UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-CSR
CERTIFIED SHAREHOLDER REPORT OF
REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-4676
Harbor Funds
(Exact name of Registrant as specified in charter)
111 South Wacker Drive, 34th Floor
Chicago, Illinois 60606-4302
Chicago, Illinois 60606-4302
(Address of principal executive offices) (Zip code)
Charles F. McCain, Esq. HARBOR FUNDS 111 South Wacker Drive, 34th Floor Chicago, Illinois 60606-4302 | Christopher P. Harvey, Esq. DECHERT LLP One International Place – 40th Floor 100 Oliver Street Boston, MA 02110-2605 |
(Name and address of agent for service)
Registrant’s telephone number, including area code: (312) 443-4400
Date of fiscal year end: October 31
Date of reporting period: October 31, 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):
Annual Report
October 31, 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 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 2020 fiscal year has been a historic period that will undoubtedly live on in our memories as much as we might like to forget the massive disruptions caused by the coronavirus pandemic and the toll it has taken on human lives.
The period began quietly in investment markets, extending a lengthy stretch of subdued volatility. That relative calm came to a dramatic end in late February when the extent of the pandemic became clear, sending shockwaves across global investment markets. Volatility spiked sharply higher, market liquidity became challenged, and government bond yields plunged in a flight to safety. From its peak on February 19 to its March 23 trough, the S&P 500 tumbled 33.8% for its fastest ever descent into bear-market territory. International markets followed suit, with the MSCI All Country World Ex. US (ND) Index falling 32.9% over the same period. Although U.S. Treasuries served as a ballast during the period, corporate bonds did not escape the sharp selloff, with both investment-grade and high-yield credit indexes experiencing double-digit losses.
Governments and central banks acted swiftly and forcefully to support the global economy with massive fiscal and monetary stimulus. This jolt of liquidity put a floor under markets and set the stage for a sharp rebound. Broad stock and bond indexes gained ground throughout much of the rest of the year, shrugging off concerns about the pandemic, inconsistent policy responses, uncertainty around the U.S. election, and escalating social tensions.
As time marched on, economic data has improved. We see GDP is growing again, unemployment appears to have bottomed, and many market measures ended the fiscal year in positive territory. However, economic and market recovery has been uneven. The re-emergence of volatility has brought about significant dispersion across markets. For example, the difference between the best and worst sectors reached its widest levels in many years. Similarly, growth stocks outperformed value stocks by the widest margin in more than 20 years.
This volatile environment, though challenging, has been welcome news for talented active managers, because it has provided them with more opportunities to add value and distance themselves from the pack. Our research shows that the difference between top performing and bottom performing managers in many categories is at its highest level in 20 years.
Harbor believes there are many ways to seek to reach long-term financial goals. Drawing upon experienced portfolio managers who stay true to a strategy grounded in enduring investment principles is one way we believe offers the potential to achieve positive outcomes over time. Even though volatility is likely to be with us for some time to come, we are confident that all our subadvisers continue to strive to skillfully execute their strategies to benefit shareholders over the long haul.
It is important to acknowledge that while market gyrations provide opportunities for skillful professional managers, they can pose behavioral challenges for the rest of us. The sharp selloff in the first quarter was enough to test the mettle of the calmest investor. However, those who stayed the course and stuck to their long-term plans likely benefitted from the sharp recovery that followed. We will look back on this period as a time that underscored the value of thoughtful active management and timeless investment principles such as diversification, discipline, and a long-term view.
I hope that you and your families continue to fare well during these ongoing challenging times. Thank you for your continued investment in Harbor Funds.
December 21, 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 Associates 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
Markets were extremely volatile in the period, unsettled by U.S.-China trade discord and the COVID-19 pandemic.
Stocks peaked at new highs in early 2020, then dropped dramatically as the viral outbreak spread around the globe, disrupting markets and life everywhere.
The realities of the pandemic dictated daily conduct for individuals, businesses, and governments around the world. Shelter-in-place and work-from-home became standard. Global infection and mortality rates reflected varying policy and social behaviors, with the number of infections and deaths highest in the U.S. Developing a vaccine became an overwhelming focus, with both human and capital resources deployed.
Markets rebounded rapidly in the period’s final months, but the pandemic’s economic damage continued to accumulate.
The effects of fiscal stimulus blunted the pandemic’s effect on employment and spending. Comprehensive monetary policy initiatives to bolster liquidity and stabilize asset prices contributed to record-low interest rates.
PERFORMANCE
Harbor Capital Appreciation Fund advanced 42.79% (Retirement Class), 42.68% (Institutional Class), 42.32% (Administrative Class), and 42.15% (Investor Class) in the fiscal year, while the Russell 1000® Growth Index rose 29.22%, and the broader market, as represented by the S&P 500 Index, climbed 9.71%.
In the growth benchmark, the Consumer Discretionary, Information Technology, and Communication Services sectors outperformed the overall index. Energy posted a double-digit decline. Industrials was the only other sector in the benchmark to lose ground.
Stock selection and sector weights benefited Fund performance relative to the growth benchmark. Holdings in Consumer Discretionary, Information Technology, and Communication Services – the Fund’s three biggest sectors – were especially strong contributors to outperformance as both stock selection and overweights were beneficial.
In Consumer Discretionary, Tesla continues to surge on a host of impressive financial results made possible by solid production, increased capacity, and strong execution. In our view, the company’s technology, scale, and low-cost advantage make it not only the breakaway leader in the electric-vehicle market but also position it to disrupt the overall automotive industry. Consumer businesses that have migrated to digital direct-to-consumer business models were notably strong performers. Amazon has operated in this mode for years, and its relevance and dominance became even more apparent. We believe that Amazon continues to benefit from economies of scale and its platform-based business model. The AWS web services business is a significant additional driver of revenue and profit for Amazon. Apparel retailer Lululemon Athletica benefited from less-seasonal offerings, strong brand, and a direct-to-consumer infrastructure that shields it from wholesale distribution backlogs and increased levels of price discounting.
In Information Technology, digital payments processors were strong performers. Adyen 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. PayPal is the largest ecommerce payments enabler in the U.S. and many developing countries. We believe that PayPal can deepen and extend its services among global, consumer, and business clients. The importance of digital commerce in times of restricted personal mobility is also benefitting Shopify, which provides cloud-based, easy-to-use infrastructure tools to enable omni-channel ecommerce capability.
With millions of people around the world working from home, the advantage of housing mission-critical software applications and services on the cloud has emerged. In addition to a strong and stable enterprise business, Microsoft has a differentiated hybrid cloud strategy
2
Harbor Capital Appreciation Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
CHANGE IN A $50,000 INVESTMENT
For the period 11/01/2010 through 10/31/2020
The graph compares a $50,000 investment in the Institutional Class shares of the Fund with the performance of the Russell 1000® Growth Index and the S&P 500 Index. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
TOTAL RETURNS
For the periods ended 10/31/2020
1 Year | Annualized | |||||||
5 Years | 10 Years | |||||||
Harbor Capital Appreciation Fund | ||||||||
Retirement Class1 | 42.79% | 18.43% | 17.10% | |||||
Institutional Class | 42.68 | 18.36 | 17.07 | |||||
Administrative Class | 42.32 | 18.06 | 16.78 | |||||
Investor Class | 42.15 | 17.92 | 16.64 | |||||
Comparative Indices | ||||||||
Russell 1000® Growth | 29.22% | 17.32% | 16.31% | |||||
S&P 500 | 9.71 | 11.71 | 13.01 |
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 at harborfunds.com or by calling 800-422-1050.
that is leading to an increase in its share of technology capital spending. Its Azure cloud business hosts Microsoft software as well as hundreds of cloud-native applications that Microsoft customers or third parties create. The company’s Teams collaboration platform is also benefitting from increased work-from-home requirements. Adobe offers content creation and digital marketing applications and services that are transforming businesses operations. Salesforce remains at the forefront of migrating traditional customer records systems to comprehensive customer intelligence systems. Even in the face of unpredictable macroeconomic trends, in our view, enterprises are concluding that the financial benefits delivered by Salesforce offset the capital outlay required for software purchase and deployment.
The increased demand for cloud storage has led to robust data center spending by chipmaker Nvidia’s largest customers. Nvidia’s acquisition of Mellanox could enhance its functionality and potentially lead to further share gains in the data center space, in our view.
With its huge installed base, Apple has been benefiting from rapid growth in service business subscriptions, a key source of recurring revenue. In our view, the upcoming product cycle should provide robust revenue and profit growth.
In Communication Services, Netflix continues to enhance its long-term competitive position with the industry’s largest commitment of investment dollars in exclusive and original content. Given its still-low global penetration and the accelerating shift from linear TV, we believe that Netflix still has significant room for growth. The company’s secular growth profile looks even stronger in the current environment, as social-distancing and shelter-in-place directives are drawing renewed attention to the value, utility, and now, resilience, of video streaming business models.
Industrials positions detracted from performance. The longer-than-anticipated Boeing 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, the position was eliminated. The position in Safran was closed based on the company’s exposure to the airline industry. Most of Safran’s revenue is generated by its aerospace propulsion business, which includes the company’s joint venture with General Electric, which makes 75% of the world’s narrow-body aircraft engines (including all of Boeing’s 737s and about half of Airbus’s A320s).
In Consumer Discretionary, the position in Adidas was eliminated based on the company’s softer-than-expected gross margin, COVID-19-related sporting event cancellations, and an anticipated back-up in wholesale inventories.
In Information Technology, the position in FleetCor Technologies, which provides specific-purpose charge cards and payment-processing services for commercial and government trucking fleets, was eliminated based on the impact of regulatory litigation related to the company’s marketing and fee practices, as well as on exposure to oil prices.
In Health Care, the position in Sage Therapeutics was closed as a Phase 3 clinical trial of its key developmental therapy to treat major depression (MDD) failed to meet the study’s primary endpoint. The MDD market opportunity was expected to be a key component of the company’s growth.
3
Harbor Capital Appreciation Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
OUTLOOK & STRATEGY
The U.S. economy continues to recover from the worst effects of the pandemic, but the pace of the rebound appears to be moderating. Congress has so far failed to agree on additional stimulus to take up the slack from the massive, but now-largely-exhausted, programs approved in March.
Investors have demonstrated their preference for businesses that were thriving before COVID-19 and that have benefitted from pandemic-related tailwinds and enhanced competitive positions. The Fund holds many companies across the technology, consumer, and communications services industries in this category. In our view, prospects for these companies’ continued growth at above-average rates remain strong.
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.
4
Harbor Capital Appreciation Fund
Portfolio of Investments—October 31, 2020
Portfolio of Investments—October 31, 2020
SECTOR ALLOCATION (% of investments) - Unaudited
Portfolio of Investments
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—99.4% | |||
Shares | Value | ||
AUTOMOBILES—6.5% | |||
6,203,769 | Tesla Inc.* | $ 2,407,311 | |
BIOTECHNOLOGY—0.8% | |||
814,755 | Sarepta Therapeutics Inc.* | 110,734 | |
884,825 | Vertex Pharmaceuticals Inc.* | 184,362 | |
295,096 | |||
CAPITAL MARKETS—1.2% | |||
195,417 | Goldman Sachs Group Inc. | 36,942 | |
1,269,823 | S&P Global Inc. | 409,810 | |
446,752 | |||
ENTERTAINMENT—4.4% | |||
2,689,555 | Netflix Inc.* | 1,279,529 | |
1,468,988 | Spotify Technology SA (Sweden)* | 352,395 | |
1,631,924 | |||
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—0.3% | |||
486,388 | American Tower Corp. | 111,699 | |
FOOD & STAPLES RETAILING—1.6% | |||
1,615,235 | Costco Wholesale Corp. | 577,640 | |
HEALTH CARE EQUIPMENT & SUPPLIES—2.0% | |||
1,439,002 | Danaher Corp. | 330,308 | |
826,700 | Dexcom Inc.* | 264,197 | |
231,299 | Intuitive Surgical Inc.* | 154,295 | |
748,800 | |||
HEALTH CARE PROVIDERS & SERVICES—1.2% | |||
1,250,993 | Guardant Health Inc.* | 133,431 | |
747,746 | Humana Inc. | 298,560 | |
431,991 | |||
HEALTH CARE TECHNOLOGY—1.0% | |||
1,888,314 | Teladoc Health Inc.* | 370,978 | |
HOTELS, RESTAURANTS & LEISURE—1.4% | |||
434,813 | Chipotle Mexican Grill Inc.* | 522,419 | |
INTERACTIVE MEDIA & SERVICES—11.3% | |||
454,450 | Alphabet Inc. Class A* | 734,441 | |
452,682 | Alphabet Inc. Class C* | 733,802 | |
6,150,128 | Facebook Inc.* | 1,618,160 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
INTERACTIVE MEDIA & SERVICES—Continued | |||
5,236,778 | Match Group Inc.* | $ 611,551 | |
6,270,447 | Tencent Holdings Ltd. (China) | 479,098 | |
4,177,052 | |||
INTERNET & DIRECT MARKETING RETAIL—9.7% | |||
1,867,071 | Alibaba Group Holding Ltd. ADR (China)*,1 | 568,878 | |
992,075 | Amazon.com Inc.* | 3,012,088 | |
3,580,966 | |||
IT SERVICES—14.4% | |||
433,107 | Adyen NV (Netherlands)*,2 | 727,942 | |
2,336,484 | Mastercard Inc. | 674,403 | |
4,650,103 | PayPal Holdings Inc.* | 865,524 | |
996,565 | Shopify Inc. (Canada)* | 922,251 | |
1,726,075 | Square Inc.* | 267,334 | |
2,685,977 | Twilio Inc.* | 749,307 | |
6,003,738 | Visa Inc. | 1,090,939 | |
5,297,700 | |||
LEISURE PRODUCTS—0.9% | |||
3,013,020 | Peloton Interactive Inc.* | 332,065 | |
PERSONAL PRODUCTS—1.4% | |||
2,299,173 | Estée Lauder Companies Inc. | 505,036 | |
PHARMACEUTICALS—1.2% | |||
8,458,724 | AstraZeneca plc ADR (United Kingdom)1 | 424,290 | |
ROAD & RAIL—2.2% | |||
12,417,672 | Uber Technologies Inc.* | 414,874 | |
2,250,063 | Union Pacific Corp. | 398,689 | |
813,563 | |||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—4.4% | |||
2,998,476 | NVIDIA Corp. | 1,503,316 | |
1,433,825 | Taiwan Semiconductor Manufacturing Co. Ltd. ADR (Taiwan)1 | 120,255 | |
1,623,571 | |||
SOFTWARE—19.2% | |||
2,507,554 | Adobe Inc.* | 1,121,127 | |
1,853,193 | Atlassian Corp. plc (Australia)* | 355,109 | |
1,352,814 | Coupa Software Inc.* | 362,148 |
5
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—Continued | |||
2,500,098 | CrowdStrike Holdings Inc.* | $ 309,612 | |
9,097,949 | Microsoft Corp. | 1,842,062 | |
1,079,996 | RingCentral Inc.* | 279,006 | |
4,667,131 | salesforce.com Inc.* | 1,084,034 | |
752,081 | ServiceNow Inc.* | 374,213 | |
2,591,142 | Splunk Inc.* | 513,150 | |
575,122 | Trade Desk Inc.* | 325,778 | |
1,527,878 | Workday Inc.* | 321,038 | |
360,968 | Zoom Video Communications Inc.* | 166,374 | |
7,053,651 | |||
SPECIALTY RETAIL—2.2% | |||
1,323,142 | Carvana Co.* | 245,245 | |
2,180,733 | Home Depot Inc. | 581,623 | |
826,868 | |||
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS—6.4% | |||
21,504,394 | Apple Inc. | 2,340,968 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
TEXTILES, APPAREL & LUXURY GOODS—5.7% | |||
792,640 | Kering SA (France) | $ 479,005 | |
2,178,391 | Lululemon Athletica Inc. (Canada)* | 695,539 | |
528,509 | LVMH Moet Hennessy Louis Vuitton SE (France) | 247,737 | |
5,531,614 | NIKE Inc. | 664,236 | |
2,086,517 | |||
TOTAL COMMON STOCKS | |||
(Cost $18,096,745) | 36,606,857 | ||
TOTAL INVESTMENTS—99.4% | |||
(Cost $18,096,745) | 36,606,857 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—0.6% | 224,064 | ||
TOTAL NET ASSETS—100.0% | $36,830,921 |
FAIR VALUE MEASUREMENTS
At October 31, 2020, the investments in Tencent Holdings Ltd., Adyen NV, Kering SA, and LVMH Moet Hennessy Louis Vuitton SE (as disclosed in the preceding Portfolio of Investments) were classified as Level 2 and all other investments were classified as Level 1. There were no Level 3 investments at October 31, 2020 or 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 | Depositary receipts such as American Depositary Receipts (ADRs), Global Depositary Receipts (GDRs) and other country specific depositary receipts are certificates evidencing ownership of shares of a foreign issuer. These certificates are issued by depositary 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 October 31, 2020, the aggregate value of these securities was $727,942 or 2% of net assets. |
The accompanying notes are an integral part of the Financial Statements.
6
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
The new decade started with the world declaring war on COVID-19, the pandemic that has infected millions globally. Around the world, governments, central banks and corporations responded with a litany of actions aimed at containing the deadly virus and limiting its economic damage. Governments issued state-of-emergency declarations, announced shelter-in-place orders and passed trillions of dollars in relief packages for businesses and citizens. Central banks cut interest rates (to near zero in the U.S.), restarted quantitative easing programs and reintroduced an “alphabet soup” of crisis-era programs last seen in the Great Financial Crisis. Against this backdrop, the S&P 500 Index posted its worst quarterly performance since 2008 in the first quarter of 2020.
Throughout late spring and early summer, equity markets rebounded as many states initiated early phases of the reopening process. The worst-case scenario of the global pandemic crisis morphing into a liquidity crunch had thus been avoided as continued central bank support and improving economic data also provided some comfort to market participants despite a myriad of economic, social and political issues at hand.
The S&P 500 closed out the reporting period up after logging consecutive monthly declines in September and October. A resurgent COVID-19 pandemic, in Europe and the U.S., made for a downbeat backdrop as the market’s hopes for pre-election fiscal stimulus were dashed. U.S. technology stocks, which have benefited from the shift online caused by COVID-19 this year, also came under pressure throughout September and October, a reminder that the macroeconomic outlook remains uncertain and markets can still quickly become volatile. On a positive note, optimism around treatments and vaccine progress, have helped cushion the market somewhat amid darkening sentiment. Clearly, more positive news on this front could be optimistic for markets.
Performance
For the year ended October 31, 2020, Harbor Large Cap Value Fund posted a total return of 5.80% (Retirement Class), 5.72% (Institutional Class), 5.42% (Administrative Class) and 5.32% (Investor Class) outperforming the -7.57% return of the Russell 1000® Value Index.
The vast majority of the portfolio’s outperformance relative to the Russell 1000® Value Index during the year can be attributed to security selection, while sector allocation also contributed modestly. Security selection was positive in all but three sectors, with holdings in the Information Technology, Consumer Discretionary, and Energy sectors being the largest contributors to relative return. Conversely, security selection in the Consumer Staples and Industrials sectors coupled with an overweight position in the Consumer Discretionary sector detracted from relative return. (Relative weights are the result of bottom-up security selection.)
Digital media and digital experience software company, Adobe, was the top contributor to the Fund’s relative return during the period. The company reported strong results throughout the year despite the challenging macroeconomic environment, which we believe further demonstrates the resiliency of Adobe’s business model. In our view, the company has benefitted from its advantaged subscription business model and previous investments in products and services that allow customers to increase efficiency and productivity in normal work environments as well as the current remote work environment. Overall, we remain confident in management’s ability to continue to provide innovative solutions to its customers regardless of market environment, as the company’s migration from a license to subscription-based model continues to march on.
7
Harbor Large Cap Value Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
CHANGE IN A $50,000 INVESTMENT
For the period 11/01/2010 through 10/31/2020
The graph compares a $50,000 investment in the Institutional Class shares of the Fund with the performance of the Russell 1000® Value Index. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
TOTAL RETURNS
For the periods ended 10/31/2020
1 Year | Annualized | |||||||
5 Years | 10 Years | |||||||
Harbor Large Cap Value Fund | ||||||||
Retirement Class1 | 5.80% | 10.86% | 12.57% | |||||
Institutional Class | 5.72 | 10.79 | 12.53 | |||||
Administrative Class | 5.42 | 10.49 | 12.22 | |||||
Investor Class | 5.32 | 10.38 | 12.10 | |||||
Comparative Index | ||||||||
Russell 1000® Value | -7.57% | 5.82% | 9.48% |
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 at harborfunds.com or by calling 800-422-1050.
Diversified refiner, chemicals and midstream energy company Phillips 66 was the top detractor from the Fund’s relative return during the year. Shares of Phillips 66 fell as the company continues to combat industry-wide disruptions. Demand for the company’s refined products, such as gasoline, heating oil, and jet fuel, remained well below normal levels throughout the year with lockdown measures in place. Although these headwinds are likely to persist in the short run, we view the strong recoveries in countries that have not experienced a second wave and the initiation of operations at the South Texas Gateway Terminal and Gray Oak Pipeline as encouraging developments. Additionally, the company announced plans to reconfigure its San Francisco refinery to produce renewable fuels. We believe these developments will support Phillips 66’s ongoing diversification away from crude oil refining, a catalyst we previously identified.
Outlook & Strategy
As the pandemic continues to impact the world, and with U.S. elections front and center, there is no shortage of headlines. For Aristotle Capital, what is important to consider is whether such events are analyzable and meaningful for long-term investors or merely interesting conversation topics. Rather than attempting to reposition our portfolios based on an assumption of how the market may react to these events (e.g., election results, timing of a COVID-19 vaccine, size of the next stimulus package), we spend our time trying to identify what we consider to be high-quality companies that can succeed over the long term. Such long-term thinking, we believe, distinguishes us from our competitors and helps us identify companies that possess sustainable competitive advantages and appear poised to outperform their peers over a market cycle.
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.
8
Harbor Large Cap Value Fund
Portfolio of Investments—October 31, 2020
Portfolio of Investments—October 31, 2020
SECTOR ALLOCATION (% of investments) - Unaudited
Portfolio of Investments
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—95.9% | |||
Shares | Value | ||
AEROSPACE & DEFENSE—1.6% | |||
190,000 | General Dynamics Corp. | $ 24,953 | |
BANKS—9.8% | |||
296,801 | Bank of America Corp. | 7,034 | |
177,284 | BOK Financial Corp. | 10,414 | |
370,000 | Commerce Bancshares Inc. | 23,032 | |
198,000 | Cullen/Frost Bankers Inc. | 13,913 | |
528,000 | East West Bancorp Inc. | 19,261 | |
340,000 | JPMorgan Chase & Co. | 33,334 | |
3,670,000 | Mitsubishi UFJ Financial Group Inc. ADR (Japan)1 | 14,460 | |
287,000 | PNC Financial Services Group Inc. | 32,110 | |
153,558 | |||
BEVERAGES—2.4% | |||
800,000 | Coca-Cola Co. | 38,448 | |
BIOTECHNOLOGY—2.9% | |||
209,000 | Amgen Inc. | 45,340 | |
BUILDING PRODUCTS—4.4% | |||
345,000 | Allegion plc (Ireland) | 33,982 | |
850,000 | Johnson Controls International plc | 35,879 | |
69,861 | |||
CAPITAL MARKETS—2.4% | |||
235,000 | Ameriprise Financial Inc. | 37,795 | |
CHEMICALS—5.2% | |||
1,290,000 | Corteva Inc. | 42,544 | |
464,000 | RPM International Inc. | 39,287 | |
81,831 | |||
CONSTRUCTION MATERIALS—2.5% | |||
148,000 | Martin Marietta Materials Inc. | 39,420 | |
CONSUMER FINANCE—1.6% | |||
336,000 | Capital One Financial Corp. | 24,555 | |
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—2.5% | |||
292,000 | Equity Lifestyle Properties Inc. | 17,283 | |
160,000 | Sun Communities Inc. | 22,021 | |
39,304 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
FOOD & STAPLES RETAILING—0.9% | |||
400,000 | Walgreens Boots Alliance Inc. | $ 13,616 | |
FOOD PRODUCTS—1.6% | |||
445,000 | Tyson Foods Inc. | 25,467 | |
HEALTH CARE EQUIPMENT & SUPPLIES—9.6% | |||
588,000 | Alcon Inc. (Switzerland)* | 33,422 | |
335,500 | Danaher Corp. | 77,011 | |
399,000 | Medtronic plc | 40,127 | |
150,560 | |||
HOUSEHOLD DURABLES—5.9% | |||
599,000 | Lennar Corp. Class A | 42,068 | |
7,120 | Lennar Corp. Class B | 405 | |
603,000 | Sony Corp. ADR (Japan)1 | 50,447 | |
92,920 | |||
HOUSEHOLD PRODUCTS—2.5% | |||
286,000 | Procter & Gamble Co. | 39,211 | |
INSURANCE—2.7% | |||
206,000 | Chubb Ltd. (Switzerland) | 26,762 | |
221,591 | Cincinnati Financial Corp | 15,675 | |
42,437 | |||
INTERACTIVE MEDIA & SERVICES—2.1% | |||
810,000 | Twitter Inc.* | 33,502 | |
IT SERVICES—2.3% | |||
189,922 | PayPal Holdings Inc.* | 35,350 | |
MACHINERY—6.9% | |||
460,000 | Oshkosh Corp. | 30,985 | |
188,600 | Parker-Hannifin Corp. | 39,297 | |
430,000 | Xylem Inc. | 37,470 | |
107,752 | |||
OIL, GAS & CONSUMABLE FUELS—3.9% | |||
1,860,000 | Cabot Oil & Gas Corp. | 33,089 | |
365,000 | Phillips 66 | 17,031 | |
150,000 | Pioneer Natural Resources Co. | 11,934 | |
�� | 62,054 |
9
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 | ||
PHARMACEUTICALS—4.1% | |||
1,190,000 | Elanco Animal Health Inc.* | $ 36,902 | |
359,000 | Novartis AG ADR (Switzerland)1 | 28,031 | |
64,933 | |||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—5.9% | |||
433,000 | Microchip Technology Inc. | 45,499 | |
380,000 | QUALCOMM Inc. | 46,877 | |
92,376 | |||
SOFTWARE—12.2% | |||
150,000 | Adobe Inc.* | 67,065 | |
192,500 | ANSYS Inc.* | 58,591 | |
324,000 | Microsoft Corp. | 65,601 | |
191,257 | |||
TOTAL COMMON STOCKS | |||
(Cost $1,197,173) | 1,506,500 | ||
TOTAL INVESTMENTS—95.9% | |||
(Cost $1,197,173) | 1,506,500 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—4.1% | 64,846 | ||
TOTAL NET ASSETS—100.0% | $1,571,346 |
FAIR VALUE MEASUREMENTS
All investments at October 31, 2020 (as disclosed in the preceding Portfolio of Investments) were classified as Level 1. There were no Level 3 investments at October 31, 2020 or 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 | Depositary receipts such as American Depositary Receipts (ADRs), Global Depositary Receipts (GDRs) and other country specific depositary receipts are certificates evidencing ownership of shares of a foreign issuer. These certificates are issued by depositary 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.
