTS—98.4% | |||
(Cost $100,495) | 112,664 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—1.6% | 1,809 | ||
TOTAL NET ASSETS—100.0% | $114,473 |
FAIR VALUE MEASUREMENTS
The following table summarizes the Fund’s investments as of April 30, 2020 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 | $— | $13,568 | $— | $13,568 | ||||
Middle East/Central Asia | 3,096 | — | — | 3,096 | ||||
North America | 68,709 | — | — | 68,709 | ||||
Pacific Basin | 5,521 | 21,770 | — | 27,291 | ||||
Total Investments in Securities | $77,326 | $35,338 | $— | $112,664 |
There were no Level 3 investments at April 30, 2020 or October 31, 2019.
For more information on valuation inputs and their aggregation into the levels 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 | Depository receipts such as American Depostiory Receipts (ADRs), Global Depository Receipts (GDRs) and other country specific depository receipts are certificates evidencing ownership of shares of a foreign issuer. These certificates are issued by depository banks and generally trade on an established market in the U.S. or elsewhere. |
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 (operating as Marathon-London in the U.S.) 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
Market enthusiasm for what appeared to be easing trade tensions between the U.S. and China towards the end of 2019 drifted deep into memory as the onslaught of the novel coronavirus epidemic began to take center stage and rock the foundations of societies, economies and equity markets across the world during the first quarter of 2020. The pandemic outbreak and countermeasures to contain COVID-19 triggered panic among investors, which in turn instigated a dramatic equity market sell-off. Subsequently investor nerves began to calm, with equity markets reversing course dramatically, following an unprecedented level of monetary and fiscal response measures globally.
During the downturn, there were significant divergences in various countries’ equity markets’ performance across the world, largely attributable to differing levels of social and economic impact and differing governments’ social, monetary and fiscal policy responses to the outbreak. This led to an abnormal level of influence of country allocation to the Fund’s relative performance. In addition, positioning relative to the index in sectors caught in the crosshairs of the outbreak (such as Travel and Leisure, Financials, cyclical industries that are correlated with business cycles) or those perceived as more insulated from the outbreak (such as Health Care, Information Technology, and Consumer Staples) was also an abnormally large ‘swing factor’. While past performance is not a guarantee of future results, history suggests that this performance divergence dissipates over time towards longer-term trends and that more idiosyncratic considerations at the stock-specific level will determine the long-term success of an investment.
Given these turbulent times the MSCI EAFE (ND) Index entered bear market territory and returned -14.21% (U.S. Dollar) over the six-month period ended April 30th. On a regional basis, the developed Asian ex-Japan markets collectively (Australia, Hong Kong, Singapore and New Zealand), which constituted 11.85% of the Index on average over the period, led the broad equity market downturn during the six-month period returning -16.93% (U.S. Dollar within the MSCI EAFE (ND) Index), with European markets following behind returning -15.47% (U.S. Dollar) and averaging 62.52% of the MSCI EAFE (ND) Index. The Japanese component of the MSCI EAFE (ND) Index, which averaged 25.04% over the period, was also in negative territory, returning -9.97% (U.S. Dollar).
PERFORMANCE
Harbor International Fund underperformed the MSCI EAFE (ND) Index over the six-month period ended April 30, 2020, returning -15.23% (Retirement Class), -15.26% (Institutional Class), -15.38% (Administrative Class) and -15.42% (Investor Class) while the Index returned -14.21%. A positive contribution came from the Fund’s regional allocation exposure; however, this was more than offset by the negative influence from stock selection and de minimis currency effect. More specifically stock selection within Europe, most notably the U.K. (and the overweight exposure to this market), was one of the strongest negative contributing factors to relative performance of the Fund over the period. Stock selection in Japan also contributed negatively. Conversely the regional allocation within the developed Asian ex-Japan markets, most notably the underweight allocation to Australia (averaging 2.84% of the Fund versus a MSCI EAFE (ND) Index average allocation of 6.68% over the period), contributed positively to the relative returns of the Fund. Additionally, the Fund’s limited out-of-benchmark allocation to emerging markets (averaging 6.16% of the Fund over the reporting period) contributed positively to the relative returns.
From a sector standpoint, the Fund’s aggregate underweight exposure to the Financials sector (which underperformed the overall MSCI EAFE (ND) Index return over the period) contributed positively to relative returns. Similarly, the Fund’s underweight exposure to the Real Estate sector (which also underperformed relative to the MSCI EAFE (ND) Index) contributed positively. Stock selection in the Health Care sector was also a positive contributor to the relative performance of the Fund (although this was outweighed by the Fund’s aggregate underweight exposure to the sector). Conversely, stock selection in the Communication Services and Materials sectors weighed on relative returns of the Fund.
25
Harbor International Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
TOTAL RETURNS
For the periods ended 04/30/2020
Unannualized | 1 Year | Annualized | |||||||||
6 Months | 5 Years | 10 Years | |||||||||
Harbor International Fund | |||||||||||
Retirement Class1 | -15.23% | -13.00% | -2.86% | 2.39% | |||||||
Institutional Class | -15.26 | -13.08 | -2.92 | 2.36 | |||||||
Administrative Class | -15.38 | -13.30 | -3.16 | 2.10 | |||||||
Investor Class | -15.42 | -13.40 | -3.28 | 1.98 | |||||||
Comparative Index | |||||||||||
MSCI EAFE (ND) | -14.21% | -11.34% | -0.17% | 3.55% |
As stated in the Fund’s prospectus dated March 1, 2020, the expense ratios were 0.69% (Net) and 0.80% (Gross) (Retirement Class); 0.77% (Net) and 0.88% (Gross) (Institutional Class); 1.02% (Net) and 1.13% (Gross) (Administrative Class); and 1.14% (Net) and 1.25% (Gross) (Investor Class). The management fee rate is 0.75% on assets up to $12 billion and 0.65% on assets in excess of $12 billion. The net expense ratios reflect a contractual management fee waiver effective through 02/28/2021. 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.
At the stock level, and within Europe most notably, Health Care stocks were a positive feature, particularly Coloplast and Novo Nordisk in Denmark, as well as Roche in Switzerland. Updated full year guidance from Coloplast reflected the business’s stable growth profile in the face of the global pandemic, while pharmaceutical company Novo Nordisk was a positive contributor given its stable earnings profile. Roche boosted relative returns as it benefitted from news that it had developed a faster COVID-19 test and the possible application of its anti-inflammation drug Actemra for coronavirus patients. HelloFresh, the German meal-kit provider, announced better-than-expected earnings during 2019, as well as accelerating first quarter sales and profits for 2020 as increased demand for home cooking caused the stock price to surge. At the other end of the performance tables, not owning certain mega-cap defensive names such as Nestlé, the Swiss food producer, and Swiss pharmaceutical company Novartis (which was sold from the Fund toward the end of 2019), contributed negatively to results. CNH Industrial, one of the world’s leaders in agricultural machinery, was also a weak performer during the period as shares fell following a profit warning, blaming weak demand from the U.S. CNH subsequently suspended most of its assembly operations in March due to the pandemic and the CEO stepped down.
OUTLOOK & STRATEGY
Times like now can test resolve; however, our focus remains committed to the implementation of our bottom-up analytical efforts within the capital cycle investment framework and, therefore, seeking to invest in companies that exhibit favorable supply side dynamics with management teams that have a track record of allocating capital efficiently. Developments over the last few months should highlight the shortfalls of spending too much energy on forecasted outlooks; our portfolio managers are not looking to become epidemiologists or react to market volatility. Rather they continue to focus on and trust the longstanding investment process that they have been committed to in our 30 plus year history.
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—April 30, 2020 (Unaudited)
Portfolio of Investments—April 30, 2020 (Unaudited)
REGION BREAKDOWN(% of investments)
Portfolio of Investments
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—98.0% | |||
Shares | Value | ||
AEROSPACE & DEFENSE—1.3% | |||
259,662 | Airbus SE (France)* | $16,441 | |
2,933,403 | BAE Systems plc (United Kingdom) | 18,710 | |
2,342,529 | Rolls-Royce Holdings plc (United Kingdom)* | 9,696 | |
116,262 | Thales SA (France) | 8,805 | |
53,652 | |||
AIR FREIGHT & LOGISTICS—0.2% | |||
221,474 | Oesterreichische Post AG (Austria) | 8,346 | |
AIRLINES—0.2% | |||
1,067,179 | EasyJet plc (United Kingdom) | 8,084 | |
AUTO COMPONENTS—0.9% | |||
434,800 | Bridgestone Corp. (Japan) | 13,534 | |
1,594,513 | Gestamp Automocion SA (Spain)1 | 3,993 | |
789,896 | GUD Holdings Ltd. (Australia) | 4,689 | |
115,472 | Hankook Tire & Technology Co. Ltd. (South Korea) | 2,026 | |
139,100 | Koito Manufacturing Co. Ltd. (Japan) | 5,239 | |
359,500 | Sumitomo Electric Industries Ltd. (Japan) | 3,699 | |
107,500 | Toyota Industries Corp. (Japan) | 5,411 | |
38,591 | |||
AUTOMOBILES—1.4% | |||
3,917,264 | Baic Motor Corp. Ltd. (China)1 | 1,714 | |
259,603 | Bayerische Motoren Werke AG (Germany) | 15,271 | |
55,852 | Hyundai Motor Co. (South Korea) | 4,317 | |
629,200 | Toyota Motor Corp. (Japan)2 | 38,901 | |
60,203 | |||
BANKS—5.2% | |||
1,164,403 | Axis Bank Ltd. (India) | 6,790 | |
786,200 | Bangkok Bank PCL (Thailand) | 2,499 | |
3,261,733 | Bank of Ireland Group plc (Ireland)* | 6,693 | |
5,368,850 | Bankia SA (Spain) | 5,463 | |
14,355,518 | Barclays plc (United Kingdom) | 19,169 | |
625,435 | BNP Paribas SA (France) | 19,649 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
BANKS—Continued | |||
335,208 | Close Brothers Group plc (United Kingdom) | $4,597 | |
195,299 | Danske Bank AS (Denmark) | 2,319 | |
666,458 | DNB ASA (Norway) | 8,069 | |
244,400 | Fukuoka Financial Group Inc. (Japan) | 3,492 | |
160,226 | Hana Financial Group Inc. (South Korea) | 3,658 | |
2,080,031 | HSBC Holdings plc (Hong Kong) | 10,732 | |
2,365,411 | Intesa Sanpaolo SpA (Italy)* | 3,693 | |
1,840,800 | Kasikornbank PCL (Thailand) | 4,837 | |
33,857,573 | Lloyds Banking Group plc (United Kingdom) | 13,699 | |
484,393 | Nordea Bank ABP (Sweden) | 3,107 | |
7,180,400 | Resona Holdings Inc. (Japan) | 22,425 | |
478,084 | Shinhan Financial Group Co. Ltd. (South Korea) | 12,121 | |
1,894,288 | Standard Chartered plc (United Kingdom) | 9,679 | |
633,100 | Sumitomo Mitsui Financial Group Inc. (Japan) | 16,649 | |
146,500 | Sumitomo Mitsui Trust Holdings Inc. (Japan) | 4,266 | |
2,120,694 | Svenska Handelsbanken AB (Sweden) | 19,356 | |
1,679,501 | UniCredit SpA (Italy) | 12,970 | |
354,300 | United Overseas Bank Ltd. (Singapore) | 5,063 | |
220,995 | |||
BEVERAGES—4.3% | |||
342,611 | Anheuser-Busch InBev SA (Belgium) | 15,955 | |
114,100 | Asahi Group Holdings Ltd. (Japan) | 3,923 | |
154,652 | Carlsberg AS (Denmark) | 19,510 | |
1,668,270 | Coca-Cola Amatil Ltd. (Australia) | 9,288 | |
216,012 | Coca-Cola European Partners plc (United Kingdom) | 8,563 | |
1,154,912 | Davide Campari-Milano SpA (Italy) | 8,976 | |
1,020,166 | Diageo plc (United Kingdom) | 35,124 | |
398,958 | Heineken NV (Netherlands) | 33,957 | |
1,954,000 | Kirin Holdings Co. Ltd. (Japan) | 37,709 | |
129,400 | Suntory Beverage & Food Ltd. (Japan) | 4,873 | |
526,000 | Tsingtao Brewery Co. Ltd. (China) | 3,196 | |
181,074 | |||
BUILDING PRODUCTS—2.2% | |||
2,362,962 | Assa Abloy AB Class B (Sweden) | 42,301 |
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 | |||
95,041 | Geberit AG (Switzerland) | $42,503 | |
1,221,760 | GWA Group Ltd. (Australia) | 2,193 | |
508,400 | LIXIL Group Corp. (Japan) | 6,099 | |
93,096 | |||
CAPITAL MARKETS—2.0% | |||
2,851,137 | 3i Group plc (United Kingdom) | 28,009 | |
694,300 | Daiwa Securities Group Inc. (Japan) | 2,887 | |
1,477,720 | IG Group Holdings plc (United Kingdom) | 14,006 | |
210,900 | JAFCO Co. Ltd. (Japan) | 6,756 | |
275,700 | Japan Exchange Group Inc. (Japan) | 5,128 | |
1,932,277 | Jupiter Fund Management plc (United Kingdom) | 5,312 | |
2,607,000 | Nomura Holdings Inc. (Japan) | 10,818 | |
151,631 | Rathbone Brothers plc (United Kingdom) | 2,883 | |
772,871 | St. James's Place plc (United Kingdom) | 8,230 | |
281,971 | UBS Group AG (Switzerland)* | 3,019 | |
87,048 | |||
CHEMICALS—1.9% | |||
102,500 | Air Water Inc. (Japan) | 1,382 | |
520,266 | BASF SE (Germany) | 26,625 | |
130,800 | Nippon Shokubai Co. Ltd. (Japan) | 6,177 | |
324,800 | Nissan Chemical Corp. (Japan) | 12,462 | |
80,200 | Nitto Denko Corp. (Japan) | 4,006 | |
969,096 | Orica Ltd. (Australia) | 11,231 | |
85,900 | Shin-Etsu Chemical Co. Ltd. (Japan) | 9,475 | |
197,100 | Tokyo Ohka Kogyo Co. Ltd. (Japan) | 8,477 | |
79,835 | |||
COMMERCIAL SERVICES & SUPPLIES—2.8% | |||
82,700 | AEON Delight Co. Ltd. (Japan) | 2,369 | |
1,415,662 | Brambles Ltd. (Australia) | 10,119 | |
10,879,209 | Cleanaway Waste Management Ltd. (Australia) | 13,126 | |
392,284 | Elis SA (France)* | 4,835 | |
7,203,139 | G4S plc (United Kingdom) | 9,888 | |
2,925,756 | HomeServe plc (United Kingdom) | 40,983 | |
47,339 | S-1 Corp. (South Korea) | 3,368 | |
128,900 | Secom Co. Ltd. (Japan) | 10,727 | |
10,562,463 | Serco Group plc (United Kingdom)* | 17,097 | |
102,200 | Sohgo Security Services Co. Ltd. (Japan) | 4,875 | |
117,387 | |||
CONSTRUCTION & ENGINEERING—1.2% | |||
432,813 | Boskalis Westminster NV (Netherlands) | 7,503 | |
180,550 | Ferrovial SA (Spain) | 4,521 | |
830,800 | Maeda Corp. (Japan) | 6,664 | |
1,774,400 | Obayashi Corp. (Japan) | 15,509 | |
1,429,900 | Penta-Ocean Construction Co. Ltd. (Japan) | 7,224 | |
606,900 | Shimizu Corp. (Japan) | 4,661 | |
70,800 | SHO-BOND Holdings Co. Ltd. (Japan) | 2,841 | |
48,923 | |||
CONSTRUCTION MATERIALS—0.8% | |||
143,938 | CRH plc (Ireland) | 4,340 | |
1,146,085 | Fletcher Building Ltd. (New Zealand) | 2,568 | |
47,229 | Imerys SA (France) | 1,482 | |
597,900 | Taiheiyo Cement Corp. (Japan) | 11,737 | |
79,528 | Vicat SA (France) | 2,232 | |
711,261 | Wienerberger AG (Austria) | 13,321 | |
35,680 | |||
CONSUMER FINANCE—0.3% | |||
370,900 | AEON Financial Service Co. Ltd. (Japan) | 3,857 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
CONSUMER FINANCE—Continued | |||
2,895,596 | International Personal Finance plc (United Kingdom) | $2,041 | |
2,947,251 | Non-Standard Finance plc (United Kingdom)1 | 483 | |
1,341,767 | Provident Financial plc (United Kingdom)* | 3,272 | |
172,275 | Shriram Transport Finance Co. Ltd. (India) | 1,788 | |
11,441 | |||
CONTAINERS & PACKAGING—0.6% | |||
4,452,574 | DS Smith plc (United Kingdom) | 17,458 | |
572,900 | Toyo Seikan Group Holdings Ltd. (Japan) | 5,812 | |
23,270 | |||
DISTRIBUTORS—0.2% | |||
1,472,419 | Inchcape plc (United Kingdom) | 9,275 | |
DIVERSIFIED FINANCIAL SERVICES—0.0% | |||
6,838,000 | First Pacific Co. Ltd. (Hong Kong) | 1,413 | |
DIVERSIFIED TELECOMMUNICATION SERVICES—1.9% | |||
1,257,040 | Deutsche Telekom AG (Germany) | 18,377 | |
6,576,564 | Koninklijke KPN NV (Netherlands) | 15,148 | |
659,423 | KT Corp. ADR (South Korea)3 | 6,469 | |
1,740,200 | Nippon Telegraph & Telephone Corp. (Japan) | 39,631 | |
1,163,174 | Spark New Zealand Ltd. (New Zealand) | 3,148 | |
82,773 | |||
ELECTRIC UTILITIES—0.7% | |||
547,000 | Kansai Electric Power Co. (Japan) | 5,605 | |
259,134 | Orsted AS (Denmark)1 | 26,175 | |
31,780 | |||
ELECTRICAL EQUIPMENT—3.3% | |||
569,568 | Legrand SA (France) | 38,185 | |
72,900 | Mabuchi Motor Co. Ltd. (Japan) | 2,258 | |
364,706 | Schneider Electric SE (France) | 33,703 | |
9,454,000 | TECO Electric and Machinery Co. Ltd. (Taiwan) | 8,507 | |
120,400 | Ushio Inc. (Japan) | 1,270 | |
670,341 | Vestas Wind Systems AS (Denmark) | 57,564 | |
141,487 | |||
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—2.7% | |||
233,800 | Azbil Corp. (Japan) | 6,149 | |
1,851,000 | Chroma ATE Inc. (Taiwan) | 8,530 | |
1,907,000 | Delta Electronics Inc. (Taiwan) | 8,895 | |
1,455,700 | Hitachi Ltd. (Japan) | 43,204 | |
249,600 | Kyocera Corp. (Japan) | 13,336 | |
88,500 | Omron Corp. (Japan) | 5,198 | |
138,200 | Shimadzu Corp. (Japan) | 3,442 | |
564,468 | Spectris plc (United Kingdom) | 19,034 | |
90,400 | TDK Corp. (Japan) | 7,793 | |
115,581 | |||
ENERGY EQUIPMENT & SERVICES—0.5% | |||
1,141,366 | John Wood Group plc (United Kingdom) | 2,890 | |
401,005 | Petrofac Ltd. (United Kingdom) | 992 | |
5,251,154 | Saipem SpA (Italy) | 13,478 | |
255,244 | TechnipFMC plc (France) | 2,235 | |
19,595 | |||
ENTERTAINMENT—0.7% | |||
228,607 | CTS Eventim AG & Co. KGaA (Germany) | 9,504 | |
103,900 | Konami Holdings Corp. (Japan) | 3,262 | |
280,300 | Major Cineplex Group PCL (Thailand) | 125 | |
143,800 | Makita Corp. (Japan) | 4,683 |
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 | |||
322,234 | Modern Times Group MTG AB Class B (Sweden) | $3,242 | |
190,500 | Nexon Co. Ltd. (Japan) | 3,076 | |
8,700 | Nintendo Co. Ltd. (Japan) | 3,592 | |
77,500 | Toho Co. Ltd. (Japan) | 2,538 | |
30,022 | |||
FOOD & STAPLES RETAILING—1.9% | |||
344,100 | Dairy Farm International Holdings Ltd. (Hong Kong) | 1,649 | |
950,325 | Koninklijke Ahold Delhaize NV (Netherlands) | 23,074 | |
141,100 | Matsumotokiyoshi Holdings Co. Ltd. (Japan) | 4,857 | |
1,830,150 | Metcash Ltd. (Australia) | 2,952 | |
830,600 | Seven & I Holdings Co. Ltd. (Japan) | 27,507 | |
105,800 | Sundrug Co. Ltd. (Japan) | 3,622 | |
6,032,433 | Tesco plc (United Kingdom) | 17,843 | |
81,504 | |||
FOOD PRODUCTS—2.0% | |||
95,200 | Calbee Inc. (Japan) | 2,881 | |
1,879,000 | China Mengniu Dairy Co. Ltd. (China)* | 6,654 | |
1,854,132 | Devro plc (United Kingdom) | 3,709 | |
160,800 | Fuji Oil Holdings Inc. (Japan) | 3,751 | |
255,500 | Megmilk Snow Brand Co. Ltd. (Japan) | 5,830 | |
67,700 | Meiji Holdings Co. Ltd. (Japan) | 4,702 | |
822,200 | Nippon Suisan Kaisha Ltd. (Japan) | 3,658 | |
5,724,000 | Tingyi Cayman Islands Holding Corp. (China) | 10,161 | |
370,400 | Toyo Suisan Kaisha Ltd. (Japan) | 17,811 | |
261,168 | Viscofan SA (Spain) | 16,738 | |
11,471,000 | Want Want China Holdings Ltd. (China) | 8,176 | |
84,071 | |||
GAS UTILITIES—0.1% | |||
217,800 | Tokyo Gas Co. Ltd. (Japan) | 4,780 | |
HEALTH CARE EQUIPMENT & SUPPLIES—5.6% | |||
515,706 | Coloplast AS (Denmark) | 81,339 | |
9,961,249 | ConvaTec Group plc (United Kingdom)1 | 26,606 | |
920,036 | Demant AS (Denmark)* | 21,996 | |
564,210 | Getinge AB Class B (Sweden) | 10,814 | |
820,555 | GN Store Nord AS (Denmark) | 37,447 | |
100,500 | Hoya Corp. (Japan) | 9,165 | |
166,100 | Japan Lifeline Co. Ltd. (Japan) | 1,953 | |
566,657 | Koninklijke Philips NV (Netherlands) | 24,702 | |
318,100 | Olympus Corp. (Japan) | 5,047 | |
309,799 | Smith & Nephew plc (United Kingdom) | 6,063 | |
69,451 | Sonova Holding AG (Switzerland) | 12,544 | |
237,676 | |||
HEALTH CARE PROVIDERS & SERVICES—1.7% | |||
573,300 | Alfresa Holdings Corp. (Japan) | 11,433 | |
349,173 | Amplifon SpA (Italy) | 7,993 | |
535,537 | Fresenius Medical Care AG & Co. KGaA (Germany) | 41,970 | |
557,500 | MediPAL Holdings Corp. (Japan) | 10,755 | |
72,151 | |||
HOTELS, RESTAURANTS & LEISURE—3.6% | |||
4,811,000 | Ajisen China Holdings Ltd. (China) | 1,071 | |
379,203 | Carnival plc (United Kingdom) | 5,226 | |
2,679,258 | Compass Group plc (United Kingdom) | 45,085 | |
360,883 | Flutter Entertainment plc (United Kingdom) | 44,379 | |
5,373,000 | Genting Singapore Ltd. (Singapore) | 2,981 | |
2,268,862 | GVC Holdings plc (United Kingdom) | 21,536 | |
63,692 | InterContinental Hotels Group PLC (United Kingdom)* | 2,901 | |
651,838 | Playtech plc (United Kingdom) | 1,912 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
HOTELS, RESTAURANTS & LEISURE—Continued | |||
3,732,425 | SSP Group plc (United Kingdom) | $13,191 | |
1,455,314 | TUI AG (Germany) | 5,912 | |
219,094 | Yum China Holdings Inc. (China) | 10,617 | |
154,811 | |||
HOUSEHOLD DURABLES—0.9% | |||
784,287 | Barratt Developments plc (United Kingdom) | 5,113 | |
478,300 | Casio Computer Co. Ltd. (Japan) | 7,548 | |
1,725,733 | McCarthy & Stone plc (United Kingdom)1 | 1,537 | |
69,700 | Rinnai Corp. (Japan) | 5,279 | |
442,300 | Sekisui Chemical Co. Ltd. (Japan) | 5,606 | |
215,600 | Sony Corp. (Japan) | 13,875 | |
38,958 | |||
HOUSEHOLD PRODUCTS—1.1% | |||
111,700 | Lion Corp. (Japan) | 2,348 | |
550,326 | Reckitt Benckiser Group plc (United Kingdom) | 45,842 | |
48,190 | |||
INDEPENDENT POWER & RENEWABLE ELECTRICITY PRODUCERS—0.0% | |||
7,568,300 | Lopez Holdings Corp. (Philippines) | 391 | |
INDUSTRIAL CONGLOMERATES—1.4% | |||
1,801,000 | CK Hutchison Holdings Ltd. (Hong Kong) | 13,349 | |
304,554 | DCC plc (United Kingdom) | 21,657 | |
397,900 | Jardine Matheson Holdings Ltd. (Hong Kong) | 17,428 | |
126,161 | LG Corp. (South Korea) | 6,420 | |
5,900,200 | Sime Darby Berhad (Malaysia) | 2,733 | |
61,587 | |||
INSURANCE—4.7% | |||
766,057 | Admiral Group plc (United Kingdom) | 22,354 | |
956,458 | AXA SA (France) | 17,003 | |
1,960,500 | Dai-ichi Life Holdings Inc. (Japan) | 24,569 | |
419,000 | Great Eastern Holdings Ltd. (Singapore) | 5,546 | |
50,740 | Hannover Rueck SE (Germany) | 8,085 | |
44,978 | Helvetia Holding AG (Switzerland) | 4,100 | |
2,112,300 | Japan Post Holdings Co. Ltd. (Japan) | 16,896 | |
236,400 | MS&AD Insurance Group Holdings Inc. (Japan) | 6,811 | |
342,689 | Prudential plc (United Kingdom)* | 4,834 | |
1,765,985 | QBE Insurance Group Ltd. (Australia) | 9,563 | |
998,541 | Sampo OYJ (Finland) | 33,099 | |
54,341 | Samsung Fire & Marine Insurance Co. Ltd. (South Korea) | 8,522 | |
461,200 | Sompo Holdings Inc. (Japan) | 14,959 | |
109,200 | Sony Financial Holdings Inc. (Japan)* | 2,070 | |
485,900 | T&D Holdings Inc. (Japan) | 4,200 | |
402,800 | Tokio Marine Holdings Inc. (Japan) | 18,898 | |
201,509 | |||
INTERACTIVE MEDIA & SERVICES—2.3% | |||
408,019 | Adevinta ASA (Norway)* | 3,389 | |
2,218,083 | Auto Trader Group plc (United Kingdom)1 | 12,768 | |
163,505 | Baidu Inc. ADR (China)*,3 | 16,502 | |
994,779 | Carsales.com Ltd. (Australia) | 9,100 | |
1,509,793 | Domain Holdings Australia Ltd. (Australia) | 2,557 | |
8,881,468 | Rightmove plc (United Kingdom) | 55,531 | |
99,847 | |||
INTERNET & DIRECT MARKETING RETAIL—1.9% | |||
15,663 | GS Home Shopping Inc. (South Korea) | 1,641 | |
1,155,941 | HelloFresh SE (Germany)* | 41,201 | |
218,201 | Just Eat Takeaway.com NV (Netherlands)*,1 | 22,348 |
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 | |||
373,220 | MoneySuperMarket.com Group plc (United Kingdom) | $1,487 | |
1,156,000 | PChome Online Inc. (Taiwan) | 3,815 | |
79,177 | Trip.Com Group Ltd. ADR (China)*,3 | 2,040 | |
24,853 | Zooplus AG (Germany)* | 3,075 | |
341,100 | ZOZO Inc. (Japan) | 5,504 | |
81,111 | |||
IT SERVICES—2.5% | |||
134,789 | Alten SA (France) | 9,705 | |
9,147,231 | Capita plc (United Kingdom)* | 4,479 | |
659,713 | Edenred (France) | 26,575 | |
141,489 | Genpact Ltd. (United States) | 4,871 | |
108,500 | ITOCHU Techno-Solutions Corp. (Japan) | 3,315 | |
307,000 | NEC Corp. (Japan) | 11,781 | |
379,100 | NET One Systems Co. Ltd. (Japan) | 10,929 | |
151,700 | Nomura Research Institute Ltd. (Japan) | 3,714 | |
2,107,400 | NTT Data Corp. (Japan) | 21,504 | |
85,600 | Otsuka Corp. (Japan) | 3,876 | |
148,100 | SCSK Corp. (Japan) | 6,704 | |
107,453 | |||
LEISURE PRODUCTS—0.9% | |||
376,700 | Bandai Namco Holdings Inc. (Japan) | 18,822 | |
1,279,000 | Giant Manufacturing Co. Ltd. (Taiwan) | 7,539 | |
2,761,000 | Goodbaby International Holdings Ltd. (Hong Kong)* | 283 | |
60,000 | Merida Industry Co. Ltd. (Taiwan) | 306 | |
803,500 | Sega Sammy Holdings Inc. (Japan) | 9,733 | |
18,900 | Shimano Inc. (Japan) | 2,785 | |
39,468 | |||
LIFE SCIENCES TOOLS & SERVICES—0.7% | |||
47,543 | Eurofins Scientific SE (France) | 26,300 | |
65,413 | Gerresheimer AG (Germany) | 5,202 | |
31,502 | |||
MACHINERY—2.4% | |||
134,867 | Andritz AG (Austria) | 4,431 | |
3,433,475 | CNH Industrial NV (Italy) | 21,477 | |
111,300 | Daifuku Co. Ltd. (Japan) | 7,789 | |
131,011 | GEA Group AG (Germany) | 3,007 | |
81,800 | Hoshizaki Corp. (Japan) | 6,234 | |
284,667 | IMI plc (United Kingdom) | 2,960 | |
316,700 | Mitsui E&S Holdings Co. Ltd. (Japan)* | 1,789 | |
1,168,074 | Rotork plc (United Kingdom) | 3,641 | |
1,379,649 | Sandvik AB (Sweden) | 21,224 | |
259,359 | Stabilus SA (Germany) | 11,079 | |
884,306 | Wartsila OYJ Abp (Finland)2 | 6,491 | |
5,257,000 | Yungtay Engineering Co. Ltd. (Taiwan) | 10,581 | |
100,703 | |||
MARINE—0.2% | |||
1,805,345 | Irish Continental Group plc (Ireland) | 6,826 | |
6,190,332 | Wan Hai Lines Ltd. (Taiwan) | 3,489 | |
10,315 | |||
MEDIA—2.1% | |||
4,082,800 | BEC World PCL (Thailand)* | 623 | |
420,560 | Daily Mail & General Trust plc (United Kingdom) | 3,735 | |
375,271 | Euromoney Institutional Investor plc (United Kingdom) | 3,900 | |
1,095,300 | Fuji Media Holdings Inc. (Japan) | 10,880 | |
664,632 | Informa plc (United Kingdom) | 3,671 | |
12,171,352 | ITV plc (United Kingdom) | 11,687 | |
296,469 | JCDecaux SA (France)* | 6,137 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
MEDIA—Continued | |||
45,429,900 | Media Nusantara Citra TBK PT (Indonesia) | $2,771 | |
3,711,995 | Nine Entertainment Co. Holdings Ltd. (Australia) | 3,415 | |
1,188,000 | Nippon Television Holdings Inc. (Japan) | 13,270 | |
322,988 | Nordic Entertainment Group AB (Sweden) | 7,655 | |
222,284 | Schibsted ASA Class A (Norway)* | 4,716 | |
189,025 | Schibsted ASA Class B (Norway) | 3,671 | |
1,471,026 | Sky Network Television Ltd. (New Zealand)* | 251 | |
1,873,700 | Television Broadcasts Ltd. (Hong Kong) | 2,586 | |
1,464,006 | WPP plc (United Kingdom) | 11,359 | |
90,327 | |||
METALS & MINING—2.2% | |||
797,343 | Acerinox SA (Spain) | 6,006 | |
3,768,778 | Alumina Ltd. (Australia) | 4,181 | |
1,072,488 | ArcelorMittal SA (France) | 11,715 | |
262,979 | BHP Group Ltd. (Australia) | 5,369 | |
616,737 | BlueScope Steel Ltd. (Australia) | 4,025 | |
9,982,285 | Glencore plc (United Kingdom)* | 18,701 | |
537,912 | Newcrest Mining Ltd. (Australia) | 9,717x | |
448,200 | Nippon Steel Corp. (Japan)* | 3,771 | |
591,814 | Rio Tinto plc (United Kingdom) | 27,471 | |
114,100 | Sumitomo Metal Mining Co. Ltd. (Japan) | 2,844 | |
93,800 | |||
MULTILINE RETAIL—0.1% | |||
327,900 | Marui Group Co. Ltd. (Japan) | 5,367 | |
OIL, GAS & CONSUMABLE FUELS—1.8% | |||
12,081,253 | BP plc (United Kingdom) | 47,605 | |
155,556 | Caltex Australia Ltd. (Australia) | 2,504 | |
1,432,918 | Equinor ASA (Norway) | 19,841 | |
1,204,400 | INPEX Corp. (Japan) | 7,775 | |
77,725 | |||
PAPER & FOREST PRODUCTS—0.2% | |||
1,521,300 | Oji Holdings Corp. (Japan) | 7,724 | |
PERSONAL PRODUCTS—1.8% | |||
143,688 | AMOREPACIFIC Group (South Korea) | 6,877 | |
4,429,898 | Asaleo Care Ltd. (Australia) | 2,965 | |
287,100 | Kao Corp. (Japan) | 22,140 | |
23,100 | Kose Corp. (Japan) | 2,888 | |
1,155,500 | L'Occitane International SA (Hong Kong) | 1,780 | |
133,700 | Mandom Corp. (Japan) | 2,569 | |
761,549 | Unilever plc (United Kingdom) | 39,214 | |
78,433 | |||
PHARMACEUTICALS—5.1% | |||
359,000 | Astellas Pharma Inc. (Japan) | 5,937 | |
337,400 | Haw Par Corp. Ltd. (Singapore) | 2,446 | |
1,044,775 | Novo Nordisk AS (Denmark) | 66,646 | |
422,400 | Otsuka Holdings Co. Ltd. (Japan) | 16,602 | |
303,408 | Roche Holding AG (Switzerland) | 105,069 | |
51,400 | Sawai Pharmaceutical Co. Ltd. (Japan) | 2,807 | |
238,100 | Takeda Pharmaceutical Co. Ltd. (Japan) | 8,586 | |
391,100 | Tsumura & Co. (Japan) | 10,819 | |
218,912 | |||
PROFESSIONAL SERVICES—4.8% | |||
522,577 | Adecco Group AG (Switzerland) | 22,868 | |
1,765,780 | ALS Ltd. (Australia) | 7,711 | |
42,520 | DKSH Holding AG (Switzerland) | 2,394 | |
1,058,434 | Experian plc (United Kingdom) | 31,785 |
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 | |||
8,488,595 | Hays plc (United Kingdom) | $11,565 | |
958,760 | Intertek Group plc (United Kingdom) | 57,218 | |
764,040 | IPH Ltd. (Australia) | 3,654 | |
435,600 | Nomura Co. Ltd. (Japan) | 3,300 | |
1,104,924 | PageGroup plc (United Kingdom) | 5,230 | |
258,700 | Persol Holdings Co. Ltd. (Japan) | 2,975 | |
96,230 | Randstad NV (Netherlands)* | 3,873 | |
1,593,818 | RELX plc (United Kingdom) | 35,960 | |
54,200 | TechnoPro Holdings Inc. (Japan) | 3,088 | |
64,498 | Teleperformance (France) | 14,448 | |
206,069 | |||
REAL ESTATE MANAGEMENT & DEVELOPMENT—0.6% | |||
214,000 | Daiwa House Industry Co. Ltd. (Japan) | 5,423 | |
1,166,600 | Mitsubishi Estate Co. Ltd. (Japan) | 18,873 | |
24,296 | |||
ROAD & RAIL—0.9% | |||
255,600 | East Japan Railway Co. (Japan) | 18,664 | |
888,110 | National Express Group plc (United Kingdom) | 3,056 | |
453,700 | Senko Group Holdings Co. Ltd. (Japan) | 3,698 | |
192,800 | West Japan Railway Co. (Japan) | 11,914 | |
37,332 | |||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—1.3% | |||
39,308 | ASML Holding NV (Netherlands) | 11,481 | |
1,320,000 | Renesas Electronics Corp. (Japan)* | 6,970 | |
154,700 | ROHM Co. Ltd. (Japan) | 9,781 | |
138,802 | SK Hynix Inc. (South Korea) | 9,552 | |
1,725,000 | Taiwan Semiconductor Manufacturing Co. Ltd. (Taiwan) | 17,402 | |
55,186 | |||
SOFTWARE—0.1% | |||
25,700 | Oracle Corp. Japan (Japan) | 2,646 | |
SPECIALTY RETAIL—0.7% | |||
53,100 | ABC-Mart Inc. (Japan) | 2,698 | |
20,611,900 | Esprit Holdings Ltd. (Hong Kong)* | 1,977 | |
2,101,321 | Pets at Home Group plc (United Kingdom) | 6,728 | |
314,700 | USS Co. Ltd. (Japan) | 4,983 | |
756,866 | WH Smith plc (United Kingdom) | 11,947 | |
28,333 | |||
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS—1.1% | |||
358,798 | Logitech International SA (Switzerland) | 17,281 | |
177,757 | Quadient SAS (France) | 2,455 | |
649,438 | Samsung Electronics Co. Ltd. (South Korea) | 26,703 | |
46,439 | |||
TEXTILES, APPAREL & LUXURY GOODS—2.7% | |||
135,197 | Adidas AG (Germany) | 30,951 | |
737,700 | ASICS Corp. (Japan) | 6,995 | |
369,174 | Cie Financiere Richemont SA (Switzerland) | 20,945 | |
546,730 | Cie Financiere Richemont SA ADR (South Africa)3 | 3,085 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
TEXTILES, APPAREL & LUXURY GOODS—Continued | |||
280,481 | EssilorLuxottica SA (France) | $34,843 | |
2,349,000 | Li Ning Co. Ltd. (China) | 7,417 | |
782,900 | Onward Holdings Co. Ltd. (Japan) | 2,449 | |
387,818 | Shenzhou International Group Holdings Ltd. (China) | 4,476 | |
2,315,000 | Stella International Holdings Ltd. (Hong Kong) | 2,330 | |
113,491 | |||
TOBACCO—0.6% | |||
127,274 | British American Tobacco plc (United Kingdom) | 4,905 | |
252,200 | Japan Tobacco Inc. (Japan) | 4,697 | |
232,635 | Swedish Match AB (Sweden) | 14,376 | |
23,978 | |||
TRADING COMPANIES & DISTRIBUTORS—1.3% | |||
448,117 | Brenntag AG (Germany) | 20,290 | |
1,252,712 | Bunzl plc (United Kingdom) | 27,190 | |
292,000 | ITOCHU Corp. (Japan) | 5,725 | |
12,600 | Mitsubishi Corp. (Japan) | 267 | |
53,472 | |||
TRANSPORTATION INFRASTRUCTURE—0.5% | |||
1,015,158 | China Merchants Port Holdings Co. Ltd. (China) | 1,307 | |
976,956 | Getlink SE (France) | 12,461 | |
291,200 | Mitsubishi Logistics Corp. (Japan) | 6,429 | |
20,197 | |||
WIRELESS TELECOMMUNICATION SERVICES—0.9% | |||
1,262,979 | Bharti Airtel Ltd. (India) | 8,605 | |
656,200 | KDDI Corp. (Japan) | 19,006 | |
357,200 | NTT DoCoMo Inc. (Japan) | 10,527 | |
30,417,408 | Vodafone Idea Ltd. (India)* | 1,685 | |
39,823 | |||
TOTAL COMMON STOCKS | |||
(Cost $4,780,000) | 4,179,128 | ||
PREFERRED STOCKS—0.4% | |||
AUTOMOBILES—0.4% | |||
128,611 | Volkswagen AG (Germany) | 17,894 | |
PERSONAL PRODUCTS—0.0% | |||
12,623 | AMOREPACIFIC Group (South Korea)* | 401 | |
TOTAL PREFERRED STOCKS | |||
(Cost $21,470) | 18,295 | ||
TOTAL INVESTMENTS—98.4% | |||
(Cost $4,801,470) | 4,197,423 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—1.6% | 67,935 | ||
TOTAL NET ASSETS—100.0% | $4,265,358 |
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 April 30, 2020 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 | $8,563 | $2,619,411 | $— | $2,627,974 | ||||
Middle East/Central Asia | — | 18,868 | — | 18,868 | ||||
North America | 4,871 | — | — | 4,871 | ||||
Pacific Basin | 43,587 | 1,474,111 | 9,717 | 1,527,415 | ||||
Preferred Stocks | ||||||||
Europe | — | 17,894 | — | 17,894 | ||||
Pacific Basin | — | 401 | — | 401 | ||||
Total Investments in Securities | $57,021 | $4,130,685 | $9,717 | $4,197,423 |
For more information on valuation inputs and their aggregation into the levels 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 April 30, 2020. 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 occured.
Valuation Description | Beginning Balance as of 11/01/2019 (000s) | Purchases (000s) | Sales (000s) | Discount/ (Premium) (000s) | Total Realized Gain/(Loss) (000s) | Change in Unrealized Appreciation/ (Depreciation) (000s) | Transfers Into Level 3 (000s)h | Transfers Out of Level 3 (000s) | Ending Balance as of 04/30/2020 (000s) | UnRealized Gain/(Loss) as of 04/30/2020 (000s) | ||||||||||
Common Stocks | $— | $— | $— | $— | $(17,166) | $19,433 | $7,450 | $— | $9,717 | $2,267 | ||||||||||
Preferred Stocks | 162 | — | (162) | — | — | — | — | — | — | — | ||||||||||
$162 | $— | $(162) | $— | $(17,166) | $19,433 | $7,450 | $— | $9,717 | $2,267 |
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 04/30/2020 (000s) | Valuation Technique | Unobservable Input(s) | Input Value(s) | ||||
Investments in Securities | ||||||||
Common Stocks | ||||||||
Newcrest Mining Ltd. (Australia) | $ 9,717 | Market Approach | Last Price Adjusted for Share Dilution Factor | AUD 27.72 |
* | 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 April 30, 2020, the aggregate value of these securities was $74,634 or 2% of net assets. |
2 | All or a portion of this security was out on loan as of April 30, 2020. |
3 | Depository receipts such as American Depostiory Receipts (ADRs), Global Depository Receipts (GDRs) and other country specific depository receipts are certificates evidencing ownership of shares of a foreign issuer. These certificates are issued by depository banks and generally trade on an established market in the U.S. or elsewhere. |
h | Transferred from Level 2 to Level 3 due to the unavailability of observable market data for pricing |
x | Fair valued in accordance with Harbor Funds' Valuation Procedures. |
AUD | Australian Dollar |
The accompanying notes are an integral part of the Financial Statements.
32
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
None of us will forget the course of events that have ensued over the last six months. After a period in international markets where much concern was focused on U.S.-China trade relations and the U.K.’s general election and upcoming exit from the European Union, 2020 started with markets in good spirits. Generally, companies were doing well. There were initially some small concerns about a localized virus outbreak in China, but that has since escalated into a situation that few of us could have expected to see in our lifetimes.
In this period, we have also witnessed oil prices plummet to the lowest levels recorded in history amidst worries about coronavirus. The coronavirus pandemic is at a point where the range of outcomes from here is highly uncertain. Scientists, medical professionals and politicians are grappling with questions such as whether there is scope for this to be controlled, or whether it keeps escalating to an extent that pandemics of this or previous generations have never reached.
Performance
Harbor International Growth Fund returned -6.52% (Retirement Class), -6.59% (Institutional Class), -6.70% (Administrative Class), and -6.70% (Investor Class) for the six months ended April 30, 2020, outperforming the -13.22 % 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 it is 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, the main contributors were Europe and Canada. The only detractor was the U.K. Our approach resulted in the Fund having overweight positions relative to the benchmark in Developed Asia and in the U.K. The Fund was underweight in Europe, Canada and Emerging Markets.
Where sectors are concerned, the main contributors were Information Technology and Financials. Stock selection was the main factor in each case. The largest detracting sectors were Consumer Staples and Materials. The main overweights, again as a result of the Fund’s bottom-up approach, were in Industrials and Information Technology. The Fund was most underweight in the Financials and Energy sectors, and it had no exposure to Utilities and Real Estate.
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, Sartorius and Bechtle. The main stock detractors during the period included Shiseido, Treasury Wine Estates and Raia Drogasil.
Shopify is a Canadian e-commerce services company that builds software to help businesses sell products online. The company continues to perform well operationally and over the past six months its share price has doubled. We have been pleased to see that Shopify’s commitment to facilitating entrepreneurship and innovation continues to be rewarded by an expanding client base across the globe. Sartorius is a German biotech and laboratory equipment company
33
Harbor International Growth Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
TOTAL RETURNS
For the periods ended 04/30/2020
Unannualized | 1 Year | Annualized | |||||||||
6 Months | 5 Years | 10 Years | |||||||||
Harbor International Growth Fund | |||||||||||
Retirement Class1 | -6.52% | -3.96% | 3.12% | 4.91% | |||||||
Institutional Class | -6.59 | -4.03 | 3.05 | 4.87 | |||||||
Administrative Class | -6.70 | -4.26 | 2.79 | 4.60 | |||||||
Investor Class | -6.70 | -4.37 | 2.68 | 4.48 | |||||||
Comparative Index | |||||||||||
MSCI All Country World Ex. U.S. (ND) | -13.22% | -11.51% | -0.17% | 2.89% |
As stated in the Fund’s prospectus dated March 1, 2020, the expense ratios were 0.77% (Net) and 0.83% (Gross) (Retirement Class); 0.85% (Net) and 0.91% (Gross) (Institutional Class); 1.10% (Net) and 1.16% (Gross) (Administrative Class); and 1.22% (Net) and 1.28% (Gross) (Investor Class). The net expense ratios reflect an expense limitation agreement (excluding interest expense, if any) effective through 02/28/2021. 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 has seen its shares perform well as investors have sought out businesses which might contribute to what is likely to be an intense and globally coordinated period of medical research. We remain excited by the improvements in both patient outcomes and healthcare costs that biopharma promises and believe that the equipment that Sartorius provides will continue to be central to both the research and manufacture of novel treatments over the long term. Bechtle is a German information technology company that supplies IT infrastructure for small and medium-sized enterprises. This company continues to benefit from demand for bespoke information technology solutions and systems. Despite short-term changes in consumer-spending priorities during the recent months, it appears that IT spending remains a priority for many business owners across Europe.
Shiseido is a Japanese luxury cosmetics manufacturer with a global presence. Shiseido’s performance has been impacted by weak sales in China during the period. This comes during a time when, at least for the short term, consumer spending on luxury items has been curbed and tourist purchases are down. We continue to closely monitor the situation. Treasury Wine Estate is an Australian-listed global wine business that has not performed well during this period. The company has had a series of management changes including the CEO’s announcement that he will be leaving the company in a year and a change in its head of the North American business. Though this company has had some challenges exacerbated by concerns around demand for premium wine during this pandemic, a primary feature of our investment case is the potential benefit from growth in the Asian market over the long term. 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 its products from an ageing population. Despite reporting good results for the quarter, Raia Drogasil’s underperformance during this period appears to be due to short-term market concerns around emerging markets. We continue to monitor this holding.
Outlook & Strategy
Though it is a challenging time in international markets, we continue to focus on the long term. Given our bottom-up stock picking approach, we consider macro and microeconomic factors at a company level, rather than imposing a top-down view. We do not believe that we have an edge in analyzing short-term market movements. We have endured various crises over its history since 1908 and we continue to undertake thorough fundamental company research and constantly monitor the robustness of the holdings in the Fund. While crises such as the current one will throw up surprises, we remain confident that overall, the Fund invests in well-funded, high quality, businesses with strong competitive advantages that should, in our view, enable us to weather the storm.
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.
34
Harbor International Growth Fund
Portfolio of Investments—April 30, 2020 (Unaudited)
Portfolio of Investments—April 30, 2020 (Unaudited)
REGION BREAKDOWN(% of investments)
(Excludes short-term investments)
Portfolio of Investments
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—95.6% | |||
Shares | Value | ||
AUTO COMPONENTS—0.6% | |||
93,800 | Denso Corp. (Japan) | $3,297 | |
AUTOMOBILES—1.0% | |||
167,700 | Suzuki Motor Corp. (Japan) | 5,352 | |
BANKS—2.0% | |||
943,200 | Public Bank BHD (Malaysia) | 3,585 | |
543,927 | United Overseas Bank Ltd. (Singapore) | 7,772 | |
11,357 | |||
BEVERAGES—4.0% | |||
31,812 | Remy Cointreau SA (France)1 | 3,549 | |
5,158,500 | Thai Beverage PCL (Thailand) | 2,511 | |
542,689 | Treasury Wine Estates Ltd. (Australia) | 3,569 | |
1,574,000 | Tsingtao Brewery Co. Ltd. (China) | 9,562 | |
471,766 | United Spirits Ltd. (India)* | 3,353 | |
22,544 | |||
BUILDING PRODUCTS—2.7% | |||
150,315 | Kingspan Group plc (Ireland) | 7,660 | |
416,911 | Nibe Industrier AB (Sweden) | 7,778 | |
15,438 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
CAPITAL MARKETS—2.0% | |||
549,897 | Hargreaves Lansdown plc (United Kingdom) | $9,950 | |
515,269 | Jupiter Fund Management plc (United Kingdom) | 1,417 | |
11,367 | |||
CHEMICALS—2.5% | |||
420,873 | Asian Paints Ltd. (India) | 9,839 | |
158,164 | Johnson Matthey plc (United Kingdom) | 3,963 | |
13,802 | |||
COMMERCIAL SERVICES & SUPPLIES—0.9% | |||
357,567 | HomeServe plc (United Kingdom) | 5,009 | |
DIVERSIFIED FINANCIAL SERVICES—1.6% | |||
176,660 | Investor AB Class B (Sweden) | 8,780 | |
ELECTRICAL EQUIPMENT—2.7% | |||
115,894 | Legrand SA (France) | 7,770 | |
126,800 | Nidec Corp. (Japan) | 7,381 | |
15,151 | |||
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—2.9% | |||
19,800 | Keyence Corp. (Japan) | 7,069 | |
163,800 | Murata Manufacturing Co. Ltd. (Japan) | 9,229 | |
16,298 |
35
Harbor International Growth Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—Continued | |||
Shares | Value | ||
ENERGY EQUIPMENT & SERVICES—0.3% | |||
599,082 | John Wood Group plc (United Kingdom) | $1,517 | |
ENTERTAINMENT—2.4% | |||
45,421 | Spotify Technology SA (Sweden)* | 6,885 | |
89,701 | Ubisoft Entertainment SA (France)* | 6,672 | |
13,557 | |||
FOOD & STAPLES RETAILING—3.8% | |||
449,942 | Jeronimo Martins SGPS SA (Portugal) | 7,628 | |
358,300 | Raia Drogasil SA (Brazil) | 6,904 | |
60,800 | Sugi Holdings Co. Ltd. (Japan) | 3,666 | |
1,204,500 | Wal-Mart de Mexico SAB de CV (Mexico) | 2,907 | |
21,105 | |||
HEALTH CARE EQUIPMENT & SUPPLIES—5.1% | |||
75,470 | Cochlear Ltd. (Australia) | 8,973 | |
674,700 | Olympus Corp. (Japan) | 10,706 | |
131,400 | Sysmex Corp. (Japan) | 9,078 | |
28,757 | |||
HOUSEHOLD PRODUCTS—0.8% | |||
130,400 | Pigeon Corp. (Japan) | 4,643 | |
INDUSTRIAL CONGLOMERATES—1.1% | |||
35,100 | Jardine Matheson Holdings Ltd. (Singapore) | 1,537 | |
212,200 | Jardine Strategic Holdings Ltd. (Singapore) | 4,562 | |
6,099 | |||
INSURANCE—5.2% | |||
1,164,600 | AIA Group Ltd. (Hong Kong) | 10,688 | |
11,159 | Fairfax Financial Holdings Ltd. (Canada) | 3,026 | |
323,900 | MS&AD Insurance Group Holdings Inc. (Japan) | 9,331 | |
634,000 | Ping An Insurance Group Co. of China Ltd. (China) | 6,452 | |
29,497 | |||
INTERACTIVE MEDIA & SERVICES—6.5% | |||
1,498,623 | Auto Trader Group plc (United Kingdom)2 | 8,627 | |
38,973 | Baidu Inc. ADR (China)*,3 | 3,933 | |
244,000 | Kakaku.com Inc. (Japan) | 4,979 | |
26,624 | Naver Corp. (South Korea) | 4,317 | |
1,594,086 | Rightmove plc (United Kingdom) | 9,967 | |
405,589 | SEEK Ltd (Australia) | 4,528 | |
36,351 | |||
INTERNET & DIRECT MARKETING RETAIL—10.5% | |||
84,371 | Alibaba Group Holding Ltd. ADR (China)*,3 | 17,100 | |
95,952 | ASOS plc (United Kingdom)* | 2,895 | |
94,396 | MakeMyTrip Ltd. (India)* | 1,393 | |
155,800 | Meituan Dianping Class B (China)* | 2,086 | |
65,034 | Naspers Ltd. (South Africa) | 10,122 | |
60,258 | Prosus NV (Netherlands)* | 4,556 | |
1,340,754 | Trainline plc (United Kingdom)*,2 | 6,408 | |
137,612 | Trip.Com Group Ltd. ADR (China)*,3 | 3,545 | |
218,248 | Zalando SE (Germany)*,2 | 10,697 | |
58,802 | |||
IT SERVICES—6.3% | |||
81,370 | Bechtle AG (Germany) | 11,767 | |
37,522 | Shopify Inc. (Canada)* | 23,725 | |
35,492 | |||
LEISURE PRODUCTS—1.2% | |||
45,800 | Shimano Inc. (Japan) | 6,749 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
LIFE SCIENCES TOOLS & SERVICES—1.7% | |||
13,203 | Mettler-Toledo International Inc. (Switzerland)* | $9,505 | |
MACHINERY—9.1% | |||
195,002 | Atlas Copco AB Class A (Sweden) | 6,721 | |
119,434 | Atlas Copco AB Class B (Sweden) | 3,694 | |
166,983 | Epiroc AB Class A (Sweden) | 1,671 | |
409,833 | Epiroc AB Class B (Sweden) | 4,044 | |
124,682 | Kone OYJ (Finland) | 7,550 | |
38,100 | Schindler Holding AG (Switzerland) | 8,479 | |
23,300 | SMC Corp. (Japan) | 10,532 | |
805,500 | Techtronic Industries Co. Ltd. (Hong Kong) | 6,108 | |
195,299 | Weir Group plc (United Kingdom) | 2,334 | |
51,133 | |||
PERSONAL PRODUCTS—2.8% | |||
79,400 | Kao Corp. (Japan) | 6,123 | |
167,400 | Shiseido Co. Ltd. (Japan) | 9,842 | |
15,965 | |||
PROFESSIONAL SERVICES—1.1% | |||
101,972 | Intertek Group plc (United Kingdom) | 6,086 | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—5.6% | |||
42,408 | ASML Holding NV (Netherlands) | 12,387 | |
335,976 | Taiwan Semiconductor Manufacturing Co. Ltd. ADR (Taiwan)3 | 17,850 | |
14,113 | U-Blox Holding AG (Switzerland)* | 989 | |
31,226 | |||
SOFTWARE—1.9% | |||
73,963 | Nemetschek SE (Germany) | 4,653 | |
121,094 | Xero Ltd. (New Zealand)* | 6,191 | |
10,844 | |||
SPECIALTY RETAIL—1.6% | |||
341,266 | Industria de Diseno Textil SA (Spain)* | 8,741 | |
TEXTILES, APPAREL & LUXURY GOODS—3.2% | |||
31,583 | Adidas AG (Germany) | 7,230 | |
235,364 | Burberry Group plc (United Kingdom) | 4,087 | |
121,081 | Cie Financiere Richemont SA (Switzerland) | 6,869 | |
18,186 | |||
THRIFTS & MORTGAGE FINANCE—1.6% | |||
365,767 | Housing Development Finance Corp. Ltd. (India) | 9,253 | |
WIRELESS TELECOMMUNICATION SERVICES—0.9% | |||
122,100 | SoftBank Group Corp. (Japan) | 5,233 | |
TOTAL COMMON STOCKS | |||
(Cost $497,554) | 537,136 | ||
PREFERRED STOCKS—2.2% | |||
(Cost $5,767) | |||
HEALTH CARE EQUIPMENT & SUPPLIES—2.2% | |||
43,272 | Sartorius AG (Germany) | 12,157 | |
36
Harbor International Growth Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
SHORT-TERM INVESTMENTS—0.0% | |||
(Cost $67) | |||
Shares | Value | ||
INVESTMENT COMPANY-SECURITIES LENDING INVESTMENT FUND—0.0% | |||
66,930 | State Street Navigator Securities Lending Government Money Market Portfolio (1-day yield of 0.190%)4 | $67 | |
TOTAL INVESTMENTS—97.8% | |||
(Cost $503,388) | 549,360 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—2.2% | 12,268 | ||
TOTAL NET ASSETS—100.0% | $561,628 |
FAIR VALUE MEASUREMENTS
The following table summarizes the Fund’s investments as of April 30, 2020 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 | $— | $10,122 | $— | $10,122 | ||||
Europe | 16,390 | 212,145 | — | 228,535 | ||||
Latin America | 9,811 | — | — | 9,811 | ||||
Middle East/Central Asia | 1,393 | 22,445 | — | 23,838 | ||||
North America | 26,751 | — | — | 26,751 | ||||
Pacific Basin | 42,428 | 195,651 | — | 238,079 | ||||
Preferred Stocks | ||||||||
Europe | — | 12,157 | — | 12,157 | ||||
Short-Term Investments | ||||||||
Investment Company-Securities Lending Investment Fund | 67 | — | — | 67 | ||||
Total Investments in Securities | $96,840 | $452,520 | $— | $549,360 |
There were no Level 3 investments at April 30, 2020 or October 31, 2019.
For more information on valuation inputs and their aggregation into the levels 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 | All or a portion of this security was out on loan as of April 30, 2020. |
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 April 30, 2020, the aggregate value of these securities was $25,732 or 5% of net assets. |
3 | Depository receipts such as American Depostiory Receipts (ADRs), Global Depository Receipts (GDRs) and other country specific depository receipts are certificates evidencing ownership of shares of a foreign issuer. These certificates are issued by depository banks and generally trade on an established market in the U.S. or elsewhere. |
4 | Represents the investment of collateral received from securities lending activities |
The accompanying notes are an integral part of the Financial Statements.
37
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
Over the six-month period ending April 30, 2020, the international small-cap market has proved volatile. From the beginning of November 2019 to the end of April 2020, the MSCI EAFE Small Cap (ND) Index has declined 14.65% (all returns are in U.S. Dollars).
During the first two months of the period, November and December 2019, international small cap, and equity markets worldwide, rose, on renewed geopolitical optimism. U.S.-China trade war tensions were receding as a result of the signing of a “Phase I” agreement between the two powers. Meanwhile, Boris Johnson’s resounding parliamentary victory provided him with the political consensus needed to achieve a Brexit. However, just prior to the Chinese Lunar New Year holiday in January, sentiment shifted quickly and focused entirely on the COVID-19 pandemic and the economic consequences of locking down entire cities and countries in hopes of containing the spread of the virus. Gross domestic product forecasts for 2020 have now turned negative for the global economy, despite myriad fiscal and monetary stimulus programs. As a result of economic uncertainty, numerous financial markets from equities to fixed income to commodities all experienced high, and often historically high, levels of volatility, as investors sought safe havens, in our view. With respect to global equities, all equity markets experienced declines year-to-date, while smaller-cap equities generally underperformed larger-cap equities on a relative basis. The Fund’s return over the period was also negative on an absolute basis and underperformed relative to the MSCI EAFE Small Cap (ND) Index due in part to negative factor exposures, namely, high exposure to value factors and low exposure to momentum factors.
Performance
Harbor International Small Cap Fund returned -16.57% (Retirement Class), -16.68% (Institutional Class), -16.77% (Administrative Class), and -16.79% (Investor Class) while the MSCI EAFE Small Cap (ND) Index returned -14.65% over the six-month period ended April 30, 2020.
During the period, the leading sectors in the MSCI EAFE Small Cap (ND) Index (the “Index”) in terms of share price performances were the Health Care and Information Technology (“IT”) sectors. The Fund’s allocations to these sectors were in line with the Index; however, stock-selection decisions in these sectors were mixed, with negative impacts from the IT sector more than offsetting positive selection effects from the Health Care sector. In other sectors, stock selection decisions reduced the relative return of the portfolio, while currency effects and allocations to these other sectors had a positive effect on the Fund’s relative returns. Stock selection effects reflect the Fund’s high exposure to value factors, which were out of favor during this time period.
From a geographical perspective, all regions produced negative returns during the period but, on a relative basis, the most significant contributors to Index returns during the period were the Asia Pacific (including Japan) and Africa/Middle East regions. The Fund’s exposure to both Asia Pacific and Africa/Middle East was in line with the Index. Stock selection and currency effects contributed positively to returns in Asia Pacific, especially in Japan, while all Africa/Middle East effects were neutral relative to the Index. Over the period as a whole, the Fund maintained a relative underweight position in Europe, but holdings still underperformed relative to the Index, due mainly to stock selection. The Fund’s exposure to companies that exhibit strong value factor characteristics instead of momentum factors played a significant role during the period due to negative value factor dynamics that were concentrated in Europe, especially the U.K., and were much less prevalent in other regions.
38
Harbor International Small Cap Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
TOTAL RETURNS
For the periods ended 04/30/2020
Unannualized | 1 Year | 5 Years | Annualized | ||||||||
6 Months | Life of Fund | ||||||||||
Harbor International Small Cap Fund | |||||||||||
Retirement Class1 | -16.57% | -16.91% | N/A | 2.61% | |||||||
Institutional Class1 | -16.68 | -17.01 | N/A | 2.54 | |||||||
Administrative Class1 | -16.77 | -17.24 | N/A | 2.26 | |||||||
Investor Class1 | -16.79 | -17.33 | N/A | 2.15 | |||||||
Comparative Index | |||||||||||
MSCI EAFE Small Cap (ND)1 | -14.65% | -12.28% | N/A | 4.61% |
As stated in the Fund’s prospectus dated March 1, 2020, the expense ratios were 0.88% (Net) and 1.25% (Gross) (Retirement Class); 0.96% (Net) and 1.33% (Gross) (Institutional Class); 1.21% (Net) and 1.58% (Gross) (Administrative Class); and 1.33% (Net) and 1.70% (Gross) (Investor Class). The net expense ratios reflect an expense limitation agreement (excluding interest expense, if any) effective through 02/28/2021. 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.
Over the period, three of the top five worst performing individual holdings for the Fund were concentrated in the U.K., including Senior, a global specialty manufacturer of engineered products for Industrial, Aerospace, and Health Care end-markets. Senior had already experienced weak sentiment due to manufacturing delays for Boeing’s 737 MAX program. The full onset of COVID-19 has had a direct impact on air travel, especially in Asia, the region with the highest number of 737 MAX orders. With heightened air travel uncertainty globally, visibility on Senior’s Aerospace business has become limited, while Industrial and Health Care orders are not yet of a sufficient scale to overcome Aerospace’s challenges. Current valuation multiples for the stock are at all-time lows, even below those experienced in the aftermath of 9/11 and the Global Financial Crisis (2009). N Brown Group, a U.K.-listed retailer of plus-sized fashion for women and men, experienced a negative return for the period due to a combination of overall slowing retail sales and a change in the regulatory structure of the company’s significant credit card business. N Brown Group also saw a sharp decline in orders after the onset of COVID-19 in the U.K., creating working capital and inventory issues.
On the plus side, the Fund benefited from its position in Draegerwerk, a German manufacturer of specialty equipment used in medical and safety applications, including ventilators and face masks that were in very high demand due to COVID-19. Draegerwerk received significant orders from various governmental healthcare agencies all over the world and accelerated its plans to boost production capacity to meet demand, including establishing a manufacturing center in the U.S. Another positive contributor over the period was Elders, a distributor and retailer of farm products and ancillary services to Australian farmers. Expectations for improving fundamentals are rising as a result of improving climate conditions in rural Australia, following a devastating fire season, as well as strong demand globally for agricultural products from Australia enhanced by the relative weakness of the Australian dollar versus the U.S. dollar.
Outlook & Strategy
It is difficult to overstate the degree to which the COVID-19 pandemic has changed economics, global and local trade, capital markets, and daily life for almost everyone. Although equity market volatility in response to economic uncertainty has resulted in negative year-to-date returns for the MSCI EAFE Small Cap (ND) Index, the Growth segment of the index has greatly outperformed the Value segment on a relative basis. Central bank monetary stimulus and investor flight-to-quality has, in our view, pushed factor dynamics to even more extreme levels. Valuation multiples for recently favored, “safe” sectors such as IT, Consumer Staples, Health Care, and Utilities are near historic highs while Financial Services, cyclical Industrials, Consumer Discretionary, and Energy sectors are near historic lows.
Similarly, from a geographic perspective, equity markets in the U.K., continental Europe, and Japan are very appealing from a valuation perspective, relative to other developed markets, in our view. Many European countries have robust social safety net programs that are likely to help cushion the economic blow from COVID-19 disruptions, while the conservative, cash-rich balance sheets of many small-cap companies in Japan will be supportive under current circumstances.
The one thing COVID-19 has not changed, however, is our steadfast conviction in our value-centric philosophy. On the contrary, we are well-practiced at deep-dive, balance sheet analysis and net-asset-valuation frameworks and relish the opportunity to upgrade our portfolio with incrementally higher quality businesses trading at new multi-year or all-time lows. As such our research pipeline continues to fill up with new inventory in just about every geography.
We typically rely on our frequent conversations with the management teams of portfolio holdings to guide our thinking, and there are two consistent perspectives we have gained from our recent conversations: 1) no one really knows how the pandemic will play out, so results guidance for upcoming quarters or the fiscal year has been mostly eliminated; and 2) strong balance sheets in terms of both solvency and liquidity have become paramount. With most economic activity halted, we expect to see
1 | The “Life of Fund” return as shown reflects the period 02/01/2016 through 04/30/2020. |
39
Harbor International Small Cap Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
many companies with stressed or weaker balance sheets struggle. In recent weeks, we have spoken to the management of all our holdings at least once, and in some cases three or four times, specifically to double-check funding sources. We expect to continue to increase the pace of our conversations and, where we identify new risks and opportunities, we will act accordingly.
Despite the near-term challenges presented by the pandemic, our outlook for the Fund’s long-term prospects remains positive. We would expect lingering COVID-19 effects to result in choppy, uneven economic growth across the globe for the near future. In such an environment, we believe stock selection opportunities based on our time-tested valuation methodology are likely to grow as economic dislocations proliferate across the asset class. Finally, as economic conditions improve from the near hard stop over the last few months, we believe value-oriented securities in our coverage universe are positioned to recover from their nearly unprecedented underperformance relative to growth-oriented equities, as risk sentiment improves and a clearer economic picture of the post-COVID-19 world manifests itself.
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—April 30, 2020 (Unaudited)
Portfolio of Investments—April 30, 2020 (Unaudited)
REGION BREAKDOWN(% of investments)
Portfolio of Investments
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—90.2% | |||
Shares | Value | ||
AEROSPACE & DEFENSE—1.3% | |||
1,340 | MTU Aero Engines AG (Germany)* | $182 | |
308,197 | Senior plc (United Kingdom) | 252 | |
434 | |||
AIR FREIGHT & LOGISTICS—3.6% | |||
398,500 | Kerry Logistics Network Ltd. (Hong Kong) | 545 | |
42,903 | Kintetsu World Express Inc. (Japan) | 624 | |
1,169 | |||
BANKS—1.1% | |||
388,147 | Virgin Money UK plc (United Kingdom)* | 370 | |
BUILDING PRODUCTS—1.4% | |||
48,062 | Tarkett SA (France)* | 475 | |
CAPITAL MARKETS—2.2% | |||
22,902 | JAFCO Co. Ltd. (Japan) | 734 | |
CHEMICALS—4.2% | |||
19,900 | Fuso Chemical Co. Ltd. (Japan) | 590 | |
29,520 | KH Neochem Co. Ltd. (Japan) | 510 | |
53,700 | Neo Performance Materials Inc. (Canada) | 286 | |
1,386 | |||
COMMERCIAL SERVICES & SUPPLIES—2.5% | |||
35,949 | ISS AS (Denmark)* | 535 | |
135,918 | Mears Group PLC (United Kingdom) | 281 | |
816 | |||
CONSTRUCTION & ENGINEERING—5.7% | |||
40,378 | Arcadis NV (Netherlands) | 628 | |
274,935 | Maire Tecnimont SpA (Italy)* | 533 | |
56,353 | Raito Kogyo Co. Ltd. (Japan) | 701 | |
1,862 | |||
CONSUMER FINANCE—1.0% | |||
85,102 | Resurs Holding AB (Sweden)1 | 313 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
CONTAINERS & PACKAGING—1.7% | |||
44,472 | BillerudKorsnas AB (Sweden) | $561 | |
DISTRIBUTORS—1.5% | |||
77,740 | Inchcape plc (United Kingdom) | 490 | |
ELECTRICAL EQUIPMENT—2.7% | |||
336,000 | Johnson Electric Holdings Ltd. (Hong Kong) | 564 | |
14,891 | Mersen SA (France)* | 329 | |
893 | |||
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—5.4% | |||
8,034 | Daiwabo Holdings Co. Ltd. (Japan) | 495 | |
8,801 | Landis+Gyr Group AG (Switzerland)* | 595 | |
33,500 | Nohmi Bosai Ltd. (Japan) | 674 | |
1,764 | |||
FOOD PRODUCTS—7.0% | |||
461,628 | Aryzta AG (Switzerland)* | 188 | |
34,138 | Ebro Foods SA (Spain) | 726 | |
112,741 | Elders Ltd. (Australia) | 632 | |
1,905,300 | Japfa Ltd. (Singapore) | 767 | |
2,313 | |||
HEALTH CARE EQUIPMENT & SUPPLIES—1.2% | |||
9,934 | Paramount Bed Holdings Co. Ltd. (Japan) | 410 | |
HEALTH CARE PROVIDERS & SERVICES—4.0% | |||
25,177 | BML Inc. (Japan) | 646 | |
398,186 | Healius Ltd. (Australia) | 666 | |
1,312 | |||
HOTELS, RESTAURANTS & LEISURE—1.5% | |||
49,008 | Resorttrust Inc. (Japan) | 502 | |
INSURANCE—4.3% | |||
23,345 | ASR Nederland NV (Netherlands) | 626 | |
50,808 | Coface SA (France) | 299 | |
256,742 | Mapfre SA (Spain)* | 471 | |
1,396 |
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 | ||
INTERNET & DIRECT MARKETING RETAIL—1.6% | |||
62,594 | Takkt AG (Germany) | $509 | |
IT SERVICES—2.1% | |||
1,737 | Alten SA (France) | 125 | |
66,365 | Indra Sistemas SA (Spain)* | 572 | |
697 | |||
MACHINERY—6.7% | |||
9,568 | Krones AG (Germany) | 576 | |
15,356 | METAWATER Co. Ltd. (Japan) | 611 | |
20,617 | Nabtesco Corp. (Japan) | 590 | |
32,200 | OSG Corp. (Japan) | 418 | |
2,195 | |||
MARINE—1.9% | |||
19,635 | Clarkson plc (United Kingdom) | 616 | |
MEDIA—1.3% | |||
42,075 | Criteo SA ADR (France)*,2 | 418 | |
METALS & MINING—1.4% | |||
17,000 | DOWA Holdings Co. Ltd. (Japan) | 470 | |
OIL, GAS & CONSUMABLE FUELS—3.5% | |||
157,834 | Beach Energy Ltd. (Australia) | 154 | |
63,964 | Golar LNG Ltd. (Bermuda) | 453 | |
574,527 | Viva Energy Group Ltd. (Australia)1 | 537 | |
1,144 | |||
PAPER & FOREST PRODUCTS—1.9% | |||
239,045 | Navigator Co. SA (Portugal) | 621 | |
PERSONAL PRODUCTS—2.3% | |||
42,294 | Ontex Group NV (Belgium) | 771 | |
PROFESSIONAL SERVICES—4.9% | |||
11,392 | Bertrandt AG (Germany) | 439 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
PROFESSIONAL SERVICES—Continued | |||
57,276 | Brunel International NV (Netherlands)* | $361 | |
12,491 | DKSH Holding AG (Switzerland) | 703 | |
2,002 | TechnoPro Holdings Inc. (Japan) | 114 | |
1,617 | |||
ROAD & RAIL—1.4% | |||
198,538 | Redde Northgate plc (United Kingdom) | 448 | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—5.5% | |||
6,777 | Siltronic AG (Germany) | 580 | |
25,920 | Sumco Corp. (Japan) | 369 | |
27,725 | Tower Semiconductor Ltd. (Israel)* | 534 | |
95,225 | X-Fab Silicon Foundries SE (Belgium)*,1 | 331 | |
1,814 | |||
SPECIALTY RETAIL—1.4% | |||
68,054 | Matas AS (Denmark) | 462 | |
TRADING COMPANIES & DISTRIBUTORS—2.0% | |||
34,150 | Kanamoto Co. Ltd. (Japan) | 662 | |
TOTAL COMMON STOCKS | |||
(Cost $36,625) | 29,644 | ||
PREFERRED STOCKS—1.6% | |||
(Cost $346) | |||
HEALTH CARE EQUIPMENT & SUPPLIES—1.6% | |||
6,180 | Draegerwerk AG & Co KGaA (Germany) | 517 | |
TOTAL INVESTMENTS—91.8% | |||
(Cost $36,971) | 30,161 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—8.2% | 2,679 | ||
TOTAL NET ASSETS—100.0% | $32,840 |
FAIR VALUE MEASUREMENTS
The following table summarizes the Fund’s investments as of April 30, 2020 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 | $871 | $14,968 | $— | $15,839 | ||||
Middle East/Central Asia | 534 | — | — | 534 | ||||
North America | 286 | — | — | 286 | ||||
Pacific Basin | — | 12,985 | — | 12,985 | ||||
Preferred Stocks | ||||||||
Europe | — | 517 | — | 517 | ||||
Total Investments in Securities | $1,691 | $28,470 | $— | $30,161 |
There were no Level 3 investments at April 30, 2020 or October 31, 2019.
For more information on valuation inputs and their aggregation into the levels in the table above, please refer to the Fair Value Measurements and Disclosures in Note 2 of the accompanying Notes to Financial Statements.
42
Harbor International Small Cap Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
* | 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 April 30, 2020, the aggregate value of these securities was $1,181 or 4% of net assets. |
2 | Depository receipts such as American Depostiory Receipts (ADRs), Global Depository Receipts (GDRs) and other country specific depository receipts are certificates evidencing ownership of shares of a foreign issuer. These certificates are issued by depository banks and generally trade on an established market in the U.S. or elsewhere. |
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
Toward the end of 2019, global markets were emboldened as the U.S. and China made progress towards a phase one trade deal. Still, investors remained cautious particularly given the history of rhetoric between the two superpowers and a U.S. election year looming. In the U.K., Boris Johnson’s election victory allowed for a decisive U.K. exit from the Eurozone in January. Although global equity markets started the decade on an upbeat note with thawing U.S.-China trade tension and signs of improving economic data, sentiment was quickly dashed as mounting fears of a global pandemic were realized. Markets struggled to process the quickening contagion and price the economic fallout. Amidst an environment of fear and uncertainty, central banks and governments worldwide used their arsenal of fiscal stimulus and quantitative easing to stem the tide of panic. Volatility surged and oil prices plunged, in part due to deterioration of oil-supply talks between Saudi Arabia and Russia in March. The International Monetary Fund slashed most countries’ growth forecasts across the world, inciting recessionary fears globally.
PERFORMANCE
For the six-month period ended April 31, 2020, Harbor Overseas Fund returned -9.00% (Retirement Class), -9.07% (Institutional Class), and -9.19% (Investor Class) compared to the MSCI EAFE (ND) Index return of -14.21%. Performance relative to the benchmark was driven by both favorable 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 mispricing’s 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, the Fund benefitted from a position in Australia’s Fisher & Paykel Healthcare, as shares rose on demand for its respiratory care products used for treating coronavirus patients skyrocketed in early 2020. Swedish Match similarly added to return, as shares of the tobacco products maker advanced on demand for its smokeless tobacco products. Stock positions in Japanese telecoms and software companies also delivered positive return over the period, consistent with their overweight position. Conversely, an investment in French automaker Peugeot proved costly to return, as shares traded lower after the company announced its merger with Fiat Chrysler in late 2019.
From an allocation perspective, the Fund saw positive results from an overweight to Swiss Healthcare and a lack of exposure to U.K. energy stocks. Meanwhile, an overweight to Italian Financials and Japanese Healthcare stocks detracted from returns.
44
Harbor Overseas Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
TOTAL RETURNS
For the periods ended 04/30/2020
Unannualized | 1 Year | 5 Years | Annualized | ||||||||
6 Months | Life of Fund | ||||||||||
Harbor Overseas Fund | |||||||||||
Retirement Class1 | -9.00% | -8.02% | N/A | -5.32% | |||||||
Institutional Class1 | -9.07 | -8.08 | N/A | -5.38 | |||||||
Investor Class1 | -9.19 | -8.39 | N/A | -5.73 | |||||||
Comparative Index | |||||||||||
MSCI EAFE (ND)1 | -14.21% | -11.34% | N/A | -7.14% |
As stated in the Fund’s prospectus dated March 1, 2020, the expense ratios were 0.77% (Net) and 1.21% (Gross) (Retirement Class); 0.85% (Net) and 1.29% (Gross) (Institutional Class); 1.10% (Net) and 1.54% (Gross) (Administrative Class); and 1.22% (Net) and 1.66% (Gross) (Investor Class). The net expense ratios reflect an expense limitation agreement (excluding interest expense, if any) effective through 02/28/2021. 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
Global economic prospects will be largely influenced by the trajectory and magnitude of the coronavirus outbreak. Unlike the SARS outbreak in 2003, the risk of economic spillover is now far greater, as the global economy has become considerably more interconnected. China plays a far more prominent role in global output, trade, and tourism than 17 years earlier, and the pandemic will continue to disrupt global supply chains, weaken demand for imported goods and services, and deter travel and tourism. Since January, when the Organisation for Economic Co-operation and Development revised 2020 growth projections down to 2.4% during the initial outbreak, it is now advising that growth may fall as low as 1.5%.
The coronavirus has distracted attention from other risks that were central to the economic outlook just a few weeks ago. These include heightened geopolitical tensions, notably between the U.S. and Iran, and worsening relations between the U.S. and its trading partners. The trade war between the U.S. and China has been a substantial drag on the global economy over the past two years, damping demand, trade, and investment. The positive signs that emerged in early 2020—more accommodative monetary policy, an initial U.S.-China trade deal, and diminished fears of a no-deal Brexit—had raised hopes of economic improvement. Any progress on these fronts now, however, is likely to be dwarfed by concerns about the long-term impact of COVID-19.
The coronavirus poses a major downside risk to the global economy. Aggressive containment measures need to succeed, and the economic costs need to be limited by effective and well targeted macroeconomic stimulus. Coordinated policy actions across economies would yield the best result on both the social and economic fronts.
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, to help us continue to be successful in the long term.