10
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
The U.S. equity markets, represented by the S&P 500 Index were positive during the year ended October 31, 2020, posting nearly 10% return. However, the U.S. mid cap market, represented by the Russell Midcap® Index, ended the period lower, down 2% for the year ended October 31, 2020.
Capital markets continued to recover as investors received clarity on the economic impact from the coronavirus epidemic and began to look forward to how a post-COVID-19 environment would support future earnings growth. Many service and retail businesses adapted to the situation with standardized PPE requirements and social distancing standards, while white-collar businesses embraced a work-from-home environment, which enabled them to continue operations. Additionally, significant progress was made on vaccine candidates, several of which are currently being tested. Many areas of the economy saw a swift rebound in activity as the government’s stimulus measures supported renewed consumption of durable goods, and record low mortgage rates buoyed the housing market. With respect to monetary policy, the U.S. Federal Reserve’s (Fed) initial actions to curb the economic effects of the virus included a wide array of stimulative measures that included short-term rate reductions to near-zero and repurchases of U.S. Treasuries, mortgages and corporate debt, to include high-yield notes. In September, the Fed stated that it would hold rates near zero through at least 2022 and would continue to increase its fixed income holdings to provide liquidity to credit markets. These moves gave further confidence to equity and fixed income investors who understood that the Fed will continue to act as a lender-of-last resort and that stimulus measures were not a one-time deal. Additionally, the central bank projected a 6.5% contraction in GDP for 2020 and forecast a 5% gain next year followed by a 3.5% increase in 2022. After hitting a record high of 14.7% in April, unemployment fell to 7.9% in September. The Fed is projecting unemployment of 7.6% at the end of 2020, then falling to 5.5% and 4.6% in 2021 and 2022, respectively.
Performance
Harbor Mid Cap Fund posted modestly positive returns, 5.86% (Retirement Class), 5.75% (Institutional Class), and 5.42% (Investor Class) while the Russell Midcap® Index returned 0.53% for the period December 1, 2019 to October 31, 2020. The portfolio outperformed the benchmark, Russell Midcap® Index, during the period by a wide margin as investors began to refocus on company fundamentals after the sharp market downturn early in 2020 as a result of COVID-19. Stock selection continued to drive relative returns in the period. Stock selection was strongest in the Consumer Discretionary, Industrials and Materials sectors. Sector positioning also contributed to the strong results, as an overweight to Information Technology and an underweight to Energy boosted relative returns.
Contributing to performance for the period, D.R. Horton is one of the largest homebuilders in the U.S. Founded in 1978, The company’s footprint now spans across the United States and has a presence in 29 states, giving it both broad diversification and significant economies of scale. D.R. Horton’s brands include: D.R. Horton America’s Builder, Express Homes, Emerald Homes and Freedom Homes. D.R. Horton reported better-than-expected earnings driving shares up more than 35% during the period. Top line and margin improvement was driven by low mortgage rates and strong demand in entry level homes. August new home sales rose 43% year-over-year which translates to a 40% rise in sales from the pre-COVID-19 period. Targeting the entry-level and mid-level price point homes, we believe that the company is well positioned to continue to benefit from families’ demand for more space combined with a historically low interest rate environment that is expected to remain low in the foreseeable future.
11
Harbor Mid Cap Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
CHANGE IN A $50,000 INVESTMENT
For the period 12/01/2019 through 10/31/2020
The graph compares a $50,000 investment in the Institutional Class shares of the Fund with the performance of the Russell Midcap® Index. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
TOTAL RETURNS
For the periods ended 10/31/2020
1 Year | 5 Years | Unannualized | ||||||
Life of Fund | ||||||||
Harbor Mid Cap Fund | ||||||||
Retirement Class1 | N/A | N/A | 5.86% | |||||
Institutional Class1 | N/A | N/A | 5.75 | |||||
Investor Class1 | N/A | N/A | 5.42 | |||||
Comparative Index | ||||||||
Russell Midcap®1 | N/A | N/A | 0.53% |
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 at harborfunds.com or by calling 800-422-1050.
Detracting from performance for the period, Boston Properties is a real estate investment trust whose portfolio is comprised primarily of first-class office space, hotels, residential properties, and retail properties which are concentrated in Boston, New York, San Francisco and Washington, DC. During the period, Boston Properties reported that a portion of its portfolio of properties was due for contract renewals. With uncertainty around the occupancy rate cycle and interest rates, market participants expressed concerns about the company’s ability to secure its existing contracts at advantageous rates and to grow new leasing of properties. Shares declined 45% during the period. We believe that Boston Properties has a strong balance sheet, experienced management team and an established track record of managing its portfolio of commercial office spaces. Additionally, the company’s properties are in the top end of the quality spectrum and are located in the high demand markets with a high-quality tenant base which we believe makes it a strong commercial real estate operator in the industry.
OUTLOOK & STRATEGY
As of October 31, 2020, the Fund had an overweight in the Industrials, Information Technology, and Financials sectors and an underweight in the Healthcare, Consumer Staples, Consumer Discretionary, and Utilities sectors. The Fund’s relative overweight and underweight positions are a result of where EARNEST Partners is finding attractive individual investment opportunities.
In managing the Harbor Mid Cap Fund, EARNEST Partners seeks 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 10/31/2020. |
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.
12
Harbor Mid Cap Fund
Portfolio of Investments—October 31, 2020
Portfolio of Investments—October 31, 2020
SECTOR ALLOCATION (% of investments) - Unaudited
Portfolio of Investments
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—97.6% | |||
Shares | Value | ||
AEROSPACE & DEFENSE—0.9% | |||
770 | General Dynamics Corp. | $ 101 | |
BANKS—1.0% | |||
8,915 | KeyCorp | 116 | |
BUILDING PRODUCTS—2.1% | |||
4,269 | Masco Corp* | 229 | |
CAPITAL MARKETS—9.3% | |||
7,196 | Eaton Vance Corp. | 430 | |
2,889 | Intercontinental Exchange Inc. | 273 | |
2,151 | Raymond James Financial Inc. | 164 | |
2,644 | Stifel Financial Corp. | 155 | |
1,022 | |||
CHEMICALS—4.0% | |||
1,460 | Albemarle Corp.* | 136 | |
1,614 | Eastman Chemical Co. | 130 | |
1,146 | Scotts Miracle-Gro Co. | 172 | |
438 | |||
COMMERCIAL SERVICES & SUPPLIES—4.4% | |||
3,181 | Republic Services Inc* | 281 | |
3,228 | Stericycle Inc.* | 201 | |
482 | |||
CONTAINERS & PACKAGING—2.4% | |||
1,249 | Packaging Corp. of America* | 143 | |
3,027 | Sealed Air Corp* | 120 | |
263 | |||
ELECTRICAL EQUIPMENT—1.6% | |||
4,116 | Sensata Technologies Holding plc (United Kingdom)* | 180 | |
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—2.3% | |||
2,381 | Keysight Technologies Inc.* | 250 | |
ENTERTAINMENT—2.1% | |||
3,104 | Activision Blizzard Inc.* | 235 | |
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—4.5% | |||
5,621 | Americold Realty Trust* | 203 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—Continued | |||
1,282 | Boston Properties Inc.* | $ 93 | |
675 | SBA Communications Corp.* | 196 | |
492 | |||
FOOD & STAPLES RETAILING—1.3% | |||
2,564 | Sysco Corp.* | 142 | |
HEALTH CARE EQUIPMENT & SUPPLIES—1.5% | |||
3,422 | Dentsply Sirona Inc.* | 161 | |
HEALTH CARE PROVIDERS & SERVICES—2.5% | |||
1,333 | AmerisourceBergen Corp* | 128 | |
767 | Laboratory Corp. of America Holdings* | 153 | |
281 | |||
HOTELS, RESTAURANTS & LEISURE—2.1% | |||
2,480 | Darden Restaurants Inc.* | 228 | |
HOUSEHOLD DURABLES—2.8% | |||
4,558 | D.R. Horton Inc.* | 305 | |
INSURANCE—4.8% | |||
1,391 | Reinsurance Group of America Inc. | 141 | |
788 | Renaissance Holdings Ltd. (Bermuda)* | 127 | |
2,876 | The Progressive Corp.* | 264 | |
532 | |||
IT SERVICES—6.7% | |||
1,311 | Akamai Technologies Inc.* | 125 | |
1,398 | Arrow Electronics Inc.* | 109 | |
2,717 | Black Knight Inc.* | 239 | |
1,668 | Global Payments Inc.* | 263 | |
736 | |||
LIFE SCIENCES TOOLS & SERVICES—5.9% | |||
2,220 | Agilent Technologies Inc. | 227 | |
485 | Bio-Rad Laboratories Inc.* | 284 | |
2,545 | Syneos Health Inc.* | 135 | |
646 | |||
MACHINERY—6.1% | |||
924 | Cummins Inc. | 203 | |
1,384 | Dover Corp. | 153 |
13
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 | |||
1,051 | Snap-on Inc. | $ 166 | |
1,884 | Woodward Inc. | 150 | |
672 | |||
MULTI-UTILITIES—1.9% | |||
2,118 | WEC Energy Group Inc. | 213 | |
OIL, GAS & CONSUMABLE FUELS—1.6% | |||
3,857 | Cimarex Energy Co.* | 98 | |
6,505 | Continental Resources Inc.* | 78 | |
176 | |||
REAL ESTATE MANAGEMENT & DEVELOPMENT—2.0% | |||
4,350 | CBRE Group Inc.* | 219 | |
ROAD & RAIL—1.6% | |||
2,281 | CSX Corp* | 180 | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—9.1% | |||
3,995 | Applied Materials Inc. | 237 | |
1,208 | CMC Materials Inc. | 172 | |
2,297 | Skyworks Solutions Inc.* | 324 | |
2,286 | Xilinx Inc. | 271 | |
1,004 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
SOFTWARE—9.6% | |||
1,022 | ANSYS Inc.* | $ 311 | |
1,240 | Autodesk Inc.* | 292 | |
320 | Intuit Inc. | 101 | |
1,669 | Synopsys Inc.* | 357 | |
1,061 | |||
SPECIALTY RETAIL—1.7% | |||
3,634 | TJX Companies Inc.* | 185 | |
TRADING COMPANIES & DISTRIBUTORS—1.8% | |||
3,057 | Air Lease Corp. | 83 | |
1,775 | GATX Corp. | 121 | |
204 | |||
TOTAL COMMON STOCKS | |||
(Cost $9,954) | 10,753 | ||
TOTAL INVESTMENTS—97.6% | |||
(Cost $9,954) | 10,753 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—2.4% | 261 | ||
TOTAL NET ASSETS—100.0% | $11,014 |
FAIR VALUE MEASUREMENTS
All investments at October 31, 2020 (as disclosed in the preceding Portfolio of Investments) were classified as Level 1. There were no Level 3 investments at October 31, 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.
14
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, as measured by the S&P 500 Index, posted positive results over the trailing year ended October 31, 2020. Mid cap growth equities outperformed the broader market during this period. During the first quarter of 2020 equities ended 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 COVID-19 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. The unprecedented scale of fiscal and monetary stimulus implemented by Congress and the Fed in response to the pandemic drove the market’s rebound in the second quarter. Momentum carried into the third quarter bolstered by substantial monetary support from the Fed, a broadening U.S. economic recovery and promising trials for COVID-19 vaccines. However, the path to sustainable economic recovery was clouded by concerns about a resurgence in COVID-19 infections around the country, an undetermined timeline for vaccines, high unemployment, elevated debt burdens, and uncertainty about additional fiscal stimulus.
Performance
For the year ended October 31, 2020, Harbor Mid Cap Growth Fund outperformed the Russell Midcap® Growth Index. The Fund returned 46.03% (Retirement Class), 45.84% (Institutional Class), 45.42% (Administrative Class), 45.32% (Investor Class) for the year, while the Russell Midcap® Growth Index returned 21.14%.
Relative outperformance was driven by positive security selection, most notably within the Information Technology, Health Care, and Communication Services sectors. Unfavorable security selection within the Financials sector slightly offset positive returns. Sector allocation, a residual of the bottom-up stock selection process, also contributed to results. An overweight allocation to the Health Care sector and an underweight to the Industrials sector contributed most to performance. An overweight allocation to the Consumer Discretionary sector detracted, partially offsetting results.
Advanced Micro Devices, a semiconductor company, was the Fund’s most significant relative 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. The company has further benefitted from Intel’s delay of its 7nm processors. We exited our position during the period as it grew beyond our market cap range for the portfolio. Other notable contributors during the period were exercise equipment and media company Peloton, mobile payment company Square, and medical devices provider Livongo Health.
Pinterest, a pinboard-style photo-sharing website, was the Fund’s most significant relative detractor during the period. Pinterest saw strong user growth in late 2019. However, the majority of new users came from international countries where users generate less revenue than those in the U.S. We eliminated the position from the portfolio during the period. Other notable detractors during the period were facilities, food and uniform service Aramark, property and casualty software provider Guidewire Software, and timeshare company Marriott Vacations.
15
Harbor Mid Cap Growth Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
CHANGE IN A $50,000 INVESTMENT
For the period 11/01/2010 through 10/31/2020
The graph compares a $50,000 investment in the Institutional Class shares of the Fund with the performance of the Russell Midcap® Growth Index. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
TOTAL RETURNS
For the periods ended 10/31/2020
1 Year | Annualized | |||||||
5 Years | 10 Years | |||||||
Harbor Mid Cap Growth Fund | ||||||||
Retirement Class1 | 46.03% | 20.07% | 16.10% | |||||
Institutional Class | 45.84 | 19.99 | 16.06 | |||||
Administrative Class | 45.42 | 19.68 | 15.76 | |||||
Investor Class | 45.32 | 19.54 | 15.62 | |||||
Comparative Index | ||||||||
Russell Midcap® Growth | 21.14% | 14.15% | 14.13% |
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 at harborfunds.com or by calling 800-422-1050.
OUTLOOK & STRATEGY
Following a 30% rebound in the Russell Midcap® Growth Index in the second quarter of 2020 driven by cyclical sectors, mid cap U.S. equities continued on a positive trajectory in the third quarter. Investors largely remained risk-on despite COVID-19 continuing to affect large portions of the U.S., slowing the economic recovery and perpetuating market uncertainty. Cyclical sectors such as Communication Services and Consumer Discretionary led the index in the third quarter.
In terms of portfolio positioning, we continued to strive for more balance in the portfolio – an effort that we began in the second quarter as we trimmed our COVID-19 winners and deployed some of that capital into more cyclical growth names. Given the uncertainty of the current environment, we believe a barbell approach between cyclical growth and emerging and compounding growth names in the portfolio should help us protect on the downside if we see another severe wave of the virus that will slow down the recovery while also allowing us to participate on the upside if the market continues to anticipate a full reopening. Part of our barbell strategy is to find some COVID-19 losers that we believe will emerge stronger coming out of this crisis. Among the COVID-19 winners, we see them falling into two camps: those growth stocks which can build on their accelerated growth going forward and those which will likely revert to the mean. Importantly, we are evaluating how possible permanent or semi-permanent changes in consumer behavior will impact companies. The paradigm shifts going on now, whether sustainable or not, are mind boggling and non-linear, and we need to be more flexible in analyzing this new world than ever before.
While a lot of uncertainty remains including the trajectory of the virus and its impact on the economy as well as the upcoming U.S. presidential election, we are staying disciplined to our bottom-up stock selection process and are confident in our positioning heading into the end of the year. We continue to look for growth companies for which we have a differentiated view from consensus and have identified a higher upside potential relative to the downside.
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.
16
Harbor Mid Cap Growth Fund
Portfolio of Investments—October 31, 2020
Portfolio of Investments—October 31, 2020
SECTOR ALLOCATION (% of investments) - Unaudited
(Excludes short-term investments)
Portfolio of Investments
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—91.1% | |||
Shares | Value | ||
AUTOMOBILES—1.8% | |||
72,836 | Thor Industries Inc. | $ 6,160 | |
BEVERAGES—4.0% | |||
5,288 | Boston Beer Co. Inc.* | 5,495 | |
105,300 | Monster Beverage Corp.* | 8,063 | |
13,558 | |||
BIOTECHNOLOGY—7.1% | |||
34,945 | Apellis Pharmaceuticals Inc.* | 1,115 | |
16,393 | Ascendis Pharma AS ADR (Denmark)*,1 | 2,678 | |
89,596 | Exact Sciences Corp.* | 11,095 | |
30,127 | Galapagos NV (Belgium)* | 3,558 | |
1,736 | Galapagos NV ADR (Belgium)*,1 | 202 | |
29,414 | Kodiak Sciences Inc.* | 2,671 | |
17,724 | Seagen Inc.* | 2,956 | |
24,275 | |||
CAPITAL MARKETS—2.7% | |||
57,202 | Blackstone Group Inc. | 2,884 | |
312,100 | Bowx Acquisition Corp.* | 3,115 | |
313,754 | Churchill Capital Corp. IV* | 3,081 | |
9,080 | |||
COMMERCIAL SERVICES & SUPPLIES—1.6% | |||
50,468 | Copart Inc.* | 5,570 | |
DIVERSIFIED CONSUMER SERVICES—2.5% | |||
115,178 | Chegg Inc.* | 8,459 | |
ELECTRICAL EQUIPMENT—0.1% | |||
16,199 | Vontier Corp.* | 466 | |
ENTERTAINMENT—3.4% | |||
17,141 | Roku Inc.* | 3,469 | |
33,564 | Spotify Technology SA (Sweden)* | 8,052 | |
11,521 | |||
HEALTH CARE EQUIPMENT & SUPPLIES—13.5% | |||
27,877 | ABIOMED Inc.* | 7,022 | |
32,942 | Align Technology Inc.* | 14,036 | |
19,893 | Dexcom Inc.* | 6,357 | |
38,139 | Insulet Corp.* | 8,476 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
HEALTH CARE EQUIPMENT & SUPPLIES—Continued | |||
22,372 | Novocure Ltd. (Jersey)* | $ 2,732 | |
68,975 | Tandem Diabetes Care Inc.* | 7,518 | |
46,141 | |||
HEALTH CARE TECHNOLOGY—1.0% | |||
12,104 | Veeva Systems Inc.* | 3,269 | |
HOTELS, RESTAURANTS & LEISURE—1.9% | |||
52,614 | Penn National Gaming Inc.* | 2,840 | |
63,840 | Planet Fitness Inc.* | 3,784 | |
6,624 | |||
HOUSEHOLD DURABLES—1.8% | |||
88,041 | Lennar Corp. | 6,183 | |
INTERACTIVE MEDIA & SERVICES—4.2% | |||
94,615 | Match Group Inc.* | 11,049 | |
80,878 | Twitter Inc.* | 3,345 | |
14,394 | |||
IT SERVICES—5.9% | |||
104,219 | GoDaddy Inc.* | 7,373 | |
57,893 | Leidos Holdings Inc. | 4,805 | |
52,053 | Square Inc.* | 8,062 | |
20,240 | |||
LEISURE PRODUCTS—6.3% | |||
196,797 | Draftkings Inc.* | 6,967 | |
94,985 | Peloton Interactive Inc.* | 10,468 | |
44,894 | Polaris Industries Inc. | 4,079 | |
21,514 | |||
LIFE SCIENCES TOOLS & SERVICES—1.0% | |||
34,735 | Agilent Technologies Inc. | 3,546 | |
MACHINERY—0.8% | |||
41,761 | Fortive Corp. | 2,572 |
17
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 | ||
PHARMACEUTICALS—1.4% | |||
121,346 | Elanco Animal Health Inc.* | $ 3,763 | |
7,042 | Reata Pharmaceuticals Inc.* | 822 | |
4,585 | |||
PROFESSIONAL SERVICES—3.2% | |||
13,305 | CoStar Group Inc.* | 10,958 | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—1.7% | |||
149,440 | Marvell Technology Group Ltd. (Bermuda) | 5,605 | |
SOFTWARE—19.0% | |||
88,032 | 2U Inc.* | 3,244 | |
14,449 | Fair Isaac Corp.* | 5,656 | |
79,664 | Guidewire Software Inc.* | 7,657 | |
398,218 | Multiplan Corp.* | 2,907 | |
18,304 | Paycom Software Inc.* | 6,664 | |
22,934 | RingCentral Inc.* | 5,925 | |
247,550 | Snap Inc.* | 9,751 | |
65,260 | Splunk Inc.* | 12,924 | |
47,817 | Workday Inc.* | 10,047 | |
64,775 | |||
SPECIALTY RETAIL—6.2% | |||
48,591 | Burlington Stores Inc.* | 9,406 | |
49,052 | Five Below Inc.* | 6,541 | |
72,031 | Floor & Decor Holdings Inc.* | 5,258 | |
21,205 | |||
TOTAL COMMON STOCKS | |||
(Cost $223,102) | 310,700 | ||
EXCHANGE-TRADED FUNDS—4.8% | |||
(Cost $16,028) | |||
Shares | Value | ||
CAPITAL MARKETS—4.8% | |||
95,009 | iShares Russell Mid-Cap Growth ETF | $ 16,444 | |
SHORT-TERM INVESTMENTS—4.6% | |||
(Cost $15,622) | |||
Principal Amount | |||
REPURCHASE AGREEMENTS—4.6% | |||
$ | 15,622 | Repurchase agreement with Bank of America dated October 30, 2020 due November 02, 2020 at 0.060% collateralized by U.S. Treasury Notes (value $15,924) | 15,622 |
TOTAL INVESTMENTS—100.5% | |||
(Cost $254,752) | 342,766 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—(0.5)% | (1,596) | ||
TOTAL NET ASSETS—100.0% | $341,170 |
FAIR VALUE MEASUREMENTS
At October 31, 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 October 31, 2020 or 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 | Depositary receipts such as American Depositary Receipts (ADRs), Global Depositary Receipts (GDRs) and other country specific depositary receipts are certificates evidencing ownership of shares of a foreign issuer. These certificates are issued by depositary 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.
18
Harbor Mid Cap Value Fund
Manager’s Commentary (Unaudited)
Manager’s Commentary (Unaudited)
Subadviser
LSV Asset Management
155 North Wacker Dr.
Suite 4600
Suite 4600
Chicago, IL 60606
Portfolio Managers
Josef Lakonishok, Ph.D.
Since 2004
Since 2004
Menno Vermeulen, CFA
Since 2004
Since 2004
Puneet Mansharamani, CFA
Since 2006
Greg Sleight
Since 2014
Since 2014
Guy Lakonishok, CFA
Since 2014
Since 2014
LSV has subadvised the Fund since 2004.
Investment Objective
The Fund seeks long-term total return.
Josef Lakonishok, Ph.D.
Menno Vermeulen, CFA
Puneet Mansharamani, CFA
Greg Sleight
Guy Lakonishok, CFA
Management’s Discussion of
Fund Performance
Fund Performance
Market Review
The broad U.S. equity market as measured by the S&P 500 Index finished up 9.71% for the twelve months ended October 31, 2020. However, equity markets took investors on a wild ride to the 9.71% return. Equities finished 2019 on a positive note but global equity markets plummeted in February and March 2020 as the COVID-19 outbreak shut down cities and economies around the globe. From mid-February to mid-March, the S&P 500 declined nearly 35%. Equity markets subsequently rebounded over the next several months in large part to massive monetary and fiscal stimulus measures.
While growth stocks have steadily outperformed value stocks since the global financial crisis, the gap in performance between growth and value stocks has reached extreme levels. Growth stocks outperformed value stocks by nearly 30% over the last twelve months as the Russell Midcap® Growth Index finished up 21.14% for the period while the Russell Midcap® Value Index was down 6.94%. The sell-off in February and March was particularly painful for value stocks as cyclical sectors of the market including Energy, Consumer Discretionary and Financial stocks were punished while defensive and growth-oriented stocks and sectors held up relatively well. While many value stocks subsequently staged a comeback, growth continued to outperform value as markets recovered in the second and third quarters. From a sector perspective, Health Care, Materials and Information Technology stocks led among mid cap value stocks while Energy, Real Estate and Financial stocks significantly lagged.
Performance
Harbor Mid Cap Value Fund returned -16.55% (Retirement Class), -16.64% (Institutional Class), -16.85% (Administrative Class), and -16.94% (Investor Class) compared to -6.94% for the Russell Midcap® Value Index for the fiscal year ended October 31, 2020. The most significant contributor to the underperformance in the period was the difficult environment for traditional deep value stocks. We have not seen such a divergence between the returns of growth and value stocks since the technology bubble. While value stocks have lagged growth stocks since the financial crisis, it was not until the last several years and in particular the last twelve months that the Fund has severely underperformed. Since 2009, the manager’s focus on buying companies that are cheap but generating strong cash flow and earnings, companies we would consider ‘higher quality’ value stocks, held up relatively well. However, over the last several years, it has been a more macro driven market and all value stocks, regardless of whether value is defined based on measures of book value, earnings yield, cash flow yield or dividend yield, had difficulties.
The performance of the Fund’s holdings in the Real Estate, Financial and Industrial sectors negatively impacted results in the period. While the Fund holds a diversified group of Real Estate Investment Trusts (REITs), the Fund’s overweight to Hotel REITs and poor selection among Office and Specialized REITs had a negative impact on results. The Fund’s overweight to airlines and exposure to aerospace & defense company Spirit Aerosystems also detracted from the Fund’s returns over the fiscal year. Within the Financials sector, the Fund’s overweight and poor selection among insurers, regional banks and mortgage REITS had a negative impact on performance. In addition, refiners HollyFrontier, Marathon Petroleum and Valero Energy struggled as Energy stocks suffered significant declines.