1 | The “Life of Fund” return as shown reflects the period 03/01/2019 through 04/30/2020. |
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—April 30, 2020 (Unaudited)
Portfolio of Investments—April 30, 2020 (Unaudited)
REGION BREAKDOWN(% of investments)
(Excludes short-term investments)
Portfolio of Investments
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—98.6% | |||
Shares | Value | ||
AEROSPACE & DEFENSE—0.0% | |||
30 | ECA (France) | $1 | |
508 | Hanwha Aerospace Co. Ltd. (South Korea)* | 11 | |
12 | |||
AUTO COMPONENTS—0.1% | |||
4,011 | Grupo Industrial Saltillo SAB de CV (Mexico) | 3 | |
1,100 | HI-LEX CORP. (Japan) | 12 | |
15 | |||
AUTOMOBILES—0.9% | |||
14,687 | Peugeot SA (France) | 208 | |
BANKS—8.8% | |||
7,213 | Bank Leumi Le-Israel (Israel) | 39 | |
1,862,100 | Bank Pembangunan Daerah Jawa Timur TBK PT (Indonesia) | 70 | |
10,664 | Barclays plc (United Kingdom) | 14 | |
8,138 | BNP Paribas SA (France) | 256 | |
40 | Credit Agricole Atlantique Vendee (France) | 6 | |
400 | DBS Group Holdings Ltd. (Singapore) | 6 | |
5,401 | Erste Group Bank AG (Austria) | 117 | |
38,668 | Faisal Islamic Bank of Egypt (Egypt) | 39 | |
132,000 | Industrial & Commercial Bank of China Ltd. (China) | 88 | |
46,403 | Israel Discount Bank Ltd. (Israel) | 150 | |
319 | Israel Discount Bank Ltd. ADR (Israel)1 | 11 | |
34,200 | Japan Post Bank Co. Ltd. (Japan) | 318 | |
91,700 | Mitsubishi UFJ Financial Group Inc. (Japan) | 370 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
BANKS—Continued | |||
168,147 | Mizuho Financial Group Inc. (Japan) | $196 | |
100 | Royal Bank of Canada (Canada) | 6 | |
6,010 | SpareBank 1 BV (Norway) | 20 | |
593 | Sparebanken Sor (Norway)* | 5 | |
3,722 | Standard Chartered plc (United Kingdom) | 19 | |
12,500 | Sumitomo Mitsui Financial Group Inc. (Japan) | 329 | |
2,000 | Sumitomo Mitsui Trust Holdings Inc. (Japan) | 58 | |
2,117 | |||
BEVERAGES—0.3% | |||
489 | Carlsberg AS (Denmark) | 62 | |
16,198 | Ginebra San Miguel Inc. (Philippines) | 10 | |
70 | Heineken Holding NV (Netherlands) | 5 | |
77 | |||
BIOTECHNOLOGY—1.0% | |||
1,030 | Galapagos NV (Belgium)* | 228 | |
BUILDING PRODUCTS—0.4% | |||
5,898 | Epwin Group PLC (United Kingdom)* | 6 | |
668 | FM Mattsson Mora Group AB (Sweden) | 6 | |
1,880 | Inwido AB (Sweden) | 11 | |
1,621 | Nederman Holding AB (Sweden)* | 17 | |
5,888 | Norcros plc (United Kingdom) | 12 | |
2,477 | Systemair AB (Sweden) | 35 | |
87 |
46
Harbor Overseas Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—Continued | |||
Shares | Value | ||
CAPITAL MARKETS—2.9% | |||
6,349 | 3i Group plc (United Kingdom) | $62 | |
273 | Altamir (France) | 5 | |
8,452 | Banca Generali SpA (Italy) | 210 | |
17,818 | Centuria Capital Group Stapled Security (Australia) | 19 | |
3,531 | Fiducian Group Ltd. (Australia) | 10 | |
3,001 | London Stock Exchange Group plc (United Kingdom) | 281 | |
10,890 | St. James's Place plc (United Kingdom) | 116 | |
703 | |||
COMMERCIAL SERVICES & SUPPLIES—0.8% | |||
68,347 | BSA Ltd. (Australia) | 12 | |
6,400 | DAI Nippon Printing Co. Ltd. (Japan) | 135 | |
24,717 | EPP NV (Netherlands)* | 7 | |
262 | Orell Fuessli Holding AG (Switzerland) | 25 | |
300 | Secom Co. Ltd. (Japan) | 25 | |
204 | |||
COMMUNICATIONS EQUIPMENT—1.2% | |||
2,500 | EXFO Inc. (Canada)* | 6 | |
50,485 | Nokia OYJ (Finland)* | 184 | |
10,067 | Telefonaktiebolaget LM Ericsson (Sweden) | 86 | |
8,412 | Telit Communications plc (United Kingdom)* | 13 | |
289 | |||
CONSTRUCTION & ENGINEERING—0.4% | |||
41,300 | Boustead Singapore Ltd. (Singapore) | 17 | |
118 | Eiffage SA (France)* | 10 | |
32,791 | Johns Lyng Group Ltd. (Australia) | 51 | |
7,241 | Tekfen Holding AS (Turkey) | 15 | |
93 | |||
CONSTRUCTION MATERIALS—0.0% | |||
19,932 | Steppe Cement Ltd. (Malaysia)* | 5 | |
CONSUMER FINANCE—0.1% | |||
4,289 | H&T Group plc (United Kingdom) | 17 | |
925 | Yiren Digital Ltd. ADR (China)*,1 | 3 | |
20 | |||
CONTAINERS & PACKAGING—0.0% | |||
64,100 | Hanwell Holdings Ltd. (Singapore) | 8 | |
DISTRIBUTORS—0.7% | |||
11,500 | Jardine Cycle & Carriage Ltd. (Singapore) | 164 | |
DIVERSIFIED CONSUMER SERVICES—0.0% | |||
7,627 | Shine Corporate Ltd. (Australia) | 4 | |
DIVERSIFIED FINANCIAL SERVICES—0.4% | |||
1,010 | Exor NV (Italy) | 55 | |
13,798 | IGB Bhd (Malaysia) | 8 | |
16,843 | M&G plc (United Kingdom) | 28 | |
91 | |||
DIVERSIFIED TELECOMMUNICATION SERVICES—3.8% | |||
258,762 | Bredband2 I Skandinavien AB (Sweden) | 38 | |
145,911 | BT Group plc (United Kingdom) | 212 | |
44,163 | Koninklijke KPN NV (Netherlands) | 102 | |
604 | Magyar Telekom Telecommunications plc ADR (Hungary)1 | 4 | |
19,000 | Nippon Telegraph & Telephone Corp. (Japan) | 433 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
DIVERSIFIED TELECOMMUNICATION SERVICES—Continued | |||
34,186 | Nos SGPS SA (Portugal) | $128 | |
109 | Telefonica SA (Spain) | — | |
917 | |||
ELECTRIC UTILITIES—1.8% | |||
10,641 | CFE Capital S de RL de CV (Mexico) | 8 | |
3,216 | Enel Americas SA ADR (Chile)1 | 26 | |
28,931 | Enel SpA (Italy) | 198 | |
23,923 | OPG Power Ventures plc (United Kingdom) | 3 | |
55,200 | Tokyo Electric Power Co. (Japan)* | 186 | |
421 | |||
ELECTRICAL EQUIPMENT—0.9% | |||
250,000 | Jiangnan Group Ltd. (China) | 10 | |
28,000 | Johnson Electric Holdings Ltd. (Hong Kong) | 47 | |
1,217 | Legrand SA (France) | 81 | |
1,700 | Mitsubishi Electric Corp. (Japan) | 21 | |
205 | Somfy SA (France) | 17 | |
5,546 | Zumtobel Group AG (Austria)* | 36 | |
212 | |||
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—1.3% | |||
190 | Barco NV (Belgium) | 30 | |
66,600 | Cal-Comp Electronics Thailand PCL NVDR (Thailand)1 | 3 | |
77,905 | Datatec Ltd. (South Africa) | 102 | |
13,314 | Hon Hai Precision Industry Co. Ltd. GDR (Taiwan)1 | 69 | |
548 | IDIS Holdings Co. Ltd. (South Korea) | 6 | |
9,170 | Partron Co. Ltd. (South Korea) | 61 | |
1,200 | Tomen Devices Corp. (Japan) | 43 | |
314 | |||
ENERGY EQUIPMENT & SERVICES—0.1% | |||
21,563 | Akastor ASA (Norway)* | 9 | |
149,000 | Hilong Holding Ltd. (Hong Kong) | 7 | |
16 | |||
ENTERTAINMENT—2.3% | |||
751 | AFC Ajax NV (Netherlands) | 12 | |
600 | Nintendo Co. Ltd. (Japan) | 248 | |
2,149 | TEN Square Games SA (Poland) | 221 | |
3,206 | Vivendi SA (France) | 69 | |
106,364 | Zengame Technology Holding Ltd. (Hong Kong) | 11 | |
561 | |||
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—0.0% | |||
6,426 | Yeni Gimat Gayrimenkul Ortakligi AS (Turkey) | 11 | |
FOOD & STAPLES RETAILING—2.0% | |||
1,832 | Amsterdam Commodities NV (Netherlands) | 40 | |
18,464 | Koninklijke Ahold Delhaize NV (Netherlands) | 448 | |
488 | |||
FOOD PRODUCTS—0.2% | |||
8,820 | Greencore Group plc (United Kingdom)* | 20 | |
900 | Maeil Holdings Co. Ltd. (South Korea) | 6 | |
45 | Nestlé SA (Switzerland) | 5 | |
119 | Neto ME Holdings Ltd. (Israel)* | 7 | |
7,165 | PGG Wrightson Ltd. (New Zealand) | 12 | |
50 | |||
HEALTH CARE EQUIPMENT & SUPPLIES—5.0% | |||
28,686 | Fisher & Paykel Healthcare Corp. Ltd. (New Zealand) | 479 | |
12,359 | Getinge AB Class B (Sweden) | 237 |
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 | |||
114 | GN Store Nord AS (Denmark) | $5 | |
1,408 | Ion Beam Applications (Belgium)* | 12 | |
10,379 | Koninklijke Philips NV (Netherlands) | 452 | |
1,185 | |||
HEALTH CARE PROVIDERS & SERVICES—0.1% | |||
6,322 | Oriola OYJ (Finland) | 15 | |
HEALTH CARE TECHNOLOGY—0.3% | |||
610 | Cegedim SA (France)* | 18 | |
1,114 | Nexus AG (Germany) | 43 | |
61 | |||
HOTELS, RESTAURANTS & LEISURE—1.0% | |||
11,841 | Aristocrat Leisure Ltd. (Australia) | 194 | |
410 | Evolution Gaming Group AB ADR (Sweden)1 | 19 | |
558 | Groupe Partouche SA (France) | 11 | |
83,100 | Jaya Bersama Indo TBK PT (Indonesia)* | 2 | |
600 | Saint Marc Holdings Co. Ltd. (Japan) | 10 | |
236 | |||
HOUSEHOLD DURABLES—4.3% | |||
477 | Amica SA (Poland)* | 11 | |
35,688 | Barratt Developments plc (United Kingdom) | 233 | |
2,956 | Berkeley Group Holdings plc (United Kingdom) | 155 | |
3,163 | Electra Consumer Products 1970 Ltd. (Israel) | 61 | |
265 | HEXAOM (France) | 7 | |
9,600 | Lii Hen Industries BHD (Malaysia) | 5 | |
18,400 | Sekisui House Ltd. (Japan)* | 315 | |
1,056 | Surteco Group SE (Germany) | 23 | |
117,956 | Taylor Wimpey plc (United Kingdom) | 218 | |
1,028 | |||
HOUSEHOLD PRODUCTS—0.0% | |||
323 | Essity AB (Sweden)* | 10 | |
INDEPENDENT POWER & RENEWABLE ELECTRICITY PRODUCERS—0.5% | |||
40,794 | Meridian Energy Ltd. (New Zealand) | 111 | |
INDUSTRIAL CONGLOMERATES—0.9% | |||
276,904 | ALFA SAB de CV (Mexico) | 113 | |
1,023 | Siemens AG (Germany) | 95 | |
2,022 | Sonae Capital SGPS SA (Portugal)* | 1 | |
209 | |||
INSURANCE—9.6% | |||
4,222 | Aegon NV (Netherlands)* | 11 | |
788 | Ageas (Belgium) | 28 | |
2,527 | Allianz SE (Germany) | 465 | |
22,970 | Assicurazioni Generali SpA (Italy) | 328 | |
19,029 | Aviva plc (United Kingdom)* | 58 | |
19,881 | Avivasa Emeklilik VE Hayat AS (Turkey) | 38 | |
800 | Dai-ichi Life Holdings Inc. (Japan) | 10 | |
4,223 | European Reliance General Insurance Co. SA (Greece) | 19 | |
2,200 | iA Financial Corp. Inc. (Canada) | 71 | |
33,600 | Japan Post Holdings Co. Ltd. (Japan) | 269 | |
100,114 | Legal & General Group plc (United Kingdom)* | 257 | |
900 | Manulife Financial Corp. (Canada) | 11 | |
1,700 | Muenchener Rueckversicherungs-Gesellschaft AG in Muenchen (Germany) | 372 | |
2,394 | NN Group NV (Netherlands)* | 69 | |
113,000 | Paninvest TBK PT (Indonesia)* | 6 | |
75 | Sun Life Financial Inc. (Canada) | 3 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
INSURANCE—Continued | |||
2,400 | Tokio Marine Holdings Inc. (Japan) | $113 | |
66,066 | Unipolsai Assicurazioni SpA (Italy) | 162 | |
2,290 | |||
INTERACTIVE MEDIA & SERVICES—0.0% | |||
120 | Mediagrif Interactive Technologies Inc. (Canada) | 1 | |
INTERNET & DIRECT MARKETING RETAIL—0.2% | |||
1,871 | Lastminute.com NV (Netherlands)* | 41 | |
IT SERVICES—4.5% | |||
300 | Business Engineering Corp. (Japan) | 7 | |
819 | Comarch SA (Poland) | 41 | |
1,861 | Digia OYJ (Finland) | 9 | |
700 | Digital Hearts Holdings Co. Ltd. (Japan) | 5 | |
18,122 | Eckoh plc (United Kingdom) | 12 | |
4,400 | Fujitsu Ltd. (Japan) | 427 | |
481 | GFT Technologies SE (Germany)* | 4 | |
241,419 | Hi Sun Technology China Ltd. (China)* | 27 | |
3,715 | Kainos Group plc (United Kingdom) | 33 | |
345 | Know It AB (Sweden)* | 5 | |
500 | Nomura Research Institute Ltd. (Japan) | 12 | |
3,400 | NTT Data Corp. (Japan) | 35 | |
9,100 | Otsuka Corp. (Japan) | 412 | |
976 | Pushpay Holdings Ltd. (New Zealand)* | 3 | |
348 | Sopra Steria Group SA (France) | 41 | |
413 | Techedge SpA (Italy) | 2 | |
1,075 | |||
LEISURE PRODUCTS—0.3% | |||
6,336 | Harvia OYJ (Finland) | 73 | |
343 | Sanlorenzo Spa/Ameglia (Italy)* | 5 | |
78 | |||
LIFE SCIENCES TOOLS & SERVICES—4.3% | |||
4,402 | Ergomed plc (United Kingdom)* | 23 | |
2,238 | ICON plc (Ireland)* | 359 | |
1,657 | Sartorius Stedim Biotech (France) | 397 | |
537 | Siegfried Holding AG (Switzerland)* | 245 | |
1,024 | |||
MACHINERY—1.9% | |||
164 | Atlas Copco AB Class A (Sweden) | 6 | |
15,611 | Famur SA (Poland) | 8 | |
59,900 | Sunningdale Tech Ltd. (Singapore)* | 43 | |
100 | Suzumo Machinery Co. Ltd. (Japan) | 1 | |
5,571 | Valmet OYJ (Finland) | 127 | |
29,600 | Zhengzhou Coal Mining Machinery Group Co. Ltd. (China) | 12 | |
318,200 | Zoomlion Heavy Industry Science And Technology Co. Ltd. (China)* | 258 | |
455 | |||
MEDIA—0.9% | |||
1,634 | 4imprint Group plc (United Kingdom) | 39 | |
4,693 | Bloomsbury Publishing plc (United Kingdom) | 12 | |
18,144 | Cello Health plc (United Kingdom) | 27 | |
195 | Cogeco Communications Inc. (Canada) | 14 | |
300 | Cogeco Inc. (Canada) | 19 | |
4,472 | Corus Entertainment Inc. (Canada) | 10 | |
4,572 | Enero Group Ltd. (Australia) | 4 | |
85 | GTN Ltd. (Australia) | — | |
2,451 | HighCo SA (France)* | 9 | |
3,663 | Ilkka-Yhtyma OYJ (Finland) | 13 |
48
Harbor Overseas Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—Continued | |||
Shares | Value | ||
MEDIA—Continued | |||
1,767 | Italian Exhibition Group SpA (Italy)* | $6 | |
8,279 | North Media AS (Denmark)* | 52 | |
205 | |||
METALS & MINING—3.2% | |||
94,785 | Arcelormittal South Africa Ltd. (South Africa)* | 3 | |
22,947 | Base Resources Ltd. (Australia)* | 2 | |
2,335 | Caledonia Mining Corp. plc (Jersey) | 30 | |
27,813 | Evraz plc (United Kingdom) | 92 | |
59,033 | Fortescue Metals Group Ltd. (Australia) | 451 | |
4,942 | Iluka Resources Ltd. (Australia) | 25 | |
26,518 | Maca Ltd. (Australia) | 13 | |
268 | Newcrest Mining Ltd. (Australia) | 5x | |
91,030 | Red 5 Ltd. (Australia)* | 11 | |
140 | Stalprodukt SA (Poland)* | 5 | |
12,083 | Trans-Siberian Gold PLC (United Kingdom) | 13 | |
3,579 | Tribune Resources Ltd. (Australia)* | 15 | |
76,658 | Western Areas Ltd. (Australia) | 108 | |
773 | |||
MULTI-UTILITIES—0.7% | |||
46,370 | Hera SpA (Italy) | 172 | |
OIL, GAS & CONSUMABLE FUELS—0.1% | |||
24,800 | China Aviation Oil Singapore Corp. Ltd. (Singapore) | 18 | |
224 | OMV AG ADR (Austria)1 | 8 | |
26 | |||
PAPER & FOREST PRODUCTS—0.0% | |||
1,311 | Midway Ltd. (Australia) | 1 | |
PERSONAL PRODUCTS—0.6% | |||
510 | L'Oreal SA (France) | 148 | |
93 | Unilever NV (Netherlands) | 5 | |
153 | |||
PHARMACEUTICALS—11.7% | |||
6,265 | AFT Pharmaceuticals Ltd. (New Zealand)* | 16 | |
321 | H Lundbeck AS ADR (Denmark)1 | 12 | |
51 | Merck KGaA (Germany) | 6 | |
5,050 | Neuren Pharmaceuticals Ltd. (New Zealand)* | 5 | |
8,549 | Novartis AG (Switzerland) | 730 | |
9,347 | Novo Nordisk AS (Denmark) | 596 | |
2,777 | Roche Holding AG (Switzerland) | 962 | |
810 | Sanofi SA (France)* | 79 | |
3,844 | UCB SA (Belgium) | 352 | |
562 | Vetoquinol SA (France) | 35 | |
2,793 | |||
PROFESSIONAL SERVICES—2.5% | |||
3,100 | Altech Corp. (Japan) | 47 | |
17,973 | Gateley Holdings plc (United Kingdom)* | 36 | |
1,745 | Impellam Group plc (United Kingdom)* | 7 | |
4,498 | People Infrastructure Ltd. (Australia) | 5 | |
218 | RELX plc (United Kingdom) | 5 | |
7,160 | SEMCOM AB (Sweden) | 40 | |
6,315 | Wolters Kluwer NV (Netherlands) | 465 | |
605 | |||
REAL ESTATE MANAGEMENT & DEVELOPMENT—1.8% | |||
58,000 | Chen Xing Development Holdings Ltd. (Hong Kong)* | 15 | |
83,000 | China Overseas Grand Oceans Group Ltd. (China) | 52 | |
1,476 | Elanders AB Class B (Sweden)* | 7 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
REAL ESTATE MANAGEMENT & DEVELOPMENT—Continued | |||
116,681 | Ever Reach Group Holdings Co. Ltd. (Hong Kong) | $12 | |
37,000 | Glorious Property Holdings Ltd. (Hong Kong)* | 1 | |
17,251 | Grupo GICSA SAB de CV (Mexico)* | 2 | |
42,000 | Hopefluent Group Holdings Ltd. (China) | 9 | |
120,899 | K Wah International Holdings Ltd. (Hong Kong) | 55 | |
3,010 | KOJAMO Oyj (Finland) | 54 | |
1,235 | LSR Group PJSC GDR (Russia)1 | 2 | |
400 | Mainstreet Equity Corp. (Canada)* | 17 | |
28,100 | MKH BHD (Malaysia) | 7 | |
20,963 | Modern Land China Co. Ltd. (Hong Kong) | 3 | |
62,150 | Powerlong Real Estate Holdings Ltd. (China) | 38 | |
40,979 | Rani Zim Shopping Centers Ltd. (Israel)* | 39 | |
9,213 | Real Estate Investors PLC (United Kingdom) | 4 | |
1,100 | Real Matters Inc. (Canada)* | 13 | |
2,000 | Sun Hung KAI Properties Ltd. (Hong Kong) | 27 | |
2,544 | TAG Immobilien AG (Germany) | 56 | |
363,000 | Zhong An Group Ltd. (China) | 11 | |
424 | |||
ROAD & RAIL—0.0% | |||
164 | RedcapTour Co. Ltd. (South Korea) | 2 | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—2.2% | |||
4,200 | Advantest Corp. (Japan) | 204 | |
522 | Dialog Semiconductor plc (Germany)* | 17 | |
2,845 | NXP Semiconductors NV (Netherlands) | 283 | |
1,419 | Tower Semiconductor Ltd. (Israel)* | 27 | |
531 | |||
SOFTWARE—3.6% | |||
801 | Atlassian Corp. plc (Australia)* | 125 | |
141 | Atoss Software AG (Germany) | 28 | |
1,624 | Check Point Software Technologies Ltd. (Israel)* | 172 | |
4,783 | F-Secure OYJ (Finland)* | 14 | |
3,315 | IVU Traffic Technologies AG (Germany) | 47 | |
144 | MiX Telematics Ltd. ADR (South Africa)1 | 1 | |
2,567 | NICE Ltd. ADR (Israel)*,1 | 422 | |
5,006 | Objective Corp. Ltd. (Australia) | 20 | |
32,434 | RPMGlobal Holdings Ltd. (Australia)* | 21 | |
628 | Sage Group plc (United Kingdom) | 5 | |
855 | |||
SPECIALTY RETAIL—0.1% | |||
1,100 | BMTC Group Inc. (Canada) | 5 | |
20 | Samse SA (France) | 3 | |
5,830 | Turners Automotive Group Ltd. (New Zealand)* | 6 | |
14 | |||
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS—1.8% | |||
5,130 | Doro AB (Sweden)* | 17 | |
1,700 | Mimaki Engineering Co. Ltd. (Japan) | 6 | |
11,744 | Pricer AB (Sweden) | 24 | |
9,300 | Samsung Electronics Co. Ltd. (South Korea) | 382 | |
429 | |||
TEXTILES, APPAREL & LUXURY GOODS—0.1% | |||
5,365 | Kingdom Holdings Ltd. (China) | 1 | |
1,472 | Ratti SpA (Italy) | 7 | |
600 | Rhythm Watch Co. Ltd. (Japan) | 4 | |
344 | Samyang Tongsang Co. Ltd. (South Korea) | 15 | |
27 |
49
Harbor Overseas Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—Continued | |||
Shares | Value | ||
TOBACCO—1.9% | |||
7,470 | Swedish Match AB (Sweden) | $462 | |
TRADING COMPANIES & DISTRIBUTORS—0.4% | |||
2,431 | Bunzl plc (United Kingdom) | 53 | |
1,195 | Hudaco Industries Ltd. (South Africa) | 4 | |
2,603 | Kloeckner & Co. SE (Germany)* | 11 | |
2,400 | Parker Corp. (Japan) | 9 | |
1,165 | Sanistal AS (Denmark)* | 10 | |
87 | |||
TRANSPORTATION INFRASTRUCTURE—0.1% | |||
23,631 | Stalexport Autostrady SA (Poland) | 16 | |
WIRELESS TELECOMMUNICATION SERVICES—3.6% | |||
9,600 | KDDI Corp. (Japan) | 278 | |
17,500 | NTT DoCoMo Inc. (Japan) | 516 | |
500 | Trilogy International Partners Inc. (Canada) | — | |
50,803 | Vodafone Group plc (United Kingdom) | 72 | |
866 | |||
TOTAL COMMON STOCKS | |||
(Cost $24,713) | 23,575 | ||
PREFERRED STOCKS—0.1% | |||
Shares | Value | ||
MACHINERY—0.1% | |||
140 | KSB SE & Co KGaA (Germany) | $30 | |
TRADING COMPANIES & DISTRIBUTORS—0.0% | |||
97 | Brodrene A&O Johansen AS (Denmark) | 5 | |
TOTAL PREFERRED STOCKS | |||
(Cost $41) | 35 | ||
TOTAL INVESTMENTS—98.7% | |||
(Cost $24,754) | 23,610 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—1.3% | 311 | ||
TOTAL NET ASSETS—100.0% | $23,921 |
FORWARD CURRENCY CONTRACTS
Counterparty | Amount to be Delivered (000s) | Amount to be Received (000s) | Settlement Date | Unrealized Appreciation/ (Depreciation) (000s) | ||||
State Street Bank and Trust Co. | $ 7 | ZAR 124 | 05/06/2020 | $ — |
FAIR VALUE MEASUREMENTS
The following table summarizes the Fund’s investments as of April 30, 2020 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 | $1 | $148 | $— | $149 | ||||
Europe | 715 | 13,062 | — | 13,777 | ||||
Latin America | 37 | 115 | — | 152 | ||||
Middle East/Central Asia | 632 | 296 | — | 928 | ||||
North America | 138 | 38 | — | 176 | ||||
Pacific Basin | 125 | 8,263 | 5 | 8,393 | ||||
Preferred Stocks | ||||||||
Europe | — | 35 | — | 35 | ||||
Total Investments in Securities | $1,648 | $21,957 | $5 | $23,610 | ||||
Financial Derivative Instruments - Assets | ||||||||
Forward Currency Contracts | $— | $— | $— | $— | ||||
Total Investments | $1,648 | $21,957 | $5 | $23,610 |
For more information on valuation inputs and their aggregation into the levels in the table above, please refer to the Fair Value Measurements and Disclosures in Note 2 of the accompanying Notes to Financial Statements.
50
Harbor Overseas 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 period ended April 30, 2020. 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 occured.
Valuation Description | Beginning Balance as of 11/01/2019 (000s) | Purchases (000s) | Sales (000s) | Discount/ (Premium) (000s) | Total Realized Gain/(Loss) (000s) | Change in Unrealized Appreciation/ (Depreciation) (000s) | Transfers Into Level 3 (000s)h | Transfers Out of Level 3 (000s) | Ending Balance as of 04/30/2020 (000s) | Unrealized Gain/(Loss) as of 04/30/2020 (000s) | ||||||||||
Common Stocks | $7 | $— | $(11) | $— | $3 | $— | $6 | $— | $5 | $(1) |
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 04/30/2020 (000s) | Valuation Technique | Unobservable Input(s) | Input Value(s) | ||||
Investments in Securities | ||||||||
Common Stocks | ||||||||
Newcrest Mining Ltd. (Australia) | $ 5 | Market Approach | Last Price Adjusted for Share Dilution Factor | AUD 27.72 |
* | Non-income producing security |
1 | Depository receipts such as American Depostiory Receipts (ADRs), Global Depository Receipts (GDRs) and other country specific depository receipts are certificates evidencing ownership of shares of a foreign issuer. These certificates are issued by depository banks and generally trade on an established market in the U.S. or elsewhere. |
h | Transferred from Level 2 to Level 3 due to the unavailability of observable market data for pricing |
x | Fair valued in accordance with Harbor Funds' Valuation Procedures. |
AUD | Australian Dollar |
ZAR | South African Rand |
The accompanying notes are an integral part of the Financial Statements.
51
Harbor International & Global Funds
StatementS of Assets and Liabilities—April 30, 2020 (Unaudited)
StatementS of Assets and Liabilities—April 30, 2020 (Unaudited)
(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 | $822,638 | $96,086 | $25,729 | $100,495 | $4,801,470 | $503,388 | $36,971 | $24,754 |
Investments, at value(Including securities loaned of $2,807, $0, $0, $0, $6,916, $65, $0 and $0) | $713,910 | $96,514 | $25,791 | $112,664 | $4,197,423 | $549,360 | $30,161 | $23,610 |
Cash | 51,695 | 3,190 | 1,519 | 1,811 | 21,919 | 15,350 | 1,501 | 119 |
Foreign currency, at value (cost: $763,$184,$0,$0,$5,702,$91,$980 and $12) | 770 | 185 | — | — | 5,722 | 92 | 987 | 11 |
Receivables for: | ||||||||
Investments sold | 490 | 968 | 248 | — | 1,438 | — | 32 | 670 |
Foreign currency spot contracts | 17,915 | 721 | 371 | — | 218 | 3,015 | 41 | 1,107 |
Capital shares sold | 178 | 19 | 176 | 65 | 2,054 | 1,805 | — | — |
Dividends | 2,660 | 55 | 47 | 77 | 19,065 | 854 | 128 | 133 |
Securities lending income | 4 | — | — | — | 1 | 1 | — | — |
Withholding tax | 597 | — | 11 | 6 | 27,677 | 340 | 41 | 28 |
Prepaid registration fees | 29 | 26 | 16 | 24 | 29 | 18 | 27 | 19 |
Prepaid fund insurance | 4 | 1 | — | 1 | 31 | 4 | — | — |
Other assets | 156 | 18 | 14 | 18 | 4,623 | 139 | 30 | 15 |
Total Assets | 788,408 | 101,697 | 28,193 | 114,666 | 4,280,200 | 570,978 | 32,948 | 25,712 |
LIABILITIES | ||||||||
Payables for: | ||||||||
Investments purchased | 28,596 | 378 | 124 | — | 1,130 | 2,923 | 9 | 639 |
Foreign currency spot contracts | 17,762 | 720 | 370 | — | 219 | 3,020 | 41 | 1,106 |
Capital shares reacquired | 1,335 | 1 | — | 77 | 4,294 | 2,538 | — | — |
Collateral for securities loaned | 1,705 | — | — | — | — | 67 | — | — |
Accrued expenses: | ||||||||
Management fees | 400 | 63 | 16 | 62 | 2,533 | 320 | 22 | 14 |
12b-1 fees | 3 | 1 | — | 4 | 67 | 6 | — | — |
Transfer agent fees | 27 | 6 | 1 | 10 | 300 | 37 | 2 | 1 |
Trustees' fees and expenses | 48 | 7 | 1 | 7 | 3,917 | 95 | 4 | 1 |
Other | 342 | 75 | 51 | 33 | 2,382 | 344 | 30 | 30 |
Total Liabilities | 50,218 | 1,251 | 563 | 193 | 14,842 | 9,350 | 108 | 1,791 |
NET ASSETS | $738,190 | $100,446 | $27,630 | $114,473 | $4,265,358 | $561,628 | $32,840 | $23,921 |
Net Assets Consist of: | ||||||||
Paid-in capital | $876,884 | $107,298 | $27,406 | $94,364 | $5,563,701 | $533,353 | $40,232 | $26,187 |
Total distributable earnings/(loss) | (138,694) | (6,852) | 224 | 20,109 | (1,298,343) | 28,275 | (7,392) | (2,266) |
$738,190 | $100,446 | $27,630 | $114,473 | $4,265,358 | $561,628 | $32,840 | $23,921 | |
The accompanying notes are an integral part of the Financial Statements.
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 | $485,437 | $39,455 | $13,972 | $12,743 | $1,085,359 | $130,025 | $9,723 | $11,932 | ||||||||
Shares of beneficial interest1 | 53,514 | 4,321 | 1,377 | 449 | 33,885 | 8,780 | 960 | 1,304 | ||||||||
Net asset value per share2 | $9.07 | $9.13 | $10.15 | $28.38 | $32.03 | $14.81 | $10.13 | $9.15 | ||||||||
Institutional Class | ||||||||||||||||
Net assets | $240,527 | $56,430 | $13,625 | $79,607 | $2,841,272 | $401,129 | $22,497 | $11,952 | ||||||||
Shares of beneficial interest1 | 26,504 | 6,178 | 1,343 | 2,811 | 88,366 | 27,102 | 2,221 | 1,306 | ||||||||
Net asset value per share2 | $9.08 | $9.13 | $10.15 | $28.32 | $32.15 | $14.80 | $10.13 | $9.15 | ||||||||
Administrative Class | ||||||||||||||||
Net assets | $6,026 | $4 | N/A | $2,373 | $16,204 | $346 | $297 | N/A | ||||||||
Shares of beneficial interest1 | 665 | — | N/A | 85 | 501 | 23 | 29 | N/A | ||||||||
Net asset value per share2 | $9.06 | $9.36 | N/A | $27.77 | $32.31 | $14.79 | $10.11 | N/A | ||||||||
Investor Class | ||||||||||||||||
Net assets | $6,200 | $4,557 | $33 | $19,750 | $322,523 | $30,128 | $323 | $37 | ||||||||
Shares of beneficial interest1 | 688 | 500 | 3 | 722 | 10,129 | 2,048 | 32 | 4 | ||||||||
Net asset value per share2 | $9.02 | $9.12 | $10.13 | $27.35 | $31.84 | $14.71 | $10.12 | $9.14 |
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—Six Months Ended April 30, 2020 (Unaudited)
StatementS of Operations—Six Months Ended April 30, 2020 (Unaudited)
(All amounts in thousands)
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 | |
Investment Income | ||||||||
Dividends | $8,470 | $836 | $155 | $574 | $51,623 | $2,700 | $295 | $362 |
Interest | 61 | 10 | 9 | 13 | 163 | 36 | 8 | 1 |
Net securities lending income | 25 | — | — | — | 76 | 11 | — | — |
Foreign taxes withheld | (853) | (123) | (18) | (20) | (4,754) | (269) | (27) | (36) |
Total Investment Income | 7,703 | 723 | 146 | 567 | 47,108 | 2,478 | 276 | 327 |
Operating Expenses | ||||||||
Management fees | 2,859 | 469 | 105 | 399 | 19,058 | 2,134 | 169 | 97 |
12b-1 fees: | ||||||||
Administrative Class | 8 | — | N/A | 3 | 59 | — | — | N/A |
Investor Class | 11 | 3 | — | 26 | 534 | 41 | 1 | — |
Shareholder communications | 9 | 3 | 2 | 4 | 250 | 13 | 3 | 3 |
Custodian fees | 188 | 49 | 12 | 22 | 442 | 79 | 28 | 16 |
Transfer agent fees: | — | — | — | — | — | — | — | — |
Retirement Class | 50 | 5 | 1 | 1 | 121 | 14 | 1 | 1 |
Institutional Class | 127 | 25 | 7 | 35 | 1,701 | 198 | 12 | 6 |
Administrative Class | 3 | — | N/A | 1 | 23 | — | — | N/A |
Investor Class | 10 | 3 | — | 23 | 470 | 36 | — | — |
Professional fees | 37 | 13 | 1 | 5 | 149 | 20 | 4 | 4 |
Trustees' fees and expenses | 19 | 2 | 1 | 3 | 136 | 14 | 1 | 1 |
Registration fees | 39 | 32 | 25 | 33 | 70 | 38 | 37 | 26 |
Miscellaneous | 10 | 5 | 5 | 5 | 47 | 9 | 4 | 4 |
Total expenses | 3,370 | 609 | 159 | 560 | 23,060 | 2,596 | 260 | 158 |
Management fees waived | (462) | (74) | — | (27) | — | — | — | — |
Transfer agent fees waived | (8) | (1) | — | (1) | (51) | (6) | — | — |
Other expenses reimbursed | (124) | (49) | (46) | (39) | (3,075) | (167) | (74) | (53) |
Custodian fees reduction | — | — | — | — | (2) | — | — | — |
Net expenses | 2,776 | 485 | 113 | 493 | 19,932 | 2,423 | 186 | 105 |
Net Investment Income/(Loss) | 4,927 | 238 | 33 | 74 | 27,176 | 55 | 90 | 222 |
Realized and Change in Net Unrealized Gain/(Loss) on Investment Transactions | ||||||||
Net realized gain/(loss) on: | ||||||||
Investments(net of foreign capital gains tax: $0,$0,$0,$0,$0,$67,$0 and $0) | (7,985) | (5,454) | 158 | 8,026 | (20,998) | (4,349) | 200 | (431) |
Foreign currency transactions | (66) | (22) | (13) | 17 | 400 | (13) | (24) | (59) |
Change in net unrealized appreciation/(depreciation) on: | ||||||||
Investments(net of foreign capital gains tax accrual: $0,$25,$8,$0,$0,$203,$0 and $0) | (131,381) | (9,177) | (1,746) | (7,418) | (771,748) | (34,141) | (6,926) | (2,104) |
Purchased options | (4) | — | — | — | (43) | — | — | — |
Translations of assets and liabilities in foreign currencies | 114 | (1) | — | 2 | (412) | (9) | 4 | (1) |
Net gain/(loss) on investment transactions | (139,322) | (14,654) | (1,601) | 627 | (792,801) | (38,512) | (6,746) | (2,595) |
Net Increase/(Decrease) in Net Assets Resulting from Operations | $(134,395) | $(14,416) | $(1,568) | $701 | $(765,625) | $(38,457) | $(6,656) | $(2,373) |
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, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | June 1, 2019a through October 31, 2019 | |||
INCREASE/(DECREASE) IN NET ASSETS | (Unaudited) | (Unaudited) | (Unaudited) | |||||
Operations: | ||||||||
Net investment income/(loss) | $4,927 | $17,441 | $238 | $1,291 | $33 | $61 | ||
Net realized gain/(loss) on investments | (8,051) | (12,713) | (5,476) | 398 | 145 | 102 | ||
Change in net unrealized appreciation/(depreciation) of investments | (131,271) | 76,189 | (9,178) | 11,588 | (1,746) | 1,801 | ||
Net increase/(decrease) in assets resulting from operations | (134,395) | 80,917 | (14,416) | 13,277 | (1,568) | 1,964 | ||
Distributions to Shareholders | ||||||||
Retirement Class | (11,421) | (18,266) | (746) | (149) | (89) | — | ||
Institutional Class | (5,596) | (9,595) | (710) | (585) | (83) | — | ||
Administrative Class | (134) | (227) | — | (1) | N/A | N/A | ||
Investor Class | (171) | (196) | (6) | (3) | — | — | ||
Total distributions to shareholders | (17,322) | (28,284) | (1,462) | (738) | (172) | — | ||
Net Increase/(Decrease) Derived from Capital Share Transactions | 116,837 | 50,721 | 16,857 | 15,648 | 1,807 | 25,599 | ||
Net increase/(decrease) in net assets | (34,880) | 103,354 | 979 | 28,187 | 67 | 27,563 | ||
Net Assets | ||||||||
Beginning of period | 773,070 | 669,716 | 99,467 | 71,280 | 27,563 | — | ||
End of period | $738,190 | $773,070 | $100,446 | $99,467 | $27,630 | $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, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | March 1, 2019a through October 31, 2019 | ||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||
$74 | $238 | $27,176 | $162,153 | $55 | $9,650 | $90 | $1,034 | $222 | $610 | ||||
8,043 | 6,732 | (20,598) | (672,620) | (4,362) | (2,753) | 176 | (551) | (490) | (786) | ||||
(7,416) | 9,378 | (772,203) | 1,073,176 | (34,150) | 86,012 | (6,922) | 1,905 | (2,105) | 962 | ||||
701 | 16,348 | (765,625) | 562,709 | (38,457) | 92,909 | (6,656) | 2,388 | (2,373) | 786 | ||||
(750) | (165) | (41,891) | (886,406) | (2,810) | (755) | (453) | (326) | (345) | — | ||||
(4,438) | (819) | (117,395) | (2,278,752) | (7,466) | (2,750) | (724) | (1,897) | (333) | — | ||||
(108) | (26) | (1,880) | (33,262) | (7) | (2) | (9) | (10) | N/A | N/A | ||||
(1,182) | (307) | (13,237) | (286,043) | (524) | (118) | (11) | (21) | (1) | — | ||||
(6,478) | (1,317) | (174,403) | (3,484,463) | (10,807) | (3,625) | (1,197) | (2,254) | (679) | — | ||||
13,778 | 37,494 | (490,257) | (3,648,830) | 18,460 | (23,133) | (5,257) | (13,683) | 721 | 25,466 | ||||
8,001 | 52,525 | (1,430,285) | (6,570,584) | (30,804) | 66,151 | (13,110) | (13,549) | (2,331) | 26,252 | ||||
106,472 | 53,947 | 5,695,643 | 12,266,227 | 592,432 | 526,281 | 45,950 | 59,499 | 26,252 | — | ||||
$114,473 | $106,472 | $4,265,358 | $5,695,643 | $561,628 | $592,432 | $32,840 | $45,950 | $23,921 | $26,252 |
57
Harbor International & Global Funds
Statements of Changes in Net Assets—Capital Stock Activity
Statements of Changes in Net Assets—Capital Stock Activity
(All amounts in thousands)
Harbor Diversified International All Cap Fund | Harbor Emerging Markets Equity Fund | Harbor Focused International Fund | ||||||
November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | June 1, 2019a through October 31, 2019 | |||
(Unaudited) | (Unaudited) | (Unaudited) | ||||||
AMOUNT ($) | ||||||||
Retirement Class | ||||||||
Net proceeds from sale of shares | $107,629 | $152,301 | $3,443 | $35,106 | $1,176 | $12,725 | ||
Reinvested distributions | 11,169 | 17,966 | 746 | 149 | 89 | — | ||
Cost of shares reacquired | (33,311) | (123,556) | (5,753) | (3,054) | (90) | (7) | ||
Net increase/(decrease) in net assets | $85,487 | $46,711 | $(1,564) | $32,201 | $1,175 | $12,718 | ||
Institutional Class | ||||||||
Net proceeds from sale of shares | $43,438 | $50,697 | $18,644 | $16,850 | $675 | $12,849 | ||
Reinvested distributions | 5,290 | 9,578 | 703 | 580 | 82 | — | ||
Cost of shares reacquired | (16,839) | (59,775) | (5,960) | (33,526) | (127) | — | ||
Net increase/(decrease) in net assets | $31,889 | $500 | $13,387 | $(16,096) | $630 | $12,849 | ||
Administrative Class | ||||||||
Net proceeds from sale of shares | $914 | $1,450 | $1 | $30 | N/A | N/A | ||
Reinvested distributions | 134 | 227 | — | 1 | N/A | N/A | ||
Cost of shares reacquired | (529) | (1,097) | (1) | (301) | N/A | N/A | ||
Net increase/(decrease) in net assets | $519 | $580 | $— | $(270) | N/A | N/A | ||
Investor Class | ||||||||
Net proceeds from sale of shares | $1,169 | $3,854 | $5,166 | $214 | $13 | $32 | ||
Reinvested distributions | 171 | 196 | 6 | 3 | — | — | ||
Cost of shares reacquired | (2,398) | (1,120) | (138) | (404) | (11) | — | ||
Net increase/(decrease) in net assets | $(1,058) | $2,930 | $5,034 | $(187) | $2 | $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, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | March 1, 2019a through October 31, 2019 | ||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||
$1,680 | $4,290 | $104,625 | $257,506 | $5,113 | $40,186 | $4,112 | $16,458 | $155 | $12,695 | ||||
750 | 165 | 40,800 | 850,774 | 2,567 | 754 | 453 | 325 | 345 | — | ||||
(846) | (855) | (138,007) | (1,812,424) | (9,219) | (9,981) | (11,701) | (5,791) | (134) | (2) | ||||
$1,584 | $3,600 | $7,418 | $(704,144) | $(1,539) | $30,959 | $(7,136) | $10,992 | $366 | $12,693 | ||||
$35,158 | $48,658 | $169,210 | $460,391 | $91,029 | $83,460 | $1,558 | $14,852 | $21 | $12,807 | ||||
4,296 | 773 | 108,612 | 2,078,310 | 6,489 | 2,429 | 640 | 1,876 | 333 | — | ||||
(29,651) | (20,776) | (612,574) | (5,342,349) | (76,035) | (136,828) | (310) | (41,253) | (10) | (64) | ||||
$9,803 | $28,655 | $(334,752) | $(2,803,648) | $21,483 | $(50,939) | $1,888 | $(24,525) | $344 | $12,743 | ||||
$1,216 | $1,787 | $2,391 | $17,911 | $37 | $98 | $— | $32 | N/A | N/A | ||||
108 | 26 | 1,871 | 32,597 | 6 | 2 | 9 | 10 | N/A | N/A | ||||
(1,790) | (153) | (56,022) | (42,730) | (52) | (100) | — | — | N/A | N/A | ||||
$(466) | $1,660 | $(51,760) | $7,778 | $(9) | $— | $9 | $42 | N/A | N/A | ||||
$5,738 | $6,208 | $11,171 | $46,031 | $2,739 | $4,712 | $11 | $21 | $10 | $31 | ||||
1,182 | 307 | 13,114 | 282,826 | 523 | 117 | 10 | 21 | 1 | — | ||||
(4,063) | (2,936) | (135,448) | (477,673) | (4,737) | (7,982) | (39) | (234) | — | (1) | ||||
$2,857 | $3,579 | $(111,163) | $(148,816) | $(1,475) | $(3,153) | $(18) | $(192) | $11 | $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, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | June 1, 2019a through October 31, 2019 | |||
(Unaudited) | (Unaudited) | (Unaudited) | ||||||
SHARES | ||||||||
Retirement Class | ||||||||
Shares sold | 11,128 | 14,562 | 353 | 3,460 | 107 | 1,271 | ||
Shares issued due to reinvestment of distributions | 965 | 1,876 | 65 | 16 | 8 | — | ||
Shares reacquired | (3,290) | (12,080) | (553) | (289) | (9) | — | ||
Net increase/(decrease) in shares outstanding | 8,803 | 4,358 | (135) | 3,187 | 106 | 1,271 | ||
Institutional Class | ||||||||
Shares sold | 4,640 | 4,900 | 2,160 | 1,646 | 65 | 1,284 | ||
Shares issued due to reinvestment of distributions | 457 | 998 | 61 | 62 | 7 | — | ||
Shares reacquired | (1,682) | (5,715) | (576) | (3,262) | (13) | — | ||
Net increase/(decrease) in shares outstanding | 3,415 | 183 | 1,645 | (1,554) | 59 | 1,284 | ||
Administrative Class | ||||||||
Shares sold | 100 | 140 | — | 3 | N/A | N/A | ||
Shares issued due to reinvestment of distributions | 11 | 24 | — | — | N/A | N/A | ||
Shares reacquired | (57) | (105) | — | (28) | N/A | N/A | ||
Net increase/(decrease) in shares outstanding | 54 | 59 | — | (25) | N/A | N/A | ||
Investor Class | ||||||||
Shares sold | 125 | 387 | 465 | 21 | 1 | 3 | ||
Shares issued due to reinvestment of distributions | 15 | 21 | 1 | — | — | — | ||
Shares reacquired | (275) | (113) | (13) | (38) | (1) | — | ||
Net increase/(decrease) in shares outstanding | (135) | 295 | 453 | (17) | — | 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, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | March 1, 2019a through October 31, 2019 | ||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||
55 | 151 | 3,358 | 6,796 | 335 | 2,641 | 339 | 1,336 | 15 | 1,269 | ||||
25 | 7 | 1,021 | 25,283 | 152 | 58 | 35 | 30 | 33 | — | ||||
(28) | (29) | (3,821) | (45,116) | (583) | (671) | (968) | (475) | (13) | — | ||||
52 | 129 | 558 | (13,037) | (96) | 2,028 | (594) | 891 | 35 | 1,269 | ||||
1,290 | 1,728 | 4,831 | 11,073 | 5,999 | 5,773 | 134 | 1,262 | 2 | 1,281 | ||||
140 | 32 | 2,706 | 61,525 | 383 | 188 | 50 | 171 | 31 | — | ||||
(974) | (722) | (16,669) | (122,208) | (4,985) | (9,476) | (26) | (3,439) | (1) | (7) | ||||
456 | 1,038 | (9,132) | (49,610) | 1,397 | (3,515) | 158 | (2,006) | 32 | 1,274 | ||||
40 | 61 | 64 | 419 | 2 | 7 | — | 3 | N/A | N/A | ||||
3 | 1 | 46 | 959 | — | — | — | 1 | N/A | N/A | ||||
(59) | (5) | (1,417) | (1,120) | (3) | (7) | — | — | N/A | N/A | ||||
(16) | 57 | (1,307) | 258 | (1) | — | — | 4 | N/A | N/A | ||||
200 | 224 | 314 | 1,183 | 176 | 322 | 1 | 2 | 1 | 3 | ||||
40 | 13 | 329 | 8,448 | 31 | 9 | 1 | 2 | — | — | ||||
(149) | (108) | (3,716) | (11,963) | (298) | (564) | (4) | (20) | — | — | ||||
91 | 129 | (3,073) | (2,332) | (91) | (233) | (2) | (16) | 1 | 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 | |||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | ||||
2019 | 2018 | 2017 | 2016f | ||
(Unaudited) | |||||
Net asset value beginning of period | $11.17 | $10.41 | $11.79 | $9.77 | $9.21 |
Income from Investment Operations | |||||
Net investment income/(loss)a,e | 0.07 | 0.26 | 0.21 | 0.14 | 0.06 |
Net realized and unrealized gains/(losses) on investments | (1.92) | 0.92 | (1.19) | 2.01 | 0.50 |
Total from investment operations | (1.85) | 1.18 | (0.98) | 2.15 | 0.56 |
Less Distributions | |||||
Dividends from net investment income | (0.25) | (0.13) | (0.12) | (0.13) | — |
Distributions from net realized capital gains | — | (0.29) | (0.28) | — | — |
Total distributions | (0.25) | (0.42) | (0.40) | (0.13) | — |
Net asset value end of period | 9.07 | 11.17 | 10.41 | 11.79 | 9.77 |
Net assets end of period (000s) | $485,437 | $499,288 | $420,056 | $92,442 | $1,786 |
Ratios and Supplemental Data (%) | |||||
Total returnb | (17.05)%c | 11.99% | (8.55)% | 22.35% | 6.08%c |
Ratio of total expenses to average net assets^ | 0.85d | 0.87 | 0.90 | 0.99 | 1.17d |
Ratio of net expenses to average net assetsa | 0.69d | 0.68 | 0.74 | 0.77 | 0.80d |
Ratio of net investment income to average net assetsa | 1.32d | 2.42 | 1.87 | 1.27 | 0.97d |
Portfolio turnover | 7c | 22 | 42 | 46 | 68c |
Administrative Class | |||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | ||||
2019 | 2018 | 2017 | 2016g | ||
(Unaudited) | |||||
Net asset value beginning of period | $11.14 | $10.39 | $11.76 | $9.75 | $10.00 |
Income from Investment Operations | |||||
Net investment income/(loss)a,e | 0.05 | 0.22 | 0.22 | 0.14 | 0.13 |
Net realized and unrealized gains/(losses) on investments | (1.91) | 0.92 | (1.22) | 1.97 | (0.38) |
Total from investment operations | (1.86) | 1.14 | (1.00) | 2.11 | (0.25) |
Less Distributions | |||||
Dividends from net investment income | (0.22) | (0.10) | (0.09) | (0.10) | —* |
Distributions from net realized capital gains | — | (0.29) | (0.28) | — | — |
Total distributions | (0.22) | (0.39) | (0.37) | (0.10) | —* |
Net asset value end of period | 9.06 | 11.14 | 10.39 | 11.76 | 9.75 |
Net assets end of period (000s) | $6,026 | $6,800 | $5,734 | $310 | $246 |
Ratios and Supplemental Data (%) | |||||
Total returnb | (17.15)%c | 11.58% | (8.76)% | 21.91% | (2.49)%c |
Ratio of total expenses to average net assets^ | 1.18d | 1.20 | 1.23 | 1.32 | 1.46d |
Ratio of net expenses to average net assetsa | 1.02d | 1.01 | 1.06 | 1.10 | 1.10d |
Ratio of net investment income to average net assetsa | 1.00d | 2.06 | 1.96 | 1.29 | 1.39d |
Portfolio turnover | 7c | 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 | ||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | |||
2019 | 2018 | 2017 | 2016g | |
(Unaudited) | ||||
$11.17 | $10.41 | $11.79 | $9.77 | $10.00 |
0.07 | 0.25 | 0.20 | 0.17 | 0.20 |
(1.92) | 0.92 | (1.18) | 1.98 | (0.42) |
(1.85) | 1.17 | (0.98) | 2.15 | (0.22) |
(0.24) | (0.12) | (0.12) | (0.13) | (0.01) |
— | (0.29) | (0.28) | — | — |
(0.24) | (0.41) | (0.40) | (0.13) | (0.01) |
9.08 | 11.17 | 10.41 | 11.79 | 9.77 |
$240,527 | $257,860 | $238,470 | $225,473 | $150,263 |
(17.02)%c | 11.90% | (8.62)% | 22.29% | (2.25)%c |
0.93d | 0.95 | 0.98 | 1.07 | 1.22d |
0.77d | 0.76 | 0.82 | 0.85 | 0.85d |
1.25d | 2.34 | 1.72 | 1.59 | 2.13d |
7c | 22 | 42 | 46 | 68c |
Investor Class | ||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | |||
2019 | 2018 | 2017 | 2016g | |
(Unaudited) | ||||
$11.08 | $10.33 | $11.71 | $9.74 | $10.00 |
0.04 | 0.21 | 0.15 | 0.14 | 0.12 |
(1.90) | 0.91 | (1.17) | 1.96 | (0.38) |
(1.86) | 1.12 | (1.02) | 2.10 | (0.26) |
(0.20) | (0.08) | (0.08) | (0.13) | — |
— | (0.29) | (0.28) | — | — |
(0.20) | (0.37) | (0.36) | (0.13) | — |
9.02 | 11.08 | 10.33 | 11.71 | 9.74 |
$6,200 | $9,122 | $5,456 | $5,195 | $329 |
(17.15)%c | 11.43% | (8.93)% | 21.82% | (2.60)%c |
1.30d | 1.32 | 1.35 | 1.44 | 1.59d |
1.14d | 1.13 | 1.19 | 1.22 | 1.22d |
0.86d | 1.99 | 1.34 | 1.31 | 1.28d |
7c | 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 | |||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | ||||
2019 | 2018 | 2017 | 2016f | ||
(Unaudited) | |||||
Net asset value beginning of period | $11.01 | $9.57 | $10.83 | $8.59 | $6.90 |
Income from Investment Operations | |||||
Net investment income/(loss)a,e | 0.03 | 0.21 | 0.12 | 0.13 | 0.05 |
Net realized and unrealized gains/(losses) on investments | (1.74) | 1.32 | (1.27) | 2.21 | 1.64 |
Total from investment operations | (1.71) | 1.53 | (1.15) | 2.34 | 1.69 |
Less Distributions | |||||
Dividends from net investment income | (0.17) | (0.09) | (0.11) | (0.10) | — |
Distributions from net realized capital gains | — | — | — | — | — |
Total distributions | (0.17) | (0.09) | (0.11) | (0.10) | — |
Net asset value end of period | 9.13 | 11.01 | 9.57 | 10.83 | 8.59 |
Net assets end of period (000s) | $39,455 | $49,052 | $12,146 | $4,232 | $1,335 |
Ratios and Supplemental Data (%) | |||||
Total returnb | (15.86)%c | 16.21% | (10.71)% | 27.62% | 24.49%c |
Ratio of total expenses to average net assets^ | 1.18d | 1.22 | 1.26 | 1.35 | 1.45d |
Ratio of net expenses to average net assetsa | 0.93d | 1.02 | 1.07 | 1.08 | 1.10d |
Ratio of net investment income to average net assetsa | 0.52d | 2.05 | 0.16 | 1.32 | 0.95d |
Portfolio turnover | 35c | 53 | 56 | 59 | 49c |
Administrative Class | ||||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | |||||
2019 | 2018 | 2017 | 2016 | 2015 | ||
(Unaudited) | ||||||
Net asset value beginning of period | $11.14 | $9.55 | $10.80 | $8.58 | $7.87 | $10.03 |
Income from Investment Operations | ||||||
Net investment income/(loss)a,e | 0.01 | 0.02 | 0.08 | 0.08 | 0.05 | 0.04 |
Net realized and unrealized gains/(losses) on investments | (1.79) | 1.62 | (1.25) | 2.22 | 0.71 | (2.18) |
Total from investment operations | (1.78) | 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 | 9.36 | 11.14 | 9.55 | 10.80 | 8.58 | 7.87 |
Net assets end of period (000s) | $4 | $5 | $249 | $275 | $217 | $197 |
Ratios and Supplemental Data (%) | ||||||
Total returnb | (15.98)%c | 17.30% | (10.91)% | 27.04% | 9.81% | (21.36)% |
Ratio of total expenses to average net assets^ | 1.51d | 1.54 | 1.59 | 1.68 | 1.74 | 1.72 |
Ratio of net expenses to average net assetsa | 1.26d | 1.40 | 1.40 | 1.40 | 1.40 | 1.43 |
Ratio of net investment income to average net assetsa | 0.20d | 0.16 | 0.77 | 0.85 | 0.69 | 0.49 |
Portfolio turnover | 35c | 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 | |||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | ||||
2019 | 2018 | 2017 | 2016 | 2015 | |
(Unaudited) | |||||
$11.01 | $9.57 | $10.83 | $8.59 | $7.89 | $10.05 |
0.02 | 0.12 | 0.14 | 0.11 | 0.07 | 0.08 |
(1.74) | 1.41 | (1.30) | 2.22 | 0.71 | (2.19) |
(1.72) | 1.53 | (1.16) | 2.33 | 0.78 | (2.11) |
(0.16) | (0.09) | (0.10) | (0.09) | (0.08) | (0.05) |
— | — | — | — | — | — |
(0.16) | (0.09) | (0.10) | (0.09) | (0.08) | (0.05) |
9.13 | 11.01 | 9.57 | 10.83 | 8.59 | 7.89 |
$56,430 | $49,891 | $58,271 | $51,849 | $36,390 | $41,927 |
(15.93)%c | 16.13% | (10.77)% | 27.54% | 9.99% | (21.10)% |
1.26d | 1.30 | 1.34 | 1.43 | 1.49 | 1.47 |
1.01d | 1.12 | 1.15 | 1.15 | 1.15 | 1.17 |
0.45d | 1.13 | 1.28 | 1.13 | 0.93 | 0.90 |
35c | 53 | 56 | 49 | 49 | 58 |
Investor Class | |||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | ||||
2019 | 2018 | 2017 | 2016 | 2015 | |
(Unaudited) | |||||
$10.96 | $9.53 | $10.78 | $8.56 | $7.85 | $10.01 |
0.02 | 0.09 | 0.09 | 0.07 | 0.05 | 0.04 |
(1.74) | 1.39 | (1.27) | 2.22 | 0.70 | (2.18) |
(1.72) | 1.48 | (1.18) | 2.29 | 0.75 | (2.14) |
(0.12) | (0.05) | (0.07) | (0.07) | (0.04) | (0.02) |
— | — | — | — | — | — |
(0.12) | (0.05) | (0.07) | (0.07) | (0.04) | (0.02) |
9.12 | 10.96 | 9.53 | 10.78 | 8.56 | 7.85 |
$4,557 | $519 | $614 | $700 | $482 | $406 |
(15.94)%c | 15.56% | (11.03)% | 27.00% | 9.69% | (21.45)% |
1.63d | 1.67 | 1.71 | 1.80 | 1.86 | 1.84 |
1.38d | 1.49 | 1.52 | 1.52 | 1.52 | 1.55 |
0.33d | 0.87 | 0.82 | 0.75 | 0.69 | 0.40 |
35c | 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 | ||||
6-Month Period Ended April 30, 2020 | Period Ended October 31, 2019j | 6-Month Period Ended April 30, 2020 | Period Ended October 31, 2019j | ||
(Unaudited) | (Unaudited) | ||||
Net asset value beginning of period | $10.78 | $10.00 | $10.78 | $10.00 | |
Income from Investment Operations | |||||
Net investment income/(loss)a,e | 0.01 | 0.03 | 0.01 | 0.02 | |
Net realized and unrealized gains/(losses) on investments | (0.57) | 0.75 | (0.58) | 0.76 | |
Total from investment operations | (0.56) | 0.78 | (0.57) | 0.78 | |
Less Distributions | |||||
Dividends from net investment income | (0.02) | — | (0.01) | — | |
Distributions from net realized capital gains | (0.05) | — | (0.05) | — | |
Total distributions | (0.07) | — | (0.06) | — | |
Net asset value end of period | 10.15 | 10.78 | 10.15 | 10.78 | |
Net assets end of period (000s) | $13,972 | $13,696 | $13,625 | $13,833 | |
Ratios and Supplemental Data (%) | |||||
Total returnb | (5.25)%c | 7.80%c | (5.30)%c | 7.80%c | |
Ratio of total expenses to average net assets^ | 1.10d | 2.15d | 1.18d | 2.23d | |
Ratio of net expenses to average net assetsa | 0.77d | 0.77d | 0.85d | 0.85d | |
Ratio of net investment income to average net assetsa | 0.27d | 0.60d | 0.19d | 0.52d | |
Portfolio turnover | 29c | 37c | 29c | 37c |
See page 76 for notes to the Financial Highlights.
The accompanying notes are an integral part of the Financial Statements.
66
Investor Class | |
6-Month Period Ended April 30, 2020 | Period Ended October 31, 2019j |
(Unaudited) | |
$10.76 | $10.00 |
(0.01) | 0.01 |
(0.57) | 0.75 |
(0.58) | 0.76 |
— | — |
(0.05) | — |
(0.05) | — |
10.13 | 10.76 |
$33 | $34 |
(5.41)%c | 7.60%c |
1.55d | 2.60d |
1.22d | 1.22d |
(0.11)d | 0.15d |
29c | 37c |
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 | |||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | ||||
2019 | 2018 | 2017k | 2016f | ||
(Unaudited) | |||||
Net asset value beginning of period | $30.81 | $25.52 | $25.33 | $20.29 | $19.79 |
Income from Investment Operations | |||||
Net investment income/(loss)a,e | 0.06 | 0.13 | 0.02 | 0.08 | (0.03) |
Net realized and unrealized gains/(losses) on investments | (0.66) | 5.76 | 2.40 | 4.96 | 0.53 |
Total from investment operations | (0.60) | 5.89 | 2.42 | 5.04 | 0.50 |
Less Distributions | |||||
Dividends from net investment income | (0.09) | — | (0.03) | — | — |
Distributions from net realized capital gains | (1.74) | (0.60) | (2.20) | — | — |
Total distributions | (1.83) | (0.60) | (2.23) | — | — |
Net asset value end of period | 28.38 | 30.81 | 25.52 | 25.33 | 20.29 |
Net assets end of period (000s) | $12,743 | $12,245 | $6,846 | $4,376 | $1,713 |
Ratios and Supplemental Data (%) | |||||
Total returnb | (2.39)%c | 23.72% | 10.01% | 24.84% | 2.53%c |
Ratio of total expenses to average net assets^ | 0.91d | 0.92 | 0.96 | 1.13 | 1.00d |
Ratio of net expenses to average net assetsa | 0.78d | 0.80 | 0.82 | 0.83 | 0.85d |
Ratio of net investment income to average net assetsa | 0.40d | 0.46 | 0.09 | 0.32 | (0.18)d |
Portfolio turnover | 30c | 47 | 20 | 123 | 76c |
Administrative Class | ||||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | |||||
2019 | 2018 | 2017k | 2016 | 2015 | ||
(Unaudited) | ||||||
Net asset value beginning of period | $30.15 | $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 | (0.64) | 5.63 | 2.34 | 4.95 | (0.82) | 0.66 |
Total from investment operations | (0.64) | 5.69 | 2.29 | 4.91 | (0.87) | 0.59 |
Less Distributions | ||||||
Dividends from net investment income | — | — | — | — | — | — |
Distributions from net realized capital gains | (1.74) | (0.60) | (2.20) | — | (0.72) | (2.57) |
Total distributions | (1.74) | (0.60) | (2.20) | — | (0.72) | (2.57) |
Net asset value end of period | 27.77 | 30.15 | 25.06 | 24.97 | 20.06 | 21.65 |
Net assets end of period (000s) | $2,373 | $3,050 | $1,111 | $1,204 | $1,253 | $1,198 |
Ratios and Supplemental Data (%) | ||||||
Total returnb | (2.57)%c | 23.35% | 9.61% | 24.48% | (4.17)% | 2.74% |
Ratio of total expenses to average net assets^ | 1.24d | 1.25 | 1.29 | 1.46 | 1.29 | 1.26 |
Ratio of net expenses to average net assetsa | 1.11d | 1.13 | 1.15 | 1.15 | 1.15 | 1.15 |
Ratio of net investment income to average net assetsa | (0.03)d | 0.22 | (0.21) | (0.13) | (0.23) | (0.31) |
Portfolio turnover | 30c | 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 | |||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | ||||
2019 | 2018 | 2017k | 2016 | 2015 | |
(Unaudited) | |||||
$30.75 | $25.49 | $25.31 | $20.29 | $21.83 | $23.79 |
0.05 | 0.11 | 0.01 | 0.03 | 0.01 | (0.01) |
(0.67) | 5.75 | 2.38 | 4.99 | (0.83) | 0.65 |
(0.62) | 5.86 | 2.39 | 5.02 | (0.82) | 0.64 |
(0.07) | — | (0.01) | — | — | (0.03) |
(1.74) | (0.60) | (2.20) | — | (0.72) | (2.57) |
(1.81) | (0.60) | (2.21) | — | (0.72) | (2.60) |
28.32 | 30.75 | 25.49 | 25.31 | 20.29 | 21.83 |
$79,607 | $72,429 | $33,574 | $29,034 | $25,471 | $34,402 |
(2.45)%c | 23.63% | 9.90% | 24.74% | (3.90)% | 2.97% |
0.99d | 1.00 | 1.04 | 1.21 | 1.04 | 1.01 |
0.86d | 0.88 | 0.90 | 0.90 | 0.90 | 0.90 |
0.34d | 0.37 | 0.03 | 0.14 | 0.04 | (0.06) |
30c | 47 | 20 | 123 | 76 | 106 |
Investor Class | |||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | ||||
2019 | 2018 | 2017k | 2016 | 2015 | |
(Unaudited) | |||||
$29.74 | $24.76 | $24.72 | $19.89 | $21.49 | $23.51 |
(0.01) | (0.01) | (0.09) | (0.06) | (0.07) | (0.10) |
(0.64) | 5.59 | 2.33 | 4.89 | (0.81) | 0.65 |
(0.65) | 5.58 | 2.24 | 4.83 | (0.88) | 0.55 |
— | — | — | — | — | — |
(1.74) | (0.60) | (2.20) | — | (0.72) | (2.57) |
(1.74) | (0.60) | (2.20) | — | (0.72) | (2.57) |
27.35 | 29.74 | 24.76 | 24.72 | 19.89 | 21.49 |
$19,750 | $18,748 | $12,416 | $11,364 | $10,659 | $13,693 |
(2.64)%c | 23.18% | 9.50% | 24.28% | (4.25)% | 2.57% |
1.36d | 1.37 | 1.41 | 1.58 | 1.41 | 1.38 |
1.23d | 1.25 | 1.27 | 1.27 | 1.27 | 1.27 |
(0.06)d | (0.03) | (0.35) | (0.25) | (0.35) | (0.44) |
30c | 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 | |||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | ||||
2019 | 2018l | 2017 | 2016f | ||
(Unaudited) | |||||
Net asset value beginning of period | $39.00 | $58.31 | $69.91 | $60.32 | $57.14 |
Income from Investment Operations | |||||
Net investment income/(loss)a,e | 0.22 | 0.91 | 1.21 | 0.94 | 0.68 |
Net realized and unrealized gains/(losses) on investments | (5.90) | 1.62 | (8.51) | 9.85 | 2.50 |
Total from investment operations | (5.68) | 2.53 | (7.30) | 10.79 | 3.18 |
Less Distributions | |||||
Dividends from net investment income | (1.29) | (0.97) | (1.30) | (1.20) | — |
Distributions from net realized capital gains | — | (20.87) | (3.00) | — | — |
Total distributions | (1.29) | (21.84) | (4.30) | (1.20) | — |
Net asset value end of period | 32.03 | 39.00 | 58.31 | 69.91 | 60.32 |
Net assets end of period (000s) | $1,085,359 | $1,299,776 | $2,703,360 | $2,657,442 | $739,842 |
Ratios and Supplemental Data (%) | |||||
Total returnb | (15.23)%c | 10.29% | (11.24)% | 18.30% | 5.57%c |
Ratio of total expenses to average net assets^ | 0.81d | 0.80 | 0.74 | 0.74 | 0.74d |
Ratio of net expenses to average net assetsa | 0.69d | 0.67 | 0.64 | 0.73 | 0.72d |
Ratio of net investment income to average net assetsa | 1.21d | 2.33 | 1.80 | 1.42 | 1.68d |
Portfolio turnover | 5c | 12 | 64 | 13 | 14c |
Administrative Class | ||||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | |||||
2019 | 2018l | 2017 | 2016 | 2015 | ||
(Unaudited) | ||||||
Net asset value beginning of period | $39.26 | $58.08 | $69.57 | $59.99 | $65.32 | $67.48 |
Income from Investment Operations | ||||||
Net investment income/(loss)a,e | 0.05 | 0.76 | 0.88 | 0.79 | 0.79 | 1.04 |
Net realized and unrealized gains/(losses) on investments | (5.86) | 1.70 | (8.37) | 9.77 | (3.44) | (2.20) |
Total from investment operations | (5.81) | 2.46 | (7.49) | 10.56 | (2.65) | (1.16) |
Less Distributions | ||||||
Dividends from net investment income | (1.14) | (0.41) | (1.00) | (0.98) | (0.91) | (1.00) |
Distributions from net realized capital gains | — | (20.87) | (3.00) | — | (1.77) | — |
Total distributions | (1.14) | (21.28) | (4.00) | (0.98) | (2.68) | (1.00) |
Net asset value end of period | 32.31 | 39.26 | 58.08 | 69.57 | 59.99 | 65.32 |
Net assets end of period (000s) | $16,204 | $70,981 | $90,009 | $398,584 | $510,575 | $831,967 |
Ratios and Supplemental Data (%) | ||||||
Total returnb | (15.38)%c | 9.94% | (11.53)% | 17.93% | (3.97)% | (1.73)% |
Ratio of total expenses to average net assets^ | 1.14d | 1.13 | 1.07 | 1.06 | 1.04 | 1.01 |
Ratio of net expenses to average net assetsa | 1.02d | 1.00 | 0.97 | 1.05 | 1.02 | 0.99 |
Ratio of net investment income to average net assetsa | 0.26d | 1.94 | 1.30 | 1.22 | 1.33 | 1.54 |
Portfolio turnover | 5c | 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 | |||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | ||||
2019 | 2018l | 2017 | 2016 | 2015 | |
(Unaudited) | |||||
$39.12 | $58.31 | $69.90 | $60.30 | $65.67 | $68.09 |
0.20 | 0.84 | 1.04 | 0.97 | 0.99 | 1.22 |
(5.92) | 1.67 | (8.39) | 9.79 | (3.51) | (2.22) |
(5.72) | 2.51 | (7.35) | 10.76 | (2.52) | (1.00) |
(1.25) | (0.83) | (1.24) | (1.16) | (1.08) | (1.42) |
— | (20.87) | (3.00) | — | (1.77) | — |
(1.25) | (21.70) | (4.24) | (1.16) | (2.85) | (1.42) |
32.15 | 39.12 | 58.31 | 69.90 | 60.30 | 65.67 |
$2,841,272 | $3,814,616 | $8,577,147 | $27,401,853 | $33,201,899 | $41,195,827 |
(15.26)%c | 10.18% | (11.31)% | 18.24% | (3.74)% | (1.48)% |
0.89d | 0.88 | 0.82 | 0.81 | 0.79 | 0.76 |
0.77d | 0.75 | 0.72 | 0.80 | 0.77 | 0.74 |
1.09d | 2.11 | 1.53 | 1.51 | 1.66 | 1.80 |
5c | 12 | 64 | 13 | 14 | 25 |
Investor Class | |||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | ||||
2019 | 2018l | 2017 | 2016 | 2015 | |
(Unaudited) | |||||
$38.65 | $57.66 | $69.14 | $59.61 | $64.86 | $67.23 |
0.12 | 0.70 | 0.81 | 0.72 | 0.73 | 0.96 |
(5.87) | 1.65 | (8.33) | 9.71 | (3.43) | (2.19) |
(5.75) | 2.35 | (7.52) | 10.43 | (2.70) | (1.23) |
(1.06) | (0.49) | (0.96) | (0.90) | (0.78) | (1.14) |
— | (20.87) | (3.00) | — | (1.77) | — |
(1.06) | (21.36) | (3.96) | (0.90) | (2.55) | (1.14) |
31.84 | 38.65 | 57.66 | 69.14 | 59.61 | 64.86 |
$322,523 | $510,270 | $895,711 | $1,798,228 | $2,188,360 | $3,756,852 |
(15.42)%c | 9.80% | (11.65)% | 17.79% | (4.09)% | (1.84)% |
1.26d | 1.25 | 1.19 | 1.18 | 1.16 | 1.13 |
1.14d | 1.12 | 1.09 | 1.17 | 1.14 | 1.11 |
0.64d | 1.80 | 1.21 | 1.13 | 1.23 | 1.43 |
5c | 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 | |||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | ||||
2019 | 2018 | 2017 | 2016f | ||
(Unaudited) | |||||
Net asset value beginning of period | $16.14 | $13.70 | $15.71 | $12.90 | $11.76 |
Income from Investment Operations | |||||
Net investment income/(loss)a,e | 0.01 | 0.30 | 0.17 | 0.17 | 0.09 |
Net realized and unrealized gains/(losses) on investments | (1.02) | 2.25 | (1.99) | 2.81 | 1.05 |
Total from investment operations | (1.01) | 2.55 | (1.82) | 2.98 | 1.14 |
Less Distributions | |||||
Dividends from net investment income | (0.32) | (0.11) | (0.19) | (0.17) | — |
Distributions from net realized capital gains | — | — | — | — | — |
Total distributions | (0.32) | (0.11) | (0.19) | (0.17) | — |
Net asset value end of period | 14.81 | 16.14 | 13.70 | 15.71 | 12.90 |
Net assets end of period (000s) | $130,025 | $143,276 | $93,815 | $24,872 | $2,360 |
Ratios and Supplemental Data (%) | |||||
Total returnb | (6.52)%c | 18.81% | (11.74)% | 23.52% | 9.69%c |
Ratio of total expenses to average net assets^ | 0.83d | 0.83 | 0.81 | 0.84 | 0.86d |
Ratio of net expenses to average net assetsa | 0.77d | 0.77 | 0.77 | 0.77 | 0.80d |
Ratio of net investment income to average net assetsa | 0.07d | 2.01 | 1.07 | 1.19 | 1.06d |
Portfolio turnover | 12c | 16 | 17 | 13 | 19c |
Administrative Class | ||||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | |||||
2019 | 2018 | 2017 | 2016 | 2015 | ||
(Unaudited) | ||||||
Net asset value beginning of period | $16.10 | $13.66 | $15.67 | $12.87 | $12.63 | $12.66 |
Income from Investment Operations | ||||||
Net investment income/(loss)a,e | (0.02) | 0.22 | 0.08 | 0.09 | 0.16 | 0.15 |
Net realized and unrealized gains/(losses) on investments | (1.02) | 2.28 | (1.95) | 2.84 | 0.12 | (0.03) |
Total from investment operations | (1.04) | 2.50 | (1.87) | 2.93 | 0.28 | 0.12 |
Less Distributions | ||||||
Dividends from net investment income | (0.27) | (0.06) | (0.14) | (0.13) | (0.04) | (0.15) |
Distributions from net realized capital gains | — | — | — | — | — | — |
Total distributions | (0.27) | (0.06) | (0.14) | (0.13) | (0.04) | (0.15) |
Net asset value end of period | 14.79 | 16.10 | 13.66 | 15.67 | 12.87 | 12.63 |
Net assets end of period (000s) | $346 | $390 | $330 | $466 | $333 | $329 |
Ratios and Supplemental Data (%) | ||||||
Total returnb | (6.70)%c | 18.45% | (12.03)% | 23.08% | 2.21% | 0.96% |
Ratio of total expenses to average net assets^ | 1.16d | 1.16 | 1.14 | 1.16 | 1.15 | 1.14 |
Ratio of net expenses to average net assetsa | 1.10d | 1.10 | 1.10 | 1.10 | 1.10 | 1.10 |
Ratio of net investment income to average net assetsa | (0.23)d | 1.50 | 0.51 | 0.66 | 1.25 | 1.20 |
Portfolio turnover | 12c | 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 | |||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | ||||
2019 | 2018 | 2017 | 2016 | 2015 | |
(Unaudited) | |||||
$16.13 | $13.69 | $15.69 | $12.89 | $12.71 | $12.75 |
—* | 0.26 | 0.13 | 0.13 | 0.17 | 0.15 |
(1.02) | 2.28 | (1.95) | 2.84 | 0.14 | —* |
(1.02) | 2.54 | (1.82) | 2.97 | 0.31 | 0.15 |
(0.31) | (0.10) | (0.18) | (0.17) | (0.13) | (0.19) |
— | — | — | — | — | — |
(0.31) | (0.10) | (0.18) | (0.17) | (0.13) | (0.19) |
14.80 | 16.13 | 13.69 | 15.69 | 12.89 | 12.71 |
$401,129 | $414,528 | $399,911 | $362,035 | $277,638 | $254,461 |
(6.59)%c | 18.73% | (11.75)% | 23.38% | 2.46% | 1.22% |
0.91d | 0.91 | 0.89 | 0.91 | 0.90 | 0.89 |
0.85d | 0.85 | 0.85 | 0.85 | 0.85 | 0.85 |
—*,d | 1.75 | 0.84 | 0.92 | 1.36 | 1.19 |
12c | 16 | 17 | 13 | 19 | 20 |
Investor Class | |||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | ||||
2019 | 2018 | 2017 | 2016 | 2015 | |
(Unaudited) | |||||
$16.00 | $13.58 | $15.57 | $12.79 | $12.60 | $12.64 |
(0.03) | 0.21 | 0.11 | 0.07 | 0.12 | 0.10 |
(1.01) | 2.26 | (1.98) | 2.82 | 0.15 | —* |
(1.04) | 2.47 | (1.87) | 2.89 | 0.27 | 0.10 |
(0.25) | (0.05) | (0.12) | (0.11) | (0.08) | (0.14) |
— | — | — | — | — | — |
(0.25) | (0.05) | (0.12) | (0.11) | (0.08) | (0.14) |
14.71 | 16.00 | 13.58 | 15.57 | 12.79 | 12.60 |
$30,128 | $34,238 | $32,225 | $14,913 | $13,466 | $15,978 |
(6.70)%c | 18.29% | (12.12)% | 22.89% | 2.15% | 0.81% |
1.28d | 1.28 | 1.26 | 1.28 | 1.27 | 1.26 |
1.22d | 1.22 | 1.22 | 1.22 | 1.22 | 1.22 |
(0.37)d | 1.40 | 0.69 | 0.54 | 0.99 | 0.79 |
12c | 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 | |||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | ||||
2019m | 2018 | 2017 | 2016h | ||
(Unaudited) | |||||
Net asset value beginning of period | $12.49 | $12.38 | $13.90 | $10.77 | $10.00 |
Income from Investment Operations | |||||
Net investment income/(loss)a,e | 0.03 | 0.24 | 0.17 | 0.08 | 0.06 |
Net realized and unrealized gains/(losses) on investments | (2.02) | 0.35 | (1.50) | 3.18 | 0.71 |
Total from investment operations | (1.99) | 0.59 | (1.33) | 3.26 | 0.77 |
Less Distributions | |||||
Dividends from net investment income | (0.37) | (0.10) | (0.09) | (0.13) | — |
Distributions from net realized capital gains | — | (0.38) | (0.10) | — | — |
Total distributions | (0.37) | (0.48) | (0.19) | (0.13) | — |
Net asset value end of period | 10.13 | 12.49 | 12.38 | 13.90 | 10.77 |
Net assets end of period (000s) | $9,723 | $19,408 | $8,213 | $7,671 | $629 |
Ratios and Supplemental Data (%) | |||||
Total returnb | (16.57)%c | 5.23% | (9.71)% | 30.67% | 7.70%c |
Ratio of total expenses to average net assets^ | 1.25d | 1.24 | 1.07 | 1.35 | 2.50d |
Ratio of net expenses to average net assetsa | 0.88d | 0.88 | 0.87 | 0.87 | 0.90d |
Ratio of net investment income to average net assetsa | 0.45d | 1.98 | 1.19 | 0.60 | 0.73d |
Portfolio turnover | 19c | 178 | 53 | 44 | 35c |
Administrative Class | |||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | ||||
2019m | 2018 | 2017 | 2016h | ||
(Unaudited) | |||||
Net asset value beginning of period | $12.46 | $12.34 | $13.87 | $10.75 | $10.00 |
Income from Investment Operations | |||||
Net investment income/(loss)a,e | 0.01 | 0.15 | 0.11 | 0.07 | 0.09 |
Net realized and unrealized gains/(losses) on investments | (2.03) | 0.40 | (1.49) | 3.15 | 0.66 |
Total from investment operations | (2.02) | 0.55 | (1.38) | 3.22 | 0.75 |
Less Distributions | |||||
Dividends from net investment income | (0.33) | (0.05) | (0.05) | (0.10) | — |
Distributions from net realized capital gains | — | (0.38) | (0.10) | — | — |
Total distributions | (0.33) | (0.43) | (0.15) | (0.10) | — |
Net asset value end of period | 10.11 | 12.46 | 12.34 | 13.87 | 10.75 |
Net assets end of period (000s) | $297 | $356 | $309 | $371 | $263 |
Ratios and Supplemental Data (%) | |||||
Total returnb | (16.77)%c | 4.90% | (10.06)% | 30.25% | 7.50%c |
Ratio of total expenses to average net assets^ | 1.58d | 1.57 | 1.40 | 1.67 | 2.80d |
Ratio of net expenses to average net assetsa | 1.21d | 1.21 | 1.20 | 1.20 | 1.20d |
Ratio of net investment income to average net assetsa | 0.19d | 1.25 | 0.76 | 0.59 | 1.16d |
Portfolio turnover | 19c | 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 | ||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | |||
2019m | 2018 | 2017 | 2016h | |
(Unaudited) | ||||
$12.49 | $12.37 | $13.90 | $10.77 | $10.00 |
0.03 | 0.19 | 0.15 | 0.10 | 0.11 |
(2.04) | 0.40 | (1.50) | 3.15 | 0.66 |
(2.01) | 0.59 | (1.35) | 3.25 | 0.77 |
(0.35) | (0.09) | (0.08) | (0.12) | — |
— | (0.38) | (0.10) | — | — |
(0.35) | (0.47) | (0.18) | (0.12) | — |
10.13 | 12.49 | 12.37 | 13.90 | 10.77 |
$22,497 | $25,758 | $50,358 | $38,818 | $17,509 |
(16.68)%c | 5.25% | (9.83)% | 30.59% | 7.70%c |
1.33d | 1.32 | 1.15 | 1.42 | 2.55d |
0.96d | 0.96 | 0.95 | 0.95 | 0.95d |
0.46d | 1.60 | 1.05 | 0.81 | 1.40d |
19c | 178 | 53 | 44 | 35c |
Investor Class | ||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | |||
2019m | 2018 | 2017 | 2016h | |
(Unaudited) | ||||
$12.45 | $12.34 | $13.86 | $10.74 | $10.00 |
—* | 0.13 | 0.10 | 0.06 | 0.10 |
(2.02) | 0.40 | (1.48) | 3.14 | 0.64 |
(2.02) | 0.53 | (1.38) | 3.20 | 0.74 |
(0.31) | (0.04) | (0.04) | (0.08) | — |
— | (0.38) | (0.10) | — | — |
(0.31) | (0.42) | (0.14) | (0.08) | — |
10.12 | 12.45 | 12.34 | 13.86 | 10.74 |
$323 | $428 | $619 | $540 | $287 |
(16.79)%c | 4.70% | (10.08)% | 30.10% | 7.40%c |
1.70d | 1.69 | 1.52 | 1.79 | 2.92d |
1.33d | 1.33 | 1.32 | 1.32 | 1.32d |
0.06d | 1.10 | 0.73 | 0.53 | 1.33d |
19c | 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 | ||||
6-Month Period Ended April 30, 2020 | Period Ended October 31, 2019i | 6-Month Period Ended April 30, 2020 | Period Ended October 31, 2019i | ||
(Unaudited) | (Unaudited) | ||||
Net asset value beginning of period | $10.31 | $10.00 | $10.31 | $10.00 | |
Income from Investment Operations | |||||
Net investment income/(loss)a,e | 0.09 | 0.24 | 0.08 | 0.24 | |
Net realized and unrealized gains/(losses) on investments | (0.98) | 0.07 | (0.98) | 0.07 | |
Total from investment operations | 0.89 | 0.31 | (0.90) | 0.31 | |
Less Distributions | |||||
Dividends from net investment income | (0.27) | — | (0.26) | — | |
Distributions from net realized capital gains | — | — | — | — | |
Total distributions | (0.27) | — | (0.26) | — | |
Net asset value end of period | 9.15 | 10.31 | 9.15 | 10.31 | |
Net assets end of period (000s) | $11,932 | $13,090 | $11,952 | $13,131 | |
Ratios and Supplemental Data (%) | |||||
Total returnb | (9.00)%c | 3.10%c | (9.07)%c | 3.10%c | |
Ratio of total expenses to average net assets^ | 1.18d | 1.79d | 1.26d | 1.87d | |
Ratio of net expenses to average net assetsa | 0.77d | 0.77d | 0.85d | 0.85d | |
Ratio of net investment income to average net assetsa | 1.76d | 3.61d | 1.69d | 3.54d | |
Portfolio turnover | 33c | 73c | 33c | 73c |
* | 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 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
Investor Class | |
6-Month Period Ended April 30, 2020 | Period Ended October 31, 2019i |
(Unaudited) | |
$10.28 | $10.00 |
0.08 | 0.21 |
(0.99) | 0.07 |
(0.91) | 0.28 |
(0.23) | — |
— | — |
(0.23) | — |
9.14 | 10.28 |
$37 | $31 |
(9.19)%c | 2.80%c |
1.63d | 2.24d |
1.22d | 1.22d |
1.58d | 3.17d |
33c | 73c |
77
Harbor International & Global Funds
Notes to Financial Statements—April 30, 2020 (Unaudited)
Notes to Financial Statements—April 30, 2020 (Unaudited)
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 April 30, 2020, the Trust consists of 38 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) certain expenses, subject to the approval of the Trust’s Board of Trustees (the “Board of Trustees”), may be applied differently to each class of shares in accordance with current regulations of the 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, and convertible preferred stock), exchange-traded funds and financial derivative instruments (such as futures contracts, options contracts, including rights and warrants 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 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.
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Harbor International & Global Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 2—Significant Accounting Policies—Continued
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 period.
Each Fund used observable inputs in its valuation methodologies whenever they were available and deemed reliable.
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 (except for premiums on certain callable debt securities that are amortized to the earliest call date) 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.
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.
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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.
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.
Distribution to Shareholders
Distributions on Fund shares are recorded on the ex-dividend date.
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.
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.
Foreign Currency 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. A forward currency contract is an agreement between two parties to buy and sell currencies at a set price on a future date.
Foreign currency contracts are marked-to-market daily 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 period, each Fund used foreign currency spot contracts to facilitate transactions in foreign securities or to convert foreign currency receipts into U.S. dollars. During the period, Harbor Global Leaders Fund and Harbor Overseas 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.
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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 period 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.
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.
Rights and Warrants
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 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 and warrants are typically written by the issuer of the security underlying the right or warrant. Although some rights and warrants may be non-transferable, others may be traded over-the-counter or on an exchange.
A Fund may acquire rights or warrants 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 right or warrant may not necessarily change with the value of the underlying securities. When a Fund acquires rights or warrants, it runs the risk that it will lose its entire investment in the rights or warrants, unless the Fund exercises the right or warrant, acquires the underlying securities, or enters into a closing transaction before expiration. Rights and warrants 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 rights or other warrants 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 rights or warrants.
Rights or warrants outstanding at the end of the period, 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 period are included in “Purchased options” in the Statements of Operations.
During the period, Harbor Diversified International All Cap Fund, Harbor International Fund, Harbor International Small Cap Fund, and Harbor Overseas Fund held rights/warrants as a result of their investments in underlying securities.
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Harbor International & Global Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 3—Investment Portfolio Transactions
Investment Portfolio Transactions
Purchases and sales of investments, other than short-term securities, for each Fund for the six-month period ended April 30, 2020 are as follows:
Purchases (000s) | Sales (000s) | ||
Harbor Diversified International All Cap Fund | $139,039 | $49,620 | |
Harbor Emerging Markets Equity Fund | 47,787 | 34,115 | |
Harbor Focused International Fund | 8,974 | 7,546 | |
Harbor Global Leaders Fund | 38,857 | 31,300 | |
Harbor International Fund | 262,462 | 867,040 | |
Harbor International Growth Fund | 72,894 | 70,166 | |
Harbor International Small Cap Fund | 7,128 | 13,335 | |
Harbor Overseas Fund | 8,681 | 8,543 |
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. Any additional collateral that may be required to secure a loan is delivered to the Fund on the next business day. Cash collateral is recognized as the gross liability for securities loaned in the Statements of Assets and Liabilities. Non-cash collateral is not disclosed in the Funds' Statements of Assets and Liabilities as it is held by the Lending Agent on behalf of the Funds, and the Funds do not have the ability to rehypothecate those securities. 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 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 and represents the income earned from the non-cash collateral and the investment of cash collateral, net of fee rebates paid to the borrower and net of fees paid to the Lending Agent.
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 loaned 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 period and summarizes the value of equity securities loaned and related cash and non-cash collateral at April 30, 2020.
Value of Securities on Loan (000s) | Cash Collateral (000s) | Non-Cash Collateral (000s) | |||
Harbor Diversified International All Cap Fund | $2,807 | $1,705 | $1,280 | ||
Harbor Global Leaders Fund | — | — | — | ||
Harbor International Fund | 6,916 | — | 7,561 | ||
Harbor International Growth Fund | 65 | 67 | — |
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Harbor International & Global Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 4—FEES AND OTHER Transactions with Affiliates
Investment Adviser
Harbor Capital is a wholly-owned subsidiary of ORIX Corporation. 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 | 0.63% | |
Harbor Emerging Markets Equity Fund | 0.95b | 0.80 | |
Harbor Focused International Fund | 0.75 | 0.75 | |
Harbor Global Leaders Fund | 0.75c | 0.70 | |
Harbor International Fund | 0.75d | 0.75 | |
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, 2019 to April 30, 2020, Harbor Capital voluntarily waived a portion of its management fee. |
b | The Adviser has contractually agreed to waive 0.15% of its management fee through February 28, 2021. |
c | The Adviser has contractually agreed to waive 0.05% of its management fee through February 28, 2021. |
d | The management fee rate is 0.75% on assets up to $12 billion and 0.65% on assets in excess of $12 billion. |
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 period, 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% | 02/28/2021 | ||||
Harbor Emerging Markets Equity Fund | 0.93 | 1.01 | 1.26 | 1.38 | 02/28/2021 | ||||
Harbor Focused International Fund | 0.77 | 0.85 | 1.10 | 1.22 | 02/28/2021 | ||||
Harbor Global Leaders Fund | 0.78 | 0.86 | 1.11 | 1.23 | 02/28/2021 | ||||
Harbor International Fund | 0.69 | 0.77 | 1.02 | 1.14 | 02/28/2021 | ||||
Harbor International Growth Fund | 0.77 | 0.85 | 1.10 | 1.22 | 02/28/2021 | ||||
Harbor International Small Cap Fund | 0.88 | 0.96 | 1.21 | 1.33 | 02/28/2021 | ||||
Harbor Overseas Fund | 0.77 | 0.85 | 1.10 | 1.22 | 02/28/2021 |
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 (each, a “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 each 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 a 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 each 12b-1 Plan.
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Harbor International & Global Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 4—FEES AND OTHER Transactions with Affiliates—Continued
Amounts payable by a Fund under each 12b-1 Plan need not be directly related to the expenses actually incurred by the Distributor on behalf of each Fund. Each 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 each 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 Fees | |
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 |
Harbor Services Group has voluntarily waived a portion of its transfer agent fees during the six-month period ended April 30, 2020. 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 six-month period, the Funds did not enter into any transactions with any other Harbor fund.
Shareholders
On April 30, 2020, 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 | 99,363 | — | — | — | 99,363 | 0.1% | |||||
Harbor Emerging Markets Equity Fund | 45,676 | — | — | — | 45,676 | 0.4 | |||||
Harbor Focused International Fund | 1,262,252 | 1,255,718 | — | 3,015 | 2,520,985 | 93.2 | |||||
Harbor Global Leaders Fund | 34,903 | 507,834 | 27,988 | 28,031 | 598,756 | 14.7 | |||||
Harbor International Fund | 24,500 | — | — | — | 24,500 | 0.0 | |||||
Harbor International Growth Fund | 83,691 | — | — | — | 83,691 | 0.2 | |||||
Harbor International Small Cap Fund | 39,493 | 1,591,970 | 26,644 | 26,500 | 1,684,607 | 52.0 | |||||
Harbor Overseas Fund | 1,288,976 | 1,279,249 | — | 3,064 | 2,571,289 | 98.4 |
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
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Harbor International & Global Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 4—FEES AND OTHER Transactions with Affiliates—Continued
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.
NOTE 5—TAX INFORMATION
The identified cost for federal income tax purposes of investments owned by each Fund and its respective gross unrealized appreciation and depreciation at April 30, 2020 are as follows:
Identified Cost (000s) | Gross Unrealized | Net Unrealized Appreciation/ (Depreciation) (000s) | |||||
Appreciation (000s) | (Depreciation) (000s) | ||||||
Harbor Diversified International All Cap Fund* | $823,401 | $53,458 | $(162,039) | $(108,581) | |||
Harbor Emerging Markets Equity Fund* | 96,271 | 11,093 | (10,691) | 402 | |||
Harbor Focused International Fund | 25,729 | 1,785 | (1,730) | 55 | |||
Harbor Global Leaders Fund | 100,495 | 14,515 | (2,345) | 12,170 | |||
Harbor International Fund* | 4,807,171 | 372,906 | (977,129) | (604,223) | |||
Harbor International Growth Fund* | 503,479 | 99,382 | (53,621) | 45,761 | |||
Harbor International Small Cap Fund* | 37,950 | 1,519 | (8,321) | (6,802) | |||
Harbor Overseas Fund* | 24,766 | 2,196 | (3,339) | (1,143) |
* | 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 six-month period ended April 30, 2020, 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 period as disclosed in the Statement of Operations, are indicators of the volume of derivative activity for each Fund.
Derivative Instruments
Net realized gain/(loss) and the change in net unrealized appreciation/(depreciation) on derivatives, by primary risk exposure, for the six-month period ended April 30, 2020, were:
HARBOR DIVERSIFIED INTERNATIONAL ALL CAP FUND
Change in net unrealized appreciation/(depreciation) on derivatives | Equity Contracts (000s) | |
Purchased options (rights/warrants) | $(4) |
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Harbor International & Global Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 6—Derivatives—Continued
HARBOR INTERNATIONAL FUND
Change in net unrealized appreciation/(depreciation) on derivatives | Equity Contracts (000s) | |
Purchased options (rights/warrants) | $(43) |
HARBOR OVERSEAS FUND
Change in net unrealized appreciation/(depreciation) on derivatives | Foreign Exchange Contracts (000s) | |
Forward currency contracts | $— |
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.
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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 November 1, 2019 through April 30, 2020.
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 November 1, 2019 | Ending Account Value April 30, 2020 | |||||
Harbor Diversified International All Cap Fund | ||||||||
Retirement Class | 0.69% | |||||||
Actual | $3.14 | $1,000 | $829.50 | |||||
Hypothetical (5% return) | 3.47 | 1,000 | 1,021.35 | |||||
Institutional Class | 0.77% | |||||||
Actual | $3.50 | $1,000 | $829.80 | |||||
Hypothetical (5% return) | 3.87 | 1,000 | 1,020.94 | |||||
Administrative Class | 1.02% | |||||||
Actual | $4.64 | $1,000 | $828.50 | |||||
Hypothetical (5% return) | 5.12 | 1,000 | 1,019.67 | |||||
Investor Class | 1.14% | |||||||
Actual | $5.18 | $1,000 | $828.50 | |||||
Hypothetical (5% return) | 5.72 | 1,000 | 1,019.05 |
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Fees and Expenses Example—Continued
Annualized Expense Ratios* | Expenses Paid During Period** | Beginning Account Value November 1, 2019 | Ending Account Value April 30, 2020 | |||||
Harbor Emerging Markets Equity Fund | ||||||||
Retirement Class | 0.93% | |||||||
Actual | $4.25 | $1,000 | $841.40 | |||||
Hypothetical (5% return) | 4.67 | 1,000 | 1,020.12 | |||||
Institutional Class | 1.01% | |||||||
Actual | $4.62 | $1,000 | $840.70 | |||||
Hypothetical (5% return) | 5.07 | 1,000 | 1,019.72 | |||||
Administrative Class | 1.26% | |||||||
Actual | $5.77 | $1,000 | $840.20 | |||||
Hypothetical (5% return) | 6.32 | 1,000 | 1,018.44 | |||||
Investor Class | 1.38% | |||||||
Actual | $6.31 | $1,000 | $840.60 | |||||
Hypothetical (5% return) | 6.92 | 1,000 | 1,017.83 | |||||
Harbor Focused International Fund | ||||||||
Retirement Class | 0.77% | |||||||
Actual | $3.73 | $1,000 | $947.50 | |||||
Hypothetical (5% return) | 3.87 | 1,000 | 1,020.94 | |||||
Institutional Class | 0.85% | |||||||
Actual | $4.12 | $1,000 | $947.00 | |||||
Hypothetical (5% return) | 4.27 | 1,000 | 1,020.53 | |||||
Investor Class | 1.22% | |||||||
Actual | $5.91 | $1,000 | $945.90 | |||||
Hypothetical (5% return) | 6.12 | 1,000 | 1,018.65 | |||||
Harbor Global Leaders Fund | ||||||||
Retirement Class | 0.78% | |||||||
Actual | $3.83 | $1,000 | $976.10 | |||||
Hypothetical (5% return) | 3.92 | 1,000 | 1,020.89 | |||||
Institutional Class | 0.86% | |||||||
Actual | $4.23 | $1,000 | $975.50 | |||||
Hypothetical (5% return) | 4.32 | 1,000 | 1,020.48 | |||||
Administrative Class | 1.11% | |||||||
Actual | $5.45 | $1,000 | $974.30 | |||||
Hypothetical (5% return) | 5.57 | 1,000 | 1,019.21 | |||||
Investor Class | 1.23% | |||||||
Actual | $6.04 | $1,000 | $973.60 | |||||
Hypothetical (5% return) | 6.17 | 1,000 | 1,018.59 | |||||
Harbor International Fund | ||||||||
Retirement Class | 0.69% | |||||||
Actual | $3.17 | $1,000 | $847.70 | |||||
Hypothetical (5% return) | 3.47 | 1,000 | 1,021.35 | |||||
Institutional Class | 0.77% | |||||||
Actual | $3.54 | $1,000 | $847.40 | |||||
Hypothetical (5% return) | 3.87 | 1,000 | 1,020.94 | |||||
Administrative Class | 1.02% | |||||||
Actual | $4.68 | $1,000 | $846.20 | |||||
Hypothetical (5% return) | 5.12 | 1,000 | 1,019.67 | |||||
Investor Class | 1.14% | |||||||
Actual | $5.23 | $1,000 | $845.80 | |||||
Hypothetical (5% return) | 5.72 | 1,000 | 1,019.05 |
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Fees and Expenses Example—Continued
Annualized Expense Ratios* | Expenses Paid During Period** | Beginning Account Value November 1, 2019 | Ending Account Value April 30, 2020 | |||||
Harbor International Growth Fund | ||||||||
Retirement Class | 0.77% | |||||||
Actual | $3.71 | $1,000 | $934.80 | |||||
Hypothetical (5% return) | 3.87 | 1,000 | 1,020.94 | |||||
Institutional Class | 0.85% | |||||||
Actual | $4.09 | $1,000 | $934.10 | |||||
Hypothetical (5% return) | 4.27 | 1,000 | 1,020.53 | |||||
Administrative Class | 1.10% | |||||||
Actual | $5.29 | $1,000 | $933.00 | |||||
Hypothetical (5% return) | 5.52 | 1,000 | 1,019.26 | |||||
Investor Class | 1.22% | |||||||
Actual | $5.87 | $1,000 | $933.00 | |||||
Hypothetical (5% return) | 6.12 | 1,000 | 1,018.65 | |||||
Harbor International Small Cap Fund | ||||||||
Retirement Class | 0.88% | |||||||
Actual | $4.02 | $1,000 | $834.30 | |||||
Hypothetical (5% return) | 4.42 | 1,000 | 1,020.38 | |||||
Institutional Class | 0.96% | |||||||
Actual | $4.37 | $1,000 | $833.20 | |||||
Hypothetical (5% return) | 4.82 | 1,000 | 1,019.97 | |||||
Administrative Class | 1.21% | |||||||
Actual | $5.52 | $1,000 | $832.30 | |||||
Hypothetical (5% return) | 6.07 | 1,000 | 1,018.70 | |||||
Investor Class | 1.33% | |||||||
Actual | $6.06 | $1,000 | $832.10 | |||||
Hypothetical (5% return) | 6.67 | 1,000 | 1,018.09 | |||||
Harbor Overseas Fund | ||||||||
Retirement Class | 0.77% | |||||||
Actual | $3.66 | $1,000 | $910.00 | |||||
Hypothetical (5% return) | 3.87 | 1,000 | 1,020.94 | |||||
Institutional Class | 0.85% | |||||||
Actual | $4.04 | $1,000 | $909.30 | |||||
Hypothetical (5% return) | 4.27 | 1,000 | 1,020.53 | |||||
Investor Class | 1.22% | |||||||
Actual | $5.79 | $1,000 | $908.10 | |||||
Hypothetical (5% return) | 6.12 | 1,000 | 1,018.65 |
* | 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 182/366 (to reflect the one-half year period). |
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Additional Information (Unaudited)
Additional Information (Unaudited)
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
The Funds file a complete portfolio of investments with the SEC as an exhibit to Form N-PORT. The Funds’ Form N-PORT-EX is 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
FACTORS CONSIDERED BY THE TRUSTEES IN APPROVING THE INVESTMENT ADVISORY AGREEMENTS AND SUBADVISORY AGREEMENTS OF THE INTERNATIONAL AND GLOBAL FUNDS
The Investment Company Act 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 Trust’s 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 February 16 and 17, 2020 (the “Meeting”), the Board, including the Independent Trustees voting separately, considered and approved the continuation of each Investment Advisory Agreement with Harbor Capital, the adviser to each Fund, and each Subadvisory Agreement with each Fund’s subadviser (each, a “Subadviser”) with respect to Harbor Diversified International All Cap Fund, Harbor Emerging Markets Equity Fund, Harbor Global Leaders Fund, Harbor International Fund, Harbor International Growth Fund and Harbor International Small Cap Fund (Investment Advisory Agreement only) (each a “Fund” and, collectively, the “Funds”). The Board noted that the Subadvisory Agreement with Cedar Street Asset Management LLC (“Cedar Street”) with respect to Harbor International Small Cap Fund was approved for an initial two-year term by the Board at an in-person meeting held on May 18-19, 2020.
In evaluating each Investment Advisory Agreement and each Subadvisory Agreement, the Trustees reviewed materials furnished by Harbor Capital and each Subadviser, including information about their respective affiliates, personnel, and operations, and also relied upon their knowledge of Harbor Capital and the Subadvisers 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 continuation of the Investment Advisory Agreements and Subadvisory Agreements, and at prior meetings, the Trustees, including the Independent Trustees, requested and received materials and presentations relating to Fund performance and the services rendered by Harbor Capital and each Subadviser. These materials included a comprehensive written response from Harbor Capital to a 15(c) request letter prepared by legal counsel to the Independent Trustees in consultation with the Independent Trustees. The Trustees also discussed with representatives of Harbor Capital, at the Meeting and at prior meetings, Harbor Funds’ operations and Harbor Capital’s ability, consistent with the “manager-of-managers” structure of Harbor Funds, to (i) identify and recommend to the Trustees a subadviser for each Fund, (ii) monitor and oversee the performance and investment capabilities of each subadviser, and (iii) recommend the replacement of a subadviser where appropriate. The Trustees specifically considered Harbor Capital’s history as a manager-of-managers, including its history of replacing subadvisers for particular Funds in circumstances in which the Board and Harbor Capital had determined that a change in subadviser was in the best
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Additional Information—Continued
ADVISORY AGREEMENT APPROVALS—Continued
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 Harbor Capital were to identify another subadviser believed to better serve the shareholders than the existing subadviser.
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 each Investment Advisory Agreement and each Subadvisory Agreement were fair and reasonable and approved the continuation for a one-year period of each such Investment Advisory Agreement and Subadvisory Agreement as being in the best interests of each Fund and its shareholders.
In their deliberations, the Independent Trustees had the opportunity to meet privately without representatives of Harbor Capital or any Subadviser present and were represented throughout the process by legal counsel to the Independent Trustees and the Funds.
In considering the approval of each Fund’s Investment Advisory Agreement and Subadvisory Agreement, as applicable, 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 Investment Advisory Agreements and Subadvisory Agreements were the following:
• | The nature, extent, and quality of the services provided by Harbor Capital and each Subadviser, including the background, education, expertise and experience of the investment professionals of Harbor Capital and each Subadviser providing services to the Funds; |
• | The favorable history, reputation, qualifications and background of Harbor Capital and each Subadviser, as well as the qualifications of their respective personnel; |
• | The profitability of Harbor Capital with respect to each Fund, including the effect of revenues of Harbor Services Group, Inc. (“Harbor Services Group”), the Funds’ transfer agent, and Harbor Funds Distributors, Inc. (“Harbor Funds Distributors”), the Funds’ principal underwriter, on such profitability; |
• | The fees charged by Harbor Capital and Subadvisers for investment advisory and subadvisory services, respectively, including, in each case, the portion of the fee to be retained by Harbor Capital, after payment of the Subadviser’s fee, for the investment advisory and related services, including investment, business, legal, compliance, financial and administrative services, that Harbor Capital provides; |
• | The extent to which economies of scale might be realized as each Fund grows, and the extent to which each Fund’s advisory fee level reflects any economies of scale for the benefit of Fund investors; |
• | The fees and expense ratios of each Fund relative to the quality of services provided and the fees and expense ratios of similar investment companies; |
• | The short- and long-term investment performance of each Fund in comparison to peer groups and certain relevant benchmark indices and Harbor Capital’s efforts to address circumstances of underperformance where applicable; |
• | The compensation received by Harbor Services Group and Harbor Funds Distributors in consideration of the services each provides to the Funds; |
• | Any “fall out” benefits that might inure to Harbor Capital and its affiliates as a result of their relationship with the Funds; |
• | Information received at regular meetings throughout the year related to Fund performance and services rendered by Harbor Capital, as well as each of the Subadvisers, and research arrangements with brokers who execute transactions on behalf of each Subadviser; |
• | Information contained in materials provided by Harbor Capital and compiled by Broadridge as to the investment returns, advisory fees and total expense ratios of the Institutional Class of each Fund (and, in certain cases, total expense ratios of the Investor Class) relative to those of other investment companies with similar objectives and strategies managed by other investment advisers, consisting both of a peer group of funds as well as a broader universe of funds compiled by Broadridge; and |
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Additional Information—Continued
ADVISORY AGREEMENT APPROVALS—Continued
• | Information contained in materials compiled by Morningstar as to the investment returns of the Institutional Class of each Fund relative to those of other investment companies with similar objectives and strategies managed by other investment advisers. |
Nature, Extent, and Quality of Services
The Trustees separately considered the nature, extent, and quality of the services provided by Harbor Capital and each Subadviser. In their deliberations as to the approval of each Fund’s Investment Advisory Agreement and Subadvisory Agreement, the Trustees were mindful of the fact that, by choosing to invest in a Fund, the shareholders had entrusted Harbor Capital with the responsibility, subject to the approval of the Trustees, for selecting each 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 favorable history, reputation, qualifications and background of Harbor Capital and each Subadviser, as well as the qualifications of their respective personnel.
The Adviser’s Services. The Board evaluated the nature, extent, and quality of Harbor Capital’s services in light of the Board’s experience with Harbor Capital, as well as materials provided by Harbor Capital concerning the financial and other resources devoted by Harbor Capital to Harbor Funds, including the breadth and depth of experience and expertise of the investment, accounting, administrative, legal and compliance professionals dedicated to Harbor Funds’ operations. The Trustees determined that Harbor Capital has the expertise and resources to identify, select, oversee and monitor each Subadviser and to operate effectively as the “manager-of-managers” for the Funds.
The Subadvisers’ Services. The Trustees’ consideration of the services provided by the Subadvisers included a review of each Subadviser’s portfolio managers, investment philosophy, style and processes and record of consistency therewith, the volatility of its results, its approach to controlling risk, and the quality and extent of its investment capabilities and resources, including the nature and extent of research it receives from broker-dealers (to the extent applicable) and other sources. In their deliberations with respect to each Fund, the Trustees considered the history of Harbor Funds’ relationship with each Subadviser and Harbor Funds’ experience with each Subadviser in this capacity.
The Trustees also considered each Subadviser’s breadth and depth of experience and investment results in managing other accounts similar to the respective Fund. The Trustees received a presentation at the Meeting by investment professionals from the Subadvisers for Harbor Diversified International All Cap Fund, Harbor International Fund and Harbor International Growth Fund. The Trustees had received presentations by investment professionals from the Subadvisers for Harbor Emerging Markets Equity Fund, Harbor Global Leaders Fund and Harbor International Small Cap Fund at meetings of the Board held in 2019. The Trustees reviewed information concerning each Subadviser’s historical investment results in managing accounts and/or funds, as applicable, in a manner substantially similar to the relevant Fund.
Investment Performance, Advisory Fees and Expense Ratios
In considering each Fund’s performance, advisory fees and expense ratio, the Trustees requested and received from Harbor Capital data compiled by Broadridge and Morningstar. The Trustees also received information explaining the methodology for compilation of certain of this information and what it was intended to demonstrate. The Trustees analyzed the Institutional Class performance of each Fund, the advisory fees of each Fund, and the Institutional Class expenses of each Fund (after giving effect to waivers and/or reimbursements, if applicable, that reduced the fees or expenses of the Fund or its peer funds) and made certain observations and findings as to each Fund as noted below. The Trustees also reviewed certain Investor Class comparative fee and expense information they considered relevant to their deliberations. In evaluating performance, the Trustees recognized that the performance data reflects a snapshot of a period as of a particular date and that selecting a different performance period could produce significantly different results.
Harbor Diversified International All Cap Fund. The Trustees considered Harbor Diversified International All Cap Fund (inception date November 2, 2015), noting that its Institutional Class performance was above its Broadridge group and universe medians for the one- and three-year and since inception periods ended December 31, 2019. The Morningstar data presented showed that the Fund’s one- and three-year and since inception rolling returns as of December 31, 2019 each ranked in the second quartile. The Trustees noted that the Fund had outperformed its benchmark, the MSCI ACWI ex. U.S. (ND) Index, for the one- and three-year periods and underperformed its benchmark index for the since inception period ended December 31, 2019.
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Additional Information—Continued
ADVISORY AGREEMENT APPROVALS—Continued
The Trustees considered the expertise of Marathon Asset Management LLP (“Marathon-London”) in managing assets generally and in the strategy used with respect to the Fund specifically, noting that Marathon-London managed approximately $6.4 billion in assets in this strategy, out of a firm-wide total of approximately $60.7 billion in assets under management. The Trustees also noted the experience of the Fund’s portfolio managers in this asset class and recent departures from the portfolio management team.
The Trustees noted that the Broadridge comparison of contractual management fees for the Fund’s expense group, assuming an asset level of $775 million, showed the Fund’s management fee was below the group median for the Institutional Class. The actual total expense ratio for the Fund’s Institutional Class was below the group and universe median expense ratios. The Trustees also considered that Harbor Capital had agreed to continue the Fund’s existing contractual fee waiver/expense reimbursement arrangement until at least February 28, 2021. The Trustees noted that Harbor Capital’s profitability in operating the Fund was not excessive.
Harbor Emerging Markets Equity Fund.The Trustees considered Harbor Emerging Markets Equity Fund (inception date November 1, 2013), noting that according to the Broadridge report, the Fund’s Institutional Class performance was above the group and universe medians for the one-, three- and five-year periods ended December 31, 2019. The Morningstar data presented ranked the Fund’s one-, three- and five-year rolling returns as of December 31, 2019 in the second, first and second quartiles, respectively. The Trustees also considered the fact that Harbor Emerging Markets Equity Fund had outperformed its benchmark, the MSCI Emerging Markets (ND) Index, for the one-, three- and five-year periods ended December 31, 2019.
The Trustees considered the expertise of the Fund’s Subadviser, Oaktree Capital Management, L.P. (“Oaktree Capital”), in managing assets generally and in the emerging markets equity asset class specifically, noting that Oaktree Capital managed approximately $6.2 billion in assets in this asset class, out of a firm-wide total of approximately $124.7 billion in assets under management. The Trustees also noted the experience of the Fund’s portfolio managers in this asset class and an upcoming departure from the portfolio management team.
The Trustees observed that the Broadridge comparison of contractual management fees for the Fund’s expense group, assuming an asset level of $100 million, showed the Fund’s contractual management fee was below the group median for the Institutional Class. The Trustees also noted that the Fund’s actual total expense ratio for the Institutional Class was above the Broadridge group and universe median expense ratios. The Trustees also considered that Harbor Capital had agreed to continue the Fund’s existing contractual fee waiver/expense reimbursement arrangement until at least February 28, 2021. The Trustees noted that Harbor Capital’s profitability in operating the Fund was not excessive.
Harbor Global Leaders Fund.The Trustees considered Harbor Global Leaders Fund (inception date March 1, 2009) and observed that its Institutional Class performance was above its Broadridge group and universe medians for the one-, three- and five-year periods ended December 31, 2019. The Morningstar data presented showed that the Fund’s one-, three- and five-year rolling returns each ranked in the first quartile for the periods ended December 31, 2019. The Trustees noted that the Fund had outperformed its benchmark, the MSCI ACWI (ND) Index, for the one-, three- and five-year periods ended December 31, 2019.
The Trustees considered the expertise of Sands Capital Management, LLC (“Sands Capital”) in managing assets generally and in the international equity asset class specifically, noting that Sands Capital managed approximately $2.0 billion in assets in this asset class, out of a firm-wide total of approximately $44.6 billion in assets under management. The Trustees also noted the experience of the Fund’s portfolio manager in this asset class.
The Trustees noted that the Broadridge comparison of contractual management fees for the Fund’s expense group, assuming an asset level of 125 million, showed the Fund’s management fee was below the group median for the Institutional Class. The actual total expense ratio for the Fund’s Institutional Class was also below the group and universe median expense ratios. The Trustees also considered that Harbor Capital had agreed to continue the Fund’s existing contractual fee waiver/expense reimbursement arrangement until at least February 28, 2021. They noted that Harbor Capital’s profitability in managing the Fund was not excessive.
Harbor International Fund. The Trustees considered Harbor International Fund (inception date December 29, 1987), noting its outperformance relative to each of its Broadridge group and universe medians for the one-year period and its underperformance relative to each of its Broadridge group and universe medians for the three- and five-year periods ended December 31, 2019. The Morningstar data presented showed that the Fund’s one-, three- and five-year rolling returns as of December 31, 2019 ranked in the second, fourth and fourth quartiles, respectively. The Trustees also considered that the Fund had outperformed its benchmark, the MSCI EAFE® (ND) Index, for the one-year period and underperformed its benchmark for the three- and five-year periods ended December 31, 2019. The Trustees noted the fact that Marathon-London had been appointed as the Fund’s Subadviser effective August 22, 2018 and that performance prior to that date is not attributable to Marathon-London.
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Additional Information—Continued
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The Trustees considered the expertise of Marathon-London in managing assets generally and in the strategy used with respect to the Fund specifically, noting that Marathon-London managed approximately $33.9 billion in this asset class, out of a firm-wide total of approximately $60.7 billion in assets under management. The Trustees also noted the experience of the Fund’s portfolio managers in this asset class.
The Trustees noted that the Broadridge comparison of contractual management fees for the Fund’s expense group, assuming an asset level of $5.7 billion, showed the Fund’s management fee was equal to the group median for the Institutional Class. The actual total expense ratio for the Institutional Class was below the group and universe median expense ratios. The Trustees observed that the advisory fee schedule included a contractual breakpoint reducing the fee rate from 75 basis points to 65 basis points on assets over $12 billion. The Trustees also considered that Harbor Capital had agreed to continue the Fund’s existing contractual fee waiver/expense reimbursement arrangement until at least February 28, 2021. The Trustees noted that Harbor Capital’s profitability in operating the Fund was not excessive.
Harbor International Growth Fund.The Trustees considered Harbor International Growth Fund (inception date November 1, 1993), and observed that its Institutional Class performance exceeded its Broadridge group and universe medians for the one-, three- and five-year periods ended December 31, 2019. The Morningstar data presented showed that the Fund’s one-, three- and five-year rolling returns as of December 31, 2019 ranked in the first, second and second quartiles, respectively. The Trustees noted that the Fund had outperformed its benchmark, the MSCI ACWI ex. U.S. (ND) Index, for the one-, three- and five-year periods ended December 31, 2019.
The Trustees considered the expertise of Baillie Gifford Overseas Limited (“Baillie Gifford”) in managing assets generally and in the ACWI ex-US Focus strategy specifically, noting that Baillie Gifford managed approximately $13.3 billion in assets in this strategy, out of a firm-wide total of approximately $289.7 billion in assets under management. The Trustees also noted the experience of the Fund’s portfolio managers in this asset class.
The Trustees noted that the Broadridge comparison of contractual management fees for the Fund’s expense group, assuming an asset level of $600 million, showed the Fund’s management fee was below the group median for the Institutional Class. The actual total expense ratio for the Fund’s Institutional Class was also below the group and universe median expense ratios. The Trustees also considered that Harbor Capital had agreed to continue the Fund’s existing contractual fee waiver/expense reimbursement arrangement until at least February 28, 2021. The Trustees noted that Harbor Capital’s profitability in managing the Fund was not excessive.
Harbor International Small Cap Fund.The Trustees considered Harbor International Small Cap Fund (inception date February 1, 2016), and observed that its Institutional Class performance was below its Broadridge group median for the one- and three-year periods and below its Broadridge universe median for the one- and three-year periods and since inception period ended December 31, 2019. The Fund’s performance was at its Broadridge group median for the since inception period ended December 31, 2019. The Morningstar data presented ranked the Fund’s one- and three-year and since inception rolling returns as of December 31, 2019 in the fourth, fourth and third quartiles, respectively. The Trustees noted that the Fund had underperformed its benchmark, the MSCI EAFE Small Cap (ND) Index, for the one- and three-year periods and since inception period ended December 31, 2019. The Trustees noted the fact that Cedar Street had recently been appointed as the Fund’s Subadviser and that the current subadvisory agreement for the Fund was considered and approved for an initial two-year term by the Trustees at an in-person meeting held on May 19-20, 2019.
The Trustees considered the expertise of Cedar Street in managing assets generally and in the international small cap asset class specifically, noting that Cedar Street managed approximately $73.3 million in assets in this strategy out of a firm-wide total of approximately $267.1 million in assets under management. The Trustees also noted the experience of the Fund’s portfolio managers in this asset class.
The Trustees noted that the Broadridge comparison of contractual management fees for the Fund’s expense group, assuming an asset level of $50 million, showed the Fund’s management fee was below the group median for the Institutional Class. The actual total expense ratio for the Fund’s Institutional Class was also below the group and universe median expense ratios. The Trustees also considered that Harbor Capital had agreed to continue the Fund’s existing contractual fee waiver/expense reimbursement arrangement until at least February 28, 2021. The Trustees noted that Harbor Capital’s profitability in operating the Fund was negative.
The Trustees also separately considered the allocation between Harbor Capital and each Subadviser of the relevant Fund’s investment advisory fee (i.e., the amount of the advisory fee retained by Harbor Capital relative to that paid to the relevant Subadviser as a subadvisory fee). They determined in each case that the allocation was reasonable and the product of arm’s length negotiation between Harbor Capital and the Subadviser.
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Additional Information—Continued
ADVISORY AGREEMENT APPROVALS—Continued
Profitability
The Trustees also considered Harbor Capital’s profitability in operating each of the Funds (as well as on a fund complex-wide basis) as presented by Harbor Capital, and the allocation methodology used by Harbor Capital to compute such profitability. The Trustees concluded that the methodology was reasonable and that a reasonable level of profitability was important to provide suitable incentives for Harbor Capital to continue to attract and maintain high-quality personnel and to invest in infrastructure and other resources to support and enhance the Funds’ operations. In considering Harbor Capital’s profitability generally, the Trustees also reviewed the compensation received by Harbor Services Group and Harbor Funds Distributors in consideration of the transfer agency and distribution services, respectively, that are provided to Harbor Funds and any other benefits enjoyed by Harbor Capital and its affiliates as a result of their relationship with Harbor Funds.
The Trustees also considered that profitability calculations with respect to advisory, transfer agency and distribution operations vary significantly depending on whether revenues on which the calculation is based are taken gross or net of amounts paid to third parties, such as subadvisory fee expenses and certain transfer agency expenses, and noted that subadvisory fee expenses are a direct expense of Harbor Capital. The Trustees also noted that Harbor Capital was, in all cases, waiving a portion of its advisory fee and/or paying or reimbursing a portion of Fund expenses. The Trustees determined that Harbor Capital’s profitability in operating each Fund was not excessive.
Economies of Scale
The Trustees also considered the extent to which economies of scale might be realized as each Fund grows, and the extent to which each Fund’s advisory fee level reflects these economies of scale for the benefit of Fund investors. The Trustees specifically considered whether any advisory fee reduction “breakpoints” should be added to the advisory fee payable by any Fund. As noted above, the Trustees concluded that Harbor Capital’s profitability in each case was not excessive. They concluded that the Funds’ fee structures reflected economies of scale to date and that breakpoints in these fee structures were not required at the present time. The Trustees noted they intend to monitor each Fund’s asset growth in connection with future reviews of each Fund’s Investment Advisory Agreement to determine whether breakpoints may be appropriate at such time.
Review of Liqudity Risk Management Program
The Trust has adopted pursuant to Rule 22e-4 under the Investment Company Act (“Rule 22e-4”) a Liquidity Risk Management Program (the “Program”) for the Funds. The Board has designated a committee of Harbor Capital employees as the Program Administrator.
The Program is designed to assess and manage each Fund’s liquidity risk. For purposes of Rule 22e-4, “liquidity risk” is defined as the risk that a Fund is unable to satisfy redemption requests without significantly diluting remaining investors’ interests in the Fund. Components of the Program include: (i) periodic assessment of each Fund’s liquidity risk based on certain factors; (ii) classification of each Fund’s holdings into one of four liquidity categories (Highly Liquid, Moderately Liquid, Less Liquid and Illiquid) that reflect an estimate of liquidity under current market conditions; (iii) to the extent a Fund does not invest primarily in Highly Liquid investments, establishment of an appropriate Highly Liquid Investment Minimum (“HLIM”) (as defined in Rule 22e-4) for such Fund and ongoing monitoring of the Fund’s net assets to assess compliance with the Fund’s HLIM; (iv) a limit on the ability of a Fund to acquire illiquid investments in excess of 15% of the Fund’s net assets; and (v) periodic reporting to the Board
At a meeting held on November 7, 2019, the Board of Trustees reviewed the operation and effectiveness of the Program for the period beginning June 1, 2019 (the date the Board formally adopted the Program) and ending September 30, 2019 (the “period”). The Board had previously received interim updates on the implementation of the Program at meetings held on February 12, 2019 and May 14, 2019. At the November 7, 2019 meeting, the Board reviewed a report prepared by, and received a presentation from, the Program Administrator regarding the operation of the Program, its adequacy, and the effectiveness of its implementation during the period. The Program Administrator’s report included, among other things, a review of: (i) the operation of the Program overall; (ii) the level of portfolio investments classified into each of the four liquidity categories and the services provided by the third-party vendor engaged by the Trust to facilitate such classification with respect to certain of the Funds; and (iii) the most recent liquidity risk assessment for the Funds conducted by the Program Administrator in accordance with Rule 22e-4. Based upon its review, the Program Administrator determined that the Program was adequate and effective in facilitating the Funds’ compliance with Rule 22e-4 during the period.
95
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
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
Douglas J. Skinner
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.SAR.IG.0420
Table of Contents
Semi-Annual Report
April 30, 2020
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
This document must be preceded or accompanied by a Prospectus.
Letter from the Chairman
Charles F. McCain Chairman |
Dear Fellow Shareholder:
The first half of the 2020 fiscal year has been remarkable in the range of positive and negative market sentiments expressed in this short six-month window. Investment markets started off the 2020 fiscal year continuing the positive momentum of the 2019 fiscal year. Equity markets across the globe generated modest positive returns during the first three months of the period while fixed income markets delivered steady returns. Market performance drivers were consistent with the prior period – stable positive economic growth and accommodative monetary and fiscal policies were the foundations of continued favorable investment conditions. Come February, however, the early negative implications of the pending global pandemic began to weigh on investment markets before the full effects of the global economic collapse took hold in March. The selloffs across equity markets were unprecedented, with few safe havens available to investors. As the heartbreaking effects of the pandemic progressed around the globe, governments and central banks implemented historic measures to attempt to protect their citizens and economies. The equity and credit markets responded to the massive stimulus measures favorably, bouncing off their March lows to partially recover through much of April.
Across most equity markets, growth stocks significantly outperformed value stocks and larger companies outperformed smaller companies, reflecting investors’ preferences in many cases for proven business models that are more likely to survive the economic challenges brought on by the global pandemic. U.S. government bonds proved to be a safe haven once again, delivering positive returns for the six-month period.
As you read through the comments from the portfolio managers of each Harbor fund included in this report, you may note their optimism for the future potential of their portfolios. The portfolio managers have responded in their own way to the challenges presented. We believe there are great opportunities for our portfolio managers to deliver attractive long-term investment results for our shareholders. During times of market stress, having a disciplined and proven actively managed investment approach allows our portfolio managers to weigh the risk and rewards that are available to them. While the long-term effects of the global pandemic on economies and markets are still unknown, we remain confident in the capabilities of our portfolio managers. At Harbor, we are actively engaged in dialogues with our subadviser partners as they navigate these challenging times.
We encourage our shareholders to take a long-term view and stay focused on their investment goals, particularly during periods of market uncertainty. While past performance is never a guarantee of future results, environments such as the last six months have often provided attractive opportunities for our fund investors to benefit from the skill of our portfolio managers.
I hope that you and your families remain safe and well during this unprecedented time. Thank you for your continued investment in Harbor Funds.
June 22, 2020
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
Mohit Mittal
Since 2019
Since 2019
PIMCO has subadvised the Fund since 1987.
Investment Objective
The Fund seeks total return.
Scott A. Mather
Mark R. Kiesel
Mohit Mittal
Management’s Discussion of
Fund Performance
Fund Performance
MARKET REVIEW
Favorable developments in the U.S.-China trade discussions bolstered investor sentiment towards the end of 2019 and capped a year of strong asset returns. Recession fears – which had escalated over the summer – subsided as equity indices reached fresh highs and sovereign yields broadly rose. Key positive market drivers included: an agreement on the U.S. and China first-stage trade deal and the reduced possibility of a no-deal Brexit following U.K. Prime Minister Johnson’s party’s resounding election victory. In response, global equities rallied, global credit spreads tightened, and sovereign bond yields rose although they still ended 2019 lower. Central banks broadly remained accommodative, with many generally moving to wait-and-see stances at the end of 2019 amid tentative signs of a stabilizing macroeconomic environment. After lowering the target federal funds rate in October, the U.S. Federal Reserve (Fed) held its policy rate steady for the remainder of the calendar year – indicating a need to see material deterioration in economic data before further cuts. The European Central Bank (ECB) and Bank of Japan remained firmly in easing mode and continued to underscore fiscal policy as a potential tool to curb global risks. The U.S. economy featured an unemployment rate that fell to its lowest rate in half a century, though inflation data were more mixed.
During the first few months of 2020, COVID-19 dominated headlines as the number of cases and their geographic dispersion increased rapidly in February and March. In China, authorities instituted quarantines across highly impacted provinces – many of which contribute significantly to the country’s gross domestic product (GDP), manufacturing, and trade activity. The People’s Bank of China took measures to ease financial conditions in an attempt to buffer the economy from the shock, including cutting policy rates, injecting liquidity, and instituting measures to smooth disruptions to businesses and consumers. Virus-related fears sparked a global sell-off in risk assets. Uncertainty over the impact on an already fragile growth backdrop – including disruptions in demand as well as supply chains – pressured most risk markets lower and led investors to seek safety in sovereign bonds. Equities retraced their recent gains, and U.S. Treasury yields plummeted. Concurrently, global credit spreads widened broadly, though investment grade credit generated positive total returns given the sharp decline in U.S. rates. As market volatility increased, the Fed announced it would monitor the impact of the coronavirus and take action as needed, prompting the market to price in rate cuts for the Fed’s March meeting. Meanwhile, major developed-market central banks generally held policy rates steady over the month while they sought more clarity on the virus’s global impact; still, most signaled easing stances even as questions arose about the effectiveness of monetary policy for supply-side shocks. By the end of April, coronavirus cases topped 1 million in the U.S. and in Europe, several countries announced official plans to phase out lockdown restrictions starting in early May.
PERFORMANCE
Harbor Bond Fund underperformed the Bloomberg Barclays U.S. Aggregate Bond Index for the six-month period ended April 30, 2020. The Fund returned 3.57% (Retirement Class), 3.36% (Institutional Class) and 3.22% (Investor Class) for the six-month period, compared with the benchmark’s return of 4.86%.
The following strategies helped returns for the six months ended April 30, 2020:
• | An overweight to U.S. duration as U.S. rates fell over the period. |
2
Harbor Bond Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
TOTAL RETURNS
For the periods ended 04/30/2020
Unannualized | 1 Year | Annualized | |||||||||
6 Months | 5 Years | 10 Years | |||||||||
Harbor Bond Fund | |||||||||||
Retirement Class1 | 3.57% | 9.54% | 3.80% | 4.08% | |||||||
Institutional Class | 3.36 | 9.26 | 3.75 | 4.06 | |||||||
Administrative Class | 3.22 | 8.95 | 3.48 | 3.80 | |||||||
Comparative Index | |||||||||||
Bloomberg Barclays U.S. Aggregate Bond | 4.86% | 10.84% | 3.80% | 3.96% |
As stated in the Fund’s prospectus dated March 1, 2020, the expense ratios were 0.43% (Net) and 1.07% (Gross) (Retirement Class); 0.51% (Net) and 1.15% (Gross) (Institutional Class); and 0.76% (Net) and 1.40% (Gross) (Administrative Class). The net expense ratios reflect a contractual management fee waiver and an expense limitation agreement (excluding interest expense) effective through 02/28/2021. 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.
• | Exposure to certain countries’ durations, including Germany and Canada, as yields in these countries rose. |
• | Positioning within investment grade credit, particularly within industrials. |
• | Modest exposure to taxable municipals. |
The following strategies were negative or neutral for returns for the six months ended April 30, 2020:
• | Non-U.S. developed market interest rate strategies, including exposure to Italian duration as Italian yields rose and short exposure to U.K. duration as U.K. yields fell. |
• | Selection within securitized credit amid repricing and widening of risk assets. |
• | Exposure to high yield credit, particularly within financials. |
• | An allocation to U.S. inflation-linked bonds or TIPS, in lieu of nominal Treasuries. |
• | Tactical currency positioning, including exposures to the Japanese Yen and a basket of emerging market Asian currencies. |
OUTLOOK & STRATEGY
Given the sheer size of support measures and the absence of major real economic imbalances, we expect the global economy to transition from intense near-term pain to gradual healing over the next six to 12 months, once the spread of the coronavirus is under control and restrictions are lifted.
However, our base case remains a U-shaped rather than a V-shaped recovery because the restrictions on economic activity will likely be lifted only gradually and at different speeds for different sectors and regions. Also, repairing the supply chain and overcoming logistical and transport bottlenecks will take some time. As a consequence, following the nosedive in economic activity that is currently underway (the downward I in the U), we expect the bottoming process to last a few months after the virus is under control (the L in the U), before output and demand ramp up back closer to more normal levels eventually, helped by fiscal and monetary support (the upward I in the U).
Our base case forecast, however, could be challenged if the pandemic lasts longer than expected, or if there is an increase in corporate defaults above expectations. We see two downside risk scenarios: a prolonged L-shaped trajectory or a recovery interrupted by a relapse – call it a W.
Markets are discounting machines, so it is never too early to think about the potential longer-term consequences of this crisis. Even if the more adverse cyclical risk scenarios (the L and the W) can be avoided and our U-shaped “hurting to healing” base case comes to pass, we believe that this crisis is likely to leave some long-term scars that investors should start considering now.
First, globalization may be dialed back even faster now as firms try to reduce the complexity of their global supply chains, which proved vulnerable not only to trade wars but also to sudden stops caused by natural or health disasters. In addition, governments may use health concerns to implement further curbs on trade, travel, and migration. Thus, companies, sectors, and countries that are very dependent on trade and travel are likely to take more than just a temporary hit to their business models, in our view.
Second, private and public sector debt levels will likely be significantly higher after this crisis, in our view fiscal dominance of monetary policy may eventually lead to significantly higher inflation rates than markets currently price in. This could erode central bank independence further as monetary policy becomes increasingly involved in allocating resources to the nonfinancial corporate sector (essentially a fiscal act) and needs to ensure that the costs of servicing government debt remain low. If governments continue to engage in more expansionary policies even after the crisis, in our view. But with central banks capping the rise in nominal yields that would normally result from higher inflation, real rates would tend to fall as inflation rises.
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
Third, many households will likely come out of this crisis with higher levels of personal debt and will have experienced severe income and/or job losses. This in turn could increase the demand for precautionary saving in relatively low-risk instruments such as cash and bonds. Also, we expect many households will strive to build home equity faster by reducing mortgage debt. Thus, with the private sector saving glut likely to rise further, investors should brace themselves for a period of even more depressed real interest rates over the secular horizon.
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 have moderated our previous steepening bias and shifted exposure farther out the curve given the extent of Fed asset purchases. |
• | We have a bias toward liquid/high quality corporate credit with an overall underweight relative to the index. |
• | We will remain tactical overall in our currency exposure and continue to seek opportunities in dislocations where there are better risk/rewards. |
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—April 30, 2020 (Unaudited)
Portfolio of Investments—April 30, 2020 (Unaudited)
Investment Allocation(% of investments)
(Excludes short-term investments and derivative positions)
Portfolio of Investments
Value, Cost, and Principal Amounts in Thousands
ASSET-BACKED SECURITIES—6.5% | |||
Principal Amount | Value | ||
Air Canada Pass-Through Trust | |||
Series 2017-1 Cl. AA | |||
$ | 3,877 | 3.300%—07/15/20311 | $3,360 |
Argent Securities Inc. | |||
Series 2006-W4 Cl. A2C | |||
6,279 | 0.647% (1 Month USD Libor + 0.160) 05/25/20362 | 2,186 | |
Series 2005-W2 Cl. A2C | |||
1,236 | 0.847% (1 Month USD Libor + 0.360) 10/25/20352 | 1,234 | |
Series 2004-W11 Cl. M3 | |||
939 | 1.612% (1 Month USD Libor + 0.750) 11/25/20342 | 873 | |
4,293 | |||
Asset Backed Securities Corp. Home Equity Loan Trust | |||
Series 2003-HE4 Cl. M1 | |||
4,709 | 2.059% (1 Month USD Libor + 0.830) 08/15/20332 | 4,447 | |
Cent CLO Ltd.3 | |||
Series 2015-24A Cl. A1R | |||
5,200 | 2.289% (3 Month USD Libor + 1.070) 10/15/20261,2 | 5,127 | |
Countrywide Asset-Backed Certificates | |||
Series 2006-21 Cl. 2A3 | |||
976 | 0.637% (1 Month USD Libor + 0.150) 05/25/20372 | 961 | |
Series 2006-ABC1 Cl. A3 | |||
4,393 | 0.727% (1 Month USD Libor + 0.240) 05/25/20362 | 3,133 | |
Series 2006-2 Cl. M1 | |||
1,200 | 0.887% (1 Month USD Libor + 0.400) 06/25/20362 | 1,134 | |
5,228 | |||
Credit Acceptance Auto Loan Trust | |||
Series 2018-2A Cl. A | |||
6,300 | 3.470%—05/17/20271 | 6,346 | |
Crown Point CLO Ltd.3 | |||
Series 2018-5A Cl. A | |||
5,696 | 2.075% (3 Month USD Libor + 0.940) 07/17/20281,2 | 5,542 | |
Dryden XXV Senior Loan Fund | |||
Series 2012-25A Cl. ARR | |||
5,355 | 2.119% (3 Month USD Libor + 0.900) 10/15/20271,2 | 5,207 | |
Evergreen Credit Card Trust | |||
Series 2019-2 Cl. A | |||
6,000 | 1.900%—09/15/20241 | 5,946 | |
First Franklin Mortgage Loan Trust | |||
Series 2006-FF10 Cl. A4 | |||
6 | 0.637% (1 Month USD Libor + 0.150) 07/25/20362 | 6 |
ASSET-BACKED SECURITIES—Continued | |||
Principal Amount | Value | ||
GSAA Home Equity Trust | |||
Series 2006-20 Cl. 1A2 | |||
$ | 4,146 | 0.667% (1 Month USD Libor + 0.180) 12/25/20462 | $1,779 |
Series 2007-9 Cl. A1A | |||
893 | 6.000%—08/25/2047 | 840 | |
2,619 | |||
GSAMP Trust | |||
Series 2007-FM1 Cl. 2A2 | |||
108 | 0.557% (1 Month USD Libor + 0.070) 12/25/20362 | 56 | |
HSI Asset Securitization Corp. Trust | |||
Series 2006-HE2 Cl. 2A3 | |||
4,947 | 0.657% (1 Month USD Libor + 0.170) 12/25/20362 | 1,859 | |
IXIS Real Estate Capital Trust | |||
Series 2005-HE1 Cl. M4 | |||
1,872 | 1.537% (1 Month USD Libor + 1.050) 06/25/20352 | 1,776 | |
JPMorgan Mortgage Acquisition Corp. | |||
Series 2006-HE1 Cl.A4 | |||
1,925 | 1.067% (1 Month USD Libor + 0.290) 01/25/20362 | 1,887 | |
Series 2007-HE1 Cl. AF3 | |||
843 | 4.229%—05/25/20354 | 649 | |
2,536 | |||
LoanCore Ltd. | |||
Series 2018-CRE1 Cl. A | |||
5,200 | 1.944% (1 Month USD Libor + 1.130) 05/15/20281,2 | 5,014 | |
MASTR Asset Backed Securities Trust | |||
Series 2006-HE2 Cl. A4 | |||
5,341 | 0.727% (1 Month USD Libor + 0.240) 06/25/20362 | 2,841 | |
Mid-State Capital Corp Trust | |||
Series 2004-1 Cl. A | |||
858 | 6.005%—08/15/2037 | 906 | |
Monarch Grove CLO3 | |||
Series 2018-1A Cl. A1 | |||
3,849 | 1.871% (3 Month USD Libor + 0.880) 01/25/20281,2 | 3,768 | |
Morgan Stanley ABS Capital I Inc. Trust | |||
Series 2007-HE1 Cl. A2C | |||
2,025 | 0.637% (1 Month USD Libor + 0.150) 11/25/20362 | 1,212 | |
Morgan Stanley Dean Witter Capital I Inc Trust | |||
Series 2002-HE1 Cl. M1 | |||
��204 | 1.387% (1 Month USD Libor + 0.600) 07/25/20322 | 204 |
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 | ||
Mountain View CLO Ltd.3 | |||
Series 2014-1A Cl. ARR | |||
$ | 3,120 | 2.019% (3 Month USD Libor + 0.800) 10/15/20261,2 | $3,065 |
OneMain Financial Issuance Trust | |||
Series 2017-1A Cl. A1 | |||
3,067 | 2.370%—09/14/20321 | 3,052 | |
Option One Mortgage Loan Trust | |||
Series 2007-6 Cl. 2A4 | |||
4,258 | 0.737% (1 Month USD Libor + 0.250) 07/25/20372 | 3,081 | |
Park Place Securities Inc. | |||
Series 2005-WCW3 Cl. M1 | |||
4,360 | 0.967% (1 Month USD Libor + 0.480) 08/25/20352 | 4,285 | |
People's Financial Realty Mortgage Securities Trust | |||
Series 2006-1 Cl. 1A2 | |||
4,618 | 0.617% (1 Month USD Libor + 0.130) 09/25/20362 | 1,229 | |
RAMP Trust | |||
Series 2004-RS8 Cl. MII1 | |||
313 | 1.387% (1 Month USD Libor + 0.600) 08/25/20342 | 310 | |
Santander Retail Auto Lease Trust | |||
Series 2019-B | |||
3,215 | 2.290%—04/20/20221 | 3,217 | |
Securitized Asset Backed Receivables LLC Trust | |||
Series 2005-FR5 Cl. M1 | |||
7,461 | 1.147% (1 Month USD Libor + 0.440) 08/25/20352 | 5,347 | |
Small Business Administration Participation Certificates | |||
Series 2003-20I Cl. 1 | |||
27 | 5.130%—09/01/2023 | 28 | |
Series 2009-20A Cl. 1 | |||
1,519 | 5.720%—01/01/2029 | 1,688 | |
Series 2008-20H Cl. 1 | |||
2,858 | 6.020%—08/01/2028 | 3,157 | |
Series 2001-20A Cl. 1 | |||
19 | 6.290%—01/01/2021 | 19 | |
4,892 | |||
SoFi Professional Loan Program Trust | |||
Series 2018-A1FX Cl. B | |||
1,061 | 2.640%—08/25/20471 | 1,061 | |
Specialty Underwriting & Residential Finance Trust | |||
Series 2006-BC4 Cl. A2B | |||
2,906 | 1.057% (1 Month USD Libor + 0.110) 09/25/20372 | 1,329 | |
Structured Asset Securities Co. | |||
Series 2007-MN1A Cl. A1 | |||
20,468 | 0.717% (1 Month USD Libor + 0.230) 01/25/20371,2 | 13,128 | |
Telos CLO Ltd.3 | |||
Series 2014 Cl. 6A | |||
3,204 | 2.405% (3 Month USD Libor + 1.270) 01/17/20271,2 | 3,190 | |
TPG Real Estate Finance Trust | |||
Series 2019-Fl3 Cl. A | |||
5,000 | 1.901% (1 Month USD Libor + 1.150) 10/15/20341,2 | 4,749 | |
Tralee CLO V Ltd.3 | |||
Series 2018-5A Cl. A1 | |||
5,900 | 2.245% (3 Month USD Libor + 1.110) 10/20/20281,2 | 5,775 | |
Venture XVI CLO Ltd.3 | |||
Series 2014-16A Cl. ARR | |||
5,189 | 2.069% (3 Month USD Libor + 0.850) 01/15/20281,2 | 5,086 | |
Westlake Automobile Receivables Trust | |||
Series 2018-A2A Cl. 3A | |||
1,082 | 2.980%—01/18/20221 | 1,083 | |
TOTAL ASSET-BACKED SECURITIES | |||
(Cost $135,476) | 132,172 | ||
BANK LOAN OBLIGATIONS—0.3% | |||
(Cost $5,195) | |||
Principal Amount | Value | ||
AUTOMOBILES—0.3% | |||
Toyota Motor Credit Corporation | |||
2018 Term Loan | |||
$ | 5,200 | 1.955% (3 Month USD Libor + 0.580) 09/28/20202 | $5,125x |
COLLATERALIZED MORTGAGE OBLIGATIONS—8.6% | |||
Adjustable Rate Mortgage Trust | |||
Series 2006-3 Cl. 4A2 | |||
2,675 | 0.607% (1 Month USD Libor + 0.120) 08/25/20362 | 1,302 | |
Alba plc | |||
Series 2007-1 Cl. A3 | |||
GBP | 2,413 | 0.683% (3 Month GBP Libor + 0.170) 03/17/20392 | 2,709 |
Banc of America Alternative Loan Trust | |||
Series 2006 -7 Cl. A3 | |||
$ | 8,554 | 5.913%—10/25/20362 | 3,689 |
Banc of America Funding Corp. | |||
Series 2007-C Cl. 7A5 | |||
768 | 1.018% (1 Month USD Libor + 0.300) 05/20/20472 | 739 | |
BCAP LLC Trust | |||
Series 2007-AA2 Cl. 12A1 | |||
5,298 | 0.697% (1 Month USD Libor + 0.210) 05/25/20472 | 4,545 | |
Series 2011-RR5 Cl. 12A1 | |||
409 | 4.863%—03/26/20371,4 | 403 | |
Series 2011-RR4 Cl. 8A1 | |||
1,896 | 5.250%—02/26/20361,2 | 1,316 | |
6,264 | |||
Bear Stearns Adjustable Rate Mortgage Trust | |||
Series 2000-2 Cl. A1 | |||
15 | 2.781% (Cost of Funds for the 11th District of San Francisco) 11/25/20302 | 14 | |
Series 2004-10 Cl. 12A3 | |||
24 | 3.832%—01/25/20352 | 22 | |
Series 2004-1 Cl. 12A5 | |||
267 | 3.894%—04/25/20342 | 242 | |
Series 2006-4 Cl. 1A1 | |||
218 | 4.317%—10/25/20362 | 204 | |
482 | |||
Bear Stearns Alt-A Trust | |||
Series 2005-4 Cl. 1A1 | |||
68 | 0.927% (1 Month USD Libor + 0.220) 07/25/20352 | 68 | |
Chase Mortgage Finance Corp Trust | |||
Series 2006-A1 Cl. 4A1 | |||
1,369 | 4.030%—09/25/20362 | 1,133 | |
Citigroup Mortgage Loan Trust | |||
Series 2007-10 Cl.2A | |||
4,181 | 4.135%—09/25/2037 | 3,746 | |
Countrywide Alternative Loan Trust | |||
Series 2006-6BC Cl. 1A2 | |||
2,859 | 0.887% (1 Month USD Libor + 0.400) 05/25/20362 | 2,264 | |
Series 2005-84 Cl. 1A1 | |||
1,937 | 3.264%—02/25/20362 | 1,552 | |
Series 2005-20CB Cl. 2A5 | |||
1,845 | 5.500%—07/25/2035 | 1,548 | |
Series 2006-36T2 Cl. 1A4 | |||
1,144 | 5.750%—12/25/2036 | 709 | |
Series 2006-1R Cl.2A3 | |||
3,738 | 6.000%—08/25/2037 | 2,903 | |
8,976 |
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 | ||
Countrywide Home Loan Mortgage Pass Through Trust | |||
Series 2007-HY5 Cl. 1A1 | |||
$ | 703 | 4.263%—09/25/20472 | $592 |
Credit Suisse First Boston Mortgage Securities Corp. | |||
Series 2006-C2 Cl. A3 | |||
300 | 6.000%—11/25/2035 | 233 | |
DC Office Trust | |||
Series 2019-MTC Cl. A | |||
4,900 | 2.965%—09/15/20451 | 5,158 | |
Deutsche Alt-A Securities Inc. Mortgage Loan Trust | |||
Series 2007-AR2 Cl. A1 | |||
4,275 | 0.637% (1 Month USD Libor + 0.150) 03/25/20372 | 3,712 | |
DSLA Mortgage Loan Trust | |||
Series 2006-AR1 Cl. 1A1A | |||
1,851 | 2.791% (Fed 12 Month Treasury Average Constant Maturity Treasury + 0.920) 03/19/20462 | 1,502 | |
Eurohome UK Mortgages plc | |||
Series 2007-1 Cl. A | |||
GBP | 1,908 | 0.656% (3 Month GBP Libor + 0.150) 06/15/20442 | 2,165 |
First Horizon Asset Securities Inc. | |||
Series 2005-AR6 Cl. 4A1 | |||
$ | 944 | 3.849%—02/25/20362 | 820 |
First Nationwide Trust | |||
Series 2001-3 Cl. 1A1 | |||
— | 6.750%—08/21/2031 | — | |
GS Mortgage Securities Corp. Trust | |||
Series 2016-RENT Cl. A | |||
6,900 | 3.203%—02/10/20291 | 6,897 | |
GSMPS Mortgage Loan Trust | |||
Series 2006-RP2 Cl. 1AF1 | |||
4,561 | 0.887% (1 Month USD Libor + 0.400) 04/25/20361,2 | 3,591 | |
GSR Mortgage Loan Trust | |||
Series 2005-AR3 Cl. 3A1 | |||
421 | 4.006%—05/25/20352 | 346 | |
Series 2005-AR7 Cl. 6A1 | |||
204 | 4.124%—11/25/20352 | 187 | |
533 | |||
HarborView Mortgage Loan Trust | |||
Series 2004-8 Cl. 2A3 | |||
559 | 1.538% (1 Month USD Libor + 0.410) 11/19/20342 | 469 | |
Hawksmoor Mortgages | |||
Series 2019-1A Cl. A | |||
GBP | 23,199 | 1.761% (3 Month Sonia + 1.050) 05/25/20531,2 | 28,532 |
HomeBanc Mortgage Trust | |||
Series 2006-H2 Cl. A2 | |||
$ | 2,317 | 0.667% (1 Month USD Libor + 0.180) 12/25/20362 | 2,224 |
IndyMac ARM Trust | |||
Series 2001-H2 Cl. A2 | |||
2 | 3.528%—01/25/20322 | 2 | |
IndyMac IMSC Mortgage Loan Trust | |||
Series 2007-F2 Cl. 2A1 | |||
2,967 | 6.500%—07/25/2037 | 1,503 | |
IndyMac INDX Mortgage Loan Trust | |||
Series 2007-AR13 Cl. 4A1 | |||
12,680 | 3.454%—07/25/20372 | 9,514 | |
Series 2005-AR31 Cl. 1A1 | |||
959 | 3.579%—01/25/20362 | 831 | |
10,345 |
COLLATERALIZED MORTGAGE OBLIGATIONS—Continued | |||
Principal Amount | Value | ||
JP Morgan Mortgage Trust | |||
Series 2006-A6 Cl. 1A4L | |||
$ | 1,852 | 4.094%—10/25/20362 | $1,539 |
Series 2006-S1 Cl. 3A1 | |||
452 | 5.500%—04/25/2036 | 459 | |
1,998 | |||
JP Morgan Resecuritization Trust | |||
Series 2009-7 Cl. 11A1 | |||
22 | 3.854%—09/27/20361,2 | 22 | |
JPMDB Commercial Mortgage Securities Trust | |||
Series 2016-C2 | |||
4,225 | 3.144%—06/15/2049 | 4,490 | |
Mansard Mortgages plc | |||
Series 2007-2X Cl. A1 | |||
GBP | 930 | 1.137% (3 Month GBP Libor + 0.650) 12/15/20492 | 1,108 |