While Consumer Discretionary stocks were among the hardest hit in the first quarter sell-off, several Fund holdings rebounded and contributed positively for the year. Top contributors included retailers Big Lots, Dicks Sporting Goods and Best Buy, appliance manufacturer Whirlpool and homebuilder Meritage Homes. Other Fund holdings that did well in the period included Atlas Air Worldwide and Cummins in the Industrials sector, Kroger in the Consumer Staples sector and chemical companies Eastman Chemical and Huntsman Corp.
19
Harbor Mid Cap Value Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
CHANGE IN A $50,000 INVESTMENT
For the period 11/01/2010 through 10/31/2020
The graph compares a $50,000 investment in the Institutional Class shares of the Fund with the performance of the Russell Midcap® Value Index. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
TOTAL RETURNS
For the periods ended 10/31/2020
1 Year | Annualized | |||||||
5 Years | 10 Years | |||||||
Harbor Mid Cap Value Fund | ||||||||
Retirement Class1 | -16.55% | 0.56% | 7.37% | |||||
Institutional Class | -16.64 | 0.50 | 7.34 | |||||
Administrative Class | -16.85 | 0.24 | 7.07 | |||||
Investor Class | -16.94 | 0.13 | 6.95 | |||||
Comparative Index | ||||||||
Russell Midcap® Value | -6.94% | 5.32% | 9.40% |
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 at harborfunds.com or by calling 800-422-1050.
Outlook & Strategy
The manager’s portfolio decision making process is quantitative and driven by (1) a proprietary model which ranks securities on fundamental measures of value and indicators of near-term appreciation potential and, (2) a portfolio construction process that controls for risk while maximizing the expected return of the portfolio. The objective of the model is to pick undervalued stocks with high near-term appreciation potential.
Sector weightings are a residual of our bottom-up stock selection process, subject to minimum and maximum exposures to sectors and industries. The Fund’s most significant sector exposures on an absolute basis are to Financials, Industrials and Consumer Discretionary stocks. Relative to the value benchmark, the Fund is overweight in the Financial, Materials, Consumer Staples and Consumer Discretionary sectors. The Fund is underweight in the Industrials, Utilities, Real Estate, Information Technology and Communication Services. The most significant changes in sector weights over the last twelve months were an increase in the relative exposure to Consumer Staples and Health Care stocks and decreases to Information Technology and Industrial stocks.
In our view, the Fund’s portfolio continues to trade at attractive valuations relative to the benchmark and relative to history. The Fund’s portfolio is trading at 9.5x forward earnings compared to 15.5x for the value benchmark and 7.4x cash flow compared to 12.5x for the Russell Midcap Value Index. The Fund has a dividend yield of 2.9% even though the Fund is underweight to traditional high yielding sectors including Utilities and Real Estate.
While stock market multiples have increased to elevated levels, 10-year Treasury yields and investment grade corporate bond yields have dropped significantly over the last year. While the debate lingers over whether equities are fairly priced or not given the interest rate environment, the manager believes that value stocks offer attractive potential long-run returns given their relative valuations and the low return expectations for the overall stock and bond markets. While the short-term outlook continues to be uncertain given the macro conditions resulting from COVID-19, the manager believes the long-term outlook for value stocks relative to growth stocks is attractive. The manager remains committed to its disciplined investment approach that seeks to take advantage of investors’ tendency to overreact to information about the prospects of each company’s long-term earnings and cash flows.
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.
20
Harbor Mid Cap Value Fund
Portfolio of Investments—October 31, 2020
Portfolio of Investments—October 31, 2020
SECTOR ALLOCATION (% of investments) - Unaudited
Portfolio of Investments
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—98.9% | |||
Shares | Value | ||
AEROSPACE & DEFENSE—1.6% | |||
9,300 | Huntington Ingalls Industries Inc. | $ 1,371 | |
114,800 | Textron Inc. | 4,110 | |
5,481 | |||
AIR FREIGHT & LOGISTICS—1.0% | |||
58,200 | Atlas Air Worldwide Holdings Inc.* | 3,443 | |
AIRLINES—1.9% | |||
49,700 | Alaska Air Group Inc. | 1,883 | |
188,800 | JetBlue Airways Corp.* | 2,260 | |
63,900 | United Airlines Holdings Inc.* | 2,164 | |
6,307 | |||
AUTO COMPONENTS—1.6% | |||
118,200 | American Axle & Manufacturing Holdings Inc.* | 794 | |
58,900 | BorgWarner Inc. | 2,060 | |
68,900 | Goodyear Tire & Rubber Co. | 571 | |
15,400 | Lear Corp. | 1,861 | |
5,286 | |||
AUTOMOBILES—0.8% | |||
81,800 | Harley-Davidson Inc. | 2,690 | |
BANKS—5.6% | |||
41,100 | CIT Group Inc. | 1,210 | |
174,900 | Citizens Financial Group Inc. | 4,766 | |
175,000 | Fifth Third Bancorp | 4,064 | |
143,100 | KeyCorp | 1,858 | |
232,100 | Regions Financial Corp. | 3,087 | |
125,200 | Zions Bancorporation | 4,040 | |
19,025 | |||
BEVERAGES—1.2% | |||
110,500 | Molson Coors Brewing Co. | 3,896 | |
BIOTECHNOLOGY—1.5% | |||
45,350 | Alexion Pharmaceuticals Inc.* | 5,222 | |
BUILDING PRODUCTS—0.9% | |||
47,400 | Owens Corning | 3,103 | |
CAPITAL MARKETS—2.4% | |||
32,300 | Ameriprise Financial Inc. | 5,195 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
CAPITAL MARKETS—Continued | |||
120,600 | Ares Capital Corp. | $ 1,668 | |
280,000 | Prospect Capital Corp. | 1,386 | |
8,249 | |||
CHEMICALS—5.5% | |||
67,674 | Cabot Corp. | 2,572 | |
34,000 | Celanese Corp. | 3,860 | |
112,122 | Chemours Co. | 2,258 | |
61,743 | Eastman Chemical Co. | 4,991 | |
180,100 | Huntsman Corp. | 4,375 | |
21,500 | Trinseo SA (Luxembourg) | 684 | |
18,740 | |||
CONSUMER FINANCE—1.9% | |||
117,500 | Ally Financial Inc. | 3,135 | |
22,700 | Discover Financial Services | 1,476 | |
225,200 | Navient Corp. | 1,804 | |
6,415 | |||
CONTAINERS & PACKAGING—2.7% | |||
61,100 | Greif Inc.* | 2,480 | |
158,830 | O-I Glass Inc.* | 1,498 | |
55,200 | Silgan Holdings Inc. | 1,902 | |
83,600 | WestRock Co. | 3,139 | |
9,019 | |||
DIVERSIFIED FINANCIAL SERVICES—1.0% | |||
79,987 | Banco Latinoamericano de Comercio Exterior SA (Panama) | 1,023 | |
51,000 | Voya Financial Inc. | 2,444 | |
3,467 | |||
ELECTRIC UTILITIES—2.3% | |||
24,500 | Edison International | 1,373 | |
44,100 | FirstEnergy Corp. | 1,311 | |
184,700 | PPL Corp. | 5,079 | |
7,763 | |||
ELECTRICAL EQUIPMENT—0.4% | |||
14,000 | Regal Beloit Corp. | 1,381 | |
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—2.2% | |||
48,100 | Avnet Inc. | 1,187 |
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 | ||
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—Continued | |||
61,800 | Methode Electronics Inc. | $ 1,902 | |
13,988 | SYNNEX Corp. | 1,841 | |
125,800 | TTM Technologies Inc.* | 1,493 | |
69,800 | Vishay Intertechnology Inc. | 1,132 | |
7,555 | |||
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—7.7% | |||
213,903 | Brandywine Realty Trust | 1,874 | |
172,300 | Brixmor Property Group Inc. | 1,888 | |
429,000 | Franklin Street Properties Corp. | 1,802 | |
48,295 | Gaming and Leisure Properties Inc. | 1,756 | |
188,700 | Hersha Hospitality Trust | 925 | |
88,234 | Industrial Logistics Properties Trust | 1,692 | |
71,600 | Iron Mountain Inc.* | 1,866 | |
52,750 | Office Properties Income Trust | 971 | |
60,600 | Omega Healthcare Investors Inc. | 1,746 | |
51,500 | Outfront Media Inc. | 675 | |
139,000 | Paramount Group Inc. | 803 | |
138,248 | Piedmont Office Realty Trust Inc. | 1,579 | |
30,543 | Retail Value Inc. | 382 | |
138,200 | Sabra Health Care REIT Inc. | 1,819 | |
124,400 | Service Properties Trust | 897 | |
216,500 | SITE Centers Corp. | 1,474 | |
141,500 | Summit Hotel Properties Inc. | 747 | |
412,800 | VEREIT Inc. | 2,559 | |
94,596 | Xenia Hotels & Resorts Inc. | 780 | |
26,235 | |||
FOOD & STAPLES RETAILING—2.1% | |||
51,800 | Ingles Markets Inc. | 1,858 | |
166,300 | Kroger Co. | 5,356 | |
7,214 | |||
FOOD PRODUCTS—3.2% | |||
39,000 | Ingredion Inc. | 2,765 | |
37,700 | JM Smucker Co. | 4,230 | |
68,100 | Tyson Foods Inc. | 3,897 | |
10,892 | |||
GAS UTILITIES—1.2% | |||
102,100 | National Fuel Gas Co. | 4,080 | |
HEALTH CARE PROVIDERS & SERVICES—5.0% | |||
59,300 | Cardinal Health Inc. | 2,715 | |
39,100 | DaVita Inc.* | 3,372 | |
18,500 | HCA Healthcare Inc. | 2,293 | |
8,400 | Laboratory Corp. of America Holdings* | 1,678 | |
27,200 | McKesson Corp. | 4,012 | |
26,600 | Universal Health Services Inc. | 2,914 | |
16,984 | |||
HOTELS, RESTAURANTS & LEISURE—0.5% | |||
12,200 | Brinker International Inc. | 531 | |
30,500 | Wyndham Destinations Inc. | 995 | |
1,526 | |||
HOUSEHOLD DURABLES—4.6% | |||
101,478 | Ethan Allen Interiors Inc. | 1,629 | |
26,100 | Meritage Homes Corp.* | 2,273 | |
68,100 | PulteGroup Inc. | 2,776 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
HOUSEHOLD DURABLES—Continued | |||
84,000 | Toll Brothers Inc. | $ 3,551 | |
29,400 | Whirlpool Corp. | 5,438 | |
15,667 | |||
INDEPENDENT POWER AND RENEWABLE ELECTRICITY PRODUCERS—1.6% | |||
314,400 | Vistra Energy Corp. | 5,461 | |
INSURANCE—6.2% | |||
48,900 | Allstate Corp. | 4,340 | |
27,500 | American Financial Group Inc. | 2,061 | |
62,600 | Assured Guaranty Ltd. | 1,598 | |
97,100 | Hartford Financial Services Group Inc. | 3,740 | |
69,800 | Lincoln National Corp. | 2,450 | |
129,100 | Old Republic International Corp. | 2,102 | |
58,400 | Principal Financial Group Inc. | 2,290 | |
75,200 | Universal Insurance Holdings Inc. | 938 | |
78,300 | Unum Group | 1,383 | |
20,902 | |||
INTERNET & DIRECT MARKETING RETAIL—0.7% | |||
51,000 | eBay Inc. | 2,429 | |
IT SERVICES—1.5% | |||
98,200 | DXC Technology Co. | 1,809 | |
164,100 | Western Union Co. | 3,190 | |
4,999 | |||
LEISURE PRODUCTS—0.4% | |||
23,300 | Brunswick Corp. | 1,484 | |
MACHINERY—7.3% | |||
42,500 | AGCO Corp. | 3,274 | |
100,600 | Allison Transmission Holdings Inc. | 3,637 | |
19,400 | Cummins Inc. | 4,266 | |
135,300 | Meritor Inc.* | 3,293 | |
38,400 | Oshkosh Corp. | 2,587 | |
20,600 | Snap-on Inc. | 3,245 | |
55,500 | Timken Co. | 3,313 | |
89,100 | Wabash National Corp. | 1,270 | |
24,885 | |||
MEDIA—1.8% | |||
82,500 | AMC Networks Inc.* | 1,753 | |
144,100 | TEGNA Inc. | 1,733 | |
87,672 | ViacomCBS Inc.* | 2,505 | |
5,991 | |||
METALS & MINING—1.3% | |||
41,300 | Reliance Steel & Aluminum Co. | 4,501 | |
MORTGAGE REAL ESTATE INVESTMENT TRUSTS (REITs)—1.0% | |||
166,600 | Annaly Capital Management Inc. | 1,181 | |
298,300 | MFA Financial Inc. | 842 | |
93,400 | PennyMac Mortgage Investment Trust | 1,398 | |
3,421 | |||
MULTILINE RETAIL—1.4% | |||
48,600 | Big Lots Inc. | 2,313 | |
76,300 | Kohl's Corp. | 1,625 | |
150,600 | Macy's Inc. | 935 | |
4,873 |
22
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 | ||
MULTI-UTILITIES—0.7% | |||
93,150 | MDU Resources Group Inc.* | $ 2,213 | |
OIL, GAS & CONSUMABLE FUELS—2.0% | |||
142,300 | Devon Energy Corp. | 1,271 | |
91,800 | HollyFrontier Corp. | 1,699 | |
61,900 | Marathon Petroleum Corp. | 1,826 | |
53,300 | Valero Energy Corp. | 2,058 | |
6,854 | |||
PHARMACEUTICALS—2.8% | |||
62,300 | Corcept Therapeutics Inc.* | 1,046 | |
42,900 | Jazz Pharmaceuticals plc (Ireland)* | 6,182 | |
110,150 | Lannett Co. Inc.* | 708 | |
93,493 | Mylan NV (Netherlands)* | 1,359 | |
9,295 | |||
PROFESSIONAL SERVICES—0.7% | |||
35,700 | ManpowerGroup Inc. | 2,423 | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—0.6% | |||
15,600 | Cirrus Logic Inc.* | 1,074 | |
14,300 | Diodes Inc.* | 827 | |
1,901 | |||
SPECIALTY RETAIL—4.8% | |||
34,100 | Best Buy Co. Inc. | 3,804 | |
49,200 | Dick's Sporting Goods Inc. | 2,787 | |
81,800 | Foot Locker Inc. | 3,017 | |
86,700 | Gap Inc. | 1,686 | |
18,600 | Group 1 Automotive Inc. | 1,973 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
SPECIALTY RETAIL—Continued | |||
55,757 | ODP Corp.* | $ 1,087 | |
36,800 | Penske Automotive Group Inc. | 1,883 | |
16,237 | |||
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS—3.0% | |||
242,314 | HP Inc. | 4,352 | |
86,900 | Seagate Technology plc | 4,156 | |
93,900 | Xerox Holdings Corp. | 1,632 | |
10,140 | |||
TEXTILES, APPAREL & LUXURY GOODS—0.4% | |||
60,900 | Capri Holdings Ltd. (Virgin Islands)* | 1,292 | |
THRIFTS & MORTGAGE FINANCE—1.2% | |||
169,600 | MGIC Investment Corp. | 1,706 | |
136,700 | Radian Group Inc. | 2,454 | |
4,160 | |||
TRADING COMPANIES & DISTRIBUTORS—0.7% | |||
65,642 | Triton International Ltd. (Bermuda) | 2,421 | |
TOTAL COMMON STOCKS | |||
(Cost $401,268) | 335,522 | ||
TOTAL INVESTMENTS—98.9% | |||
(Cost $401,268) | 335,522 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—1.1% | 3,872 | ||
TOTAL NET ASSETS—100.0% | $339,394 |
FAIR VALUE MEASUREMENTS
All investments at October 31, 2020 (as disclosed in the preceding Portfolio of Investments) were classified as Level 1. There were no Level 3 investments at October 31, 2020 or 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.
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 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. Stocks snapped back from the March lows as violently as they sold off during the early days of the crisis. With the continued support of fiscal and monetary stimulus measures, a healing economy, and rising expectations for a vaccine breakthrough, stocks were able to surpass prior highs, reflecting an optimistic outlook on the recovery as we head into the end of the year. The continued outperformance of large cap technology companies was noteworthy in the first two months of the third quarter before concerns about crowding, heightened regulatory scrutiny, and the broadening recovery ultimately shifted investor sentiment towards those companies that would ultimately benefit the most as a broad economic recovery took hold. With stabilizing market conditions and rising prospects for the resumption of economic growth, small cap stocks and more cyclical companies saw fresh enthusiasm from investors.
Performance
Harbor Small Cap Growth Fund returned 24.93% (Retirement Class), 24.87% (Institutional Class), 24.49% (Administrative Class) and 24.32% (Investor Class) for the year ended October 31, 2020, outperforming its benchmark, the Russell 2000® Growth Index, which returned 13.37%. The outperformance was broad-based with nine sectors adding double digits to relative returns. Notable strength in the Health Care and Information Technology sectors offset relative weakness in the Energy sector.
Health Care was the top source of relative and absolute strength, adding 751 basis points (“bps”) to relative returns. Stock selection accounted for the vast majority of relative outperformance within the sector, with strength in biotechnology and pharmaceuticals. We believe innovative therapeutic approaches continue to be the key driver in the space and the return of M&A activity has once again sparked investors interest heading into year end. Medicines Company, a late-stage drug developer focused on cholesterol management therapies for cardiovascular disease and long-term high conviction holding for the Fund, was the key driver for both the sector and the Fund during the period. The stock was up meaningfully after the late November 2019 announcement that Novartis was acquiring the company at a premium.
Information Technology was another strong contributor, adding 188 bps to relative results, driven largely by stock selection. Since the beginning of the pandemic, the sector has led market returns with the tailwinds from work from home continuing to accelerate secular growth trends in the space. We continue to maintain broad-based exposure to these secular growth themes, and believe the Fund is well balanced to capitalize on continued work from home beneficiaries as well as recovery plays heading into the new year. During the period, the Fund’s software and semiconductors investments were notably strong. SiTime Corporation, a manufacturer of timing devices for semiconductors, led relative performance for the sector. Historically these devices have been made of quartz, which can be brittle and are not adequate
24
Harbor Small Cap Growth Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
CHANGE IN A $50,000 INVESTMENT
For the period 11/01/2010 through 10/31/2020
The graph compares a $50,000 investment in the Institutional Class shares of the Fund with the performance of the Russell 2000® Growth Index. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
TOTAL RETURNS
For the periods ended 10/31/2020
1 Year | Annualized | |||||||
5 Years | 10 Years | |||||||
Harbor Small Cap Growth Fund | ||||||||
Retirement Class1 | 24.93% | 13.90% | 13.39% | |||||
Institutional Class | 24.87 | 13.82 | 13.35 | |||||
Administrative Class | 24.49 | 13.45 | 13.04 | |||||
Investor Class | 24.32 | 13.39 | 12.93 | |||||
Comparative Index | ||||||||
Russell 2000® Growth | 13.37% | 10.36% | 11.95% |
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 at harborfunds.com or by calling 800-422-1050.
for extreme environments, but SiTime has created a silicon alternative with improved reliability and performance. We believe that its product is both unique and potentially superior to industry peers, leaving the company well positioned for long-term growth as its devices are engineered into new products.
Energy was the largest source of relative weakness, costing 189 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. 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. We will continue to monitor the space and look to opportunistically reinvest in idiosyncratic growth stories that, in our view, should benefit from future changes in supply or demand, however, we are currently finding more attractive cyclical investment opportunities elsewhere.
Outlook & Strategy
All eyes are currently fixated on the U.S. election with investors placing their bets on how the outcome will ultimately drive policy and the resultant environment in which companies both big and small operate. Additionally, we are approaching the first data releases from phase three COVID-19 vaccine trials, each of which carries the potential to dramatically alter both the course of the disease and the economic prospects for the nation, and the world, over the near term. We have seen evidence of broadening participation across equity markets in addition to indications of improving economic conditions, which make us more inclined to tilt portfolios on the margin towards smaller companies and those more leveraged to the economic recovery, believing that they are likely to fare better in this environment. However, we continue to maintain balanced exposure in the Fund with a mix of companies benefitting from the current environment and those that we believe should do so as activity returns to more normal patterns.
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—October 31, 2020
Portfolio of Investments—October 31, 2020
SECTOR ALLOCATION (% of investments) - Unaudited
Portfolio of Investments
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—98.2% | |||
Shares | Value | ||
BIOTECHNOLOGY—17.3% | |||
180,006 | Acceleron Pharma Inc.* | $ 18,825 | |
140,540 | Ascendis Pharma AS ADR (Denmark)*,1 | 22,957 | |
247,256 | Blueprint Medicines Corp.* | 25,289 | |
172,760 | Bridgebio Pharma Inc.* | 6,631 | |
113,560 | Eidos Therapeutics Inc.* | 8,054 | |
192,894 | Fate Therapeutics Inc.* | 8,564 | |
227,122 | Fibrogen Inc.* | 8,717 | |
181,220 | Global Blood Therapeutics Inc.* | 9,583 | |
629,825 | Insmed Inc.* | 20,746 | |
1,689,339 | Ironwood Pharmaceuticals Inc.* | 16,691 | |
319,746 | Rocket Pharmaceuticals Inc.* | 8,934 | |
171,953 | Turning Point Therapeutics Inc.* | 15,852 | |
170,843 | |||
BUILDING PRODUCTS—4.3% | |||
375,315 | Advanced Drainage Systems Inc. | 23,806 | |
267,800 | Trex Co. Inc.* | 18,623 | |
42,429 | |||
CAPITAL MARKETS—2.5% | |||
194,904 | Hamilton Lane Inc. | 13,585 | |
142,962 | LPL Financial Holdings Inc. | 11,427 | |
25,012 | |||
COMMERCIAL SERVICES & SUPPLIES—1.0% | |||
76,920 | MSA Safety Inc. | 10,147 | |
COMMUNICATIONS EQUIPMENT—1.4% | |||
342,226 | ADTRAN Inc. | 3,659 | |
811,845 | Viavi Solutions Inc.* | 10,026 | |
13,685 | |||
CONTAINERS & PACKAGING—1.6% | |||
349,550 | Berry Global Group Inc.* | 16,300 | |
ENTERTAINMENT—2.3% | |||
29,118 | Madison Square Garden Sports Corp* | 4,124 | |
2,046,530 | Zynga Inc.* | 18,399 | |
22,523 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—3.2% | |||
347,529 | Rexford Industrial Realty Inc. | $ 16,146 | |
613,720 | STORE Capital Corp | 15,773 | |
31,919 | |||
HEALTH CARE EQUIPMENT & SUPPLIES—4.6% | |||
244,240 | Haemonetics Corp.* | 24,690 | |
36,241 | Masimo Corp.* | 8,111 | |
113,960 | Tandem Diabetes Care Inc.* | 12,422 | |
45,223 | |||
HEALTH CARE PROVIDERS & SERVICES—2.2% | |||
84,974 | Amedisys Inc.* | 22,008 | |
HOTELS, RESTAURANTS & LEISURE—3.4% | |||
116,780 | Churchill Downs Inc. | 17,418 | |
227,120 | Texas Roadhouse Inc.* | 15,905 | |
33,323 | |||
HOUSEHOLD DURABLES—4.6% | |||
273,435 | KB Home | 8,818 | |
237,193 | Skyline Champion Corp.* | 6,084 | |
198,130 | Topbuild Corp.* | 30,356 | |
45,258 | |||
INSURANCE—4.0% | |||
167,117 | BRP Group Inc.* | 4,262 | |
229,537 | Palomar Holdings Inc.* | 20,468 | |
131,281 | Primerica Inc. | 14,472 | |
39,202 | |||
IT SERVICES—6.1% | |||
637,885 | Repay Holdings Corp.* | 14,371 | |
154,639 | Science Applications International Corp. | 11,810 | |
201,350 | Shift4 Payments Inc.* | 10,251 | |
94,432 | WEX Inc.* | 11,950 | |
206,987 | WNS Holdings Ltd. ADR (India)*,1 | 11,931 | |
60,313 | |||
LEISURE PRODUCTS—1.7% | |||
318,133 | BRP Inc. (Canada)* | 17,163 | |
LIFE SCIENCES TOOLS & SERVICES—5.9% | |||
43,890 | Bio-Rad Laboratories Inc.* | 25,738 |
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 | ||
LIFE SCIENCES TOOLS & SERVICES—Continued | |||
141,144 | ICON plc (Ireland)* | $ 25,448 | |
42,080 | Repligen Corp.* | 7,010 | |
58,196 | |||
MACHINERY—5.5% | |||
215,444 | ITT Inc. | 13,037 | |
165,510 | Lincoln Electric Holdings Inc. | 16,852 | |
419,211 | Timken Co. | 25,027 | |
54,916 | |||
PHARMACEUTICALS—3.1% | |||
34,630 | Myokardia Inc.* | 7,741 | |
442,970 | Pacira BioSciences Inc.* | 23,167 | |
30,908 | |||
REAL ESTATE MANAGEMENT & DEVELOPMENT—1.1% | |||
175,180 | The Howard Hughes Corp.* | 10,894 | |
ROAD & RAIL—1.7% | |||
117,190 | Saia Inc.* | 17,304 | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—5.5% | |||
242,827 | Advanced Energy Industries Inc.* | 16,383 | |
239,776 | Kulicke & Soffa Industries Inc. | 6,268 | |
180,579 | Semtech Corp.* | 9,912 | |
359,210 | Silicon Motion Technology Corp. ADR (Taiwan)1 | 13,557 | |
104,026 | SiTime Corp.* | 8,685 | |
54,805 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
SOFTWARE—10.3% | |||
318,130 | 2U Inc.* | $ 11,723 | |
279,874 | ACI Worldwide Inc.* | 8,164 | |
110,340 | Blackline Inc.* | 10,778 | |
342,302 | Bottomline Technologies de Inc.* | 13,596 | |
58,790 | Envestnet Inc.* | 4,512 | |
310,484 | Mimecast Ltd. (Jersey)* | 11,864 | |
653,590 | Nuance Communications Inc.* | 20,856 | |
49,129 | Paylocity Holding Corp.* | 9,114 | |
114,970 | Proofpoint Inc.* | 11,007 | |
101,614 | |||
SPECIALTY RETAIL—3.7% | |||
104,700 | Five Below Inc.* | 13,961 | |
555,325 | National Vision Holdings Inc.* | 22,396 | |
36,357 | |||
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS—1.2% | |||
588,735 | NCR Corp.* | 11,963 | |
TOTAL COMMON STOCKS | |||
(Cost $751,753) | 972,305 | ||
TOTAL INVESTMENTS—98.2% | |||
(Cost $751,753) | 972,305 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—1.8% | 17,904 | ||
TOTAL NET ASSETS—100.0% | $990,209 |
FAIR VALUE MEASUREMENTS
All investments at October 31, 2020 (as disclosed in the preceding Portfolio of Investments) were classified as Level 1. There were no Level 3 investments at October 31, 2020 or 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 | Depositary receipts such as American Depositary Receipts (ADRs), Global Depositary Receipts (GDRs) and other country specific depositary receipts are certificates evidencing ownership of shares of a foreign issuer. These certificates are issued by depositary 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 Value Fund
Manager’s Commentary (Unaudited)
Manager’s Commentary (Unaudited)
Subadviser
EARNEST Partners LLC
1180 Peachtree St. NE
Suite 2300
Suite 2300
Atlanta, GA 30309
Portfolio Manager
Paul E. Viera
Since 2001
Since 2001
EARNEST Partners has subadvised the Fund since 2001.