Merrill Lynch Alternative Note Asset Trust | |||
Series 2007-F1 Cl. 2A6 | |||
$ | 547 | 6.000%—03/25/2037 | 345 |
Morgan Stanley Bank of America Merrill Lynch Trust | |||
Series 2015-C22 Cl. ASB | |||
5,999 | 3.040%—04/15/2048 | 6,169 | |
Provident Funding Mortgage Loan Trust | |||
Series 2005-2 Cl. 3A | |||
975 | 4.583%—10/25/20352 | 956 | |
Residential Accredit Loans Inc. | |||
Series 2007-QS4 Cl. 3A9 | |||
1,793 | 6.000%—03/25/2037 | 1,576 | |
Residential Asset Securitization Trust | |||
Series 2007-A8 Cl. 2A1 | |||
17,924 | 6.250%—08/25/2037 | 5,455 | |
Residential Funding Mortgage Securities I | |||
Series 2007-SA1 Cl. 2A2 | |||
238 | 4.403%—02/25/20372 | 181 | |
Series 2006-SA1 Cl. 2A1 | |||
252 | 4.871%—02/25/20362 | 204 | |
385 | |||
Ripon Mortgages PLC | |||
GBP | 6,561 | 1.551% (3 Month GBP Libor + 0.800) 08/20/20561,2 | 8,159 |
RMAC Securities plc | |||
Series 2006-NS4X Cl. A3A | |||
1,586 | 0.630% (3 Month GBP Libor + 0.170) 06/12/20442 | 1,822 | |
Structured Adjustable Rate Mortgage Loan Trust | |||
Series 2007-1 Cl. 1A1 | |||
$ | 1,633 | 0.637% (1 Month USD Libor + 0.150) 02/25/20372 | 1,424 |
Series 2005-21A Cl. 3A1 | |||
387 | 3.888%—04/25/20352 | 367 | |
1,791 | |||
Structured Asset Mortgage Investments Inc. | |||
Series 2005-AR5 Cl. A2 | |||
324 | 0.968% (1 Month USD Libor + 0.250) 07/19/20352 | 291 | |
Suntrust Adjustable Rate Mortgage Loan Trust | |||
Series 2007-S1 Cl. 1A | |||
487 | 4.420%—01/25/20372 | 421 | |
Towd Point Mortgage Funding plc | |||
Series 2019-A13A Cl. A1 | |||
GBP | 16,300 | 1.392% (3 Month Sonia + 0.900) 07/20/20451,2 | 20,260 |
Series 2019-GR4A Cl. A1 | |||
5,951 | 1.677% (3 Month GBP Libor + 1.025) 10/20/20511,2 | 7,393 | |
27,653 |
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 | ||
Washington Mutual Mortgage Pass Through Certificates Trust | |||
Series 2005-AR13 Cl. A1A1 | |||
$ | 165 | 0.777% (1 Month USD Libor + 0.290) 10/25/20452 | $155 |
Series 2005-AR6 Cl. 2A1A | |||
349 | 0.947% (1 Month USD Libor + 0.230) 04/25/20452 | 328 | |
Series 2006-AR11 Cl. 3A1A | |||
1,699 | 2.791% (Fed 12 Month Treasury Average Constant Maturity Treasury + 0.920) 09/25/20462 | 1,476 | |
Series 2006-AR8 Cl.1A4 | |||
2,519 | 3.890%—08/25/2046 | 2,226 | |
4,185 | |||
Wells Fargo Commercial Mortgage Trust | |||
Series 2018-C48 | |||
7,117 | 4.302%—01/15/2052 | 8,334 | |
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS | |||
(Cost $175,900) | 172,546 | ||
CORPORATE BONDS & NOTES—37.5% | |||
AEROSPACE & DEFENSE—0.3% | |||
Rockwell Collins Inc. | |||
5,500 | 2.800%—03/15/2022 | 5,642 | |
AUTO COMPONENTS—0.3% | |||
ZF North America Capital Inc. | |||
5,200 | 4.500%—04/29/20221 | 5,206 | |
AUTOMOBILES—3.0% | |||
BMW Finance NV | |||
4,900 | 2.250%—08/12/20221 | 4,890 | |
Daimler Finance North America LLC | |||
5,900 | 2.550%—08/15/20221 | 5,828 | |
Ford Motor Credit Co. LLC | |||
3,400 | 2.343%—11/02/2020 | 3,326 | |
3,400 | 2.425%—06/12/2020 | 3,400 | |
1,550 | 3.200%—01/15/2021 | 1,505 | |
2,700 | 5.875%—08/02/2021 | 2,687 | |
10,918 | |||
Ford Motor Credit Co. LLC MTN5 | |||
5,000 | 1.744%—07/19/2024 | 4,631 | |
General Motors Financial Co. Inc. | |||
7,700 | 2.277% (3 Month USD Libor + 0.540) 11/06/20202 | 7,568 | |
6,600 | 2.450%—11/06/2020 | 6,532 | |
2,600 | 3.200%—07/13/2020 | 2,595 | |
16,695 | |||
Nissan Motor Acceptance Corp. | |||
2,600 | 2.550%—03/08/20211 | 2,522 | |
Volkswagen Bank GmbH MTN5 | |||
EUR | 2,000 | 0.000% (3 Month EUR Libor + 1.550) 06/15/20212 | 2,159 |
Volkswagen Group of America Finance LLC | |||
$ | 6,500 | 2.477% (3 Month USD Libor + 0.770) 11/13/20201,2 | 6,438 |
4,800 | 4.750%—11/13/20281 | 5,242 | |
11,680 | |||
Volkswagen International Finance NV | |||
EUR | 1,800 | 1.139% (3 Month EUR Libor + 1.550) 11/16/20242 | 1,896 |
61,219 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
BANKS—8.2% | |||
Banco Espirito Santo SA MTN5 | |||
EUR | 3,500 | 0.000%—01/15/2049* | $1,050 |
Banco Santander SA | |||
700 | 6.750%—12/31/209911 | 764 | |
Banque Federative du Credit Mutuel SA | |||
$ | 6,300 | 3.750%—07/20/20231 | 6,660 |
Barclays plc | |||
4,200 | 3.684%—01/10/2023 | 4,297 | |
6,300 | 3.844% (3 Month USD Libor + 2.110) 08/10/20212 | 6,311 | |
3,700 | 4.610%—02/15/202311 | 3,849 | |
1,000 | 7.875%—12/29/204911 | 993 | |
EUR | 2,900 | 8.000%—12/15/20206,11 | 3,144 |
18,594 | |||
Barclays plc MTN5 | |||
GBP | 4,000 | 3.250%—02/12/2027 | 5,197 |
BBVA Bancomer SA/Texas | |||
$ | 289 | 6.500%—03/10/2021 | 295 |
BBVA USA | |||
2,900 | 2.500%—08/27/2024 | 2,842 | |
BNP Paribas SA | |||
400 | 7.625%—12/29/204911 | 407 | |
Citigroup Inc. | |||
6,800 | 2.750%—04/25/2022 | 6,967 | |
3,900 | 2.876%— 07/24/202311 | 3,998 | |
10,965 | |||
Credit Suisse Group AG | |||
5,100 | 2.997%—12/14/20231,11 | 5,196 | |
300 | 7.125%—12/31/209911 | 303 | |
2,500 | 7.500%—12/29/204911 | 2,653 | |
8,152 | |||
Deutsche Bank AG/New York | |||
3,500 | 2.281% (3 Month USD Libor + 0.970) 07/13/20202 | 3,491 | |
5,500 | 2.700%—07/13/2020 | 5,494 | |
6,000 | 3.150%—01/22/2021 | 5,994 | |
9,000 | 3.961%—11/26/202511 | 8,809 | |
3,200 | 4.250%—10/14/2021 | 3,223 | |
27,011 | |||
Intesa Sanpaolo SpA | |||
5,000 | 4.000%—09/23/20291 | 4,916 | |
Lloyds Banking Group plc | |||
6,000 | 2.858%—03/17/202311 | 6,064 | |
2,900 | 4.450%—05/08/2025 | 3,159 | |
9,223 | |||
Mitsubishi UFJ Financial Group Inc. | |||
4,800 | 2.623%—07/18/2022 | 4,899 | |
3,900 | 3.455%—03/02/2023 | 4,068 | |
8,967 | |||
Mitsubishi UFJ Lease & Finance Co. Ltd. MTN5 | |||
3,000 | 2.250%—09/07/2021 | 2,993 | |
Mizuho Financial Group Inc. | |||
4,900 | 2.555%—09/13/202511 | 4,978 | |
Nordea Bank Abp | |||
2,500 | 3.750%—08/30/20231 | 2,615 | |
Oversea-Chinese Banking Corp. Ltd. | |||
3,700 | 2.142% (3 Month USD Libor + 0.450) 05/17/20211,2 | 3,679 | |
Royal Bank of Scotland Group plc | |||
700 | 3.162% (3 Month USD Libor + 1.470) 05/15/20232 | 678 | |
200 | 4.519%—06/25/202411 | 213 | |
200 | 4.892%—05/18/202911 | 225 |
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 | |||
$ | 917 | 7.500%—12/29/204911 | $879 |
3,600 | 8.625%—08/15/20216,11 | 3,688 | |
5,683 | |||
Royal Bank of Scotland Group plc MTN5 | |||
EUR | 600 | 2.000%—03/04/202511 | 665 |
Societe Generale SA MTN5 | |||
$ | 4,900 | 4.250%—09/14/20231 | 5,181 |
Standard Chartered plc | |||
5,000 | 2.744%—09/10/20221,11 | 5,014 | |
5,000 | 4.247%—01/20/20231,11 | 5,138 | |
10,152 | |||
Synchrony Bank | |||
3,000 | 3.650%—05/24/2021 | 2,997 | |
UniCredit SpA MTN5 | |||
10,600 | 7.830%—12/04/20231 | 11,652 | |
Wells Fargo & Co. | |||
3,100 | 1.990% (3 Month USD Libor + 1.230) 10/31/20232 | 3,090 | |
Wells Fargo & Co. MTN5 | |||
5,600 | 3.550%—09/29/2025 | 6,060 | |
164,788 | |||
BEVERAGES—1.0% | |||
Anheuser-Busch InBev Finance Inc. | |||
4,700 | 3.700%—02/01/2024 | 5,094 | |
Anheuser-Busch InBev Worldwide Inc. | |||
5,100 | 4.500%—06/01/2050 | 5,696 | |
Bacardi Ltd. | |||
4,700 | 4.450%—05/15/20251 | 4,961 | |
Keurig Dr Pepper Inc. | |||
4,000 | 3.200%—11/15/2021 | 4,082 | |
19,833 | |||
BUILDING PRODUCTS—0.6% | |||
CRH America Finance Inc. | |||
3,200 | 3.950%—04/04/20281 | 3,347 | |
3,200 | 4.500%—04/04/20481 | 3,470 | |
6,817 | |||
Fortune Brands Home & Security Inc. | |||
4,700 | 3.250%—09/15/2029 | 4,620 | |
Owens Corning | |||
300 | 4.200%—12/01/2024 | 313 | |
11,750 | |||
CAPITAL MARKETS—2.2% | |||
BGC Partners Inc. | |||
6,300 | 5.375%—07/24/2023 | 6,311 | |
BM & FBovespa SA | |||
1,300 | 5.500%—07/16/2020 | 1,299 | |
Credit Agricole SA/London MTN5 | |||
4,900 | 3.750%—04/24/20231 | 5,147 | |
Credit Suisse Group Funding Guernsey Ltd. | |||
4,900 | 3.750%—03/26/2025 | 5,198 | |
4,845 | 3.800%—09/15/2022 | 5,047 | |
10,245 | |||
E*Trade Financial Corp. | |||
5,100 | 2.950%—08/24/2022 | 5,212 | |
Goldman Sachs Group Inc. | |||
7,700 | 1.540% (3 Month USD Libor + 0.780) 10/31/20222 | 7,586 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
CAPITAL MARKETS—Continued | |||
$ | 3,400 | 3.200%—02/23/2023 | $3,530 |
800 | 5.750%—01/24/2022 | 857 | |
11,973 | |||
Moody's Corp. | |||
300 | 2.625%—01/15/2023 | 309 | |
462 | 4.500%—09/01/2022 | 492 | |
801 | |||
Platin 1426 GmbH | |||
EUR | 2,700 | 6.875%—06/15/20231 | 3,041 |
UBS Group AG | |||
$ | 1,100 | 6.875%—12/29/204911 | 1,111 |
45,140 | |||
CHEMICALS—0.1% | |||
Sasol Financing USA LLC | |||
3,900 | 5.875%—03/27/2024 | 2,574 | |
CONSUMER FINANCE—2.0% | |||
Ally Financial Inc. | |||
200 | 7.500%—09/15/2020 | 205 | |
American Express Co. | |||
6,400 | 3.400%—02/27/2023 | 6,699 | |
5,200 | 3.700%—08/03/2023 | 5,523 | |
12,222 | |||
Capital One Financial Corp. | |||
5,500 | 1.210% (3 Month USD Libor + 0.450) 10/30/20202 | 5,486 | |
Daimler Finance North America LLC | |||
4,861 | 2.200%—10/30/20211 | 4,782 | |
5,300 | 3.350%—05/04/20211 | 5,314 | |
5,300 | 3.700%—05/04/20231 | 5,270 | |
15,366 | |||
Harley-Davidson Financial Services Inc. | |||
5,300 | 3.550%—05/21/20211 | 5,303 | |
Springleaf Finance Corp. | |||
2,800 | 6.875%—03/15/2025 | 2,665 | |
41,247 | |||
DIVERSIFIED FINANCIAL SERVICES—2.3% | |||
Avolon Holdings Funding Ltd. | |||
4,804 | 5.125%—10/01/20231 | 4,306 | |
AXA Equitable Holdings Inc. | |||
3,200 | 3.900%—04/20/2023 | 3,328 | |
BAT International Finance plc | |||
3,600 | 3.250%—06/07/20221 | 3,697 | |
Cantor Fitzgerald LP | |||
5,400 | 6.500%—06/17/20221 | 5,568 | |
Depository Trust & Clearing Corp. | |||
3,000 | 4.875%—06/15/20201,6,11 | 2,641 | |
Guardian Life Global Funding | |||
4,000 | 3.400%—04/25/20231 | 4,202 | |
Imperial Brands Finance plc | |||
2,100 | 3.500%—02/11/20231 | 2,128 | |
5,600 | 3.875%—07/26/20291 | 5,633 | |
7,761 | |||
Reckitt Benckiser Treasury Services plc | |||
3,400 | 2.375%—06/24/20221 | 3,469 | |
Rio Oil Finance Trust | |||
1,336 | 9.250%—07/06/20241 | 1,284 | |
5,598 | 9.750%—01/06/20271 | 5,380 | |
6,664 |
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 | ||
DIVERSIFIED FINANCIAL SERVICES—Continued | |||
Syngenta Finance NV | |||
$ | 4,500 | 3.933%—04/23/20211 | $4,444 |
46,080 | |||
DIVERSIFIED TELECOMMUNICATION SERVICES—1.6% | |||
Altice France SA | |||
1,000 | 7.375%—05/01/20261 | 1,049 | |
AT&T Inc. | |||
3,500 | 1.964% (3 Month USD Libor + 1.180) 06/12/20242 | 3,433 | |
5,000 | 3.000%—06/30/2022 | 5,149 | |
8,582 | |||
British Telecommunications plc | |||
1,300 | 4.500%—12/04/2023 | 1,413 | |
Deutsche Telekom International Finance BV | |||
6,080 | 2.820%—01/19/20221 | 6,214 | |
Verizon Communications Inc. | |||
12,695 | 3.376%—02/15/2025 | 13,936 | |
31,194 | |||
ELECTRIC UTILITIES—2.6% | |||
American Electric Power Co. Inc. | |||
1,500 | 2.150%—11/13/2020 | 1,508 | |
Baltimore Gas & Electric | |||
3,400 | 3.350%—07/01/2023 | 3,604 | |
Duke Energy Corp. | |||
5,300 | 2.204% (3 Month USD Libor + 0.500) 05/14/20211,2 | 5,284 | |
4,536 | 3.750%—04/15/2024 | 4,940 | |
10,224 | |||
Evergy Inc. | |||
5,000 | 2.450%—09/15/2024 | 5,186 | |
Exelon Corp. | |||
3,100 | 4.050%—04/15/2030 | 3,542 | |
FirstEnergy Corp. | |||
1,100 | 2.850%—07/15/2022 | 1,123 | |
Greenko Solar Mauritius Ltd. | |||
4,900 | 5.550%—01/29/20251 | 4,364 | |
Interstate Power & Light Co. | |||
4,800 | 3.250%—12/01/2024 | 5,143 | |
Nextera Energy Capital Holdings Inc. | |||
5,000 | 1.950%—09/01/2022 | 5,080 | |
1,624 | 2.800%—01/15/2023 | 1,683 | |
4,800 | 3.200%—02/25/2022 | 4,948 | |
11,711 | |||
Sempra Energy | |||
5,200 | 1.191% (3 Month USD Libor + 0.450) 03/15/20212 | 5,118 | |
Virginia Electric & Power Co. | |||
1,100 | 2.950%—01/15/2022 | 1,127 | |
52,650 | |||
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—0.1% | |||
Arrow Electronics Inc. | |||
2,100 | 3.500%—04/01/2022 | 2,121 | |
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—3.0% | |||
Alexandria Real Estate Equities Inc. | |||
2,100 | 2.750%—12/15/2029 | 2,109 | |
American Tower Corp. | |||
5,000 | 2.750%—01/15/2027 | 5,184 | |
2,099 | 3.300%—02/15/2021 | 2,124 | |
7,308 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—Continued | |||
AvalonBay Communities Inc. MTN5 | |||
$ | 4,700 | 2.300%—03/01/2030 | $4,669 |
3,000 | 3.450%—06/01/2025 | 3,204 | |
7,873 | |||
Boston Properties LP | |||
4,905 | 2.750%—10/01/2026 | 4,913 | |
Brandywine Operating Partnership LP | |||
5,000 | 4.100%—10/01/2024 | 5,106 | |
CBL & Associates LP | |||
2,700 | 4.600%—10/15/2024 | 742 | |
6,600 | 5.950%—12/15/2026 | 1,787 | |
2,529 | |||
Crown Castle International Corp. | |||
4,000 | 3.700%—06/15/2026 | 4,357 | |
Digital Realty Trust LP | |||
5,500 | 4.450%—07/15/2028 | 6,234 | |
EPR Properties | |||
1,900 | 4.500%—06/01/2027 | 1,594 | |
600 | 4.950%—04/15/2028 | 512 | |
2,106 | |||
GLP Capital LP / GLP Financing II Inc. | |||
4,500 | 4.000%—01/15/2030 | 3,997 | |
OMEGA Healthcare Investors Inc. | |||
2,300 | 4.375%—08/01/2023 | 2,282 | |
Physicians Realty LP | |||
1,400 | 3.950%—01/15/2028 | 1,260 | |
Service Properties Trust | |||
4,800 | 4.350%—10/01/2024 | 4,069 | |
Spirit Realty LP | |||
4,700 | 3.400%—01/15/2030 | 3,915 | |
Washington Prime Group LP | |||
5,800 | 6.450%—08/15/2024 | 3,256 | |
61,314 | |||
FOOD & STAPLES RETAILING—0.0% | |||
CVS Pass-Through Trust | |||
502 | 6.943%—01/10/2030 | 574 | |
Viterra Inc. | |||
200 | 5.950%—08/01/20201 | 202 | |
776 | |||
FOOD PRODUCTS—0.3% | |||
Kraft Heinz Foods Co. | |||
400 | 2.304% (3 Month USD Libor + 0.570) 02/10/20212 | 394 | |
McCormick & Co. Inc. | |||
4,400 | 2.700%—08/15/2022 | 4,509 | |
Tyson Foods Inc. | |||
1,100 | 2.250%—08/23/2021 | 1,114 | |
6,017 | |||
HEALTH CARE PROVIDERS & SERVICES—0.7% | |||
CVS Health Corp. | |||
5,800 | 3.700%—03/09/2023 | 6,156 | |
3,900 | 4.125%—04/01/2040 | 4,380 | |
10,536 | |||
HCA Inc. | |||
4,000 | 5.375%—09/01/2026 | 4,355 | |
100 | 5.875%—02/01/2029 | 115 | |
4,470 | |||
15,006 |
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 | ||
HOTELS, RESTAURANTS & LEISURE—0.5% | |||
Wynn Las Vegas LLC / Wynn Las Vegas Capital Corp. | |||
$ | 5,200 | 4.250%—05/30/20231 | $4,881 |
4,800 | 5.500%—03/01/20251 | 4,302 | |
9,183 | |||
INSURANCE—0.5% | |||
AIA Group Ltd. | |||
5,900 | 1.636% (3 Month USD Libor + 0.520) 09/20/20211,2 | 5,804 | |
2,700 | 3.375%—04/07/20301 | 2,946 | |
8,750 | |||
Ambac LSNI LLC | |||
782 | 6.450% (3 Month USD Libor + 5.000) 02/12/20231,2 | 748 | |
9,498 | |||
IT SERVICES—0.3% | |||
Paypal Holdings Inc. | |||
5,000 | 2.850%—10/01/2029 | 5,330 | |
MACHINERY—0.1% | |||
CNH Industrial Capital LLC | |||
500 | 3.875%—10/15/2021 | 506 | |
2,200 | 4.375%—11/06/2020 | 2,207 | |
2,713 | |||
MEDIA—0.3% | |||
Charter Communications Operating LLC | |||
1,800 | 3.579%—07/23/2020 | 1,803 | |
COX Communications Inc. | |||
4,700 | 3.250%—12/15/20221 | 4,898 | |
6,701 | |||
MORTGAGE REAL ESTATE INVESTMENT TRUSTS (REITs)—0.5% | |||
ERP Operating LP | |||
4,100 | 3.375%—06/01/2025 | 4,314 | |
Simon Property Group LP | |||
6,000 | 2.500%—09/01/2020 | 5,999 | |
10,313 | |||
OIL, GAS & CONSUMABLE FUELS—1.0% | |||
EQM Midstream Partners LP | |||
1,550 | 4.750%—07/15/2023 | 1,462 | |
Equinor ASA | |||
2,000 | 3.125%—04/06/2030 | 2,150 | |
MPLX LP | |||
3,300 | 4.900%—04/15/2058 | 2,731 | |
Occidental Petroleum Corp. | |||
3,900 | 2.900%—08/15/2024 | 2,982 | |
Odebrecht Drilling Norbe VIII/IX Ltd. | |||
777 | 6.350%—12/01/2021 | 640 | |
3,350 | 7.350%—12/01/2026 | 1,080 | |
8 | 7.350%—12/01/20261 | 3 | |
1,723 | |||
Odebrecht Offshore Drilling Finance Ltd. | |||
704 | 6.720%—12/01/2022 | 538 | |
3,477 | 7.720%—12/01/2026 | 312 | |
850 | |||
Odebrecht Oil & Gas Finance Ltd. | |||
2,183 | 0.000%—09/12/20991,6,7 | 12 | |
Rio Oil Finance Trust | |||
2,034 | 9.250%—07/06/2024 | 1,955 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
OIL, GAS & CONSUMABLE FUELS—Continued | |||
Shell International Finance BV | |||
$ | 5,200 | 2.750%—04/06/2030 | $5,399 |
Southern California Gas Co. | |||
900 | 3.200%—06/15/2025 | 964 | |
20,228 | |||
PHARMACEUTICALS—1.9% | |||
Abbvie Inc. | |||
5,000 | 2.150%—11/19/20211 | 5,070 | |
4,900 | 2.600%—11/21/20241 | 5,117 | |
1,000 | 3.200%—11/06/2022 | 1,048 | |
11,235 | |||
Allergan Funding SCS | |||
2,200 | 3.450%—03/15/2022 | 2,256 | |
Bayer US Finance II LLC | |||
6,300 | 3.875%—12/15/20231 | 6,697 | |
2,800 | 4.250%—12/15/20251 | 3,105 | |
9,802 | |||
Mylan NV | |||
EUR | 5,100 | 2.250%—11/22/2024 | 5,707 |
Takeda Pharmaceutical Co. Ltd. | |||
$ | 3,900 | 4.400%—11/26/2023 | 4,283 |
Teva Pharmaceutical Finance Netherlands II BV | |||
EUR | 2,200 | 3.250%—04/15/2022 | 2,375 |
Teva Pharmaceutical Finance Netherlands III BV | |||
$ | 3,000 | 6.750%—03/01/20288 | 3,099 |
38,757 | |||
REAL ESTATE MANAGEMENT & DEVELOPMENT—0.2% | |||
Tesco Property Finance 5 plc | |||
GBP | 2,254 | 5.661%—10/13/2041 | 3,723 |
ROAD & RAIL—0.3% | |||
ERAC USA Finance LLC | |||
$ | 2,600 | 3.300%—10/15/20221 | 2,630 |
Penske Truck Leasing Co. LP | |||
3,800 | 2.700%—03/14/20231 | 3,820 | |
TTX Co. MTN5 | |||
250 | 2.600%—06/15/20201 | 250 | |
6,700 | |||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—0.6% | |||
Broadcom Corp. / Broadcom Cayman Finance Ltd. | |||
3,800 | 3.875%—01/15/2027 | ��� 3,949 | |
Broadcom Inc. | |||
4,900 | 3.125%—10/15/20221 | 5,083 | |
NXP BV / NXP Funding LLC | |||
700 | 4.125%—06/01/20211 | 716 | |
1,800 | 4.625%—06/15/20221 | 1,878 | |
2,594 | |||
11,626 | |||
SOFTWARE—0.3% | |||
Oracle Corp. | |||
2,400 | 2.950%—04/01/2030 | 2,629 | |
3,500 | 3.600%—04/01/2040 | 3,962 | |
6,591 | |||
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS—0.6% | |||
Dell International LLC | |||
4,000 | 5.450%—06/15/20231 | 4,233 |
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 | ||
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS—Continued | |||
EMC Corp. | |||
$ | 1,080 | 2.650%—06/01/2020 | $1,078 |
Hewlett Packard Enterprise Co. | |||
5,900 | 2.093% (3 Month USD Libor + 0.720) 10/05/20212 | 5,800 | |
11,111 | |||
THRIFTS & MORTGAGE FINANCE—0.3% | |||
Nationwide Building Society | |||
5,300 | 4.363%—08/01/20241,11 | 5,551 | |
TOBACCO—0.4% | |||
Japan Tobacco Inc. MTN5 | |||
5,000 | 2.000%—04/13/2021 | 5,005 | |
Reynolds American Inc. | |||
3,600 | 4.000%—06/12/2022 | 3,748 | |
8,753 | |||
TRADING COMPANIES & DISTRIBUTORS—1.1% | |||
AerCap Ireland Capital DAC / AerCap Global Aviation Trust | |||
2,000 | 3.500%—05/26/2022 | 1,862 | |
5,500 | 4.875%—01/16/2024 | 5,137 | |
6,999 | |||
Air Lease Corp. MTN5 | |||
3,600 | 4.250%—02/01/2024 | 3,437 | |
Aviation Capital Group LLC | |||
3,900 | 2.875%—01/20/20221 | 3,380 | |
3,300 | 3.875%—05/01/20231 | 2,699 | |
5,300 | 4.125%—08/01/20251 | 4,375 | |
10,454 | |||
International Lease Finance Corp. | |||
837 | 8.250%—12/15/2020 | 839 | |
Mitsubishi Corp. MTN5 | |||
400 | 2.625%—07/14/2022 | 407 | |
22,136 | |||
TRANSPORTATION INFRASTRUCTURE—0.1% | |||
Central Nippon Expressway Co. Ltd. | |||
1,150 | 2.849%—03/03/2022 | 1,177 | |
WIRELESS TELECOMMUNICATION SERVICES—0.2% | |||
Sprint Communications Inc. | |||
800 | 6.000%—11/15/2022 | 850 | |
1,400 | 7.000%—08/15/2020 | 1,416 | |
2,266 | |||
Sprint Corp. | |||
1,390 | 7.250%—09/15/2021 | 1,464 | |
3,730 | |||
TOTAL CORPORATE BONDS & NOTES | |||
(Cost $763,919) | 756,378 | ||
ESCROW—0.0% | |||
(Cost $15) | |||
Shares | Value | ||
ESCROW—0.0% | |||
36,000 | General Motors Co. Escrow | $—x | |
FOREIGN GOVERNMENT OBLIGATIONS—2.8% | |||
Principal Amount | |||
Israel Government International Bond | |||
$ | 4,800 | 2.750%—07/03/2030 | 5,051 |
4,600 | 3.875%—07/03/2050 | 5,108 | |
10,159 | |||
Japan Finance Organization For Municipalities MTN5 | |||
6,800 | 2.625%—04/20/20221 | 7,041 | |
Japan International Cooperation Agency | |||
6,900 | 2.750%—04/27/2027 | 7,750 | |
Peruvian Government International Bond | |||
5,600 | 2.783%—01/23/2031 | 5,782 | |
Province of Ontario Canada | |||
CAD | 5,600 | 3.150%—06/02/2022 | 4,236 |
Province of Quebec Canada | |||
3,800 | 3.500%—12/01/2022 | 2,929 | |
13,900 | 4.250%—12/01/2021 | 10,573 | |
13,502 | |||
Provincia de Buenos Aires/Government Bonds | |||
ARS | 310 | 37.596% (Argentina Deposit Rates Badlar Private Banks ARS 30 to 35 Days + 3.750) 04/12/20251,2 | 3 |
Qatar Government International Bond | |||
$ | 5,500 | 3.375%—03/14/2024 | 5,827 |
2,000 | 4.500%—01/20/2022 | 2,107 | |
7,934 | |||
TOTAL FOREIGN GOVERNMENT OBLIGATIONS | |||
(Cost $60,925) | 56,407 | ||
MORTGAGE PASS-THROUGH—41.7% | |||
Bancorp Commercial Mortgage Trust | |||
Series 2018-CRE4 Cl. A | |||
3,479 | 1.714% (1 Month USD Libor + 0.900) 09/15/20351,2 | 3,295 | |
Federal Home Loan Mortgage Corp. | |||
5,900 | 2.700%—08/01/2023 | 6,127 | |
8,065 | 4.000%—12/01/2047-01/01/2049 | 8,616 | |
3 | 4.148% (U.S. Treasury Yield Curve Rate T Note 1 Year Constant Maturity Treasury + 2.209) 06/01/20242 | 3 | |
23 | 4.283% (U.S. Treasury Yield Curve Rate T Note 1 Year Constant Maturity Treasury + 2.250) 08/01/20352 | 23 | |
315 | 4.500%—12/01/2040-09/01/2041 | 350 | |
802 | 5.500%—02/01/2038-07/01/2038 | 918 | |
2,841 | 6.000%—01/01/2029-05/01/2040 | 3,276 | |
19,313 | |||
Federal Home Loan Mortgage Corp. Multifamily Structured Pass Through Certificates | |||
17,895 | 1.360%—08/25/20222 | 423 | |
Federal Home Loan Mortgage Corp. REMIC9 | |||
4,310 | 1.214% (1 Month USD Libor + 0.400) 06/15/20412 | 4,297 | |
14 | 1.264% (1 Month USD Libor + 0.450) 11/15/20302 | 14 |
12
Harbor Bond Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
MORTGAGE PASS-THROUGH—Continued | |||
Principal Amount | Value | ||
$ | 22 | 8.000%—08/15/2022 | $24 |
1 | 9.000%—12/15/2020 | 1 | |
4,336 | |||
Federal Home Loan Mortgage Corp. Structured Pass Through Certificates | |||
Series T-63 Cl. 1A1 | |||
81 | 3.128% (Fed 12 Month Treasury Average Constant Maturity Treasury + 1.200) 02/25/20452 | 80 | |
Series E3 Cl. A | |||
21 | 4.016%—08/15/20322 | 22 | |
102 | |||
Federal National Mortgage Association | |||
5,230 | 2.310%—08/01/2022 | 5,368 | |
213 | 3.000%—02/01/2021-11/01/2025 | 225 | |
191 | 3.271% (Fed 12 Month Treasury Average Constant Maturity Treasury + 1.400) 10/01/20402 | 191 | |
418 | 3.330%—11/01/2021 | 428 | |
3,487 | 3.500%—04/01/2045 | 3,755 | |
44,741 | 4.000%—09/01/2023-06/01/2049 | 48,115 | |
33 | 4.393% (12 Month USD Libor + 1.674) 05/01/20352 | 33 | |
425 | 4.415% (12 Month USD Libor + 1.693) 08/01/20352 | 428 | |
8,171 | 4.500%—07/01/2020-11/01/2048 | 8,837 | |
585 | 4.547% (12 Month USD Libor + 1.715) 06/01/20352 | 608 | |
2,098 | 5.000%—10/01/2031-06/01/2044 | 2,338 | |
21,482 | 5.500%—01/01/2025-09/01/2041 | 24,510 | |
6,831 | 6.000%—07/01/2023-06/01/2040 | 7,807 | |
102,643 | |||
Federal National Mortgage Association REMIC9 | |||
Series 2015-38 Cl. DF | |||
3,708 | 1.891% (1 Month USD Libor + 0.310) 06/25/20552 | 3,694 | |
4,400 | 2.444%—09/25/2029 | 4,752 | |
Series 2011-98 Cl. ZL | |||
75,339 | 3.500%—10/25/2041 | 79,762 | |
Series 2006-5 Cl. 3A2 | |||
46 | 3.799%—05/25/20352 | 48 | |
Series 2003-25 Cl. KP | |||
407 | 5.000%—04/25/2033 | 464 | |
Series 2003-W1 Cl. 1A1 | |||
146 | 5.281%—12/25/20422 | 161 | |
88,881 | |||
Federal National Mortgage Association TBA10 | |||
68,300 | 2.500%—07/14/2050 | 70,888 | |
157,300 | 3.000%—07/12/2048 | 165,607 | |
75,900 | 3.500%—06/19/2032-06/13/2048 | 80,234 | |
106,600 | 4.000%—5/16/2028-05/13/2050 | 113,537 | |
3,500 | 4.500%—06/13/2047 | 3,775 | |
1,000 | 5.500%—05/14/2048 | 1,097 | |
435,138 | |||
Government National Mortgage Association | |||
2,956 | 5.000%—08/15/2033-06/15/2041 | 3,318 | |
Government National Mortgage Association II | |||
223 | 3.000% (U.S. Treasury Yield Curve Rate T Note 1 Year Constant Maturity Treasury + 1.500) 01/20/2025-02/20/20322 | 230 | |
74 | 3.125% (U.S. Treasury Yield Curve Rate T Note 1 Year Constant Maturity Treasury + 1.500) 10/20/2025-11/20/20292 | 76 | |
79 | 3.250% (U.S. Treasury Yield Curve Rate T Note 1 Year Constant Maturity Treasury + 1.500) 08/20/2022-07/20/20272 | 81 |
MORTGAGE PASS-THROUGH—Continued | |||
Principal Amount | Value | ||
$ | 9,963 | 3.500%—12/20/2049 | $10,609 |
18 | 3.875% (U.S. Treasury Yield Curve Rate T Note 1 Year Constant Maturity Treasury + 1.500) 05/20/20242 | 18 | |
7,967 | 4.000%—06/20/2047-09/20/2049 | 8,575 | |
9,491 | 4.500%—06/20/2048-02/20/2049 | 10,205 | |
16,414 | 5.000%—01/20/2049-10/20/2049 | 17,754 | |
47,548 | |||
Government National Mortgage Association II TBA10 | |||
600 | 3.000%—06/22/2050 | 637 | |
92,800 | 4.500%—05/20/2050-06/22/2050 | 99,363 | |
2,000 | 5.000%—05/21/2049 | 2,158 | |
102,158 | |||
Government National Mortgage Association TBA10 | |||
2,000 | 3.000%—06/21/2046 | 2,125 | |
5,000 | 4.000%—05/21/2048 | 5,310 | |
23,500 | 5.000%—05/21/2048 | 25,624 | |
33,059 | |||
TOTAL MORTGAGE PASS-THROUGH | |||
(Cost $827,368) | 840,214 | ||
MUNICIPAL BONDS—0.1% | |||
MUNICIPAL BONDS—0.1% | |||
Chicago Transit Authority | |||
150 | 6.300%—12/01/2021 | 158 | |
City of Chicago, IL | |||
816 | 7.750%—01/01/2042 | 910 | |
New Jersey Transportation Trust Fund Authority | |||
1,400 | 2.551%—06/15/2023 | 1,425 | |
TOTAL MUNICIPAL BONDS | |||
(Cost $2,351) | 2,493 | ||
U.S. GOVERNMENT OBLIGATIONS—24.6% | |||
U.S. Treasury Bonds | |||
11,100 | 2.000%—02/15/2050 | 13,045 | |
11,000 | 2.250%—08/15/2046 | 13,358 | |
34,200 | 2.500%—02/15/2045-02/15/2046 | 43,111 | |
28,400 | 2.875%—05/15/2043-08/15/2045 | 37,888 | |
13,100 | 3.000%—05/15/2042-02/15/2048 | 18,052 | |
87,100 | 3.125%—02/15/2042-08/15/2044 | 120,795 | |
13,400 | 3.375%—05/15/2044 | 19,293 | |
9,200 | 3.625%—02/15/2044 | 13,710 | |
4,200 | 4.250%—05/15/2039 | 6,563 | |
10,500 | 4.375%—05/15/2040 | 16,744 | |
12,000 | 4.625%—02/15/2040 | 19,642 | |
322,201 | |||
U.S. Treasury Notes | |||
31,600 | 1.750%—09/30/2022-06/30/20248 | 32,998 | |
25,100 | 1.875%—07/31/20228 | 26,040 | |
41,000 | 2.000%—08/31/2021 | 41,999 |
13
Harbor Bond Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
U.S. GOVERNMENT OBLIGATIONS—Continued | |||
Principal Amount | Value | ||
$ | 49,500 | 2.000%—10/31/2021-12/31/20218 | $50,954 |
18,800 | 2.625%—02/15/2029 | 22,047 | |
174,038 | |||
TOTAL U.S. GOVERNMENT OBLIGATIONS | |||
(Cost $432,231) | 496,239 | ||
SHORT-TERM INVESTMENTS—4.7% | |||
REPURCHASE AGREEMENTS—2.6% | |||
6,700 | Repurchase Agreement with Barclays dated April 30, 2020 due May 01, 2020 at 0.070% collateralized by U.S. Treasury Bonds (value $6,758) | 6,700 | |
46,700 | Repurchase Agreement with HSBC dated April 30, 2020 due May 01, 2020 at 0.070% collateralized by U.S. Treasury Bonds (value $47,178) | 46,700 | |
53,400 |
SHORT-TERM INVESTMENTS—Continued | |||
Principal Amount | Value | ||
U.S. TREASURY BILLS—2.1%† | |||
U.S. Cash Management Bill | |||
$ | 7,500 | 0.111%—08/04/20207,8 | $7,498 |
U.S. Treasury Bills | |||
34,300 | 0.125%—07/23/2020 | 34,293 | |
41,791 | |||
TOTAL SHORT-TERM INVESTMENTS | |||
(Cost $95,188) | 95,191 | ||
TOTAL INVESTMENTS—126.8% | |||
(Cost $2,498,568) | 2,556,765 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—(26.8)% | (539,734) | ||
TOTAL NET ASSETS—100.0% | $2,017,031 |
FUTURES CONTRACTS
Description | Number of Contracts | Expiration Date | Current Notional Value (000s) | Unrealized Appreciation/ (Depreciation) (000s) | ||||
Euro-Bund Futures (Sell) | 11 | 06/08/2020 | EUR 1,100 | $ 2 | ||||
Euro-Buxl Futures (Buy) | 19 | 06/08/2020 | 1,900 | 28 | ||||
U.S. Treasury Bond Futures 30 year (Sell) | 690 | 06/19/2020 | $ 69,000 | (3,528) | ||||
U.S. Treasury Note Futures 5 year (Buy) | 1,982 | 06/30/2020 | 198,200 | 6,363 | ||||
U.S. Treasury Note Futures 10 year (Buy) | 888 | 06/19/2020 | 88,800 | 915 | ||||
Total Futures Contracts | $3,780 |
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-Schatz Futures Option (Call) | Eurex | EUR 113.50 | 05/22/2020 | 84 | $1 | $— |
PURCHASED OPTIONS NOT SETTLED THROUGH VARIATION MARGIN
Description | 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 | $ 196.00 | 05/22/2020 | 329 | $3 | $21 | ||||||
U.S. Treasury Note Futures Option 5 year (Put) | Chicago Board of Trade | 113.00 | 05/22/2020 | 1,187 | 10 | 1 | ||||||
U.S. Treasury Note Futures Option 10 year (Put) | Chicago Board of Trade | 119.50 | 05/22/2020 | 76 | 1 | — | ||||||
U.S. Treasury Note Futures Option 10 year (Put) | Chicago Board of Trade | 120.00 | 05/22/2020 | 38 | — | — | ||||||
Total Purchased Options Not Settled Through Variation Margin | $14 | $22 | ||||||||||
Total Purchased Options | $15 | $22 |
14
Harbor Bond Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
WRITTEN OPTIONS
WRITTEN OPTIONS NOT SETTLED THROUGH VARIATION MARGIN
Description | Counterparty | Strike Index | Expiration Date | Number of Contracts/ Notional | Premiums Received (000s) | Value (000s) | ||||||
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 | 218.011j | 10/13/2020 | 15,600,000 | 153 | — | ||||||
Total Written Options Not Settled Through Variation Margin | $344 | $— |
WRITTEN SWAP OPTIONS NOT SETTLED THROUGH VARIATION MARGIN
Description | Counterparty | Floating Rate Index | Buy/Sell Credit Protection | Strike Rate | Expiration Date | Number of Contracts/ Notional | Premiums Received (000s) | Value (000s) | ||||||||
Credit Default Swap Option 5 year (Put) | BNP Paribas SA | Markit CDX North America Investment Grade | Sell | 0.80% | 06/17/2020 | 8,900,000 | $9 | $(53) | ||||||||
Credit Default Swap Option 5 year (Put) | Deutsche Bank AG | Markit CDX North America Investment Grade | Sell | 0.85 | 06/17/2020 | 1,900,000 | 2 | (9) | ||||||||
Credit Default Swap Option 5 year (Put) | Morgan Stanley Capital Services LLC | Markit CDX North America Investment Grade | Sell | 0.85 | 06/17/2020 | 3,000,000 | 4 | (15) | ||||||||
Total Written Swap Options Not Settled Through Variation Margin | $15 | $(77) | ||||||||||||||
Total Written Options | $359 | $(77) |
FORWARD CURRENCY CONTRACTS
Counterparty | Amount to be Delivered (000s) | Amount to be Received (000s) | Settlement Date | Unrealized Appreciation/ (Depreciation) (000s) | ||||
BNP Paribas SA | $ 10,591 | BRL 55,100 | 07/02/2020 | $ (503) | ||||
Deutsche Bank AG | $ 24,970 | BRL 135,512 | 05/05/2020 | (59) | ||||
HSBC Bank USA | $ 95 | BRL 512 | 05/05/2020 | (1) | ||||
UBS AG | $ 26,943 | BRL 135,000 | 05/05/2020 | (2,127) | ||||
Citibank NA | BRL 55,100 | $ 13,008 | 07/02/2020 | 2,920 | ||||
Deutsche Bank AG | BRL 135,512 | $ 26,382 | 05/05/2020 | 1,471 | ||||
HSBC Bank USA | BRL 512 | $ 94 | 05/05/2020 | — | ||||
HSBC Bank USA | BRL 512 | $ 95 | 06/02/2020 | 1 | ||||
UBS AG | BRL 135,000 | $ 24,876 | 05/05/2020 | 59 | ||||
Barclays Bank plc | $ 14,275 | GBP 11,191 | 05/15/2020 | (180) | ||||
Citibank NA | $ 1,611 | GBP 1,353 | 05/15/2020 | 94 | ||||
Goldman Sachs Bank USA | $ 27,832 | GBP 22,625 | 05/15/2020 | 666 | ||||
JP Morgan Chase Bank NA | $ 2,198 | GBP 1,887 | 05/15/2020 | 179 | ||||
Citibank NA | GBP 4,628 | $ 34,009 | 05/15/2020 | 863 | ||||
Goldman Sachs Bank USA | GBP 1,605 | $ 19,618 | 05/15/2020 | 377 | ||||
HSBC Bank USA | GBP 3,869 | $ 4,783 | 05/15/2020 | (91) | ||||
HSBC Bank USA | GBP 3,750 | $ 20,512 | 05/15/2020 | 430 | ||||
JP Morgan Chase Bank NA | GBP 3,758 | $ 4,893 | 05/15/2020 | 160 | ||||
JP Morgan Chase Bank NA | GBP 1,681 | $ 8,281 | 05/15/2020 | (238) | ||||
Société Générale | GBP 31,831 | $ 41,428 | 05/15/2020 | 1,335 | ||||
Citibank NA | $ 18,696 | CAD 25,940 | 05/04/2020 | (60) | ||||
Citibank NA | CAD 25,940 | $ 18,404 | 05/04/2020 | (232) | ||||
Citibank NA | CAD 25,940 | $ 18,697 | 06/02/2020 | 60 | ||||
HSBC Bank USA | $ 169 | CNY 1,185 | 06/17/2020 | (2) | ||||
Barclays Bank plc | $ 1,119 | EUR 2,008 | 05/15/2020 | (8) | ||||
BNP Paribas SA | $ 15,569 | EUR 34,658 | 05/15/2020 | (903) | ||||
BNP Paribas SA | $ 3,383 | EUR 23,478 | 05/15/2020 | 232 | ||||
Goldman Sachs Bank USA | $ 3,161 | EUR 2,806 | 05/15/2020 | (85) | ||||
Goldman Sachs Bank USA | $ 6,934 | EUR 6,437 | 05/15/2020 | 122 | ||||
JP Morgan Chase Bank NA | $ 1,023 | EUR 13,261 | 05/15/2020 | 246 | ||||
Barclays Bank plc | EUR 1,544 | $ 1,711 | 05/15/2020 | 19 | ||||
BNP Paribas SA | EUR 58,001 | $ 68,719 | 05/15/2020 | (241) | ||||
Citibank NA | EUR 7,490 | $ 8,392 | 05/15/2020 | 181 | ||||
Goldman Sachs Bank USA | EUR 1,909 | $ 7,673 | 05/15/2020 | 66 | ||||
HSBC Bank USA | EUR 5,267 | $ 5,720 | 05/15/2020 | (53) | ||||
HSBC Bank USA | EUR 1,535 | $ 1,712 | 05/15/2020 | 29 |
15
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) | ||||
JP Morgan Chase Bank NA | EUR 17,682 | $ 22,698 | 05/15/2020 | $(64) | ||||
JP Morgan Chase Bank NA | EUR 4,945 | $ 5,630 | 05/15/2020 | 210 | ||||
BNP Paribas SA | $ 139 | INR 10,030 | 06/17/2020 | (6) | ||||
BNP Paribas SA | $ 1,362 | JPY 149,500 | 05/15/2020 | 31 | ||||
Citibank NA | $ 39,485 | JPY 4,323,300 | 05/15/2020 | 810 | ||||
Citibank NA | JPY 2,891,500 | $ 39,870 | 05/15/2020 | (1,168) | ||||
JP Morgan Chase Bank NA | JPY 131,700 | $ 1,197 | 05/15/2020 | (30) | ||||
JP Morgan Chase Bank NA | $ 46 | MXN 878 | 06/17/2020 | (10) | ||||
Citibank NA | TRY 867 | $ 127 | 05/12/2020 | 3 | ||||
Total Forward Currency Contracts | $4,503 |
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 | $(1,235) | $256 | $(1,491) | |||||||||
LCH Group | British Bankers' Association LIBOR GBP 6-Month | Receive | 1.000 | Semi-annual | 06/17/2050 | 9,500 | (2,001) | 175 | (2,176) | |||||||||
CME Group | British Bankers' Association LIBOR JPY 6-Month | Receive | 0.300 | Semi-annual | 03/18/2026 | JPY 10,510,000 | (2,274) | (564) | (1,710) | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Pay | 0.036 | Semi-annual | 03/10/2038 | 196,000 | (25) | — | (25) | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Pay | 0.040 | Semi-annual | 03/10/2038 | 196,000 | (23) | 1 | (24) | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Receive | 0.300 | Semi-annual | 03/18/2026 | 5,900,000 | (1,275) | (350) | (925) | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Pay | (0.095) | Semi-annual | 09/13/2026 | 1,190,000 | (7) | — | (7) | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Pay | (0.092) | Semi-annual | 09/13/2026 | 590,000 | (2) | — | (2) | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Pay | (0.068) | Semi-annual | 09/18/2026 | 990,000 | 9 | — | 9 | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Pay | (0.062) | Semi-annual | 09/18/2026 | 1,580,000 | 20 | (1) | 21 | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Pay | (0.064) | Semi-annual | 09/19/2026 | 595,000 | 6 | — | 6 | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Pay | (0.063) | Semi-annual | 09/19/2026 | 595,000 | 7 | — | 7 | |||||||||
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 | (8) | 1 | (9) | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Receive | 0.300 | Semi-annual | 09/20/2027 | 2,180,000 | (564) | (113) | (451) | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Receive | 0.300 | Semi-annual | 03/20/2028 | 1,020,000 | (272) | 73 | (345) | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Pay | 0.380 | Semi-annual | 06/18/2028 | 5,480,000 | 1,866 | 209 | 1,657 | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Receive | 0.399 | Semi-annual | 06/18/2028 | 770,000 | (274) | (1) | (273) | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Receive | 0.450 | Semi-annual | 03/20/2029 | 660,000 | (275) | (48) | (227) | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Receive | 0.750 | Semi-annual | 03/20/2038 | 1,204,000 | (1,289) | (15) | (1,274) | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Receive | 0.800 | Semi-annual | 10/22/2038 | 220,000 | (257) | — | (257) | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Receive | 0.705 | Semi-annual | 10/31/2038 | 640,000 | (663) | 41 | (704) |
16
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 | Receive | 0.785% | Semi-annual | 11/12/2038 | JPY 320,000 | $(377) | $1 | $(378) | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Receive | 0.750 | Semi-annual | 12/20/2038 | 1,847,800 | (2,058) | 100 | (2,158) | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Pay | 0.122 | Semi-annual | 08/22/2039 | 1,310,000 | (20) | 107 | (127) | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Pay | 0.123 | Semi-annual | 08/22/2039 | 1,020,000 | (15) | 26 | (41) | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Pay | 0.103 | Semi-annual | 08/28/2039 | 190,000 | (9) | — | (9) | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Pay | 1.000 | Semi-annual | 03/21/2048 | 230,000 | 485 | 562 | (77) | |||||||||
CME Group | British Bankers' Association LIBOR USD 3-Month | Pay | 2.800 | Semi-annual | 08/22/2023 | $ 86,000 | 7,152 | (1,932) | 9,084 | |||||||||
Centrally Cleared Interest Rate Swaps | (1,907) | |||||||||||||||||
Interest Rate Swaps | $(1,907) |
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 | 0.347% | Quarterly | EUR 5,000 | $84 | $(244) | $328 | ||||||||||
ICE Group | AT&T Inc. 2.450% due 06/30/2020 | Sell | 1.000 | 12/20/2020 | 0.999 | Quarterly | $ 3,100 | 4 | 21 | (17) | ||||||||||
ICE Group | General Electric Company 2.700% due 10/09/2022 | Sell | 1.000 | 12/20/2023 | 1.658 | Quarterly | 2,700 | (59) | (120) | 61 | ||||||||||
ICE Group | General Electric Company 2.700% due 10/09/2022 | Sell | 1.000 | 06/20/2024 | 1.732 | Quarterly | 1,200 | (33) | (3) | (30) | ||||||||||
ICE Group | General Electric Company 2.700% due 10/09/2022 | Sell | 1.000 | 12/20/2024 | 1.800 | Quarterly | 2,600 | (88) | (38) | (50) | ||||||||||
ICE Group | The Boeing Company 8.750% due 08/15/2021 | Sell | 1.000 | 12/20/2020 | 3.999 | Quarterly | 5,100 | (91) | 29 | (120) | ||||||||||
ICE Group | The Goldman Sachs Group, Inc. 5.950% due 01/18/2018 | Sell | 1.000 | 09/20/2020 | 0.452 | Quarterly | 8,000 | 27 | 128 | (101) | ||||||||||
Centrally Cleared Credit Default Swaps | $71 |
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 | Equitable Holdings Inc. 3.900% due 04/20/2023 | Sell | 1.000% | 06/20/2023 | 0.025% | Quarterly | $ 4,200 | $(186) | $(115) | $(71) | ||||||||||
Credit Default Swaps | $— | |||||||||||||||||||
Total Swaps | $(1,907) |
17
Harbor Bond Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
FIXED INCOME INVESTMENTS SOLD SHORT — (8.1)%
Principal Amount (000s) | Security | Proceeds (000s) | Value (000s) | |||
$ 138,800 | Federal National Mortgage Association TBA10 4.000%—05/13/2050-06/11/2050 | $ 148,026 | $ (147,956) | |||
9,000 | Federal National Mortgage Association TBA10 6.000%—05/13/2050 | 10,043 | (10,002) | |||
4,400 | Federal National Mortgage Association TBA10 5.000%—05/13/2050 | 4,762 | (4,785) | |||
Total Fixed Income Investments Sold Short | $162,831 | $(162,743) |
REVERSE REPURCHASE AGREEMENTS — (0.1)%
Counterparty | Borrowing Rate | Borrowing Date | Maturity Date | Proceeds (000s) | Payable for Reverse Repurchase Agreements (000s) | |||||
Barclays Bank PLC | (0.500)% | 04/03/2020 | 04/06/2022 | $1,427 | $(1,427) | |||||
BNP Paribas SA | (0.050)% | 10/21/2019 | 10/21/2021 | 1,291 | (1,291) | |||||
Total Reverse Repurchase Agreements | $2,718 | $(2,718) |
FAIR VALUE MEASUREMENTS
The following table summarizes the Fund’s investments as of April 30, 2020 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 | $— | $132,172 | $— | $132,172 | ||||
Bank Loan Obligations | — | — | 5125 | 5,125 | ||||
Collateralized Mortgage Obligations | — | 172,546 | — | 172,546 | ||||
Corporate Bonds & Notes | — | 756,378 | — | 756,378 | ||||
Escrow | — | — | — | — | ||||
Foreign Government Obligations | — | 56,407 | — | 56,407 | ||||
Mortgage Pass-Through | — | 840,214 | — | 840,214 | ||||
Municipal Bonds | — | 2,493 | — | 2,493 | ||||
U.S. Government Obligations | — | 496,239 | — | 496,239 | ||||
Short-Term Investments | ||||||||
Repurchase Agreements | — | 53,400 | — | 53,400 | ||||
U.S. Treasury Bills | — | 41,791 | — | 41,791 | ||||
Total Investments in Securities | $— | $2,551,640 | $5,125 | $2,556,765 | ||||
Financial Derivative Instruments - Assets | ||||||||
Forward Currency Contracts | $— | $10,564 | $— | $10,564 | ||||
Futures Contracts | 7,308 | — | — | 7,308 | ||||
Purchased Options | 22 | — | — | 22 | ||||
Swap Agreements | — | 11,173 | — | 11,173 | ||||
Total Financial Derivative Instruments - Assets | $7,330 | $21,737 | $— | $29,067 | ||||
Liability Category | ||||||||
Fixed Income Investments Sold Short | $— | $(162,743) | $— | $(162,743) | ||||
Financial Derivative Instruments - Liabilities | ||||||||
Forward Currency Contracts | $— | $(6,061) | $— | $(6,061) | ||||
Futures Contracts | (3,528) | — | — | (3,528) | ||||
Swap Agreements | — | (13,080) | — | (13,080) | ||||
Written Options | — | (77) | — | (77) | ||||
Total Financial Derivative Instruments - Liabilities | $(3,528) | $(19,218) | $— | $(22,746) | ||||
Total Investments | $3,802 | $2,391,416 | $5,125 | $2,400,343 |
For more information on valuation inputs and their aggregation into the levels in the table above, please refer to the Fair Value Measurements and Disclosures in Note 2 of the accompanying Notes to Financial Statements.
18
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 period ended April 30, 2020.
Valuation Description | Beginning Balance as of 11/01/2019 (000s) | Purchases (000s) | Sales (000s) | Discount/ (Premium) (000s) | Total Realized Gain/(Loss) (000s) | Change in Unrealized Appreciation/ (Depreciation) (000s) | Transfers Into Level 3 (000s) | Transfers Out of Level 3 (000s) | Ending Balance as of 04/30/2020 (000s) | Unrealized Gain/(Loss) as of 04/30/2020 (000s) | ||||||||||
Bank Loan Obligations | $5,198 | $— | $— | $(5) | $— | $(68) | $— | $— | $5,125 | $(70) | ||||||||||
Escrow | — | — | — | — | — | — | — | — | — | (15) | ||||||||||
$5,198 | $— | $— | $(5) | $— | $(68) | $— | $— | $5,125 | $(85) |
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 04/30/2020 (000s) | Valuation Technique | Unobservable Input(s) | Input Value(s) | ||||
Investments in Securities | ||||||||
Bank Loan Obligations | ||||||||
Toyota Motor Credit Corporation 2018 Term Loan | $ 5,125 | Benchmark Pricing | Base Price | $ 98.55 | ||||
Escrow | ||||||||
General Motors Co. Escrow | — | Cash Available in Relation to Claims | Estimated Recovery Value | $ 0.00 | ||||
$5,125 |
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 April 30, 2020.
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 | $— | $— | $— | $2,718 | $2,718 |
19
Harbor Bond Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
* | Security in Default |
† | Coupon represents yield to maturity |
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 April 30, 2020, the aggregate value of these securities was $434,661 or 22% of net assets. |
2 | Variable or floating rate security; the stated rate represents the rate in effect at April 30, 2020. 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 | CLO after the name of a security stands for Collateralized Loan Obligation. |
4 | Step coupon security; the stated rate represents the rate in effect at April 30, 2020. |
5 | MTN after the name of a security stands for Medium Term Note. |
6 | Perpetuity bond; the maturity date represents the next callable date. |
7 | Zero coupon bond |
8 | At April 30, 2020, 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 $20,074 or 1% of net assets. |
9 | REMICs are collateralized mortgage obligations which can hold mortgages secured by any type of real property and issue multiple-class securities backed by those mortgages. |
10 | TBAs are mortgage-backed securities traded under delayed delivery commitments, settling after April 30, 2020. 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 | Rate changes from fixed to variable rate at a specified date prior to its final maturity. Stated rate is fixed rate currently in effect and stated date is the final maturity date. |
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. |
j | Amount represents index value |
x | Fair valued in accordance with Harbor Funds' Valuation Procedures. |
ARS | Argentine Peso |
BRL | Brazilian Real |
CAD | Canadian Dollar |
CNY | Chinese Yuan Renminbi |
EUR | Euro |
GBP | British Pound |
INR | Indian Rupee |
JPY | Japanese Yen |
MXN | Mexican Peso |
TRY | Turkish Lira |
The accompanying notes are an integral part of the Financial Statements.
20
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
After setting an all-time high of 3,386.15 on February 19, 2020, largely due to continued optimism in the strength of the U.S. economy, the S&P 500 Index closed the first half of the Fund’s fiscal year at 2,912.43, down -13.99% from the February high and -3.17% from the start of the fiscal year in November 2019. The market’s abrupt turnaround is virtually entirely attributable to the COVID-19 pandemic and its consequent negative effects on everyday life and U.S. and global supply chains and economies. The ICE BofA U.S. Convertible Ex Mandatory Index (the “Index”) returned 2.50% for the six-month period ended April 30, 2020, with underlying equities returning 5.39%. Performance in the Index’s underlying equities was somewhat mixed with positive contribution from the Consumer Discretionary, Health Care, and Information Technology (IT) sectors, and with negative contribution from the Energy, Financials and Materials sectors.
After a hiatus during most of the month of March, the convertible new issue market, spurred by the unprecedented monetary intervention in the U.S. capital markets by the U.S. Federal Reserve and the simultaneous fiscal intervention by the U.S. Government post the onset of the coronavirus pandemic, rebounded sharply in April with 24 deals raising $13.6 billion. Issuance for the six-month period ended April 30, 2020 now stands at $32.7 billion, more than twice the $15.2 billion for the same period last year. Notably, issuance was led by sectors outside of IT and Health Care, with companies taking advantage of benign monetary conditions to issue convertibles in combination with simultaneous offerings of equity and/or debt. We expect a continued shift from a base of primarily growth issuers (IT and Health Care) to a mix, with more mature issuers seeking an outlet to refinance existing debt in a higher credit spread environment.
Performance
The Fund returned -0.59% (Retirement Class), -0.72% (Institutional Class), -0.76% (Administrative Class), and -0.84% (Investor Class) for the six-month period ended April 30, 2020, compared with the 2.50% return of the Index during the same period. The Fund was negatively impacted relative to the Index due to an underweight allocation in the most equity like portion of the market (those securities with a 100% investment premium or more), which the Fund stylistically tends to underweight/sell due to excess equity sensitivity. The Fund ended the period with an average weighting in the >100% investment premium bin of 2.92% and a portfolio total return of 19.45%, compared to the Index’s 16.93% average weighting and 13.57% total return.
From an industry contribution point of view, the best performing industries in the Fund were Automobiles, Health Care Equipment, Software, Internet Marketing, and IT Services. Automobiles’ primary constituent Tesla, with an average weighting of 0.87%, had a portfolio total return of 269.5%. The company continues to benefit from meeting/exceeding production targets. Healthcare Equipment was led by DEXCOM, a medical device company focused on the development of continuous glucose monitoring systems. Software continues to be the largest industry in the Fund with an average weight of 18.36%. The Software industry performance was well diversified among 26 different holdings. In addition, both Internet Marketing (led by Wayfair and Etsy), and IT Services (led by Akamai and OKTA) were among the beneficiaries of the stay/work at home phenomenon.
21
Harbor Convertible Securities Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
TOTAL RETURNS
For the periods ended 04/30/2020
Unannualized | 1 Year | Annualized | |||||||||
6 Months | 5 Years | Life of Fund | |||||||||
Harbor Convertible Securities Fund | |||||||||||
Retirement Class1,2 | -0.59% | 0.79% | 4.38% | 5.00% | |||||||
Institutional Class1 | -0.72 | 0.52 | 4.32 | 4.97 | |||||||
Administrative Class1 | -0.76 | 0.36 | 4.01 | 4.68 | |||||||
Investor Class1 | -0.84 | 0.22 | 3.94 | 4.58 | |||||||
Comparative Index | |||||||||||
ICE BofA U.S. Convertible Ex Mandatory1 | 2.50% | 5.26% | 7.76% | 8.71% |
As stated in the Fund’s prospectus dated March 1, 2020, the expense ratios were 0.69% (Net) and 0.74% (Gross) (Retirement Class), 0.77% (Net) and 0.82% (Gross) (Institutional Class), 1.02% (Net) and 1.07% (Gross) (Administrative Class), and 1.14% (Net) and 1.19% (Gross) (Investor Class). The net expense ratios reflect a contractual management fee waiver effective through 02/28/2021. 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.
Negative contribution was sector driven including negative performance from Mortgage REITs, Media, Entertainment, and Equity REITs, which all had a direct negative effect from the economic and social side effects of the COVID-19 pandemic. Additionally, Energy Equipment was a negative contributor as the Fund completed its exit of a stub position (0.51% average weight) in the industry and currently has no exposure. We will continue to monitor developments closely.
Outlook & Strategy
The sudden increase in volatility the market witnessed starting in late February has presented a unique opportunity to rebalance the Fund by selling deep out of the money holdings with diminished remaining optionality and to further diversify the Fund by selectively buying or adding to credit worthy names with a balanced credit profile.
Looking forward, given recent market upheaval and renewed volatility, we believe long term prospects remain constructive for convertible securities. The prospects include: balanced posture of the convertible market with an emphasis on credit; an issuer base with long term growth characteristics; a new issue conduit for backed up High Yield and/or Equity issuers; and potential upside combination of underlying equity improvement and credit spread tightening.
As we experience an unprecedented period of economic uncertainty with associated periods of heightened volatility, we expect the market is likely to favor more balanced convertible securities with a positive credit profile, placing a premium on reward versus risk.
1 | The “Life of Fund” return as shown reflects the period 05/01/2011 through 04/30/2020. |
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.
22
Harbor Convertible Securities Fund
Portfolio of Investments—April 30, 2020 (Unaudited)
Portfolio of Investments—April 30, 2020 (Unaudited)
Sector Allocation(% of investments)
Portfolio of Investments
Value, Cost, and Principal Amounts in Thousands
CONVERTIBLE BONDS—96.3% | |||
Principal Amount | Value | ||
AIRLINES—0.8% | |||
Southwest Airlines Co. | |||
$ | 952 | 1.250%—05/01/2025 | $1,055 |
AUTO COMPONENTS—0.6% | |||
CIE Generale des Etablissements Michelin SCA | |||
800 | 0.000%—01/10/20221 | 777 | |
AUTOMOBILES—0.4% | |||
Tesla Inc. | |||
257 | 1.250%—03/01/2021 | 568 | |
BANKS—0.5% | |||
BofA Finance LLC MTN2 | |||
643 | 0.250%—05/01/2023 | 630 | |
BIOTECHNOLOGY—4.5% | |||
BioMarin Pharmaceutical Inc. | |||
2,515 | 0.599%—08/01/2024 | 2,703 | |
Coherus Biosciences Inc. | |||
586 | 1.500%—04/15/20263 | 622 | |
Exact Sciences Corp. | |||
966 | 0.375%—03/15/2027 | 943 | |
595 | 1.000%—01/15/2025 | 767 | |
1,710 | |||
Ionis Pharmaceuticals Inc. | |||
560 | 0.125%—12/15/20243 | 538 | |
Neurocrine Biosciences Inc. | |||
414 | 2.250%—05/15/2024 | 582 | |
6,155 | |||
CAPITAL MARKETS—1.0% | |||
Ares Capital Corp. | |||
1,191 | 3.750%—02/01/2022 | 1,145 | |
233 | 4.625%—03/01/2024 | 219 | |
1,364 | |||
COMMUNICATIONS EQUIPMENT—3.8% | |||
InterDigital Inc. | |||
612 | 2.000%—06/01/20243 | 619 | |
Lumentum Holdings Inc. | |||
270 | 0.250%—03/15/2024 | 393 | |
1,508 | 0.500%—12/15/20263 | 1,600 | |
1,993 |
CONVERTIBLE BONDS—Continued | |||
Principal Amount | Value | ||
COMMUNICATIONS EQUIPMENT—Continued | |||
Palo Alto Networks Inc. | |||
$ | 2,515 | 0.750%—07/01/2023 | $2,583 |
5,195 | |||
CONSTRUCTION & ENGINEERING—1.7% | |||
KBR Inc. | |||
632 | 2.500%—11/01/2023 | 670 | |
Tutor Perini Corp. | |||
104 | 2.875%—06/15/2021 | 86 | |
Vinci SA | |||
1,400 | 0.375%—02/16/2022 | 1,594 | |
2,350 | |||
DIVERSIFIED CONSUMER SERVICES—1.4% | |||
Chegg Inc. | |||
1,259 | 0.125%—03/15/2025 | 1,327 | |
341 | 0.250%—05/15/2023 | 563 | |
1,890 | |||
DIVERSIFIED TELECOMMUNICATION SERVICES—3.4% | |||
Liberty Interactive LLC | |||
783 | 1.750%—09/30/20463 | 1,153 | |
Liberty Media Corp. | |||
702 | 1.000%—01/30/2023 | 747 | |
251 | 1.375%—10/15/2023 | 263 | |
2,061 | 2.125%—03/31/20483 | 2,025 | |
3,035 | |||
Vonage Holdings Corp. | |||
410 | 1.750%—06/01/20243 | 370 | |
4,558 | |||
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—1.2% | |||
Insight Enterprises Inc. | |||
1,217 | 0.750%—02/15/20253 | 1,224 | |
OSI Systems Inc. | |||
440 | 1.250%—09/01/2022 | 424 | |
1,648 | |||
ENTERTAINMENT—4.6% | |||
Bilibili Inc. | |||
298 | 1.375%—04/01/20263 | 382 |
23
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 | ||
ENTERTAINMENT—Continued | |||
iQIYI Inc. | |||
$ | 1,793 | 2.000%—04/01/2025 | $1,526 |
Live Nation Entertainment Inc. | |||
739 | 2.000%—02/15/20253 | 583 | |
2,302 | 2.500%—03/15/2023 | 2,205 | |
2,788 | |||
Zynga Inc. | |||
1,335 | 0.250%—06/01/20243 | 1,489 | |
6,185 | |||
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—1.1% | |||
Extra Space Storage LP | |||
406 | 3.125%—10/01/20353 | 435 | |
IH Merger Sub LLC | |||
957 | 3.500%—01/15/2022 | 1,109 | |
1,544 | |||
HEALTH CARE EQUIPMENT & SUPPLIES—4.9% | |||
CONMED Corp. | |||
598 | 2.625%—02/01/2024 | 635 | |
Dexcom Inc. | |||
901 | 0.750%—12/01/2023 | 1,900 | |
Insulet Corp. | |||
1,406 | 0.375%—09/01/20263 | 1,584 | |
Integra Lifesciences Holdings Corp. | |||
808 | 0.500%—08/15/20253 | 763 | |
Nuvasive Inc. | |||
1,255 | 0.375%—03/15/20253 | 1,160 | |
258 | 2.250%—03/15/2021 | 300 | |
1,460 | |||
Repligen Corp. | |||
269 | 0.375%—07/15/2024 | 321 | |
6,663 | |||
HEALTH CARE TECHNOLOGY—1.0% | |||
Allscripts Healthcare Solutions Inc. | |||
1,115 | 0.875%—01/01/20273 | 862 | |
Tabula Rasa Healthcare Inc. | |||
427 | 1.750%—02/15/20263 | 472 | |
1,334 | |||
HOTELS, RESTAURANTS & LEISURE—2.2% | |||
Caesars Entertainment Corp. | |||
200 | 5.000%—10/01/2024 | 284 | |
Huazhu Group Ltd. | |||
873 | 0.375%—11/01/2022 | 884 | |
Marriott Vacations Worldwide Corp. | |||
2,027 | 1.500%—09/15/2022 | 1,866 | |
3,034 | |||
INDEPENDENT POWER & RENEWABLE ELECTRICITY PRODUCERS—0.1% | |||
Nextera Energy Partners LP | |||
164 | 1.500%—09/15/20203 | 170 | |
INTERACTIVE MEDIA & SERVICES—4.5% | |||
IAC Financeco 3 Inc. | |||
1,103 | 2.000%—01/15/20303 | 1,155 | |
Snap Inc. | |||
1,170 | 0.750%—08/01/20263 | 1,215 | |
Twitter Inc. | |||
1,929 | 0.250%—06/15/2024 | 1,803 |
CONVERTIBLE BONDS—Continued | |||
Principal Amount | Value | ||
INTERACTIVE MEDIA & SERVICES—Continued | |||
Zillow Group Inc. | |||
$ | 1,635 | 0.750%—09/01/20243 | $1,916 |
6,089 | |||
INTERNET & DIRECT MARKETING RETAIL—4.3% | |||
Booking Holdings Inc. | |||
104 | 0.350%—06/15/2020 | 119 | |
1,343 | 0.750%—05/01/2025 | 1,522 | |
1,641 | |||
Etsy Inc. | |||
246 | 0.000%—03/01/20231 | 457 | |
1,700 | 0.125%—10/01/20263 | 1,731 | |
2,188 | |||
Mercadolibre Inc. | |||
382 | 2.000%—08/15/2028 | 566 | |
Wayfair Inc. | |||
202 | 0.375%—09/01/2022 | 261 | |
902 | 1.000%—08/15/20263 | 920 | |
245 | 1.125%—11/01/2024 | 302 | |
1,483 | |||
5,878 | |||
IT SERVICES—7.6% | |||
Akamai Technologies Inc. | |||
973 | 0.125%—05/01/2025 | 1,159 | |
1,345 | 0.375%—09/01/20273 | 1,407 | |
2,566 | |||
Euronet Worldwide Inc. | |||
609 | 0.750%—03/15/2049 | 555 | |
Okta Inc. | |||
1,878 | 0.125%—09/01/20253 | 1,992 | |
Sabre GLBL Inc. | |||
734 | 4.000%—04/15/20253 | 874 | |
Square Inc. | |||
993 | 0.125%—03/01/20253 | 920 | |
1,250 | 0.500%—05/15/2023 | 1,408 | |
2,328 | |||
Twilio Inc. | |||
478 | 0.250%—06/01/2023 | 796 | |
Wix.com Ltd. | |||
1,049 | 0.000%—07/01/20231 | 1,214 | |
10,325 | |||
LIFE SCIENCES TOOLS & SERVICES—1.1% | |||
Illumina Inc. | |||
1,154 | 0.000%—08/15/20231 | 1,191 | |
227 | 0.500%—06/15/2021 | 305 | |
1,496 | |||
MACHINERY—2.9% | |||
Chart Industries Inc. | |||
50 | 1.000%—11/15/20243 | 45 | |
Fortive Corp. | |||
761 | 0.875%—02/15/2022 | 735 | |
Greenbrier Cos. Inc. | |||
1,347 | 2.875%—02/01/2024 | 1,086 | |
Meritor Inc. | |||
2,175 | 3.250%—10/15/2037 | 2,093 | |
3,959 |
24
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 | ||
MEDIA—3.3% | |||
Dish Network Corp. | |||
$ | 3,128 | 3.375%—08/15/2026 | $2,543 |
Liberty Latin America Ltd. | |||
1,999 | 2.000%—07/15/20243 | 1,550 | |
Pandora Media LLC | |||
319 | 1.750%—12/01/2023 | 358 | |
4,451 | |||
MORTGAGE REAL ESTATE INVESTMENT TRUSTS (REITs)—2.3% | |||
Blackstone Mortgage Trust Inc. | |||
2,362 | 4.750%—03/15/2023 | 2,079 | |
Starwood Property Trust Inc. | |||
1,165 | 4.375%—04/01/2023 | 1,013 | |
3,092 | |||
OIL, GAS & CONSUMABLE FUELS—1.3% | |||
Total SA MTN2 | |||
1,800 | 0.500%—12/02/2022 | 1,735 | |
PERSONAL PRODUCTS—0.6% | |||
Herbalife Nutrition Ltd. | |||
816 | 2.625%—03/15/2024 | 745 | |
PHARMACEUTICALS—1.6% | |||
Ironwood Pharmaceuticals Inc. | |||
366 | 0.750%—06/15/20243 | 373 | |
357 | 1.500%—06/15/20263 | 361 | |
734 | |||
Jazz Investments I Ltd. | |||
986 | 1.500%—08/15/2024 | 908 | |
Supernus Pharmaceuticals Inc. | |||
617 | 0.625%—04/01/2023 | 530 | |
2,172 | |||
PROFESSIONAL SERVICES—0.7% | |||
FTI Consulting Inc. | |||
660 | 2.000%—08/15/2023 | 915 | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—9.5% | |||
Enphase Energy Inc. | |||
751 | 0.250%—03/01/20253 | 688 | |
Inphi Corp. | |||
511 | 0.750%—04/15/20253 | 540 | |
Microchip Technology Inc. | |||
2,853 | 1.625%—02/15/2025-02/15/2027 | 3,816 | |
ON Semiconductor Corp. | |||
2,219 | 1.625%—10/15/2023 | 2,424 | |
Silicon Laboratories Inc. | |||
1,619 | 1.375%—03/01/2022 | 1,950 | |
STMicroelectronics NV | |||
1,600 | 0.250%—07/03/2024 | 2,310 | |
Teradyne Inc. | |||
530 | 1.250%—12/15/2023 | 1,082 | |
12,810 | |||
SOFTWARE—19.7% | |||
Altair Engineering Inc. | |||
298 | 0.250%—06/01/2024 | 288 | |
Alteryx Inc. | |||
773 | 0.500%—08/01/20243 | 739 | |
326 | 1.000%—08/01/20263 | 309 | |
1,048 |
CONVERTIBLE BONDS—Continued | |||
Principal Amount | Value | ||
SOFTWARE—Continued | |||
Atlassian Inc. | |||
$ | 309 | 0.625%—05/01/2023 | $601 |
Blackline Inc. | |||
960 | 0.125%—08/01/20243 | 1,023 | |
Coupa Software Inc. | |||
763 | 0.125%—06/15/20253 | 974 | |
CyberArk Software Ltd. | |||
1,005 | 0.000%—11/15/20241,3 | 938 | |
DocuSign Inc. | |||
604 | 0.500%—09/15/2023 | 944 | |
Envestnet Inc. | |||
686 | 1.750%—06/01/2023 | 766 | |
FireEye Inc. | |||
1,094 | 0.875%—06/01/2024 | 959 | |
Five9 Inc. | |||
254 | 0.125%—05/01/2023 | 581 | |
J2 Global Inc. | |||
380 | 1.750%—11/01/20263 | 357 | |
448 | 3.250%—06/15/2029 | 575 | |
932 | |||
New Relic Inc. | |||
1,407 | 0.500%—05/01/2023 | 1,274 | |
Nuance Communications Inc. | |||
719 | 1.000%—12/15/2035 | 751 | |
1,042 | 1.250%—04/01/2025 | 1,261 | |
2,012 | |||
Pegasystems Inc. | |||
872 | 0.750%—03/01/20253 | 847 | |
Proofpoint Inc. | |||
1,111 | 0.250%—08/15/20243 | 1,156 | |
Q2 Holdings Inc. | |||
547 | 0.750%—06/01/20263 | 589 | |
Rapid7 Inc. | |||
1,180 | 2.250%—05/01/20253 | 1,204 | |
RingCentral Inc. | |||
102 | 0.000%—03/15/20231 | 281 | |
1,386 | 0.000%—03/01/20251,3 | 1,344 | |
1,625 | |||
Sailpoint Technologies Holdings Inc. | |||
1,209 | 0.125%—09/15/20243 | 1,139 | |
Slack Technologies Inc. | |||
1,087 | 0.500%—04/15/20253 | 1,210 | |
Splunk Inc. | |||
1,937 | 0.500%—09/15/2023 | 2,232 | |
Verint Systems Inc. | |||
950 | 1.500%—06/01/2021 | 924 | |
Workday Inc. | |||
1,430 | 0.250%—10/01/2022 | 1,757 | |
Workiva Inc. | |||
652 | 1.125%—08/15/20263 | 528 | |
Zendesk Inc. | |||
859 | 0.250%—03/15/2023 | 1,164 | |
26,715 | |||
SPECIALTY RETAIL—2.2% | |||
�� | Burlington Stores Inc. | ||
1,778 | 2.250%—04/15/2025 | 1,893 | |
Guess? Inc. | |||
848 | 2.000%—04/15/20243 | 547 |
25
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 | ||
SPECIALTY RETAIL—Continued | |||
RH | |||
$ | 599 | 0.000%—06/15/20231 | $585 |
3,025 | |||
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS—1.5% | |||
Pure Storage Inc. | |||
1,357 | 0.125%—04/15/2023 | 1,252 | |
Western Digital Corp. | |||
860 | 1.500%—02/01/2024 | 794 | |
2,046 | |||
TOTAL CONVERTIBLE BONDS | |||
(Cost $130,680) | 130,573 | ||
TOTAL INVESTMENTS—96.3% | |||
(Cost $130,680) | 130,573 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—3.7% | 5,019 | ||
TOTAL NET ASSETS—100.0% | $135,592 |
FAIR VALUE MEASUREMENTS
All investments at April 30, 2020 (as disclosed in the preceding Portfolio of Investments) were classified as Level 2. There were no Level 3 investments at April 30, 2020 or October 31, 2019.
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 April 30, 2020, the aggregate value of these securities was $44,642 or 33% of net assets. |
The accompanying notes are an integral part of the Financial Statements.
26
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 2019, a firm market tone and positive sentiment elevated risk assets, a stark contrast to the volatile environment that characterized the fourth quarter of 2018. At the October meeting, the U.S. Federal Reserve (Fed) cut the federal funds target range by 25 basis points (bps) for the third time this year. The Fed cited ongoing fears of a potential slowdown in global growth, but also signaled future cuts were unlikely unless there was a “material reassessment.” Such concerns were later eased, however, as trade talks progressed with a finalized phase-one trade deal between China and the US, and the passage of the United States-Mexico-Canada Agreement (USMCA). A stabilization in global tensions pushed yields higher, and the total amount of negative yielding debt worldwide fell from over $14 trillion to $11 trillion. In the U.S., the 10-year Treasury yield increased by 25bps, while the 3-month Treasury yield fell by 27bps, alleviating the curve inversion from the previous quarter. The 10-year breakeven inflation rate increased from 1.52% to 1.75%.
In the beginning of 2020, volatility took center stage as the world’s response to the novel coronavirus outbreak led to global recession concerns, straining liquidity in the U.S. fixed-income market. Waves of shelter-in-place mandates across much of the developed economy resulted in a weak market for risk assets. The Fed cut the fed funds rate twice by a total of 150bps to a target range of 0.0-0.25%. Additionally, the Fed initiated several bond-buying programs aimed at alleviating liquidity pressure in the bond market. Amid the risk-off market tone, Treasury rates fell by over 100bps across the curve during the quarter, and the 30-year Treasury briefly dipped below 1.00% before closing at 1.32%. Simultaneous demand and supply shocks caused oil prices to fall to an 18-year low of $20, after beginning the quarter above $60. The sharp drop in energy prices, combined with recession concerns, drove down inflation expectations, and the 5-year breakeven rate declined by 116bps to 0.53%. The Fed’s monetary policy changes were soon followed by a $2 trillion economic rescue package – the largest in U.S. history – which was signed into law by President Trump. Investment-grade corporates reversed many of the trends from the previous month amid the risk-on tone; corporate spreads tightened 70bps to 202bps, lower-quality outperformed higher-quality, and long-duration outperformed shorter-duration in April. Corporate credit curves steepened as a result, with the difference between the long corporate spread and the short corporate spread increasing from 13bps to 80bps, but still behind the longer-term average of roughly 100bps. However, the issuance trend did not falter, with over $285 billion pricing in April – the highest month of supply on record – as issuers continued to utilize the fixed income market, while the total amount of tapped revolvers leveled off. Boeing closed the month with a $25 billion deal across seven tenors, the largest deal of 2020 and sixth largest of all time; investor interest in the offering was considerable, which allowed Boeing to increase its size from $10 billion.
Performance
During the six-month period ended April 30, 2020, Harbor Core Bond Fund returned 4.50% (Retirement Class) and 4.46% (Institutional Class), underperforming the Bloomberg Barclays U.S. Aggregate Index’s 4.86% return.
Detractors from relative performance included the Fund’s underweight to Treasuries, overweight to commercial mortgage-backed securities (CMBS) and security selection within agency residential mortgage-backed securities. Overall, strong security selection helped to partially offset the detraction from active sector weightings. The positive contributors to relative performance included the Fund’s modest overweight to Industrials and security selection within Financials,
27
Harbor Core Bond Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
TOTAL RETURNS
For the periods ended 04/30/2020
Unannualized | 1 Year | 5 Years | Annualized | ||||||||
6 Months | Life of Fund | ||||||||||
Harbor Core Bond Fund | |||||||||||
Retirement Class1 | 4.50% | 10.45% | N/A | 7.81% | |||||||
Institutional Class1 | 4.46 | 10.36 | N/A | 7.74 | |||||||
Comparative Index | |||||||||||
Bloomberg Barclays U.S. Aggregate Bond | 4.86% | 10.84% | N/A | 8.00% |
As stated in the Fund’s prospectus dated March 1, 2020, 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 an expense limitation agreement effective through 02/28/2021. 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.
Utilities, and CMBS. Holdings that drove positive performance in the Fund included JP Morgan Chase, Comcast Corporation, Disney, and JPMBB Commercial Mortgage Securities Trust 2015-C32, while detractors included Occidental Petroleum, United Airlines and American Airlines. We continue to be comfortable with our holdings, from a fundamental perspective, so did not eliminate or reduce any positions, materially.
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.
Our investment process is driven by bottom-up security selection, which provides consistency over time relative to potentially more volatile macro decisions. Given our relatively small size, we do not have to buy everything, and we can be selective within smaller market sub-sectors in which larger managers may not be able to participate. These factors have allowed us to add value historically and should continue to allow us to add value going forward within all of our funds. Overall, our investment strategy centers around several core principles: bottom-up security selection, a value orientation, appropriate diversification, and risk control. We may opportunistically sacrifice liquidity when compensation is generous; however, we are always vigilant as to the availability of overall liquidity, carefully limiting our exposure to any one sector and remaining diversified at the individual holding level.
Our defensive risk posture coming into end of 2019 helped minimize the impacts of spread product volatility towards the end of the first quarter in 2020. Having liquidity in the Fund also allowed us to take advantage of new issue that came with attractive concessions, as well as adding some risk in the secondary market, by way of some of our favorite issuers at cheap levels.
Compared to the Bloomberg Barclays U.S. Aggregate Index, the Fund holds a ~22% underweight to Treasuries and an overweight to spread sectors, with a ~14% Credit overweight and a ~7% Securitized overweight at the end of the reporting period.
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 more attractive opportunities within the sector. Over the course of the period we also broadly brought down our Treasury and securitized allocation and took the opportunity to increase our credit exposure.
1 | The “Life of Fund” return as shown reflects the period 06/01/2018 through 04/30/2020. |
28
Harbor Core Bond Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
Outlook & Strategy
Going forward, market participants continue to digest a deluge of data on the coronavirus outbreak, its impact on the economy, and the stimulation measures taken by central banks and policy makers around the globe. Treasury rates remain historically low, despite the expectation that the majority of a $2 trillion U.S. fiscal stimulus package will require Treasury issuance. Economic woes are expected to create headwinds for risk assets, including the potential for credit downgrades, as stay-at-home measures filter through the economy, increasing unemployment and weighing on gross domestic product (GDP).
At IR+M, we continue to believe that it is time to leverage our years of experience and security selection skills. We continue to deploy liquidity and increase credit risk in our portfolios, favoring industries and companies that show resilience in tough economic conditions and represent attractive relative value.
Our portfolio construction process is focused on creating portfolios that provide attractive returns, reasonable risk exposure, and necessary liquidity in any market environment. We aim to build portfolios that encompass our best ideas, by purchasing attractive, inefficiently priced bonds within our risk and liquidity parameters. Going into the current environment, our strategy had been relatively conservatively positioned given corporates’ elevated leverage and rich valuations. This conservative risk posture helped our performance and allowed us to take advantage of recent spread widening and market volatility to add names we like at attractive prices.
We are still digesting the impact of the coronavirus on the global economy. Liquidity in March was reminiscent of that during the Global Financial Crisis of 2008, and it was further challenged by structural changes to the bond market over the last decade and the need to work remotely. However, even at its most challenging, we were able to find pockets of strength to transact.
Going forward, we think there is a likelihood of continued downgrades, defaults, and unknown economic disruptions. Performance outcome rests on several factors, including powerful technicals from the Fed, rotation out of fixed income and into equity, virus behavior, and idiosyncratic risks. We believe this environment favors higher quality yield advantage and disciplined security selection. We will continue to deploy liquidity and increase credit risk in our portfolios, favoring industries and companies that show resilience in tough economic conditions and represent attractive relative value.
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.
29
Harbor Core Bond Fund
Portfolio of Investments—April 30, 2020 (Unaudited)
Portfolio of Investments—April 30, 2020 (Unaudited)
Investment Allocation(% of investments)
Portfolio of Investments
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 | |||
$ | 317 | 3.600%—03/15/20271 | $286 |
American Airlines Pass-Through Trust | |||
Series 2015-1 Cl. A | |||
560 | 3.375%—05/01/2027 | 457 | |
Series 2013-2 Cl. A | |||
94 | 4.950%—01/15/2023 | 84 | |
541 | |||
Angel Oak Mortgage Trust | |||
Series 2019-6 Cl.A1 | |||
184 | 2.620%—11/25/20591 | 186 | |
CNH Equipment Trust | |||
Series 2018-A Cl. A3 | |||
489 | 3.120%—07/17/2023 | 497 | |
Series 2018-B Cl. A3 | |||
271 | 3.190%—11/15/2023 | 276 | |
773 | |||
CVS Pass-Through Trust | |||
274 | 5.773%—01/10/20331 | 302 | |
126 | 5.880%—01/10/2028 | 138 | |
Series 2009 | |||
515 | 8.353%—07/10/20311 | 618 | |
1,058 | |||
DB Master Finance LLC | |||
Series 2017-1A Cl. A2I | |||
244 | 3.629%—11/20/20471 | 243 | |
174 | 3.787%—05/20/20491 | 176 | |
419 | |||
Delta Air Lines Pass-Through Trust | |||
Series 2015-1 Cl. AA | |||
290 | 3.625%—07/30/2027 | 277 | |
DLL Securitization Trust | |||
Series 2017-A Cl. A3 | |||
112 | 2.140%—12/15/20211 | 112 | |
Domino's Pizza Master Issuer LLC | |||
Series 2017-1A Cl. A2I | |||
244 | 2.241% (3 Month USD Libor + 1.380) 07/25/20471,2 | 236 | |
Series 2019-1A Cl. A2 | |||
60 | 3.668%—10/25/20491 | 59 | |
295 |
ASSET-BACKED SECURITIES—Continued | |||
Principal Amount | Value | ||
Duke Energy Carolinas, LLC | |||
$ | 111 | 3.950%—03/15/2048 | $138 |
Ford Credit Auto Owner Trust | |||
Series 2020-1 Cl.A | |||
500 | 2.040%—08/15/20311 | 488 | |
GM Financial Automobile Leasing Trust | |||
Series 2019-1 Cl. A3 | |||
437 | 2.980%—12/20/2021 | 441 | |
Invitation Homes Trust | |||
Series 2018-SFR1 Cl. A | |||
111 | 1.451% (1 Month USD Libor + 3.800) 03/17/20371,2 | 107 | |
MMAF Equipment Finance LLC | |||
Series 2019-A Cl. A3 | |||
334 | 2.840%—11/13/20231 | 337 | |
Progress Residential Trust | |||
Series 2019-SFR3 Cl.A | |||
445 | 2.271%—09/17/20361 | 448 | |
Series 2018-SFR3 Cl.A | |||
433 | 3.880%—10/17/20351 | 451 | |
899 | |||
Sabey Data Center Issuer LLC | |||
Series 2020-1 Cl. A2 | |||
202 | 3.812%—04/20/2045 | 200X | |
Stack Infrastructure Issuer LLC | |||
Series 2019-2A Cl. A2 | |||
185 | 3.080%—10/25/20441 | 176 | |
Store Master Funding I-VII | |||
Series 2019-1 Cl.A1 | |||
171 | 2.820%—11/20/20491 | 172 | |
Series 2018-1A Cl. A1 | |||
201 | 3.960%—10/20/20481 | 203 | |
375 | |||
United Airlines Pass-Through Trust | |||
Series 2014-1 Cl. A | |||
785 | 4.000%—04/11/2026 | 678 | |
Vantage Data Centers Issuer LLC | |||
Series 2018-1A Cl.A2 | |||
291 | 4.072%—02/16/20431 | 297 | |
Verizon Owner Trust | |||
Series 2019-B Cl. A1A | |||
374 | 2.330%—12/20/2023 | 381 |
30
Harbor Core Bond Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost and Principal Amounts in Thousands
ASSET-BACKED SECURITIES—Continued | |||
Principal Amount | Value | ||
Series 2018-A Cl. A1A | |||
$ | 501 | 3.230%—04/20/2023 | $512 |
893 | |||
Wendy's Funding LLC | |||
Series 2019-1A Cl. A2I | |||
176 | 3.783%—06/15/20491 | 171 | |
Wheels SPV LLC | |||
Series 2017-1A Cl. A2 | |||
80 | 3.060%—04/20/20271 | 80 | |
World Omni Auto Receivables Trust | |||
Series 2020-A Cl.A3 | |||
1,012 | 1.700%—01/17/2023 | 1,007 | |
Series 2017-B Cl. A3 | |||
312 | 1.950%—02/15/2023 | 314 | |
Series 2019-A Cl. A3 | |||
273 | 3.040%—05/15/2024 | 279 | |
Series 2018-D Cl. A3 | |||
750 | 3.330%—04/15/2024 | 772 | |
2,372 | |||
TOTAL ASSET-BACKED SECURITIES | |||
(Cost $11,782) | 11,599 | ||
COLLATERALIZED MORTGAGE OBLIGATIONS—8.3% | |||
BANK 2019-BNK16 | |||
Series 2019-BN16 Cl. ASB | |||
651 | 3.898%—02/15/2052 | 721 | |
BBCMS Mortgage Trust | |||
Series 2020-C6 Cl.A2 | |||
380 | 2.690%—02/15/2053 | 396 | |
Benchmark Mortgage Trust | |||
Series 2019-B15 Cl. A5 | |||
212 | 2.928%—12/15/2072 | 228 | |
BX Commercial Mortgage Trust | |||
Series 2019-XL Cl. A | |||
534 | 1.734% (1 Month USD Libor + 2.710) 10/15/20361,2 | 524 | |
Commercial Mortgage Pass-Through Certificates | |||
Series 2014-CR14 Cl. A2 | |||
207 | 3.147%—02/10/2047 | 207 | |
Series 2014-CR21 Cl. A3 | |||
243 | 3.528%—12/10/2047 | 259 | |
466 | |||
Flagstar Mortgage Trust | |||
Series 2018-1 Cl. A5 | |||
116 | 3.500%—03/25/20481,2 | 117 | |
Freddie Mac Seasoned Credit Risk Transfer Trust | |||
Series 2018-1 Cl. MA | |||
239 | 3.000%—05/25/2057 | 252 | |
Series 2018-4 Cl. MA | |||
620 | 3.500%—03/25/2058 | 662 | |
Series 2019-2 Cl. MA | |||
238 | 3.500%—08/25/2058 | 255 | |
1,169 | |||
GS Mortgage Backed Securities Trust | |||
Series 2020-PJ1 Cl.A6 | |||
399 | 3.500%—05/25/20501 | 406 | |
GS Mortgage Securities Trust | |||
Series 2012-GCJ7 Cl. A4 | |||
388 | 3.377%—05/10/2045 | 392 |
COLLATERALIZED MORTGAGE OBLIGATIONS—Continued | |||
Principal Amount | Value | ||
Series 2012-GC6 Cl. A3 | |||
$ | 386 | 3.482%—01/10/2045 | $393 |
785 | |||
JPMBB Commercial Mortgage Securities Trust | |||
Series 2015-C32 Cl. A2 | |||
569 | 2.816%—11/15/2048 | 570 | |
JPMorgan Chase Commercial Mortgage Securities Trust | |||
Series 2019-COR5 Cl. A2 | |||
635 | 3.150%—06/13/2052 | 665 | |
Series 2012-CBX Cl. A4 | |||
300 | 3.483%—06/15/2045 | 305 | |
970 | |||
JPMorgan Mortgage Trust | |||
Series 2016-4 Cl. A5 | |||
158 | 3.500%—10/25/20461,2 | 161 | |
Series 2018-4 Cl. A5 | |||
261 | 3.500%—10/25/20481,2 | 266 | |
Series 2018-6 Cl. 1A4 | |||
102 | 3.500%—12/25/20481 | 102 | |
Series 2019-1 Cl. A6 | |||
28 | 4.000%—05/25/20491,2 | 28 | |
557 | |||
Morgan Stanley Capital I Trust | |||
Series 2012-C4 Cl. A4 | |||
319 | 3.244%—03/15/2045 | 323 | |
PSMC Trust | |||
Series 2019-2 Cl. A3 | |||
206 | 3.500%—10/25/20491 | 208 | |
Wells Fargo Mortgage Backed Securities Trust | |||
Series 2019-2 Cl. A3 | |||
98 | 4.000%—04/25/20491,2 | 98 | |
WF RBS Commercial Mortgage Trust | |||
Series 2012-C10 Cl. A3 | |||
244 | 2.875%—12/15/2045 | 245 | |
Series 2011-C4 Cl. A4 | |||
400 | 4.902%—06/15/20441,2 | 408 | |
653 | |||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS | |||
(Cost $8,053) | 8,191 | ||
CORPORATE BONDS & NOTES—40.3% | |||
AEROSPACE & DEFENSE—1.4% | |||
BAE Systems Holdings Inc. | |||
489 | 3.800%—10/07/20241 | 521 | |
General Dynamics Corp. | |||
59 | 4.250%—04/01/2050 | 76 | |
Lockheed Martin Corp. | |||
225 | 4.700%—05/15/2046 | 309 | |
Northrop Grumman Corp. | |||
107 | 5.250%—05/01/2050 | 153 | |
Textron Inc. | |||
370 | 3.000%—06/01/2030 | 348 | |
1,407 | |||
AIR FREIGHT & LOGISTICS—0.4% | |||
FedEx Corp. | |||
270 | 4.050%—02/15/2048 | 268 |
31
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 | ||
AIR FREIGHT & LOGISTICS—Continued | |||
United Parcel Service Inc. | |||
$ | 73 | 5.300%—04/01/2050 | $104 |
372 | |||
AUTOMOBILES—2.1% | |||
Daimler Finance North America LLC | |||
300 | 2.200%—05/05/20201 | 300 | |
Hyundai Capital America Co. | |||
219 | 2.375%—02/10/20231 | 211 | |
468 | 5.750%—04/06/20231 | 495 | |
706 | |||
Toyota Motor Credit Corp. MTN3 | |||
572 | 3.000%—04/01/2025 | 610 | |
197 | 3.375%—04/01/2030 | 215 | |
825 | |||
Volkswagen Group of America Finance LLC | |||
240 | 4.625%—11/13/20251 | 254 | |
2,085 | |||
BANKS—4.7% | |||
Bank of America Corp. MTN3 | |||
200 | 3.500%—04/19/2026 | 218 | |
206 | 4.330%—03/15/20506 | ���254 | |
472 | |||
Bank of Nova Scotia | |||
349 | 1.625%—05/01/2023 | 349 | |
Capital One Financial Corp. | |||
450 | 3.300%—10/30/2024 | 461 | |
Citigroup Inc. | |||
421 | 3.400%—05/01/2026 | 448 | |
169 | 3.520%—10/27/20286 | 180 | |
279 | 4.412%—03/31/20316 | 321 | |
949 | |||
JPMorgan Chase & Co. | |||
300 | 3.200%—01/25/2023 | 314 | |
476 | 4.203%—07/23/20296 | 539 | |
330 | 4.493%—03/24/20316 | 391 | |
1,244 | |||
Lloyds Banking Group plc | |||
300 | 2.438% (U.S. Treasury 1 Year Constant Maturity Yield + 1.920) 02/05/20262 | 300 | |
PNC Bank NA | |||
250 | 3.500%—06/08/2023 | 267 | |
Truist Bank | |||
602 | 1.500%—03/10/2025 | 600 | |
4,642 | |||
BEVERAGES—0.7% | |||
Anheuser-Busch Cos. LLC / Anheuser-Busch InBev Worldwide Inc. | |||
358 | 4.900%—02/01/2046 | 412 | |
Coca-Cola Co. | |||
84 | 4.200%—03/25/2050 | 108 | |
PepsiCo Inc. | |||
145 | 3.625%—03/19/2050 | 174 | |
694 | |||
BIOTECHNOLOGY—0.4% | |||
AbbVie Inc. | |||
400 | 2.500%—05/14/2020 | 400 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
CAPITAL MARKETS—4.8% | |||
Apollo Management Holdings LP | |||
$ | 250 | 4.000%—05/30/20241 | $258 |
Blackstone Holdings Finance Co. LLC | |||
286 | 3.500%—09/10/20491 | 277 | |
Goldman Sachs Group Inc. | |||
291 | 3.800%—03/15/2030 | 318 | |
420 | 5.750%—01/24/2022 | 450 | |
768 | |||
KKR Group Finance Co. II LLC | |||
456 | 5.500%—02/01/20431 | 515 | |
Macquarie Group Ltd. | |||
165 | 3.189%—11/28/20231,6 | 169 | |
Macquarie Group Ltd. MTN3 | |||
250 | 4.150%—03/27/20241,6 | 263 | |
Moody's Corp. | |||
407 | 3.250%—06/07/2021 | 415 | |
Morgan Stanley | |||
285 | 3.622%—04/01/20316 | 314 | |
Morgan Stanley MTN3 | |||
645 | 3.125%—07/27/2026 | 685 | |
252 | 3.875%—01/27/2026 | 278 | |
963 | |||
State Street Corp. | |||
110 | 2.901%—03/30/20261,6 | 117 | |
95 | 3.152%—03/30/20311,6 | 104 | |
221 | |||
UBS AG London | |||
246 | 1.750%—04/21/20221 | 247 | |
UBS Group AG | |||
300 | 4.125%—04/15/20261 | 329 | |
4,739 | |||
CONSUMER FINANCE—1.9% | |||
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 | 416 | |
General Motors Financial Co. Inc. | |||
444 | 4.150%—06/19/2023 | 430 | |
Mastercard Inc. | |||
130 | 3.350%—03/26/2030 | 148 | |
71 | 3.850%—03/26/2050 | 89 | |
237 | |||
Nissan Motor Acceptance Corp. MTN3 | |||
400 | 2.150%—09/28/20201 | 393 | |
1,888 | |||
DIVERSIFIED FINANCIAL SERVICES—1.0% | |||
Cooperatieve Rabobank U.A. | |||
400 | 3.875%—09/26/20231 | 425 | |
Siemens Financieringsmaatschappij NV | |||
300 | 2.150%—05/27/20201 | 300 | |
Voya Financial Inc. | |||
200 | 3.125%—07/15/2024 | 206 | |
931 |
32
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 | ||
DIVERSIFIED TELECOMMUNICATION SERVICES—1.4% | |||
AT&T Inc. | |||
$ | 664 | 1.964% (3 Month USD Libor + 1.180) 06/12/20242 | $651 |
178 | 3.400%—05/15/2025 | 189 | |
840 | |||
Verizon Communications Inc. | |||
162 | 4.500%—08/10/2033 | 201 | |
247 | 4.522%—09/15/2048 | 327 | |
528 | |||
1,368 | |||
ELECTRIC UTILITIES—3.4% | |||
Berkshire Hathaway Energy Co. | |||
195 | 4.050%—04/15/20251 | 220 | |
525 | 6.125%—04/01/2036 | 738 | |
958 | |||
Eversource Energy | |||
260 | 2.750%—03/15/2022 | 267 | |
200 | 2.900%—10/01/2024 | 210 | |
477 | |||
Exelon Corp. | |||
82 | 4.700%—04/15/2050 | 106 | |
368 | 5.100%—06/15/2045 | 474 | |
580 | |||
Nextera Energy Capital Holdings Inc. | |||
255 | 2.403%—09/01/2021 | 259 | |
Southern Co. | |||
430 | 3.250%—07/01/2026 | 460 | |
Virginia Electric & Power Co. | |||
305 | 3.150%—01/15/2026 | 335 | |
Xcel Energy Inc. | |||
220 | 3.400%—06/01/2030 | 245 | |
3,314 | |||
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—1.5% | |||
Boston Properties LP | |||
468 | 4.500%—12/01/2028 | 530 | |
Digital Realty Trust LP | |||
500 | 3.700%—08/15/2027 | 535 | |
HCP Inc. | |||
188 | 4.250%—11/15/2023 | 196 | |
Ventas Realty LP | |||
250 | 4.125%—01/15/2026 | 254 | |
1,515 | |||
FOOD & STAPLES RETAILING—1.6% | |||
Costco Wholesale Corp. | |||
778 | 1.600%—04/20/2030 | 770 | |
Kroger Co. | |||
159 | 4.000%—02/01/2024 | 173 | |
Target Corp. | |||
407 | 2.250%—04/15/2025 | 429 | |
Walmart Inc. | |||
166 | 3.950%—06/28/2038 | 206 | |
1,578 | |||
HEALTH CARE EQUIPMENT & SUPPLIES—0.2% | |||
Zimmer Biomet Holdings Inc. | |||
159 | 3.050%—01/15/2026 | 161 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
HEALTH CARE PROVIDERS & SERVICES—0.8% | |||
Cigna Corp. | |||
$ | 495 | 3.400%—03/01/20271 | $530 |
CommonSpirit Health | |||
232 | 4.187%—10/01/2049 | 228 | |
758 | |||
HOTELS, RESTAURANTS & LEISURE—0.4% | |||
McDonald's Corp. MTN3 | |||
225 | 3.500%—07/01/2027 | 247 | |
Starbucks Corp. | |||
159 | 2.000%—03/12/2027 | 160 | |
407 | |||
HOUSEHOLD DURABLES—0.4% | |||
Home Depot Inc. | |||
220 | 3.300%—04/15/2040 | 240 | |
Lowe's Cos Inc. | |||
59 | 5.000%—04/15/2040 | 73 | |
84 | 5.125%—04/15/2050 | 110 | |
183 | |||
423 | |||
HOUSEHOLD PRODUCTS—0.2% | |||
Procter & Gamble Co. | |||
169 | 3.550%—03/25/2040 | 203 | |
INDUSTRIAL CONGLOMERATES—0.2% | |||
General Electric Co. MTN3 | |||
172 | 4.625%—01/07/2021 | 175 | |
INSURANCE—1.4% | |||
American International Group Inc. | |||
465 | 4.125%—02/15/2024 | 504 | |
Five Corners Funding Trust | |||
250 | 4.419%—11/15/20231 | 275 | |
Liberty Mutual Group Inc. | |||
400 | 4.569%—02/01/20291 | 449 | |
Mass Mutual Life Insurance Co. | |||
170 | 3.375%—04/15/20501 | 175 | |
1,403 | |||
MEDIA—2.8% | |||
Charter Communications Operating LLC / Charter Communications Operating Capital | |||
478 | 6.384%—10/23/2035 | 620 | |
Comcast Cable Communication Co. | |||
200 | 9.455%—11/15/2022 | 242 | |
Comcast Corp. | |||
470 | 3.000%—02/01/2024 | 502 | |
146 | 3.300%—04/01/2027 | 160 | |
392 | 3.400%—04/01/2030 | 440 | |
1,102 | |||
COX Communications Inc. | |||
300 | 2.950%—06/30/20231 | 311 | |
200 | 3.250%—12/15/20221 | 208 | |
519 | |||
Walt Disney Co. | |||
164 | 4.700%—03/23/2050 | 219 | |
2,702 |
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 | ||
OIL, GAS & CONSUMABLE FUELS—2.7% | |||
BP Capital Markets America Inc. | |||
$ | 169 | 2.937%—04/06/2023 | $174 |
Exxon Mobil Corp. | |||
415 | 1.571%—04/15/2023 | 421 | |
291 | 2.992%—03/19/2025 | 312 | |
733 | |||
Occidental Petroleum Corp. | |||
1,482 | 0.000%—10/10/20364 | 630 | |
Phillips 66 Partners LP | |||
250 | 3.605%—02/15/2025 | 244 | |
Schlumberger Holdings Corp. | |||
252 | 3.900%—05/17/20281 | 243 | |
Shell International Finance BV | |||
267 | 2.375%—04/06/2025 | 276 | |
Sunoco Logistics Partners Operations LP | |||
375 | 3.900%—07/15/2026 | 354 | |
2,654 | |||
PAPER & FOREST PRODUCTS—0.3% | |||
Georgia-Pacific LLC | |||
293 | 1.750%—09/30/20251 | 294 | |
PHARMACEUTICALS—0.4% | |||
Bristol-Myers Squibb Co. | |||
400 | 2.875%—08/15/20201 | 402 | |
ROAD & RAIL—1.8% | |||
Canadian National Railway Co. | |||
172 | 3.650%—02/03/2048 | 207 | |
Canadian Pacific Railway Co. | |||
190 | 6.125%—09/15/2115 | 288 | |
Norfolk Southern Corp. | |||
310 | 4.837%—10/01/2041 | 393 | |
Penske Truck Leasing Co. LP / PTL Finance Corp. | |||
500 | 3.900%—02/01/20241 | 517 | |
Ryder System Inc. MTN3 | |||
360 | 3.650%—03/18/2024 | 371 | |
1,776 | |||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—1.2% | |||
Broadcom Inc. | |||
257 | 3.625%—10/15/20241 | 271 | |
Intel Corp. | |||
272 | 3.750%—03/25/2027 | 310 | |
LAM Research Corp. | |||
110 | 2.875%—06/15/2050 | 110 | |
NXP BV / NXP Funding LLC | |||
251 | 4.625%—06/01/20231 | 267 | |
NXP BV / NXP Funding LLC / NXP USA Inc | |||
255 | 2.700%—05/01/20251 | 258 | |
1,216 | |||
SOFTWARE—0.5% | |||
Oracle Corp. | |||
443 | 2.500%—04/01/2025 | 468 | |
TEXTILES, APPAREL & LUXURY GOODS—0.4% | |||
Nike Inc. | |||
202 | 2.750%—03/27/2027 | 218 | |
158 | 3.250%—03/27/2040 | 172 | |
390 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
TOBACCO—0.2% | |||
Bat Capital Corp. | |||
$ | 183 | 4.700%—04/02/2027 | $202 |
TRADING COMPANIES & DISTRIBUTORS—0.9% | |||
AerCap Ireland Capital DAC / AerCap Global Aviation Trust | |||
272 | 4.125%—07/03/2023 | 253 | |
Air Lease Corp. | |||
374 | 3.875%—07/03/2023 | 349 | |
Ferguson Finance plc | |||
236 | 4.500%—10/24/20281 | 257 | |
859 | |||
WATER UTILITIES—0.1% | |||
Aquarion Co. | |||
117 | 4.000%—08/15/20241 | 130 | |
WIRELESS TELECOMMUNICATION SERVICES—0.1% | |||
T-Mobile USA Inc. | |||
132 | 3.500%—04/15/20251 | 139 | |
TOTAL CORPORATE BONDS & NOTES | |||
(Cost $37,391) | 39,695 | ||
MORTGAGE PASS-THROUGH—19.2% | |||
Federal Home Loan Mortgage Corp. | |||
2,220 | 3.000%—11/01/2043-02/01/2047 | 2,390 | |
3,323 | 3.500%—07/01/2046-01/01/2050 | 3,585 | |
1,511 | 4.000%—02/01/2046-05/01/2049 | 1,629 | |
600 | 4.500%—03/01/2049 | 654 | |
190 | 5.000%—06/01/2041 | 217 | |
8,475 | |||
Federal National Mortgage Association | |||
2,116 | 3.500%—10/01/2037-09/01/2049 | 2,290 | |
269 | 4.000%—04/01/2045 | 303 | |
1,485 | 4.500%—05/01/2046-11/01/2047 | 1,648 | |
2,262 | 5.000%—09/01/2033-08/01/2049 | 2,537 | |
6,778 | |||
Freddie Mac Seasoned Credit Risk Transfer Trust | |||
Series 2020-1 Cl. MA | |||
335 | 2.500%—08/25/2059 | 345 | |
Government National Mortgage Association | |||
844 | 4.000%—09/20/2041-09/15/2046 | 929 | |
2,197 | 4.500%—01/15/2042-08/20/2047 | 2,415 | |
3,344 | |||
TOTAL MORTGAGE PASS-THROUGH | |||
(Cost $17,966) | 18,942 | ||
MUNICIPAL BONDS—1.6% | |||
Metropolitan Transportation Authority | |||
195 | 5.871%—11/15/2039 | 217 | |
Metropolitan Water Reclamation District of Greater Chicago | |||
145 | 5.720%—12/01/2038 | 195 | |
New York State Urban Development Corp. | |||
555 | 5.770%—03/15/2039 | 677 |
34
Harbor Core Bond Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost and Principal Amounts in Thousands
MUNICIPAL BONDS—Continued | |||
Principal Amount | Value | ||
State of California | |||
$ | 300 | 7.500%—04/01/2034 | $472 |
TOTAL MUNICIPAL BONDS | |||
(Cost $1,464) | 1,561 | ||
U.S. GOVERNMENT OBLIGATIONS—17.3% | |||
U.S. Small Business Administration | |||
Series 2012-20C Cl. 1 | |||
156 | 2.510%—03/01/2032 | 162 | |
Series 2017-20H Cl. 1 | |||
157 | 2.750%—08/01/2037 | 165 | |
Series 2016-20L Cl. 1 | |||
1,151 | 2.810%—12/01/2036 | 1,221 | |
Series 2015-20H Cl. 1 | |||
376 | 2.820%—08/01/2035 | 397 | |
Series 2017-20J Cl. 1 | |||
258 | 2.850%—10/01/2037 | 272 | |
Series 2018-20B Cl. 1 | |||
311 | 3.220%—02/01/2038 | 336 | |
Series 2018-20G Cl. 1 | |||
462 | 3.540%—07/01/2038 | 507 | |
Series 2018-20F Cl. 1 | |||
703 | 3.600%—06/01/2038 | 772 | |
3,832 |
U.S. GOVERNMENT OBLIGATIONS—Continued | |||
Principal Amount | Value | ||
U.S. Treasury Bonds | |||
$ | 3,298 | 3.000%—02/15/2048-08/15/2048 | $4,634 |
1,400 | 3.500%—02/15/2039 | 2,006 | |
414 | 4.500%—05/15/2038 | 658 | |
7,298 | |||
U.S. Treasury Inflation Index Notes5 | |||
2,270 | 0.125%—10/15/2024-01/15/2030 | 2,337 | |
U.S. Treasury Notes | |||
2,466 | 0.375%—03/31/2022 | 2,475 | |
1,091 | 0.500%—03/15/2023 | 1,099 | |
3,574 | |||
TOTAL U.S. GOVERNMENT OBLIGATIONS | |||
(Cost $14,995) | 17,041 | ||
TOTAL INVESTMENTS—98.5% | |||
(Cost $91,651) | 97,029 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—1.5% | 1,489 | ||
TOTAL NET ASSETS—100.0% | $98,518 |
FAIR VALUE MEASUREMENTS
At April 30, 2020, the investments in Sabey Data Center Issuer LLC (as disclosed in the preceding Portfolio of Investments) 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 period ended April 30, 2020. 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 there classification occured.
Valuation Description | Beginning Balance as of 11/01/2019 (000s) | Purchases (000s) | Sales (000s) | Discount/ (Premium) (000s) | Total Realized Gain/(Loss) (000s) | Change in Unrealized Appreciation/ (Depreciation) (000s) | Transfers Into Level 3 (000s)h | Transfers Out of Level 3 (000s) | Ending Balance as of 04/30/2020 (000s) | Unrealized Gain/(Loss) as of 04/30/2020 (000s) | ||||||||||
Asset-Backed Securities | $— | $— | $— | $— | $— | $(1) | $201 | $— | $200 | $(1) |
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 04/30/2020 (000s) | Valuation Technique | Unobservable Input(s) | Input Value(s) | ||||
Investments in Securities | ||||||||
Asset-Backed Securities | ||||||||
Sabey Data Center Issuer LLC Series 2020-1 Cl. A2 | $200 | Market Approach | New Issue Price plus Spread | $ 99.24 |
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 April 30, 2020, the aggregate value of these securities was $17,590 or 18% of net assets. |
2 | Variable or floating rate security; the stated rate represents the rate in effect at April 30, 2020. 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 |
5 | 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. |
6 | Rate changes from fixed to variable rate at a specified date prior to its final maturity. Stated rate is fixed rate currently in effect and stated date is the final maturity date. |
h | Transferred from Level 2 to Level 3 due to the unavailability of observable market data for pricing |
x | Fair valued in accordance with Harbor Funds' Valuation Procedures. |
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
Jordan N. Barrow, CFA
Since 2020
Since 2020
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
Jordan N. Barrow, CFA
Management’s Discussion of
Fund Performance
Fund Performance
Market review
While 2019 ended the decade with a very strong November and December, the ICE BofA U.S. High Yield Non-Distressed Index (the “H0ND” or the “Index”) hit a five-year low in spread-to-worst of 252 basis points in mid-December. However, everything changed with the COVID-19 pandemic concerns, and the returns in March and April dominated the overall period.
During March, when the COVID-19 pandemic triggered lockdowns in the U.S. and around the globe, the Index posted the second worst return in its history with a return of -9.93%. Not only did the COVID-19 pandemic impact the market, but a price war developed in oil and over one weekend the price per barrel dropped by approximately 60%. However, as government programs to support the unemployed, businesses and the financial markets all started to be announced, the market rebounded aggressively and returned 3.9% in April, the largest one month return since 2009.
The last several months of the period have led to many changes in the high yield bond asset class. There was a wave of ratings downgrades as investment grade companies such as Ford, Occidental Petroleum and others got downgraded and entered the high yield bond market, which we estimate to be over $150 billion of additional debt. This has started to reshape the market, increasing BB rated credits, extending the duration and causing shifts in industry weightings. The sudden supply can also add pressure to prices broadly or in a specific industry. However, April showed the supply has been absorbed well by the below investment grade market. Another aspect that has been prevalent since the start of the COVID-19 pandemic has been an increase in defaults as notable companies such as Frontier Corp., Intelsat and Diamond Offshore, among others, all defaulted on payments. It is worth noting that many of these issuers were already trading at distressed levels, which implies that a reasonable probability of default was already being priced into the market. Finally, the third unique feature that has reshaped the asset class in the last few months of the period was a flurry of new high yield bond issues. This began in late March after congressional support programs were announced and continued through April. The initial transactions tended to focus on credits directly impacted by the COVID-19 pandemic that were looking for additional liquidity. Structures tended to be secured with higher coupons and shorter maturities. This corporate access to capital is very different than what was experienced in the great Financial Crisis when capital markets had basically seized.
performance
The Harbor High-Yield Bond Fund returned -6.30% (Retirement Class), -6.34% (Institutional Class), -6.44% (Administrative Class), and -6.53 (Investor Class) for the six months ended April 30, 2020, while the H0ND returned -5.57%, and the ICE BofA U.S. High Yield Index (H0A0) returned -7.68% during the same period. Detracting from relative performance versus the H0ND was negative selection in the Oil & Gas and Beverage/Food industries. Our selection in Support Services and our overweight and selection in Satellites added to relative outperformance during the period. The Fund also benefitted from better selection and an overweighting in the short duration portion of the market, as well as holdings in bank loans. It is worth noting the Fund outperformed the Index due to better selection in some
37
Harbor High-Yield Bond Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
TOTAL RETURNS
For the periods ended 04/30/2020
Unannualized | 1 Year | Annualized | |||||||||
6 Months | 5 Years | 10 Years | |||||||||
Harbor High-Yield Bond Fund | |||||||||||
Retirement Class1 | -6.30% | -3.33% | 2.44% | 4.69% | |||||||
Institutional Class | -6.34 | -3.41 | 2.38 | 4.66 | |||||||
Administrative Class | -6.44 | -3.66 | 2.14 | 4.40 | |||||||
Investor Class | -6.53 | -3.80 | 2.00 | 4.27 | |||||||
Comparative Indices | |||||||||||
ICE BofA U.S. High Yield (H0A0) | -7.68% | -5.26% | 3.19% | 5.66% | |||||||
ICE BofA U.S. Non-Distressed High Yield | -5.57 | -1.95 | 3.91 | 6.07 |
As stated in the Fund’s prospectus dated March 1, 2020, the expense ratios were 0.57% (Net) and 0.66% (Gross) (Retirement Class); 0.65% (Net) and 0.74% (Gross) (Institutional Class); 0.90% (Net) and 0.99% (Gross) (Administrative Class); and 1.02% (Net) and 1.11% (Gross) (Investor Class). The net expense ratios reflect a contractual management fee waiver effective through 02/28/2021. 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.
of the industries most impacted by the quarantine, namely Gaming, Hotels, and Leisure/Entertainment. Versus the broader market H0A0 Index, the Fund had meaningful outperformance in the Oil & Gas and Health Care sectors, while our positioning in Packaging, and Food/Beverage detracted on a relative basis. The Fund ended the period invested in 258 different issuers across 35 industries, had a yield-to-worst of 6.43%, a weighted average credit rating of B1/BB-, and a duration-to-worst of 3.32 years.
The Fund remained active during the period, reducing exposure in Energy and Satellites, while bringing up exposure in Technology and Telecom. We continued to migrate the overall credit quality in the Fund higher as we added exposure to BB and some BBBs as well.
Outlook & Strategy
The markets showed significant resiliency as they rallied back from one of the fastest and worst sell-offs in the history of the high yield market. There is no question the market got a boost from the rapid government actions, but for this amount of rapid recovery the markets appear to be anticipating results in the future and deeply discounting the difficulties on the road to get there, in our view. We believe the markets and the economy are still very sensitive to the path of the coronavirus. As the coronavirus subsides, or is viewed as controlled due to medical breakthroughs, the path of re-employment will be critical. After the initial boost from the lifting of quarantines, unemployment will likely linger for some time and be a drag on economic results, in our view. Having the right exposures to the best industries, and selecting the right credits within those industries, is likely to be of increasing importance as we expect this recovery to have greater credit differentiation than in prior recoveries.
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—April 30, 2020 (Unaudited)
Portfolio of Investments—April 30, 2020 (Unaudited)
Sector Allocation(% of investments)
Portfolio of Investments
Value, Cost, and Principal Amounts in Thousands
BANK LOAN OBLIGATIONS—7.0% | |||
Principal Amount | Value | ||
CAPITAL MARKETS—0.5% | |||
Refinitiv US Holdings Inc. | |||
Initial Term Loan B | |||
$ | 2,059 | 3.654% (1 Month USD Libor + 3.250) 10/01/20251 | $2,019 |
CHEMICALS—0.3% | |||
Solenis International LP | |||
Initial First-Lien Term Loan | |||
1,174 | 5.613% (3 Month USD Libor + 4.000) 06/26/20251 | 1,025 | |
COMMERCIAL SERVICES & SUPPLIES—0.8% | |||
Garda World Security Corp. | |||
First Lien Term Loan B | |||
1,240 | 6.390% (3 Month USD Libor + 4.750) 10/30/20261 | 1,200 | |
Granite Acquisition Inc. | |||
First-Lien Term Loan B | |||
2,149 | 4.950% (3 Month USD Libor + 3.500) 12/17/20211 | 2,105 | |
3,305 | |||
CONTAINERS & PACKAGING—0.4% | |||
Flex Acquisition Co. Inc. | |||
Term Loan | |||
459 | 4.433% (3 Month USD Libor + 3.000) 12/29/20231 | 431 | |
Mauser Packaging Solutions Holding Co. | |||
Term Loan B | |||
1,122 | 4.561% (3 Month USD Libor + 3.250) 04/03/20241 | 974 | |
1,405 | |||
DIVERSIFIED TELECOMMUNICATION SERVICES—0.1% | |||
Zayo Group Holdings Inc. | |||
Term Loan | |||
366 | 3.404% (1 Month USD Libor + 3.000) 03/09/20271 | 345 | |
FOOD & STAPLES RETAILING—0.1% | |||
BJ's Wholesale Club Inc. | |||
Term Loan | |||
460 | 3.079% (1 Month USD Libor + 2.250) 02/03/20241 | 449 | |
HEALTH CARE PROVIDERS & SERVICES—0.8% | |||
AHP Health Partners Inc. | |||
Term Loan B | |||
1,428 | 5.500% (1 Month USD Libor + 4.500) 06/30/20251 | 1,339 |
BANK LOAN OBLIGATIONS—Continued | |||
Principal Amount | Value | ||
HEALTH CARE PROVIDERS & SERVICES—Continued | |||
LifePoint Health Inc. | |||
First-Lien Term Loan B | |||
$ | 1,936 | 4.154% (1 Month USD Libor + 3.750) 11/16/20251 | $1,800 |
3,139 | |||
HEALTH CARE TECHNOLOGY—0.6% | |||
Verscend Holding Corp. | |||
Term Loan B | |||
1,347 | 4.904% (1 Month USD Libor + 4.500) 08/27/20251 | 1,277 | |
VVC Holding Corp | |||
Term Loan B | |||
1,196 | 5.284% (3 Month USD Libor + 4.500) 02/11/20261 | 1,117 | |
2,394 | |||
HOTELS, RESTAURANTS & LEISURE—0.7% | |||
Alterra Mountain Co. | |||
Term Loan B | |||
582 | 3.154% (1 Month USD Libor + 2.750) 07/31/20241 | 541 | |
Stars Group Holdings BV | |||
Term Loan | |||
2,404 | 4.950% (3 Month USD Libor + 3.500) 07/10/20251 | 2,380 | |
2,921 | |||
INTERACTIVE MEDIA & SERVICES—0.3% | |||
Ancestry.com Operations Inc. | |||
First-Lien Term Loan B | |||
1,217 | 4.660% (1 Month USD Libor + 4.250) 08/27/20261 | 1,067 | |
LEISURE PRODUCTS—0.1% | |||
Playtika Holding Corp. | |||
Term Loan B | |||
455 | 7.072% (3 Month USD Libor + 6.000) 12/10/20241 | 452 | |
LIFE SCIENCES TOOLS & SERVICES—0.3% | |||
Jaguar Holding Co. II | |||
Term Loan | |||
1,277 | 2.904% (1 Month USD Libor + 2.500) 08/18/20221 | 1,256 | |
MACHINERY—0.3% | |||
Navistar Inc. | |||
Term Loan B | |||
1,428 | 4.220% (1 Month USD Libor + 3.500) 11/06/20241 | 1,304 |
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—0.5% | |||
Univision Communications Inc. | |||
Term Loan | |||
$ | 680 | 3.750% (1 Month USD Libor + 2.750) 03/15/20241 | $603 |
William Morris Endeavor Entertainment LLC | |||
First-Lien Term Loan B | |||
1,560 | 3.731% (Multiple Contracts + 2.750) 05/18/20251 | 1,188 | |
1,791 | |||
PROFESSIONAL SERVICES—0.1% | |||
Deerfield Dakota Holding LLC | |||
Term Loan B | |||
235 | 4.750% (1 Month USD Libor + 3.750) 04/09/20271 | 226 | |
SOFTWARE—0.7% | |||
Informatica LLC | |||
Second-Lien Term Loan | |||
290 | 7.125%—02/25/2025 | 281 | |
Project Alpha Intermediate Holding Inc. | |||
Term Loan B | |||
486 | 5.380% (6 Month USD Libor + 3.500) 04/26/20241 | 464 | |
2019 Incremental Term Loan | |||
750 | 6.130% (6 Month USD Libor + 4.250) 04/26/20241 | 720 | |
1,184 | |||
Solarwinds Holdings Inc. | |||
2018 Refinancing First-LienTerm Loan | |||
1,048 | 3.154% (1 Month USD Libor + 2.750) 02/05/20241 | 1,021 | |
TIBCO Software Inc. | |||
Second-Lien Term Loan | |||
350 | 7.660% (1 Month USD Libor + 7.250) 03/03/20281 | 327 | |
2,813 | |||
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS—0.4% | |||
Diebold Nixdorf Inc. | |||
Term Loan A | |||
1,684 | 9.688% (1 Month USD Libor + 9.250) 08/31/20221 | 1,539 | |
TOTAL BANK LOAN OBLIGATIONS | |||
(Cost $29,182) | 27,450 | ||
CORPORATE BONDS & NOTES—87.9% | |||
AEROSPACE & DEFENSE—3.1% | |||
Bombardier Inc. | |||
212 | 6.000%—10/15/20222 | 160 | |
1,205 | 7.875%—04/15/20272 | 788 | |
948 | |||
Howmet Aerospace Inc. | |||
1,140 | 5.400%—04/15/2021 | 1,165 | |
272 | 5.900%—02/01/2027 | 260 | |
479 | 5.950%—02/01/2037 | 447 | |
435 | 6.875%—05/01/2025 | 445 | |
2,317 | |||
Moog Inc. | |||
715 | 4.250%—12/15/20272 | 675 | |
Science Applications International Corp. | |||
365 | 4.875%—04/01/2028 | 359 | |
Spirit Aerosystems Inc. | |||
860 | 7.500%—04/15/20252 | 851 | |
SSL Robotics LLC | |||
885 | 9.750%—12/31/20232 | 945 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
AEROSPACE & DEFENSE—Continued | |||
TransDigm Inc. | |||
$ | 985 | 5.500%—11/15/20272 | $837 |
1,400 | 6.250%—03/15/20262 | 1,377 | |
1,045 | 6.500%—07/15/2024 | 971 | |
360 | 8.000%—12/15/20252 | 376 | |
3,561 | |||
TransDigm UK Holdings plc | |||
1,520 | 6.875%—05/15/2026 | 1,314 | |
Triumph Group Inc. | |||
754 | 6.250%—09/15/20242 | 600 | |
1,000 | 7.750%—08/15/2025 | 656 | |
1,256 | |||
12,226 | |||
AIR FREIGHT & LOGISTICS—1.0% | |||
XPO Logistics Inc. | |||
1,000 | 6.125%—09/01/20232 | 1,018 | |
965 | 6.250%—05/01/20252 | 979 | |
800 | 6.500%—06/15/20222 | 807 | |
1,000 | 6.750%—08/15/20242 | 1,035 | |
3,839 | |||
AUTO COMPONENTS—0.6% | |||
Adient Global Holdings Ltd. | |||
487 | 4.875%—08/15/20262 | 366 | |
Adient US LLC | |||
445 | 7.000%—05/15/20262 | 445 | |
240 | 9.000%—04/15/20252 | 251 | |
696 | |||
American Axle & Manufacturing Inc. | |||
606 | 6.625%—10/15/2022 | 510 | |
IHO Verwaltungs GMBH | |||
200 | 6.375%—05/15/20292 | 176 | |
Valvoline Inc. | |||
450 | 4.250%—02/15/20302 | 440 | |
2,188 | |||
AUTOMOBILES—1.0% | |||
Ford Motor Co. | |||
1,235 | 9.000%—04/22/2025 | 1,207 | |
555 | 9.625%—04/22/2030 | 547 | |
1,754 | |||
Ford Motor Credit Co. LLC | |||
363 | 2.979%—08/03/2022 | 332 | |
1,215 | 3.350%—11/01/2022 | 1,118 | |
295 | 5.750%—02/01/2021 | 291 | |
1,741 | |||
Jaguar Land Rover Automotive plc | |||
750 | 4.500%—10/01/20272 | 468 | |
3,963 | |||
BEVERAGES—0.3% | |||
Cott Holdings Inc. | |||
1,000 | 5.500%—04/01/20252 | 1,010 | |
BIOTECHNOLOGY—1.0% | |||
Avantor Inc. | |||
1,760 | 6.000%—10/01/20242 | 1,864 | |
1,840 | 9.000%—10/01/20252 | 2,005 | |
3,869 |
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 | ||
BUILDING PRODUCTS—1.4% | |||
Griffon Corp. | |||
$ | 294 | 5.250%—03/01/2022 | $290 |
New Enterprise Stone & Lime Co. Inc. | |||
342 | 6.250%—03/15/20262 | 324 | |
620 | 10.125%—04/01/20222 | 620 | |
944 | |||
Norbord Inc. | |||
650 | 5.750%—07/15/20272 | 596 | |
Standard Industries Inc. | |||
316 | 4.750%—01/15/20282 | 311 | |
662 | 5.375%—11/15/20242 | 668 | |
660 | 5.500%—02/15/20232 | 658 | |
135 | 6.000%—10/15/20252 | 140 | |
1,777 | |||
Summit Materials LLC / Summit Materials Finance Corp. | |||
1,400 | 6.125%—07/15/2023 | 1,406 | |
300 | 6.500%—03/15/20272 | 299 | |
1,705 | |||
5,312 | |||
CAPITAL MARKETS—0.4% | |||
MSCI Inc. | |||
725 | 3.625%—09/01/20302 | 737 | |
254 | 4.750%—08/01/20262 | 267 | |
130 | 5.750%—08/15/20252 | 137 | |
1,141 | |||
Refinitiv US Holdings Inc. | |||
350 | 6.250%—05/15/20262 | 375 | |
35 | 8.250%—11/15/20262 | 38 | |
413 | |||
1,554 | |||
CHEMICALS—2.2% | |||
Blue Cube Spinco LLC | |||
975 | 9.750%—10/15/2023 | 1,023 | |
GCP Applied Technologies Inc. | |||
645 | 5.500%—04/15/20262 | 625 | |
NOVA Chemicals Corp. | |||
130 | 4.875%—06/01/20242 | 117 | |
535 | 5.250%—08/01/20232 | 508 | |
625 | |||
OCI NV | |||
2,000 | 6.625%—04/15/20232 | 2,020 | |
PolyOne Corp. | |||
530 | 5.750%—05/15/20252 | 537 | |
PQ Corp. | |||
1,410 | 6.750%—11/15/20222 | 1,431 | |
Trinseo LLC | |||
750 | 5.375%—09/01/20252 | 644 | |
Tronox Inc. | |||
1,680 | 6.500%—05/01/2025-04/15/20262 | 1,572 | |
8,477 | |||
COMMERCIAL SERVICES & SUPPLIES—3.6% | |||
Allied Universal Holdco LLC | |||
1,495 | 6.625%—07/15/20262 | 1,544 | |
1,145 | 9.750%—07/15/20272 | 1,163 | |
2,707 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
COMMERCIAL SERVICES & SUPPLIES—Continued | |||
Aramark Services Inc. | |||
$ | 805 | 6.375%—05/01/20252 | $839 |
Covanta Holding Corp. | |||
970 | 5.875%—07/01/2025 | 946 | |
Garda World Security Corp. | |||
1,262 | 9.500%—11/01/20272 | 1,268 | |
GFL Environmental Inc. | |||
1,200 | 7.000%—06/01/20262 | 1,258 | |
594 | 8.500%—05/01/20272 | 651 | |
1,909 | |||
KAR Auction Services Inc. | |||
1,428 | 5.125%—06/01/20252 | 1,239 | |
LABL Escrow Issuer LLC | |||
820 | 6.750%—07/15/20262 | 851 | |
NuStar Logistics LP | |||
1,650 | 6.750%—02/01/2021 | 1,604 | |
Stericycle Inc. | |||
444 | 5.375%—07/15/20242 | 448 | |
Williams Scotsman International Inc. | |||
555 | 6.875%—08/15/20232 | 558 | |
1,494 | 7.875%—12/15/20222 | 1,525 | |
2,083 | |||
13,894 | |||
COMMUNICATIONS EQUIPMENT—2.2% | |||
CommScope Inc. | |||
96 | 5.000%—06/15/20212 | 95 | |
695 | 6.000%—03/01/20262 | 698 | |
793 | |||
CommScope Technologies LLC | |||
430 | 5.000%—03/15/20272 | 370 | |
Hughes Satellite Systems Corp. | |||
500 | 6.625%—08/01/2026 | 539 | |
3,000 | 7.625%—06/15/2021 | 3,129 | |
3,668 | |||
Telesat Canada / Telesat LLC | |||
525 | 4.875%—06/01/20272 | 515 | |
1,156 | 6.500%—10/15/20272 | 1,095 | |
1,610 | |||
Viasat Inc. | |||
2,217 | 5.625%—09/15/20252 | 2,096 | |
8,537 | |||
CONSTRUCTION & ENGINEERING—0.1% | |||
AECOM | |||
337 | 5.875%—10/15/2024 | 358 | |
CONSUMER FINANCE—1.4% | |||
Ally Financial Inc. | |||
985 | 5.750%—11/20/2025 | 1,016 | |
265 | 8.000%—11/01/2031 | 323 | |
1,339 | |||
Navient Corp. | |||
750 | 5.000%—10/26/2020 | 738 | |
245 | 6.500%—06/15/2022 | 238 | |
976 |
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 | ||
CONSUMER FINANCE—Continued | |||
Navient Corp. MTN3 | |||
$ | 1,550 | 5.500%—01/25/2023 | $1,447 |
1,080 | 5.625%—08/01/2033 | 822 | |
2,269 | |||
Springleaf Finance Corp. | |||
1,000 | 7.750%—10/01/2021 | 1,000 | |
5,584 | |||
CONTAINERS & PACKAGING—1.0% | |||
ARD Finance SA | |||
109 | 6.500%—06/30/20272 | 101 | |
Ardagh Packaging Finance plc | |||
1,135 | 5.250%—04/30/20252 | 1,169 | |
Berry Global Inc. | |||
650 | 4.875%—07/15/20262 | 667 | |
Cascades Inc./ Cascades USA Inc. | |||
680 | 5.125%—01/15/20262 | 684 | |
Flex Acquisition Co. Inc. | |||
1,215 | 6.875%—01/15/20252 | 1,185 | |
3,806 | |||
DIVERSIFIED CONSUMER SERVICES—0.5% | |||
Frontdoor Inc. | |||
1,267 | 6.750%—08/15/20262 | 1,323 | |
Service Corp International | |||
460 | 5.125%—06/01/2029 | 481 | |
1,804 | |||
DIVERSIFIED FINANCIAL SERVICES—0.9% | |||
Avolon Holdings Funding Ltd. | |||
500 | 5.250%—05/15/20242 | 435 | |
Compass Group Diversified Holdings LLC | |||
1,140 | 8.000%—05/01/20262 | 1,199 | |
DAE Funding LLC | |||
470 | 4.000%—08/01/20202 | 465 | |
643 | 5.000%—08/01/20242 | 573 | |
546 | 5.750%—11/15/20232 | 493 | |
1,531 | |||
Fidelity & Guaranty Life Holdings Inc. | |||
242 | 5.500%—05/01/20252 | 257 | |
3,422 | |||
DIVERSIFIED TELECOMMUNICATION SERVICES—3.2% | |||
Altice Financing SA | |||
1,012 | 7.500%—05/15/20262 | 1,062 | |
CenturyLink Inc. | |||
715 | 4.000%—02/15/20272 | 698 | |
308 | 5.125%—12/15/20262 | 294 | |
1,250 | 5.800%—03/15/2022 | 1,285 | |
780 | 6.750%—12/01/2023 | 819 | |
655 | 6.875%—01/15/2028 | 683 | |
3,779 | |||
Connect Finco Sarl / Connect US Finco LLC | |||
854 | 6.750%—10/01/20262 | 818 | |
GCI LLC | |||
1,500 | 6.625%—06/15/20242 | 1,563 | |
167 | 6.875%—04/15/2025 | 174 | |
1,737 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
DIVERSIFIED TELECOMMUNICATION SERVICES—Continued | |||
Level 3 Financing Inc. | |||
$ | 420 | 5.375%—08/15/2022 | $421 |
1,845 | 5.625%—02/01/2023 | 1,859 | |
2,280 | |||
Telecom Italia Capital SA | |||
500 | 6.000%—09/30/2034 | 521 | |
200 | 6.375%—11/15/2033 | 216 | |
215 | 7.721%—06/04/2038 | 251 | |
988 | |||
Zayo Group Holdings Inc. | |||
2,015 | 6.125%—03/01/20282 | 1,909 | |
12,573 | |||
ELECTRIC UTILITIES—1.3% | |||
Talen Energy Supply LLC | |||
545 | 6.625%—01/15/20282 | 516 | |
940 | 7.250%—05/15/20272 | 935 | |
1,451 | |||
Vistra Operations Co. LLC | |||
2,829 | 4.300%—07/15/20292 | 2,817 | |
592 | 5.000%—07/31/20272 | 607 | |
3,424 | |||
4,875 | |||
ELECTRICAL EQUIPMENT—0.2% | |||
Sensata Technologies UK Financing Co. plc | |||
730 | 6.250%—02/15/20262 | 757 | |
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—0.8% | |||
Anixter Inc. | |||
1,075 | 5.500%—03/01/2023 | 1,093 | |
CDW LLC/CDW Finance Co. | |||
480 | 4.125%—05/01/2025 | 487 | |
Presidio Holdings Inc. | |||
450 | 4.875%—02/01/20272 | 442 | |
940 | 8.250%—02/01/20282 | 934 | |
1,376 | |||
2,956 | |||
ENERGY EQUIPMENT & SERVICES—0.8% | |||
Archrock Partners LP / Archrock Partners Finance Corp. | |||
605 | 6.250%—04/01/20282 | 454 | |
Ensign Drilling Inc. | |||
839 | 9.250%—04/15/20242 | 249 | |
Nabors Industries Inc. | |||
795 | 5.750%—02/01/2025 | 189 | |
Nabors Industries Ltd. | |||
260 | 7.250%—01/15/20262 | 100 | |
260 | 7.500%—01/15/20282 | 106 | |
206 | |||
Transocean Inc. | |||
500 | 6.800%—03/15/2038 | 114 | |
292 | 7.250%—11/01/20252 | 117 | |
990 | 7.500%—01/15/20262 | 386 | |
805 | 8.000%—02/01/20272 | 318 | |
935 | |||
Transocean Poseidon Ltd. | |||
500 | 6.875%—02/01/20272 | 400 |
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 | ||
ENERGY EQUIPMENT & SERVICES—Continued | |||
USA Compression Partners LP / USA Compression Finance Corp. | |||
$ | 680 | 6.875%—09/01/2027 | $561 |
2,994 | |||
ENTERTAINMENT—2.1% | |||
Cinemark USA Inc. | |||
373 | 5.125%—12/15/2022 | 319 | |
Diamond Sports Group LLC / Diamond Sports Finance Co. | |||
3,617 | 5.375%—08/15/20262 | 2,766 | |
Lions Gate Capital Holdings LLC | |||
2,282 | 6.375%—02/01/20242 | 2,137 | |
Live Nation Entertainment Inc. | |||
899 | 4.750%—10/15/20272 | 773 | |
Meredith Corp. | |||
1,250 | 6.875%—02/01/2026 | 1,070 | |
Netflix Inc. | |||
700 | 4.875%—06/15/20302 | 753 | |
300 | 6.375%—05/15/2029 | 353 | |
1,106 | |||
8,171 | |||
EQUITY REAL ESTATE INVESTMENT—0.4% | |||
Iron Mountain Inc. | |||
1,000 | 4.875%—09/15/20292 | 963 | |
QualityTech LP | |||
314 | 4.750%—11/15/20252 | 318 | |
SBA Communications Corp. | |||
85 | 3.875%—02/15/20272 | 88 | |
1,369 | |||
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—2.2% | |||
Iron Mountain Inc. | |||
500 | 5.750%—08/15/2024 | 494 | |
1,750 | 6.000%—08/15/2023 | 1,777 | |
2,271 | |||
Kennedy-Wilson Inc. | |||
1,500 | 5.875%—04/01/2024 | 1,444 | |
Ladder Capital Finance Corp. | |||
460 | 5.875%—08/01/20212 | 410 | |
MPT Operating Partnership LP / MPT Finance Corp. | |||
2,500 | 6.375%—03/01/2024 | 2,590 | |
Sabra Health Care LP | |||
580 | 5.125%—08/15/2026 | 563 | |
SBA Communications Corp. | |||
1,250 | 4.000%—10/01/2022 | 1,264 | |
8,542 | |||
FOOD & STAPLES RETAILING—1.8% | |||
Albertsons Companies LLC | |||
1,435 | 4.625%—01/15/20272 | 1,449 | |
1,305 | 4.875%—02/15/20302 | 1,331 | |
500 | 5.750%—03/15/2025 | 516 | |
350 | 5.875%—02/15/20282 | 367 | |
230 | 6.625%—06/15/2024 | 239 | |
3,902 | |||
Ingles Markets Inc. | |||
420 | 5.750%—06/15/2023 | 423 | |
Kraft Heinz Foods Co. | |||
70 | 3.750%—04/01/20302 | 71 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
FOOD & STAPLES RETAILING—Continued | |||
$ | 635 | 4.375%—06/01/2046 | $606 |
990 | 5.200%—07/15/2045 | 1,017 | |
1,694 | |||
US Foods Inc. | |||
1,046 | 6.250%—04/15/20252 | 1,075 | |
7,094 | |||
FOOD PRODUCTS—0.6% | |||
Darling Ingredients Inc. | |||
800 | 5.250%—04/15/20272 | 811 | |
Post Holdings Inc. | |||
510 | 4.625%—04/15/20302 | 503 | |
411 | 5.500%—12/15/20292 | 415 | |
918 | |||
TreeHouse Foods Inc. | |||
437 | 4.875%—03/15/2022 | 440 | |
2,169 | |||
GAS UTILITIES—0.3% | |||
AmeriGas Partners LP | |||
500 | 5.750%—05/20/2027 | 512 | |
DCP Midstream Operating LP | |||
690 | 5.125%—05/15/2029 | 517 | |
500 | 6.750%—09/15/20372 | 304 | |
821 | |||
1,333 | |||
HEALTH CARE EQUIPMENT & SUPPLIES—0.4% | |||
Hill-Rom Holdings Inc. | |||
260 | 4.375%—09/15/20272 | 265 | |
Teleflex Inc. | |||
1,410 | 4.625%—11/15/2027 | 1,452 | |
1,717 | |||
HEALTH CARE PROVIDERS & SERVICES—6.5% | |||
Acadia Healthcare Co. Inc. | |||
794 | 5.125%—07/01/2022 | 768 | |
232 | 5.625%—02/15/2023 | 221 | |
989 | |||
AHP Health Partners Inc. | |||
561 | 9.750%—07/15/20262 | 559 | |
AMN Healthcare Inc. | |||
960 | 4.625%—10/01/20272 | 938 | |
Centene Corp. | |||
1,880 | 3.375%—02/15/20302 | 1,902 | |
3,053 | 4.625%—12/15/20292 | 3,357 | |
81 | 4.750%—01/15/20252 | 83 | |
2,000 | 5.375%—06/01/20262 | 2,129 | |
7,471 | |||
DaVita Inc. | |||
1,725 | 5.125%—07/15/2024 | 1,760 | |
Encompass Health Corp. | |||
925 | 5.750%—09/15/2025 | 946 | |
HCA Inc. | |||
1,300 | 3.500%—09/01/2030 | 1,242 | |
265 | 5.375%—02/01/2025 | 286 | |
300 | 5.625%—09/01/2028 | 334 |
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 | |||
$ | 1,150 | 5.875%—02/15/2026-02/01/2029 | $1,296 |
1,465 | 7.690%—06/15/2025 | 1,681 | |
4,839 | |||
LifePoint Health Inc. | |||
495 | 6.750%—04/15/20252 | 511 | |
Molina Healthcare Inc. | |||
1,637 | 4.875%—06/15/20252 | 1,657 | |
1,500 | 5.375%—11/15/2022 | 1,558 | |
3,215 | |||
Polaris Intermediate Corp. | |||
560 | 8.500%—12/01/20222 | 473 | |
Regionalcare Hospital Partners Holdings Inc. / LifePoint Health Inc. | |||
1,367 | 9.750%—12/01/20262 | 1,471 | |
Tenet Healthcare Corp. | |||
1,180 | 4.875%—01/01/20262 | 1,172 | |
720 | 7.500%—04/01/20252 | 778 | |
1,950 | |||
25,122 | |||
HEALTH CARE TECHNOLOGY—0.8% | |||
Change Healthcare Holdings LLC | |||
2,745 | 5.750%—03/01/20252 | 2,701 | |
Verscend Escrow Corp. | |||
383 | 9.750%—08/15/20262 | 402 | |
3,103 | |||
HOTELS, RESTAURANTS & LEISURE—6.1% | |||
Boyd Gaming Corp. | |||
445 | 4.750%—12/01/20272 | 385 | |
Caesars Resort Collection LLC / CRC Finco Inc. | |||
1,773 | 5.250%—10/15/20252 | 1,403 | |
Cedar Fair LP | |||
478 | 5.500%—05/01/20252 | 482 | |
Eldorado Resorts Inc. | |||
2,265 | 6.000%—04/01/2025 | 2,186 | |
Hilton Domestic Operating Co. Inc. | |||
670 | 4.875%—01/15/2030 | 645 | |
1,864 | 5.125%—05/01/2026 | 1,854 | |
320 | 5.750%—05/01/20282 | 326 | |
2,825 | |||
Hyatt Hotels Corp. | |||
170 | 5.375%—04/23/2025 | 173 | |
450 | 5.750%—04/23/2030 | 466 | |
639 | |||
International Game Technology plc | |||
1,000 | 6.250%—02/15/20222 | 980 | |
IRB Holding Corp. | |||
560 | 6.750%—02/15/20262 | 469 | |
Landry's Inc. | |||
298 | 6.750%—10/15/20242 | 234 | |
LTF Merger Sub Inc. | |||
550 | 8.500%—06/15/20232 | 444 | |
Marriott International Inc. | |||
605 | 1.649%—03/08/20211 | 587 | |
850 | 2.300%—01/15/2022 | 824 | |
677 | 5.750%—05/01/2025 | 708 | |
2,119 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
HOTELS, RESTAURANTS & LEISURE—Continued | |||
Marriott Ownership Resorts Inc. / ILG LLC | |||
$ | 1,171 | 6.500%—09/15/2026 | $1,115 |
MGM Resorts International | |||
520 | 6.000%—03/15/2023 | 508 | |
2,400 | 7.750%—03/15/2022 | 2,452 | |
2,960 | |||
New Red Finance Inc. | |||
865 | 5.000%—10/15/20252 | 874 | |
225 | 5.750%—04/15/20252 | 238 | |
1,112 | |||
Scientific Games International Inc. | |||
630 | 5.000%—10/15/20252 | 554 | |
515 | 6.625%—05/15/2021 | 465 | |
500 | 7.250%—11/15/20292 | 359 | |
340 | 8.250%—03/15/20262 | 258 | |
1,636 | |||
Six Flags Theme Parks Inc. | |||
491 | 7.000%—07/01/20252 | 511 | |
Stars Group Holdings BV / Stars Group US Co. Borrower LLC | |||
1,525 | 7.000%—07/15/20262 | 1,575 | |
Vail Resorts Inc. | |||
395 | 6.250%—05/15/20252 | 410 | |
VICI Properties LP / VICI Note Co. Inc. | |||
755 | 3.750%—02/15/20272 | 706 | |
1,020 | 4.125%—08/15/20302 | 933 | |
109 | 4.250%—12/01/20262 | 102 | |
441 | 4.625%—12/01/20292 | 409 | |
2,150 | |||
VOC Escrow Ltd. | |||
134 | 5.000%—02/15/20282 | 106 | |
23,741 | |||
HOUSEHOLD DURABLES—1.6% | |||
Lennar Corp. | |||
1,000 | 4.750%—04/01/2021-11/29/2027 | 1,020 | |
1,000 | 4.875%—12/15/2023 | 1,032 | |
475 | 5.250%—06/01/2026 | 498 | |
2,550 | |||
M/I Homes Inc. | |||
671 | 4.950%—02/01/20282 | 592 | |
400 | 5.625%—08/01/2025 | 371 | |
963 | |||
Pulte Group Inc. | |||
450 | 5.000%—01/15/2027 | 471 | |
605 | 6.375%—05/15/2033 | 646 | |
1,117 | |||
Shea Homes LP | |||
715 | 4.750%—02/15/20282 | 621 | |
Toll Brothers Finance Corp. | |||
190 | 4.350%—02/15/2028 | 188 | |
Tri Pointe Group Inc. | |||
650 | 4.875%—07/01/2021 | 642 | |
245 | 5.875%—06/15/2024 | 239 | |
881 | |||
6,320 |
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 | ||
HOUSEHOLD PRODUCTS—0.1% | |||
Prestige Brands Inc. | |||
$ | 400 | 6.375%—03/01/20242 | $413 |
INDEPENDENT POWER & RENEWABLE ELECTRICITY PRODUCERS—1.6% | |||
AES Corp. | |||
1,065 | 4.000%—03/15/2021 | 1,068 | |
500 | 5.500%—04/15/2025 | 516 | |
300 | 6.000%—05/15/2026 | 315 | |
1,899 | |||
Calpine Corp. | |||
505 | 5.250%—06/01/20262 | 516 | |
NRG Energy Inc. | |||
955 | 5.250%—06/15/20292 | 1,028 | |
293 | 5.750%—01/15/2028 | 316 | |
240 | 6.625%—01/15/2027 | 257 | |
1,400 | 7.250%—05/15/2026 | 1,512 | |
3,113 | |||
Terraform Power Operating LLC | |||
583 | 4.250%—01/31/20232 | 601 | |
6,129 | |||
INSURANCE—0.4% | |||
Acrisure LLC / Acrisure Finance Inc. | |||
500 | 8.125%—02/15/20242 | 517 | |
GTCR AP Finance Inc. | |||
965 | 8.000%—05/15/20272 | 909 | |
1,426 | |||
INTERACTIVE MEDIA & SERVICES—0.5% | |||
Twitter Inc. | |||
1,920 | 3.875%—12/15/20272 | 1,924 | |
INTERNET & DIRECT MARKETING RETAIL—0.5% | |||
Expedia Group Inc. | |||
225 | 6.250%—05/01/20252 | 230 | |
120 | 7.000%—05/01/20252 | 122 | |
352 | |||
QVC Inc. | |||
205 | 4.375%—03/15/2023 | 197 | |
987 | 4.750%—02/15/2027 | 908 | |
396 | 5.450%—08/15/2034 | 311 | |
1,416 | |||
1,768 | |||
IT SERVICES—0.7% | |||
Sabre GLBL Inc. | |||
170 | 9.250%—04/15/20252 | 181 | |
Verisign Inc. | |||
455 | 4.625%—05/01/2023 | 460 | |
WEX Inc. | |||
2,315 | 4.750%—02/01/20232 | 2,251 | |
2,892 | |||
LEISURE PRODUCTS—0.3% | |||
Wyndham Destinations Inc. | |||
305 | 3.900%—03/01/2023 | 268 | |
332 | 4.625%—03/01/20302 | 284 | |
390 | 5.400%—04/01/2024 | 344 | |
210 | 5.750%—04/01/2027 | 185 | |
1,081 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
LIFE SCIENCES TOOLS & SERVICES—0.6% | |||
Charles River Laboratories International Inc. | |||
$ | 465 | 4.250%—05/01/20282 | $471 |
Jaguar Holding Co. II | |||
1,865 | 6.375%—08/01/20232 | 1,900 | |
2,371 | |||
MACHINERY—0.7% | |||
Colfax Corp. | |||
925 | 6.000%—02/15/20242 | 943 | |
EnPro Industries Inc. | |||
1,000 | 5.750%—10/15/2026 | 982 | |
Navistar International Corp. | |||
775 | 9.500%—05/01/20252 | 816 | |
2,741 | |||
MEDIA—10.1% | |||
Altice France Holding SA | |||
1,905 | 6.000%—02/15/20282 | 1,753 | |
Altice France SA | |||
1,535 | 5.500%—01/15/20282 | 1,557 | |
1,000 | 7.375%—05/01/20262 | 1,050 | |
1,080 | 8.125%—02/01/20272 | 1,174 | |
3,781 | |||
AMC Networks Inc. | |||
305 | 4.750%—08/01/2025 | 280 | |
1,345 | 5.000%—04/01/2024 | 1,311 | |
1,591 | |||
Block Communications Inc. | |||
570 | 4.875%—03/01/20282 | 570 | |
C&W Senior Financing Designated Activity Company | |||
900 | 7.500%—10/15/20262 | 905 | |
CCO Holdings LLC | |||
2,983 | 4.500%—08/15/2030-05/01/20322 | 2,990 | |
3,105 | 5.375%—05/01/2025-06/01/20292 | 3,239 | |
230 | 5.750%—02/15/20262 | 241 | |
6,470 | |||
CSC Holdings LLC | |||
365 | 5.750%—01/15/20302 | 381 | |
975 | 6.500%—02/01/20292 | 1,070 | |
495 | 6.625%—10/15/20252 | 521 | |
740 | 7.500%—04/01/20282 | 817 | |
500 | 7.750%—07/15/20252 | 524 | |
3,000 | 10.875%—10/15/20252 | 3,257 | |
6,570 | |||
Cumulus Media New Holdings Inc. | |||
485 | 6.750%—07/01/20262 | 397 | |
DISH DBS Corp. | |||
400 | 5.875%—11/15/2024 | 387 | |
2,500 | 7.750%—07/01/2026 | 2,474 | |
2,861 | |||
Entercom Media Corp. | |||
820 | 6.500%—05/01/20272 | 611 | |
EW Scripps Co. | |||
1,000 | 5.125%—05/15/20252 | 851 | |
Graham Holdings Co. | |||
945 | 5.750%—06/01/20262 | 961 | |
Lamar Media Corp. | |||
500 | 5.000%—05/01/2023 | 503 | |
LCPR Senior Secured Financing DAC | |||
1,105 | 6.750%—10/15/20272 | 1,143 |
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 | |||
MDC Partners Inc. | |||
$ | 535 | 6.500%—05/01/20242 | $418 |
Quebecor Media Inc. | |||
600 | 5.750%—01/15/2023 | 636 | |
Sirius XM Radio Inc. | |||
2,518 | 4.625%—05/15/2023-07/15/20242 | 2,567 | |
350 | 5.375%—04/15/20252 | 363 | |
850 | 5.500%—07/01/20292 | 900 | |
3,830 | |||
Univision Communications Inc. | |||
2,570 | 5.125%—05/15/2023-02/15/20252 | 2,358 | |
Virgin Media Finance plc | |||
800 | 6.000%—10/15/20242 | 816 | |
Virgin Media Secured Finance plc | |||
1,305 | 5.500%—05/15/20292 | 1,361 | |
Ziggo Bond Finance BV | |||
1,000 | 6.000%—01/15/20272 | 1,011 | |
39,397 | |||
METALS & MINING—0.9% | |||
Alliance Resource Operating Partners LP | |||
1,070 | 7.500%—05/01/20252 | 701 | |
FMG Resources August 2006 Pty Ltd. | |||
1,000 | 4.750%—05/15/20222 | 1,009 | |
600 | 5.125%—03/15/20232 | 609 | |
1,618 | |||
Freeport-McMoRan Inc. | |||
116 | 3.550%—03/01/2022 | 118 | |
260 | 5.450%—03/15/2043 | 241 | |
359 | |||
Grinding Media Inc. | |||
1,000 | 7.375%—12/15/20232 | 986 | |
3,664 | |||
MORTGAGE REAL ESTATE INVESTMENT TRUSTS (REITs)—0.2% | |||
Starwood Property Trust Inc. | |||
900 | 3.625%—02/01/2021 | 853 | |
OIL, GAS & CONSUMABLE FUELS—7.4% | |||
Antero Midstream Partners LP / Antero Midstream Finance Corp. | |||
1,210 | 5.750%—03/01/2027-01/15/20282 | 901 | |
Apache Corp. | |||
210 | 4.750%—04/15/2043 | 144 | |
Blue Racer Midstream LLC / Blue Racer Finance Corp. | |||
300 | 6.125%—11/15/20222 | 256 | |
Buckeye Partners LP | |||
715 | 3.950%—12/01/2026 | 651 | |
770 | 4.500%—03/01/20282 | 698 | |
377 | 5.600%—10/15/2044 | 270 | |
1,619 | |||
Cheniere Corpus Christi Holdings LLC | |||
410 | 5.875%—03/31/2025 | 425 | |
Cheniere Energy Partners LP | |||
915 | 4.500%—10/01/20292 | 848 | |
750 | 5.250%—10/01/2025 | 721 | |
500 | 5.625%—10/01/2026 | 480 | |
2,049 | |||
CNX Midstream Partners LP | |||
800 | 6.500%—03/15/20262 | 664 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
OIL, GAS & CONSUMABLE FUELS—Continued | |||
Crestwood Midstream Partners LP / Crestwood Midstream Finance Corp. | |||
$ | 460 | 5.625%—05/01/20272 | $302 |
Crownrock LP | |||
1,405 | 5.625%—10/15/20252 | 1,147 | |
EnLink Midstream LLC | |||
920 | 5.375%—06/01/2029 | 576 | |
Equities Corp. | |||
655 | 3.000%—10/01/2022 | 622 | |
Genesis Energy LP | |||
124 | 5.625%—06/15/2024 | 105 | |
255 | 6.000%—05/15/2023 | 227 | |
134 | 6.250%—05/15/2026 | 113 | |
1,390 | 7.750%—02/01/2028 | 1,186 | |
1,631 | |||
Global Partners LP | |||
1,450 | 7.000%—06/15/2023 | 1,272 | |
Gulfport Energy Corp. | |||
1,665 | 6.375%—05/15/2025-01/15/2026 | 784 | |
Hilcorp Finance Co. | |||
455 | 5.000%—12/01/20242 | 261 | |
Indigo Natural Resources LLC | |||
785 | 6.875%—02/15/20262 | 735 | |
Jagged Peak Energy LLC | |||
790 | 5.875%—05/01/2026 | 676 | |
Magnolia Oil & Gas Operating LLC / Magnolia Oil & Gas Finance Corp. | |||
1,635 | 6.000%—08/01/20262 | 1,357 | |
Matador Resources Co. | |||
480 | 5.875%—09/15/2026 | 238 | |
Moss Creek Resources Holdings Inc. | |||
725 | 7.500%—01/15/20262 | 248 | |
618 | 10.500%—05/15/20272 | 236 | |
484 | |||
Murphy Oil Corp. | |||
1,180 | 5.875%—12/01/2027-12/01/2042 | 711 | |
870 | 7.050%—05/01/2029 | 563 | |
1,274 | |||
NGL Energy Partners LP | |||
1,600 | 7.500%—11/01/2023 | 1,094 | |
NGPL Pipeco LLC | |||
555 | 4.375%—08/15/20222 | 557 | |
Occidental Petroleum Corp. | |||
228 | 4.200%—03/15/2048 | 137 | |
68 | 4.400%—04/15/2046 | 43 | |
190 | 6.200%—03/15/2040 | 137 | |
317 | |||
Parkland Fuel Corp. | |||
430 | 5.875%—07/15/20272 | 415 | |
1,300 | 6.000%—04/01/20262 | 1,257 | |
1,672 | |||
Parsley Energy LLC / Parsley Finance Corp. | |||
103 | 5.375%—01/15/20252 | 93 | |
515 | 5.625%—10/15/20272 | 443 | |
536 | |||
QEP Resources Inc. | |||
771 | 5.250%—05/01/2023 | 261 | |
2,474 | 5.625%—03/01/2026 | 814 | |
1,075 |
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 | |||
Sanchez Energy Corp. | |||
$ | 3,000 | 0.000%—06/15/2021* | $17 |
SM Energy Co. | |||
182 | 5.000%—01/15/2024 | 59 | |
262 | 6.125%—11/15/2022 | 106 | |
622 | 6.750%—09/15/2026 | 174 | |
339 | |||
Summit Midstream Holdings LLC | |||
1,400 | 5.750%—04/15/2025 | 291 | |
Sunoco LP / Sunoco Finance Corp. | |||
1,000 | 4.875%—01/15/2023 | 980 | |
Tallgrass Energy Finance Corp. | |||
785 | 4.750%—10/01/20232 | 609 | |
440 | 5.500%—09/15/20242 | 337 | |
975 | 6.000%—03/01/20272 | 655 | |
1,601 | |||
Targa Resources Partners LP / Targa Resources Partners Finance Corp. | |||
1,000 | 5.500%—03/01/20302 | 856 | |
200 | 5.875%—04/15/2026 | 178 | |
1,256 | 6.750%—03/15/2024 | 1,195 | |
2,229 | |||
WPX Energy Inc. | |||
924 | 5.250%—09/15/2024-10/15/2027 | 814 | |
28,939 | |||
PHARMACEUTICALS—2.3% | |||
Bausch Health Cos Inc. | |||
1,033 | 5.500%—03/01/2023-11/01/20252 | 1,042 | |
436 | 5.875%—05/15/20232 | 433 | |
1,750 | 6.500%—03/15/20222 | 1,789 | |
3,045 | 7.000%—03/15/2024-01/15/20282 | 3,175 | |
485 | 7.250%—05/30/20292 | 520 | |
545 | 8.500%—01/31/20272 | 603 | |
7,562 | |||
Catalent Pharma Solutions Inc. | |||
445 | 5.000%—07/15/20272 | 456 | |
Teva Pharmaceutical Finance Netherlands III BV | |||
1,020 | 2.200%—07/21/2021 | 998 | |
9,016 | |||
PROFESSIONAL SERVICES—1.3% | |||
Nielsen Finance LLC | |||
2,725 | 5.000%—04/15/20222 | 2,696 | |
Tempo Acquisition LLC / Tempo Acquisition Finance Corp. | |||
520 | 5.750%—06/01/20252 | 520 | |
2,080 | 6.750%—06/01/20252 | 2,031 | |
2,551 | |||
5,247 | |||
REAL ESTATE INVESTMENT TRUSTS (REITs)—0.3% | |||
RHP Hotel Properties LP | |||
160 | 5.000%—04/15/2023 | 150 | |
Ryman Hospitality Properties Inc. | |||
845 | 4.750%—10/15/20272 | 741 | |
Sabra Health Care LP | |||
495 | 3.900%—10/15/2029 | 446 | |
1,337 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
REAL ESTATE MANAGEMENT & DEVELOPMENT—0.4% | |||
Greystar Real Estate Partners LLC | |||
$ | 1,158 | 5.750%—12/01/20252 | $1,073 |
Newmark Group Inc. | |||
500 | 6.125%—11/15/2023 | 461 | |
1,534 | |||
ROAD & RAIL—0.1% | |||
Avis Budget Car Rental LLC / Avis Budget Finance Inc. | |||
148 | 5.500%—04/01/2023 | 98 | |
505 | 5.750%—07/15/20272 | 297 | |
395 | |||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—0.4% | |||
Broadcom Inc. | |||
250 | 5.000%—04/15/20302 | 281 | |
Entegris Inc. | |||
1,180 | 4.375%—04/15/20282 | 1,187 | |
1,468 | |||
SOFTWARE—1.7% | |||
CDK Global Inc. | |||
213 | 5.000%—10/15/2024 | 222 | |
495 | 5.250%—05/15/20292 | 506 | |
728 | |||
Infor US Inc. | |||
2,250 | 6.500%—05/15/2022 | 2,262 | |
Open Text Corp. | |||
500 | 3.875%—02/15/20282 | 490 | |
Open Text Holdings Inc. | |||
1,765 | 4.125%—02/15/20302 | 1,725 | |
PTC Inc. | |||
505 | 3.625%—02/15/20252 | 501 | |
340 | 4.000%—02/15/20282 | 335 | |
836 | |||
Solera LLC | |||
650 | 10.500%—03/01/20242 | 650 | |
6,691 | |||
SPECIALTY RETAIL—0.5% | |||
Asbury Automotive Group Co. | |||
224 | 4.500%—03/01/20282 | 190 | |
126 | 4.750%—03/01/20302 | 106 | |
296 | |||
Michaels Stores Inc. | |||
889 | 8.000%—07/15/20272 | 623 | |
Penske Automotive Group Inc. | |||
1,000 | 5.750%—10/01/2022 | 963 | |
1,882 | |||
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS—2.3% | |||
Dell International LLC / EMC Corp. | |||
180 | 5.300%—10/01/20292 | 187 | |
440 | 6.100%—07/15/20272 | 482 | |
885 | 6.200%—07/15/20302 | 983 | |
3,500 | 7.125%—06/15/20242 | 3,638 | |
1,550 | 8.350%—07/15/20462 | 1,938 | |
7,228 |
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. | |||
$ | 855 | 6.125%—09/01/20292 | $853 |
405 | 8.125%—04/15/20252 | 431 | |
1,284 | |||
Seagate HDD Cayman Co. | |||
470 | 5.750%—12/01/2034 | 478 | |
8,990 | |||
TEXTILES, APPAREL & LUXURY GOODS—0.1% | |||
Hanesbrands Inc. | |||
520 | 5.375%—05/15/20252 | 520 | |
THRIFTS & MORTGAGE FINANCE—0.4% | |||
Nationstar Mortgage Holdings Inc. | |||
261 | 6.000%—01/15/20272 | 224 | |
345 | 8.125%—07/15/20232 | 333 | |
557 | |||
Quicken Loans Inc. | |||
1,000 | 5.750%—05/01/20252 | 985 | |
1,542 | |||
TRADING COMPANIES & DISTRIBUTORS—1.1% | |||
United Rentals North America Inc. | |||
570 | 4.000%—07/15/2030 | 539 | |
450 | 4.625%—10/15/2025 | 443 | |
286 | 5.875%—09/15/2026 | 296 | |
3,000 | 6.500%—12/15/2026 | 3,126 | |
4,404 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
WIRELESS TELECOMMUNICATION SERVICES—3.2% | |||
Sprint Capital Corp. | |||
$ | 1,890 | 6.875%—11/15/2028 | $2,285 |
1,175 | 8.750%—03/15/2032 | 1,656 | |
3,941 | |||
Sprint Corp. | |||
330 | 7.125%—06/15/2024 | 372 | |
1,443 | 7.875%—09/15/2023 | 1,631 | |
2,003 | |||
T-Mobile USA Inc. | |||
1,250 | 3.875%—04/15/20302 | 1,374 | |
600 | 4.000%—04/15/2022 | 617 | |
85 | 4.500%—02/01/2026 | 88 | |
500 | 4.750%—02/01/2028 | 527 | |
1,050 | 6.000%—03/01/2023-04/15/2024 | 1,069 | |
620 | 6.375%—03/01/2025 | 640 | |
1,890 | 6.500%—01/15/2024-01/15/2026 | 1,992 | |
6,307 | |||
12,251 | |||
TOTAL CORPORATE BONDS & NOTES | |||
(Cost $361,194) | 341,554 | ||
TOTAL INVESTMENTS—94.9% | |||
(Cost $390,376) | 369,004 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—5.1% | 19,720 | ||
TOTAL NET ASSETS—100.0% | $388,724 |
FAIR VALUE MEASUREMENTS
All investments at April 30, 2020 (as disclosed in the preceding Portfolio of Investments) were classified as Level 2. There were no Level 3 investments at April 30, 2020 or October 31, 2019.
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 April 30, 2020. 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 April 30, 2020, the aggregate value of these securities was $213,256 or 55% 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 generated a negative return for the six months ended April 30, 2020, down 7.68% as measured by the ICE BofA U.S. High Yield (H0A0) Index. The asset class was up in November and December of 2019 but started 2020 with a historic sell‐off as the COVID-19 outbreak quickly spread outside of China to most other countries including the U.S., causing a global economic shutdown. To add to the turmoil, production disagreements emerged from the Organization of the Petroleum Exporting Countries Plus (OPEC+) members with Russia and Saudi Arabia engaging in price wars, sending crude oil prices tumbling down; West Texas Intermediate (WTI) oil declined 65% during the six months under review to end at $20.48 per barrel at the end of April. The equity market also suffered losses, after falling 33% from 2/21 to 3/23, the S&P 500 recovered most its losses to end at -3.17% for the six months under review. Most other asset classes were also down except U.S. investment grade which returned +1.54% during the six month review period; European High Yield returned -7.75%, emerging markets returned -7.93% and leveraged loans returned -7.14%.
The U.S. government rapidly responded with fiscal and monetary stimuli to help counter the effects of a sharp increase in unemployment and small business failures. Measures included direct cash payments to citizens, tax relief, and rent, utility and payroll subsidies for small businesses. As a result of the market volatility, yields and spreads gapped out wider; specifically in U.S. high yield, spreads reached over 1,000 basis points and yields climbed to 11.34% in March before settling back down to 8.06% and 763 basis points at the end of April. It is noteworthy to mention it took 14 months to reach spreads over a 1,000 in the 2001 recession and seven months in the 2008 Great Financial Crisis but during the March sell‐off it took less than 30 days. U.S. Treasury yields moved lower during the six months under review; the 10‐ year yield decreased by 105 basis points and the 5-year yield decreased by 115 basis points to end at 0.64% and 0.36%, respectively. Default activity picked up considerably and specifically in April, a record 19 companies filed for bankruptcy or missed an interest payment for a total of $35.7 billion in defaulted debt of which $24 billion was in high yield bonds and $11.7 billion was in loans. Notably, the Energy sector has accounted for a large portion of defaults over the last year, with $25.2 billion of Energy bond defaults/distressed exchanges over the last twelve months. The U.S. trailing 12-month default rate according to Moody’s Investor Service was 4.73% at the end of April.
performance
Harbor High-Yield Opportunities Fund returned -7.66% (Retirement Class), -7.61% (Institutional Class), -7.68% (Administrative Class) and -7.79% (Investor Class) while the ICE BofA U.S. High Yield (H0A0) Index returned -7.68% for the six-month period ended April 30, 2020. The main source of outperformance was attributable to strong security selection within the Energy sector. A combination of a weaker economy stemming from the COVID-19 outbreak and the Saudi-Russia price war caused WTI oil prices to plummet. As a result, Energy was the worst performing sector with a ‐27% return for the six-month period ended April 30, 2020. The Fund’s relative performance benefitted from avoiding stressed issuers in the Energy sector such as Noble Corporation (down 82%), Oasis Petroleum Inc. (down 79%) and Denbury Resources Inc. (down 73%). The Fund also benefited from strong security selection within the Retail sector, again by avoiding stressed issuers such as Party City Holdco, Inc. (down 89%), J.C. Penney Company, Inc. (down 66%) and Bed Bath & Beyond Inc. (down 37%).