Investment Objective
The Fund seeks long-term total return.
Paul E. Viera
Management’s Discussion of
Fund Performance
Fund Performance
Market Review
The U.S. equity markets, represented by the S&P 500 Index were positive during the year ended October 31, 2020, posting nearly 10% return. However, the U.S. small cap value market, represented by the Russell 2000® Value Index, ended the period down roughly 14% for the period.
Capital markets continued to recover as investors received clarity on the economic impact from the coronavirus epidemic and began to look forward to how a post-COVID-19 environment would support future earnings growth. Many service and retail businesses adapted to the situation with standardized personal protective equipment requirements and social distancing standards, while white-collar businesses embraced a work-from-home environment, which enabled them to continue operations. Additionally, significant progress was made on vaccine candidates, several of which are currently being tested. Many areas of the economy saw a swift rebound in activity as the government’s stimulus measures supported renewed consumption of durable goods and record low mortgage rates buoyed the housing market. With respect to monetary policy, the U.S. Federal Reserve’s (Fed) initial actions to curb the economic effects of the virus included a wide array of stimulative measures that included short-term rate reductions to near-zero and repurchases of Treasuries, mortgages and corporate debt, to include high-yield notes. In September, the Fed stated that it would hold rates near zero through at least 2022 and would continue to increase its fixed income holdings to provide liquidity to credit markets. These moves gave further confidence to equity and fixed income investors who understood that the Fed will continue to act as a lender-of-last resort and that stimulus measures were not a one-time deal. Additionally, the central bank projected a 6.5% contraction in GDP for 2020 and forecast a 5% gain next year followed by a 3.5% increase in 2022. After hitting a record high of 14.7% in April, unemployment fell to 7.9% in September. The Fed is projecting unemployment of 7.6% at the end of 2020, then falling to 5.5% and 4.6% in 2021 and 2022, respectively.
Performance
Harbor Small Cap Value Fund posted negative returns of -4.22% (Retirement Class), -4.33% (Institutional Class), -4.54% (Administrative Class), and -4.67% (Investor Class) for the year ended October 31, 2020. The portfolio outperformed its benchmark, the Russell 2000® Value Index, which returned -13.92% during the period, by a wide margin as investors began to refocus on company fundamentals after the sharp market downturn early in 2020 as a result of COVID-19. Stock selection continued to drive relative returns in the period. Stock selection was strongest in Consumer Discretionary, Industrials and Materials. Sector positioning also contributed to the strong results, as an overweight to Information Technology and an underweight to Energy boosted relative returns.
Contributing to performance for the period, Entegris, headquartered in Billerica, Massachusetts, is a leading supplier of contamination control solutions and microenvironments to the semiconductor chip processing industry. These solutions have positioned Entegris as a global leader in yield-enabling products and materials for the semiconductor industry. Entegris continues to see robust financial performance on the back of strong earnings which drove the stock up over 70% in the period. Revenues grew double-digits compared to a year ago, well ahead of consensus expectations. Entegris’ growth was driven primarily by the increasing adoption of proprietary leading edge semiconductor manufacturing processes. Entegris continues to benefit from the increasingly stringent requirements for contamination control in the fabrication of the chips based on advanced technologies. As a leader in the space and with their ability to invest in R&D, Entegris has strong pricing power and continues to gain market share over time and retain pricing power over its competitors.
28
Harbor Small Cap Value Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
CHANGE IN A $50,000 INVESTMENT
For the period 11/01/2010 through 10/31/2020
The graph compares a $50,000 investment in the Institutional Class shares of the Fund with the performance of the Russell 2000® Value Index. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
TOTAL RETURNS
For the periods ended 10/31/2020
1 Year | Annualized | |||||||
5 Years | 10 Years | |||||||
Harbor Small Cap Value Fund | ||||||||
Retirement Class1 | -4.22% | 7.74% | 10.38% | |||||
Institutional Class | -4.33 | 7.66 | 10.34 | |||||
Administrative Class | -4.54 | 7.40 | 10.05 | |||||
Investor Class | -4.67 | 7.26 | 9.92 | |||||
Comparative Index | ||||||||
Russell 2000® Value | -13.92% | 3.71% | 7.06% |
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 at harborfunds.com or by calling 800-422-1050.
Detracting from performance during the period, Raymond James is a diversified brokerage company offering a comprehensive range of financial services, with a focus on investment and financial planning products and services to individuals, corporations and municipalities through an independent advisor model. Its three principal wholly owned broker/dealers have more than 8,100 financial advisors serving approximately 3.0 million accounts in approximately 2,800 locations throughout the United States, Canada and overseas. During the period the stock was down 15%. While investment banking revenues were down year-over-year, there was a strong increase in its brokerage division revenues which were up 26% year-over-year. Raymond James has historically done well coming out of recessions and volatile stock markets.
Outlook & Strategy
As of October 31, 2020, the Fund had an overweight in the Industrials, Materials, Health Care, Information Technology, and Telecommunications sectors and an underweight in Financials, Real Estate, Consumer Staples, Consumer Discretionary, and Utilities. The Fund had a market weight to Energy. The Fund’s relative overweight and underweight positions are an outgrowth of where EARNEST Partners is finding good individual investment opportunities.
In managing the Harbor Small Cap Value Fund, EARNEST Partners seeks 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.
29
Harbor Small Cap Value Fund
Portfolio of Investments—October 31, 2020
Portfolio of Investments—October 31, 2020
SECTOR ALLOCATION (% of investments) - Unaudited
Portfolio of Investments
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—95.6% | |||
Shares | Value | ||
AEROSPACE & DEFENSE—5.3% | |||
771,158 | Hexcel Corp. | $ 25,818 | |
271,402 | Moog Inc. | 16,933 | |
156,602 | Teledyne Technologies Inc.* | 48,414 | |
91,165 | |||
BANKS—6.6% | |||
578,992 | Enterprise Financial Services Corp. | 16,854 | |
884,087 | First Merchants Corp. | 23,084 | |
464,816 | Heartland Financial USA Inc. | 15,311 | |
362,494 | South State Corp. | 22,257 | |
746,202 | Trustmark Corp. | 17,454 | |
696,912 | United Bankshares Inc. | 18,280 | |
113,240 | |||
BIOTECHNOLOGY—2.9% | |||
376,844 | Emergent BioSolutions Inc.* | 33,904 | |
1,293,876 | Myriad Genetics Inc.* | 16,083 | |
49,987 | |||
CAPITAL MARKETS—4.0% | |||
144,881 | Eaton Vance Corp. | 8,663 | |
338,161 | Raymond James Financial Inc. | 25,849 | |
586,694 | Stifel Financial Corp. | 34,298 | |
68,810 | |||
CHEMICALS—4.3% | |||
648,247 | Cabot Corp. | 24,640 | |
323,187 | Scotts Miracle-Gro Co. | 48,494 | |
73,134 | |||
COMMERCIAL SERVICES & SUPPLIES—4.5% | |||
975,178 | Casella Waste Systems Inc.* | 52,650 | |
2,380,235 | Steelcase Inc. | 24,849 | |
77,499 | |||
CONSUMER FINANCE—1.7% | |||
550,916 | FirstCash Inc. | 28,670 | |
ELECTRICAL EQUIPMENT—2.0% | |||
479,790 | EnerSys | 34,353 | |
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—8.2% | |||
163,465 | Coherent Inc.* | 20,456 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—Continued | |||
600,830 | FLIR Systems Inc. | $ 20,843 | |
184,678 | Littelfuse Inc. | 36,555 | |
426,757 | Plexus Corp.* | 29,677 | |
1,321,451 | Sanmina Corp.* | 32,296 | |
139,827 | |||
ENERGY EQUIPMENT & SERVICES—1.2% | |||
357,503 | Core Laboratories NV (Netherlands) | 5,166 | |
414,279 | DMC Global Inc. | 14,736 | |
19,902 | |||
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—4.8% | |||
1,233,479 | Corporate Office Properties Trust | 27,667 | |
1,619,682 | Pebblebrook Hotel Trust | 19,404 | |
1,106,201 | STAG Industrial Inc. | 34,425 | |
81,496 | |||
FOOD PRODUCTS—3.8% | |||
1,533,224 | Darling Ingredients Inc.* | 65,929 | |
HEALTH CARE EQUIPMENT & SUPPLIES—1.9% | |||
415,349 | CONMED Corp. | 32,385 | |
HEALTH CARE PROVIDERS & SERVICES—2.3% | |||
214,626 | Molina Healthcare Inc.* | 40,021 | |
HOTELS, RESTAURANTS & LEISURE—2.0% | |||
300,284 | Cracker Barrel Old Country Store Inc.* | 34,178 | |
HOUSEHOLD DURABLES—2.0% | |||
396,185 | Meritage Homes Corp.* | 34,504 | |
INSURANCE—3.8% | |||
44,553 | American Equity Investment Life Holding Co. | 1,106 | |
796,115 | Horace Mann Educators Corp. | 26,996 | |
258,300 | Reinsurance Group of America Inc. | 26,094 | |
494,764 | United Fire Group Inc. | 10,162 | |
64,358 | |||
IT SERVICES—3.5% | |||
503,499 | ManTech International Corp. | 32,667 | |
4,099,305 | Sabre Corp.* | 26,727 | |
59,394 |
30
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—8.2% | |||
496,012 | Albany International Corp. | $ 25,267 | |
781,765 | Altra Industrial Motion Corp. | 33,428 | |
725,612 | Franklin Electric Co. Inc. | 43,341 | |
638,888 | Timken Co. | 38,142 | |
140,178 | |||
OIL, GAS & CONSUMABLE FUELS—0.3% | |||
821,294 | Archrock Inc.* | 4,870 | |
PHARMACEUTICALS—3.9% | |||
765,322 | Catalent Inc.* | 67,172 | |
ROAD & RAIL—1.4% | |||
477,294 | Ryder System Inc. | 23,511 | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—13.7% | |||
291,992 | Advanced Energy Industries Inc.* | 19,701 | |
374,972 | CMC Materials Inc. | 53,317 | |
752,542 | Entegris Inc. | 56,267 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—Continued | |||
1,598,469 | FormFactor Inc.* | $ 45,317 | |
189,668 | Monolithic Power Systems Inc. | 60,618 | |
235,220 | |||
TEXTILES, APPAREL & LUXURY GOODS—1.7% | |||
1,108,916 | Wolverine World Wide Inc. | 29,575 | |
TRADING COMPANIES & DISTRIBUTORS—1.6% | |||
404,920 | GATX Corp. | 27,648 | |
TOTAL COMMON STOCKS | |||
(Cost $1,275,245) | 1,637,026 | ||
TOTAL INVESTMENTS—95.6% | |||
(Cost $1,275,245) | 1,637,026 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—4.4% | 75,580 | ||
TOTAL NET ASSETS—100.0% | $1,712,606 |
FAIR VALUE MEASUREMENTS
All investments at October 31, 2020 (as disclosed in the preceding Portfolio of Investments) were classified as Level 1. There were no Level 3 investments at October 31, 2020 or 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.
31
Harbor Strategic Growth Fund
Manager’s Commentary (Unaudited)
Manager’s Commentary (Unaudited)
Subadviser
Mar Vista Investment Partners, LLC
11150 Santa Monica Boulevard, Suite 320
Los Angeles, CA 90025
Portfolio Managers
Silas A. Myers, CFA
Since 2017
Since 2017
Brian L. Massey, CFA
Since 2017
Since 2017
Joshua J. Honeycutt, CFA
Since 2017
Jeffrey B. Prestine
Since 2017
Since 2017
Mar Vista has subadvised the Fund since 2017.*
Investment Objective
The Fund seeks long-term growth of capital.
Silas A. Myers, CFA
Brian L. Massey, CFA
Joshua J. Honeycutt, CFA
Jeffrey B. Prestine
Management’s Discussion of
Fund Performance
Fund Performance
MARKET REVIEW
For the year ended October 31, 2020, the Russell 1000® Growth Index was up 29.22%. This impressive index return was achieved in spite of the market’s peak-to-trough decline of 35% in February through late March, due to the societal disruption caused by the COVID-19 outbreak. The central bank’s pledge to save our virus ravaged economy has provided financial reassurance for equity and credit markets. Businesses have adapted to social distancing, but recovery patterns differ by industry. The broader stock market’s extensive climb has been led by economic improvement and surging technology stocks. Consumer spending recovered from abysmal levels and employment trends improved rapidly. The buoyant financial summer ended with a correction in September after political and virus-related roadblocks emerged. Disruptive technology companies with real or perceived exposure to digital payments, electric vehicles, ecommerce, cloud computing, or anything related to the stay-at-home economy continued to appreciate. We believe that their outperformance largely reflected the uneven distribution of economic ramifications related to the pandemic. The forced economic shutdown enabled digital companies to disproportionately benefit from changes in consumer behavior.
Most recently, October began with a rally off of the September sell-off. However, as election uncertainty increased, combined with a fear of business shutdowns due to an acceleration in COVID-19 cases, the Russell 1000® Growth Index experienced a pullback from recent highs.
PERFORMANCE
For the year ended October 31, 2020, Harbor Strategic Growth Fund returned 12.60% (Retirement Class), 12.54% (Institutional Class), 12.21% (Administrative Class) and 12.12% (Investor Class) while the Russell 1000® Growth Index returned 29.22%. Stock selection and a relative underweight within Information Technology and Financials were the biggest detractors from relative performance. Positive contributors to performance included Apple, Adobe, Amazon.com, NIKE and Alphabet. The largest detractors for the period included Markel, Oracle, TransDigm Group, U.S. Bancorp and Ecolab.
The market decline in March placed a growing number of durable franchises on sale. We deployed capital into several businesses that offered sufficient discounts to intrinsic values. At the same time, we exited lower conviction investments with higher idiosyncratic risk. Purchases included Comcast, Nike, Starbucks, Amphenol, SalesForce.com, Microsoft and SAP. We exited our positions in Booking Holdings, CarMax, Sensata and Oracle. Since those purchases in March, no new names have been added to the portfolio.
Our Information Technology weight increased on an absolute and relative basis during the twelve-month period as a result of our purchases as well as the Information 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 merging of the Federal Reserve and Treasury stimulus programs is providing massive liquidity to support asset prices. These policies are designed to sustain economic activity by offsetting negative effects from the pandemic. We continue to deploy capital in serial compounders that we believe are likely to emerge from the pandemic in stronger competitive positions.
* | 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. |
32
Harbor Strategic Growth Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
CHANGE IN A $50,000 INVESTMENT
For the period 11/01/2011 through 10/31/2020
The graph compares a $50,000 investment in the Institutional Class shares of the Fund with the performance of the Russell 1000® Growth Index. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
TOTAL RETURNS
For the periods ended 10/31/2020
1 Year | Annualized | |||||||
5 Years | Life of Class | |||||||
Harbor Strategic Growth Fund | ||||||||
Retirement Class1 | 12.60% | N/A | 13.27% | |||||
Institutional Class2 | 12.54 | 11.83 | 13.87 | |||||
Administrative Class1 | 12.21 | N/A | 12.90 | |||||
Investor Class1 | 12.12 | N/A | 12.36 | |||||
Comparative Index | ||||||||
Russell 1000® Growth2 | 29.22% | 17.32% | 17.04% |
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 at harborfunds.com or by calling 800-422-1050.
Our team claims no special skill in predicting the market’s direction but, in the fullness of time, we believe a patient, high-conviction portfolio comprised of competitively advantaged serial compounders with stock prices that represent an appropriate margin of safety will generate excess risk-adjusted returns. In an environment with growing optimism, we will remain diligent, conservative and patient as we deploy capital within our wide-moat universe.
1 | The “Life of Class” return as shown reflects the period 03/06/2017 through 10/31/2020. |
2 | The “Life of Class” return as shown reflects the period 11/01/2011 through 10/31/2020. |
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.
33
Harbor Strategic Growth Fund
Portfolio of Investments—October 31, 2020
Portfolio of Investments—October 31, 2020
SECTOR ALLOCATION (% of investments) - Unaudited
Portfolio of Investments
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—95.7% | |||
Shares | Value | ||
AEROSPACE & DEFENSE—1.3% | |||
2,974 | TransDigm Group Inc.* | $ 1,420 | |
BANKS—5.4% | |||
34,150 | First Republic Bank | 4,308 | |
38,514 | U.S. Bancorp. | 1,500 | |
5,808 | |||
BEVERAGES—1.9% | |||
15,367 | PepsiCo Inc. | 2,048 | |
CAPITAL MARKETS—5.4% | |||
60,618 | Charles Schwab Corp. | 2,492 | |
12,590 | Moody's Corp. | 3,310 | |
5,802 | |||
CHEMICALS—3.2% | |||
8,218 | Ecolab Inc. | 1,509 | |
8,641 | Linde plc (Ireland) | 1,904 | |
3,413 | |||
DIVERSIFIED FINANCIAL SERVICES—4.4% | |||
23,596 | Berkshire Hathaway Inc. Class B* | 4,764 | |
ELECTRICAL EQUIPMENT—2.3% | |||
17,769 | Amphenol Corp.* | 2,005 | |
15,498 | Vontier Corp.* | 445 | |
2,450 | |||
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—2.5% | |||
11,812 | American Tower Corp. | 2,713 | |
HEALTH CARE EQUIPMENT & SUPPLIES—2.9% | |||
10,035 | Teleflex Inc. | 3,193 | |
HOTELS, RESTAURANTS & LEISURE—1.1% | |||
13,934 | Starbucks Corp. | 1,212 | |
INDUSTRIAL CONGLOMERATES—5.1% | |||
20,434 | Honeywell International Inc. | 3,371 | |
5,686 | Roper Technologies Inc. | 2,111 | |
5,482 | |||
INSURANCE—3.4% | |||
3,940 | Markel Corp.* | 3,675 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
INTERACTIVE MEDIA & SERVICES—7.2% | |||
2,948 | Alphabet Inc. Class C* | $ 4,779 | |
11,362 | Facebook Inc.* | 2,989 | |
7,768 | |||
INTERNET & DIRECT MARKETING RETAIL—5.0% | |||
1,772 | Amazon.com Inc.* | 5,380 | |
IT SERVICES—3.0% | |||
17,576 | Visa Inc. | 3,194 | |
LIFE SCIENCES TOOLS & SERVICES—2.3% | |||
2,449 | Mettler-Toledo International Inc.* | 2,444 | |
MACHINERY—2.2% | |||
38,745 | Fortive Corp. | 2,387 | |
MEDIA—1.9% | |||
48,646 | Comcast Corp. | 2,055 | |
PERSONAL PRODUCTS—2.3% | |||
44,684 | Unilever NV NY Registry Shares (Netherlands) | 2,527 | |
PHARMACEUTICALS—3.4% | |||
26,818 | Johnson & Johnson | 3,677 | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—3.4% | |||
35,434 | Microchip Technology Inc. | 3,723 | |
SOFTWARE—16.2% | |||
9,198 | Adobe Inc.* | 4,112 | |
14,354 | Intuit Inc. | 4,517 | |
18,782 | Microsoft Corp. | 3,803 | |
12,417 | salesforce.com Inc.* | 2,884 | |
20,173 | SAP SE ADR (Germany)1 | 2,155 | |
17,471 | |||
SPECIALTY RETAIL—1.4% | |||
3,478 | O'Reilly Automotive Inc.* | 1,519 | |
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS—5.8% | |||
57,734 | Apple Inc. | 6,285 |
34
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—2.7% | |||
24,099 | NIKE Inc. | $ 2,894 | |
TOTAL COMMON STOCKS | |||
(Cost $70,299) | 103,304 | ||
TOTAL INVESTMENTS—95.7% | |||
(Cost $70,299) | 103,304 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—4.3% | 4,604 | ||
TOTAL NET ASSETS—100.0% | $107,908 |
FAIR VALUE MEASUREMENTS
All investments at October 31, 2020 (as disclosed in the preceding Portfolio of Investments) were classified as Level 1. There were no Level 3 investments at October 31, 2020 or 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 | Depositary receipts such as American Depositary Receipts (ADRs), Global Depositary Receipts (GDRs) and other country specific depositary receipts are certificates evidencing ownership of shares of a foreign issuer. These certificates are issued by depositary 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.
35
Harbor Domestic Equity Funds
StatementS of Assets and Liabilities—October 31, 2020
StatementS of Assets and Liabilities—October 31, 2020
(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 Value Fund | Harbor Strategic Growth Fund | |||||||||
ASSETS | ||||||||||||||||
Investments, at identified cost | $18,096,745 | $1,197,173 | $ 9,954 | $254,752* | $401,268 | $ 751,753 | $1,275,245 | $ 70,299 | ||||||||
Investments, at value | $36,606,857 | $1,506,500 | $10,753 | $ 327,144 | $335,522 | $ 972,305 | $1,637,026 | $103,304 | ||||||||
Repurchase agreements | — | — | — | 15,622 | — | — | — | — | ||||||||
Cash | 86,480 | 64,324 | 237 | 1 | 4,414 | 24,335 | 68,887 | 3,613 | ||||||||
Receivables for: | ||||||||||||||||
Investments sold | 337,756 | 1,432 | — | 257 | 1,324 | 5,973 | 9,994 | 1,225 | ||||||||
Capital shares sold | 22,692 | 1,078 | — | 757 | 129 | 447 | 4,079 | 113 | ||||||||
Dividends | 2,327 | 1,203 | 5 | 20 | 382 | — | 510 | 29 | ||||||||
Withholding tax | 1,763 | 134 | — | 1 | — | — | — | — | ||||||||
Prepaid registration fees | 29 | 22 | 26 | 25 | 13 | 20 | 18 | 1 | ||||||||
Other assets | 3,291 | 93 | 9 | 71 | 77 | 110 | 151 | 10 | ||||||||
Total Assets | 37,061,195 | 1,574,786 | 11,030 | 343,898 | 341,861 | 1,003,190 | 1,720,665 | 108,295 | ||||||||
LIABILITIES | ||||||||||||||||
Payables for: | ||||||||||||||||
Investments purchased | 157,604 | 1,589 | — | 1,552 | — | 11,434 | 4,289 | — | ||||||||
Unrealized depreciation on foreign currency spot contracts | 7 | — | — | — | — | — | — | — | ||||||||
Capital shares reacquired | 46,270 | 770 | — | 829 | 2,080 | 661 | 2,241 | 301 | ||||||||
Accrued expenses: | ||||||||||||||||
Management fees | 18,320 | 823 | 7 | 214 | 233 | 659 | 1,116 | 58 | ||||||||
12b-1 fees | 389 | 8 | — | 8 | 7 | 2 | 13 | — | ||||||||
Transfer agent fees | 2,554 | 84 | 1 | 27 | 30 | 57 | 122 | 6 | ||||||||
Trustees' fees and expenses | 3,721 | 99 | — | 74 | 81 | 121 | 169 | 6 | ||||||||
Other | 1,409 | 67 | 8 | 24 | 36 | 47 | 109 | 16 | ||||||||
Total Liabilities | 230,274 | 3,440 | 16 | 2,728 | 2,467 | 12,981 | 8,059 | 387 | ||||||||
NET ASSETS | $36,830,921 | $1,571,346 | $11,014 | $ 341,170 | $339,394 | $ 990,209 | $1,712,606 | $107,908 | ||||||||
Net Assets Consist of: | ||||||||||||||||
Paid-in capital | $13,840,411 | $1,209,968 | $10,364 | $ 198,782 | $418,606 | $ 732,180 | $1,390,486 | $ 71,239 | ||||||||
Total distributable earnings/(loss) | 22,990,510 | 361,378 | 650 | 142,388 | (79,212) | 258,029 | 322,120 | 36,669 | ||||||||
$36,830,921 | $1,571,346 | $11,014 | $ 341,170 | $339,394 | $ 990,209 | $1,712,606 | $107,908 | |||||||||
NET ASSET VALUE PER SHARE BY CLASS | ||||||||||||||||
Retirement Class | ||||||||||||||||
Net assets | $ 9,549,061 | $ 655,562 | $ 5,148 | $ 64,242 | $ 29,897 | $ 348,997 | $ 300,473 | $ 6,488 | ||||||||
Shares of beneficial interest1 | 96,274 | 38,321 | 487 | 4,970 | 1,776 | 21,931 | 9,492 | 263 | ||||||||
Net asset value per share2 | $ 99.19 | $ 17.11 | $ 10.57 | $ 12.93 | $ 16.83 | $ 15.91 | $ 31.65 | $ 24.67 | ||||||||
Institutional Class | ||||||||||||||||
Net assets | $25,579,181 | $ 880,755 | $ 5,411 | $ 236,863 | $277,767 | $ 633,535 | $1,350,681 | $100,895 | ||||||||
Shares of beneficial interest1 | 257,906 | 51,484 | 512 | 18,408 | 16,504 | 39,991 | 42,703 | 4,095 | ||||||||
Net asset value per share2 | $ 99.18 | $ 17.11 | $ 10.56 | $ 12.87 | $ 16.83 | $ 15.84 | $ 31.63 | $ 24.64 | ||||||||
Administrative Class | ||||||||||||||||
Net assets | $ 420,324 | $ 11,502 | N/A | $ 3,666 | $ 4,945 | $ 866 | $ 10,082 | $ 22 | ||||||||
Shares of beneficial interest1 | 4,348 | 673 | N/A | 307 | 291 | 60 | 321 | 1 | ||||||||
Net asset value per share2 | $ 96.68 | $ 17.11 | N/A | $ 11.93 | $ 16.98 | $ 14.36 | $ 31.41 | $ 24.58 | ||||||||
Investor Class | ||||||||||||||||
Net assets | $ 1,282,355 | $ 23,527 | $ 455 | $ 36,399 | $ 26,785 | $ 6,811 | $ 51,370 | $ 503 | ||||||||
Shares of beneficial interest1 | 13,615 | 1,362 | 43 | 3,201 | 1,595 | 506 | 1,673 | 21 | ||||||||
Net asset value per share2 | $ 94.19 | $ 17.28 | $ 10.54 | $ 11.37 | $ 16.80 | $ 13.47 | $ 30.71 | $ 24.17 |
* | 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.