49
Harbor High-Yield Opportunities Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
TOTAL RETURNS
For the periods ended 04/30/2020
Unannualized | 1 Year | 5 Years | Annualized | ||||||||
6 Months | Life of Fund | ||||||||||
Harbor High-Yield Opportunities Fund | |||||||||||
Retirement Class1 | -7.66% | -3.97% | N/A | -0.15% | |||||||
Institutional Class1 | -7.61 | -4.04 | N/A | -0.22 | |||||||
Administrative Class1 | -7.68 | -4.24 | N/A | -0.45 | |||||||
Investor Class1 | -7.79 | -4.31 | N/A | -0.58 | |||||||
Comparative Index | |||||||||||
ICE BofA U.S. High Yield (H0A0) | -7.68% | -5.26% | N/A | 0.34% |
As stated in the Fund’s prospectus dated March 1, 2020, the expense ratios were 0.65% (Net) and 0.74% (Gross) (Retirement Class); 0.73% (Net) and 0.82% (Gross) (Institutional Class); 0.98% (Net) and 1.07% (Gross) (Administrative Class); and 1.10% (Net) and 1.19% (Gross) (Investor Class). The net expense ratios reflect an expense limitation agreement (excluding interest expense, if any) effective through 02/28/2021. 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.
Lastly, the Fund benefitted from an overweight positioning and strong security selection within the Consumer Goods sector. Conversely, weak security selection within the Information Technology & Electronics and Media sectors detracted from relative performance.
From a ratings standpoint, the Fund exhibited strong security selection in the CCC-rated credit tier; however, this benefit was offset by the Fund’s weak security selection in the B- and BB-rated credit tiers. The allocation to the out-of-benchmark BBB-rated credit tier benefitted the Fund’s relative performance.
Lastly, the Fund held an average 2.25% in cash which was accretive to relative performance.
OUTLOOK & STRATEGY
As a result of the increasingly global spread of the coronavirus our views have become more cautious on below investment grade corporate credit. We believe the U.S. has likely entered into a recession. Economist estimates for U.S. GDP in 2020 range from -0.5% (Citibank) to -6.2% (Goldman Sachs). This recession can reasonably be expected to be deeper than 2009 but the recovery should be much quicker, possibly three quarters or shorter. Unlike 2009, housing, banks and consumers are less levered today. The U.S. government has rapidly responded with fiscal and monetary stimuli to help counter the effects of a sharp increase unemployment and small business failures. Measures include direct cash payments to citizens, tax relief and rent, and utility and payroll subsidies for small businesses. U.S. borrowers expect lower revenues and profits due to a near nationwide shutdown for at least two months, as well as lingering effects of diminished consumer spending as U.S. unemployment likely increases above 10%. Accordingly, we expect corporate defaults to rise in the U.S., particularly in hard-hit industries such as transportation, hotels and casinos, and leisure. U.S. high yield strategists have recently predicted a sharp increase in default rates in 2020 in the range of 8-10%. High yield credit spreads reached over 1,000 basis points, in line with spread levels seen during the last two U.S. recessions of 2009 and 2002.
1 | The “Life of Fund” return as shown reflects the period 11/01/2017 through 04/30/2020. |
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—April 30, 2020 (Unaudited)
Portfolio of Investments—April 30, 2020 (Unaudited)
Sector Allocation(% of investments)
Portfolio of Investments
Value, Cost, and Principal Amounts in Thousands
CORPORATE BONDS & NOTES—95.1% | |||
Principal Amount | Value | ||
AEROSPACE & DEFENSE—2.7% | |||
Boeing Co. | |||
$ | 200 | 2.950%—02/01/2030 | $171 |
200 | 3.750%—02/01/2050 | 160 | |
331 | |||
Bombardier Inc. | |||
600 | 7.500%—12/01/2024-03/15/20251 | 397 | |
Global Aircraft Leasing Co. Ltd. | |||
225 | 6.500%—09/15/20241 | 137 | |
Howmet Aerospace Inc. | |||
350 | 5.125%—10/01/2024 | 338 | |
Signature Aviation US Holdings Inc. | |||
200 | 5.375%—05/01/20261 | 186 | |
Spirit Aerosystems Inc. | |||
100 | 4.600%—06/15/2028 | 79 | |
TransDigm Inc. | |||
400 | 5.500%—11/15/20271 | 340 | |
TransDigm UK Holdings plc | |||
200 | 6.875%—05/15/2026 | 173 | |
1,981 | |||
AIR FREIGHT & LOGISTICS—0.3% | |||
XPO Logistics Inc. | |||
100 | 6.125%—09/01/20231 | 102 | |
150 | 6.750%—08/15/20241 | 155 | |
257 | |||
AUTO COMPONENTS—1.3% | |||
Adient Global Holdings Ltd. | |||
100 | 4.875%—08/15/20261 | 75 | |
Adient US LLC | |||
200 | 7.000%—05/15/20261 | 200 | |
KGA Escrow LLC | |||
400 | 7.500%—08/15/20231 | 366 | |
Panther BF Aggregator 2 LP / Panther Finance Co. Inc. | |||
100 | 6.250%—05/15/20261 | 101 | |
275 | 8.500%—05/15/20271 | 234 | |
335 | |||
976 | |||
AUTOMOBILES—2.8% | |||
Fiat Chrysler Automobiles NV | |||
175 | 5.250%—04/15/2023 | 175 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
AUTOMOBILES—Continued | |||
Ford Motor Co. | |||
$ | 100 | 4.750%—01/15/2043 | $64 |
175 | 8.500%—04/21/2023 | 174 | |
225 | 9.000%—04/22/2025 | 220 | |
50 | 9.625%—04/22/2030 | 49 | |
507 | |||
Ford Motor Credit Co. | |||
650 | 4.063%—11/01/2024 | 574 | |
250 | 4.134%—08/04/2025 | 213 | |
787 | |||
General Motors Financial Co Inc. | |||
375 | 2.900%—02/26/2025 | 341 | |
Jaguar Land Rover Automotive plc | |||
125 | 4.500%—10/01/20271 | 78 | |
McLaren Finance plc | |||
200 | 5.750%—08/01/20221 | 142 | |
2,030 | |||
BANKS—0.9% | |||
Intesa Sanpaolo SpA MTN2 | |||
200 | 5.017%—06/26/20241 | 200 | |
Oxford Finance LLC | |||
500 | 6.375%—12/15/20221 | 487 | |
687 | |||
BEVERAGES—0.6% | |||
Cott Holdings Inc. | |||
400 | 5.500%—04/01/20251 | 404 | |
BUILDING PRODUCTS—1.0% | |||
Builders FirstSource Inc. | |||
360 | 6.750%—06/01/20271 | 373 | |
Norbord Inc. | |||
150 | 5.750%—07/15/20271 | 138 | |
Standard Industries Inc. | |||
250 | 5.375%—11/15/20241 | 252 | |
763 | |||
CAPITAL MARKETS—0.7% | |||
LPL Holdings Inc. | |||
300 | 5.750%—09/15/20251 | 300 |
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 | 8.250%—11/15/20261 | $217 |
517 | |||
CHEMICALS—1.2% | |||
CF Industries Inc. | |||
450 | 5.150%—03/15/2034 | 470 | |
Chemours Co. | |||
150 | 6.625%—05/15/2023 | 141 | |
NOVA Chemicals Corp. | |||
125 | 4.875%—06/01/20241 | 113 | |
Olin Corp. | |||
150 | 5.125%—09/15/2027 | 138 | |
862 | |||
COMMERCIAL SERVICES & SUPPLIES—2.4% | |||
ADT Security Corp. | |||
125 | 4.875%—07/15/20321 | 112 | |
Allied Universal Holdco LLC | |||
300 | 6.625%—07/15/20261 | 310 | |
200 | 9.750%—07/15/20271 | 203 | |
513 | |||
Cimpress plc | |||
300 | 7.000%—06/15/20261 | 220 | |
Garda World Security Corp. | |||
291 | 9.500%—11/01/20271 | 292 | |
Prime Security Services Borrower LLC / Prime Finance Inc. | |||
200 | 5.750%—04/15/20261 | 198 | |
Williams Scotsman International Inc. | |||
200 | 6.875%—08/15/20231 | 201 | |
225 | 7.875%—12/15/20221 | 230 | |
431 | |||
1,766 | |||
COMMUNICATIONS EQUIPMENT—1.5% | |||
CommScope Inc. | |||
250 | 6.000%—03/01/20261 | 251 | |
CommScope Technologies LLC | |||
100 | 5.000%—03/15/20271 | 86 | |
200 | 6.000%—06/15/20251 | 179 | |
265 | |||
Hughes Satellite Systems Corp. | |||
275 | 6.625%—08/01/2026 | 296 | |
Plantronics Inc. | |||
400 | 5.500%—05/31/20231 | 320 | |
1,132 | |||
CONSTRUCTION MATERIALS—0.4% | |||
Cemex SAB de CV | |||
325 | 7.750%—04/16/20261 | 305 | |
CONSUMER FINANCE—2.8% | |||
Ally Financial Inc. | |||
150 | 5.750%—11/20/2025 | 155 | |
Credit Acceptance Corp. | |||
150 | 6.625%—03/15/2026 | 136 | |
Goeasy Ltd. | |||
300 | 5.375%—12/01/20241 | 271 |
CORPORATE BONDS & NOTES���Continued | |||
Principal Amount | Value | ||
CONSUMER FINANCE—Continued | |||
Icahn Enterprises LP / Icahn Enterprises Finance Corp | |||
$ | 250 | 5.250%—05/15/2027 | $239 |
125 | 6.250%—05/15/2026 | 123 | |
362 | |||
Navient Corp. | |||
100 | 5.000%—03/15/2027 | 85 | |
200 | 6.750%—06/25/2025 | 186 | |
271 | |||
Navient Corp. MTN2 | |||
300 | 6.125%—03/25/2024 | 278 | |
Springleaf Finance Corp. | |||
150 | 6.875%—03/15/2025 | 143 | |
500 | 7.125%—03/15/2026 | 465 | |
608 | |||
2,081 | |||
CONTAINERS & PACKAGING—2.6% | |||
ARD Finance SA | |||
575 | 6.500%—06/30/20271 | 536 | |
Berry Global Inc. | |||
150 | 5.625%—07/15/20271 | 156 | |
Cascades Inc./ Cascades USA Inc. | |||
250 | 5.125%—01/15/20261 | 252 | |
Flex Acquisition Co. Inc. | |||
275 | 6.875%—01/15/20251 | 268 | |
Mauser Packaging Solutions Holding Co. | |||
175 | 7.250%—04/15/20251 | 138 | |
Pactiv LLC | |||
550 | 7.950%—12/15/2025 | 583 | |
1,933 | |||
DIVERSIFIED CONSUMER SERVICES—0.4% | |||
Laureate Education Inc. | |||
250 | 8.250%—05/01/20251 | 257 | |
DIVERSIFIED FINANCIAL SERVICES—0.9% | |||
Equitable Holdings Inc. | |||
250 | 5.000%—04/20/2048 | 261 | |
Jefferies Finance LLC / JFIN Co. Issuer Corp. | |||
425 | 6.250%—06/03/20261 | 388 | |
649 | |||
DIVERSIFIED TELECOMMUNICATION SERVICES—6.1% | |||
Altice Financing SA | |||
250 | 5.000%—01/15/20281 | 245 | |
250 | 7.500%—05/15/20261 | 263 | |
508 | |||
Altice France Holding SA | |||
400 | 6.000%—02/15/20281 | 368 | |
200 | 10.500%—05/15/20271 | 216 | |
584 | |||
Altice France SA | |||
75 | 5.500%—01/15/20281 | 76 | |
525 | 7.375%—05/01/20261 | 551 | |
627 | |||
AMC Networks Inc. | |||
350 | 5.000%—04/01/2024 | 341 |
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. | |||
$ | 225 | 5.125%—12/15/20261 | $215 |
325 | 7.500%—04/01/2024 | 354 | |
569 | |||
Connect Finco Sarl / Connect US Finco LLC | |||
175 | 6.750%—10/01/20261 | 168 | |
Hughes Satellite Systems Corp. | |||
275 | 5.250%—08/01/2026 | 292 | |
Intelsat Connect Finance SA | |||
100 | 9.500%—02/15/20231 | 20 | |
Telecom Italia Capital SA | |||
100 | 6.000%—09/30/2034 | 104 | |
Telecom Italia SpA | |||
275 | 5.303%—05/30/20241 | 288 | |
Videotron Ltd. | |||
200 | 5.125%—04/15/20271 | 210 | |
Virgin Media Secured Finance plc | |||
500 | 5.500%—08/15/20261 | 519 | |
Zayo Group LLC | |||
275 | 5.750%—01/15/20271 | 260 | |
4,490 | |||
ELECTRIC UTILITIES—1.3% | |||
Talen Energy Supply LLC | |||
475 | 7.250%—05/15/20271 | 472 | |
Vistra Operations Co. LLC | |||
450 | 5.625%—02/15/20271 | 476 | |
948 | |||
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—0.5% | |||
Ingram Micro Inc. | |||
400 | 5.450%—12/15/2024 | 383 | |
ENERGY EQUIPMENT & SERVICES—0.7% | |||
Archrock Partners LP / Archrock Partners Finance Corp. | |||
350 | 6.875%—04/01/20271 | 265 | |
Oceaneering International Inc. | |||
175 | 4.650%—11/15/2024 | 92 | |
USA Compression Partners LP / USA Compression Finance Corp. | |||
150 | 6.875%—04/01/2026 | 121 | |
478 | |||
ENTERTAINMENT—1.4% | |||
Live Nation Entertainment Inc. | |||
225 | 4.750%—10/15/20271 | 194 | |
150 | 5.625%—03/15/20261 | 133 | |
327 | |||
Netflix Inc. | |||
200 | 4.875%—06/15/20301 | 215 | |
400 | 5.875%—11/15/2028 | 454 | |
669 | |||
996 | |||
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—2.0% | |||
Glp Capital LP / Glp Financing II Inc. | |||
450 | 4.000%—01/15/2030 | 400 | |
Iron Mountain Inc. | |||
450 | 5.250%—03/15/20281 | 442 | |
iStar Inc. | |||
400 | 4.250%—08/01/2025 | 318 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—Continued | |||
Ladder Capital Finance Corp. | |||
$ | 175 | 5.250%—10/01/20251 | $129 |
100 | 5.875%—08/01/20211 | 89 | |
218 | |||
MPT Operating Partnership LP / MPT Finance Corp. | |||
50 | 4.625%—08/01/2029 | 50 | |
50 | 5.250%—08/01/2026 | 51 | |
101 | |||
1,479 | |||
FOOD & STAPLES RETAILING—2.5% | |||
Albertsons Companies LLC | |||
350 | 4.875%—02/15/20301 | 357 | |
75 | 5.875%—02/15/20281 | 79 | |
436 | |||
Kraft Heinz Foods Co. | |||
875 | 4.375%—06/01/2046 | 835 | |
Rite Aid Corp. | |||
200 | 6.125%—04/01/20231 | 182 | |
375 | 7.500%—07/01/20251 | 368 | |
550 | |||
1,821 | |||
FOOD PRODUCTS—2.2% | |||
Cooke Omega Investments Inc / Alpha VesselCo Holdings Inc. | |||
75 | 8.500%—12/15/20221 | 76 | |
JBS USA Lux SA | |||
400 | 6.500%—04/15/20291 | 423 | |
Kraft Heinz Foods Co. | |||
425 | 5.000%—07/15/2035 | 457 | |
Pilgrim's Pride Corp. | |||
200 | 5.875%—09/30/20271 | 203 | |
Post Holdings Inc. | |||
300 | 5.500%—12/15/20291 | 303 | |
150 | 5.750%—03/01/20271 | 154 | |
457 | |||
1,616 | |||
GAS UTILITIES—0.3% | |||
DCP Midstream Operating LP | |||
250 | 5.125%—05/15/2029 | 187 | |
HEALTH CARE PROVIDERS & SERVICES—5.4% | |||
Centene Corp. | |||
250 | 4.750%—01/15/2025 | 257 | |
250 | 5.375%—08/15/20261 | 269 | |
526 | |||
Community Health Systems Inc. | |||
225 | 6.625%—02/15/20251 | 208 | |
125 | 6.875%—02/01/2022 | 93 | |
575 | 8.000%—03/15/20261 | 554 | |
75 | 8.625%—01/15/20241 | 74 | |
929 | |||
Encompass Health Corp. | |||
100 | 4.500%—02/01/2028 | 101 | |
HCA Inc. | |||
600 | 4.125%—06/15/2029 | 647 |
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 | |||
MEDNAX Inc. | |||
$ | 175 | 6.250%—01/15/20271 | $159 |
Polaris Intermediate Corp. | |||
175 | 8.500%—12/01/20221 | 148 | |
Regionalcare Hospital Partners Holdings Inc. / LifePoint Health Inc. | |||
125 | 9.750%—12/01/20261 | 134 | |
Tenet Healthcare Corp. | |||
75 | 5.125%—11/01/20271 | 74 | |
400 | 6.250%—02/01/20271 | 395 | |
325 | 6.750%—06/15/2023 | 327 | |
275 | 7.000%—08/01/2025 | 257 | |
225 | 7.500%—04/01/20251 | 243 | |
1,296 | |||
3,940 | |||
HOTELS, RESTAURANTS & LEISURE—7.0% | |||
Aramark Services Inc. | |||
250 | 5.000%—02/01/20281 | 240 | |
Caesars Resort Collection LLC / CRC Finco Inc. | |||
175 | 5.250%—10/15/20251 | 139 | |
Carnival Corp. | |||
225 | 11.500%—04/01/20231 | 236 | |
Cedar Fair LP | |||
275 | 5.250%—07/15/20291 | 238 | |
100 | 5.375%—06/01/2024 | 94 | |
332 | |||
Churchill Downs Inc. | |||
425 | 5.500%—04/01/20271 | 408 | |
Everi Payments Inc. | |||
235 | 7.500%—12/15/20251 | 193 | |
Hilton Domestic Operating Co. Inc. | |||
250 | 4.875%—01/15/2030 | 241 | |
25 | 5.375%—05/01/20251 | 25 | |
25 | 5.750%—05/01/20281 | 25 | |
291 | |||
Hyatt Hotels Corp. | |||
25 | 5.375%—04/23/2025 | 25 | |
75 | 5.750%—04/23/2030 | 78 | |
103 | |||
International Game Technology plc | |||
250 | 6.500%—02/15/20251 | 247 | |
KFC Holding Co./Pizza Hut Holdings LLC/Taco Bell of America LLC | |||
100 | 5.250%—06/01/20261 | 103 | |
Marriott Ownership Resorts Inc. | |||
325 | 4.750%—01/15/20281 | 287 | |
Melco Resorts Finance Ltd. | |||
200 | 4.875%—06/06/20251 | 194 | |
MGM Resorts International | |||
131 | 5.500%—04/15/2027 | 121 | |
115 | 5.750%—06/15/2025 | 111 | |
232 | |||
New Red Finance Inc. | |||
400 | 5.000%—10/15/20251 | 404 | |
Sabre GLBL Inc. | |||
150 | 5.375%—04/15/20231 | 140 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
HOTELS, RESTAURANTS & LEISURE—Continued | |||
Scientific Games International Inc. | |||
$ | 250 | 7.000%—05/15/20281 | $181 |
225 | 8.250%—03/15/20261 | 171 | |
352 | |||
Station Casinos LLC | |||
150 | 4.500%—02/15/20281 | 121 | |
125 | 5.000%—10/01/20251 | 105 | |
226 | |||
Vail Resorts Inc. | |||
50 | 6.250%—05/15/20251 | 52 | |
VICI Properties LP / VICI Note Co. Inc. | |||
425 | 4.125%—08/15/20301 | 389 | |
25 | 4.625%—12/01/20291 | 23 | |
412 | |||
Viking Cruises Ltd. | |||
75 | 6.250%—05/15/20251 | 51 | |
VOC Escrow Ltd. | |||
275 | 5.000%—02/15/20281 | 217 | |
Wyndham Destinations Inc. | |||
25 | 5.625%—03/01/2021 | 24 | |
Wynn Las Vegas LLC / Wynn Las Vegas Capital Corp. | |||
275 | 5.500%—03/01/20251 | 246 | |
5,129 | |||
HOUSEHOLD DURABLES—2.2% | |||
KB Home Co. | |||
100 | 4.800%—11/15/2029 | 94 | |
Lennar Corp. | |||
250 | 4.750%—11/29/2027 | 258 | |
M/I Homes Inc. | |||
150 | 4.950%—02/01/20281 | 132 | |
Newell Brands Inc. | |||
350 | 5.500%—04/01/2046 | 362 | |
PulteGroup Inc. | |||
250 | 5.500%—03/01/2026 | 267 | |
Tempur Sealy International Inc. | |||
500 | 5.500%—06/15/2026 | 479 | |
1,592 | |||
HOUSEHOLD PRODUCTS—1.4% | |||
Clearwater Paper Corp. | |||
350 | 5.375%—02/01/20251 | 330 | |
Energizer Holdings Inc. | |||
200 | 7.750%—01/15/20271 | 213 | |
Kronos Acquisition Holdings Inc. | |||
550 | 9.000%—08/15/20231 | 481 | |
1,024 | |||
INDEPENDENT POWER & RENEWABLE ELECTRICITY PRODUCERS—1.7% | |||
Calpine Corp. | |||
325 | 4.500%—02/15/20281 | 316 | |
125 | 5.250%—06/01/20261 | 128 | |
444 | |||
Clearway Energy Operating LLC | |||
450 | 4.750%—03/15/20281 | 460 | |
NRG Energy Inc. | |||
350 | 6.625%—01/15/2027 | 375 | |
1,279 |
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 | ||
INSURANCE—1.1% | |||
Acrisure LLC / Acrisure Finance Inc. | |||
$ | 200 | 8.125%—02/15/20241 | $207 |
AssuredPartners Inc. | |||
325 | 7.000%—08/15/20251 | 304 | |
Hub International Ltd. | |||
300 | 7.000%—05/01/20261 | 298 | |
809 | |||
INTERACTIVE MEDIA & SERVICES—0.5% | |||
Match Group Inc. | |||
325 | 5.625%—02/15/20291 | 343 | |
INTERNET & DIRECT MARKETING RETAIL—1.0% | |||
Expedia Group Inc. | |||
100 | 3.250%—02/15/2030 | 84 | |
250 | 3.800%—02/15/2028 | 217 | |
301 | |||
QVC Inc. | |||
500 | 4.750%—02/15/2027 | 460 | |
761 | |||
INTERNET SERVICES & INFRASTRUCTURE—0.7% | |||
EIG Investors Corp. | |||
250 | 10.875%—02/01/2024 | 217 | |
J2 Cloud Services LLC | |||
325 | 6.000%—07/15/20251 | 330 | |
547 | |||
IT SERVICES—0.7% | |||
Banff Merger Sub Inc. | |||
125 | 9.750%—09/01/20261 | 113 | |
Cardtronics Inc. | |||
275 | 5.500%—05/01/20251 | 263 | |
MPH Acquisition Holdings LLC | |||
125 | 7.125%—06/01/20241 | 112 | |
488 | |||
LEISURE PRODUCTS—0.4% | |||
Mattel Inc. | |||
300 | 5.875%—12/15/20271 | 295 | |
MACHINERY—0.7% | |||
Allison Transmission Inc. | |||
175 | 5.875%—06/01/20291 | 171 | |
Titan Acquisition Ltd. | |||
400 | 7.750%—04/15/20261 | 374 | |
545 | |||
MEDIA—9.2% | |||
Block Communications Inc. | |||
250 | 4.875%—03/01/20281 | 250 | |
CCO Holdings LLC | |||
100 | 5.000%—02/01/20281 | 103 | |
250 | 5.375%—05/01/2025-06/01/20291 | 261 | |
775 | 5.500%—05/01/20261 | 811 | |
1,175 | |||
CSC Holdings LLC | |||
75 | 5.375%—02/01/20281 | 79 | |
675 | 5.500%—04/15/20271 | 705 | |
100 | 5.750%—01/15/20301 | 104 | |
888 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
MEDIA—Continued | |||
Diamond Sports Group LLC / Diamond Sports Finance Co. | |||
$ | 200 | 5.375%—08/15/20261 | $153 |
225 | 6.625%—08/15/20271 | 124 | |
277 | |||
DISH DBS Corp. | |||
550 | 5.875%—11/15/2024 | 532 | |
75 | 7.750%—07/01/2026 | 74 | |
606 | |||
iHeartCommunications Inc. | |||
50 | 4.750%—01/15/20281 | 43 | |
225 | 8.375%—05/01/2027 | 189 | |
232 | |||
Intelsat Jackson Holdings SA | |||
500 | 8.500%—10/15/20241 | 293 | |
125 | 9.750%—07/15/20251 | 73 | |
366 | |||
National CineMedia LLC | |||
250 | 5.875%—04/15/20281 | 179 | |
Nexstar Broadcasting Inc. | |||
350 | 5.625%—07/15/20271 | 336 | |
Salem Media Group Inc. | |||
425 | 6.750%—06/01/20241 | 334 | |
Sinclair Television Group Inc. | |||
400 | 5.500%—03/01/20301 | 334 | |
Sirius XM Radio Inc. | |||
650 | 5.000%—08/01/20271 | 668 | |
TEGNA Inc. | |||
350 | 5.000%—09/15/20291 | 314 | |
Telenet Finance Luxembourg Notes Sarl | |||
200 | 5.500%—03/01/20281 | 209 | |
Townsquare Media Inc. | |||
350 | 6.500%—04/01/20231 | 312 | |
Univision Communications Inc. | |||
100 | 5.125%—02/15/20251 | 88 | |
Ziggo Secured Finance BV | |||
150 | 5.500%—01/15/20271 | 153 | |
6,721 | |||
METALS & MINING—1.4% | |||
Alcoa Nederland Holding BV | |||
100 | 7.000%—09/30/20261 | 99 | |
Arconic Corp. | |||
75 | 6.000%—05/15/20251 | 76 | |
200 | 6.125%—02/15/20281 | 192 | |
268 | |||
Freeport-McMoRan Inc. | |||
500 | 5.000%—09/01/2027 | 488 | |
Novelis Corp. | |||
225 | 4.750%—01/30/20301 | 201 | |
1,056 | |||
OIL, GAS & CONSUMABLE FUELS—9.3% | |||
Aker BP ASA | |||
50 | 4.750%—06/15/20241 | 46 | |
Ascent Resources Utica Holdings LLC / ARU Finance Corp. | |||
125 | 7.000%—11/01/20261 | 73 | |
175 | 10.000%—04/01/20221 | 138 | |
211 |
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 | |||
Berry Petroleum Co. LLC | |||
$ | 200 | 7.000%—02/15/20261 | $97 |
Buckeye Partners LP | |||
175 | 3.950%—12/01/2026 | 160 | |
50 | 4.500%—03/01/20281 | 45 | |
205 | |||
Cenovus Energy Inc. | |||
75 | 4.250%—04/15/2027 | 59 | |
Cheniere Corpus Christi Holdings LLC | |||
400 | 5.125%—06/30/2027 | 400 | |
Cheniere Energy Partners LP | |||
250 | 5.250%—10/01/2025 | 240 | |
150 | 5.625%—10/01/2026 | 144 | |
384 | |||
Continental Resources Co. | |||
275 | 3.800%—06/01/2024 | 228 | |
Crestwood Midstream Partners LP / Crestwood Midstream Finance Corp. | |||
250 | 5.625%—05/01/20271 | 164 | |
Crownrock LP | |||
275 | 5.625%—10/15/20251 | 224 | |
Endeavor Energy Resources LP | |||
150 | 5.750%—01/30/20281 | 131 | |
Energy Transfer Operating LP | |||
275 | 5.250%—04/15/2029 | 281 | |
EnLink Midstream Partners LP | |||
200 | 4.150%—06/01/2025 | 125 | |
EQM Midstream Partners LP | |||
250 | 5.500%—07/15/2028 | 226 | |
Equities Corp. | |||
150 | 6.125%—02/01/2025 | 144 | |
150 | 7.000%—02/01/2030 | 143 | |
287 | |||
Hess Midstream Operations LP | |||
325 | 5.125%—06/15/20281 | 286 | |
175 | 5.625%—02/15/20261 | 164 | |
450 | |||
Hilcorp Finance Co. | |||
100 | 5.000%—12/01/20241 | 57 | |
Murphy Oil Corp. | |||
300 | 5.875%—12/01/2027 | 205 | |
200 | 6.875%—08/15/2024 | 143 | |
348 | |||
Murphy Oil USA Inc. | |||
350 | 5.625%—05/01/2027 | 363 | |
NGL Energy Partners LP / NGL Energy Finance Corp. | |||
225 | 7.500%—04/15/2026 | 148 | |
Occidental Petroleum Corp. | |||
500 | 3.200%—08/15/2026 | 363 | |
Parsley Energy LLC / Parsley Finance Corp. | |||
250 | 5.625%—10/15/20271 | 215 | |
PBF Logistics LP / PBF Logistics Finance Corp. | |||
75 | 6.875%—05/15/2023 | 58 | |
Seven Generations Energy Ltd. | |||
125 | 5.375%—09/30/20251 | 100 | |
Southwestern Energy Co. | |||
125 | 6.200%—01/23/2025 | 111 | |
Sunoco LP / Sunoco Finance Corp. | |||
600 | 6.000%—04/15/2027 | 588 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
OIL, GAS & CONSUMABLE FUELS—Continued | |||
Tallgrass Energy Finance Corp. | |||
$ | 125 | 5.500%—09/15/20241 | $96 |
Targa Resources Partners LP / Targa Resources Partners Finance Corp. | |||
425 | 5.500%—03/01/20301 | 364 | |
Transocean Inc. | |||
448 | 7.500%—01/15/20261 | 175 | |
75 | 9.350%—12/15/2041 | 19 | |
194 | |||
Valaris plc | |||
175 | 5.750%—10/01/2044 | 16 | |
50 | 7.750%—02/01/2026 | 4 | |
20 | |||
W&T Offshore Inc. | |||
150 | 9.750%—11/01/20231 | 50 | |
Western Midstream Operating LP | |||
225 | 4.050%—02/01/2030 | 206 | |
6,799 | |||
PERSONAL PRODUCTS—1.1% | |||
HLF Financing Sarl LLC / Herbalife International Inc. | |||
550 | 7.250%—08/15/20261 | 538 | |
Sally Holdings/Sally Capital Inc. | |||
275 | 8.750%—04/30/20251 | 280 | |
818 | |||
PHARMACEUTICALS—2.8% | |||
Bausch Health Cos Inc. | |||
175 | 5.000%—01/30/20281 | 168 | |
150 | 5.250%—01/30/20301 | 149 | |
400 | 5.750%—08/15/20271 | 424 | |
75 | 7.000%—01/15/20281 | 78 | |
175 | 7.250%—05/30/20291 | 188 | |
175 | 8.500%—01/31/20271 | 194 | |
1,201 | |||
Catalent Pharma Solutions Inc. | |||
125 | 5.000%—07/15/20271 | 128 | |
Elanco Animal Health Inc. | |||
200 | 5.650%—08/28/2028 | 222 | |
Endo Finance LLC | |||
425 | 5.875%—10/15/20241 | 412 | |
125 | 6.000%—07/15/20231 | 95 | |
507 | |||
2,058 | |||
REAL ESTATE MANAGEMENT & DEVELOPMENT—0.2% | |||
Newmark Group Inc. | |||
175 | 6.125%—11/15/2023 | 162 | |
ROAD & RAIL—0.1% | |||
Hertz Corp. | |||
200 | 5.500%—10/15/20241 | 41 | |
SOFTWARE—0.7% | |||
Solera LLC | |||
500 | 10.500%—03/01/20241 | 500 | |
SPECIALTY RETAIL—1.2% | |||
Lithia Motors Inc. | |||
175 | 4.625%—12/15/20271 | 167 |
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 | ||
SPECIALTY RETAIL—Continued | |||
Penske Automotive Group Inc. | |||
$ | 150 | 5.500%—05/15/2026 | $139 |
PetSmart Inc. | |||
175 | 5.875%—06/01/20251 | 177 | |
200 | 7.125%—03/15/20231 | 191 | |
368 | |||
Staples Inc. | |||
250 | 7.500%—04/15/20261 | 199 | |
873 | |||
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS—1.0% | |||
Dell Inc. | |||
400 | 6.500%—04/15/2038 | 414 | |
100 | 7.100%—04/15/2028 | 111 | |
525 | |||
Xerox Corp. | |||
275 | 4.800%—03/01/2035 | 237 | |
762 | |||
TEXTILES, APPAREL & LUXURY GOODS—0.4% | |||
L Brands Inc. | |||
350 | 6.875%—11/01/2035 | 259 | |
TOBACCO—0.5% | |||
Vector Group Ltd. | |||
375 | 6.125%—02/01/20251 | 366 | |
TRADING COMPANIES & DISTRIBUTORS—1.8% | |||
Fortress Transportation & Infrastructure Investors LLC | |||
350 | 6.500%—10/01/20251 | 289 | |
Herc Holdings Inc. | |||
300 | 5.500%—07/15/20271 | 283 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
TRADING COMPANIES & DISTRIBUTORS—Continued | |||
United Rentals North America Inc. | |||
$ | 225 | 5.250%—01/15/2030 | $227 |
500 | 5.500%—05/15/2027 | 508 | |
735 | |||
1,307 | |||
WIRELESS TELECOMMUNICATION SERVICES—3.1% | |||
C&W Senior Financing Designated Activity Company | |||
400 | 6.875%—09/15/20271 | 397 | |
Level 3 Financing Inc. | |||
125 | 5.250%—03/15/2026 | 129 | |
Sprint Capital Corp. | |||
100 | 6.875%—11/15/2028 | 121 | |
50 | 8.750%—03/15/2032 | 70 | |
191 | |||
Sprint Corp. | |||
725 | 7.125%—06/15/2024 | 818 | |
T-Mobile USA Inc. | |||
700 | 4.750%—02/01/2028 | 738 | |
2,273 | |||
TOTAL CORPORATE BONDS & NOTES | |||
(Cost $74,638) | 69,745 | ||
TOTAL INVESTMENTS—95.1% | |||
(Cost $74,638) | 69,745 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—4.9% | 3,622 | ||
TOTAL NET ASSETS—100.0% | $73,367 |
RIGHTS/WARRANTS
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 April 30, 2020, the investments in Jones Energy II Inc. (as disclosed in the preceding Rights/Warrants 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 period ended April 30, 2020.
Valuation Description | Beginning Balance as of 11/01/2019 (000s) | Purchases (000s) | Sales (000s) | Discount/ (Premium) (000s) | Total Realized Gain/(Loss) (000s) | Change in Unrealized Appreciation/ (Depreciation) (000s) | Transfers Into Level 3 (000s) | Transfers Out of Level 3 (000s) | Ending Balance as of 04/30/2020 (000s) | Unrealized Gain/(Loss) as of 04/30/2020 (000s) | ||||||||||
Common Stocks | $4 | $— | $(4) | $— | $— | $— | $— | $— | $— | $— | ||||||||||
Rights/Warrants | — | — | — | — | — | — | — | — | — | — | ||||||||||
$4 | $— | $(4) | $— | $— | $— | $— | $— | $— | $— |
57
Harbor High-Yield Opportunities Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
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 04/30/2020 (000s) | Valuation Technique | Unobservable Input(s) | Input Value(s) | ||||
Financial Derivative Instruments | ||||||||
Rights/Warrants | ||||||||
Jones Energy II Inc. | $— | Market Approach | Estimated Recovery Value | $ 0.00 |
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 April 30, 2020, the aggregate value of these securities was $43,875 or 60% of net assets. |
2 | MTN after the name of a security stands for Medium Term Note. |
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
A viral pandemic with origins in Wuhan, China spread around the globe during the first quarter of 2020. Countries adopted travel restrictions followed by business closures in an attempt to slow the spread of the deadly coronavirus. The economic impact has been devastating and is likely to result in a global recession by mid-2020. The timing of the crisis was also unfortunate as several large economies are challenged to reduce interest rates further having been unable to escape the low interest rate environment of the prior recession. With limited tools at their disposal, central bankers have reinstituted non-traditional crisis-era stimulus measures in an effort to stabilize markets. The recovery burden has shifted to fiscal authorities that have passed large stimulus packages to support individuals and businesses negatively impacted by viral restrictions.
In March 2020, the U.S. Federal Reserve (Fed) reduced monetary policy interest rates back to the lows since the Great Financial Crisis of 2008. The inter-meeting reductions shocked markets resulting in a spike in volatility as liquidity evaporated across sectors. Safe havens rallied as risk assets plummeted sending equity markets into freefall. Credit spreads widened across all sectors in response to forced selling by asset managers raising cash to fund redemptions in fund vehicles. Fed Chair Jerome Powell followed up the Fed actions with the announcement of an uncapped and open-ended balance sheet purchase program designed to signal a ‘’do whatever it takes’’ policy framework. Markets are currently forecasting an extended period of near zero short-term interest rates.
Short-term U.S. Treasury Note yields declined to the zero-lower bound as market panic set in and investors began to anticipate an economic recession. Money market yields closely tracked monetary policy rates with yields declining into single digits. The decline back to zero percent money market yields is an unwelcomed harbinger for investors who have previously endured low interest rates during the last decade. We believe that money market yields will remain at current levels through year-end as Fed policy remains on hold for an extended period.
PerformancE
For the six months ended April 30, 2020, the Fund returned 0.60% (Institutional Class) and 0.48% (Administrative Class), underperforming the 0.85% return of the Fund’s benchmark, the ICE BofA U.S.3-Month Treasury Bill Index. The duration of the portfolio, a measure of its sensitivity to changes in interest rates, was managed tactically throughout the period in a range between approximately 20 and 40 days as the path of monetary policy changed dramatically.
59
Harbor Money Market Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
TOTAL RETURNS
For the periods ended 04/30/2020
Unannualized | 1 Year | Annualized | |||||||||
6 Months | 5 Years | 10 Years | |||||||||
Harbor Money Market Fund | |||||||||||
Institutional Class | 0.60% | 1.57% | 1.02% | 0.56% | |||||||
Administrative Class | 0.48 | 1.32 | 0.93 | 0.51 | |||||||
Comparative Index | |||||||||||
ICE BofA U.S. 3-Month Treasury Bill | 0.85% | 2.07% | 1.19% | 0.64% |
Current 7-day subsidizeda SEC yield for period ended 04/30/2020: | Institutional Class: 0.50% | Administrative Class: 0.28% |
Current 7-day unsubsidizedb SEC yield for period ended 04/30/2020: | Institutional Class: 0.37% | Administrative Class: 0.14% |
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. Voluntary waivers and reimbursements may be discontinued at any time without notice. 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 at the zero-lower bound throughout 2020 and well into 2021 as the Fed assesses the evolution of the economy in the wake of the pandemic. We expect that real, or inflation-adjusted, economic growth in the U.S. will fall substantially in the second quarter placing the economy firmly into recession. This is likely to be followed by a rebound in the second half of the year though estimates of 2020 growth (year-over-year) remain negative. The U.S. economy will need to recover from substantial unemployment and weak personal consumption; however, a recovery in business investment should be a strong driver of domestic growth.
In our view, the Fed is unlikely to stray from their current policy stance until strong evidence emerges that the economy is on a sustainable path to recovery. The Fed will need to re-achieve both of its dual mandate goals of full employment and stable prices before removing stimulus measures. We expect that the next tightening may occur in 2022 if the pandemic is contained and the global growth trend resumes. 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 reverse repo facility, though we do expect the Fed to announce an end to balance sheet purchases prior to changes in policy interest rates. The transparency of the Federal Open Market Committee should ultimately provide opportunities to tactically adjust the Fund’s duration profile as conditions evolve. We believe that government money market funds generally will remain a safe haven vehicle despite the current low level of interest rates.
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—April 30, 2020 (Unaudited)
Portfolio of Investments—April 30, 2020 (Unaudited)
Investment Allocation(% of investments)
Portfolio of Investments
Value, Cost, and Principal Amounts in Thousands
GOVERNMENT AGENCY DEBT—10.2%† | |||
Principal Amount | Value | ||
Federal Home Loan Bank Discount Notes | |||
$ | 500 | 0.000%—05/11/2020 | $500 |
350 | 0.120%—05/20/2020 | 350 | |
9,450 | 1.334%—05/15/2020 | 9,445 | |
TOTAL GOVERNMENT AGENCY DEBT | |||
(Cost $10,295) | 10,295 | ||
TREASURY DEBT—89.5%† | |||
U.S. Treasury Bills | |||
5,300 | 0.034%—05/12/2020 | 5,300 | |
9,700 | 0.070%—06/16/2020 | 9,699 | |
11,400 | 0.087%—07/16/2020 | 11,398 | |
13,500 | 0.088%—07/09/2020 | 13,498 | |
10,000 | 0.095%—07/23/2020 | 9,998 |
TREASURY DEBT—Continued | |||
Principal Amount | Value | ||
$ | 13,600 | 0.097%—05/28/2020 | $13,599 |
1,350 | 0.405%—06/04/2020 | 1,349 | |
6,000 | 0.815%—05/14/2020 | 5,998 | |
7,000 | 1.334%—05/21/2020 | 6,995 | |
12,300 | 1.533%—05/07/2020 | 12,297 | |
TOTAL TREASURY DEBT | |||
(Cost $90,131) | 90,131 | ||
TOTAL INVESTMENTS—99.7% | |||
(Cost $100,426) | 100,426 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—0.3% | 332 | ||
TOTAL NET ASSETS—100.0% | $100,758 |
FAIR VALUE MEASUREMENTS
All investments at April 30, 2020 (as disclosed in the preceding Portfolio of Investments) were classified as Level 2. There were no Level 3 investments at April 30, 2020 or October 31, 2019.
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—April 30, 2020 (Unaudited)
StatementS of Assets and Liabilities—April 30, 2020 (Unaudited)
(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 | $2,498,568* | $130,680 | $91,651 | $390,376 | $74,638 | $100,426 |
Investments, at value | $2,503,365 | $130,573 | $97,029 | $369,004 | $69,745 | $100,426 |
Repurchase agreements | 53,400 | — | — | — | — | — |
Cash | 19,533 | 5,602 | 1,959 | 14,140 | 999 | 11,875 |
Foreign currency, at value (cost: $3,279,$0,$0,$0,$0,$0 and $0) | 3,351 | — | — | — | — | — |
Receivables for: | ||||||
Investments sold | 2,093,562 | 2,093 | 151 | 5,055 | 1,388 | — |
Capital shares sold | 834 | 6 | 387 | 438 | 1,267 | 68 |
Interest | 11,525 | 471 | 5,606 | 1,213 | — | |
Unrealized appreciation on open forward currency contracts | 10,564 | — | — | — | — | — |
Variation margin on options and futures contracts | 1,286 | — | — | — | — | — |
Variation margin on centrally cleared swap agreements | 849 | — | — | — | — | — |
Purchased options not settled through variation margin, at value (cost: $14,$0,$0,$0,$0,$0 and $0) | 22 | — | — | — | — | — |
Withholding tax | — | — | — | 7 | 2 | — |
Prepaid registration fees | 38 | 23 | 13 | 12 | 25 | 8 |
Prepaid fund insurance | 11 | 1 | 1 | 3 | — | 1 |
Other assets | 684 | 23 | 13 | 155 | 15 | 33 |
Total Assets | 4,699,024 | 138,611 | 100,024 | 394,420 | 74,654 | 112,411 |
LIABILITIES | ||||||
Payables for: | ||||||
Due to broker | 28,492 | — | — | — | — | — |
Investments purchased | 2,478,630 | 2,871 | 1,447 | 5,106 | 1,221 | 11,498 |
Capital shares reacquired | 1,413 | 25 | 8 | 185 | 6 | 77 |
Investments sold short, at value (proceeds: $162,831,$0,$0,$0,$0,$0 and $0) | 162,743 | — | — | — | — | — |
Written options not settled through variation margin, at value (premiums received: $359,$0,$0,$0,$0,$0 and $0) | 77 | — | — | — | — | — |
Swap premiums received on OTC swap agreements | 115 | — | — | — | — | — |
Unrealized depreciation on OTC swap agreements | 71 | — | — | — | — | — |
Reverse repurchase agreements | 2,718 | — | — | — | — | — |
Unrealized depreciation on open forward currency contracts | 6,061 | — | — | — | — | — |
Accrued expenses: | ||||||
Management fees | 751 | 64 | 27 | 157 | 35 | 16 |
12b-1 fees | 4 | — | — | 3 | — | 1 |
Transfer agent fees | 154 | 8 | 7 | 29 | 6 | 9 |
Trustees' fees and expenses | 538 | 26 | 4 | 167 | 5 | 18 |
Other | 226 | 25 | 13 | 49 | 14 | 34 |
Total Liabilities | 2,681,993 | 3,019 | 1,506 | 5,696 | 1,287 | 11,653 |
NET ASSETS | $2,017,031 | $135,592 | $98,518 | $388,724 | $73,367 | $100,758 |
Net Assets Consist of: | ||||||
Paid-in capital | $1,982,502 | $133,216 | $91,113 | $507,361 | $82,610 | $100,724 |
Total distributable earnings/(loss) | 34,529 | 2,376 | 7,405 | (118,637) | (9,243) | 34 |
$2,017,031 | $135,592 | $98,518 | $388,724 | $73,367 | $100,758 | |
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 | $162,837 | $30,359 | $15,995 | $49,998 | $179 | N/A | ||||||
Shares of beneficial interest1 | 13,440 | 2,924 | 1,470 | 5,566 | 20 | N/A | ||||||
Net asset value per share2 | $12.12 | $10.38 | $10.88 | $8.98 | $8.78 | N/A | ||||||
Institutional Class | ||||||||||||
Net assets | $1,836,302 | $103,407 | $82,523 | $324,623 | $72,984 | $97,177 | ||||||
Shares of beneficial interest1 | 151,679 | 9,962 | 7,584 | 36,138 | 8,309 | 97,177 | ||||||
Net asset value per share2 | $12.11 | $10.38 | $10.88 | $8.98 | $8.78 | $1.00 | ||||||
Administrative Class | ||||||||||||
Net assets | $17,892 | $59 | N/A | $632 | $142 | $3,581 | ||||||
Shares of beneficial interest1 | 1,476 | 5 | N/A | 70 | 16 | 3,581 | ||||||
Net asset value per share2 | $12.12 | $10.36 | N/A | $9.02 | $8.78 | $1.00 | ||||||
Investor Class | ||||||||||||
Net assets | N/A | $1,767 | N/A | $13,471 | $62 | N/A | ||||||
Shares of beneficial interest1 | N/A | 171 | N/A | 1,494 | 7 | N/A | ||||||
Net asset value per share2 | N/A | $10.36 | N/A | $9.01 | $8.78 | N/A |
* | Including repurchase agreements |
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—Six Months Ended April 30, 2020 (Unaudited)
StatementS of Operations—Six Months Ended April 30, 2020 (Unaudited)
(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 | $35,163 | $983 | $1,394 | $11,946 | $2,147 | $987 |
Foreign taxes withheld | 8 | — | — | — | — | — |
Consent fee income | — | 5 | 1 | 116 | 3 | — |
Total Investment Income | 35,171 | 988 | 1,395 | 12,062 | 2,150 | 987 |
Operating Expenses | ||||||
Management fees | 4,842 | 444 | 156 | 1,346 | 228 | 131 |
12b-1 fees: | ||||||
Administrative Class | 23 | — | N/A | 1 | — | 4 |
Investor Class | N/A | 2 | N/A | 23 | — | N/A |
Shareholder communications | 78 | 3 | 3 | 14 | 2 | 10 |
Custodian fees | 111 | 13 | 8 | 14 | 7 | 12 |
Transfer agent fees: | ||||||
Retirement Class | 8 | 3 | 1 | 7 | — | N/A |
Institutional Class | 962 | 55 | 41 | 182 | 38 | 64 |
Administrative Class | 9 | — | N/A | — | — | 2 |
Investor Class | N/A | 2 | N/A | 20 | — | N/A |
Professional fees | 50 | 4 | 2 | 12 | 2 | 4 |
Trustees' fees and expenses | 48 | 3 | 2 | 12 | 2 | 3 |
Registration fees | 40 | 33 | 19 | 50 | 31 | 22 |
Miscellaneous | 18 | 5 | 3 | 8 | 4 | 4 |
Expenses before interest expense | 6,189 | 567 | 235 | 1,689 | 314 | 256 |
Interest expense | 2,060 | — | — | — | — | — |
Total expenses | 8,249 | 567 | 235 | 1,689 | 314 | 256 |
Management fees waived | (256) | (34) | — | (206) | — | (13) |
Transfer agent fees waived | (21) | (1) | (1) | (5) | (1) | (1) |
Other expenses reimbursed | (774) | — | (31) | — | (36) | (53) |
Custodian fees reduction | (1) | — | — | — | — | (1) |
Net expenses | 7,197 | 532 | 203 | 1,478 | 277 | 188 |
Net Investment Income/(Loss) | 27,974 | 456 | 1,192 | 10,584 | 1,873 | 799 |
Realized and Change in Net Unrealized Gain/(Loss) on Investment Transactions | ||||||
Net realized gain/(loss) on: | ||||||
Investments | 42,253 | 2,971 | 1,810 | (14,447) | (1,004) | — |
Foreign currency transactions | (13,692) | — | — | — | — | — |
Investments sold short | (510) | — | — | — | — | — |
Swap agreements | (959) | — | — | — | — | — |
Futures contracts | (5,493) | — | — | — | — | — |
Purchased options | (167) | — | — | — | — | — |
Written options | 939 | — | — | — | — | — |
Change in net unrealized appreciation/(depreciation) on: | ||||||
Investments | (1,875) | (4,864) | 1,191 | (25,157) | (6,693) | — |
Forwards currency contracts | 11,857 | — | — | — | — | — |
Investments sold short | 204 | — | — | — | — | — |
Swap agreements | 273 | — | — | — | — | — |
Futures contracts | 5,181 | — | — | — | — | — |
Purchased options | 139 | — | — | — | — | — |
Written options | (685) | — | — | — | — | — |
Translations of assets and liabilities in foreign currencies | 205 | — | — | — | — | — |
Net gain/(loss) on investment transactions | 37,670 | (1,893) | 3,001 | (39,604) | (7,697) | — |
Net Increase/(Decrease) in Net Assets Resulting from Operations | $65,644 | $(1,437) | $4,193 | $(29,020) | $(5,824) | $799 |
The accompanying notes are an integral part of the Financial Statements.
64
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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, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | |||
INCREASE/(DECREASE) IN NET ASSETS | (Unaudited) | (Unaudited) | (Unaudited) | |||||
Operations: | ||||||||
Net investment income/(loss) | $27,974 | $62,549 | $456 | $1,157 | $1,192 | $2,229 | ||
Net realized gain/(loss) on investments | 22,371 | 43,239 | 2,971 | 4,662 | 1,810 | 955 | ||
Change in net unrealized appreciation/(depreciation) of investments | 15,299 | 91,835 | (4,864) | 6,316 | 1,191 | 5,019 | ||
Net increase/(decrease) in assets resulting from operations | 65,644 | 197,623 | (1,437) | 12,135 | 4,193 | 8,203 | ||
Distributions to Shareholders | ||||||||
Retirement Class | (806) | (328) | (754) | (1,614) | (176) | (145) | ||
Institutional Class | (31,775) | (59,992) | (3,958) | (5,977) | (1,705) | (2,015) | ||
Administrative Class | (279) | (878) | (2) | (3) | N/A | N/A | ||
Investor Class | N/A | N/A | (67) | (111) | N/A | N/A | ||
Total distributions to shareholders | (32,860) | (61,198) | (4,781) | (7,705) | (1,881) | (2,160) | ||
Net Increase/(Decrease) Derived from Capital Share Transactions | (6,653) | (83,237) | 858 | 15,772 | 11,450 | 23,403 | ||
Net increase/(decrease) in net assets | 26,131 | 53,188 | (5,360) | 20,202 | 13,762 | 29,446 | ||
Net Assets | ||||||||
Beginning of period | 1,990,900 | 1,937,712 | 140,952 | 120,750 | 84,756 | 55,310 | ||
End of period | $2,017,031 | $1,990,900 | $135,592 | $140,952 | $98,518 | $84,756 |
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, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | ||
(Unaudited) | (Unaudited) | (Unaudited) | |||||
$10,584 | $30,652 | $1,873 | $3,949 | $799 | $3,111 | ||
(14,447) | (14,481) | (1,004) | (2,438) | — | — | ||
(25,157) | 24,504 | (6,693) | 4,416 | — | — | ||
(29,020) | 40,675 | (5,824) | 5,927 | 799 | 3,111 | ||
(1,835) | (8,772) | (5) | (13) | N/A | N/A | ||
(10,304) | (23,233) | (2,030) | (4,010) | (783) | (3,012) | ||
(18) | (44) | (4) | (3) | (16) | (99) | ||
(458) | (1,147) | (2) | (3) | N/A | N/A | ||
(12,615) | (33,196) | (2,041) | (4,029) | (799) | (3,111) | ||
(61,316) | (322,558) | 4,293 | 3,327 | (20,409) | (10,745) | ||
(102,951) | (315,079) | (3,572) | 5,225 | (20,409) | (10,745) | ||
491,675 | 806,754 | 76,939 | 71,714 | 121,167 | 131,912 | ||
$388,724 | $491,675 | $73,367 | $76,939 | $100,758 | $121,167 |
67
Harbor Fixed Income Funds
Statements of Changes in Net Assets—Capital Stock Activity
Statements of Changes in Net Assets—Capital Stock Activity
(All amounts in thousands)
Harbor Bond Fund | Harbor Convertible Securities Fund | Harbor Core Bond Fund | ||||||
November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | |||
(Unaudited) | (Unaudited) | (Unaudited) | ||||||
AMOUNT ($) | ||||||||
Retirement Class | ||||||||
Net proceeds from sale of shares | $162,272 | $6,756 | $28,719 | $246 | $10,826 | $3,158 | ||
Net proceeds from redemption fees | — | — | — | — | — | — | ||
Reinvested distributions | 806 | 328 | 754 | 1,614 | 175 | 128 | ||
Cost of shares reacquired | (15,373) | (2,022) | (22,351) | (3,434) | (737) | (1,473) | ||
Net increase/(decrease) in net assets | $147,705 | $5,062 | $7,122 | $(1,574) | $10,264 | $1,813 | ||
Institutional Class | ||||||||
Net proceeds from sale of shares | $220,960 | $288,671 | $8,053 | $36,943 | $10,497 | $31,811 | ||
Net proceeds from redemption fees | — | — | — | 1 | — | — | ||
Reinvested distributions | 30,207 | 56,920 | 3,911 | 5,898 | 1,705 | 2,015 | ||
Cost of shares reacquired | (403,651) | (420,202) | (18,015) | (25,631) | (11,016) | (12,236) | ||
Net increase/(decrease) in net assets | $(152,484) | $(74,611) | $(6,051) | $17,211 | $1,186 | $21,590 | ||
Administrative Class | ||||||||
Net proceeds from sale of shares | $930 | $6,129 | $— | $— | N/A | N/A | ||
Net proceeds from redemption fees | — | — | — | — | N/A | N/A | ||
Reinvested distributions | 279 | 878 | 2 | 3 | N/A | N/A | ||
Cost of shares reacquired | (3,083) | (20,695) | — | — | N/A | N/A | ||
Net increase/(decrease) in net assets | $(1,874) | $(13,688) | $2 | $3 | N/A | N/A | ||
Investor Class | ||||||||
Net proceeds from sale of shares | N/A | N/A | $82 | $1,212 | N/A | N/A | ||
Net proceeds from redemption fees | N/A | N/A | — | — | N/A | N/A | ||
Reinvested distributions | N/A | N/A | 67 | 111 | N/A | N/A | ||
Cost of shares reacquired | N/A | N/A | (364) | (1,191) | N/A | N/A | ||
Net increase/(decrease) in net assets | N/A | N/A | $(215) | $132 | N/A | N/A |
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, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | ||
(Unaudited) | (Unaudited) | (Unaudited) | |||||
$9,322 | $15,713 | $56 | $80 | N/A | N/A | ||
1 | 5 | — | — | N/A | N/A | ||
1,755 | 8,598 | 4 | 13 | N/A | N/A | ||
(28,613) | (254,561) | (120) | (90) | N/A | N/A | ||
$(17,535) | $(230,245) | $(60) | $3 | N/A | N/A | ||
$41,197 | $80,070 | $5,610 | $5,062 | $183,501 | $375,658 | ||
6 | 12 | 1 | — | — | — | ||
10,147 | 22,836 | 2,030 | 4,010 | 779 | 2,986 | ||
(91,723) | (181,784) | (3,400) | (5,756) | (205,135) | (390,438) | ||
$(40,373) | $(78,866) | $4,241 | $3,316 | $(20,855) | $(11,794) | ||
$61 | $79 | $100 | $— | $2,402 | $21,058 | ||
— | — | — | — | — | — | ||
17 | 42 | 4 | 3 | 16 | 99 | ||
(74) | (822) | — | — | (1,972) | (20,108) | ||
$4 | $(701) | $104 | $3 | $446 | $1,049 | ||
$5,586 | $6,096 | $7 | $2 | N/A | N/A | ||
— | 1 | — | — | N/A | N/A | ||
452 | 1,133 | 2 | 3 | N/A | N/A | ||
(9,450) | (19,976) | (1) | — | N/A | N/A | ||
$(3,412) | $(12,746) | $8 | $5 | 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, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | |||
(Unaudited) | (Unaudited) | (Unaudited) | ||||||
SHARES | ||||||||
Retirement Class | ||||||||
Shares sold | 13,588 | 603 | 2,611 | 24 | 1,025 | 316 | ||
Shares issued due to reinvestment of distributions | 68 | 29 | 71 | 166 | 17 | 12 | ||
Shares reacquired | (1,292) | (180) | (2,041) | (334) | (70) | (141) | ||
Net increase/(decrease) in shares outstanding | 12,364 | 452 | 641 | (144) | 972 | 187 | ||
Institutional Class | ||||||||
Shares sold | 18,582 | 25,078 | 783 | 3,514 | 986 | 3,140 | ||
Shares issued due to reinvestment of distributions | 2,574 | 4,986 | 365 | 606 | 163 | 196 | ||
Shares reacquired | (33,944) | (36,786) | (1,729) | (2,496) | (1,034) | (1,176) | ||
Net increase/(decrease) in shares outstanding | (12,788) | (6,722) | (581) | 1,624 | 115 | 2,160 | ||
Administrative Class | ||||||||
Shares sold | 79 | 537 | — | — | N/A | N/A | ||
Shares issued due to reinvestment of distributions | 23 | 77 | — | — | N/A | N/A | ||
Shares reacquired | (262) | (1,779) | — | — | N/A | N/A | ||
Net increase/(decrease) in shares outstanding | (160) | (1,165) | — | — | N/A | N/A | ||
Investor Class | ||||||||
Shares sold | N/A | N/A | 8 | 114 | N/A | N/A | ||
Shares issued due to reinvestment of distributions | N/A | N/A | 7 | 12 | N/A | N/A | ||
Shares reacquired | N/A | N/A | (35) | (113) | N/A | N/A | ||
Net increase/(decrease) in shares outstanding | N/A | N/A | (20) | 13 | N/A | N/A |
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, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | ||
(Unaudited) | (Unaudited) | (Unaudited) | |||||
985 | 1,616 | 6 | 8 | N/A | N/A | ||
189 | 898 | — | 2 | N/A | N/A | ||
(3,064) | (26,404) | (12) | (10) | N/A | N/A | ||
(1,890) | (23,890) | (6) | — | N/A | N/A | ||
4,402 | 8,195 | 630 | 524 | 183,501 | 375,658 | ||
1,097 | 2,362 | 223 | 422 | 779 | 2,986 | ||
(9,681) | (18,795) | (377) | (598) | (205,135) | (390,438) | ||
(4,182) | (8,238) | 476 | 348 | (20,855) | (11,794) | ||
7 | 8 | 10 | — | 2,402 | 21,058 | ||
2 | 4 | 1 | — | 16 | 99 | ||
(8) | (84) | — | — | (1,972) | (20,108) | ||
1 | (72) | 11 | — | 446 | 1,049 | ||
578 | 623 | 1 | — | N/A | N/A | ||
48 | 117 | — | — | N/A | N/A | ||
(1,049) | (2,073) | — | — | N/A | N/A | ||
(423) | (1,333) | 1 | — | 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 | |||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | ||
2019 | 2018g | ||
(Unaudited) | |||
Net asset value beginning of period | $11.90 | $11.09 | $11.28 |
Income from Investment Operations | |||
Net investment income/(loss)a,e | 0.17 | 0.38 | 0.16 |
Net realized and unrealized gains/(losses) on investments | 0.25 | 0.80 | (0.16) |
Total from investment operations | 0.42 | 1.18 | —* |
Less Distributions | |||
Dividends from net investment income | (0.20) | (0.37) | (0.19) |
Distributions from net realized capital gains | — | — | — |
Total distributions | (0.20) | (0.37) | (0.19) |
Net asset value end of period | 12.12 | 11.90 | 11.09 |
Net assets end of period (000s) | $162,837 | $12,802 | $6,921 |
Ratios and Supplemental Data (%) | |||
Total returnb | 3.57%c | 10.84% | 0.01%c |
Ratio of total expenses to average net assets^ | 0.65d | 1.06 | 1.16d |
Ratio of net expenses to average net assetsa | 0.55d | 0.96 | 1.06d |
Ratio of net expenses excluding interest expense to average net assetsa | 0.43d | 0.43 | 0.43d |
Ratio of net investment income to average net assetsa | 2.94d | 3.30 | 3.44d |
Portfolio turnover | 317c | 644 | 674c |
Administrative Class | ||||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | |||||
2019 | 2018 | 2017 | 2016 | 2015 | ||
(Unaudited) | ||||||
Net asset value beginning of period | $11.92 | $11.11 | $11.69 | $11.89 | $11.93 | $12.28 |
Income from Investment Operations | ||||||
Net investment income/(loss)a,e | 0.15 | 0.35 | 0.31 | 0.34 | 0.34 | 0.30 |
Net realized and unrealized gains/(losses) on investments | 0.23 | 0.79 | (0.53) | (0.05) | 0.16 | (0.16) |
Total from investment operations | 0.38 | 1.14 | (0.22) | 0.29 | 0.50 | 0.14 |
Less Distributions | ||||||
Dividends from net investment income | (0.18) | (0.33) | (0.36) | (0.32) | (0.45) | (0.38) |
Distributions from net realized capital gains | — | — | — | (0.17) | (0.09) | (0.11) |
Total distributions | (0.18) | (0.33) | (0.36) | (0.49) | (0.54) | (0.49) |
Net asset value end of period | 12.12 | 11.92 | 11.11 | 11.69 | 11.89 | 11.93 |
Net assets end of period (000s) | $17,892 | $19,498 | $31,111 | $30,376 | $37,887 | $57,874 |
Ratios and Supplemental Data (%) | ||||||
Total returnb | 3.22%c | 10.44% | (1.88)% | 2.56% | 4.42% | 1.13% |
Ratio of total expenses to average net assets^ | 1.07d | 1.39 | 1.16 | 0.88 | 0.85 | 0.83 |
Ratio of net expenses to average net assetsa | 0.97d | 1.29 | 1.06 | 0.79 | 0.78 | 0.77 |
Ratio of net expenses excluding interest expense to average net assetsa | 0.76d | 0.76 | 0.76 | 0.76 | 0.76 | 0.77 |
Ratio of net investment income to average net assetsa | 2.61d | 3.01 | 2.69 | 2.90 | 2.89 | 2.47 |
Portfolio turnover | 317c | 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 | |||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | ||||
2019 | 2018 | 2017 | 2016 | 2015 | |
(Unaudited) | |||||
$11.91 | $11.10 | $11.68 | $11.88 | $11.92 | $12.28 |
0.16 | 0.37 | 0.33 | 0.36 | 0.37 | 0.34 |
0.23 | 0.80 | (0.52) | (0.04) | 0.16 | (0.18) |
0.39 | 1.17 | (0.19) | 0.32 | 0.53 | 0.16 |
(0.19) | (0.36) | (0.39) | (0.35) | (0.48) | (0.41) |
— | — | — | (0.17) | (0.09) | (0.11) |
(0.19) | (0.36) | (0.39) | (0.52) | (0.57) | (0.52) |
12.11 | 11.91 | 11.10 | 11.68 | 11.88 | 11.92 |
$1,836,302 | $1,958,600 | $1,899,680 | $2,159,390 | $2,438,815 | $2,874,705 |
3.36%c | 10.74% | (1.63)% | 2.82% | 4.70% | 1.32% |
0.82d | 1.14 | 0.90 | 0.63 | 0.60 | 0.58 |
0.72d | 1.04 | 0.80 | 0.54 | 0.53 | 0.52 |
0.51d | 0.51 | 0.51 | 0.51 | 0.51 | 0.52 |
2.86d | 3.23 | 2.93 | 3.15 | 3.16 | 2.80 |
317c | 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 | |||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | ||||
2019 | 2018 | 2017 | 2016f | ||
(Unaudited) | |||||
Net asset value beginning of period | $10.82 | $10.47 | $11.27 | $10.53 | $9.78 |
Income from Investment Operations | |||||
Net investment income/(loss)a,e | 0.04 | 0.10 | 0.10 | 0.14 | 0.08 |
Net realized and unrealized gains/(losses) on investments | (0.10) | 0.92 | 0.19 | 0.78 | 0.75 |
Total from investment operations | (0.06) | 1.02 | 0.29 | 0.92 | 0.83 |
Less Distributions | |||||
Dividends from net investment income | (0.05) | (0.18) | (0.09) | (0.18) | (0.08) |
Distributions from net realized capital gains | (0.33) | (0.49) | (1.00) | — | — |
Total distributions | (0.38) | (0.67) | (1.09) | (0.18) | (0.08) |
Proceeds from redemption fees | —* | —* | —* | —* | — |
Net asset value end of period | 10.38 | 10.82 | 10.47 | 11.27 | 10.53 |
Net assets end of period (000s) | $30,359 | $24,697 | $25,412 | $24,585 | $2,215 |
Ratios and Supplemental Data (%) | |||||
Total returnb | (0.59)%c | 10.48% | 2.80% | 8.81% | 8.51%c |
Ratio of total expenses to average net assets^ | 0.76d | 0.74 | 0.74 | 0.72 | 0.73d |
Ratio of net expenses to average net assetsa | 0.71d | 0.69 | 0.69 | 0.67 | 0.71d |
Ratio of net investment income to average net assetsa | 0.72d | 0.98 | 0.95 | 1.24 | 1.13d |
Portfolio turnover | 61c | 74 | 94 | 102 | 102c |
Administrative Class | ||||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | |||||
2019 | 2018 | 2017 | 2016 | 2015 | ||
(Unaudited) | ||||||
Net asset value beginning of period | $10.80 | $10.44 | $11.26 | $10.53 | $10.62 | $11.19 |
Income from Investment Operations | ||||||
Net investment income/(loss)a,e | 0.02 | 0.07 | 0.07 | 0.10 | 0.09 | 0.12 |
Net realized and unrealized gains/(losses) on investments | (0.09) | 0.91 | 0.17 | 0.77 | 0.20 | (0.08) |
Total from investment operations | (0.07) | 0.98 | 0.24 | 0.87 | 0.29 | 0.04 |
Less Distributions | ||||||
Dividends from net investment income | (0.04) | (0.13) | (0.06) | (0.14) | (0.19) | (0.19) |
Distributions from net realized capital gains | (0.33) | (0.49) | (1.00) | — | (0.19) | (0.42) |
Total distributions | (0.37) | (0.62) | (1.06) | (0.14) | (0.38) | (0.61) |
Proceeds from redemption fees | —* | —* | —* | —* | —* | —* |
Net asset value end of period | 10.36 | 10.80 | 10.44 | 11.26 | 10.53 | 10.62 |
Net assets end of period (000s) | $59 | $59 | $53 | $395 | $392 | $376 |
Ratios and Supplemental Data (%) | ||||||
Total returnb | (0.76)%c | 10.11% | 2.27% | 8.37% | 2.96% | 0.47% |
Ratio of total expenses to average net assets^ | 1.09d | 1.07 | 1.07 | 1.04 | 1.02 | 1.00 |
Ratio of net expenses to average net assetsa | 1.04d | 1.02 | 1.01 | 1.00 | 1.01 | 1.00 |
Ratio of net investment income to average net assetsa | 0.41d | 0.64 | 0.63 | 0.93 | 0.90 | 1.11 |
Portfolio turnover | 61c | 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 | |||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | ||||
2019 | 2018 | 2017 | 2016 | 2015 | |
(Unaudited) | |||||
$10.83 | $10.48 | $11.27 | $10.53 | $10.63 | $11.20 |
0.04 | 0.09 | 0.09 | 0.13 | 0.12 | 0.15 |
(0.11) | 0.92 | 0.20 | 0.78 | 0.19 | (0.08) |
(0.07) | 1.01 | 0.29 | 0.91 | 0.31 | 0.07 |
(0.05) | (0.17) | (0.08) | (0.17) | (0.22) | (0.22) |
(0.33) | (0.49) | (1.00) | — | (0.19) | (0.42) |
(0.38) | (0.66) | (1.08) | (0.17) | (0.41) | (0.64) |
—* | —* | —* | —* | —* | —* |
10.38 | 10.83 | 10.48 | 11.27 | 10.53 | 10.63 |
$103,407 | $114,130 | $93,424 | $87,391 | $421,671 | $373,421 |
(0.72)%c | 10.39% | 2.82% | 8.74% | 3.12% | 0.72% |
0.84d | 0.82 | 0.82 | 0.79 | 0.77 | 0.75 |
0.79d | 0.77 | 0.76 | 0.76 | 0.76 | 0.75 |
0.66d | 0.89 | 0.88 | 1.18 | 1.15 | 1.37 |
61c | 74 | 94 | 102 | 102 | 81 |
Investor Class | |||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | ||||
2019 | 2018 | 2017 | 2016 | 2015 | |
(Unaudited) | |||||
$10.80 | $10.45 | $11.25 | $10.52 | $10.61 | $11.18 |
0.02 | 0.05 | 0.05 | 0.09 | 0.08 | 0.11 |
(0.10) | 0.92 | 0.19 | 0.77 | 0.20 | (0.08) |
(0.08) | 0.97 | 0.24 | 0.86 | 0.28 | 0.03 |
(0.03) | (0.13) | (0.04) | (0.13) | (0.18) | (0.18) |
(0.33) | (0.49) | (1.00) | — | (0.19) | (0.42) |
(0.36) | (0.62) | (1.04) | (0.13) | (0.37) | (0.60) |
—* | —* | —* | —* | —* | —* |
10.36 | 10.80 | 10.45 | 11.25 | 10.52 | 10.61 |
$1,767 | $2,066 | $1,861 | $2,015 | $2,039 | $1,861 |
(0.84)%c | 9.99% | 2.35% | 8.26% | 2.85% | 0.35% |
1.21d | 1.19 | 1.19 | 1.16 | 1.14 | 1.12 |
1.16d | 1.14 | 1.13 | 1.12 | 1.13 | 1.12 |
0.29d | 0.52 | 0.51 | 0.81 | 0.77 | 1.00 |
61c | 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 | |||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | ||
2019 | 2018g | ||
(Unaudited) | |||
Net asset value beginning of period | $10.64 | $9.84 | $10.00 |
Income from Investment Operations | |||
Net investment income/(loss)a,e | 0.14 | 0.31 | 0.12 |
Net realized and unrealized gains/(losses) on investments | 0.33 | 0.79 | (0.19) |
Total from investment operations | 0.47 | 1.10 | (0.07) |
Less Distributions | |||
Dividends from net investment income | (0.16) | (0.30) | (0.09) |
Distributions from net realized capital gains | (0.07) | — | — |
Total distributions | (0.23) | (0.30) | (0.09) |
Net asset value end of period | 10.88 | 10.64 | 9.84 |
Net assets end of period (000s) | $15,995 | $5,298 | $3,061 |
Ratios and Supplemental Data (%) | |||
Total returnb | 4.50%c | 11.34% | (0.73)%c |
Ratio of total expenses to average net assets^ | 0.44d | 0.45 | 0.77d |
Ratio of net expenses to average net assetsa | 0.37d | 0.37 | 0.37d |
Ratio of net investment income to average net assetsa | 2.64d | 2.98 | 2.98d |
Portfolio turnover | 44c | 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 | ||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | |
2019 | 2018g | |
(Unaudited) | ||
$10.64 | $9.84 | $10.00 |
0.14 | 0.30 | 0.12 |
0.32 | 0.79 | (0.19) |
0.46 | 1.09 | (0.07) |
(0.15) | (0.29) | (0.09) |
(0.07) | — | — |
(0.22) | (0.29) | (0.09) |
10.88 | 10.64 | 9.84 |
$82,523 | $79,458 | $52,249 |
4.46%c | 11.26% | (0.75)%c |
0.52d | 0.53 | 0.85d |
0.45d | 0.45 | 0.45d |
2.59d | 2.89 | 2.86d |
44c | 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 | |||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | ||||
2019 | 2018 | 2017 | 2016f | ||
(Unaudited) | |||||
Net asset value beginning of period | $9.88 | $9.69 | $10.22 | $10.00 | $9.40 |
Income from Investment Operations | |||||
Net investment income/(loss)a,e | 0.23 | 0.54 | 0.54 | 0.55 | 0.36 |
Net realized and unrealized gains/(losses) on investments | (0.85) | 0.22 | (0.49) | 0.25 | 0.61 |
Total from investment operations | (0.62) | 0.76 | 0.05 | 0.80 | 0.97 |
Less Distributions | |||||
Dividends from net investment income | (0.28) | (0.57) | (0.58) | (0.58) | (0.37) |
Distributions from net realized capital gains | — | — | — | — | — |
Total distributions | (0.28) | (0.57) | (0.58) | (0.58) | (0.37) |
Proceeds from redemption fees | —* | —* | —* | —* | —* |
Net asset value end of period | 8.98 | 9.88 | 9.69 | 10.22 | 10.00 |
Net assets end of period (000s) | $49,998 | $73,676 | $303,627 | $41,975 | $1,828 |
Ratios and Supplemental Data (%) | |||||
Total returnb | (6.30)%c | 8.13% | 0.54% | 8.23% | 10.49%c |
Ratio of total expenses to average net assets^ | 0.66d | 0.65 | 0.61 | 0.65 | 0.66d |
Ratio of net expenses to average net assetsa | 0.57d | 0.56 | 0.53 | 0.61 | 0.61d |
Ratio of net investment income to average net assetsa | 5.23d | 5.53 | 5.50 | 5.44 | 5.38d |
Portfolio turnover | 49c | 80 | 53 | 56 | 58c |
Administrative Class | ||||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | |||||
2019 | 2018 | 2017 | 2016 | 2015 | ||
(Unaudited) | ||||||
Net asset value beginning of period | $9.92 | $9.71 | $10.25 | $10.01 | $10.02 | $10.87 |
Income from Investment Operations | ||||||
Net investment income/(loss)a,e | 0.21 | 0.50 | 0.52 | 0.53 | 0.51 | 0.55 |
Net realized and unrealized gains/(losses) on investments | (0.84) | 0.25 | (0.51) | 0.25 | (0.02) | (0.67) |
Total from investment operations | (0.63) | 0.75 | 0.01 | 0.78 | 0.49 | (0.12) |
Less Distributions | ||||||
Dividends from net investment income | (0.27) | (0.54) | (0.55) | (0.54) | (0.50) | (0.51) |
Distributions from net realized capital gains | — | — | — | — | — | (0.22) |
Total distributions | (0.27) | (0.54) | (0.55) | (0.54) | (0.50) | (0.73) |
Proceeds from redemption fees | —* | —* | —* | —* | —* | —* |
Net asset value end of period | 9.02 | 9.92 | 9.71 | 10.25 | 10.01 | 10.02 |
Net assets end of period (000s) | $632 | $686 | $1,374 | $1,753 | $4,631 | $4,314 |
Ratios and Supplemental Data (%) | ||||||
Total returnb | (6.44)%c | 7.91% | 0.10% | 7.98% | 5.18% | (1.03)% |
Ratio of total expenses to average net assets^ | 0.99d | 0.98 | 0.94 | 0.97 | 0.95 | 0.94 |
Ratio of net expenses to average net assetsa | 0.90d | 0.89 | 0.86 | 0.92 | 0.91 | 0.90 |
Ratio of net investment income to average net assetsa | 4.92d | 5.13 | 5.18 | 5.20 | 5.20 | 5.26 |
Portfolio turnover | 49c | 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 | |||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | ||||
2019 | 2018 | 2017 | 2016 | 2015 | |
(Unaudited) | |||||
$9.88 | $9.68 | $10.21 | $9.99 | $10.00 | $10.85 |
0.23 | 0.52 | 0.54 | 0.55 | 0.53 | 0.57 |
(0.85) | 0.25 | (0.51) | 0.24 | (0.02) | (0.66) |
(0.62) | 0.77 | 0.03 | 0.79 | 0.51 | (0.09) |
(0.28) | (0.57) | (0.57) | (0.57) | (0.52) | (0.54) |
— | — | — | — | — | (0.22) |
(0.28) | (0.57) | (0.57) | (0.57) | (0.52) | (0.76) |
—* | —* | 0.01 | —* | —* | —* |
8.98 | 9.88 | 9.68 | 10.21 | 9.99 | 10.00 |
$324,623 | $398,320 | $470,204 | $1,387,213 | $1,817,902 | $1,460,808 |
(6.34)%c | 8.16% | 0.45% | 8.16% | 5.46% | (0.79)% |
0.74d | 0.73 | 0.69 | 0.72 | 0.70 | 0.69 |
0.65d | 0.64 | 0.62 | 0.67 | 0.66 | 0.65 |
5.16d | 5.35 | 5.40 | 5.43 | 5.43 | 5.51 |
49c | 80 | 53 | 56 | 58 | 49 |
Investor Class | |||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | ||||
2019 | 2018 | 2017 | 2016 | 2015 | |
(Unaudited) | |||||
$9.91 | $9.71 | $10.24 | $10.01 | $10.02 | $10.87 |
0.21 | 0.49 | 0.50 | 0.52 | 0.49 | 0.53 |
(0.85) | 0.24 | (0.49) | 0.24 | (0.02) | (0.66) |
(0.64) | 0.73 | 0.01 | 0.76 | 0.47 | (0.13) |
(0.26) | (0.53) | (0.54) | (0.53) | (0.48) | (0.50) |
— | — | — | — | — | (0.22) |
(0.26) | (0.53) | (0.54) | (0.53) | (0.48) | (0.72) |
—* | —* | —* | —* | —* | —* |
9.01 | 9.91 | 9.71 | 10.24 | 10.01 | 10.02 |
$13,471 | $18,993 | $31,549 | $42,753 | $87,155 | $96,957 |
(6.53)%c | 7.72% | 0.08% | 7.79% | 5.02% | (1.15)% |
1.11d | 1.10 | 1.06 | 1.09 | 1.07 | 1.06 |
1.02d | 1.01 | 0.98 | 1.04 | 1.03 | 1.02 |
4.78d | 5.00 | 5.05 | 5.08 | 5.09 | 5.14 |
49c | 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 | |||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | ||
2019 | 2018h | ||
(Unaudited) | |||
Net asset value beginning of period | $9.78 | $9.53 | $10.00 |
Income from Investment Operations | |||
Net investment income/(loss)a,e | 0.24 | 0.52 | 0.52 |
Net realized and unrealized gains/(losses) on investments | (0.98) | 0.26 | (0.57) |
Total from investment operations | (0.74) | 0.78 | (0.05) |
Less Distributions | |||
Dividends from net investment income | (0.26) | (0.53) | (0.42) |
Distributions from net realized capital gains | — | — | — |
Total distributions | (0.26) | (0.53) | (0.42) |
Proceeds from redemption fees | —* | — | —* |
Net asset value end of period | 8.78 | 9.78 | 9.53 |
Net assets end of period (000s) | $179 | $259 | $250 |
Ratios and Supplemental Data (%) | |||
Total returnb | (7.66)%c | 8.46% | (0.53)%c |
Ratio of total expenses to average net assets^ | 0.75d | 0.74 | 0.92d |
Ratio of net expenses to average net assetsa | 0.65d | 0.65 | 0.65d |
Ratio of net investment income to average net assetsa | 5.22d | 5.42 | 5.29d |
Portfolio turnover | 39c | 87 | 56c |
Administrative Class | |||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | ||
2019 | 2018h | ||
(Unaudited) | |||
Net asset value beginning of period | $9.77 | $9.53 | $10.00 |
Income from Investment Operations | |||
Net investment income/(loss)a,e | 0.22 | 0.49 | 0.47 |
Net realized and unrealized gains/(losses) on investments | (0.96) | 0.25 | (0.55) |
Total from investment operations | (0.74) | 0.74 | (0.08) |
Less Distributions | |||
Dividends from net investment income | (0.25) | (0.50) | (0.39) |
Distributions from net realized capital gains | — | — | — |
Total distributions | (0.25) | (0.50) | (0.39) |
Proceeds from redemption fees | —* | — | —* |
Net asset value end of period | 8.78 | 9.77 | 9.53 |
Net assets end of period (000s) | $142 | $54 | $50 |
Ratios and Supplemental Data (%) | |||
Total returnb | (7.68)%c | 8.00% | (0.82)%c |
Ratio of total expenses to average net assets^ | 1.08d | 1.07 | 1.25d |
Ratio of net expenses to average net assetsa | 0.98d | 0.98 | 0.98d |
Ratio of net investment income to average net assetsa | 4.90d | 5.08 | 4.84d |
Portfolio turnover | 39c | 87 | 56c |
See page 82 for notes to the Financial Highlights.