36
Harbor Domestic Equity Funds
StatementS of Operations—Year Ended October 31, 2020
StatementS of Operations—Year Ended October 31, 2020
(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 Value Fund | Harbor Strategic Growth Fund | |
Investment Income | ||||||||
Dividends | $ 167,884 | $ 23,179 | $ 121 | $ 739 | $ 14,737 | $ 4,336 | $ 22,953 | $ 1,171 |
Interest | 751 | 191 | 1 | 63 | 19 | 155 | 385 | 32 |
Foreign taxes withheld | (1,077) | (270) | — | (2) | (18) | (1) | (14) | (27) |
Total Investment Income | 167,558 | 23,100 | 122 | 800 | 14,738 | 4,490 | 23,324 | 1,176 |
Operating Expenses | ||||||||
Management fees | 201,730 | 8,138 | 68 | 2,084 | 3,524 | 6,305 | 11,906 | 666 |
12b-1 fees: | ||||||||
Administrative Class | 979 | 29 | N/A | 7 | 25 | 2 | 22 | — |
Investor Class | 2,938 | 71 | 1 | 57 | 103 | 17 | 128 | 1 |
Shareholder communications | 806 | 53 | 15 | 23 | 30 | 39 | 134 | 11 |
Custodian fees | 1,024 | 37 | 8 | 29 | 36 | 48 | 40 | 10 |
Transfer agent fees: | ||||||||
Retirement Class | 1,637 | 106 | 1 | 9 | 12 | 62 | 52 | 1 |
Institutional Class | 23,870 | 785 | 4 | 206 | 358 | 524 | 1,268 | 105 |
Administrative Class | 391 | 12 | N/A | 3 | 10 | 1 | 9 | — |
Investor Class | 2,586 | 62 | 1 | 50 | 90 | 15 | 113 | 1 |
Professional fees | 1,490 | 62 | 49 | 14 | 38 | 97 | 72 | 5 |
Trustees' fees and expenses | 1,517 | 64 | — | 12 | 20 | 35 | 74 | 5 |
Registration fees | 293 | 97 | 57 | 66 | 70 | 71 | 137 | 62 |
Miscellaneous | 428 | 26 | 8 | 12 | 18 | 18 | 32 | 14 |
Total expenses | 239,689 | 9,542 | 212 | 2,572 | 4,334 | 7,234 | 13,987 | 881 |
Management fees waived | (17,535) | — | — | (83) | (60) | — | — | — |
Transfer agent fees waived | (1,048) | (42) | — | (9) | (12) | (26) | (47) | (3) |
Other expenses reimbursed | — | (431) | (135) | — | — | — | — | (93) |
Custodian fees reduction | (13) | (2) | — | — | (1) | — | (1) | — |
Net expenses | 221,093 | 9,067 | 77 | 2,480 | 4,261 | 7,208 | 13,939 | 785 |
Net Investment Income/(Loss) | (53,535) | 14,033 | 45 | (1,680) | 10,477 | (2,718) | 9,385 | 391 |
Realized and Change in Net Unrealized Gain/(Loss) on Investment Transactions | �� | |||||||
Net realized gain/(loss) on: | ||||||||
Investments | 5,291,038 | 56,241 | (189) | 69,854 | (23,673) | 95,253 | (45,312) | 4,310 |
In-kind redemption | 654,292 | — | — | — | — | — | — | — |
Foreign currency transactions | (1,594) | — | — | (7) | — | — | — | — |
Change in net unrealized appreciation/(depreciation) on: | ||||||||
Investments | 5,967,168 | 38,926 | 800 | 39,517 | (90,873) | 119,273 | (36,478) | 8,635 |
Translations of assets and liabilities in foreign currencies | 18 | — | — | — | — | — | — | — |
Net gain/(loss) on investment transactions | 11,910,922 | 95,167 | 611 | 109,364 | (114,546) | 214,526 | (81,790) | 12,945 |
Net Increase/(Decrease) in Net Assets Resulting from Operations | $11,857,387 | $109,200 | $ 656 | $107,684 | $(104,069) | $211,808 | $(72,405) | $13,336 |
a | For the period December 1, 2019 (inception) through October 31, 2020 |
The accompanying notes are an integral part of the Financial Statements.
37
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 October 31, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | December 1, 2019a through October 31, 2020 | November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | ||||
INCREASE/(DECREASE) IN NET ASSETS | ||||||||||
Operations: | ||||||||||
Net investment income/(loss) | $ (53,535) | $ 31,800 | $ 14,033 | $ 12,286 | $ 45 | $ (1,680) | $ (1,399) | |||
Net realized gain/(loss) on investments | 5,943,736 | 2,821,316 | 56,241 | (1,877) | (189) | 69,847 | 61,125 | |||
Change in net unrealized appreciation/(depreciation) of investments | 5,967,186 | 877,252 | 38,926 | 159,031 | 800 | 39,517 | 5,571 | |||
Net increase/(decrease) in assets resulting from operations | 11,857,387 | 3,730,368 | 109,200 | 169,440 | 656 | 107,684 | 65,297 | |||
Distributions to Shareholders | ||||||||||
Retirement Class | (618,547) | (502,294) | (5,049) | (8,957) | (3) | (6,194) | (25,016) | |||
Institutional Class | (1,854,118) | (2,034,649) | (7,208) | (16,546) | (3) | (39,106) | (26,702) | |||
Administrative Class | (30,561) | (41,111) | (73) | (368) | N/A | (555) | (2,326) | |||
Investor Class | (98,181) | (121,068) | (132) | (947) | — | (4,732) | (2,988) | |||
Total distributions to shareholders | (2,601,407) | (2,699,122) | (12,462) | (26,818) | (6) | (50,587) | (57,032) | |||
Net Increase/(Decrease) Derived from Capital Share Transactions | (2,136,709) | (855,516) | 207,621 | 144,596 | 10,364 | 30,686 | (101,560) | |||
Net increase/(decrease) in net assets | 7,119,271 | 175,730 | 304,359 | 287,218 | 11,014 | 87,783 | (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 | $36,830,921 | $29,711,650 | $1,571,346 | $1,266,987 | $11,014 | $341,170 | $ 253,387 |
a | Inception |
The accompanying notes are an integral part of the Financial Statements.
38
Harbor Mid Cap Value Fund | Harbor Small Cap Growth Fund | Harbor Small Cap Value Fund | Harbor Strategic Growth Fund | |||||||
November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | |||
$ 10,477 | $ 19,254 | $ (2,718) | $ (1,229) | $ 9,385 | $ 8,678 | $ 391 | $ 488 | |||
(23,673) | 1,296 | 95,253 | 23,936 | (45,312) | 15,233 | 4,310 | 1,660 | |||
(90,873) | 17,301 | 119,273 | 82,988 | (36,478) | 129,521 | 8,635 | 12,686 | |||
(104,069) | 37,851 | 211,808 | 105,695 | (72,405) | 153,432 | 13,336 | 14,834 | |||
(3,052) | (6,960) | (10,182) | (58,115) | (4,051) | (11,611) | (98) | (104) | |||
(15,499) | (49,842) | (15,949) | (76,800) | (19,292) | (99,888) | (1,932) | (1,822) | |||
(490) | (2,796) | (17) | (157) | (89) | (638) | — | — | |||
(1,654) | (5,150) | (295) | (1,469) | (633) | (5,986) | (6) | (9) | |||
(20,695) | (64,748) | (26,443) | (136,541) | (24,065) | (118,123) | (2,036) | (1,935) | |||
(236,852) | (215,050) | 75,623 | 45,807 | 167,649 | 223,153 | (15,442) | 29,032 | |||
(361,616) | (241,947) | 260,988 | 14,961 | 71,179 | 258,462 | (4,142) | 41,931 | |||
701,010 | 942,957 | 729,221 | 714,260 | 1,641,427 | 1,382,965 | 112,050 | 70,119 | |||
$ 339,394 | $ 701,010 | $990,209 | $ 729,221 | $1,712,606 | $1,641,427 | $107,908 | $112,050 |
39
Harbor Domestic Equity Funds
Statements of Changes in Net Assets—Capital Stock Activity
Statements of Changes in Net Assets—Capital Stock Activity
(All amounts in thousands)
Harbor Capital Appreciation Fund | Harbor Large Cap Value Fund | Harbor Mid Cap Fund | Harbor Mid Cap Growth Fund | |||||||
November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | December 1, 2019a through October 31, 2020 | November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | ||||
AMOUNT ($) | ||||||||||
Retirement Class | ||||||||||
Net proceeds from sale of shares | $ 2,114,924 | $ 2,120,682 | $ 319,834 | $ 142,086 | $4,902 | $ 25,383 | $ 33,252 | |||
Reinvested distributions | 551,856 | 474,879 | 3,751 | 8,374 | 3 | 6,194 | 25,016 | |||
Cost of shares reacquired | (2,310,156) | (1,293,167) | (167,747) | (56,492) | (33) | (15,585) | (171,764) | |||
Net increase/(decrease) in net assets | $ 356,624 | $ 1,302,394 | $ 155,838 | $ 93,968 | $4,872 | $ 15,992 | $(113,496) | |||
Institutional Class | ||||||||||
Net proceeds from sale of shares | $ 4,000,724 | $ 2,848,926 | $ 426,035 | $ 296,956 | $5,116 | $ 85,884 | $ 67,981 | |||
Reinvested distributions | 1,758,584 | 1,856,429 | 5,445 | 14,891 | 2 | 27,491 | 19,729 | |||
Cost of shares reacquired | (7,160,313) | (6,481,485) | (366,117) | (240,786) | (6) | (111,020) | (55,847) | |||
Cost of shares reacquired through in-kind redemption | (948,692) | — | — | — | — | — | — | |||
Net increase/(decrease) in net assets | $(2,349,697) | $(1,776,130) | $ 65,363 | $ 71,061 | $5,112 | $ 2,355 | $ 31,863 | |||
Administrative Class | ||||||||||
Net proceeds from sale of shares | $ 87,311 | $ 78,686 | $ 658 | $ 628 | N/A | $ 337 | $ 690 | |||
Reinvested distributions | 28,968 | 39,641 | 73 | 367 | N/A | 542 | 2,321 | |||
Cost of shares reacquired | (149,315) | (228,371) | (2,003) | (6,315) | N/A | (480) | (26,644) | |||
Net increase/(decrease) in net assets | $ (33,036) | $ (110,044) | $ (1,272) | $ (5,320) | N/A | $ 399 | $ (23,633) | |||
Investor Class | ||||||||||
Net proceeds from sale of shares | $ 270,132 | $ 130,741 | $ 5,661 | $ 7,391 | $ 394 | $ 23,375 | $ 12,290 | |||
Reinvested distributions | 96,628 | 119,520 | 130 | 939 | — | 4,641 | 2,958 | |||
Cost of shares reacquired | (477,360) | (521,997) | (18,099) | (23,443) | (14) | (16,076) | (11,542) | |||
Net increase/(decrease) in net assets | $ (110,600) | $ (271,736) | $ (12,308) | $ (15,113) | $ 380 | $ 11,940 | $ 3,706 |
a | Inception |
The accompanying notes are an integral part of the Financial Statements.
40
Harbor Mid Cap Value Fund | Harbor Small Cap Growth Fund | Harbor Small Cap Value Fund | Harbor Strategic Growth Fund | |||||||
November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | |||
$ 30,057 | $ 36,603 | $ 81,574 | $ 45,531 | $ 156,404 | $ 140,043 | $ 2,451 | $ 1,564 | |||
3,047 | 6,960 | 9,807 | 56,734 | 2,583 | 6,760 | 98 | 104 | |||
(86,865) | (42,938) | (88,256) | (113,847) | (78,104) | (80,276) | (1,739) | (766) | |||
$ (53,761) | $ 625 | $ 3,125 | $ (11,582) | $ 80,883 | $ 66,527 | $ 810 | $ 902 | |||
$ 97,779 | $ 140,350 | $ 198,667 | $ 75,466 | $ 506,813 | $ 467,716 | $ 16,227 | $ 47,025 | |||
14,723 | 47,820 | 15,322 | 73,911 | 16,697 | 86,451 | 1,836 | 1,758 | |||
(265,068) | (359,812) | (140,747) | (91,745) | (440,065) | (384,397) | (34,344) | (20,699) | |||
— | — | — | — | — | — | — | — | |||
$(152,566) | $(171,642) | $ 73,242 | $ 57,632 | $ 83,445 | $ 169,770 | $(16,281) | $ 28,084 | |||
$ 2,443 | $ 7,271 | $ 516 | $ 301 | $ 5,655 | $ 1,624 | $ 2 | $ — | |||
459 | 2,759 | 17 | 157 | 86 | 620 | — | — | |||
(13,858) | (32,849) | (230) | (788) | (2,853) | (2,944) | — | — | |||
$ (10,956) | $ (22,819) | $ 303 | $ (330) | $ 2,888 | $ (700) | $ 2 | $ — | |||
$ 8,714 | $ 18,709 | $ 5,269 | $ 1,073 | $ 28,011 | $ 15,106 | $ 168 | $ 78 | |||
1,601 | 4,997 | 294 | 1,447 | 621 | 5,903 | 6 | 8 | |||
(29,884) | (44,920) | (6,610) | (2,433) | (28,199) | (33,453) | (147) | (40) | |||
$ (19,569) | $ (21,214) | $ (1,047) | $ 87 | $ 433 | $ (12,444) | $ 27 | $ 46 |
41
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 October 31, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | December 1, 2019a through October 31, 2020 | November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | ||||
SHARES | ||||||||||
Retirement Class | ||||||||||
Shares sold | 24,367 | 29,405 | 20,337 | 9,352 | 491 | 2,912 | 3,229 | |||
Shares issued due to reinvestment of distributions | 7,403 | 7,633 | 228 | 606 | — | 662 | 2,954 | |||
Shares reacquired | (27,474) | (17,963) | (10,280) | (3,757) | (4) | (1,469) | (16,564) | |||
Net increase/(decrease) in shares outstanding | 4,296 | 19,075 | 10,285 | 6,201 | 487 | 2,105 | (10,381) | |||
Institutional Class | ||||||||||
Shares sold | 48,185 | 39,971 | 27,030 | 19,742 | 513 | 8,232 | 6,704 | |||
Shares issued due to reinvestment of distributions | 23,573 | 29,827 | 331 | 1,078 | — | 2,950 | 2,335 | |||
Shares reacquired | (84,852) | (90,937) | (22,489) | (16,319) | (1) | (11,020) | (5,408) | |||
Shares reacquired through in-kind redemption | (10,241) | — | — | — | — | — | — | |||
Net increase/(decrease) in shares outstanding | (23,335) | (21,139) | 4,872 | 4,501 | 512 | 162 | 3,631 | |||
Administrative Class | ||||||||||
Shares sold | 1,067 | 1,141 | 42 | 43 | N/A | 33 | 73 | |||
Shares issued due to reinvestment of distributions | 397 | 649 | 4 | 27 | N/A | 63 | 291 | |||
Shares reacquired | (1,777) | (3,309) | (121) | (398) | N/A | (51) | (2,701) | |||
Net increase/(decrease) in shares outstanding | (313) | (1,519) | (75) | (328) | N/A | 45 | (2,337) | |||
Investor Class | ||||||||||
Shares sold | 3,290 | 1,916 | 349 | 487 | 44 | 2,271 | 1,271 | |||
Shares issued due to reinvestment of distributions | 1,359 | 2,001 | 8 | 68 | — | 562 | 384 | |||
Shares reacquired | (5,989) | (7,625) | (1,157) | (1,537) | (1) | (1,746) | (1,223) | |||
Net increase/(decrease) in shares outstanding | (1,340) | (3,708) | (800) | (982) | 43 | 1,087 | 432 |
a | Inception |
The accompanying notes are an integral part of the Financial Statements.
42
Harbor Mid Cap Value Fund | Harbor Small Cap Growth Fund | Harbor Small Cap Value Fund | Harbor Strategic Growth Fund | |||||||
November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | |||
1,582 | 1,837 | 6,248 | 3,726 | 5,105 | 4,533 | 104 | 78 | |||
144 | 385 | 715 | 5,519 | 75 | 243 | 4 | 6 | |||
(4,893) | (2,120) | (6,395) | (9,154) | (2,569) | (2,509) | (76) | (36) | |||
(3,167) | 102 | 568 | 91 | 2,611 | 2,267 | 32 | 48 | |||
6,148 | 7,050 | 15,543 | 6,036 | 17,130 | 14,992 | 714 | 2,290 | |||
696 | 2,644 | 1,120 | 7,211 | 482 | 3,109 | 80 | 99 | |||
(15,347) | (18,090) | (10,218) | (7,596) | (15,058) | (12,202) | (1,477) | (984) | |||
— | — | — | — | — | — | — | — | |||
(8,503) | (8,396) | 6,445 | 5,651 | 2,554 | 5,899 | (683) | 1,405 | |||
137 | 361 | 44 | 26 | 218 | 51 | — | — | |||
22 | 151 | 1 | 17 | 3 | 22 | — | — | |||
(749) | (1,607) | (18) | (67) | (96) | (94) | — | — | |||
(590) | (1,095) | 27 | (24) | 125 | (21) | — | — | |||
490 | 945 | 487 | 115 | 909 | 496 | 8 | 4 | |||
76 | 276 | 25 | 164 | 18 | 218 | — | 1 | |||
(1,807) | (2,258) | (598) | (240) | (1,033) | (1,102) | (6) | (2) | |||
(1,241) | (1,037) | (86) | 39 | (106) | (388) | 2 | 3 |
43
Harbor Domestic Equity Funds Financial Highlights
Selected Data for a Share Outstanding for the Periods Presented
Selected Data for a Share Outstanding for the Periods Presented
HARBOR CAPITAL APPRECIATION FUND | |||||
Retirement Class | |||||
Year Ended October 31, | 2020 | 2019 | 2018 | 2017 | 2016 f |
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 | (0.08) | 0.13 | 0.23 | 0.16 | 0.05 |
Net realized and unrealized gain/(loss) on investments | 30.27 | 8.54 | 6.50 | 18.40 | 4.53 |
Total from investment operations | 30.19 | 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 | 99.19 | 75.79 | 73.98 | 75.34 | 60.37 |
Net assets end of period (000s) | $9,549,061 | $6,970,617 | $5,393,675 | $2,892,484 | $1,022,839 |
Ratios and Supplemental Data (%) | |||||
Total returnb | 42.79% | 13.73% | 9.50% | 32.62% | 8.21% c |
Ratio of total expenses to average net assets^ | 0.64 | 0.63 | 0.62 | 0.63 | 0.65 d |
Ratio of net expenses to average net assetsa | 0.58 | 0.58 | 0.57 | 0.59 | 0.59 d |
Ratio of net investment income/(loss) to average net assetsa | (0.09) | 0.18 | 0.30 | 0.23 | 0.13 d |
Portfolio turnover | 51 | 40 | 40 | 52 | 34 c |
Administrative Class | |||||
Year Ended October 31, | 2020 | 2019 | 2018 | 2017 | 2016 |
Net asset value beginning of period | $ 74.15 | $ 72.54 | $ 74.08 | $ 59.50 | $ 64.51 |
Income from Investment Operations | |||||
Net investment income/(loss)a,e | (0.34) | (0.09) | (0.01) | (0.04) | (0.06) |
Net realized and unrealized gain/(loss) on investments | 29.54 | 8.35 | 6.39 | 18.11 | (0.84) |
Total from investment operations | 29.20 | 8.26 | 6.38 | 18.07 | (0.90) |
Less Distributions | |||||
Dividends from net investment income | — | — | — | — | — |
Distributions from net realized capital gains | (6.67) | (6.65) | (7.92) | (3.49) | (4.11) |
Total distributions | (6.67) | (6.65) | (7.92) | (3.49) | (4.11) |
Net asset value end of period | 96.68 | 74.15 | 72.54 | 74.08 | 59.50 |
Net assets end of period (000s) | $ 420,324 | $ 345,550 | $ 448,241 | $ 493,860 | $ 555,665 |
Ratios and Supplemental Data (%) | |||||
Total returnb | 42.32% | 13.35% | 9.16% | 32.20% | (1.48)% |
Ratio of total expenses to average net assets^ | 0.97 | 0.96 | 0.95 | 0.96 | 0.94 |
Ratio of net expenses to average net assetsa | 0.91 | 0.91 | 0.90 | 0.90 | 0.89 |
Ratio of net investment income/(loss) to average net assetsa | (0.41) | (0.13) | (0.01) | (0.06) | (0.11) |
Portfolio turnover | 51 | 40 | 40 | 52 | 34 |
See page 60 for notes to the Financial Highlights.
The accompanying notes are an integral part of the Financial Statements.
44
Institutional Class | ||||
2020 | 2019 | 2018 | 2017 | 2016 |
$ 75.78 | $ 73.97 | $ 75.32 | $ 60.36 | $ 65.27 |
(0.14) | 0.08 | 0.18 | 0.13 | 0.09 |
30.26 | 8.53 | 6.50 | 18.38 | (0.84) |
30.12 | 8.61 | 6.68 | 18.51 | (0.75) |
(0.05) | (0.15) | (0.11) | (0.06) | (0.05) |
(6.67) | (6.65) | (7.92) | (3.49) | (4.11) |
(6.72) | (6.80) | (8.03) | (3.55) | (4.16) |
99.18 | 75.78 | 73.97 | 75.32 | 60.36 |
$25,579,181 | $21,311,587 | $22,366,214 | $23,896,840 | $21,608,221 |
42.68% | 13.63% | 9.44% | 32.52% | (1.23)% |
0.72 | 0.71 | 0.70 | 0.71 | 0.69 |
0.66 | 0.66 | 0.65 | 0.65 | 0.64 |
(0.16) | 0.11 | 0.23 | 0.20 | 0.15 |
51 | 40 | 40 | 52 | 34 |
Investor Class | ||||
2020 | 2019 | 2018 | 2017 | 2016 |
$ 72.48 | $ 71.15 | $ 72.88 | $ 58.66 | $ 63.73 |
(0.43) | (0.17) | (0.10) | (0.11) | (0.13) |
28.81 | 8.15 | 6.29 | 17.82 | (0.83) |
28.38 | 7.98 | 6.19 | 17.71 | (0.96) |
— | — | — | — | — |
(6.67) | (6.65) | (7.92) | (3.49) | (4.11) |
(6.67) | (6.65) | (7.92) | (3.49) | (4.11) |
94.19 | 72.48 | 71.15 | 72.88 | 58.66 |
$ 1,282,355 | $ 1,083,896 | $ 1,327,790 | $ 1,531,809 | $ 1,540,557 |
42.15% | 13.21% | 9.03% | 32.04% | (1.60)% |
1.09 | 1.08 | 1.07 | 1.08 | 1.06 |
1.03 | 1.03 | 1.02 | 1.02 | 1.01 |
(0.53) | (0.25) | (0.13) | (0.17) | (0.22) |
51 | 40 | 40 | 52 | 34 |
45
Harbor Domestic Equity Funds Financial Highlights—Continued
Selected Data for a Share Outstanding for the Periods Presented
Selected Data for a Share Outstanding for the Periods Presented
HARBOR LARGE CAP VALUE FUND | |||||
Retirement Class | |||||
Year Ended October 31, | 2020 | 2019 | 2018 | 2017 | 2016 f |
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 | 0.18 | 0.18 | 0.17 | 0.12 | 0.12 |
Net realized and unrealized gain/(loss) on investments | 0.76 | 2.17 | (0.13) | 3.00 | 1.33 |
Total from investment operations | 0.94 | 2.35 | 0.04 | 3.12 | 1.45 |
Less Distributions | |||||
Dividends from net investment income | (0.16) | (0.16) | (0.13) | (0.14) | (0.07) |
Distributions from net realized capital gains | — | (0.23) | (0.41) | (0.43) | — |
Total distributions | (0.16) | (0.39) | (0.54) | (0.57) | (0.07) |
Net asset value end of period | 17.11 | 16.33 | 14.37 | 14.87 | 12.32 |
Net assets end of period (000s) | $655,562 | $457,908 | $313,721 | $143,966 | $3,822 |
Ratios and Supplemental Data (%) | |||||
Total returnb | 5.80% | 16.92% | 0.18% | 26.08% | 13.24% c |
Ratio of total expenses to average net assets^ | 0.64 | 0.65 | 0.64 | 0.64 | 0.67 d |
Ratio of net expenses to average net assetsa | 0.61 | 0.61 | 0.60 | 0.60 | 0.63 d |
Ratio of net investment income/(loss) to average net assetsa | 1.08 | 1.19 | 1.12 | 0.83 | 1.46 d |
Portfolio turnover | 26 | 11 | 15 | 16 | 34 c |
Administrative Class | |||||
Year Ended October 31, | 2020 | 2019 | 2018 | 2017 | 2016 |
Net asset value beginning of period | $ 16.33 | $ 14.36 | $ 14.84 | $ 12.30 | $12.15 |
Income from Investment Operations | |||||
Net investment income/(loss)a,e | 0.13 | 0.14 | 0.13 | 0.10 | 0.13 |
Net realized and unrealized gain/(loss) on investments | 0.75 | 2.17 | (0.15) | 2.99 | 0.63 |
Total from investment operations | 0.88 | 2.31 | (0.02) | 3.09 | 0.76 |
Less Distributions | |||||
Dividends from net investment income | (0.10) | (0.11) | (0.05) | (0.12) | (0.10) |
Distributions from net realized capital gains | — | (0.23) | (0.41) | (0.43) | (0.51) |
Total distributions | (0.10) | (0.34) | (0.46) | (0.55) | (0.61) |
Net asset value end of period | 17.11 | 16.33 | 14.36 | 14.84 | 12.30 |
Net assets end of period (000s) | $ 11,502 | $ 12,195 | $ 15,460 | $ 53,006 | $9,361 |
Ratios and Supplemental Data (%) | |||||
Total returnb | 5.42% | 16.60% | (0.23)% | 25.77% | 6.77% |
Ratio of total expenses to average net assets^ | 0.97 | 0.98 | 0.97 | 0.97 | 0.96 |
Ratio of net expenses to average net assetsa | 0.94 | 0.94 | 0.93 | 0.93 | 0.93 |
Ratio of net investment income/(loss) to average net assetsa | 0.78 | 0.91 | 0.84 | 0.70 | 1.09 |
Portfolio turnover | 26 | 11 | 15 | 16 | 34 |
See page 60 for notes to the Financial Highlights.