The accompanying notes are an integral part of the Financial Statements.
80
Institutional Class | ||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | |
2019 | 2018h | |
(Unaudited) | ||
$9.77 | $9.53 | $10.00 |
0.23 | 0.51 | 0.50 |
(0.97) | 0.25 | (0.56) |
(0.74) | 0.76 | (0.06) |
(0.25) | (0.52) | (0.41) |
— | — | — |
(0.25) | (0.52) | (0.41) |
—* | — | —* |
8.78 | 9.77 | 9.53 |
$72,984 | $76,566 | $71,361 |
(7.61)%c | 8.27% | (0.59)%c |
0.83d | 0.82 | 1.00d |
0.73d | 0.73 | 0.73d |
5.13d | 5.33 | 5.12d |
39c | 87 | 56c |
Investor Class | ||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | |
2019 | 2018h | |
(Unaudited) | ||
$9.77 | $9.53 | $10.00 |
0.22 | 0.47 | 0.46 |
(0.97) | 0.26 | (0.55) |
(0.75) | 0.73 | (0.09) |
(0.24) | (0.49) | (0.38) |
— | — | — |
(0.24) | (0.49) | (0.38) |
—* | — | —* |
8.78 | 9.77 | 9.53 |
$62 | $60 | $53 |
(7.79)%c | 7.88% | (0.92)%c |
1.20d | 1.19 | 1.37d |
1.10d | 1.10 | 1.10d |
4.77d | 4.95 | 4.73d |
39c | 87 | 56c |
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 | ||||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | |||||
2019 | 2018 | 2017 | 2016 | 2015 | ||
(Unaudited) | ||||||
Net asset value beginning of period | $1.00 | $1.00 | $1.00 | $1.00 | $1.00 | $1.00 |
Income from Investment Operations | ||||||
Net investment income/(loss)a,e | 0.01 | 0.02 | 0.01 | 0.01 | —* | —* |
Net realized and unrealized gains/(losses) on investments | — | — | — | — | — | — |
Total from investment operations | 0.01 | 0.02 | 0.01 | 0.01 | —* | —* |
Less Distributions | ||||||
Dividends from net investment income | (0.01) | (0.02) | (0.01) | (0.01) | —* | —* |
Distributions from net realized capital gains | — | — | — | — | — | — |
Total distributions | (0.01) | (0.02) | (0.01) | (0.01) | —* | —* |
Net asset value end of period | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 |
Net assets end of period (000s) | $97,177 | $118,032 | $129,826 | $169,637 | $136,986 | $176,781 |
Ratios and Supplemental Data (%) | ||||||
Total returnb | 0.60%c | 2.02% | 1.44% | 0.73% | 0.30% | 0.08% |
Ratio of total expenses to average net assets^ | 0.38d | 0.35 | 0.35 | 0.35 | 0.36 | 0.32 |
Ratio of net expenses to average net assetsa | 0.28d | 0.28 | 0.20 | — | — | — |
Ratio of net investment income to average net assetsa | 1.23d | 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, 2018. |
The accompanying notes are an integral part of the Financial Statements.
82
Administrative Class | |||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | ||||
2019 | 2018 | 2017 | 2016 | 2015 | |
(Unaudited) | |||||
$1.00 | $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 | 1.00 |
$3,581 | $3,135 | $2,086 | $1,545 | $2,267 | $1,727 |
0.48%c | 1.76% | 1.36% | 0.73% | 0.30% | 0.08% |
0.63d | 0.60 | 0.60 | 0.60 | 0.61 | 0.57 |
0.53d | 0.53 | 0.29 | — | — | — |
0.95d | 1.79 | 1.36 | 0.70 | 0.28 | 0.07 |
83
Harbor Fixed Income Funds
Notes to Financial Statements—April 30, 2020 (Unaudited)
Notes to Financial Statements—April 30, 2020 (Unaudited)
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 April 30, 2020, the Trust consists of 38 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) certain expenses, subject to the approval of the Trust’s Board of Trustees (the “Board of Trustees”), may be applied differently to each class of shares in accordance with current regulations of the 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, and convertible preferred stock), exchange-traded funds and financial derivative instruments (such as futures contracts, options contracts, including rights and warrants 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 period.
Each Fund used observable inputs in its valuation methodologies whenever they were available and deemed reliable.
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 (except for premiums on certain callable debt securities that amortized to the earliest call date) using the effective yield method. Paydown gains and losses on mortgage-backed and asset-backed securities are recognized as a component of interest income. Inflation adjustments to the face amount of inflation-indexed securities are included in interest income. Consent fees relating to corporate actions from investments held are recorded as income upon receipt.
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.
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.
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.
Distribution to Shareholders
Distributions on Fund shares are recorded on the ex-dividend date.
86
Harbor Fixed Income Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 2—Significant Accounting Policies—Continued
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.
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.
Foreign Currency 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. A forward currency contract is an agreement between two parties to buy and sell currencies at a set price on a future date.
Foreign currency contracts are marked-to-market daily 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 period, Harbor Bond Fund used foreign currency spot contracts to facilitate transactions in foreign securities or to convert foreign currency receipts into U.S. dollars and 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 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 period end.
87
Harbor Fixed Income Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 2—Significant Accounting Policies—Continued
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.
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.
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. 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. As of November 1, 2019, the Funds have adopted ASU 2017-08, which did not have a material impact on the financial statements, and had no effect on the net increase (decrease) in net assets resulting from operations, net asset value or the net assets of the Funds.
Forward Commitments and When-Issued Securities
Each Fund may enter into a when-issued or purchase or sell securities on a forward commitment basis. 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.
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. 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 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.
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. However, when a Fund purchases securities on a when-issued 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 period, Harbor Bond Fund purchased and sold securities on a forward commitment basis, including “TBA” (to be announced) purchase and sale commitments.
88
Harbor Fixed Income Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 2—Significant Accounting Policies—Continued
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 or decrease 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.
During the period, Harbor Bond Fund and Harbor Core Bond Fund invested in inflation-indexed bonds.
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 period, 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 period, 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 April 30, 2020, Harbor High-Yield Bond Fund did not have unfunded loan commitments outstanding.
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 period, Harbor Bond Fund and Harbor Core Bond 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
89
Harbor Fixed Income Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 2—Significant Accounting Policies—Continued
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 period, Harbor Bond Fund, Harbor Core Bond Fund, and Harbor Money Market Fund invested in U.S. government securities.
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 period, 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 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. 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 six-month period, Harbor Bond Fund entered into reverse repurchase agreements. The average amount of borrowings outstanding for the Fund was $78,288,000 at a weighted average interest rate of 1.578%. Average debt outstanding and average interest rate during the period 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.
90
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 Statement 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 period, Harbor Bond Fund entered into sale-buyback transactions. The average amount of borrowings outstanding for the Fund was $47,524,000 at a weighted average interest rate of 1.866%. Average debt outstanding and average interest rate during the period 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, if any, can be found subsequent to 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 period, 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 Fund considers it appropriate or desirable to do so. In the event of adverse price movements, a Fund may be required to
91
Harbor Fixed Income Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 2—Significant Accounting Policies—Continued
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 period, 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 rights and warrants, 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 period, 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.
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.
92
Harbor Fixed Income Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 2—Significant Accounting Policies—Continued
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 period, 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 period, 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 Fund used credit default swap agreements as a buyer to provide a measure of protection against defaults of an issuer. At April 30, 2020, the maximum exposure to loss of the notional value as the seller of credit default swaps outstanding for Harbor Bond Fund was $32,379,000.
93
Harbor Fixed Income Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 3—Investment Portfolio Transactions
Investment Portfolio Transactions
Purchases and sales of investments, other than short-term securities, for each Fund for the six-month period ended April 30, 2020 are as follows:
Purchases (000s) | Sales (000s) | ||||||
U.S. Government | Other | U.S. Government | Other | ||||
Harbor Bond Fund | $9,157,399 | $196,792 | $9,506,069 | $635,475 | |||
Harbor Convertible Securities Fund | — | 86,113 | — | 81,489 | |||
Harbor Core Bond Fund | 30,575 | 23,398 | 36,791 | 3,291 | |||
Harbor High-Yield Bond Fund | — | 210,746 | — | 271,098 | |||
Harbor High-Yield Opportunities Fund | — | 33,411 | — | 28,874 |
Note 4—FEES AND OTHER Transactions with Affiliates
Investment Adviser
Harbor Capital is a wholly-owned subsidiary of ORIX Corporation. 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 | 0.45% | |
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 28, 2021. |
b | The Adviser has contractually agreed to reduce the management fee to 0.60% through February 28, 2021. |
c | The Adviser has contractually agreed to reduce the management fee to 0.508% through February 28, 2021. |
d | The Adviser has contractually agreed to reduce the management fee to 0.18% through February 28, 2021. |
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 period, 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 | 02/28/2021 | ||||
Harbor Core Bond Fund | 0.37 | 0.45 | N/A | N/A | 02/28/2021 | ||||
Harbor High-Yield Opportunities Fund | 0.65 | 0.73 | 0.98 | 1.10% | 02/28/2021 | ||||
Harbor Money Market Fund | N/A | 0.28 | 0.53 | N/A | 02/28/2021 |
All expense limitation agreements include the transfer agent fee waiver discussed in the Transfer Agent note.
94
Harbor Fixed Income Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 4—FEES AND OTHER Transactions with Affiliates—Continued
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 (each, a “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 each 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 a 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 each 12b-1 Plan.
Amounts payable by a Fund under each 12b-1 Plan need not be directly related to the expenses actually incurred by the Distributor on behalf of each Fund. Each 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 each 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 Fees | |
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 |
Harbor Services Group has voluntarily waived a portion of its transfer agent fees during the six-month period ended April 30, 2020. 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 six-month period, 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 April 30, 2020, 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 | 77,242 | — | — | — | 77,242 | 0.0% | |||||
Harbor Convertible Securities Fund | 50,020 | — | — | — | 50,020 | 0.4 | |||||
Harbor Core Bond Fund | 47,044 | 4,806,546 | — | — | 4,853,590 | 53.6 | |||||
Harbor High-Yield Bond | 105,137 | — | — | — | 105,137 | 0.2 | |||||
Harbor High-Yield Opportunities Fund | 2,989 | 5,383,897 | 5,632 | 5,613 | 5,398,131 | 65.5 | |||||
Harbor Money Market | — | 9,799,140 | 26,367 | — | 9,825,507 | 9.8 |
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 six-month period ended April 30, 2020 redemption fee proceeds are as follows:
Amount (000s) | |
Harbor Convertible Securities Fund | $— |
Harbor High-Yield Bond Fund | 7 |
Harbor High-Yield Opportunities Fund | 1 |
96
Harbor Fixed Income Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
NOTE 5—TAX INFORMATION
The identified cost for federal income tax purposes of investments owned by each Fund and its respective gross unrealized appreciation and depreciation at April 30, 2020 are as follows:
Identified Cost (000s) | Gross Unrealized | Net Unrealized Appreciation/ (Depreciation) (000s) | |||||
Appreciation (000s) | (Depreciation) (000s) | ||||||
Harbor Bond Fund* | $2,503,781 | $145,977 | $(81,103) | $64,874 | |||
Harbor Convertible Securities Fund | 130,680 | 6,630 | (6,737) | (107) | |||
Harbor Core Bond Fund | 91,651 | 6,002 | (624) | 5,378 | |||
Harbor High-Yield Bond Fund* | 390,370 | 5,415 | (26,781) | (21,366) | |||
Harbor High-Yield Opportunities Fund* | 74,638 | 1,010 | (5,903) | (4,893) | |||
Harbor Money Market Fund | 100,426 | — | — | — |
* | 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 six-month period ended April 30, 2020, 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 period as disclosed in the Statement of Operations, are indicators of the volume of derivative activity for each Fund.
Derivative Instruments
At April 30, 2020, 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 | $— | $10,564 | $— | $10,564 | ||||||||
Variation margin on centrally cleared swap agreementsa,b | 10,784 | — | 389 | 11,173 | ||||||||
Variation margin on options and futures contracts (futures)a | 7,308 | — | — | 7,308 | ||||||||
Purchased options, at value | 22 | — | — | 22 | ||||||||
Liabilities | ||||||||||||
Unrealized depreciation on open forward currency contracts | $— | $(6,061) | $— | $(6,061) | ||||||||
Unrealized appreciation on OTC swap agreementsb | — | — | (71) | (71) | ||||||||
Variation margin on centrally cleared swap agreementsa,b | (12,691) | — | (318) | (13,009) | ||||||||
Variation margin on options and futures contracts (futures)a | (3,528) | — | — | (3,528) | ||||||||
Written options, at value | — | — | (77) | (77) |
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 and paid of $1,814 |
97
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 six-month period ended April 30, 2020, 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 | $— | $148 | $— | $148 | ||||
Futures contracts | (5,493) | — | — | (5,493) | ||||
Purchased options | (167) | — | — | (167) | ||||
Written options | 939 | — | — | 939 | ||||
Swap agreements | (1,825) | — | 866 | (959) | ||||
Net realized gain/(loss) on derivatives | $(6,546) | $148 | $866 | $(5,532) |
Change in Net Unrealized Appreciation/(Depreciation) on Derivatives | Interest Rate Contracts (000s) | Foreign Exchange Contracts (000s) | Credit Contracts (000s) | Total (000s) | ||||
Forward currency contracts | $— | $11,857 | $— | $11,857 | ||||
Futures contracts | 5,181 | — | — | 5,181 | ||||
Purchased options | 139 | — | — | 139 | ||||
Written options | (967) | — | 282 | (685) | ||||
Swap agreements | 1,576 | — | (1,303) | 273 | ||||
Change in net unrealized appreciation/(depreciation) on derivatives | $5,929 | $11,857 | $(1,021) | $16,765 |
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 six-month period ended April 30, 2020, 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 April 30, 2020, 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 April 30, 2020, 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 April 30, 2020, Harbor Bond Fund had investment exposures subject to the terms of these agreements.
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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 April 30, 2020:
HARBOR BOND FUND
Counterparty | Payable for Reverse Repurchase Agreements (000s) | Payable for Short Sale (000s) | Total Borrowings and Other Financing Transactions (000s) | Collateral (Received)/ Pledged (000s) | Net Exposure (000s) | ||||||||||
Global/Master Repurchase Agreement | |||||||||||||||
Barclays Bank PLC | $(1,427) | $— | $(1,427) | $1,550 | $— | ||||||||||
BNP Paribas SA | (1,291) | — | (1,291) | 1,503 | — | ||||||||||
Master Securities Forward Transactions Agreements | |||||||||||||||
Credit Suisse AG | — | (4,785) | — | — | (4,785) | ||||||||||
J.P. Morgan Securities LLC | — | (54,960) | — | — | (54,960) | ||||||||||
Morgan Stanley & Co. LLC. | — | (102,998) | — | — | (102,998) | ||||||||||
Total Borrowings and Other Financing Transactions | $(2,718) | $(162,743) |
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 April 30, 2020.
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 | $19 | $— | $— | $19 | $(188) | $— | $— | $(188) | $(169) | $426 | $— | |||||||||||
BNP Paribas SA | 263 | — | — | 263 | (1,653) | (53) | — | (1,706) | (1,443) | 1,337 | (106) | |||||||||||
Citibank NA | 4,931 | — | — | 4,931 | (1,460) | — | (71) | (1,531) | 3,400 | — | 3,400 | |||||||||||
Deutsche Bank AG | 1,471 | — | — | 1,471 | (59) | (9) | — | (68) | 1,403 | — | 1,403 | |||||||||||
Goldman Sachs Bank USA | 1,231 | — | — | 1,231 | (85) | — | — | (85) | 1,146 | — | 1,146 | |||||||||||
HSBC Bank USA NA | 460 | — | — | 460 | (147) | — | — | (147) | 313 | — | 313 | |||||||||||
JP Morgan Chase Bank NA | 795 | — | — | 795 | (342) | — | — | (342) | 453 | — | 453 | |||||||||||
Morgan Stanley Capital Services LLC | — | — | — | — | — | (15) | — | (15) | (15) | — | (15) | |||||||||||
Société Générale Paris | 1,335 | — | — | 1,335 | — | — | — | — | 1,335 | — | 1,335 | |||||||||||
UBS AG Stamford | 59 | — | — | 59 | (2,127) | — | — | (2,127) | (2,068) | 1,842 | (226) | |||||||||||
Total Over-the-Counter Exposure | $10,564 | $— | $— | $10,564 | $(6,061) | $(77) | $(71) | $(6,209) |
* | Of the total collateral received and/or pledged listed in the table above, no cash has been received as collateral. |
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.
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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 November 1, 2019 through April 30, 2020.
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 November 1, 2019 | Ending Account Value April 30, 2020 | |||||
Harbor Bond Fund | ||||||||
Retirement Class | 0.56% | |||||||
Actual | $2.83 | $1,000 | $1,035.70 | |||||
Hypothetical (5% return) | 2.82 | 1,000 | 1,022.01 | |||||
Institutional Class | 0.73% | |||||||
Actual | $3.69 | $1,000 | $1,033.60 | |||||
Hypothetical (5% return) | 3.67 | 1,000 | 1,021.14 | |||||
Administrative Class | 0.98% | |||||||
Actual | $4.95 | $1,000 | $1,032.20 | |||||
Hypothetical (5% return) | 4.92 | 1,000 | 1,019.87 | |||||
Harbor Convertible Securities Fund | ||||||||
Retirement Class | 0.71% | |||||||
Actual | $3.52 | $1,000 | $994.10 | |||||
Hypothetical (5% return) | 3.57 | 1,000 | 1,021.25 | |||||
Institutional Class | 0.79% | |||||||
Actual | $3.92 | $1,000 | $992.80 | |||||
Hypothetical (5% return) | 3.97 | 1,000 | 1,020.84 | |||||
Administrative Class | 1.04% | |||||||
Actual | $5.15 | $1,000 | $992.40 | |||||
Hypothetical (5% return) | 5.22 | 1,000 | 1,019.56 | |||||
Investor Class | 1.16% | |||||||
Actual | $5.75 | $1,000 | $991.60 | |||||
Hypothetical (5% return) | 5.82 | 1,000 | 1,018.95 |
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Harbor Fixed Income Funds
Fees and Expenses Example—Continued
Fees and Expenses Example—Continued
Annualized Expense Ratios* | Expenses Paid During Period** | Beginning Account Value November 1, 2019 | Ending Account Value April 30, 2020 | |||||
Harbor Core Bond Fund | ||||||||
Retirement Class | 0.37% | |||||||
Actual | $1.88 | $1,000 | $1,045.00 | |||||
Hypothetical (5% return) | 1.86 | 1,000 | 1,022.98 | |||||
Institutional Class | 0.45% | |||||||
Actual | $2.29 | $1,000 | $1,044.60 | |||||
Hypothetical (5% return) | 2.26 | 1,000 | 1,022.57 | |||||
Harbor High-Yield Bond Fund | ||||||||
Retirement Class | 0.57% | |||||||
Actual | $2.74 | $1,000 | $937.00 | |||||
Hypothetical (5% return) | 2.87 | 1,000 | 1,021.96 | |||||
Institutional Class | 0.65% | |||||||
Actual | $3.13 | $1,000 | $936.60 | |||||
Hypothetical (5% return) | 3.27 | 1,000 | 1,021.55 | |||||
Administrative Class | 0.90% | |||||||
Actual | $4.34 | $1,000 | $935.60 | |||||
Hypothetical (5% return) | 4.52 | 1,000 | 1,020.28 | |||||
Investor Class | 1.02% | |||||||
Actual | $4.90 | $1,000 | $934.70 | |||||
Hypothetical (5% return) | 5.12 | 1,000 | 1,019.67 | |||||
Harbor High-Yield Opportunities Fund | ||||||||
Retirement Class | 0.65% | |||||||
Actual | $3.11 | $1,000 | $923.40 | |||||
Hypothetical (5% return) | 3.27 | 1,000 | 1,021.55 | |||||
Institutional Class | 0.73% | |||||||
Actual | $3.49 | $1,000 | $923.90 | |||||
Hypothetical (5% return) | 3.67 | 1,000 | 1,021.14 | |||||
Administrative Class | 0.98% | |||||||
Actual | $4.68 | $1,000 | $923.20 | |||||
Hypothetical (5% return) | 4.92 | 1,000 | 1,019.87 | |||||
Investor Class | 1.10% | |||||||
Actual | $5.26 | $1,000 | $922.10 | |||||
Hypothetical (5% return) | 5.52 | 1,000 | 1,019.26 | |||||
Harbor Money Market Fund | ||||||||
Institutional Class | 0.28% | |||||||
Actual | $1.39 | $1,000 | $1,006.00 | |||||
Hypothetical (5% return) | 1.41 | 1,000 | 1,023.44 | |||||
Administrative Class | 0.53% | |||||||
Actual | $2.65 | $1,000 | $1,004.80 | |||||
Hypothetical (5% return) | 2.66 | 1,000 | 1,022.16 |
* | 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 182/366 (to reflect the one-half year period). |
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Harbor Fixed Income Funds
Additional Information (Unaudited)
Additional Information (Unaudited)
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
The Funds (excluding Harbor Money Market Fund) file a complete portfolio of investments with the SEC as an exhibit to Form N-PORT. The Funds’ Form N-PORT-EX is 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
FACTORS CONSIDERED BY THE TRUSTEES IN APPROVING THE INVESTMENT ADVISORY AGREEMENTS AND SUBADVISORY AGREEMENTS OF THE FIXED INCOME FUNDS
The Investment Company Act 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 Trust’s 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 February 16 and 17, 2020 (the “Meeting”), the Board, including the Independent Trustees voting separately, considered and approved the continuation of each Investment Advisory Agreement with Harbor Capital, the adviser to each Fund, and each Subadvisory Agreement with each Fund’s subadviser (each, a “Subadviser”) with respect to 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 (each a “Fund” and, collectively, the “Funds”).
In evaluating each Investment Advisory Agreement and each Subadvisory Agreement, the Trustees reviewed materials furnished by Harbor Capital and each Subadviser, including information about their respective affiliates, personnel, and operations, and also relied upon their knowledge of Harbor Capital and the Subadvisers 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 continuation of the Investment Advisory Agreements and Subadvisory Agreements, and at prior meetings, the Trustees, including the Independent Trustees, requested and received materials and presentations relating to Fund performance and the services rendered by Harbor Capital and each Subadviser. These materials included a comprehensive written response from Harbor Capital to a 15(c) request letter prepared by legal counsel to the Independent Trustees in consultation with the Independent Trustees. The Trustees also discussed with representatives of Harbor Capital, at the Meeting and at prior meetings, Harbor Funds’ operations and Harbor Capital’s ability, consistent with the “manager-of-managers” structure of Harbor Funds, to (i) identify and recommend to the Trustees a subadviser for each Fund, (ii) monitor and oversee the performance and investment capabilities of each subadviser, and (iii) recommend the replacement of a subadviser where appropriate. The Trustees specifically considered Harbor Capital’s history as a manager-of-managers, including its history of replacing subadvisers for particular Funds in circumstances in which the Board and Harbor Capital 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 Harbor Capital were to identify another subadviser believed to better serve the shareholders than the existing subadviser.
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Additional Information—Continued
Additional Information—Continued
ADVISORY AGREEMENT APPROVALS—Continued
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 each Investment Advisory Agreement and each Subadvisory Agreement were fair and reasonable and approved the continuation for a one-year period of each such Investment Advisory Agreement and Subadvisory Agreement as being in the best interests of each Fund and its shareholders.
In their deliberations, the Independent Trustees had the opportunity to meet privately without representatives of Harbor Capital or any Subadviser present and were represented throughout the process by legal counsel to the Independent Trustees and the Funds.
In considering the approval of each Fund’s 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 Investment Advisory Agreements and Subadvisory Agreements were the following:
• | The nature, extent, and quality of the services provided by Harbor Capital and each Subadviser, including the background, education, expertise and experience of the investment professionals of Harbor Capital and each Subadviser providing services to the Funds; |
• | The favorable history, reputation, qualifications and background of Harbor Capital and each Subadviser, as well as the qualifications of their respective personnel; |
• | The profitability of Harbor Capital with respect to each Fund, including the effect of revenues of Harbor Services Group, Inc. (“Harbor Services Group”), the Funds’ transfer agent, and Harbor Funds Distributors, Inc. (“Harbor Funds Distributors”), the Funds’ principal underwriter, on such profitability; |
• | The fees charged by Harbor Capital and Subadvisers for investment advisory and subadvisory services, respectively, including, in each case, the portion of the fee to be retained by Harbor Capital, after payment of the Subadviser’s fee, for the investment advisory and related services, including investment, business, legal, compliance, financial and administrative services, that Harbor Capital provides; |
• | The extent to which economies of scale might be realized as each Fund grows, and the extent to which each Fund’s advisory fee level reflects any economies of scale for the benefit of Fund investors; |
• | The fees and expense ratios of each Fund relative to the quality of services provided and the fees and expense ratios of similar investment companies; |
• | The short- and long-term investment performance of each Fund in comparison to peer groups and certain relevant benchmark indices and Harbor Capital’s efforts to address circumstances of underperformance where applicable; |
• | The compensation received by Harbor Services Group and Harbor Funds Distributors in consideration of the services each provides to the Funds; |
• | Any “fall out” benefits that might inure to Harbor Capital and its affiliates as a result of their relationship with the Funds; |
• | Information received at regular meetings throughout the year related to Fund performance and services rendered by Harbor Capital, as well as each of the Subadvisers, and research arrangements with brokers who execute transactions on behalf of each Subadviser; |
• | Information contained in materials provided by Harbor Capital and compiled by Broadridge as to the investment returns, advisory fees and total expense ratios of the Institutional Class of each Fund (and, in certain cases, total expense ratios of the Investor Class) relative to those of other investment companies with similar objectives and strategies managed by other investment advisers, consisting both of a peer group of funds as well as a broader universe of funds compiled by Broadridge; and |
• | Information contained in materials compiled by Morningstar as to the investment returns of the Institutional Class of each Fund relative to those of other investment companies with similar objectives and strategies managed by other investment advisers. |
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Harbor Fixed Income Funds
Additional Information—Continued
Additional Information—Continued
ADVISORY AGREEMENT APPROVALS—Continued
Nature, Extent, and Quality of Services
The Trustees separately considered the nature, extent, and quality of the services provided by Harbor Capital and each Subadviser. In their deliberations as to the approval of each Fund’s Investment Advisory Agreement and Subadvisory Agreement, the Trustees were mindful of the fact that, by choosing to invest in a Fund, the shareholders had entrusted Harbor Capital with the responsibility, subject to the approval of the Trustees, for selecting each 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 favorable history, reputation, qualifications and background of Harbor Capital and each Subadviser, as well as the qualifications of their respective personnel.
The Adviser’s Services. The Board evaluated the nature, extent, and quality of Harbor Capital’s services in light of the Board’s experience with Harbor Capital, as well as materials provided by Harbor Capital concerning the financial and other resources devoted by Harbor Capital to Harbor Funds, including the breadth and depth of experience and expertise of the investment, accounting, administrative, legal and compliance professionals dedicated to Harbor Funds’ operations. The Trustees determined that Harbor Capital has the expertise and resources to identify, select, oversee and monitor each Subadviser and to operate effectively as the “manager-of-managers” for the Funds.
The Subadvisers’ Services. The Trustees’ consideration of the services provided by the Subadvisers included a review of each Subadviser’s portfolio managers, investment philosophy, style and processes and record of consistency therewith, the volatility of its results, its approach to controlling risk, and the quality and extent of its investment capabilities and resources, including the nature and extent of research it receives from broker-dealers (to the extent applicable) and other sources. In their deliberations with respect to each Fund, the Trustees considered the history of Harbor Funds’ relationship with each Subadviser and Harbor Funds’ experience with each Subadviser in this capacity.
The Trustees also considered each Subadviser’s breadth and depth of experience and investment results in managing other accounts similar to the respective Fund. The Trustees had received presentations by investment professionals from the Subadvisers for each Fund at meetings of the Board held in 2019. The Trustees reviewed information concerning each Subadviser’s historical investment results in managing accounts and/or funds, as applicable, in a manner substantially similar to the relevant Fund.
Investment Performance, Advisory Fees and Expense Ratios
In considering each Fund’s performance, advisory fees and expense ratio, the Trustees requested and received from Harbor Capital data compiled by Broadridge and Morningstar. The Trustees also received information explaining the methodology for compilation of certain of this information and what it was intended to demonstrate. The Trustees analyzed the Institutional Class performance of each Fund, the advisory fees of each Fund, and the Institutional Class expenses of each Fund (after giving effect to waivers and/or reimbursements, if applicable, that reduced the fees or expenses of the Fund or its peer funds) and made certain observations and findings as to each Fund as noted below. The Trustees also reviewed certain Investor Class comparative fee and expense information they considered relevant to their deliberations. In evaluating performance, the Trustees recognized that the performance data reflects a snapshot of a period as of a particular date and that selecting a different performance period could produce significantly different results.
Harbor Bond Fund.The Trustees considered Harbor Bond Fund (inception date December 29, 1987), noting the Fund’s underperformance relative to its Broadridge group median for the one-, three- and five-year periods and underperformance relative to its Broadridge universe median for the one-year period ended December 31, 2019. The Trustees considered the Fund’s outperformance relative to the Broadridge universe median for the three- and five-year periods ended December 31, 2019. The Fund’s one-, three- and five-year rolling returns as of December 31, 2019 ranked in the third, second and second quartiles, respectively, according to Morningstar data. The Trustees also considered the fact that Harbor Bond Fund had outperformed its benchmark, the Bloomberg Barclays U.S. Aggregate Bond Index, for the three- and five-year periods ended December 31, 2019 and underperformed its benchmark index for the one-year period ended December 31, 2019.
The Trustees considered the expertise of Pacific Investment Management Company LLC (“PIMCO”) in managing assets generally and in the bond asset class specifically, noting that PIMCO managed approximately $149.2 billion in “total return” assets, out of a firm-wide total of approximately $1.9 trillion in assets under management. The Trustees also noted the experience of the Fund’s portfolio managers in this asset class and a recent departure from the portfolio management team.
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Harbor Fixed Income Funds
Additional Information—Continued
Additional Information—Continued
ADVISORY AGREEMENT APPROVALS—Continued
The Trustees observed that the Broadridge comparison of contractual management fees for the Fund’s expense group, assuming an asset level of $2.0 billion, showed the Fund’s management fee was below the group median for the Institutional Class. The actual total expense ratio of the Fund’s Institutional Class was below the Broadridge group median and above the universe median. The Trustees also considered that Harbor Capital had agreed to continue the Fund’s existing contractual fee waiver/expense reimbursement arrangement until at least February 28, 2021. The Trustees noted that Harbor Capital’s profitability in operating the Fund was not excessive.
Harbor Convertible Securities Fund.The Trustees considered Harbor Convertible Securities Fund (inception date May 1, 2011), noting its underperformance relative to its Broadridge group and universe medians for the one-, three- and five-year periods ended December 31, 2019. The Fund’s one-, three- and five-year rolling returns as of December 31, 2019 each ranked in the fourth quartile according to Morningstar data. The Trustees also considered the fact that the Fund had underperformed its benchmark, the ICE Bank of America (“ICE BofA”) All US Convertibles Ex Mandatory Index, for the one-, three- and five-year periods ended December 31, 2019.
The Trustees considered the expertise of Shenkman Capital Management, Inc. (“Shenkman Capital”) in managing assets generally and in the convertible securities asset class specifically, noting that Shenkman Capital managed approximately $422 million in assets in this asset class, out of a firm-wide total of approximately $25.4 billion in assets under management. The Trustees also noted the experience of the Fund’s portfolio managers in this asset class.
The Trustees observed that the Broadridge comparison of contractual management fees for the Fund’s expense group, assuming an asset level of $150 million, showed the Fund’s management fee was below the group median for the Institutional Class. The actual total expense ratio of the Fund’s Institutional Class was also below the group and universe medians. The Trustees also considered that Harbor Capital had agreed to continue the Fund’s existing contractual fee waiver/expense reimbursement arrangement until at least February 28, 2021. The Trustees noted that Harbor Capital’s profitability in operating the Fund was not excessive.
Harbor Core Bond Fund.The Trustees considered Harbor Core Bond Fund (inception date June 1, 2018), noting its outperformance relative to its Broadridge group median for the one-year and since inception periods and its Broadridge universe median for the since inception period ended December 31, 2019. The Trustees also noted the Fund’s underperformance relative to its Broadridge universe median for the one-year period ended December 31, 2019. The Fund’s one-year and since inception rolling returns as of December 31, 2019 each ranked in the third quartile according to Morningstar data. The Trustees also considered the fact that the Fund had underperformed its benchmark, the Bloomberg Barclays U.S. Aggregate Bond Index, for the one-year and since inception periods ended December 31, 2019. The Trustees noted that the short time period since the Fund’s inception did not support making any significant conclusions about the Fund’s performance.
The Trustees considered the expertise of Income Research + Management (“IR+M”) in managing assets generally and in the bond asset class specifically, noting that IR+M managed approximately $10.5 billion in assets in this asset class, out of a firm-wide total of approximately $75.7 billion in assets under management as of November 30, 2019. The Trustees also noted the experience of the Fund’s portfolio managers in this asset class.
The Trustees observed that the Broadridge comparison of contractual management fees for the Fund’s expense group, assuming an asset level of $100 million, showed the Fund’s management fee was below the group median for the Institutional Class. The actual total expense ratio of the Fund’s Institutional Class was also below the group and universe medians. The Trustees also considered that Harbor Capital had agreed to continue the Fund’s existing contractual fee waiver/expense reimbursement arrangement until at least February 28, 2021. The Trustees noted that Harbor Capital’s profitability in operating the Fund was not excessive.
Harbor High-Yield Bond Fund.The Trustees considered Harbor High-Yield Bond Fund (inception date December 1, 2002), noting its underperformance relative to its Broadridge group median for the one-, three- and five-year periods and relative to its Broadridge universe median for the one- and five-year periods ended December 31, 2019 and its slight outperformance relative to its Broadridge universe median for the three-year period ended December 31, 2019. The Fund’s one-, three- and five-year rolling returns as of December 31, 2019 each ranked in the third quartile according to Morningstar data. The Trustees also considered the fact that the Fund had underperformed its primary benchmark, the ICE BofA U.S. Non-Distressed High Yield Index, for the one-, three- and five-year periods ended December 31, 2019. The Trustees considered that the Fund’s Subadviser, Shenkman Capital, utilizes a more conservative high yield bond investment strategy that often underperforms in periods when high-yield bonds are generally performing well.
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Harbor Fixed Income Funds
Additional Information—Continued
Additional Information—Continued
ADVISORY AGREEMENT APPROVALS—Continued
The Trustees considered the expertise of Shenkman Capital in managing assets generally and in the high-yield asset class specifically, noting that Shenkman Capital managed approximately $5.6 billion in assets in this asset class, out of a firm-wide total of approximately $25.4 billion in assets under management. The Trustees also noted the experience of the Fund’s portfolio managers, one of whom is the founder of the firm, in this asset class and a recent departure from the portfolio management team.
The Trustees observed that the Broadridge comparison of contractual management fees for the Fund’s expense group, assuming an asset level of $500 million, showed the Fund’s management fee was above the group median for the Institutional Class. The actual total expense ratio of the Fund’s Institutional Class, however, was below the group and universe medians. The Trustees also considered that Harbor Capital had agreed to continue the Fund’s existing contractual fee waiver/expense reimbursement arrangement until at least February 28, 2021. The Trustees noted that Harbor Capital’s profitability in operating the Fund was not excessive.
Harbor High-Yield Opportunities Fund.The Trustees considered Harbor High-Yield Opportunities Fund (inception date November 1, 2017), noting its outperformance relative to its Broadridge group median for the one-year period and its Broadridge universe median for the one-year and since inception periods and the Fund’s underperformance relative to its Broadridge group median for the since inception period as of December 31, 2019. The Fund’s one-year and since inception rolling returns as of December 31, 2019 ranked in the second and third quartiles, respectively, according to Morningstar data. The Trustees also considered the fact that the Fund had outperformed its benchmark, the ICE BofA U.S. High Yield Index, for the one-year period and had underperformed its benchmark for the since inception period ended December 31, 2019. The Trustees noted that the short time period since the Fund’s inception did not support drawing any significant conclusions about the Fund’s performance.
The Trustees considered the expertise of Crescent Capital Group LP (“Crescent Capital”) in managing assets generally and in the high-yield asset class specifically, noting that Crescent Capital managed approximately $2.8 billion in assets in this asset class, out of a firm-wide total of approximately $26.4 billion in assets under management. The Trustees also noted the experience of the Fund’s portfolio managers in this asset class.
The Trustees observed that the Broadridge comparison of contractual management fees for the Fund’s expense group, assuming an asset level of $100 million, showed the Fund’s management fee was above the group median for the Institutional Class. The actual total expense ratio of the Fund’s Institutional Class was above the group and universe medians. The Trustees also considered that Harbor Capital had agreed to continue the Fund’s existing contractual fee waiver/expense reimbursement arrangement until at least February 28, 2021. The Trustees noted that Harbor Capital’s profitability in operating the Fund was not excessive.
Harbor Money Market Fund.The Trustees considered Harbor Money Market Fund (inception date December 29, 1987), noting the Fund’s outperformance relative to its group and universe medians for each of the one-, three- and five-year periods ended December 31, 2019, according to Broadridge. According to the Morningstar data presented, the Fund’s one-, three- and five-year rolling returns as of December 31, 2019 were ranked in the second, second and first quartiles, respectively. The Trustees considered the Fund’s performance record relative to its benchmark, the ICE BofA US 3-Month U.S. Treasury Bill Index, noting that the Fund had underperformed the benchmark for the one-, three- and five-year periods ended December 31, 2019. The Trustees noted that the Fund operates as a “government money market fund,” as defined in Rule 2a-7 under the Investment Company Act.
The Trustees considered the expertise of BNP Paribas Asset Management USA, Inc. (“BNPP AM US”) in managing assets generally and in the short duration fixed income asset class specifically, noting that BNPP AM US managed approximately $11.1 billion in short duration assets, out of a firm-wide total of approximately $642.1 billion in assets under management (reflecting the assets of BNP Paribas Asset Management), as of September 31, 2019. The Trustees also noted the experience of the Fund’s portfolio manager in this asset class.
The Trustees considered that the Broadridge comparison of contractual management fees for the Fund’s expense group, assuming an asset level of $125 million, showed that the Fund’s management fee was below the group median for the Institutional Class. The actual total expense ratio of the Fund’s Institutional Class was below the group and universe medians. The Trustees also considered that Harbor Capital had agreed to continue the Fund’s existing contractual fee waiver/expense reimbursement arrangement until at least February 28, 2021. The Trustees noted that Harbor Capital’s profitability in managing the Fund was negative.
The Trustees also separately considered the allocation between Harbor Capital and each Subadviser of the relevant Fund’s investment advisory fee (i.e., the amount of the advisory fee retained by Harbor Capital relative to that paid to the relevant Subadviser as a subadvisory fee). They determined in each case that the allocation was reasonable and the product of arm’s length negotiation between Harbor Capital and the Subadviser.
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Harbor Fixed Income Funds
Additional Information—Continued
Additional Information—Continued
ADVISORY AGREEMENT APPROVALS—Continued
Profitability
The Trustees also considered Harbor Capital’s profitability in operating each of the Funds (as well as on a fund complex-wide basis) as presented by Harbor Capital, and the allocation methodology used by Harbor Capital to compute such profitability. The Trustees concluded that the methodology was reasonable and that a reasonable level of profitability was important to provide suitable incentives for Harbor Capital to continue to attract and maintain high-quality personnel and to invest in infrastructure and other resources to support and enhance the Funds’ operations. In considering Harbor Capital’s profitability generally, the Trustees also reviewed the compensation received by Harbor Services Group and Harbor Funds Distributors in consideration of the transfer agency and distribution services, respectively, that are provided to Harbor Funds and any other benefits enjoyed by Harbor Capital and its affiliates as a result of their relationship with Harbor Funds.
The Trustees also considered that profitability calculations with respect to advisory, transfer agency and distribution operations vary significantly depending on whether revenues on which the calculation is based are taken gross or net of amounts paid to third parties, such as subadvisory fee expenses and certain transfer agency expenses, and noted that subadvisory fee expenses are a direct expense of Harbor Capital. The Trustees also noted that Harbor Capital was, in all cases, waiving a portion of its advisory fee and/or paying or reimbursing a portion of Fund expenses. The Trustees determined that Harbor Capital’s profitability in operating each Fund was not excessive.
Economies of Scale
The Trustees also considered the extent to which economies of scale might be realized as each Fund grows, and the extent to which each Fund’s advisory fee level reflects these economies of scale for the benefit of Fund investors. The Trustees specifically considered whether any advisory fee reduction “breakpoints” should be added to the advisory fee payable by any Fund. As noted above, the Trustees concluded that Harbor Capital’s profitability in each case was not excessive. They concluded that the Funds’ fee structures reflected economies of scale to date and that breakpoints in these fee structures were not required at the present time. The Trustees noted they intend to monitor each Fund’s asset growth in connection with future reviews of each Fund’s Investment Advisory Agreement to determine whether breakpoints may be appropriate at such time.
Review of Liqudity Risk Management Program
The Trust has adopted pursuant to Rule 22e-4 under the Investment Company Act (“Rule 22e-4”) a Liquidity Risk Management Program (the “Program”) for the Funds (except Harbor Money Market Fund). The Board has designated a committee of Harbor Capital employees as the Program Administrator.
The Program is designed to assess and manage each Fund’s liquidity risk. For purposes of Rule 22e-4, “liquidity risk” is defined as the risk that a Fund is unable to satisfy redemption requests without significantly diluting remaining investors’ interests in the Fund. Components of the Program include: (i) periodic assessment of each Fund’s liquidity risk based on certain factors; (ii) classification of each Fund’s holdings into one of four liquidity categories (Highly Liquid, Moderately Liquid, Less Liquid and Illiquid) that reflect an estimate of liquidity under current market conditions; (iii) to the extent a Fund does not invest primarily in Highly Liquid investments, establishment of an appropriate Highly Liquid Investment Minimum (“HLIM”) (as defined in Rule 22e-4) for such Fund and ongoing monitoring of the Fund’s net assets to assess compliance with the Fund’s HLIM; (iv) a limit on the ability of a Fund to acquire illiquid investments in excess of 15% of the Fund’s net assets; and (v) periodic reporting to the Board
At a meeting held on November 7, 2019, the Board of Trustees reviewed the operation and effectiveness of the Program for the period beginning June 1, 2019 (the date the Board formally adopted the Program) and ending September 30, 2019 (the “period”). The Board had previously received interim updates on the implementation of the Program at meetings held on February 12, 2019 and May 14, 2019. At the November 7, 2019 meeting, the Board reviewed a report prepared by, and received a presentation from, the Program Administrator regarding the operation of the Program, its adequacy, and the effectiveness of its implementation during the period. The Program Administrator’s report included, among other things, a review of: (i) the operation of the Program overall; (ii) the level of portfolio investments classified into each of the four liquidity categories and the services provided by the third-party vendor engaged by the Trust to facilitate such classification with respect to certain of the Funds; and (iii) the most recent liquidity risk assessment for the Funds conducted by the Program Administrator in accordance with Rule 22e-4. Based upon its review, the Program Administrator determined that the Program was adequate and effective in facilitating the Funds’ compliance with Rule 22e-4 during the period.
107
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
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
Douglas J. Skinner
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.SAR.FI.0420
Table of Contents
Semi-Annual Report
April 30, 2020
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 |
Harbor Target Retirement 2060 Fund | HATDX |
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:
The first half of the 2020 fiscal year has been remarkable in the range of positive and negative market sentiments expressed in this short six-month window. Investment markets started off the 2020 fiscal year continuing the positive momentum of the 2019 fiscal year. Equity markets across the globe generated modest positive returns during the first three months of the period while fixed income markets delivered steady returns. Market performance drivers were consistent with the prior period – stable positive economic growth and accommodative monetary and fiscal policies were the foundations of continued favorable investment conditions. Come February, however, the early negative implications of the pending global pandemic began to weigh on investment markets before the full effects of the global economic collapse took hold in March. The selloffs across equity markets were unprecedented, with few safe havens available to investors. As the heartbreaking effects of the pandemic progressed around the globe, governments and central banks implemented historic measures to attempt to protect their citizens and economies. The equity and credit markets responded to the massive stimulus measures favorably, bouncing off their March lows to partially recover through much of April.
Across most equity markets, growth stocks significantly outperformed value stocks and larger companies outperformed smaller companies, reflecting investors’ preferences in many cases for proven business models that are more likely to survive the economic challenges brought on by the global pandemic. U.S. government bonds proved to be a safe haven once again, delivering positive returns for the six-month period.
As you read through the comments from the portfolio managers of the Harbor Funds included in this report, you may note their optimism for the future potential of their portfolios. The portfolio managers have responded in their own way to the challenges presented. We believe there are great opportunities for our portfolio managers to deliver attractive long-term investment results for our shareholders. During times of market stress, having a disciplined and proven actively managed investment approach allows our portfolio managers to weigh the risk and rewards that are available to them. While the long-term effects of the global pandemic on economies and markets are still unknown, we remain confident in the capabilities of our portfolio managers.
We encourage our shareholders to take a long-term view and stay focused on their investment goals, particularly during periods of market uncertainty. While past performance is never a guarantee of future results, environments such as the last six months have often provided attractive opportunities for our fund investors to benefit from the skill of our portfolio managers.
I hope that you and your families remain safe and well during this unprecedented time. Thank you for your continued investment in Harbor Funds.
June 22, 2020
Charles F. McCain |
Chairman |
1
Harbor Target Retirement Funds
Manager’s Commentary (Unaudited)
Manager’s Commentary (Unaudited)
Adviser
Harbor Capital Advisors, Inc.
(“Harbor Capital”)
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
The first six months of the 2020 fiscal year began with relative optimism, with U.S. and non-U.S. stock and bond markets extending their rallies from 2019, fueled by economic growth and central bank accommodation. The sense of ease turned to uncertainty and fear as financial markets and the world began the process of digesting the COVID-19 global pandemic’s impact on economic activity in the period and beyond. Global equities, and investment-grade and high-yield corporate bonds sold off sharply and quickly from mid-February to mid-March 2020. While markets recovered much of this lost ground swiftly before the end of April, aided by historic monetary and fiscal policy measures, major indexes measuring their performance posted declines for the period.
U.S. stocks, as measured by the Russell 3000® Index, lost 4.33% during the period. This overall figure obscures wide variations in performance by different types of stocks; two prominent examples carry over from the 2019 fiscal year. First, there was a striking contrast between the performance of growth and value stocks, with the Russell 3000® Growth Index gaining 5.21% and the Russell 3000® Value Index falling by 14.31%. In addition, the differences in the returns of large-cap and small-cap stocks remained wide, with the S&P 500 Index shedding 3.51% while the Russell 2000® Index fell 15.47%.
Non-U.S. equity markets also continued to languish. The MSCI EAFE (ND) Index, a gauge of the performance of large- and mid-cap stocks in developed markets, declined by 14.21%. One reasonable explanation for the weaker performance abroad is that these markets have fewer strong performing Information Technology and Communications Services companies than in the U.S. The MSCI Emerging Markets (ND) Index, measuring emerging markets stock returns, fared a bit better but was still down 10.50%. Part of the difference comes from the strong performance of many Chinese stocks. The index’s China component, roughly 33% of the index, gained 5.27%, as investors became more comfortable that the government had stabilized the virus outbreak.
In fixed income markets, higher quality U.S. bonds held up in this difficult period. The Bloomberg Barclays U.S. Aggregate Bond Index gained 4.86% for the fiscal half year. Here, as well, there was quite a divergence in the performance of different broad segments of the index as U.S. Treasury bonds, typically a safe haven in times of unrest, gained 7.95%, while corporate bonds returned 1.77%. High yield bonds fell during March, as investors punished the bonds of Energy and other pandemic-influenced issuers. The ICE BofA U.S. High Yield (H0A0) Index returned -7.68% for the six months ended April 30.
Performance
The Harbor Target Retirement Funds were down in this environment. The nearest-dated Funds, designed for investors in or near retirement, have greater allocations to underlying Harbor fixed-income funds, and as a result delivered smaller declines. The longest-dated Funds, intended for investors with more time to retirement, include greater weightings to equity funds, and therefore registered larger declines.
The Funds had mixed results relative to their Composite Indexes. The Income through 2035 Funds underperformed their indices while the Funds dated 2040 and later, including the 2060 Fund, which incepted on November 1, 2019, outperformed their indices. Tables with the returns of the Funds and Composite Indices accompany this section. Details on select contributors to and detractors from performance are included below.
The results for the nearer-dated Funds are more influenced by the performance of the underlying fixed income funds. As explained below, certain of these funds had positive returns on an absolute basis during the period, however they were unable to keep up with their benchmarks. Harbor Core Bond was the best absolute performer for the fiscal half year, returning 4.46%. (Returns for all of the underlying funds are for the Institutional Class.) However, the fund trailed the Bloomberg Barclays U.S. Aggregate Bond Index’s 4.86% gain. The principal detractor was the fund’s underweight to Treasury bonds, which as discussed performed strongly during the flight to quality, as well as an overweight to commercial mortgage backed securities and security selection within Agency mortgage backed securities. Harbor Bond Fund also posted a positive return during the period, gaining 3.36%, which also lagged the Bloomberg Barclays U.S. Aggregate Bond Index’s showing. The fund follows a diversified approach which includes
2
Harbor Target Retirement Funds
Manager’s Commentary—Continued
Manager’s Commentary—Continued
taking exposure in sectors outside of the benchmark to enhance risk-adjusted performance. The fund’s positions in non-U.S., high yield, and inflation-linked bonds detracted from results in this period. Both of these funds have posted competitive results over longer periods.
The longer-dated funds rely more on the underlying equity funds. In all, the equity funds fared well in relative terms from November to April, with seven of the 12 holdings topping their benchmarks. However, results here also ran towards extremes. For instance, for the period, Harbor Capital Appreciation Fund returned 10.54% and topped the Russell 1000® Growth Index by 4.45 percentage points. Broad-based positive stock selection contributed to the fund’s outperformance. Its positions in electronic car maker Tesla Motors and online marketplace Shopify have led the way and continue to deliver strong growth as a recession takes hold. Meanwhile, Harbor Diversified International All Cap Fund returned -17.02%, which fell behind its benchmark MSCI All-Country World Ex. U.S. (ND) Index’s decline of -13.22%. The fund’s underweight in and negative stock selection in China was a driver due to its underexposure to Alibaba and Tencent, two Chinese internet stocks that performed well in the period. Negative stock selection and an overweight in the U.K. was also a large detractor as a cadre of travel names and a preference for smaller capitalization rather than larger capitalization stocks weighed on results.
3
Harbor Target Retirement Funds
Manager’s Commentary—Continued
Manager’s Commentary—Continued
Outlook
The COVID-19 driven dislocation during this period shook up financial markets and tested their functioning. Deep uncertainty about the lasting individual, societal, and economic impacts remain. There is still much more unknown than known about how to solve the global pandemic.
The impact on global markets is likely to be great, both due to the dislocation and the various responses. But we also believe that society’s capacity for ingenuity will lead us to weather the storm. That includes the ingenuity of the subadvisers of the Harbor Funds, working to identify the companies and securities that they believe are likely to prove resilient over time.
We continue to believe that constructing diversified portfolios of top-tier actively managed funds and taking a long-term approach should lead to strong outcomes for shareholders, including in the uncertain times ahead.
HARBOR TARGET RETIREMENT FUNDS | Unannualized Total Return 6 Months Ended April 30, 2020 |
Harbor Target Retirement Income Fund | -0.88% |
Harbor Target Retirement 2020 Fund | -2.17 |
Harbor Target Retirement 2025 Fund | -3.72 |
Harbor Target Retirement 2030 Fund | -4.62 |
Harbor Target Retirement 2035 Fund | -5.56 |
Harbor Target Retirement 2040 Fund | -6.52 |
Harbor Target Retirement 2045 Fund | -7.09 |
Harbor Target Retirement 2050 Fund | -7.93 |
Harbor Target Retirement 2055 Fund | -8.76 |
Harbor Target Retirement 2060 Fund | -10.09 |
COMMONLY USED MARKET INDICES | Unannualized Total Return 6 Months Ended April 30, 2020 |
Bloomberg Barclays U.S. Aggregate Bond (domestic bonds) | 4.86% |
MSCI EAFE (ND) (foreign stocks) | -14.21 |
Russell 3000® (entire U.S. stock market) | -4.33 |
HARBOR TARGET RETIREMENT FUND COMPOSITE INDICES | Unannualized Total Return 6 Months Ended April 30, 2020 |
Composite Index Income | -0.23% |
Composite Index 2020 | -1.44 |
Composite Index 2025 | -3.11 |
Composite Index 2030 | -4.40 |
Composite Index 2035 | -5.50 |
Composite Index 2040 | -6.57 |
Composite Index 2045 | -7.25 |
Composite Index 2050 | -8.40 |
Composite Index 2055 | -9.47 |
Composite Index 2060 | -10.57 |
4
Harbor Target Retirement Funds
Manager’s Commentary—Continued
Manager’s Commentary—Continued
Underlying Harbor Funds Performance (Institutional Class Shares)
Total Return for the Period Ended April 30, 2020 | |||||||||||||||||||
EQUITY | 6 Monthsb | One Year | Five Yearsa | Ten Yearsa | Since Inceptiona | Current 7-Day SEC Yield | Inception Date | Expense Ratios*,a | |||||||||||
Subsidizedc | Unsubsidizedd | Net | Gross | ||||||||||||||||
Harbor Capital Appreciation Fund | 10.54% | 10.73% | 13.43% | 14.33% | 11.87% | N/A | N/A | 12/29/1987 | 0.67%e | 0.72% | |||||||||
Harbor Diversified International All Cap Fund | -17.02 | -14.96 | N/A | N/A | 0.32 | N/A | N/A | 11/02/2015 | 0.80f | 0.95 | |||||||||
Harbor Global Leaders Fund | -2.45 | 3.26 | 9.50 | 11.69 | 16.16 | N/A | N/A | 03/01/2009 | 0.86e,f | 1.00 | |||||||||
Harbor International Fund | -15.26 | -13.08 | -2.92 | 2.36 | 9.26 | N/A | N/A | 12/29/1987 | 0.77f | 0.88 | |||||||||
Harbor International Growth Fund | -6.59 | -4.03 | 3.05 | 4.87 | 3.55 | N/A | N/A | 11/01/1993 | 0.85f | 0.91 | |||||||||
Harbor Large Cap Value Fund | -8.30 | -4.14 | 7.74 | 10.73 | 9.63 | N/A | N/A | 12/29/1987 | 0.69f | 0.73 | |||||||||
Harbor Mid Cap Growth Fund | 3.69 | 3.31 | 10.89 | 12.33 | 5.65 | N/A | N/A | 11/01/2000 | 0.88e | 0.91 | |||||||||
Harbor Mid Cap Value Fund | -27.24 | -27.86 | -2.87 | 5.90 | 5.32 | N/A | N/A | 03/01/2002 | 0.86e | 0.89 | |||||||||
Harbor Small Cap Growth Fund | -2.64 | -0.29 | 6.88 | 10.77 | 8.49 | N/A | N/A | 11/01/2000 | 0.88 | 0.88 | |||||||||
Harbor Small Cap Value Fund | -16.49 | -15.88 | 3.97 | 8.38 | 8.76 | N/A | N/A | 12/14/2001 | 0.88 | 0.88 | |||||||||
Harbor Strategic Growth Fund | -1.66 | 2.14 | 9.36 | N/A | 12.95 | N/A | N/A | 11/01/2011g | 0.71f | 0.80 | |||||||||
FIXED INCOME | |||||||||||||||||||
Harbor Bond Fund | 3.36% | 9.26% | 3.75% | 4.06% | 6.91% | N/A | N/A | 12/29/1987 | 0.51%e,f | 1.15% | |||||||||
Harbor Core Bond Fund | 4.46 | 10.36 | N/A | N/A | 7.74 | N/A | N/A | 06/01/2018 | 0.45f | 0.54 | |||||||||
Harbor High-Yield Bond Fund | -6.34 | -3.41 | 2.38 | 4.66 | 6.19 | N/A | N/A | 12/01/2002 | 0.65e | 0.74 | |||||||||
Harbor High-Yield Opportunities Fund | -7.61 | -4.04 | N/A | N/A | -0.22 | N/A | N/A | 11/01/2017 | 0.73f | 0.82 | |||||||||
MONEY MARKET | |||||||||||||||||||
Harbor Money Market Fund | 0.60% | 1.57% | 1.02% | 0.56% | 3.08% | 0.50% | 0.37% | 12/29/1987 | 0.28%e,f | 0.35% |
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, a Fund’s portfolio. This report is distributed for informational purposes only. Information contained herein has been obtained from sources believed reliable, but not guaranteed.
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.
* | 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 | Unannualized |
c | Reflects reimbursements or waivers in effect during the period |
d | Does not reflect reimbursements or waivers currently in effect |
e | Reflects a contractual management fee waiver effective through February 28, 2021 |
f | Reflects an expense limitation agreement (excluding interest expense, if any) effective through February 28, 2021 |
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. |
5
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 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 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 APRIL 30, 2020 | |||||||||||||||||||
2060 Fund | 2055 Fund | 2050 Fund | 2045 Fund | 2040 Fund | 2035 Fund | 2030 Fund | 2025 Fund | 2020 Fund | Income Fund | ||||||||||
Equity | |||||||||||||||||||
Harbor Capital Appreciation Fund | 8% | 8% | 7% | 6% | 6% | 5% | 4% | 3% | 2% | 1% | |||||||||
Harbor Diversified International All Cap Fund | 12 | 12 | 10 | 9 | 9 | 7 | 6 | 5 | 4 | 3 | |||||||||
Harbor Global Leaders Fund | 5 | 5 | 4 | 4 | 3 | 3 | 2 | 2 | 1 | 1 | |||||||||
Harbor International Fund | 12 | 11 | 10 | 9 | 8 | 7 | 6 | 5 | 4 | 3 | |||||||||
Harbor International Growth Fund | 12 | 11 | 10 | 9 | 8 | 7 | 6 | 5 | 4 | 3 | |||||||||
Harbor Large Cap Value Fund | 14 | 14 | 12 | 11 | 10 | 9 | 7 | 6 | 4 | 3 | |||||||||
Harbor Mid Cap Growth Fund | 6 | 6 | 6 | 5 | 5 | 4 | 3 | 3 | 2 | 1 | |||||||||
Harbor Mid Cap Value Fund | 9 | 9 | 8 | 7 | 6 | 6 | 5 | 4 | 3 | 2 | |||||||||
Harbor Small Cap Growth Fund | 5 | 5 | 5 | 5 | 4 | 4 | 3 | 2 | 2 | 1 | |||||||||
Harbor Small Cap Value Fund | 6 | 6 | 6 | 5 | 5 | 4 | 4 | 3 | 2 | 1 | |||||||||
Harbor Strategic Growth Fund | 4 | 4 | 4 | 3 | 3 | 2 | 2 | 3 | 2 | 1 | |||||||||
Total Equity | 93 | 91 | 82 | 73 | 67 | 58 | 48 | 41 | 30 | 20 | |||||||||
Fixed Income | |||||||||||||||||||
Harbor Bond Fund | 4% | 5% | 7% | 10% | 10% | 12% | 15% | 19% | 23% | 26% | |||||||||
Harbor Core Bond Fund | 0 | 0 | 3 | 6 | 10 | 12 | 15 | 19 | 22 | 26 | |||||||||
Harbor High-Yield Bond Fund | 0 | 0 | 0 | 7 | 8 | 11 | 13 | 13 | 11 | 11 | |||||||||
Harbor High-Yield Opportunities Fund | 3 | 4 | 8 | 4 | 5 | 7 | 9 | 8 | 7 | 7 | |||||||||
Total Fixed Income | 7 | 9 | 18 | 27 | 33 | 42 | 52 | 59 | 63 | 70 | |||||||||
Money Market | |||||||||||||||||||
Harbor Money Market Fund | 0% | 0% | 0% | 0% | 0% | 0% | 0% | 0% | 7% | 10% | |||||||||
100% | 100% | 100% | 100% | 100% | 100% | 100% | 100% | 100% | 100% |
6
Harbor Target Retirement Income Fund
Fund Summary —April 30, 2020 (Unaudited)
Fund Summary —April 30, 2020 (Unaudited)
Asset Allocation(% of investments)
FUND PERFORMANCE
TOTAL RETURNS For the periods ended 04/30/2020 | Unannualized | 1 Year | Annualized | Inception Date | ||||||||||
6 Months | 5 Years | 10 Years | ||||||||||||
Harbor Target Retirement Income Fund | ||||||||||||||
Institutional Class | -0.88% | 3.15% | 3.35% | 4.55% | 01/02/2009 | |||||||||
Comparative Indices | ||||||||||||||
Bloomberg Barclays U.S. Aggregate Bond | 4.86% | 10.84% | 3.80% | 3.96% | — | |||||||||
Composite Index Income | -0.23 | 3.96 | 3.54 | 4.63 | — | |||||||||
MSCI EAFE (ND) | -14.21 | -11.34 | -0.17 | 3.55 | — | |||||||||
Russell 3000® | -4.33 | -1.04 | 8.33 | 11.29 | — |
As stated in the Fund’s prospectus dated March 1, 2020, 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.
7
Harbor Target Retirement Income Fund
Portfolio of Investments—April 30, 2020 (Unaudited)
Portfolio of Investments—April 30, 2020 (Unaudited)
Value and Cost in Thousands
EQUITY FUNDS—19.7% | ||||
Shares | Value | |||
3,182 | Harbor Capital Appreciation Fund | $245 | ||
52,488 | Harbor Diversified International All Cap Fund | 477 | ||
7,213 | Harbor Global Leaders Fund | 204 | ||
14,806 | Harbor International Fund | 476 | ||
32,119 | Harbor International Growth Fund | 475 | ||
38,051 | Harbor Large Cap Value Fund | 567 | ||
27,077 | Harbor Mid Cap Growth Fund | 248 | ||
24,539 | Harbor Mid Cap Value Fund | 360 | ||
17,776 | Harbor Small Cap Growth Fund | 220 | ||
9,554 | Harbor Small Cap Value Fund | 264 | ||
11,233 | Harbor Strategic Growth Fund | 242 | ||
TOTAL EQUITY FUNDS | ||||
(Cost $3,882) | 3,778 | |||
FIXED INCOME FUNDS—70.3% | |||
| Shares | Value | |
416,954 | Harbor Bond Fund | $5,049 | |
463,802 | Harbor Core Bond Fund | 5,046 | |
224,288 | Harbor High-Yield Bond Fund | 2,014 | |
153,068 | Harbor High-Yield Opportunities Fund | 1,344 | |
TOTAL FIXED INCOME FUNDS | |||
(Cost $13,395) | 13,453 | ||
MONEY MARKET FUND—10.0% | |||
(Cost $1,923) | |||
1,922,992 | Harbor Money Market Fund | 1,923 | |
TOTAL INVESTMENTS—100.0% | |||
(Cost $19,200) | 19,154 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—0.0% | —a | ||
TOTAL NET ASSETS—100.0% | $19,154 |
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, 2019 through April 30, 2020.
Underlying Funds | Beginning Balance as of 11/01/2019 (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 Bond Fund | $4,582 | $1,598 | $(1,216) | $33 | $52 | $— | $88 | |||||||
Harbor Capital Appreciation Fund | 221 | 168 | (147) | 2 | 1 | 22 | — | |||||||
Harbor Core Bond Fund | 4,581 | 1,623 | (1,278) | 41 | 79 | 38 | 75 | |||||||
Harbor Diversified International Fund | 438 | 301 | (158) | (77) | (27) | — | 11 | |||||||
Harbor Global Leaders Fund | 187 | 136 | (101) | (32) | 14 | 12 | 1 | |||||||
Harbor High-Yield Bond Fund | 1,826 | 724 | (344) | (167) | (25) | — | 62 | |||||||
Harbor High-Yield Opportunities Fund | 1,217 | 511 | (241) | (119) | (24) | — | 39 | |||||||
Harbor International Fund | 438 | 300 | (162) | 13 | (113) | — | 16 | |||||||
Harbor International Growth Fund | 439 | 272 | (190) | (46) | — | — | 10 | |||||||
Harbor Large Cap Value Fund | 524 | 398 | (300) | (61) | 6 | — | 3 | |||||||
Harbor Mid Cap Growth Fund | 227 | 219 | (156) | (11) | (31) | 52 | — | |||||||
Harbor Mid Cap Value Fund | 340 | 362 | (215) | (24) | (103) | 3 | 10 | |||||||
Harbor Money Market Fund | 1,746 | 653 | (476) | — | — | — | 13 | |||||||
Harbor Small Cap Growth Fund | 204 | 171 | (141) | (1) | (13) | 9 | — | |||||||
Harbor Small Cap Value Fund | 249 | 247 | (177) | (6) | (49) | 3 | 1 | |||||||
Harbor Strategic Growth Fund | 222 | 149 | (120) | (16) | 7 | 4 | 1 | |||||||
Total | $17,441 | $7,832 | $(5,422) | $(471) | $(226) | $143 | $330 |
a | Rounds to less than $1,000 |
The accompanying notes are an integral part of the Financial Statements.
8
Harbor Target Retirement 2020 Fund
Fund Summary —April 30, 2020 (Unaudited)
Fund Summary —April 30, 2020 (Unaudited)
Asset Allocation(% of investments)
FUND PERFORMANCE
TOTAL RETURNS For the periods ended 04/30/2020 | Unannualized | 1 Year | Annualized | Inception Date | ||||||||||
6 Months | 5 Years | 10 Years | ||||||||||||
Harbor Target Retirement 2020 Fund | ||||||||||||||
Institutional Class | -2.17% | 1.62% | 3.63% | 5.41% | 01/02/2009 | |||||||||
Comparative Indices | ||||||||||||||
Bloomberg Barclays U.S. Aggregate Bond | 4.86% | 10.84% | 3.80% | 3.96% | — | |||||||||
Composite Index 2020 | -1.44 | 2.45 | 3.89 | 5.49 | — | |||||||||
MSCI EAFE (ND) | -14.21 | -11.34 | -0.17 | 3.55 | — | |||||||||
Russell 3000® | -4.33 | -1.04 | 8.33 | 11.29 | — |
As stated in the Fund’s prospectus dated March 1, 2020, the expense ratio was 0.72%. 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.
9
Harbor Target Retirement 2020 Fund
Portfolio of Investments—April 30, 2020 (Unaudited)
Portfolio of Investments—April 30, 2020 (Unaudited)
Value and Cost in Thousands
EQUITY FUNDS—29.8% | ||||
Shares | Value | |||
5,679 | Harbor Capital Appreciation Fund | $436 | ||
94,207 | Harbor Diversified International All Cap Fund | 855 | ||
12,226 | Harbor Global Leaders Fund | 346 | ||
26,568 | Harbor International Fund | 855 | ||
57,683 | Harbor International Growth Fund | 854 | ||
67,290 | Harbor Large Cap Value Fund | 1,003 | ||
50,511 | Harbor Mid Cap Growth Fund | 462 | ||
45,217 | Harbor Mid Cap Value Fund | 664 | ||
33,455 | Harbor Small Cap Growth Fund | 413 | ||
18,107 | Harbor Small Cap Value Fund | 500 | ||
19,865 | Harbor Strategic Growth Fund | 428 | ||
TOTAL EQUITY FUNDS | ||||
(Cost $6,881) | 6,816 | |||
FIXED INCOME FUNDS—63.2% | |||
| Shares | Value | |
422,500 | Harbor Bond Fund | $5,117 | |
469,832 | Harbor Core Bond Fund | 5,112 | |
280,188 | Harbor High-Yield Bond Fund | 2,516 | |
190,919 | Harbor High-Yield Opportunities Fund | 1,676 | |
TOTAL FIXED INCOME FUNDS | |||
(Cost $14,387) | 14,421 | ||
MONEY MARKET FUND—7.0% | |||
(Cost $1,591) | |||
1,590,538 | Harbor Money Market Fund | 1,591 | |
TOTAL INVESTMENTS—100.0% | |||
(Cost $22,859) | 22,828 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—0.0% | —a | ||
TOTAL NET ASSETS—100.0% | $22,828 |
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, 2019 through April 30, 2020.
Underlying Funds | Beginning Balance as of 11/01/2019 (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 Bond Fund | $5,189 | $1,543 | $(1,705) | $2 | $88 | $— | $87 | |||||||
Harbor Capital Appreciation Fund | 504 | 224 | (299) | 8 | (1) | 44 | — | |||||||
Harbor Core Bond Fund | 5,187 | 1,540 | (1,738) | 14 | 109 | 38 | 76 | |||||||
Harbor Diversified International All Cap Fund | 1,025 | 357 | (348) | (167) | (12) | — | 22 | |||||||
Harbor Global Leaders Fund | 400 | 167 | (192) | (67) | 38 | 23 | 1 | |||||||
Harbor High-Yield Bond Fund | 2,729 | 521 | (497) | (210) | (27) | — | 80 | |||||||
Harbor High-Yield Opportunities Fund | 1,821 | 368 | (338) | (153) | (22) | — | 50 | |||||||
Harbor International Fund | 1,030 | 347 | (349) | 137 | (310) | — | 33 | |||||||
Harbor International Growth Fund | 1,038 | 305 | (416) | (123) | 50 | — | 19 | |||||||
Harbor Large Cap Value Fund | 1,183 | 471 | (559) | (132) | 40 | — | 6 | |||||||
Harbor Mid Cap Growth Fund | 541 | 302 | (301) | (36) | (44) | 106 | — | |||||||
Harbor Mid Cap Value Fund | 795 | 487 | (392) | (57) | (169) | 5 | 19 | |||||||
Harbor Money Market Fund | 1,712 | 389 | (510) | — | — | — | 10 | |||||||
Harbor Small Cap Growth Fund | 495 | 217 | (278) | 12 | (33) | 17 | — | |||||||
Harbor Small Cap Value Fund | 592 | 327 | (322) | (20) | (77) | 6 | 3 | |||||||
Harbor Strategic Growth Fund | 502 | 174 | (234) | (36) | 22 | 7 | 2 | |||||||
Total | $24,743 | $7,739 | $(8,478) | $(828) | $(348) | $246 | $408 |
a | Rounds to less than $1,000 |
The accompanying notes are an integral part of the Financial Statements.
10
Harbor Target Retirement 2025 Fund
Fund Summary —April 30, 2020 (Unaudited)
Fund Summary —April 30, 2020 (Unaudited)
Asset Allocation(% of investments)
FUND PERFORMANCE
TOTAL RETURNS For the periods ended 04/30/2020 | Unannualized | 1 Year | Annualized | Inception Date | ||||||||||
6 Months | 5 Years | 10 Years | ||||||||||||
Harbor Target Retirement 2025 Fund | ||||||||||||||
Institutional Class | -3.72% | -0.08% | 3.62% | 5.56% | 01/02/2009 | |||||||||
Comparative Indices | ||||||||||||||
Bloomberg Barclays U.S. Aggregate Bond | 4.86% | 10.84% | 3.80% | 3.96% | — | |||||||||
Composite Index 2025 | -3.11 | 0.64 | 3.88 | 5.68 | — | |||||||||
MSCI EAFE (ND) | -14.21 | -11.34 | -0.17 | 3.55 | — | |||||||||
Russell 3000® | -4.33 | -1.04 | 8.33 | 11.29 | — |
As stated in the Fund’s prospectus dated March 1, 2020, 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.
11
Harbor Target Retirement 2025 Fund
Portfolio of Investments—April 30, 2020 (Unaudited)
Portfolio of Investments—April 30, 2020 (Unaudited)
Value and Cost in Thousands
EQUITY FUNDS—40.6% | |||
Shares | Value | ||
6,549 | Harbor Capital Appreciation Fund | $503 | |
111,073 | Harbor Diversified International All Cap Fund | 1,009 | |
13,991 | Harbor Global Leaders Fund | 396 | |
31,351 | Harbor International Fund | 1,008 | |
68,019 | Harbor International Growth Fund | 1,007 | |
78,410 | Harbor Large Cap Value Fund | 1,169 | |
59,422 | Harbor Mid Cap Growth Fund | 544 | |
53,449 | Harbor Mid Cap Value Fund | 785 | |
39,891 | Harbor Small Cap Growth Fund | 493 | |
21,392 | Harbor Small Cap Value Fund | 590 | |
23,188 | Harbor Strategic Growth Fund | 499 | |
TOTAL EQUITY FUNDS | |||
(Cost $8,256) | 8,003 | ||
FIXED INCOME FUNDS—59.4% | |||
| Shares | Value | |
312,832 | Harbor Bond Fund | $3,788 | |
347,840 | Harbor Core Bond Fund | 3,785 | |
277,075 | Harbor High-Yield Bond Fund | 2,488 | |
188,784 | Harbor High-Yield Opportunities Fund | 1,658 | |
TOTAL FIXED INCOME FUNDS | |||
(Cost $11,792) | 11,719 | ||
TOTAL INVESTMENTS—100.0% | |||
(Cost $20,048) | 19,722 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—0.0% | —a | ||
TOTAL NET ASSETS—100.0% | $19,722 |
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, 2019 through April 30, 2020.
Underlying Funds | Beginning Balance as of 11/01/2019 (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 Bond Fund | $3,607 | $1,506 | $(1,392) | $(10) | $77 | $— | $62 | |||||||
Harbor Capital Appreciation Fund | 535 | 213 | (250) | 10 | (5) | 48 | — | |||||||
Harbor Core Bond Fund | 3,607 | 1,478 | (1,394) | 9 | 85 | 27 | 53 | |||||||
Harbor Diversified International All Cap Fund | 1,082 | 403 | (263) | (197) | (16) | — | 24 | |||||||
Harbor Global Leaders Fund | 422 | 173 | (166) | (64) | 31 | 25 | 1 | |||||||
Harbor High-Yield Bond Fund | 2,585 | 693 | (561) | (181) | (48) | — | 77 | |||||||
Harbor High-Yield Opportunities Fund | 1,722 | 462 | (357) | (144) | (25) | — | 48 | |||||||
Harbor International Fund | 1,086 | 396 | (266) | 50 | (258) | — | 36 | |||||||
Harbor International Growth Fund | 1,094 | 349 | (346) | (130) | 40 | — | 21 | |||||||
Harbor Large Cap Value Fund | 1,247 | 504 | (473) | (128) | 19 | — | 6 | |||||||
Harbor Mid Cap Growth Fund | 581 | 332 | (275) | (32) | (62) | 118 | — | |||||||
Harbor Mid Cap Value Fund | 834 | 591 | (373) | (79) | (188) | 6 | 22 | |||||||
Harbor Small Cap Growth Fund | 528 | 246 | (252) | 24 | (53) | 20 | — | |||||||
Harbor Small Cap Value Fund | 628 | 373 | (294) | (28) | (89) | 6 | 4 | |||||||
Harbor Strategic Growth Fund | 534 | 184 | (200) | (34) | 15 | 8 | 2 | |||||||
Total | $20,092 | $7,903 | $(6,862) | $(934) | $(477) | $258 | $356 |
a | Rounds to less than $1,000 |
The accompanying notes are an integral part of the Financial Statements.
12
Harbor Target Retirement 2030 Fund
Fund Summary —April 30, 2020 (Unaudited)
Fund Summary —April 30, 2020 (Unaudited)
Asset Allocation(% of investments)
FUND PERFORMANCE
TOTAL RETURNS For the periods ended 04/30/2020 | Unannualized | 1 Year | Annualized | Inception Date | ||||||||||
6 Months | 5 Years | 10 Years | ||||||||||||
Harbor Target Retirement 2030 Fund | ||||||||||||||
Institutional Class | -4.62% | -1.19% | 3.66% | 5.90% | 01/02/2009 | |||||||||
Comparative Indices | ||||||||||||||
Bloomberg Barclays U.S. Aggregate Bond | 4.86% | 10.84% | 3.80% | 3.96% | — | |||||||||
Composite Index 2030 | -4.40 | -0.92 | 3.82 | 5.94 | — | |||||||||
MSCI EAFE (ND) | -14.21 | -11.34 | -0.17 | 3.55 | — | |||||||||
Russell 3000® | -4.33 | -1.04 | 8.33 | 11.29 | — |
As stated in the Fund’s prospectus dated March 1, 2020, 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.
13
Harbor Target Retirement 2030 Fund
Portfolio of Investments—April 30, 2020 (Unaudited)
Portfolio of Investments—April 30, 2020 (Unaudited)
Value and Cost in Thousands
EQUITY FUNDS—47.9% | |||
Shares | Value | ||
14,094 | Harbor Capital Appreciation Fund | $1,083 | |
193,838 | Harbor Diversified International All Cap Fund | 1,760 | |
24,163 | Harbor Global Leaders Fund | 684 | |
54,677 | Harbor International Fund | 1,758 | |
118,626 | Harbor International Growth Fund | 1,756 | |
135,746 | Harbor Large Cap Value Fund | 2,024 | |
104,153 | Harbor Mid Cap Growth Fund | 953 | |
90,307 | Harbor Mid Cap Value Fund | 1,327 | |
69,384 | Harbor Small Cap Growth Fund | 857 | |
36,326 | Harbor Small Cap Value Fund | 1,002 | |
31,309 | Harbor Strategic Growth Fund | 674 | |
TOTAL EQUITY FUNDS | |||
(Cost $14,400) | 13,878 | ||
FIXED INCOME FUNDS—52.1% | |||
| Shares | Value | |
368,606 | Harbor Bond Fund | $4,464 | |
409,911 | Harbor Core Bond Fund | 4,460 | |
413,596 | Harbor High-Yield Bond Fund | 3,714 | |
282,332 | Harbor High-Yield Opportunities Fund | 2,479 | |
TOTAL FIXED INCOME FUNDS | |||
(Cost $15,220) | 15,117 | ||
TOTAL INVESTMENTS—100.0% | |||
(Cost $29,620) | 28,995 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—0.0% | —a | ||
TOTAL NET ASSETS—100.0% | $28,995 |
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, 2019 through April 30, 2020.
Underlying Funds | Beginning Balance as of 11/01/2019 (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 Bond Fund | $4,495 | $1,423 | $(1,538) | $42 | $42 | $— | $73 | |||||||
Harbor Capital Appreciation Fund | 1,236 | 309 | (483) | (6) | 27 | 107 | 1 | |||||||
Harbor Core Bond Fund | 4,494 | 1,410 | (1,558) | 13 | 101 | 32 | 63 | |||||||
Harbor Diversified International All Cap Fund | 1,945 | 443 | (253) | (357) | (18) | — | 42 | |||||||
Harbor Global Leaders Fund | 757 | 174 | (191) | (110) | 54 | 43 | 2 | |||||||
Harbor High-Yield Bond Fund | 3,862 | 962 | (773) | (264) | (73) | — | 112 | |||||||
Harbor High-Yield Opportunities Fund | 2,575 | 648 | (494) | (205) | (45) | — | 70 | |||||||
Harbor International Fund | 1,947 | 436 | (261) | (145) | (219) | — | 63 | |||||||
Harbor International Growth Fund | 1,969 | 343 | (399) | (223) | 66 | — | 37 | |||||||
Harbor Large Cap Value Fund | 2,246 | 587 | (627) | (307) | 125 | — | 10 | |||||||
Harbor Mid Cap Growth Fund | 1,068 | 449 | (404) | (68) | (92) | 209 | — | |||||||
Harbor Mid Cap Value Fund | 1,491 | 862 | (564) | (175) | (287) | 11 | 37 | |||||||
Harbor Small Cap Growth Fund | 954 | 323 | (374) | 32 | (78) | 34 | — | |||||||
Harbor Small Cap Value Fund | 1,142 | 496 | (436) | (86) | (114) | 11 | 6 | |||||||
Harbor Strategic Growth Fund | 697 | 166 | (163) | (36) | 10 | 10 | 3 | |||||||
Total | $30,878 | $9,031 | $(8,518) | $(1,895) | $(501) | $457 | $519 |
a | Rounds to less than $1,000 |
The accompanying notes are an integral part of the Financial Statements.