The accompanying notes are an integral part of the Financial Statements.
46
Institutional Class | ||||
2020 | 2019 | 2018 | 2017 | 2016 |
$ 16.33 | $ 14.37 | $ 14.87 | $ 12.32 | $ 12.16 |
0.17 | 0.17 | 0.16 | 0.15 | 0.16 |
0.76 | 2.17 | (0.13) | 2.97 | 0.64 |
0.93 | 2.34 | 0.03 | 3.12 | 0.80 |
(0.15) | (0.15) | (0.12) | (0.14) | (0.13) |
— | (0.23) | (0.41) | (0.43) | (0.51) |
(0.15) | (0.38) | (0.53) | (0.57) | (0.64) |
17.11 | 16.33 | 14.37 | 14.87 | 12.32 |
$880,755 | $761,262 | $605,040 | $498,360 | $310,127 |
5.72% | 16.83% | 0.11% | 26.00% | 7.14% |
0.72 | 0.73 | 0.72 | 0.72 | 0.72 |
0.69 | 0.69 | 0.68 | 0.68 | 0.68 |
1.02 | 1.12 | 1.05 | 1.10 | 1.32 |
26 | 11 | 15 | 16 | 34 |
Investor Class | ||||
2020 | 2019 | 2018 | 2017 | 2016 |
$ 16.48 | $ 14.49 | $ 14.99 | $ 12.42 | $ 12.25 |
0.11 | 0.12 | 0.11 | 0.10 | 0.11 |
0.76 | 2.19 | (0.14) | 2.99 | 0.66 |
0.87 | 2.31 | (0.03) | 3.09 | 0.77 |
(0.07) | (0.09) | (0.06) | (0.09) | (0.09) |
— | (0.23) | (0.41) | (0.43) | (0.51) |
(0.07) | (0.32) | (0.47) | (0.52) | (0.60) |
17.28 | 16.48 | 14.49 | 14.99 | 12.42 |
$ 23,527 | $ 35,622 | $ 45,548 | $ 71,374 | $ 57,716 |
5.32% | 16.39% | (0.27)% | 25.52% | 6.80% |
1.09 | 1.10 | 1.09 | 1.09 | 1.09 |
1.06 | 1.06 | 1.05 | 1.05 | 1.05 |
0.67 | 0.79 | 0.70 | 0.75 | 0.94 |
26 | 11 | 15 | 16 | 34 |
47
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 | |||
Year Ended October 31, | 2020 i | 2020 i | 2020 i | ||
Net asset value beginning of period | $10.00 | $10.00 | $10.00 | ||
Income from Investment Operations | |||||
Net investment income/(loss)a,e | 0.05 | 0.04 | 0.01 | ||
Net realized and unrealized gain/(loss) on investments | 0.53 | 0.53 | 0.53 | ||
Total from investment operations | 0.58 | 0.57 | 0.54 | ||
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 | 10.57 | 10.56 | 10.54 | ||
Net assets end of period (000s) | $5,148 | $5,411 | $ 455 | ||
Ratios and Supplemental Data (%) | |||||
Total returnb | 5.86% c | 5.75% c | 5.42% c | ||
Ratio of total expenses to average net assets^ | 2.28 d | 2.36 d | 2.73 d | ||
Ratio of net expenses to average net assetsa | 0.80 d | 0.88 d | 1.25 d | ||
Ratio of net investment income/(loss) to average net assetsa | 0.54 d | 0.46 d | 0.07 d | ||
Portfolio turnover | 9 c | 9 c | 9 c |
See page 60 for notes to the Financial Highlights.
The accompanying notes are an integral part of the Financial Statements.
48
Harbor Domestic Equity Funds Financial Highlights—Continued
Selected Data for a Share Outstanding for the Periods Presented
Selected Data for a Share Outstanding for the Periods Presented
HARBOR MID CAP GROWTH FUND | |||||
Retirement Class | |||||
Year Ended October 31, | 2020 | 2019 | 2018 | 2017 | 2016 f |
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 | (0.06) | (0.04) | (0.03) | 0.01 | (0.03) |
Net realized and unrealized gain/(loss) on investments | 4.25 | 1.85 | 0.88 | 2.66 | 0.85 |
Total from investment operations | 4.19 | 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 | 12.93 | 10.91 | 10.88 | 11.25 | 8.58 |
Net assets end of period (000s) | $64,242 | $31,265 | $144,137 | $127,446 | $ 2,718 |
Ratios and Supplemental Data (%) | |||||
Total returnb | 46.03% | 21.38% | 8.02% | 31.12% | (10.57)% c |
Ratio of total expenses to average net assets^ | 0.83 | 0.82 | 0.80 | 0.81 | 0.81 d |
Ratio of net expenses to average net assetsa | 0.79 | 0.81 | 0.80 | 0.81 | 0.80 d |
Ratio of net investment income/(loss) to average net assetsa | (0.53) | (0.37) | (0.28) | 0.07 | (0.45) d |
Portfolio turnover | 113 | 70 | 85 | 87 | 84 c |
Administrative Class | |||||
Year Ended October 31, | 2020 | 2019 | 2018 | 2017 | 2016 |
Net asset value beginning of period | $ 10.26 | $ 10.37 | $ 10.81 | $ 8.27 | $ 9.45 |
Income from Investment Operations | |||||
Net investment income/(loss)a,e | (0.08) | (0.06) | (0.06) | (0.04) | (0.05) |
Net realized and unrealized gain/(loss) on investments | 3.92 | 1.73 | 0.84 | 2.58 | (0.03) |
Total from investment operations | 3.84 | 1.67 | 0.78 | 2.54 | (0.08) |
Less Distributions | |||||
Dividends from net investment income | — | — | — | — | (0.04) |
Distributions from net realized capital gains | (2.17) | (1.78) | (1.22) | — | (1.06) |
Total distributions | (2.17) | (1.78) | (1.22) | — | (1.10) |
Net asset value end of period | 11.93 | 10.26 | 10.37 | 10.81 | 8.27 |
Net assets end of period (000s) | $ 3,666 | $ 2,687 | $ 26,936 | $110,114 | $175,211 |
Ratios and Supplemental Data (%) | |||||
Total returnb | 45.42% | 21.04% | 7.68% | 30.71% | (0.91)% |
Ratio of total expenses to average net assets^ | 1.16 | 1.15 | 1.13 | 1.13 | 1.10 |
Ratio of net expenses to average net assetsa | 1.12 | 1.14 | 1.12 | 1.12 | 1.10 |
Ratio of net investment income/(loss) to average net assetsa | (0.84) | (0.66) | (0.55) | (0.45) | (0.57) |
Portfolio turnover | 113 | 70 | 85 | 87 | 84 |
See page 60 for notes to the Financial Highlights.
The accompanying notes are an integral part of the Financial Statements.
50
Institutional Class | ||||
2020 | 2019 | 2018 | 2017 | 2016 |
$ 10.88 | $ 10.86 | $ 11.24 | $ 8.58 | $ 9.76 |
(0.06) | (0.05) | (0.04) | (0.01) | (0.03) |
4.22 | 1.85 | 0.88 | 2.67 | (0.03) |
4.16 | 1.80 | 0.84 | 2.66 | (0.06) |
— | — | — | — | (0.06) |
(2.17) | (1.78) | (1.22) | — | (1.06) |
(2.17) | (1.78) | (1.22) | — | (1.12) |
12.87 | 10.88 | 10.86 | 11.24 | 8.58 |
$236,863 | $198,544 | $158,680 | $145,914 | $303,802 |
45.84% | 21.32% | 7.94% | 31.00% | (0.60)% |
0.91 | 0.90 | 0.88 | 0.88 | 0.86 |
0.87 | 0.89 | 0.87 | 0.87 | 0.85 |
(0.58) | (0.48) | (0.36) | (0.14) | (0.31) |
113 | 70 | 85 | 87 | 84 |
Investor Class | ||||
2020 | 2019 | 2018 | 2017 | 2016 |
$ 9.88 | $ 10.07 | $ 10.54 | $ 8.07 | $ 9.24 |
(0.09) | (0.08) | (0.08) | (0.04) | (0.05) |
3.75 | 1.67 | 0.83 | 2.51 | (0.04) |
3.66 | 1.59 | 0.75 | 2.47 | (0.09) |
— | — | — | — | (0.02) |
(2.17) | (1.78) | (1.22) | — | (1.06) |
(2.17) | (1.78) | (1.22) | — | (1.08) |
11.37 | 9.88 | 10.07 | 10.54 | 8.07 |
$ 36,399 | $ 20,891 | $ 16,929 | $ 20,121 | $ 17,167 |
45.32% | 20.83% | 7.57% | 30.61% | (1.05)% |
1.28 | 1.27 | 1.25 | 1.25 | 1.22 |
1.24 | 1.26 | 1.24 | 1.24 | 1.22 |
(0.96) | (0.85) | (0.72) | (0.48) | (0.68) |
113 | 70 | 85 | 87 | 84 |
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 MID CAP VALUE FUND | |||||
Retirement Class | |||||
Year Ended October 31, | 2020 | 2019 | 2018 | 2017 | 2016 f |
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 | 0.43 | 0.48 | 0.50 | 0.40 | 0.28 |
Net realized and unrealized gain/(loss) on investments | (3.73) | 0.47 | (1.52) | 3.43 | 1.53 |
Total from investment operations | (3.30) | 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 | 16.83 | 20.82 | 21.39 | 23.33 | 20.17 |
Net assets end of period (000s) | $29,897 | $102,945 | $103,552 | $89,942 | $14,999 |
Ratios and Supplemental Data (%) | |||||
Total returnb | (16.55)% | 5.53% | (4.75)% | 19.22% | 9.86% c |
Ratio of total expenses to average net assets^ | 0.82 | 0.80 | 0.79 | 0.80 | 0.82 d |
Ratio of net expenses to average net assetsa | 0.80 | 0.77 | 0.76 | 0.77 | 0.79 d |
Ratio of net investment income/(loss) to average net assetsa | 2.39 | 2.39 | 2.15 | 1.79 | 2.11 d |
Portfolio turnover | 4 | 11 | 24 | 22 | 18 c |
Administrative Class | |||||
Year Ended October 31, | 2020 | 2019 | 2018 | 2017 | 2016 |
Net asset value beginning of period | $ 20.98 | $ 21.52 | $ 23.47 | $ 20.30 | $ 20.40 |
Income from Investment Operations | |||||
Net investment income/(loss)a,e | 0.36 | 0.42 | 0.43 | 0.34 | 0.40 |
Net realized and unrealized gain/(loss) on investments | (3.77) | 0.48 | (1.54) | 3.45 | 0.07 |
Total from investment operations | (3.41) | 0.90 | (1.11) | 3.79 | 0.47 |
Less Distributions | |||||
Dividends from net investment income | (0.44) | (0.29) | (0.25) | (0.31) | (0.22) |
Distributions from net realized capital gains | (0.15) | (1.15) | (0.59) | (0.31) | (0.35) |
Total distributions | (0.59) | (1.44) | (0.84) | (0.62) | (0.57) |
Net asset value end of period | 16.98 | 20.98 | 21.52 | 23.47 | 20.30 |
Net assets end of period (000s) | $ 4,945 | $ 18,508 | $ 42,557 | $48,809 | $40,992 |
Ratios and Supplemental Data (%) | |||||
Total returnb | (16.85)% | 5.19% | (5.06)% | 18.84% | 2.54% |
Ratio of total expenses to average net assets^ | 1.15 | 1.13 | 1.12 | 1.12 | 1.11 |
Ratio of net expenses to average net assetsa | 1.13 | 1.10 | 1.08 | 1.09 | 1.09 |
Ratio of net investment income/(loss) to average net assetsa | 1.98 | 2.08 | 1.83 | 1.51 | 2.03 |
Portfolio turnover | 4 | 11 | 24 | 22 | 18 |
See page 60 for notes to the Financial Highlights.
The accompanying notes are an integral part of the Financial Statements.
52
Institutional Class | ||||
2020 | 2019 | 2018 | 2017 | 2016 |
$ 20.82 | $ 21.38 | $ 23.33 | $ 20.17 | $ 20.27 |
0.40 | 0.47 | 0.49 | 0.39 | 0.44 |
(3.73) | 0.47 | (1.54) | 3.43 | 0.08 |
(3.33) | 0.94 | (1.05) | 3.82 | 0.52 |
(0.51) | (0.35) | (0.31) | (0.35) | (0.27) |
(0.15) | (1.15) | (0.59) | (0.31) | (0.35) |
(0.66) | (1.50) | (0.90) | (0.66) | (0.62) |
16.83 | 20.82 | 21.38 | 23.33 | 20.17 |
$277,767 | $520,629 | $714,309 | $739,122 | $600,800 |
(16.64)% | 5.48% | (4.85)% | 19.16% | 2.81% |
0.90 | 0.88 | 0.87 | 0.87 | 0.86 |
0.88 | 0.85 | 0.83 | 0.84 | 0.84 |
2.25 | 2.33 | 2.09 | 1.76 | 2.28 |
4 | 11 | 24 | 22 | 18 |
Investor Class | ||||
2020 | 2019 | 2018 | 2017 | 2016 |
$ 20.78 | $ 21.31 | $ 23.23 | $ 20.09 | $ 20.19 |
0.34 | 0.39 | 0.40 | 0.31 | 0.37 |
(3.74) | 0.48 | (1.53) | 3.41 | 0.08 |
(3.40) | 0.87 | (1.13) | 3.72 | 0.45 |
(0.43) | (0.25) | (0.20) | (0.27) | (0.20) |
(0.15) | (1.15) | (0.59) | (0.31) | (0.35) |
(0.58) | (1.40) | (0.79) | (0.58) | (0.55) |
16.80 | 20.78 | 21.31 | 23.23 | 20.09 |
$ 26,785 | $ 58,928 | $ 82,539 | $110,094 | $152,358 |
(16.94)% | 5.08% | (5.20)% | 18.71% | 2.45% |
1.27 | 1.25 | 1.24 | 1.24 | 1.23 |
1.25 | 1.22 | 1.20 | 1.21 | 1.21 |
1.89 | 1.95 | 1.71 | 1.40 | 1.92 |
4 | 11 | 24 | 22 | 18 |
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 SMALL CAP GROWTH FUND | |||||
Retirement Class | |||||
Year Ended October 31, | 2020 | 2019 | 2018 | 2017 | 2016 f |
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 | (0.04) | (0.01) | (0.05) | (0.04) | (0.02) |
Net realized and unrealized gain/(loss) on investments | 3.25 | 1.56 | 0.82 | 3.23 | 1.25 |
Total from investment operations | 3.21 | 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 | 15.91 | 13.18 | 14.39 | 15.08 | 11.95 |
Net assets end of period (000s) | $348,997 | $281,603 | $306,026 | $189,516 | $54,634 |
Ratios and Supplemental Data (%) | |||||
Total returnb | 24.93% | 16.23% | 5.11% | 26.78% | 11.47% c |
Ratio of total expenses to average net assets^ | 0.81 | 0.80 | 0.79 | 0.79 | 0.81 d |
Ratio of net expenses to average net assetsa | 0.80 | 0.80 | 0.79 | 0.79 | 0.80 d |
Ratio of net investment income/(loss) to average net assetsa | (0.27) | (0.12) | (0.33) | (0.26) | (0.27) d |
Portfolio turnover | 95 | 74 | 99 | 83 | 89 c |
Administrative Class | |||||
Year Ended October 31, | 2020 | 2019 | 2018 | 2017 | 2016 |
Net asset value beginning of period | $ 11.98 | $ 13.39 | $ 14.17 | $ 11.30 | $ 13.04 |
Income from Investment Operations | |||||
Net investment income/(loss)a,e | (0.08) | (0.05) | (0.09) | (0.07) | (0.05) |
Net realized and unrealized gain/(loss) on investments | 2.94 | 1.40 | 0.77 | 3.00 | (0.11) |
Total from investment operations | 2.86 | 1.35 | 0.68 | 2.93 | (0.16) |
Less Distributions | |||||
Dividends from net investment income | — | — | — | — | — |
Distributions from net realized capital gains | (0.48) | (2.76) | (1.46) | (0.06) | (1.58) |
Total distributions | (0.48) | (2.76) | (1.46) | (0.06) | (1.58) |
Net asset value end of period | 14.36 | 11.98 | 13.39 | 14.17 | 11.30 |
Net assets end of period (000s) | $ 866 | $ 395 | $ 769 | $ 719 | $ 686 |
Ratios and Supplemental Data (%) | |||||
Total returnb | 24.49% | 15.87% | 4.76% | 26.02% | (1.29)% |
Ratio of total expenses to average net assets^ | 1.14 | 1.13 | 1.12 | 1.11 | 1.10 |
Ratio of net expenses to average net assetsa | 1.13 | 1.12 | 1.11 | 1.10 | 1.10 |
Ratio of net investment income/(loss) to average net assetsa | (0.62) | (0.44) | (0.65) | (0.56) | (0.46) |
Portfolio turnover | 95 | 74 | 99 | 83 | 89 |
See page 60 for notes to the Financial Highlights.
The accompanying notes are an integral part of the Financial Statements.
54
Institutional Class | ||||
2020 | 2019 | 2018 | 2017 | 2016 |
$ 13.13 | $ 14.35 | $ 15.06 | $ 11.94 | $ 13.65 |
(0.05) | (0.03) | (0.06) | (0.04) | (0.02) |
3.24 | 1.57 | 0.81 | 3.22 | (0.11) |
3.19 | 1.54 | 0.75 | 3.18 | (0.13) |
— | — | — | — | — |
(0.48) | (2.76) | (1.46) | (0.06) | (1.58) |
(0.48) | (2.76) | (1.46) | (0.06) | (1.58) |
15.84 | 13.13 | 14.35 | 15.06 | 11.94 |
$633,535 | $440,553 | $400,389 | $509,889 | $523,888 |
24.87% | 16.18% | 4.97% | 26.72% | (0.99)% |
0.89 | 0.88 | 0.87 | 0.86 | 0.85 |
0.88 | 0.87 | 0.86 | 0.85 | 0.85 |
(0.35) | (0.20) | (0.40) | (0.30) | (0.21) |
95 | 74 | 99 | 83 | 89 |
Investor Class | ||||
2020 | 2019 | 2018 | 2017 | 2016 |
$ 11.28 | $ 12.79 | $ 13.62 | $ 10.84 | $ 12.59 |
(0.08) | (0.06) | (0.11) | (0.08) | (0.06) |
2.75 | 1.31 | 0.74 | 2.92 | (0.11) |
2.67 | 1.25 | 0.63 | 2.84 | (0.17) |
— | — | — | — | — |
(0.48) | (2.76) | (1.46) | (0.06) | (1.58) |
(0.48) | (2.76) | (1.46) | (0.06) | (1.58) |
13.47 | 11.28 | 12.79 | 13.62 | 10.84 |
$ 6,811 | $ 6,670 | $ 7,076 | $ 7,913 | $ 8,401 |
24.32% | 15.81% | 4.58% | 26.29% | (1.44)% |
1.26 | 1.25 | 1.24 | 1.23 | 1.22 |
1.25 | 1.24 | 1.23 | 1.22 | 1.22 |
(0.71) | (0.57) | (0.77) | (0.67) | (0.58) |
95 | 74 | 99 | 83 | 89 |
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 SMALL CAP VALUE FUND | |||||
Retirement Class | |||||
Year Ended October 31, | 2020 | 2019 | 2018 | 2017 | 2016 f |
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 | 0.21 | 0.21 | 0.17 | 0.06 | 0.05 |
Net realized and unrealized gain/(loss) on investments | (1.59) | 2.84 | (1.98) | 8.94 | 3.33 |
Total from investment operations | (1.38) | 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 | 31.65 | 33.55 | 33.60 | 36.16 | 27.29 |
Net assets end of period (000s) | $300,473 | $230,861 | $155,036 | $57,196 | $2,529 |
Ratios and Supplemental Data (%) | |||||
Total returnb | (4.22)% | 10.98% | (5.18)% | 33.06% | 14.14% c |
Ratio of total expenses to average net assets^ | 0.80 | 0.80 | 0.79 | 0.81 | 0.82 d |
Ratio of net expenses to average net assetsa | 0.80 | 0.80 | 0.79 | 0.81 | 0.81 d |
Ratio of net investment income/(loss) to average net assetsa | 0.67 | 0.67 | 0.45 | 0.17 | 0.27 d |
Portfolio turnover | 17 | 27 | 22 | 8 | 10 c |
Administrative Class | |||||
Year Ended October 31, | 2020 | 2019 | 2018 | 2017 | 2016 |
Net asset value beginning of period | $ 33.30 | $ 33.36 | $ 35.97 | $ 27.16 | $26.07 |
Income from Investment Operations | |||||
Net investment income/(loss)a,e | 0.10 | 0.11 | 0.06 | (0.02) | 0.05 |
Net realized and unrealized gain/(loss) on investments | (1.57) | 2.82 | (1.98) | 8.88 | 1.93 |
Total from investment operations | (1.47) | 2.93 | (1.92) | 8.86 | 1.98 |
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) |
Total distributions | (0.42) | (2.99) | (0.69) | (0.05) | (0.89) |
Net asset value end of period | 31.41 | 33.30 | 33.36 | 35.97 | 27.16 |
Net assets end of period (000s) | $ 10,082 | $ 6,537 | $ 7,253 | $ 4,462 | $1,360 |
Ratios and Supplemental Data (%) | |||||
Total returnb | (4.54)% | 10.59% | (5.50)% | 32.67% | 7.93% |
Ratio of total expenses to average net assets^ | 1.13 | 1.13 | 1.12 | 1.13 | 1.11 |
Ratio of net expenses to average net assetsa | 1.13 | 1.12 | 1.11 | 1.12 | 1.11 |
Ratio of net investment income/(loss) to average net assetsa | 0.32 | 0.35 | 0.16 | (0.05) | 0.21 |
Portfolio turnover | 17 | 27 | 22 | 8 | 10 |
See page 60 for notes to the Financial Highlights.
The accompanying notes are an integral part of the Financial Statements.
56
Institutional Class | ||||
2020 | 2019 | 2018 | 2017 | 2016 |
$ 33.53 | $ 33.57 | $ 36.14 | $ 27.27 | $ 26.21 |
0.18 | 0.19 | 0.15 | 0.08 | 0.12 |
(1.58) | 2.84 | (2.00) | 8.90 | 1.92 |
(1.40) | 3.03 | (1.85) | 8.98 | 2.04 |
(0.18) | (0.12) | (0.03) | (0.11) | (0.09) |
(0.32) | (2.95) | (0.69) | — | (0.89) |
(0.50) | (3.07) | (0.72) | (0.11) | (0.98) |
31.63 | 33.53 | 33.57 | 36.14 | 27.27 |
$1,350,681 | $1,346,098 | $1,149,857 | $1,081,412 | $738,705 |
(4.33)% | 10.91% | (5.28)% | 33.00% | 8.18% |
0.88 | 0.88 | 0.87 | 0.88 | 0.86 |
0.88 | 0.87 | 0.86 | 0.87 | 0.86 |
0.59 | 0.60 | 0.40 | 0.24 | 0.48 |
17 | 27 | 22 | 8 | 10 |
Investor Class | ||||
2020 | 2019 | 2018 | 2017 | 2016 |
$ 32.56 | $ 32.68 | $ 35.29 | $ 26.65 | $ 25.63 |
0.07 | 0.08 | 0.01 | (0.05) | 0.03 |
(1.55) | 2.75 | (1.93) | 8.71 | 1.88 |
(1.48) | 2.83 | (1.92) | 8.66 | 1.91 |
(0.05) | — | — | (0.02) | — |
(0.32) | (2.95) | (0.69) | — | (0.89) |
(0.37) | (2.95) | (0.69) | (0.02) | (0.89) |
30.71 | 32.56 | 32.68 | 35.29 | 26.65 |
$ 51,370 | $ 57,931 | $ 70,819 | $ 37,548 | $ 17,775 |
(4.67)% | 10.48% | (5.60)% | 32.49% | 7.79% |
1.25 | 1.25 | 1.24 | 1.25 | 1.23 |
1.25 | 1.24 | 1.23 | 1.24 | 1.23 |
0.23 | 0.24 | 0.03 | (0.16) | 0.10 |
17 | 27 | 22 | 8 | 10 |
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 STRATEGIC GROWTH FUND | ||||||
Retirement Class | ||||||
Year Ended October 31, | Year Ended June 30, | |||||
2020 | 2019 | 2018 | 2017 h | 2017 g | ||
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 | 0.09 | 0.12 | 0.07 | 0.05 | 0.03 | |
Net realized and unrealized gain/(loss) on investments | 2.69 | 3.10 | 1.11 | 1.14 | 0.88 | |
Total from investment operations | 2.78 | 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 | 24.67 | 22.31 | 19.65 | 18.86 | 17.67 | |
Net assets end of period (000s) | $6,488 | $5,152 | $3,584 | $ 435 | $ 316 | |
Ratios and Supplemental Data (%) | ||||||
Total returnb | 12.60% | 17.04% | 6.34% | 6.73% c | 5.43% c | |
Ratio of total expenses to average net assets^ | 0.72 | 0.71 | 0.76 | 1.10 d | 1.52 d | |
Ratio of net expenses to average net assetsa | 0.63 | 0.63 | 0.62 | 0.62 d | 0.62 d | |
Ratio of net investment income/(loss) to average net assetsa | 0.40 | 0.60 | 0.33 | 0.42 d | 0.58 d | |
Portfolio turnover | 22 | 26 | 15 | 9 c | 21 c |
Administrative Class | ||||||
Year Ended October 31, | Year Ended June 30, | |||||
2020 | 2019 | 2018 | 2017 h | 2017 g | ||
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 | 0.02 | 0.05 | 0.01 | 0.01 | 0.01 | |
Net realized and unrealized gain/(loss) on investments | 2.67 | 3.10 | 1.10 | 1.16 | 0.88 | |
Total from investment operations | 2.69 | 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 | 24.58 | 22.24 | 19.58 | 18.82 | 17.65 | |
Net assets end of period (000s) | $ 22 | $ 18 | $ 16 | $ 12 | $ 11 | |
Ratios and Supplemental Data (%) | ||||||
Total returnb | 12.21% | 16.70% | 5.96% | 6.63% c | 5.31% c | |
Ratio of total expenses to average net assets^ | 1.05 | 1.04 | 1.09 | 1.43 d | 1.93 d | |
Ratio of net expenses to average net assetsa | 0.96 | 0.96 | 0.95 | 0.95 d | 0.95 d | |
Ratio of net investment income/(loss) to average net assetsa | 0.08 | 0.26 | 0.03 | 0.10 d | 0.19 d | |
Portfolio turnover | 22 | 26 | 15 | 9 c | 21 c |
See page 60 for notes to the Financial Highlights.