14
Harbor Target Retirement 2035 Fund
Fund Summary —April 30, 2020 (Unaudited)
Fund Summary —April 30, 2020 (Unaudited)
Asset Allocation(% of investments)
FUND PERFORMANCE
TOTAL RETURNS For the periods ended 04/30/2020 | Unannualized | 1 Year | Annualized | Inception Date | ||||||||||
6 Months | 5 Years | 10 Years | ||||||||||||
Harbor Target Retirement 2035 Fund | ||||||||||||||
Institutional Class | -5.56% | -2.43% | 3.81% | 6.31% | 01/02/2009 | |||||||||
Comparative Indices | ||||||||||||||
Bloomberg Barclays U.S. Aggregate Bond | 4.86% | 10.84% | 3.80% | 3.96% | — | |||||||||
Composite Index 2035 | -5.50 | -2.31 | 3.85 | 6.25 | — | |||||||||
MSCI EAFE (ND) | -14.21 | -11.34 | -0.17 | 3.55 | — | |||||||||
Russell 3000® | -4.33 | -1.04 | 8.33 | 11.29 | — |
As stated in the Fund’s prospectus dated March 1, 2020, 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.
15
Harbor Target Retirement 2035 Fund
Portfolio of Investments—April 30, 2020 (Unaudited)
Portfolio of Investments—April 30, 2020 (Unaudited)
Value and Cost in Thousands
EQUITY FUNDS—58.1% | |||
Shares | Value | ||
11,686 | Harbor Capital Appreciation Fund | $898 | |
151,270 | Harbor Diversified International All Cap Fund | 1,373 | |
18,719 | Harbor Global Leaders Fund | 530 | |
42,682 | Harbor International Fund | 1,373 | |
92,153 | Harbor International Growth Fund | 1,364 | |
105,971 | Harbor Large Cap Value Fund | 1,580 | |
80,750 | Harbor Mid Cap Growth Fund | 739 | |
73,391 | Harbor Mid Cap Value Fund | 1,078 | |
54,353 | Harbor Small Cap Growth Fund | 671 | |
29,451 | Harbor Small Cap Value Fund | 813 | |
21,114 | Harbor Strategic Growth Fund | 455 | |
TOTAL EQUITY FUNDS | |||
(Cost $11,415) | 10,874 | ||
FIXED INCOME FUNDS—41.9% | |||
| Shares | Value | |
185,866 | Harbor Bond Fund | $2,251 | |
206,604 | Harbor Core Bond Fund | 2,248 | |
223,583 | Harbor High-Yield Bond Fund | 2,007 | |
152,398 | Harbor High-Yield Opportunities Fund | 1,338 | |
TOTAL FIXED INCOME FUNDS | |||
(Cost $7,911) | 7,844 | ||
TOTAL INVESTMENTS—100.0% | |||
(Cost $19,326) | 18,718 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—0.0% | —a | ||
TOTAL NET ASSETS—100.0% | $18,718 |
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, 2019 through April 30, 2020.
Underlying Funds | Beginning Balance as of 11/01/2019 (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 Bond Fund | $2,310 | $953 | $(1,054) | $(7) | $49 | $— | $38 | |||||||
Harbor Capital Appreciation Fund | 989 | 296 | (403) | (20) | 36 | 87 | 1 | |||||||
Harbor Core Bond Fund | 2,308 | 941 | (1,058) | (11) | 68 | 17 | 32 | |||||||
Harbor Diversified International All Cap Fund | 1,507 | 344 | (187) | (286) | (5) | — | 33 | |||||||
Harbor Global Leaders Fund | 583 | 147 | (156) | (88) | 44 | 34 | 1 | |||||||
Harbor High-Yield Bond Fund | 2,052 | 725 | (585) | (125) | (60) | — | 61 | |||||||
Harbor High-Yield Opportunities Fund | 1,368 | 481 | (375) | (104) | (32) | — | 38 | |||||||
Harbor International Fund | 1,507 | 355 | (207) | (128) | (154) | — | 49 | |||||||
Harbor International Growth Fund | 1,512 | 253 | (276) | (172) | 47 | — | 29 | |||||||
Harbor Large Cap Value Fund | 1,731 | 517 | (519) | (248) | 99 | — | 8 | |||||||
Harbor Mid Cap Growth Fund | 810 | 374 | (321) | (68) | (56) | 163 | — | |||||||
Harbor Mid Cap Value Fund | 1,153 | 679 | (394) | (164) | (196) | 8 | 30 | |||||||
Harbor Small Cap Growth Fund | 738 | 241 | (271) | 9 | (46) | 27 | — | |||||||
Harbor Small Cap Value Fund | 880 | 396 | (305) | (97) | (61) | 9 | 5 | |||||||
Harbor Strategic Growth Fund | 496 | 110 | (134) | (27) | 10 | 7 | 2 | |||||||
Total | $19,944 | $6,812 | $(6,245) | $(1,536) | $(257) | $352 | $327 |
a | Rounds to less than $1,000 |
The accompanying notes are an integral part of the Financial Statements.
16
Harbor Target Retirement 2040 Fund
Fund Summary —April 30, 2020 (Unaudited)
Fund Summary —April 30, 2020 (Unaudited)
Asset Allocation(% of investments)
FUND PERFORMANCE
TOTAL RETURNS For the periods ended 04/30/2020 | Unannualized | 1 Year | Annualized | Inception Date | ||||||||||
6 Months | 5 Years | 10 Years | ||||||||||||
Harbor Target Retirement 2040 Fund | ||||||||||||||
Institutional Class | -6.52% | -3.46% | 3.96% | 6.69% | 01/02/2009 | |||||||||
Comparative Indices | ||||||||||||||
Bloomberg Barclays U.S. Aggregate Bond | 4.86% | 10.84% | 3.80% | 3.96% | — | |||||||||
Composite Index 2040 | -6.57 | -3.64 | 3.87 | 6.60 | — | |||||||||
MSCI EAFE (ND) | -14.21 | -11.34 | -0.17 | 3.55 | — | |||||||||
Russell 3000® | -4.33 | -1.04 | 8.33 | 11.29 | — |
As stated in the Fund’s prospectus dated March 1, 2020, the expense ratio was 0.77%. 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.
17
Harbor Target Retirement 2040 Fund
Portfolio of Investments—April 30, 2020 (Unaudited)
Portfolio of Investments—April 30, 2020 (Unaudited)
Value and Cost in Thousands
EQUITY FUNDS—67.4% | |||
Shares | Value | ||
20,276 | Harbor Capital Appreciation Fund | $1,558 | |
255,837 | Harbor Diversified International All Cap Fund | 2,323 | |
32,278 | Harbor Global Leaders Fund | 914 | |
72,164 | Harbor International Fund | 2,321 | |
156,575 | Harbor International Growth Fund | 2,317 | |
179,882 | Harbor Large Cap Value Fund | 2,682 | |
136,786 | Harbor Mid Cap Growth Fund | 1,252 | |
119,096 | Harbor Mid Cap Value Fund | 1,749 | |
90,882 | Harbor Small Cap Growth Fund | 1,122 | |
47,741 | Harbor Small Cap Value Fund | 1,318 | |
35,669 | Harbor Strategic Growth Fund | 768 | |
TOTAL EQUITY FUNDS | |||
(Cost $19,288) | 18,324 | ||
FIXED INCOME FUNDS—32.6% | |||
| Shares | Value | |
215,191 | Harbor Bond Fund | $2,606 | |
239,315 | Harbor Core Bond Fund | 2,604 | |
243,660 | Harbor High-Yield Bond Fund | 2,188 | |
165,627 | Harbor High-Yield Opportunities Fund | 1,454 | |
TOTAL FIXED INCOME FUNDS | |||
(Cost $8,866) | 8,852 | ||
TOTAL INVESTMENTS—100.0% | |||
(Cost $28,154) | 27,176 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—0.0% | — | ||
TOTAL NET ASSETS—100.0% | $27,176 |
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, 2019 through April 30, 2020.
Underlying Funds | Beginning Balance as of 11/01/2019 (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 Bond Fund | $2,495 | $1,296 | $(1,233) | $(9) | $57 | $— | $41 | |||||||
Harbor Capital Appreciation Fund | 1,641 | 475 | (573) | (66) | 81 | 140 | 1 | |||||||
Harbor Core Bond Fund | 2,492 | 1,294 | (1,248) | (13) | 79 | 18 | 35 | |||||||
Harbor Diversified International All Cap Fund | 2,509 | 566 | (253) | (499) | — | — | 53 | |||||||
Harbor Global Leaders Fund | 973 | 273 | (253) | (137) | 58 | 54 | 3 | |||||||
Harbor High-Yield Bond Fund | 2,040 | 1,002 | (658) | (124) | (72) | — | 62 | |||||||
Harbor High-Yield Opportunities Fund | 1,354 | 672 | (426) | (98) | (48) | — | 38 | |||||||
Harbor International Fund | 2,520 | 562 | (278) | (271) | (212) | — | 79 | |||||||
Harbor International Growth Fund | 2,539 | 435 | (437) | (290) | 70 | — | 46 | |||||||
Harbor Large Cap Value Fund | 2,889 | 817 | (758) | (411) | 145 | — | 13 | |||||||
Harbor Mid Cap Growth Fund | 1,344 | 563 | (447) | (161) | (47) | 260 | — | |||||||
Harbor Mid Cap Value Fund | 1,939 | 1,130 | (708) | (318) | (294) | 13 | 47 | |||||||
Harbor Small Cap Growth Fund | 1,222 | 385 | (413) | (39) | (33) | 43 | — | |||||||
Harbor Small Cap Value Fund | 1,459 | 676 | (546) | (209) | (62) | 14 | 7 | |||||||
Harbor Strategic Growth Fund | 820 | 179 | (200) | (38) | 7 | 11 | 4 | |||||||
Total | $28,236 | $10,325 | $(8,431) | $(2,683) | $(271) | $553 | $429 |
The accompanying notes are an integral part of the Financial Statements.
18
Harbor Target Retirement 2045 Fund
Fund Summary —April 30, 2020 (Unaudited)
Fund Summary —April 30, 2020 (Unaudited)
Asset Allocation(% of investments)
FUND PERFORMANCE
TOTAL RETURNS For the periods ended 04/30/2020 | Unannualized | 1 Year | Annualized | Inception Date | ||||||||||
6 Months | 5 Years | 10 Years | ||||||||||||
Harbor Target Retirement 2045 Fund | ||||||||||||||
Institutional Class | -7.09% | -4.31% | 4.09% | 7.03% | 01/02/2009 | |||||||||
Comparative Indices | ||||||||||||||
Bloomberg Barclays U.S. Aggregate Bond | 4.86% | 10.84% | 3.80% | 3.96% | — | |||||||||
Composite Index 2045 | -7.25 | -4.44 | 3.97 | 6.91 | — | |||||||||
MSCI EAFE (ND) | -14.21 | -11.34 | -0.17 | 3.55 | — | |||||||||
Russell 3000® | -4.33 | -1.04 | 8.33 | 11.29 | — |
As stated in the Fund’s prospectus dated March 1, 2020, 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.
19
Harbor Target Retirement 2045 Fund
Portfolio of Investments—April 30, 2020 (Unaudited)
Portfolio of Investments—April 30, 2020 (Unaudited)
Value and Cost in Thousands
EQUITY FUNDS—72.8% | |||
Shares | Value | ||
11,529 | Harbor Capital Appreciation Fund | $886 | |
144,759 | Harbor Diversified International All Cap Fund | 1,314 | |
18,660 | Harbor Global Leaders Fund | 529 | |
40,832 | Harbor International Fund | 1,313 | |
88,596 | Harbor International Growth Fund | 1,311 | |
102,589 | Harbor Large Cap Value Fund | 1,530 | |
76,705 | Harbor Mid Cap Growth Fund | 702 | |
67,465 | Harbor Mid Cap Value Fund | 991 | |
50,833 | Harbor Small Cap Growth Fund | 628 | |
26,852 | Harbor Small Cap Value Fund | 741 | |
20,295 | Harbor Strategic Growth Fund | 437 | |
TOTAL EQUITY FUNDS | |||
(Cost $11,058) | 10,382 | ||
FIXED INCOME FUNDS—27.2% | |||
| Shares | Value | |
118,403 | Harbor Bond Fund | $1,434 | |
77,721 | Harbor Core Bond Fund | 846 | |
107,077 | Harbor High-Yield Bond Fund | 961 | |
72,565 | Harbor High-Yield Opportunities Fund | 637 | |
TOTAL FIXED INCOME FUNDS | |||
(Cost $3,873) | 3,878 | ||
TOTAL INVESTMENTS—100.0% | |||
(Cost $14,931) | 14,260 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—0.0% | —a | ||
TOTAL NET ASSETS—100.0% | $14,260 |
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, 2019 through April 30, 2020.
Underlying Funds | Beginning Balance as of 11/01/2019 (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 Bond Fund | $1,512 | $733 | $(837) | $(14) | $40 | $— | $25 | |||||||
Harbor Capital Appreciation Fund | 928 | 245 | (302) | (3) | 18 | 81 | 1 | |||||||
Harbor Core Bond Fund | 756 | 553 | (485) | (9) | 31 | 6 | 11 | |||||||
Harbor Diversified International All Cap Fund | 1,399 | 290 | (104) | (272) | 1 | — | 31 | |||||||
Harbor Global Leaders Fund | 560 | 136 | (125) | (75) | 33 | 32 | 2 | |||||||
Harbor High-Yield Bond Fund | 956 | 469 | (382) | (44) | (38) | — | 28 | |||||||
Harbor High-Yield Opportunities Fund | 633 | 312 | (248) | (37) | (23) | — | 17 | |||||||
Harbor International Fund | 1,404 | 287 | (115) | (179) | (84) | — | 46 | |||||||
Harbor International Growth Fund | 1,415 | 200 | (188) | (142) | 26 | — | 27 | |||||||
Harbor Large Cap Value Fund | 1,631 | 411 | (376) | (195) | 59 | — | 8 | |||||||
Harbor Mid Cap Growth Fund | 746 | 298 | (231) | (75) | (36) | 148 | — | |||||||
Harbor Mid Cap Value Fund | 1,082 | 584 | (343) | (148) | (184) | 8 | 27 | |||||||
Harbor Small Cap Growth Fund | 675 | 195 | (208) | 3 | (37) | 24 | — | |||||||
Harbor Small Cap Value Fund | 810 | 349 | (273) | (63) | (82) | 8 | 4 | |||||||
Harbor Strategic Growth Fund | 463 | 89 | (101) | (19) | 5 | 7 | 1 | |||||||
Total | $14,970 | $5,151 | $(4,318) | $(1,272) | $(271) | $314 | $228 |
a | Rounds to less than $1,000 |
The accompanying notes are an integral part of the Financial Statements.
20
Harbor Target Retirement 2050 Fund
Fund Summary —April 30, 2020 (Unaudited)
Fund Summary —April 30, 2020 (Unaudited)
Asset Allocation(% of investments)
FUND PERFORMANCE
TOTAL RETURNS For the periods ended 04/30/2020 | Unannualized | 1 Year | Annualized | Inception Date | ||||||||||
6 Months | 5 Years | 10 Years | ||||||||||||
Harbor Target Retirement 2050 Fund | ||||||||||||||
Institutional Class | -7.93% | -5.42% | 4.17% | 7.36% | 01/02/2009 | |||||||||
Comparative Indices | ||||||||||||||
Bloomberg Barclays U.S. Aggregate Bond | 4.86% | 10.84% | 3.80% | 3.96% | — | |||||||||
Composite Index 2050 | -8.40 | -5.92 | 3.94 | 7.17 | — | |||||||||
MSCI EAFE (ND) | -14.21 | -11.34 | -0.17 | 3.55 | — | |||||||||
Russell 3000® | -4.33 | -1.04 | 8.33 | 11.29 | — |
As stated in the Fund’s prospectus dated March 1, 2020, the expense ratio was 0.80%. 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.
21
Harbor Target Retirement 2050 Fund
Portfolio of Investments—April 30, 2020 (Unaudited)
Portfolio of Investments—April 30, 2020 (Unaudited)
Value and Cost in Thousands
EQUITY FUNDS—81.8% | |||
Shares | Value | ||
21,706 | Harbor Capital Appreciation Fund | $1,668 | |
271,761 | Harbor Diversified International All Cap Fund | 2,467 | |
35,384 | Harbor Global Leaders Fund | 1,002 | |
76,682 | Harbor International Fund | 2,466 | |
166,466 | Harbor International Growth Fund | 2,464 | |
193,555 | Harbor Large Cap Value Fund | 2,886 | |
143,362 | Harbor Mid Cap Growth Fund | 1,312 | |
127,901 | Harbor Mid Cap Value Fund | 1,879 | |
95,272 | Harbor Small Cap Growth Fund | 1,177 | |
50,776 | Harbor Small Cap Value Fund | 1,401 | |
38,179 | Harbor Strategic Growth Fund | 822 | |
TOTAL EQUITY FUNDS | |||
(Cost $20,518) | 19,544 | ||
FIXED INCOME FUNDS—18.2% | |||
| Shares | Value | |
134,533 | Harbor Bond Fund | $1,629 | |
74,795 | Harbor Core Bond Fund | 814 | |
218,659 | Harbor High-Yield Opportunities Fund | 1,920 | |
TOTAL FIXED INCOME FUNDS | |||
(Cost $4,377) | 4,363 | ||
TOTAL INVESTMENTS—100.0% | |||
(Cost $24,895) | 23,907 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—0.0% | —a | ||
TOTAL NET ASSETS—100.0% | $23,907 |
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, 2019 through April 30, 2020.
Underlying Funds | Beginning Balance as of 11/01/2019 (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 Bond Fund | $1,497 | $1,071 | $(970) | $(9) | $40 | $— | $25 | |||||||
Harbor Capital Appreciation Fund | 1,809 | 403 | (561) | (88) | 105 | 157 | 2 | |||||||
Harbor Core Bond Fund | 748 | 536 | (491) | (10) | 31 | 5 | 11 | |||||||
Harbor Diversified International All Cap Fund | 2,724 | 466 | (191) | (527) | (5) | — | 59 | |||||||
Harbor Global Leaders Fund | 1,102 | 201 | (216) | (135) | 50 | 63 | 2 | |||||||
Harbor High-Yield Opportunities Fund | 1,827 | 1,025 | (736) | (106) | (90) | — | 51 | |||||||
Harbor International Fund | 2,728 | 478 | (222) | (344) | (174) | — | 88 | |||||||
Harbor International Growth Fund | 2,738 | 341 | (385) | (296) | 66 | — | 52 | |||||||
Harbor Large Cap Value Fund | 3,186 | 588 | (610) | (402) | 124 | — | 15 | |||||||
Harbor Mid Cap Growth Fund | 1,443 | 481 | (383) | (217) | (12) | 285 | — | |||||||
Harbor Mid Cap Value Fund | 2,107 | 1,039 | (614) | (401) | (252) | 15 | 52 | |||||||
Harbor Small Cap Growth Fund | 1,306 | 290 | (345) | (68) | (6) | 47 | — | |||||||
Harbor Small Cap Value Fund | 1,573 | 593 | (478) | (261) | (26) | 15 | 8 | |||||||
Harbor Strategic Growth Fund | 904 | 126 | (177) | (38) | 7 | 13 | 4 | |||||||
Total | $25,692 | $7,638 | $(6,379) | $(2,902) | $(142) | $600 | $369 |
a | Rounds to less than $1,000 |
The accompanying notes are an integral part of the Financial Statements.
22
Harbor Target Retirement 2055 Fund
Fund Summary —April 30, 2020 (Unaudited)
Fund Summary —April 30, 2020 (Unaudited)
Asset Allocation(% of investments)
FUND PERFORMANCE
TOTAL RETURNS For the periods ended 04/30/2020 | Unannualized | 1 Year | Annualized | Inception Date | ||||||||||
6 Months | 5 Years | Life of Fund | ||||||||||||
Harbor Target Retirement 2055 Fund | ||||||||||||||
Institutional Class | -8.76% | -6.49% | 4.12% | 4.92% | 11/01/2014 | |||||||||
Comparative Indices | ||||||||||||||
Bloomberg Barclays U.S. Aggregate Bond | 4.86% | 10.84% | 3.80% | 3.83% | — | |||||||||
Composite Index 2055 | -9.47 | -7.20 | 3.83 | 4.35 | — | |||||||||
MSCI EAFE (ND) | -14.21 | -11.34 | -0.17 | 1.05 | — | |||||||||
Russell 3000® | -4.33 | -1.04 | 8.33 | 8.46 | — |
As stated in the Fund’s prospectus dated March 1, 2020, the expense ratio was 0.80%. 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.
23
Harbor Target Retirement 2055 Fund
Portfolio of Investments—April 30, 2020 (Unaudited)
Portfolio of Investments—April 30, 2020 (Unaudited)
Value and Cost in Thousands
EQUITY FUNDS—91.0% | |||
Shares | Value | ||
6,512 | Harbor Capital Appreciation Fund | $500 | |
81,205 | Harbor Diversified International All Cap Fund | 737 | |
10,738 | Harbor Global Leaders Fund | 304 | |
22,907 | Harbor International Fund | 737 | |
49,702 | Harbor International Growth Fund | 735 | |
58,071 | Harbor Large Cap Value Fund | 866 | |
42,585 | Harbor Mid Cap Growth Fund | 390 | |
37,897 | Harbor Mid Cap Value Fund | 557 | |
28,122 | Harbor Small Cap Growth Fund | 347 | |
14,965 | Harbor Small Cap Value Fund | 413 | |
11,456 | Harbor Strategic Growth Fund | 247 | |
TOTAL EQUITY FUNDS | |||
(Cost $6,328) | 5,833 | ||
FIXED INCOME FUNDS—9.0% | |||
| Shares | Value | |
26,036 | Harbor Bond Fund | $315 | |
29,446 | Harbor High-Yield Opportunities Fund | 259 | |
TOTAL FIXED INCOME FUNDS | |||
(Cost $581) | 574 | ||
TOTAL INVESTMENTS—100.0% | |||
(Cost $6,909) | 6,407 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—0.0% | —a | ||
TOTAL NET ASSETS—100.0% | $6,407 |
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, 2019 through April 30, 2020.
Underlying Funds | Beginning Balance as of 11/01/2019 (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 Bond Fund | $239 | $258 | $(188) | $(4) | $10 | $— | $4 | |||||||
Harbor Capital Appreciation Fund | 483 | 153 | (141) | 4 | 1 | 43 | — | |||||||
Harbor Diversified International All Cap Fund | 724 | 242 | (76) | (150) | (3) | — | 16 | |||||||
Harbor Global Leaders Fund | 299 | 85 | (56) | (37) | 13 | 17 | 1 | |||||||
Harbor High-Yield Opportunities Fund | 194 | 197 | (108) | (16) | (8) | — | 6 | |||||||
Harbor International Fund | 724 | 249 | (89) | (56) | (91) | — | 24 | |||||||
Harbor International Growth Fund | 730 | 186 | (115) | (78) | 12 | — | 14 | |||||||
Harbor Large Cap Value Fund | 851 | 238 | (142) | (93) | 12 | — | 4 | |||||||
Harbor Mid Cap Growth Fund | 382 | 154 | (84) | (44) | (18) | 78 | — | |||||||
Harbor Mid Cap Value Fund | 557 | 331 | (143) | (109) | (79) | 4 | 14 | |||||||
Harbor Small Cap Growth Fund | 343 | 100 | (74) | (5) | (17) | 13 | — | |||||||
Harbor Small Cap Value Fund | 415 | 193 | (114) | (44) | (37) | 4 | 2 | |||||||
Harbor Strategic Growth Fund | 242 | 60 | (46) | (11) | 2 | 4 | 1 | |||||||
Total | $6,183 | $2,446 | $(1,376) | $(643) | $(203) | $163 | $86 |
a | Rounds to less than $1,000 |
The accompanying notes are an integral part of the Financial Statements.
24
Harbor Target Retirement 2060 Fund
Fund Summary —April 30, 2020 (Unaudited)
Fund Summary —April 30, 2020 (Unaudited)
Asset Allocation(% of investments)
FUND PERFORMANCE
TOTAL RETURNS For the periods ended 04/30/2020 | Unannualized | 1 Year | 5 Years | Unannualized | Inception Date | |||||||||
6 Months | Life of Fund | |||||||||||||
Harbor Target Retirement 2060 Fund | ||||||||||||||
Institutional Class | -10.09% | N/A | N/A | -10.09% | 11/01/2019 | |||||||||
Comparative Indices | ||||||||||||||
Bloomberg Barclays U.S. Aggregate Bond | 4.86% | N/A | N/A | 4.86% | — | |||||||||
Composite Index 2060 | -10.57 | N/A | N/A | -10.57 | — | |||||||||
MSCI EAFE (ND) | -14.21 | N/A | N/A | -14.21 | — | |||||||||
Russell 3000® | -4.33 | N/A | N/A | -4.33 | — |
As stated in the Fund’s prospectus dated March 1, 2020, the expense ratio was 0.80%. 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.
25
Harbor Target Retirement 2060 Fund
Portfolio of Investments—April 30, 2020 (Unaudited)
Portfolio of Investments—April 30, 2020 (Unaudited)
Value and Cost in Thousands
EQUITY FUNDS—92.8% | |||
Shares | Value | ||
318 | Harbor Capital Appreciation Fund | $24 | |
3,956 | Harbor Diversified International All Cap Fund | 36 | |
525 | Harbor Global Leaders Fund | 15 | |
1,116 | Harbor International Fund | 36 | |
2,421 | Harbor International Growth Fund | 36 | |
2,833 | Harbor Large Cap Value Fund | 42 | |
2,072 | Harbor Mid Cap Growth Fund | 19 | |
1,850 | Harbor Mid Cap Value Fund | 27 | |
1,368 | Harbor Small Cap Growth Fund | 17 | |
730 | Harbor Small Cap Value Fund | 20 | |
558 | Harbor Strategic Growth Fund | 12 | |
TOTAL EQUITY FUNDS | |||
(Cost $294) | 284 | ||
FIXED INCOME FUNDS—7.2% | |||
| Shares | Value | |
990 | Harbor Bond Fund | $12 | |
1,119 | Harbor High-Yield Opportunities Fund | 10 | |
TOTAL FIXED INCOME FUNDS | |||
(Cost $22) | 22 | ||
TOTAL INVESTMENTS—100.0% | |||
(Cost $316) | 306 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—0.0% | —a | ||
TOTAL NET ASSETS—100.0% | $306 |
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, 2019 (inception) through April 30, 2020.
Underlying Funds | Beginning Balance as of 11/01/2019 (000s) | Purchases of Affiliated Funds (000s) | Sales of Affiliated Funds (000s) | Change in Net Unrealized Gain/(Loss) from Affiliated Funds (000s) | Investment Income from Affiliated Funds (000s) | |||||||||
Sale of Affiliated Funds (000s) | Distributions Received from Affiliated Funds (000s) | |||||||||||||
Harbor Bond Fund | $— | $18 | $(6) | $— | $— | $— | $— | |||||||
Harbor Capital Appreciation Fund | — | 33 | (8) | — | (1) | 1 | — | |||||||
Harbor Diversified International All Cap Fund | — | 52 | (13) | (2) | (1) | — | — | |||||||
Harbor Global Leaders Fund | — | 20 | (5) | — | — | — | — | |||||||
Harbor High-Yield Opportunities Fund | — | 15 | (5) | — | — | — | — | |||||||
Harbor International Fund | — | 52 | (12) | (2) | (2) | — | 1 | |||||||
Harbor International Growth Fund | — | 50 | (12) | (1) | (1) | — | — | |||||||
Harbor Large Cap Value Fund | — | 59 | (14) | (2) | (1) | — | — | |||||||
Harbor Mid Cap Growth Fund | — | 27 | (7) | — | (1) | 1 | — | |||||||
Harbor Mid Cap Value Fund | — | 41 | (10) | (2) | (2) | — | — | |||||||
Harbor Small Cap Growth Fund | — | 24 | (7) | — | — | — | — | |||||||
Harbor Small Cap Value Fund | — | 29 | (7) | (1) | (1) | — | — | |||||||
Harbor Strategic Growth Fund | — | 17 | (5) | — | — | — | — | |||||||
Total | $— | $437 | $(111) | $(10) | $(10) | $2 | $1 |
a | Rounds to less than $1,000 |
The accompanying notes are an integral part of the Financial Statements.
26
Harbor Target Retirement Funds
StatementS of Assets and Liabilities—April 30, 2020 (Unaudited)
StatementS of Assets and Liabilities—April 30, 2020 (Unaudited)
(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 | Harbor Target Retirement 2060 Fund | |||||||||||
ASSETS | ||||||||||||||||||||
Investments, at identified cost | $19,200 | $22,859 | $20,048 | $29,620 | $19,326 | $28,154 | $14,931 | $24,895 | $6,909 | $316 | ||||||||||
Investments in affiliated funds, at value | $19,154 | $22,828 | $19,722 | $28,995 | $18,718 | $27,176 | $14,260 | $23,907 | $6,407 | $306 | ||||||||||
Receivables for: | ||||||||||||||||||||
Investments in affiliated funds sold | 116 | 2 | 51 | 239 | 3 | 439 | 201 | 302 | 59 | — | ||||||||||
Capital shares sold | — | — | — | — | — | — | — | 49 | — | — | ||||||||||
Distributions from affiliated funds | 1 | 1 | — | — | — | — | — | — | — | — | ||||||||||
Total Assets | 19,271 | 22,831 | 19,773 | 29,234 | 18,721 | 27,615 | 14,461 | 24,258 | 6,466 | 306 | ||||||||||
LIABILITIES | ||||||||||||||||||||
Payables for: | ||||||||||||||||||||
Investments in affiliated funds purchased | 92 | 1 | — | 237 | — | 435 | 197 | 351 | 59 | — | ||||||||||
Capital shares reacquired | 25 | 2 | 51 | 2 | 3 | 4 | 4 | — | — | — | ||||||||||
Total Liabilities | 117 | 3 | 51 | 239 | 3 | 439 | 201 | 351 | 59 | — | ||||||||||
NET ASSETS | $19,154 | $22,828 | $19,722 | $28,995 | $18,718 | $27,176 | $14,260 | $23,907 | $6,407 | $306 | ||||||||||
Net Assets Consist of: | ||||||||||||||||||||
Paid-in capital | $19,750 | $23,361 | $20,603 | $30,104 | $19,523 | $28,190 | $15,122 | $24,862 | $7,010 | $324 | ||||||||||
Total distributable earnings/(loss) | (596) | (533) | (881) | (1,109) | (805) | (1,014) | (862) | (955) | (603) | (18) | ||||||||||
$19,154 | $22,828 | $19,722 | $28,995 | $18,718 | $27,176 | $14,260 | $23,907 | $6,407 | $306 | |||||||||||
NET ASSET VALUE PER SHARE BY CLASS | ||||||||||||||||||||
Institutional Class | ||||||||||||||||||||
Net assets | $19,154 | $22,828 | $19,722 | $28,995 | $18,718 | $27,176 | $14,260 | $23,907 | $6,407 | $306 | ||||||||||
Shares of beneficial interest1 | 2,129 | 2,446 | 1,729 | 3,545 | 1,460 | 3,498 | 1,093 | 2,852 | 633 | 34 | ||||||||||
Net asset value per share2 | $9.00 | $9.33 | $11.40 | $8.18 | $12.83 | $7.77 | $13.05 | $8.38 | $10.11 | $8.88 |
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.
27
Harbor Target Retirement Funds
StatementS of Operations—Six Months Ended April 30, 2020 (Unaudited)
StatementS of Operations—Six Months Ended April 30, 2020 (Unaudited)
(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 | Harbor Target Retirement 2060 Fund | |
Investment Income | ||||||||||
Dividends from affiliated funds | $330 | $408 | $356 | $519 | $327 | $429 | $228 | $369 | $86 | $1 |
Total Investment Income | 330 | 408 | 356 | 519 | 327 | 429 | 228 | 369 | 86 | 1 |
Net Investment Income/(Loss) | 330 | 408 | 356 | 519 | 327 | 429 | 228 | 369 | 86 | 1 |
Realized and Change in Net Unrealized Gain/(Loss) on Investment Transactions | ||||||||||
Net realized gain/(loss) on: | ||||||||||
Sale of affiliated funds | (226) | (348) | (477) | (501) | (257) | (271) | (271) | (142) | (203) | (10) |
Distributions received from affiliated funds | 143 | 246 | 258 | 457 | 352 | 553 | 314 | 600 | 163 | 2 |
Change in net unrealized appreciation/(depreciation) on: | ||||||||||
Affiliated funds | (471) | (828) | (934) | (1,895) | (1,536) | (2,683) | (1,272) | (2,902) | (643) | (10) |
Net gain/(loss) on investment transactions | (554) | (930) | (1,153) | (1,939) | (1,441) | (2,401) | (1,229) | (2,444) | (683) | (18) |
Net Increase/(Decrease) in Net Assets Resulting from Operations | $(224) | $(522) | $(797) | $(1,420) | $(1,114) | $(1,972) | $(1,001) | $(2,075) | $(597) | $(17) |
The accompanying notes are an integral part of the Financial Statements.
28
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, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | ||||
INCREASE/(DECREASE) IN NET ASSETS | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||
Operations: | |||||||||||
Net investment income/(loss) | $330 | $376 | $408 | $677 | $356 | $489 | $519 | $722 | |||
Net realized gain/(loss) on sale of affiliated funds | (226) | (130) | (348) | 55 | (477) | 41 | (501) | 130 | |||
Realized gain distributions received from affiliated funds | 143 | 238 | 246 | 812 | 258 | 709 | 457 | 1,338 | |||
Change in net unrealized appreciation/(depreciation) on affiliated funds | (471) | 801 | (828) | 1,081 | (934) | 933 | (1,895) | 1,206 | |||
Net increase/(decrease) in assets resulting from operations | (224) | 1,285 | (522) | 2,625 | (797) | 2,172 | (1,420) | 3,396 | |||
Distributions to Shareholders | |||||||||||
Institutional Class | (354) | (618) | (1,010) | (1,480) | (1,349) | (1,339) | (2,233) | (1,951) | |||
Total distributions to shareholders | (354) | (618) | (1,010) | (1,480) | (1,349) | (1,339) | (2,233) | (1,951) | |||
Net Increase/(Decrease) Derived from Capital Share Transactions | 2,291 | 4,213 | (383) | (1,956) | 1,776 | 1,608 | 1,770 | 1,460 | |||
Net increase/(decrease) in net assets | 1,713 | 4,880 | (1,915) | (811) | (370) | 2,441 | (1,883) | 2,905 | |||
Net Assets | |||||||||||
Beginning of period | 17,441 | 12,561 | 24,743 | 25,554 | 20,092 | 17,651 | 30,878 | 27,973 | |||
End of period | $19,154 | $17,441 | $22,828 | $24,743 | $19,722 | $20,092 | $28,995 | $30,878 |
a | Inception |
The accompanying notes are an integral part of the Financial Statements.
29
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 | Harbor Target Retirement 2060 Fund | ||||||||||
November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019a through April 30, 2020 | |||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||
$327 | $367 | $429 | $474 | $228 | $226 | $369 | $317 | $86 | $45 | $1 | |||||
(257) | 114 | (271) | 396 | (271) | 99 | (142) | 283 | (203) | 2 | (10) | |||||
352 | 900 | 553 | 1,633 | 314 | 934 | 600 | 1,893 | 163 | 355 | 2 | |||||
(1,536) | 773 | (2,683) | 856 | (1,272) | 506 | (2,902) | 699 | (643) | 251 | (10) | |||||
(1,114) | 2,154 | (1,972) | 3,359 | (1,001) | 1,765 | (2,075) | 3,192 | (597) | 653 | (17) | |||||
(1,534) | (955) | (2,674) | (2,079) | (1,463) | (894) | (2,860) | (1,977) | (483) | (311) | (1) | |||||
(1,534) | (955) | (2,674) | (2,079) | (1,463) | (894) | (2,860) | (1,977) | (483) | (311) | (1) | |||||
1,422 | 3,621 | 3,586 | 2,906 | 1,754 | 1,689 | 3,150 | 1,086 | 1,304 | 2,085 | 324 | |||||
(1,226) | 4,820 | (1,060) | 4,186 | (710) | 2,560 | (1,785) | 2,301 | 224 | 2,427 | 306 | |||||
19,944 | 15,124 | 28,236 | 24,050 | 14,970 | 12,410 | 25,692 | 23,391 | 6,183 | 3,756 | — | |||||
$18,718 | $19,944 | $27,176 | $28,236 | $14,260 | $14,970 | $23,907 | $25,692 | $6,407 | $6,183 | $306 |
30
Harbor Target Retirement Funds
Statements of Changes in Net Assets—Capital Stock Activity
Statements of Changes in Net Assets—Capital Stock Activity
(All amounts in thousands)
Harbor Target Retirement Income Fund | Harbor Target Retirement 2020 Fund | Harbor Target Retirement 2025 Fund | Harbor Target Retirement 2030 Fund | ||||||||
November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | ||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||
AMOUNT ($) | |||||||||||
Institutional Class | |||||||||||
Net proceeds from sale of shares | $4,417 | $6,194 | $2,377 | $3,456 | $2,850 | $4,684 | $2,148 | $6,413 | |||
Reinvested distributions | 354 | 618 | 1,010 | 1,480 | 1,349 | 1,339 | 2,233 | 1,951 | |||
Cost of shares reacquired | (2,480) | (2,599) | (3,770) | (6,892) | (2,423) | (4,415) | (2,611) | (6,904) | |||
Net increase/(decrease) in net assets | $2,291 | $4,213 | $(383) | $(1,956) | $1,776 | $1,608 | $1,770 | $1,460 | |||
SHARES | |||||||||||
Institutional Class | |||||||||||
Shares sold | 478 | 683 | 245 | 365 | 232 | 389 | 245 | 739 | |||
Shares issued due to reinvestment of distributions | 39 | 72 | 104 | 169 | 111 | 122 | 252 | 244 | |||
Shares reacquired | (276) | (294) | (397) | (729) | (206) | (365) | (304) | (797) | |||
Net increase/(decrease) in shares outstanding | 241 | 461 | (48) | (195) | 137 | 146 | 193 | 186 |
a | Inception |
The accompanying notes are an integral part of the Financial Statements.
31
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 | Harbor Target Retirement 2060 Fund | ||||||||||
November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through April 30, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019a through April 30, 2020 | |||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||
$1,857 | $5,670 | $3,177 | $5,000 | $1,831 | $3,935 | $2,016 | $3,823 | $1,375 | $2,489 | $438 | |||||
1,534 | 955 | 2,674 | 2,079 | 1,463 | 894 | 2,860 | 1,977 | 483 | 311 | 1 | |||||
(1,969) | (3,004) | (2,265) | (4,173) | (1,540) | (3,140) | (1,726) | (4,714) | (554) | (715) | (115) | |||||
$1,422 | $3,621 | $3,586 | $2,906 | $1,754 | $1,689 | $3,150 | $1,086 | $1,304 | $2,085 | $324 | |||||
134 | 411 | 370 | 580 | 132 | 270 | 219 | 396 | 125 | 221 | 46 | |||||
109 | 76 | 308 | 268 | 100 | 68 | 299 | 233 | 41 | 32 | — | |||||
(145) | (216) | (267) | (478) | (107) | (215) | (193) | (487) | (51) | (65) | (12) | |||||
98 | 271 | 411 | 370 | 125 | 123 | 325 | 142 | 115 | 188 | 34 |
32
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 | ||||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | |||||
2019 | 2018 | 2017 | 2016 | 2015 | ||
(Unaudited) | ||||||
Net asset value beginning of period | $9.24 | $8.80 | $9.25 | $8.93 | $9.19 | $9.75 |
Income from Investment Operations | ||||||
Net investment income/(loss)a | 0.15 | 0.25 | 0.28 | 0.22 | 0.25 | 0.34 |
Net realized and unrealized gains/(losses) on investments | (0.23) | 0.62 | (0.38) | 0.40 | 0.08 | (0.30) |
Total from investment operations | (0.08) | 0.87 | (0.10) | 0.62 | 0.33 | 0.04 |
Less Distributions | ||||||
Dividends from net investment income | (0.16) | (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 | (0.16) | (0.43) | (0.35) | (0.30) | (0.59) | (0.60) |
Net asset value end of period | 9.00 | 9.24 | 8.80 | 9.25 | 8.93 | 9.19 |
Net assets end of period (000s) | $19,154 | $17,441 | $12,561 | $13,746 | $13,805 | $15,124 |
Ratios and Supplemental Data (%) | ||||||
Total return | (0.88)%d | 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 | 3.26e | 2.85 | 3.13 | 2.46 | 2.87 | 3.57 |
Portfolio turnoverc | 30d | 67 | 28 | 16 | 26 | 24 |
HARBOR TARGET RETIREMENT 2020 FUND
Institutional Class | ||||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | |||||
2019 | 2018 | 2017 | 2016 | 2015 | ||
(Unaudited) | ||||||
Net asset value beginning of period | $9.92 | $9.50 | $9.90 | $9.29 | $9.94 | $10.63 |
Income from Investment Operations | ||||||
Net investment income/(loss)a | 0.16 | 0.25 | 0.28 | 0.23 | 0.26 | 0.32 |
Net realized and unrealized gains/(losses) on investments | (0.36) | 0.73 | (0.40) | 0.73 | 0.04 | (0.30) |
Total from investment operations | (0.20) | 0.98 | (0.12) | 0.96 | 0.30 | 0.02 |
Less Distributions | ||||||
Dividends from net investment income | (0.27) | (0.28) | (0.28) | (0.24) | (0.32) | (0.34) |
Distributions from net realized capital gains | (0.12) | (0.28) | — | (0.11) | (0.63) | (0.37) |
Total distributions | (0.39) | (0.56) | (0.28) | (0.35) | (0.95) | (0.71) |
Net asset value end of period | 9.33 | 9.92 | 9.50 | 9.90 | 9.29 | 9.94 |
Net assets end of period (000s) | $22,828 | $24,743 | $25,554 | $27,742 | $25,419 | $27,290 |
Ratios and Supplemental Data (%) | ||||||
Total return | (2.17)%d | 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 | 3.32e | 2.69 | 2.89 | 2.44 | 2.83 | 3.19 |
Portfolio turnoverc | 34d | 64 | 31 | 29 | 33 | 28 |
See page 37 for notes to the Financial Highlights.
The accompanying notes are an integral part of the Financial Statements.
33
HARBOR TARGET RETIREMENT 2025 FUND
Institutional Class | ||||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | |||||
2019 | 2018 | 2017 | 2016 | 2015 | ||
(Unaudited) | ||||||
Net asset value beginning of period | $12.62 | $12.21 | $12.76 | $11.78 | $12.32 | $13.48 |
Income from Investment Operations | ||||||
Net investment income/(loss)a | 0.21 | 0.31 | 0.37 | 0.29 | 0.31 | 0.37 |
Net realized and unrealized gains/(losses) on investments | (0.63) | 1.03 | (0.57) | 1.12 | 0.05 | (0.36) |
Total from investment operations | (0.42) | 1.34 | (0.20) | 1.41 | 0.36 | 0.01 |
Less Distributions | ||||||
Dividends from net investment income | (0.33) | (0.38) | (0.35) | (0.28) | (0.37) | (0.41) |
Distributions from net realized capital gains | (0.47) | (0.55) | — | (0.15) | (0.53) | (0.76) |
Total distributions | (0.80) | (0.93) | (0.35) | (0.43) | (0.90) | (1.17) |
Net asset value end of period | 11.40 | 12.62 | 12.21 | 12.76 | 11.78 | 12.32 |
Net assets end of period (000s) | $19,722 | $20,092 | $17,651 | $21,218 | $14,293 | $11,487 |
Ratios and Supplemental Data (%) | ||||||
Total return | (3.72)%d | 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 | 3.45e | 2.57 | 2.92 | 2.42 | 2.69 | 2.91 |
Portfolio turnoverc | 33d | 61 | 36 | 24 | 25 | 25 |
HARBOR TARGET RETIREMENT 2030 FUND
Institutional Class | ||||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | |||||
2019 | 2018 | 2017 | 2016 | 2015 | ||
(Unaudited) | ||||||
Net asset value beginning of period | $9.21 | $8.84 | $9.25 | $8.60 | $9.19 | $10.04 |
Income from Investment Operations | ||||||
Net investment income/(loss)a | 0.15 | 0.21 | 0.24 | 0.20 | 0.21 | 0.24 |
Net realized and unrealized gains/(losses) on investments | (0.53) | 0.77 | (0.38) | 0.96 | 0.01 | (0.23) |
Total from investment operations | (0.38) | 0.98 | (0.14) | 1.16 | 0.22 | 0.01 |
Less Distributions | ||||||
Dividends from net investment income | (0.24) | (0.25) | (0.25) | (0.21) | (0.26) | (0.28) |
Distributions from net realized capital gains | (0.41) | (0.36) | (0.02) | (0.30) | (0.55) | (0.58) |
Total distributions | (0.65) | (0.61) | (0.27) | (0.51) | (0.81) | (0.86) |
Net asset value end of period | 8.18 | 9.21 | 8.84 | 9.25 | 8.60 | 9.19 |
Net assets end of period (000s) | $28,995 | $30,878 | $27,973 | $28,618 | $24,634 | $25,084 |
Ratios and Supplemental Data (%) | ||||||
Total return | (4.62)%d | 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 | 3.38e | 2.41 | 2.62 | 2.30 | 2.54 | 2.55 |
Portfolio turnoverc | 28d | 46 | 31 | 29 | 31 | 24 |
The accompanying notes are an integral part of the Financial Statements.
34
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 | ||||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | |||||
2019 | 2018 | 2017 | 2016 | 2015 | ||
(Unaudited) | ||||||
Net asset value beginning of period | $14.64 | $13.86 | $14.44 | $12.93 | $13.56 | $14.92 |
Income from Investment Operations | ||||||
Net investment income/(loss)a | 0.22 | 0.28 | 0.33 | 0.28 | 0.27 | 0.30 |
Net realized and unrealized gains/(losses) on investments | (0.94) | 1.36 | (0.58) | 1.75 | 0.04 | (0.26) |
Total from investment operations | (0.72) | 1.64 | (0.25) | 2.03 | 0.31 | 0.04 |
Less Distributions | ||||||
Dividends from net investment income | (0.34) | (0.35) | (0.33) | (0.28) | (0.35) | (0.36) |
Distributions from net realized capital gains | (0.75) | (0.51) | — | (0.24) | (0.59) | (1.04) |
Total distributions | (1.09) | (0.86) | (0.33) | (0.52) | (0.94) | (1.40) |
Net asset value end of period | 12.83 | 14.64 | 13.86 | 14.44 | 12.93 | 13.56 |
Net assets end of period (000s) | $18,718 | $19,944 | $15,124 | $15,005 | $11,496 | $9,007 |
Ratios and Supplemental Data (%) | ||||||
Total return | (5.56)%d | 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 | 3.28e | 2.05 | 2.26 | 2.06 | 2.17 | 2.17 |
Portfolio turnoverc | 31d | 35 | 29 | 26 | 26 | 22 |
HARBOR TARGET RETIREMENT 2040 FUND
Institutional Class | ||||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | |||||
2019 | 2018 | 2017 | 2016 | 2015 | ||
(Unaudited) | ||||||
Net asset value beginning of period | $9.15 | $8.85 | $9.30 | $8.42 | $9.05 | $9.84 |
Income from Investment Operations | ||||||
Net investment income/(loss)a | 0.13 | 0.15 | 0.18 | 0.15 | 0.17 | 0.18 |
Net realized and unrealized gains/(losses) on investments | (0.63) | 0.90 | (0.34) | 1.30 | (0.01) | (0.10) |
Total from investment operations | (0.50) | 1.05 | (0.16) | 1.45 | 0.16 | 0.08 |
Less Distributions | ||||||
Dividends from net investment income | (0.20) | (0.20) | (0.19) | (0.17) | (0.20) | (0.22) |
Distributions from net realized capital gains | (0.68) | (0.55) | (0.10) | (0.40) | (0.59) | (0.65) |
Total distributions | (0.88) | (0.75) | (0.29) | (0.57) | (0.79) | (0.87) |
Net asset value end of period | 7.77 | 9.15 | 8.85 | 9.30 | 8.42 | 9.05 |
Net assets end of period (000s) | $27,176 | $28,236 | $24,050 | $24,940 | $19,448 | $19,805 |
Ratios and Supplemental Data (%) | ||||||
Total return | (6.52)%d | 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 | 3.06e | 1.77 | 1.90 | 1.78 | 2.03 | 1.96 |
Portfolio turnoverc | 30d | 28 | 30 | 21 | 30 | 18 |
See page 37 for notes to the Financial Highlights.
The accompanying notes are an integral part of the Financial Statements.
35
HARBOR TARGET RETIREMENT 2045 FUND
Institutional Class | ||||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | |||||
2019 | 2018 | 2017 | 2016 | 2015 | ||
(Unaudited) | ||||||
Net asset value beginning of period | $15.46 | $14.69 | $15.43 | $13.51 | $14.25 | $15.17 |
Income from Investment Operations | ||||||
Net investment income/(loss)a | 0.22 | 0.24 | 0.23 | 0.21 | 0.21 | 0.23 |
Net realized and unrealized gains/(losses) on investments | (1.15) | 1.56 | (0.49) | 2.42 | 0.01 | (0.06) |
Total from investment operations | (0.93) | 1.80 | (0.26) | 2.63 | 0.22 | 0.17 |
Less Distributions | ||||||
Dividends from net investment income | (0.31) | (0.29) | (0.28) | (0.22) | (0.27) | (0.29) |
Distributions from net realized capital gains | (1.17) | (0.74) | (0.20) | (0.49) | (0.69) | (0.80) |
Total distributions | (1.48) | (1.03) | (0.48) | (0.71) | (0.96) | (1.09) |
Net asset value end of period | 13.05 | 15.46 | 14.69 | 15.43 | 13.51 | 14.25 |
Net assets end of period (000s) | $14,260 | $14,970 | $12,410 | $9,863 | $7,211 | $5,523 |
Ratios and Supplemental Data (%) | ||||||
Total return | (7.09)%d | 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 | 3.05e | 1.62 | 1.49 | 1.50 | 1.58 | 1.56 |
Portfolio turnoverc | 29d | 29 | 22 | 32 | 24 | 15 |
HARBOR TARGET RETIREMENT 2050 FUND
Institutional Class | ||||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | |||||
2019 | 2018 | 2017 | 2016 | 2015 | ||
(Unaudited) | ||||||
Net asset value beginning of period | $10.17 | $9.81 | $10.42 | $9.23 | $10.39 | $11.40 |
Income from Investment Operations | ||||||
Net investment income/(loss)a | 0.13 | 0.12 | 0.13 | 0.12 | 0.12 | 0.14 |
Net realized and unrealized gains/(losses) on investments | (0.80) | 1.08 | (0.33) | 1.81 | (0.03) | 0.05 |
Total from investment operations | (0.67) | 1.20 | (0.20) | 1.93 | 0.09 | 0.19 |
Less Distributions | ||||||
Dividends from net investment income | (0.18) | (0.17) | (0.16) | (0.13) | (0.17) | (0.19) |
Distributions from net realized capital gains | (0.94) | (0.67) | (0.25) | (0.61) | (1.08) | (1.01) |
Total distributions | (1.12) | (0.84) | (0.41) | (0.74) | (1.25) | (1.20) |
Net asset value end of period | 8.38 | 10.17 | 9.81 | 10.42 | 9.23 | 10.39 |
Net assets end of period (000s) | $23,907 | $25,692 | $23,391 | $22,821 | $18,728 | $19,221 |
Ratios and Supplemental Data (%) | ||||||
Total return | (7.93)%d | 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 | 2.90e | 1.28 | 1.20 | 1.27 | 1.34 | 1.35 |
Portfolio turnoverc | 25d | 25 | 22 | 33 | 24 | 24 |
The accompanying notes are an integral part of the Financial Statements.
36
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 | ||||||
6-Month Period Ended April 30, 2020 | Year Ended October 31, | |||||
2019 | 2018 | 2017 | 2016 | 2015 | ||
(Unaudited) | ||||||
Net asset value beginning of period | $11.94 | $11.39 | $11.97 | $10.02 | $10.08 | $10.00 |
Income from Investment Operations | ||||||
Net investment income/(loss)a | 0.15 | 0.10 | 0.11 | 0.10 | 0.11 | 0.05 |
Net realized and unrealized gains/(losses) on investments | (1.07) | 1.34 | (0.37) | 2.17 | 0.01 | 0.18 |
Total from investment operations | (0.92) | 1.44 | (0.26) | 2.27 | 0.12 | 0.23 |
Less Distributions | ||||||
Dividends from net investment income | (0.18) | (0.16) | (0.16) | (0.12) | (0.14) | (0.15) |
Distributions from net realized capital gains | (0.73) | (0.73) | (0.16) | (0.20) | (0.04) | — |
Total distributions | (0.91) | (0.89) | (0.32) | (0.32) | (0.18) | (0.15) |
Net asset value end of period | 10.11 | 11.94 | 11.39 | 11.97 | 10.02 | 10.08 |
Net assets end of period (000s) | $6,407 | $6,183 | $3,756 | $2,728 | $1,240 | $762 |
Ratios and Supplemental Data (%) | ||||||
Total return | (8.76)%d | 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 | 2.70e | 0.90 | 0.91 | 0.95 | 1.13 | 0.52 |
Portfolio turnoverc | 21d | 14 | 29 | 32 | 33 | 15 |
HARBOR TARGET RETIREMENT 2060 FUND
Institutional Class | |
6-Month Period Ended April 30, 2020f | |
(Unaudited) | |
Net asset value beginning of period | $10.00 |
Income from Investment Operations | |
Net investment income/(loss)a | 0.08 |
Net realized and unrealized gains/(losses) on investments | (1.07) |
Total from investment operations | (0.99) |
Less Distributions | |
Dividends from net investment income | (0.13) |
Distributions from net realized capital gains | — |
Total distributions | (0.13) |
Net asset value end of period | 8.88 |
Net assets end of period (000s) | $306 |
Ratios and Supplemental Data (%) | |
Total return | (10.09)%d |
Ratio of total expenses to average net assetsb | — |
Ratio of net investment income to average net assetsb | 1.61e |
Portfolio turnoverc | 85d |
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. |
d | Unannualized |
e | Annualized |
f | Fund Inception was November 1, 2019. |
The accompanying notes are an integral part of the Financial Statements.
37
Harbor Target Retirement Funds
Notes to Financial Statements—April 30, 2020 (Unaudited)
Notes to Financial Statements—April 30, 2020 (Unaudited)
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 April 30, 2020, the Trust consists of 38 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, Harbor Target Retirement 2055 Fund, and Harbor Target Retirement 2060 Fund (each 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 April 30, 2020, 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 April 30, 2020 or October 31, 2019. For Harbor Target Retirement 2060 Fund, there were no Level 3 investments at April 30, 2020 or November 1, 2019 (inception).
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.
38
Harbor Target Retirement Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 2—Significant Accounting Policies—Continued
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 April 30, 2020, each Fund held less than 25% of the outstanding shares of any Underlying Fund. In aggregate, the Funds held 25% of Harbor Core Bond Fund.
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.
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.
Distribution to Shareholders
Distributions on Fund shares are recorded on the ex-dividend date.
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 (if applicable), 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.
Note 3—FEES AND OTHER Transactions with Affiliates
Investment Adviser
Harbor Capital is a wholly-owned subsidiary of ORIX Corporation. 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.
The Funds have entered into an 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.
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.
39
Harbor Target Retirement Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 3—FEES AND OTHER Transactions with Affiliates—Continued
Shareholders
On April 30, 2020, 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 2030 Fund | 38,093 | 1.1% | |
Harbor Target Retirement 2035 Fund | 28,775 | 2.0 | |
Harbor Target Retirement 2040 Fund | 3,702 | 0.1 | |
Harbor Target Retirement 2045 Fund | 4,665 | 0.4 | |
Harbor Target Retirement 2050 Fund | 15,269 | 0.5 | |
Harbor Target Retirement 2055 Fund | 7,771 | 1.2 |
Independent Trustees
The Independent Trustees received no remuneration from the Target Retirement Funds for the six-month period ended April 30, 2020.
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 4—TAX INFORMATION
The identified cost for federal income tax purposes of investments owned by each Fund and its respective gross unrealized appreciation and depreciation at April 30, 2020 are as follows:
Identified Cost (000s) | Gross Unrealized | Net Unrealized Appreciation/ (Depreciation) (000s) | |||||
Appreciation (000s) | (Depreciation) (000s) | ||||||
Harbor Target Retirement Income Fund* | $19,200 | $390 | $(436) | $(46) | |||
Harbor Target Retirement 2020 Fund | 22,859 | 598 | (629) | (31) | |||
Harbor Target Retirement 2025 Fund | 20,048 | 432 | (758) | (326) | |||
Harbor Target Retirement 2030 Fund | 29,620 | 834 | (1,459) | (625) | |||
Harbor Target Retirement 2035 Fund | 19,326 | 459 | (1,067) | (608) | |||
Harbor Target Retirement 2040 Fund | 28,154 | 860 | (1,838) | (978) | |||
Harbor Target Retirement 2045 Fund | 14,931 | 318 | (989) | (671) | |||
Harbor Target Retirement 2050 Fund | 24,895 | 909 | (1,897) | (988) | |||
Harbor Target Retirement 2055 Fund | 6,909 | 60 | (562) | (502) | |||
Harbor Target Retirement 2060 Fund | 316 | 1 | (11) | (10) |
* | 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.
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 November 1, 2019 through April 30, 2020.
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 November 1, 2019 | Ending Account Value April 30, 2020 | |||||
Harbor Target Retirement Income Fund | ||||||||
Institutional Class | 0.00% | |||||||
Actual | $0.00 | $1,000 | $991.20 | |||||
Hypothetical (5% return) | 0.00 | 1,000 | 1,024.86 | |||||
Harbor Target Retirement 2020 Fund | ||||||||
Institutional Class | 0.00% | |||||||
Actual | $0.00 | $1,000 | $978.30 | |||||
Hypothetical (5% return) | 0.00 | 1,000 | 1,024.86 | |||||
Harbor Target Retirement 2025 Fund | ||||||||
Institutional Class | 0.00% | |||||||
Actual | $0.00 | $1,000 | $962.80 | |||||
Hypothetical (5% return) | 0.00 | 1,000 | 1,024.86 | |||||
Harbor Target Retirement 2030 Fund | ||||||||
Institutional Class | 0.00% | |||||||
Actual | $0.00 | $1,000 | $953.80 | |||||
Hypothetical (5% return) | 0.00 | 1,000 | 1,024.86 | |||||
Harbor Target Retirement 2035 Fund | ||||||||
Institutional Class | 0.00% | |||||||
Actual | $0.00 | $1,000 | $944.40 | |||||
Hypothetical (5% return) | 0.00 | 1,000 | 1,024.86 |
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 November 1, 2019 | Ending Account Value April 30, 2020 | |||||
Harbor Target Retirement 2040 Fund | ||||||||
Institutional Class | 0.00% | |||||||
Actual | $0.00 | $1,000 | $934.80 | |||||
Hypothetical (5% return) | 0.00 | 1,000 | 1,024.86 | |||||
Harbor Target Retirement 2045 Fund | ||||||||
Institutional Class | 0.00% | |||||||
Actual | $0.00 | $1,000 | $929.10 | |||||
Hypothetical (5% return) | 0.00 | 1,000 | 1,024.86 | |||||
Harbor Target Retirement 2050 Fund | ||||||||
Institutional Class | 0.00% | |||||||
Actual | $0.00 | $1,000 | $920.70 | |||||
Hypothetical (5% return) | 0.00 | 1,000 | 1,024.86 | |||||
Harbor Target Retirement 2055 Fund | ||||||||
Institutional Class | 0.00% | |||||||
Actual | $0.00 | $1,000 | $912.40 | |||||
Hypothetical (5% return) | 0.00 | 1,000 | 1,024.86 | |||||
Harbor Target Retirement 2060 Fund | ||||||||
Institutional Class | 0.00% | |||||||
Actual | $0.00 | $1,000 | $899.10 | |||||
Hypothetical (5% return) | 0.00 | 1,000 | 1,024.86 |
* | Expenses are equal to the Fund’s annualized expense ratio, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). |
42
Harbor Target Retirement Funds
Additional Information (Unaudited)
Additional Information (Unaudited)
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
The Funds file a complete portfolio of investments with the SEC as an exhibit to Form N-PORT. The Funds’ Form N-PORT-EX is 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
FACTORS CONSIDERED BY THE TRUSTEES IN APPROVING THE INVESTMENT ADVISORY AGREEMENTS OF THE TARGET RETIREMENT FUNDS
The Investment Company Act requires that the Investment Advisory Agreement of each Fund be approved initially, and following an initial two-year term, at least annually, by the Trust’s 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 February 16 and 17, 2020 (the “Meeting”), the Board, including the Independent Trustees voting separately, considered and approved the continuation of an Investment Advisory Agreement with Harbor Capital, the adviser to each Fund, with respect to 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 (each, a “Target Retirement Fund” and collectively, the “Target Retirement Funds”), each a series of the Harbor Funds.
In evaluating the Target Retirement Funds’ Investment Advisory Agreement, the Trustees reviewed materials furnished by Harbor Capital, including information about its affiliates, personnel, and operations, and also relied upon their knowledge of Harbor Capital 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 continuation of the Investment Advisory Agreement, and at prior meetings, the Trustees, including the Independent Trustees, requested and received materials and presentations relating to Fund performance and the services rendered by Harbor Capital. These materials included a comprehensive written response from Harbor Capital to a 15(c) request letter prepared by legal counsel to the Independent Trustees in consultation with the Independent Trustees.
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 were fair and reasonable and approved the continuation for a one-year period of the Investment Advisory Agreement as being in the best interests of each Target Retirement Fund and its shareholders.
In their deliberations, the Independent Trustees had the opportunity to meet privately without representatives of Harbor Capital present and were represented throughout the process by legal counsel to the Independent Trustees and the Funds.
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Harbor Target Retirement Funds
Additional Information—Continued
Additional Information—Continued
ADVISORY AGREEMENT APPROVALS—Continued
In considering the approval of the Target Retirement Funds’ Investment Advisory 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 Investment Advisory Agreements were the following:
• | The nature, extent, and quality of the services provided by Harbor Capital, including the background, education, expertise and experience of the investment professionals of Harbor Capital providing services to the Target Retirement Funds; |
• | The favorable history, reputation, qualifications and background of Harbor Capital, as well as the qualifications of its personnel; |
• | The profitability of Harbor Capital with respect to each Target Retirement Fund; |
• | While no fees were proposed to be charged by Harbor Capital for investment advisory services, Harbor Capital would benefit from assets invested in the Target Retirement Funds in the form of increased advisory fees from the underlying Harbor Funds attributable to assets invested in such Funds by the Target Retirement Funds; |
• | The fees and expense ratios of each Target Retirement Fund relative to the quality of services provided and the fees and expense ratios of similar investment companies; |
• | The short- and long-term investment performance of each Target Retirement Fund in comparison to peer funds and the impact of the Target Retirement Funds’ glide paths on relative performance; |
• | Any “fall out” benefits that might inure to Harbor Capital and its affiliates as a result of their relationship with the Target Retirement Funds; |
• | Information received at regular meetings throughout the year related to Target Retirement Fund performance and services rendered by Harbor Capital; |
• | Information contained in materials provided by Harbor Capital and compiled by Broadridge as to the investment returns, advisory fees and total expense ratios of the Institutional Class of each Target Retirement Fund relative to those of other investment companies with similar objectives and strategies managed by other investment advisers, consisting both of a peer group of funds as well as a broader universe of funds compiled by Broadridge; and |
• | Information contained in materials compiled by Morningstar as to the investment returns of the Institutional Class of each Target Retirement Fund relative to those of other investment companies with similar objectives and strategies managed by other investment advisers. |
Nature, Extent, and Quality of Services
The Board evaluated the nature, extent, and quality of Harbor Capital’s services in light of the Board’s experience with Harbor Capital, as well as materials provided by Harbor Capital concerning the financial and other resources devoted by Harbor Capital to Harbor Funds, including the breadth and depth of experience and expertise of the investment, accounting, administrative, legal and compliance professionals dedicated to Harbor Funds’ operations. The Trustees determined that Harbor Capital has the expertise and resources to manage and operate effectively each Target Retirement Fund.
Investment Performance, Advisory Fees and Expense Ratios
In considering each Target Retirement Fund’s performance, advisory fees and expense ratio, the Trustees requested and received from Harbor Capital data compiled by Broadridge. The Trustees also received information explaining the methodology for compilation of certain of this information and what it was intended to demonstrate. In evaluating performance, the Trustees recognized that the performance data reflects a snapshot of a period as of a particular date and that selecting a different performance period could produce significantly different results.
Harbor Target Retirement Funds
The Trustees considered the Harbor Target Retirement Funds (inception date of January 2, 2009 for each Target Retirement Fund except the Target Retirement 2055 Fund, which had an inception date of November 1, 2014, and the Target Retirement 2060 Fund, which had an inception date of November 1, 2019). The Trustees noted that the performance analysis conducted by Broadridge included selected mixed-asset peer target funds with the same target year as the performance group and all
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Harbor Target Retirement Funds
Additional Information—Continued
Additional Information—Continued
ADVISORY AGREEMENT APPROVALS—Continued
target date funds with the same target year as the performance universe. The Trustees noted the fact that the Harbor Target Retirement 2060 Fund had recently been launched and that the current investment advisory agreement for the Fund was considered and approved for an initial two-year term by the Trustees at an in-person meeting held on May 19-20, 2019.
The Trustees considered the expertise of Harbor Capital in managing assets generally and in the target retirement asset class specifically, noting that Harbor Capital had maintained risk-based asset allocation options for retirement plans sponsored by Owens-Illinois and other clients for more than 15 years prior to the 2009 launch of these funds. The Trustees noted that the Target Retirement Funds totaled $203.7 million in assets, out of a firm-wide total of approximately $47.3 billion in assets under management as of December 31, 2019.
The Trustees noted that the glide paths for the Target Retirement Funds are generally more conservative compared to the peer funds in that the equity exposure for the Target Retirement Funds declines more steeply than it does in other target date fund families. The Trustees noted that Harbor Capital had recently made changes to the target allocations for Harbor Target Retirement 2025-2040 Funds to increase the Funds’ equity exposure, although the Funds continue to be relatively conservative in their positioning. The Trustees considered how periods of strong equity market performance would negatively impact the performance of the Target Retirement Funds relative to their more aggressively positioned peer funds. The Trustees also considered the fact that Harbor Capital charged no management fee to the Funds and that Harbor Capital pays the expenses of each Target Retirement Fund with limited exceptions. The Trustees noted that Harbor Capital’s profitability in managing the Target Retirement Funds was negative.
Harbor Target Retirement Income Fund.The Trustees noted the Fund’s underperformance for the one- and three-year periods and outperformance for the five-year period relative to its group median as of December 31, 2019, according to Broadridge. The Trustees noted that the Fund underperformed for the one-year period, was equal to for the three-year period and outperformed for the five-year period relative to its universe median as of December 31, 2019, according to Broadridge. The actual total expense ratio of the Fund’s Institutional Class (including acquired fund fees and expenses) was above the peer group and peer universe medians.
Harbor Target Retirement 2020 Fund.The Trustees noted the Fund’s underperformance for the one- and three-year periods and slight outperformance for the five-year period relative to its group median as of December 31, 2019, according to Broadridge. The Trustees noted that the Fund underperformed for the one-, three- and five-year periods relative to its universe median as of December 31, 2019, according to Broadridge. The actual total expense ratio of the Fund’s Institutional Class (including acquired fund fees and expenses) was above the peer group and peer universe medians.
Harbor Target Retirement 2025 Fund.The Trustees noted the Fund’s underperformance for the one-, three- and five-year periods relative to its group median as of December 31, 2019, according to Broadridge. The Trustees noted that the Fund outperformed for the one-year period and underperformed for the three- and five-year periods relative to its universe median as of December 31, 2019, according to Broadridge. The actual total expense ratio of the Fund’s Institutional Class (including acquired fund fees and expenses) was above the peer group and peer universe medians.
Harbor Target Retirement 2030 Fund.The Trustees noted the Fund’s underperformance for the one-, three- and five-year periods relative to its group median as of December 31, 2019, according to Broadridge. The Trustees noted that the Fund slightly outperformed for the one-year period and underperformed for the three- and five-year periods relative to its universe median as of December 31, 2019, according to Broadridge. The actual total expense ratio of the Fund’s Institutional Class (including acquired fund fees and expenses) was at the peer group median and above the peer universe median.
Harbor Target Retirement 2035 Fund.The Trustees noted the Fund’s underperformance relative to its group and universe medians for the one-, three- and five-year periods ended December 31, 2019, according to Broadridge. The actual total expense ratio of the Fund’s Institutional Class (including acquired fund fees and expenses) was above the peer group and peer universe medians.
Harbor Target Retirement 2040 Fund.The Trustees noted the Fund’s underperformance relative to its group median for the one-, three- and five-year periods ended December 31, 2019, according to Broadridge. The Trustees noted that the Fund outperformed for the one-year period, was equal to for the three-year period, and underperformed for the five-year period relative to its universe median as of December 31, 2019, according to Broadridge. The actual total expense ratio of the Fund’s Institutional Class (including acquired fund fees and expenses) was above the peer group and peer universe medians.
Harbor Target Retirement 2045 Fund.The Trustees noted the Fund’s underperformance relative to its group median for the one- and three-year period and its outperformance for the five-year period ended December 31, 2019, according to Broadridge. The Trustees noted that the Fund outperformed for the one-, three- and five-year periods relative to its universe median as of December 31, 2019, according to Broadridge. The actual total expense ratio of the Fund’s Institutional Class (including acquired fund fees and expenses) was above the peer group and peer universe medians.
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Harbor Target Retirement Funds
Additional Information—Continued
Additional Information—Continued
ADVISORY AGREEMENT APPROVALS—Continued
Harbor Target Retirement 2050 Fund.The Trustees noted the Fund’s outperformance relative to its group and universe medians for the one-, three- and five-year periods ended December 31, 2019, according to Broadridge. The actual total expense ratio of the Fund’s Institutional Class (including acquired fund fees and expenses) was above the peer group and peer universe medians.
Harbor Target Retirement 2055 Fund.The Trustees noted the Fund’s outperformance relative to its group and universe medians for the one-, three- and five-year periods ended December 31, 2019, according to Broadridge. The actual total expense ratio of the Fund’s Institutional Class (including acquired fund fees and expenses) was above the peer group and peer universe medians.
Adviser Fees and Profitability
The Trustees noted that Harbor Capital receives no fee from any of the Target Retirement Funds for Harbor Capital’s services in allocating the Target Retirement Funds’ assets among shares of the other Harbor Funds. They also noted that Harbor Capital benefits indirectly from assets invested in the Target Retirement Funds in the form of increased advisory and other fees from the underlying Harbor Funds attributable to assets invested in such funds by the Target Retirement Funds and that the Board considers the issue of Harbor Capital’s profitability in operating these underlying funds at least annually as part of its annual investment advisory contract review process with respect to all of the Harbor Funds. The Board also noted that Harbor Capital pays the expenses of each Target Retirement Fund with limited exceptions and that Harbor Capital was incurring a loss in operating the Target Retirement Funds.
Economies of Scale
As Harbor Capital does not receive a fee from any of the Target Retirement Funds for Harbor Capital’s services, the Trustees determined that it was unnecessary to consider economies of scale in this context. However, given that Harbor Capital benefits from assets invested in the Target Retirement Funds in the form of increased advisory fees from the underlying Harbor Funds, the Board noted that it considers the issue of breakpoints in the Harbor Funds’ fee schedules at least annually as part of its annual investment contract review process for all of the underlying Harbor Funds.
FACTORS CONSIDERED BY THE TRUSTEES IN APPROVING THE INVESTMENT ADVISORY AGREEMENT OF HARBOR TARGET RETIREMENT 2060 FUND
The Investment Company Act of 1940, as amended, requires that the Investment Advisory Agreement of each Fund be approved initially, and following an initial two-year term, at least annually, by the Trust’s 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 and 20, 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 (“Harbor Capital”) with respect to Harbor Target Retirement 2060 Fund (the “Fund”), a newly formed series of Harbor Funds.
In evaluating the Fund’s Investment Advisory Agreement, the Trustees reviewed materials furnished by Harbor Capital, including information about its affiliates, personnel, and operations, and also relied upon their knowledge of Harbor Capital 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, the Trustees, including the Independent Trustees, requested and received materials and presentations relating to the services to be rendered by Harbor Capital.
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 with respect to Harbor Target Retirement 2060 Fund were fair and reasonable and approved the Investment Advisory 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 Harbor Capital 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, 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 were the following:
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Harbor Target Retirement Funds
Additional Information—Continued
Additional Information—Continued
ADVISORY AGREEMENT APPROVALS—Continued
• | the nature, extent, and quality of the services expected to be provided by Harbor Capital, including the background, education, expertise and experience of the investment professionals of Harbor Capital who would provide services to the Fund; |
• | the favorable history, reputation, qualifications and background of Harbor Capital, as well as the qualifications of its personnel; |
• | the expected profitability of Harbor Capital with respect to the Fund; |
• | the fact that while no fees were proposed to be charged by Harbor Capital for investment advisory services, Harbor Capital would benefit from assets invested in the Fund in the form of increased advisory fees from the underlying Harbor Funds attributable to assets that would be invested in such funds by the Fund; |
• | using information for the Harbor Target Retirement 2055 Fund (the “TR 2055 Fund”), an existing Target Retirement Fund with similar objectives and strategies, as a proxy for the Fund, the anticipated expense ratio of the Fund (including acquired fund fees and expenses) relative to the fees and expense ratios of other investment companies with similar objectives and strategies managed by other investment advisers; |
• | information received at regular meetings throughout the year related to the existing Target Retirement Funds’ performance, including the impact of the Target Retirement Funds’ glide paths on relative performance, and services rendered by Harbor Capital; |
• | information contained in materials provided by Harbor Capital as to the investment returns of the Institutional Class of the TR 2055 Fund relative to those of other investment companies with similar objectives and strategies managed by other investment advisers; and |
• | any “fall out” benefits that might inure to Harbor Capital and its affiliates as a result of their relationship with the Fund. |
Nature, Extent, and Quality of Services
The Board evaluated the nature, extent, and quality of Harbor Capital’s proposed services in light of the Board’s actual experience with Harbor Capital concerning the financial and other resources devoted by Harbor Capital to the Harbor Funds, including the breadth and depth of experience and expertise of the investment, accounting, administrative, legal and compliance professionals dedicated to Harbor Funds’ operations. The Trustees determined that Harbor Capital has the expertise and resources to manage and operate effectively the Fund.
Advisory Fees, Expense Ratios and Profitability
The Trustees noted that Harbor Capital would receive no fee from the Fund for its services in allocating the Fund’s assets among shares of the other Harbor Funds. They also noted that Harbor Capital would benefit indirectly from assets invested in the Fund in the form of increased advisory and other fees from the underlying Harbor Funds attributable to assets invested in such funds by the Fund and that the Board considers the issue of Harbor Capital’s profitability in operating these underlying funds at least annually as part of its annual investment advisory contract review process with respect to all of the Harbor Funds. The Board also noted that Harbor Capital would pay the expenses of the Fund with limited exceptions.
The Trustees observed that the data available concerning comparative fees and expense ratios showed that the Fund’s anticipated Institutional Class net expense ratio (including acquired fund fees and expenses) was higher than the average and median expense ratios of the peer group of funds presented to the Board for comparison purposes using Morningstar, Inc. data. The Trustees also noted that the Adviser expected to operate the Fund initially at a loss.
Economies of Scale
As Harbor Capital would not receive a fee from the Fund for Harbor Capital’s services, the Trustees determined that it was unnecessary to consider economies of scale in this context. However, given that Harbor Capital would benefit from assets invested in the Fund in the form of increased advisory fees from the underlying Harbor Funds, the Board noted that it considers the issue of breakpoints in the Harbor Funds’ fee schedules at least annually as part of its annual investment advisory contract review process for all of the underlying Harbor Funds.
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Harbor Target Retirement Funds
Additional Information—Continued
Additional Information—Continued
Review of Liqudity Risk Management Program
The Trust has adopted pursuant to Rule 22e-4 under the Investment Company Act (“Rule 22e-4”) a Liquidity Risk Management Program (the “Program”) for the Funds. The Board has designated a committee of Harbor Capital employees as the Program Administrator.
The Program is designed to assess and manage each Fund’s liquidity risk. For purposes of Rule 22e-4, “liquidity risk” is defined as the risk that a Fund is unable to satisfy redemption requests without significantly diluting remaining investors’ interests in the Fund. Components of the Program include: (i) periodic assessment of each Fund’s liquidity risk based on certain factors; (ii) classification of each Fund’s holdings into one of four liquidity categories (Highly Liquid, Moderately Liquid, Less Liquid and Illiquid) that reflect an estimate of liquidity under current market conditions; (iii) to the extent a Fund does not invest primarily in Highly Liquid investments, establishment of an appropriate Highly Liquid Investment Minimum (“HLIM”) (as defined in Rule 22e-4) for such Fund and ongoing monitoring of the Fund’s net assets to assess compliance with the Fund’s HLIM; (iv) a limit on the ability of a Fund to acquire illiquid investments in excess of 15% of the Fund’s net assets; and (v) periodic reporting to the Board
At a meeting held on November 7, 2019, the Board of Trustees reviewed the operation and effectiveness of the Program for the period beginning June 1, 2019 (the date the Board formally adopted the Program) and ending September 30, 2019 (the “period”). The Board had previously received interim updates on the implementation of the Program at meetings held on February 12, 2019 and May 14, 2019. At the November 7, 2019 meeting, the Board reviewed a report prepared by, and received a presentation from, the Program Administrator regarding the operation of the Program, its adequacy, and the effectiveness of its implementation during the period. The Program Administrator’s report included, among other things, a review of: (i) the operation of the Program overall; (ii) the level of portfolio investments classified into each of the four liquidity categories and the services provided by the third-party vendor engaged by the Trust to facilitate such classification with respect to certain of the Funds; and (iii) the most recent liquidity risk assessment for the Funds conducted by the Program Administrator in accordance with Rule 22e-4. Based upon its review, the Program Administrator determined that the Program was adequate and effective in facilitating the Funds’ compliance with Rule 22e-4 during the period.
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Benchmark Descriptions
Composite Index Income—The Composite Index Income is derived by applying the Harbor Target Retirement Income 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 BofA U.S. High Yield Index (H0A0), ICE BofA U.S. Non-Distressed High Yield Index (with respect to the Harbor High-Yield Bond Fund; prior to March 31, 2015, the ICE BofA 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 BofA 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 BofA U.S. High Yield Index (H0A0), ICE BofA U.S. Non-Distressed High Yield Index (with respect to the Harbor High-Yield Bond Fund; prior to March 31, 2015, the ICE BofA 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 BofA 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 BofA U.S. High Yield Index (H0A0), ICE BofA U.S. Non-Distressed High Yield Index (with respect to the Harbor High-Yield Bond Fund; prior to March 31, 2015, the ICE BofA 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 BofA U.S. High Yield Index (H0A0), ICE BofA U.S. Non-Distressed High Yield Index (with respect to the Harbor High-Yield Bond Fund; prior to March 31, 2015, the ICE BofA 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 BofA U.S. High Yield Index (H0A0), ICE BofA U.S. Non-Distressed High Yield Index (with respect to the Harbor High-Yield Bond Fund; prior to March 31, 2015, the ICE BofA 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
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Benchmark Descriptions—Continued
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 BofA U.S. High Yield Index (H0A0), ICE BofA U.S. Non-Distressed High Yield Index (with respect to the Harbor High-Yield Bond Fund; prior to March 31, 2015, the ICE BofA 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 BofA U.S. High Yield Index (H0A0), ICE BofA U.S. Non-Distressed High Yield Index (with respect to the Harbor High-Yield Bond Fund; prior to March 31, 2015, the ICE BofA 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 BofA 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 BofA 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.
Composite Index 2060— The Composite Index 2060 is derived by applying the Harbor Target Retirement 2060 Fund’s (the “2060 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 BofA U.S. High Yield Index (H0A0), Bloomberg Barclays U.S. Aggregate Bond Index. The weights of the Composite Index 2060 match the 2060 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 2060 Fund’s target asset allocation. This unmanaged index does not reflect fees and expenses and is not available for direct investment.
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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
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
Douglas J. Skinner
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.SAR.TR.0420
Table of Contents
ITEM 2 – CODE OF ETHICS
Not applicable.
ITEM 3 – AUDIT COMMITTEE FINANCIAL EXPERT
Not applicable.
ITEM 4 – PRINCIPAL ACCOUNTANT FEES AND SERVICES
Not applicable.
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 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
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 June 22, 2020 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) | June 22, 2020 |
By: | /s/ Anmarie S. Kolinski Anmarie S. Kolinski | Treasurer (Principal Financial and Accounting Officer) | June 22, 2020 |
Exhibit Index
Number | Description | |
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). |