The accompanying notes are an integral part of the Financial Statements.
58
Institutional Class | ||||||
Year Ended October 31, | Year Ended June 30, | |||||
2020 | 2019 | 2018 | 2017 h | 2017 | 2016 | |
$ 22.28 | $ 19.63 | $ 18.85 | $ 17.66 | $ 15.54 | $ 15.39 | |
0.08 | 0.11 | 0.06 | 0.03 | 0.12 | 0.03 | |
2.68 | 3.08 | 1.11 | 1.16 | 2.22 | 0.63 | |
2.76 | 3.19 | 1.17 | 1.19 | 2.34 | 0.66 | |
(0.09) | (0.06) | (0.04) | — | (0.11) | (0.01) | |
(0.31) | (0.48) | (0.35) | — | (0.11) | (0.50) | |
(0.40) | (0.54) | (0.39) | — | (0.22) | (0.51) | |
N/A | N/A | N/A | N/A | — * | — * | |
24.64 | 22.28 | 19.63 | 18.85 | 17.66 | 15.54 | |
$100,895 | $106,463 | $66,197 | $56,026 | $31,866 | $25,388 | |
12.54% | 16.91% | 6.26% | 6.74% c | 15.21% | 4.44% | |
0.80 | 0.79 | 0.84 | 1.18 d | 1.48 | 1.74 | |
0.71 | 0.71 | 0.70 | 0.70 d | 0.83 | 0.90 | |
0.35 | 0.51 | 0.28 | 0.29 d | 0.71 | 0.19 | |
22 | 26 | 15 | 9 c | 21 | 40 |
Investor Class | |||||
Year Ended October 31, | Year Ended June 30, | ||||
2020 | 2019 | 2018 | 2017 h | 2017 g | |
$21.87 | $19.54 | $18.81 | $17.64 | $16.76 | |
(0.01) | 0.03 | (0.02) | 0.02 | 0.01 | |
2.63 | 2.79 | 1.10 | 1.15 | 0.87 | |
2.62 | 2.82 | 1.08 | 1.17 | 0.88 | |
(0.01) | (0.01) | — | — | — | |
(0.31) | (0.48) | (0.35) | — | — | |
(0.32) | (0.49) | (0.35) | — | — | |
24.17 | 21.87 | 19.54 | 18.81 | 17.64 | |
$ 503 | $ 417 | $ 322 | $ 75 | $ 22 | |
12.12% | 14.99% | 5.80% | 6.63% c | 5.25% c | |
1.17 | 1.16 | 1.21 | 1.55 d | 2.03 d | |
1.08 | 1.08 | 1.07 | 1.07 d | 1.07 d | |
(0.04) | 0.14 | (0.11) | 0.05 d | 0.13 d | |
22 | 26 | 15 | 9 c | 21 c |
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
* | 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 average daily 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 October 31, 2020 |
The accompanying notes are an integral part of the Financial Statements.
60
Harbor Domestic Equity Funds
Notes to Financial Statements—October 31, 2020
Notes to Financial Statements—October 31, 2020
Note 1—Organizational Matters
Harbor Funds (the “Trust”) is registered under the Investment Company Act of 1940, as amended (the “Investment Company Act”), as an open-end management investment company. As of October 31, 2020, the Trust consists of 36 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 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 Harbor Mid Cap Fund’s inception date was December 1, 2019.
The Funds currently offer four classes of shares, designated as Retirement Class, Institutional Class, Administrative Class and Investor Class. The shares of each class represent an interest in the same portfolio of investments of the Funds and have equal rights with respect to voting, redemptions, dividends, and liquidations, except that: (i) subject to the approval of the Trust’s Board of Trustees (the “Board of Trustees”), certain expenses may be applied differently to each class of shares in accordance with current regulations of the U.S. Securities and Exchange Commission (“SEC”) and the Internal Revenue Service; and (ii) shareholders of a class that bears distribution and service expenses under terms of a distribution plan have exclusive voting rights as to that distribution plan.
Reorganization
At a meeting held on February 16-17, 2020, the Board of Trustees approved the reorganization of Harbor Small Cap Growth Opportunities Fund (the “Target Fund”), a series of the Trust, with and into Harbor Small Cap Growth Fund the (“the Acquiring Fund”), also a series of the Trust (the “Reorganization”).
Harbor Capital serves as the investment adviser to the Target Fund and the Acquiring Fund. The Adviser believed that the Reorganization was in the best interest of both Target Fund and Acquiring Fund shareholders as it provided shareholders opportunity to participate in a larger combined fund with an identical investment objective and similar investment strategies, policies and restrictions, and to benefit from the lower expense ratios of the Acquiring Fund.
The Reorganization was completed on May 15, 2020 (the “Reorganization Date”). The Reorganization was accomplished by the transfer of the assets and the liabilities of the Target Fund to the Acquiring Fund in exchange for shares of the Acquiring Fund, the pro-rata distribution of such shares to the shareholders of the Target Fund, and liquidation and termination of the Target Fund on the Reorganization Date. The Reorganization was structured to qualify as a tax-free reorganization under the Internal Revenue Code for federal income tax purposes; therefore, no gain or loss was recognized by the Target Fund or its shareholders as a direct result of the Reorganization.
The following table shows by each share class the number of shares and value of the Acquiring Fund that was exchanged for shares of the Target Fund outstanding as of the Reorganization Date.
Share Class | Acquiring Fund Shares Exchanged (000s) | Acquiring Fund Exchanged Shares Value (000s) | Target Fund Outstanding Shares (000s) | |||
Retirement Class | 2,471 | $ 31,052 | 3,746 | |||
Institutional Class | 8,331 | 104,255 | 12,622 | |||
Administrative Class | 16 | 184 | 23 | |||
Investor Class | 24 | 255 | 32 |
The investment portfolio of the Target Fund, with a value of $128,365,000 and identified cost of $128,092,000 at the Reorganization Date, was the principal asset acquired by Acquiring Fund. For financial reporting purposes, assets received and shares issued by the Acquiring Fund were recorded at fair value; however, the cost basis of the investments received from the Target Fund were carried forward to align ongoing reporting of the Acquiring Fund’s realized and unrealized gains and losses with amounts distributable to shareholders for tax purposes. Immediately prior to the Reorganization, the net assets of the Acquiring Fund were $711,601,000.
61
Harbor Domestic Equity Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 1—Organizational Matters—Continued
The following table reflects the pro-forma results of operations for the year ended October 31, 2020 assuming the Reorganization was completed on November 1, 2019, the beginning of the Acquiring Fund’s current fiscal year.
Acquiring Fund – Pro Forma Results of Operations | Amount (000s) | |
Net Investment Income/(loss) | $ (3,349)a | |
Net gain/(loss) on investment transactions | 196,261 b | |
Net increase/(decrease) in net assets resulting from operations | 192,912 |
a | As reported, $(2,718) plus $(735) Target Fund premerger plus $104 of pro-forma eliminated expenses. |
b | As reported, $214,526 plus $(18,265) Target Fund premerger. |
Because the combined investment portfolios have been managed as a single integrated portfolio since the Reorganization was completed, it is not practicable to separate the amounts of revenue and earnings of the Target Fund that have been included in the Acquiring Fund’s Statement of Operations since the Reorganization Date.
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
62
Harbor Domestic Equity Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 2—Significant Accounting Policies—Continued
instrument can be determined by a pricing vendor or subadviser using a series of techniques, including simulation pricing models. The pricing models use inputs, such as issuer details, indices, spreads, interest rates, yield curves, dividends and exchange rates, that are observed from actively quoted markets. Derivative instruments that use valuation techniques and inputs similar to those described above are normally categorized as Level 2 in the fair value hierarchy.
A Fund may also use fair value pricing if the value of some or all of the Fund’s securities have been materially affected by events occurring before the Fund’s pricing time but after the close of the primary markets or exchanges on which the security is traded. This most commonly occurs with foreign securities, but may occur with other securities as well. In such cases, the Fund may apply a fair value factor supplied by the pricing vendor to a foreign security’s market close value to reflect changes in value that may have occurred between the close of the primary market or exchange on which the security is traded and the Fund’s pricing time. That factor may be derived using observable inputs such as a comparison of the trading patterns of a foreign security to intraday trading in the U.S. markets that are highly correlated to the foreign security or other information that becomes available after the close of the foreign market on which the security principally traded. When fair value pricing is employed, the prices of securities used by a Fund to calculate its net asset value may differ from market quotations, official closing prices or evaluated prices for the same securities, which means that the Fund may value those securities higher or lower than another given fund that uses market quotations, official closing prices or evaluated prices supplied by a pricing vendor in its calculation of net asset value. Securities valued using observable inputs, such as those described above, are normally categorized as Level 2 of the fair value hierarchy.
When reliable market quotations or evaluated prices supplied by a pricing vendor are not readily available or are not believed to accurately reflect fair value, securities are priced at their fair value as determined by the Trust’s Valuation Committee (the “Valuation Committee”) pursuant to procedures adopted, and subject to oversight, by the Board of Trustees. The Valuation Committee is comprised of a trustee and officers of the Trust and employees of Harbor Capital with relevant experience or responsibilities. Each security for which the Valuation Committee determines a fair value, including the basis for the fair value decision, is reviewed by the Board of Trustees at its regularly scheduled board meetings. Securities valued using fair valuation methods that incorporate significant unobservable inputs are normally categorized as Level 3 in the fair value hierarchy.
Fair Value Measurements and Disclosures
Various inputs may be used to determine the value of each Fund’s investments, which are summarized in three broad categories defined as Level 1, Level 2, and Level 3. The inputs or methodologies used for valuing securities are not necessarily indicative of the risk associated with investing in those securities. The assignment of an investment to Levels 1, 2, or 3 is based on the lowest level of significant inputs used to determine its fair value.
Level 1– | Quoted prices in active markets for identical securities. |
Level 2– | Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). |
Level 3– | Significant unobservable inputs are used in situations where quoted prices or other observable inputs are not available or are deemed unreliable. Significant unobservable inputs may include each Fund’s own assumptions. |
The categorization of investments into Levels 1, 2, or 3, and a summary of significant unobservable inputs used for Level 3 investments, when applicable, can be found at the end of each Fund’s Portfolio of Investments schedule. For fair valuations using significant unobservable inputs, if any, a reconciliation of the beginning to ending balances for reported fair values is provided at the end of each Fund’s Portfolio of Investments schedule that presents changes attributable to realized and unrealized gains and losses and purchases, sales, and transfers in/out of the Level 3 category during the year.
Each Fund used observable inputs in its valuation methodologies whenever they were available and deemed reliable.
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
63
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 U.S. 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 U.S. 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 foreign 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, 2017–2019), including all positions expected to be taken upon filing the 2020 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.
64
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 year, 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 year end.
Reported net realized gains and losses on foreign currency transactions, when applicable, represent net gains and losses from sales and maturities of foreign currency contracts, disposition of foreign currencies, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of investment income accrued and tax reclaims receivable and the U.S. dollar amount actually received. The effects of changes in foreign currency exchange rates on investments in securities, when applicable, are included in the net realized and unrealized gain or loss on investments in the Statements of Operations.
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 year, Harbor Mid Cap Growth Fund entered into repurchase agreements with domestic or foreign banks or with a member firm of the Financial Industry Regulatory Authority, Inc., or an affiliate of a member firm that is a primary dealer in U.S. government securities.
65
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 year ended October 31, 2020 are as follows:
Purchases (000s) | Sales (000s) | ||
Harbor Capital Appreciation Fund | $16,846,169 | $20,676,101* | |
Harbor Large Cap Value Fund | 511,961 | 339,371 | |
Harbor Mid Cap Fund | 11,023 | 881 | |
Harbor Mid Cap Growth Fund | 305,998 | 338,428 | |
Harbor Mid Cap Value Fund | 20,029 | 268,048 | |
Harbor Small Cap Growth Fund | 776,542 | 868,727 | |
Harbor Small Cap Value Fund | 395,913 | 258,164 | |
Harbor Strategic Growth Fund | 23,004 | 33,351 |
* | Sales for this Fund include $927,281 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, a Fund recognizes a gain or loss on the securities distributed related to the in-kind redemption. Such Fund-level gains and losses on in-kind redemptions are not taxable to shareholders. For the year ended October 31, 2020, Harbor Capital Appreciation Fund realized gains of $654,292,000 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 | 0.60 b | 0.60 | |
Harbor Mid Cap Fund | 0.75 | 0.75 | |
Harbor Mid Cap Growth Fund | 0.75 c | 0.72 | |
Harbor Mid Cap Value Fund | 0.75 d | 0.74 | |
Harbor Small Cap Growth 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 through February 28, 2021, 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. |
66
Harbor Domestic Equity Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 4—FEES AND OTHER Transactions with Affiliates—Continued
Harbor Capital has from time to time voluntarily or contractually agreed not to impose a portion of its management fees and/or to bear a portion of the expenses incurred in the operation of certain Funds in order to limit Fund expenses. Such waivers, if any, are reflected on the accompanying Statements of Operations. Interest expense, if any, is excluded from contractual limitations. During the year, the following expense limitation agreements were in effect:
Retirement Class | Institutional Class | Administrative Class | Investor Class | Expense Limitation Agreement Expiration Date | |||||
Harbor Large Cap Value 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 year ended October 31, 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.
67
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 year, the Funds did not enter into any transactions with any other Harbor fund.
Shareholders
As of October 31, 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 Appreciation Fund | 37,119 | — | — | — | 37,119 | 0.0% | |||||
Harbor Large Cap Value Fund | 83,903 | — | — | — | 83,903 | 0.1 | |||||
Harbor Mid Cap Fund | 480,659 | 473,745 | N/A | 3,001 | 957,405 | 91.9 | |||||
Harbor Mid Cap Growth Fund | 147,003 | — | — | — | 147,003 | 0.5 | |||||
Harbor Mid Cap Value Fund | 63,737 | — | — | — | 63,737 | 0.3 | |||||
Harbor Small Cap Growth Fund | 97,019 | — | — | — | 97,019 | 0.2 | |||||
Harbor Small Cap Value Fund | 37,974 | — | — | — | 37,974 | 0.1 | |||||
Harbor Strategic Growth Fund | 44,177 | 308,278 | 640 | — | 353,095 | 8.1 |
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.
NOTE 5—TAX INFORMATION
The amount and character of income and net realized gains to be distributed are determined in accordance with income tax rules and regulations, which may differ from U.S. GAAP. These differences are attributable to permanent book and tax accounting differences that were primarily due to the tax treatment of net investment losses, redemption in-kind distributions, and the use of equalization. Reclassifications, if any, are made to each Fund’s capital account to reflect income and net realized gains available for distribution (or available capital loss carryovers) under income tax rules and regulations. The amounts reclassified on the Statements of Assets and Liabilities for the year ended October 31, 2020 are as follows:
68
Harbor Domestic Equity Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
NOTE 5—TAX INFORMATION—Continued
Total Distributable Earnings/(Loss) (000s) | Paid in Capital (000s) | ||
Harbor Capital Appreciation Fund | $(1,271,855) | $1,271,855 | |
Harbor Large Cap Value Fund | (4,762) | 4,762 | |
Harbor Mid Cap Fund | — | — | |
Harbor Mid Cap Growth Fund | (11,005) | 11,005 | |
Harbor Mid Cap Value Fund | 138 | (138) | |
Harbor Small Cap Growth Fund | (47,058) | 47,058 | |
Harbor Small Cap Value Fund | — | — | |
Harbor Strategic Growth Fund | (661) | 661 |
The tax composition of each Fund’s distributions is as follows:
As of October 31, 2020 | As of October 31, 2019 | ||||||||||
Ordinary Income (000s) | Long-Term Capital Gains (000s) | Total (000s) | Ordinary Income (000s) | Long-Term Capital Gains (000s) | Total (000s) | ||||||
Harbor Capital Appreciation Fund | $24,458 | $2,576,949 | $2,601,407 | $59,595 | $2,639,527 | $2,699,122 | |||||
Harbor Large Cap Value Fund | 12,462 | — | 12,462 | 12,011 | 14,807 | 26,818 | |||||
Harbor Mid Cap Fund | 6 | — | 6 | N/A | N/A | N/A | |||||
Harbor Mid Cap Growth Fund | — | 50,587 | 50,587 | 7,944 | 49,088 | 57,032 | |||||
Harbor Mid Cap Value Fund | 16,282 | 4,413 | 20,695 | 18,976 | 45,772 | 64,748 | |||||
Harbor Small Cap Growth Fund | — | 26,443 | 26,443 | 20,148 | 116,393 | 136,541 | |||||
Harbor Small Cap Value Fund | 8,542 | 15,523 | 24,065 | 9,116 | 109,007 | 118,123 | |||||
Harbor Strategic Growth Fund | 458 | 1,578 | 2,036 | 530 | 1,405 | 1,935 |
As of October 31, 2020, the components of each Fund’s distributable earnings on a tax basis are as follows:
Undistributed Ordinary Income (000s) | Undistributed Long-Term Capital Gains (000s) | Unrealized Appreciation/ (Depreciation) (000s) | |||
Harbor Capital Appreciation Fund | $ — | $4,640,283 | $18,413,235 | ||
Harbor Large Cap Value Fund | 3,820 | 48,993 | 308,631 | ||
Harbor Mid Cap Fund | 38 | — | 791 | ||
Harbor Mid Cap Growth Fund | 22,241 | 34,792 | 85,402 | ||
Harbor Mid Cap Value Fund | 6,495 | — | (62,598) | ||
Harbor Small Cap Growth Fund | 29,611 | 51,761 | 176,724 | ||
Harbor Small Cap Value Fund | 4,176 | — | 347,259 | ||
Harbor Strategic Growth Fund | 277 | 3,413 | 32,987 |
At October 31, 2020, for federal income tax purposes, the following Funds had a qualified late year loss deferral to offset fiscal year 2020 ordinary income:
Qualified Late Year Ordinary Loss Deferral (000s) | |
Harbor Capital Appreciation Fund | $60,464 |
69
Harbor Domestic Equity Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
NOTE 5—TAX INFORMATION—Continued
At October 31, 2020, the Funds in the following table had capital loss carryforwards for federal tax purposes which will reduce each Fund’s taxable income arising from future net realized gains on investments to the extent permitted by the Internal Revenue Code. Use of the capital loss carryforwards will reduce the amount of the distribution to shareholders which would otherwise be necessary to relieve each Fund of any federal tax liability. The capital loss carryforwards do not expire.
Capital Loss Carryfoward | |||||
Short-Term (000s) | Long-Term (000s) | Total (000s) | |||
Harbor Mid Cap Fund | $ 179 | $ — | $ 179 | ||
Harbor Mid Cap Value Fund | — | 23,046 | 23,046 | ||
Harbor Small Cap Growth Fund* | 1,052 | 38,938 | 39,990 | ||
Harbor Small Cap Value Fund | 29,207 | — | 29,207 |
* | A portion of the Harbor Small Cap Growth Fund capital loss carryforward is subject to an annual limitation under the Internal Revenue Code and related regulations. |
The identified cost for federal income tax purposes of investments owned by each Fund and its respective gross unrealized appreciation and depreciation at October 31, 2020 are as follows:
Identified Cost (000s) | Gross Unrealized | Net Unrealized Appreciation/ (Depreciation) (000s) | |||||
Appreciation (000s) | (Depreciation) (000s) | ||||||
Harbor Capital Appreciation Fund | $18,193,653 | $18,516,072 | $(102,837) | $18,413,235 | |||
Harbor Large Cap Value Fund* | 1,197,869 | 364,075 | (55,444) | 308,631 | |||
Harbor Mid Cap Fund | 9,962 | 1,381 | (590) | 791 | |||
Harbor Mid Cap Growth Fund | 257,364 | 90,800 | (5,398) | 85,402 | |||
Harbor Mid Cap Value Fund* | 398,120 | 49,497 | (112,095) | (62,598) | |||
Harbor Small Cap Growth Fund* | 795,307 | 195,837 | (19,113) | 176,724 | |||
Harbor Small Cap Value Fund* | 1,289,767 | 502,763 | (155,504) | 347,259 | |||
Harbor Strategic Growth Fund | 70,317 | 33,717 | (730) | 32,987 |
* | Capital loss carryforwards are available, which may reduce taxable income from future net realized gain on investments. |
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
70
Harbor Domestic Equity Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 6—Legal Proceedings—Continued
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 July 6, 2020, plaintiffs filed a new petition for a writ of certiorari in the U.S. Supreme Court. In that petition, plaintiffs stated that “[t]o make it more likely that there will be a quorum for this petition,” they have “abandon[ed] the case and let the judgment below stand” with respect to certain defendants. That list did not include the Harbor Mid Cap Value Fund. Defendants filed an opposition to the certiorari petition on August 26, 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 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. The Court held oral argument on August 24, 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
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.
71
Harbor Domestic Equity Funds
Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
The Board of Trustees and Shareholders of
Harbor Funds
Harbor Funds
Opinion on the Financial Statements
We have audited the accompanying statements of assets and liabilities of Harbor Capital Appreciation Fund, Harbor Large Cap Value Fund, Harbor Mid Cap Fund, Harbor Mid Cap Growth Fund, Harbor Mid Cap Value Fund, Harbor Small Cap Growth Fund, Harbor Small Cap Value Fund, and Harbor Strategic Growth Fund (collectively referred to as the “Funds”), (eight of the funds constituting Harbor Funds (the “Trust”)), including the portfolios of investments, as of October 31, 2020, and the related statements of operations and changes in net assets, and the financial highlights for each of the periods indicated in the table below and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Funds (eight of the funds constituting Harbor Funds) at October 31, 2020, the results of their operations, changes in net assets and financial highlights for each of the periods indicated in the table below, in conformity with U.S. generally accepted accounting principles.
Individual fund comprising the Harbor Funds | Statement of operations | Statement of changes in net assets | Financial highlights |
Harbor Capital Appreciation Fund Harbor Large Cap Value Fund Harbor Mid Cap Growth Fund Harbor Mid Cap Value Fund Harbor Small Cap Growth Fund Harbor Small Cap Value Fund | For the year ended October 31, 2020 | For each of the two years in the period ended October 31, 2020 | For each of the five years in the period ended October 31, 2020 |
Harbor Mid Cap Fund | For the period from December 1, 2019 (inception) through October 31, 2020 | ||
Harbor Strategic Growth Fund | For the year ended October 31, 2020 | For each of the two years in the period ended October 31, 2020 | For each of the three years in the period ended October 31, 2020, the period from July 1, 2017 through October 31, 2017, and the period from July 1, 2016 to June 30, 2017* |
* | The financial highlights for the Harbor Strategic Growth Fund for the periods presented through June 30, 2016, were audited by other auditors whose report dated August 26, 2016, expressed an unqualified opinion on those financial highlights. |
Basis for Opinion
These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on each of the Funds’ financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust’s internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2020, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Harbor Funds investment companies since 2000.
Chicago, Illinois
December 21, 2020
December 21, 2020
72
Harbor Domestic Equity Funds
Fees and Expenses Example (Unaudited)
Fees and Expenses Example (Unaudited)
Example
As a shareholder of a Fund, you incur two types of costs: (1) transaction costs, including redemption fees (if any) and (2) ongoing costs, including management fees, distribution and service (12b-1) fees (if any), and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in a Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period May 1, 2020 through October 31, 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 May 1, 2020 | Ending Account Value October 31, 2020 | |||||
Harbor Capital Appreciation Fund | ||||||||
Retirement Class | 0.58% | |||||||
Actual | $3.35 | $1,000 | $1,291.37 | |||||
Hypothetical (5% return) | 2.95 | 1,000 | 1,022.15 | |||||
Institutional Class | 0.66% | |||||||
Actual | $3.80 | $1,000 | $1,290.73 | |||||
Hypothetical (5% return) | 3.35 | 1,000 | 1,021.74 | |||||
Administrative Class | 0.91% | |||||||
Actual | $5.23 | $1,000 | $1,289.07 | |||||
Hypothetical (5% return) | 4.62 | 1,000 | 1,020.45 | |||||
Investor Class | 1.03% | |||||||
Actual | $5.93 | $1,000 | $1,288.33 | |||||
Hypothetical (5% return) | 5.23 | 1,000 | 1,019.83 |
73
Harbor Domestic Equity Funds
Fees and Expenses Example—Continued
Fees and Expenses Example—Continued
Annualized Expense Ratios* | Expenses Paid During Period** | Beginning Account Value May 1, 2020 | Ending Account Value October 31, 2020 | |||||
Harbor Large Cap Value Fund | ||||||||
Retirement Class | 0.61% | |||||||
Actual | $3.31 | $1,000 | $1,153.29 | |||||
Hypothetical (5% return) | 3.10 | 1,000 | 1,021.99 | |||||
Institutional Class | 0.69% | |||||||
Actual | $3.74 | $1,000 | $1,152.88 | |||||
Hypothetical (5% return) | 3.51 | 1,000 | 1,021.58 | |||||
Administrative Class | 0.94% | |||||||
Actual | $5.09 | $1,000 | $1,151.41 | |||||
Hypothetical (5% return) | 4.77 | 1,000 | 1,020.29 | |||||
Investor Class | 1.06% | |||||||
Actual | $5.73 | $1,000 | $1,150.61 | |||||
Hypothetical (5% return) | 5.38 | 1,000 | 1,019.67 | |||||
Harbor Mid Cap Fund | ||||||||
Retirement Class | 0.80% | |||||||
Actual | $4.40 | $1,000 | $1,191.44 | |||||
Hypothetical (5% return) | 4.06 | 1,000 | 1,021.01 | |||||
Institutional Class | 0.88% | |||||||
Actual | $4.84 | $1,000 | $1,190.32 | |||||
Hypothetical (5% return) | 4.47 | 1,000 | 1,020.60 | |||||
Investor Class | 1.25% | |||||||
Actual | $6.87 | $1,000 | $1,188.28 | |||||
Hypothetical (5% return) | 6.34 | 1,000 | 1,018.69 | |||||
Harbor Mid Cap Growth Fund | ||||||||
Retirement Class | 0.79% | |||||||
Actual | $4.72 | $1,000 | $1,406.96 | |||||
Hypothetical (5% return) | 3.96 | 1,000 | 1,021.07 | |||||
Institutional Class | 0.87% | |||||||
Actual | $5.20 | $1,000 | $1,406.56 | |||||
Hypothetical (5% return) | 4.37 | 1,000 | 1,020.65 | |||||
Administrative Class | 1.12% | |||||||
Actual | $6.71 | $1,000 | $1,405.18 | |||||
Hypothetical (5% return) | 5.63 | 1,000 | 1,019.36 | |||||
Investor Class | 1.24% | |||||||
Actual | $7.43 | $1,000 | $1,403.70 | |||||
Hypothetical (5% return) | 6.24 | 1,000 | 1,018.75 | |||||
Harbor Mid Cap Value Fund | ||||||||
Retirement Class | 0.80% | |||||||
Actual | $4.31 | $1,000 | $1,145.68 | |||||
Hypothetical (5% return) | 4.06 | 1,000 | 1,021.01 | |||||
Institutional Class | 0.88% | |||||||
Actual | $4.74 | $1,000 | $1,145.68 | |||||
Hypothetical (5% return) | 4.47 | 1,000 | 1,020.60 | |||||
Administrative Class | 1.13% | |||||||
Actual | $6.09 | $1,000 | $1,143.43 | |||||
Hypothetical (5% return) | 5.74 | 1,000 | 1,019.31 | |||||
Investor Class | 1.25% | |||||||
Actual | $6.73 | $1,000 | $1,143.64 | |||||
Hypothetical (5% return) | 6.34 | 1,000 | 1,018.69 |
74
Harbor Domestic Equity Funds
Fees and Expenses Example—Continued
Fees and Expenses Example—Continued
Annualized Expense Ratios* | Expenses Paid During Period** | Beginning Account Value May 1, 2020 | Ending Account Value October 31, 2020 | |||||
Harbor Small Cap Growth Fund | ||||||||
Retirement Class | 0.80% | |||||||
Actual | $4.59 | $1,000 | $1,283.06 | |||||
Hypothetical (5% return) | 4.06 | 1,000 | 1,021.01 | |||||
Institutional Class | 0.88% | |||||||
Actual | $5.04 | $1,000 | $1,282.59 | |||||
Hypothetical (5% return) | 4.47 | 1,000 | 1,020.60 | |||||
Administrative Class | 1.13% | |||||||
Actual | $6.48 | $1,000 | $1,281.00 | |||||
Hypothetical (5% return) | 5.74 | 1,000 | 1,019.31 | |||||
Investor Class | 1.25% | |||||||
Actual | $7.16 | $1,000 | $1,280.42 | |||||
Hypothetical (5% return) | 6.34 | 1,000 | 1,018.69 | |||||
Harbor Small Cap Value Fund | ||||||||
Retirement Class | 0.80% | |||||||
Actual | $4.31 | $1,000 | $1,146.69 | |||||
Hypothetical (5% return) | 4.06 | 1,000 | 1,021.01 | |||||
Institutional Class | 0.88% | |||||||
Actual | $4.74 | $1,000 | $1,145.60 | |||||
Hypothetical (5% return) | 4.47 | 1,000 | 1,020.60 | |||||
Administrative Class | 1.13% | |||||||
Actual | $6.09 | $1,000 | $1,144.68 | |||||
Hypothetical (5% return) | 5.74 | 1,000 | 1,019.31 | |||||
Investor Class | 1.25% | |||||||
Actual | $6.73 | $1,000 | $1,143.76 | |||||
Hypothetical (5% return) | 6.34 | 1,000 | 1,018.69 | |||||
Harbor Strategic Growth Fund | ||||||||
Retirement Class | 0.63% | |||||||
Actual | $3.40 | $1,000 | $1,144.78 | |||||
Hypothetical (5% return) | 3.20 | 1,000 | 1,021.89 | |||||
Institutional Class | 0.71% | |||||||
Actual | $3.83 | $1,000 | $1,144.45 | |||||
Hypothetical (5% return) | 3.61 | 1,000 | 1,021.48 | |||||
Administrative Class | 0.96% | |||||||
Actual | $5.18 | $1,000 | $1,143.26 | |||||
Hypothetical (5% return) | 4.87 | 1,000 | 1,020.19 | |||||
Investor Class | 1.08% | |||||||
Actual | $5.82 | $1,000 | $1,142.25 | |||||
Hypothetical (5% return) | 5.48 | 1,000 | 1,019.57 |
* | Reflective of all fee waivers and expense reimbursements |
** | Expenses are equal to the Fund’s annualized net expense ratio, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). |
75
Harbor Domestic Equity Funds
Additional Information (Unaudited)
Additional Information (Unaudited)
Additional Tax Information
The Funds designate the following portions of their distributions from investment company taxable income for the fiscal year ended October 31, 2020 as qualifying for the dividends received deduction for corporate shareholders.
Percentage of Distribution | |
Harbor Capital Appreciation Fund | 100% |
Harbor Large Cap Value Fund | 100 |
Harbor Mid Cap Fund | 100 |
Harbor Mid Cap Growth Fund | 2 |
Harbor Mid Cap Value Fund | 100 |
Harbor Small Cap Growth Fund | 10 |
Harbor Small Cap Value Fund | 100 |
Harbor Strategic Growth Fund | 100 |
Pursuant to Section 852 of the Internal Revenue Code, the Funds designate the following capital gain dividends for the fiscal year ended October 31, 2020:
Amount (000s) | |
Harbor Capital Appreciation Fund | $3,194,979 |
Harbor Large Cap Value Fund | 4,418 |
Harbor Mid Cap Growth Fund | 57,460 |
Harbor Mid Cap Value Fund | 4,649 |
Harbor Small Cap Growth Fund | 27,423 |
Harbor Small Cap Value Fund | 15,523 |
Harbor Strategic Growth Fund | 2,193 |
For the fiscal year ended October 31, 2020, each Fund designates up to the maximum amount of such dividends allowable pursuant to the Internal Revenue Code as qualified dividend income eligible for reduced tax rates. These lower rates range from 0% to 20% depending on an individual’s tax bracket. If a Fund pays a distribution during calendar year 2020, complete information will be reported in conjunction with Form 1099-DIV.
Shareholders who own shares through a taxable Harbor Funds account and that received distributions from a Fund during calendar year 2020 will receive a Form 1099-DIV in January 2021 that will show the tax character of those distributions.
Proxy Voting
Harbor Funds has adopted Proxy Voting Policies and Procedures under which proxies relating to securities held by the Harbor funds are voted. In addition, Harbor Funds files Form N-PX, with its complete proxy voting record for the 12 months ended June 30th, no later than August 31st of each year. A description of Harbor Funds’ Proxy Voting Policies and Procedures and the proxy voting records (Form N-PX) are available (i) without charge, upon request, by calling Harbor Funds toll-free at 800-422-1050; (ii) on Harbor Funds’ website at harborfunds.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 for their first and third fiscal quarters with the SEC as an exhibit to Form N-PORT. The Funds’ Form N-PORT exhibit is available (i) without charge, upon request, by calling Harbor Funds toll-free at 800-422-1050, (ii) on Harbor Funds’ website at harborfunds.com, and (iii) on the SEC’s website at sec.gov.
76
Harbor Domestic Equity Funds
Additional Information—Continued
Additional Information—Continued
Trustees and Officers
As of December 2020
The business and affairs of the Trust shall be managed by or under the direction of the Trustees, and they shall have all powers necessary or desirable to carry out that responsibility. The Trustees shall have full power and authority to take or refrain from taking any action and to execute any contracts and instruments that they may consider necessary or desirable in the management of the Trust. Any determination made by the Trustees in good faith as to what is in the interests of the Trust shall be conclusive. Information pertaining to the Trustees and Officers of Harbor Funds is set forth below. The address of each Trustee and Officer is: [Name of Trustee or Officer] c/o Harbor Funds, 111 South Wacker Drive, 34th Floor, Chicago, IL 60606-4302.
Harbor Funds' Statement of Additional Information includes additional information about the Trust’s Trustees and is available without charge by calling 800-422-1050 or at the Trust’s website at harborfunds.com.
Name (Age) Position(s) with Fund | Term of Office and Length of Time Served1 | Principal Occupation(s) During Past Five Years | Number of Portfolios In Fund Complex Overseen By Trustee | Other Directorships Of Public Companies and Other Registered Investment Companies Held by Trustee During Past Five Years |
INDEPENDENT TRUSTEES | ||||
Scott M. Amero (57) Trustee | Since 2014 | Chairman (2015-Present) and Trustee (2011-2015), Rare (conservation nonprofit); Trustee, Berkshire School (2014-Present); Trustee, The Nature Conservancy, Massachusetts Chapter (2018-Present); Vice Chairman and Global Chief Investment Officer, Fixed Income (2010), Vice Chairman and Global Chief Investment Officer, Fixed Income, and Co-Head, Fixed Income Portfolio Management (2007-2010), BlackRock, Inc., (publicly traded investment management firm). | 36 | None |
Donna J. Dean (69) Trustee | Since 2010 | Chief Investment Officer of the Rockefeller Foundation (a private foundation) (2001-2019). | 36 | None |
Joseph L. Dowling III (56) Trustee | Since 2017 | Chair & Special Advisor to the University’s President (2020-Present), Chief Executive Officer (2018-2020), Interim Chief Financial Officer (2019-2020), and Chief Investment Officer (2013-2018), Brown University Investment Office; Chief Executive Officer, Jaws Acquisition Corp. (blank check company, 2020-Present); Advisory Board Member, Harbor Funds (2016-2017); and Founder and Managing Member, Narragansett Asset Management (private investment management firm) (1998-2013). | 36 | Director of Integrated Electrical Services (2012-Present);Director of Third Point RE (2019- Present). |
Randall A. Hack (73) Trustee | Since 2010 | Founder and Senior Managing Director of Capstone Capital LLC (private investment firm) (2003-Present); Director of Tower Development Corporation (cell tower developer) (2009-2016); Advisory Director of Berkshire Partners (private equity firm) (2002-2013); Founder and Senior Managing Director of Nassau Capital, LLC (private investment firm, investing solely on behalf of the Princeton Endowment) (1995-2001); and President of The Princeton University Investment Company (1990-1994). | 36 | None |
Robert Kasdin (62) Trustee | Since 2014 | Senior Vice President and Chief Operating Officer (2015-Present) and Chief Financial Officer (2018-Present), Johns Hopkins Medicine; Senior Executive Vice President, Columbia University (2002-2015); Trustee and Member of the Finance Committee, National September 11 Memorial & Museum at the World Trade Center (2005-2019); Director, Apollo Commercial Real Estate Finance, Inc. (2014-Present); Director and Executive Committee Member, The Y in Central Maryland (2018-Present); and Director, Noranda Aluminum Holdings Corp. (2007-2014). | 36 | Director of Apollo Commercial Real Estate Finance, Inc. (2014-Present). |
77
Harbor Domestic Equity Funds
Additional Information—Continued
Additional Information—Continued
Trustees and Officers—Continued
Name (Age) Position(s) with Fund | Term of Office and Length of Time Served1 | Principal Occupation(s) During Past Five Years | Number of Portfolios In Fund Complex Overseen By Trustee | Other Directorships Of Public Companies and Other Registered Investment Companies Held by Trustee During Past Five Years |
INDEPENDENT TRUSTEES—Continued | ||||
Kathryn L. Quirk (68) Trustee | Since 2017 | Retired; Vice President, Senior Compliance Officer and Head, U.S. Regulatory Compliance, Goldman Sachs Asset Management (2013-2017); Deputy Chief Legal Officer, Asset Management, and Vice President and Corporate Counsel, Prudential Insurance Company of America (2010-2012); Co-Chief Legal Officer, Prudential Investment Management, Inc., and Chief Legal Officer, Prudential Investments and Prudential Mutual Funds (2008-2012); Vice President and Corporate Counsel and Chief Legal Officer, Mutual Funds, Prudential Insurance Company of America, and Chief Legal Officer, Prudential Investments (2005-2008); Vice President and Corporate Counsel and Chief Legal Officer, Mutual Funds, Prudential Insurance Company of America (2004-2005); Member, Management Committee (2000-2002), General Counsel and Chief Compliance Officer, Zurich Scudder Investments, Inc. (1997-2002). | 36 | None |
Douglas J. Skinner (58) Trustee | Since 2020 | Professor of Accounting (2005-Present), Deputy Dean for Faculty (2015-2016, 2017-Present), Interim Dean (2016-2017), University of Chicago Booth School of Business. | 36 | None |
Ann M. Spruill (66) Trustee | Since 2014 | Partner (1993-2008), member of Executive Committee (1996-2008), Member Board of Directors (2002-2008), Grantham, Mayo, Van Otterloo & Co, LLC (private investment management firm) (with the firm since 1990); Member Investment Committee and Chair of Global Public Equities, Museum of Fine Arts, Boston (2000-Present); and Trustee, Financial Accounting Foundation (2014-Present). | 36 | None |
INTERESTED TRUSTEE | ||||
Charles F. McCain (51)* Chairman, Trustee and President | Since 2017 | Chief Executive Officer (2017-Present), Director (2007-Present), President and Chief Operating Officer (2017), Executive Vice President and General Counsel (2004-2017), and Chief Compliance Officer (2004-2014), Harbor Capital Advisors, Inc.; Director and Chairperson (2019-Present), Harbor Trust Company, Inc.; Director (2007-Present) and Chief Compliance Officer (2004-2017), Harbor Services Group, Inc.; Chief Executive Officer (2017-Present), Director (2007-Present), Chief Compliance Officer and Executive Vice President (2007-2017), Harbor Funds Distributors, Inc.; and Chief Compliance Officer, Harbor Funds (2004-2017). | 36 | None |
Name (Age) Position(s) with Fund | Term of Office and Length of Time Served1 | Principal Occupation(s) During Past Five Years |
FUND OFFICERS NOT LISTED ABOVE** | ||
Erik D. Ojala (45) Chief Compliance Officer | Since 2017 | Executive Vice President and General Counsel (2017-Present) and Secretary (2010-Present); Senior Vice President and Associate General Counsel (2007-2017), Harbor Capital Advisors, Inc.; Director and Secretary (2019-Present), Harbor Trust Company, Inc.; Director, Executive Vice President and Chief Compliance Officer (2017-Present), Harbor Funds Distributors, Inc.; Director (2017-Present) and Assistant Secretary (2014-Present), Harbor Services Group, Inc.; and AML Compliance Officer (2010-2017) and Vice President and Secretary (2007-2017), Harbor Funds. |
Anmarie S. Kolinski (49) Treasurer | Since 2007 | Executive Vice President and Chief Financial Officer (2007-Present), Harbor Capital Advisors, Inc.; Director and Treasurer (2019-Present), Harbor Trust Company, Inc.; Chief Financial Officer (2007-Present), Harbor Services Group, Inc.; and Chief Financial Officer (2015-Present) and Treasurer (2012-Present), Harbor Funds Distributors, Inc. |
Kristof M. Gleich (41) Vice President | Since 2019 | President (2018-Present) and Chief Investment Officer (2020), Harbor Capital Advisors, Inc.; Director, Vice Chairperson, President (2019-Present) and Chief Investment Officer (2020-Present), Harbor Trust Company, Inc.; and Managing Director, Global Head of Manager Selection (2010-2018), JP Morgan Chase & Co. |
78
Harbor Domestic Equity Funds
Additional Information—Continued
Additional Information—Continued
Trustees and Officers—Continued
Name (Age) Position(s) with Fund | Term of Office and Length of Time Served1 | Principal Occupation(s) During Past Five Years |
FUND OFFICERS NOT LISTED ABOVE**—Continued | ||
Gregg M. Boland (57) Vice President | Since 2019 | Executive Vice President (2020-Present), Vice President (2019-2020), Harbor Capital Advisors, Inc.; President (2019-Present), Senior Vice President – Operations (2016-2019), and Vice President – Operations (2007-2015), Harbor Services Group, Inc.; and Senior Vice President, AML Compliance Officer, and OFAC Officer (2019-Present), Harbor Funds Distributors, Inc. |
Diana R. Podgorny (41) Secretary | Since 2018 | Senior Vice President and Assistant General Counsel (2020-Present), Vice President and Assistant General Counsel (2017-2020), Harbor Capital Advisors, Inc.; Director and Vice President (2020 – Present), Harbor Trust Company, Inc.; Vice President and Counsel, AMG Funds LLC (2016-2017); Assistant Secretary, AMG Funds, AMG Funds I, AMG Funds II and AMG Funds III (2016-2017); Assistant Secretary, AMG Funds IV (2010-2017); and Vice President and Counsel, Aston Asset Management, LLC (2010-2016). |
Jodie L. Crotteau (48) Assistant Secretary | Since 2014 | Senior Vice President and Chief Compliance Officer, Harbor Capital Advisors, Inc. (2014-Present); Chief Compliance Officer and AML/OFAC Officer (2019-Present), Harbor Trust Company, Inc.; Chief Compliance Officer and Secretary (2017-present) and Assistant Secretary (2015-2016), Harbor Services Group, Inc.; Assistant Secretary (2016-present), Harbor Funds Distributors, Inc.; Vice President and Chief Compliance Officer, Grosvenor Registered Funds (2011-2014); and Vice President, Grosvenor Capital Management, L.P. (2010-2014). |
Lana M. Lewandowski (41) AML Compliance Officer and Assistant Secretary | Since 2017 | Legal & Compliance Manager (2016-Present) and Legal Specialist (2012-2015), Harbor Capital Advisors, Inc. |
Lora A. Kmieciak (56) Assistant Treasurer | Since 2017 | Senior Vice President – Fund Administration and Analysis (2017-Present), Senior Vice President - Business Analysis (2015-2017), Harbor Capital Advisors, Inc.; Vice President (2020 – Present), Harbor Trust Company, Inc.; and Assurance Executive Director, Ernst & Young LLP (1999-2015). |
John M. Paral (52) Assistant Treasurer | Since 2013 | Director of Fund Administration and Analysis (2017-Present), Vice President (2012-Present) and Financial Reporting Manager (2007-2017), Harbor Capital Advisors, Inc. |
1 | Each Trustee serves for an indefinite term, until his or her successor is elected. Each Officer is elected annually. |
* | Mr. McCain is deemed an “Interested Trustee” due to his affiliation with the Adviser and Distributor of Harbor Funds. |
** | Officers of the Funds are “interested persons” as defined in the Investment Company Act. |
79
This privacy statement is not part of this report
Harbor’s Privacy Statement
The following privacy statement (“Privacy Statement”) is issued by Harbor Funds and each series of Harbor Funds and its affiliates, Harbor Capital Advisors, Inc., Harbor Services Group, Inc. and Harbor Funds Distributors, Inc. (collectively, “Harbor” “we” or “us”). The measures described in this Privacy Statement reflect the commitments we make to protect the privacy of your personal information. We appreciate the confidence you have shown by entrusting us with your assets.
Personal Information
In the course of providing products and services, we collect personal information about you from the following sources: applications, forms, our website (including any information captured through our use of “cookies”), through mobile applications, by telephone and in correspondence and transactions with us, our affiliates or other parties, including when you contact Shareholder Services or establish an account with us. This Privacy Statement applies to personal information we collect from those sources unless we inform you otherwise.
The personal information collected may include name, address, email address, telephone/fax numbers, account number, social security or taxpayer identification number, investment activity, bank account information, location data (depending on your app settings and device permissions), and other information voluntarily provided by you.
We may also collect certain information automatically when you visit us through our website or a mobile application. For example, we may collect technical and navigational information, such as computer browser type, device type, device ID, Internet protocol address, pages visited average time spent on our website and searches performed on our website. We may use this information to alert you to software compatibility issues; to provide you with or improve or websites, applications, products or services; or to provide you with content that may be of interest to you. We use your IP address to help diagnose problems with our server and to administer our website. Your IP address is also used to gather broad demographic information. This information will be used for internal purposes only. We also collect information in the form of log files that record website and app activity and gather statistics about your browsing habits. These entries are generated automatically, and help us to troubleshoot errors, improve performance and maintain the security of our sites and apps. We use “cookies” and similar files that may be placed on your computer or device for security purposes, to facilitate site navigation and to personalize the appearance of our site. We provide more information regarding cookies and other tracking technologies below.
In addition, we may receive personal information about you that you authorize third parties to provide to us. We also may obtain personal information from third-party service providers to verify your identity, to prevent fraud, or to help us identify products and services that may be of interest to you.
The personal information we collect about you may be transferred to or stored by us or our service providers in the United States or elsewhere, as permitted by law.
If you do not wish to provide personal information to us, we may be unable to provide certain products or services to you.
Information Sharing
We disclose personal information with affiliated and non-affiliated parties: (1) as permitted or required by law or regulation; (2) if we believe that is necessary to: comply with applicable laws, regulations, or industry requirements; respond to requests from a legal, regulatory, or governmental authority; enforce legal terms; detect and resolve any fraud or security concerns, and protect the rights, property, and safety of us, our users, or others; (3) in the event of a merger, acquisition or sale of all or substantially all of our assets; or (4) as otherwise described in this Privacy Statement.
Personal information we collect may be shared with non-affiliated companies that perform support services on our behalf or to other firms that assist us in providing you with products and services (including, without limitation, completing transactions), such as custodians, transfer agents, broker-dealers and marketing service firms (to support our marketing to you), as well as with other financial institutions. We may also share information with affiliates that are engaged in a variety of financial services in order to better service your account(s).
When information is shared with third parties, they are not permitted to use the information for any purpose other than those purposes described in this Privacy Statement or as permitted by law.
If you close your account(s) or if we lose contact with you, we will continue to share information in accordance with our current privacy policy and practices.
If you close your account(s) or if we lose contact with you, we will continue to share information in accordance with our current privacy policy and practices.
80
Harbor’s Privacy Statement—Continued
Security
We maintain physical, electronic and procedural safeguards designed to protect your personal information; however, please be aware that no data security measures can guarantee 100% security.
For shareholders accessing information through our website or a mobile application, various forms of Internet security, such as data encryption firewall barriers, user names and passwords, two-factor authentication, and other tools are used. For additional information regarding our security measures, visit the terms and conditions of use on our website at harborfunds.com.
Linking to
Third Parties
Third Parties
When you visit our website and leave to go to another linked site, we are not responsible for the content or availability of the linked site. Please be advised that if you enter into a transaction on the third-party site, we do not represent either the third party or you. Further, the privacy and security policies of the linked site may differ from those practiced by us.
Cookies and Other Technologies
A cookie is a small text file that is stored on your computer, tablet, or device when you visit a website or a mobile application. Cookies usually store small bits of information about you and what you do on that site or application, which are then used to improve your browsing experience. Some cookies are only used during a single visit, while others are saved on your device until your next visit. Harbor Funds and our third-party providers use both types of cookies to make your visits more productive.
If you are concerned about cookies, they can be blocked from your device, or you can set your browser to notify you when they are being used. Use the Help feature of your browser to learn how.
Our website, mobile application, and emails may use a web beacon. A web beacon helps to measure usage and activity and reports that activity back to the system providers. In some cases, a web beacon triggers the placement of a cookie on your device.
We and our service providers use web beacons and cookies to determine things like if and when you open our emails, what type of device, operating system, email program, or web browser you are using, your IP address, and what links you click within our site or email. These things enable us to gauge the effectiveness, relevance, and value of our content and communications.
We use Google Analytics (which uses a web beacon) to collect information about use of our website and mobile application. For more information on opting out of being tracked by Google Analytics, visit https://tools.google.com/dlpage/gaoptout.
Do Not Track
Our third-party vendors may collect information about users across our website. We do not currently have the capability to respond to a web browser that does not track signals or other mechanisms that provide you with the ability to exercise choice regarding the collection of this information.
Changes to this
Privacy Statement
Privacy Statement
We reserve the right to change or revise this Privacy Statement at any time to reflect changes in the law or our data collection and use practices. New updates to the Privacy Statement will be posted to our website and are include in Harbor Funds’ annual reports to shareholders. Privacy Statement changes will apply to the information collected from the date we post our revised Privacy Statement, as well as to existing information we hold.
Contact Us
If you have any questions or concerns about how we maintain the privacy of your personal information or if you would like to update your personal information on file, please contact us at 800-422-1050 Monday through Friday, between the hours of 8:00 a.m. and 6:00 p.m. Eastern time. You may also write to us at the following postal address:
Harbor Funds
c/o Harbor Services Group, Inc.
PO Box 804660
Chicago, IL 60680-4108
c/o Harbor Services Group, Inc.
PO Box 804660
Chicago, IL 60680-4108
We recommend that you read and retain this notice for your personal files.
Last Updated: December 2020
81
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
Douglas J. Skinner
Trustee
Trustee
Ann M. Spruill
Trustee
Trustee
Erik D. Ojala
Chief Compliance Officer
Chief Compliance Officer
Anmarie S. Kolinski
Treasurer
Treasurer
Kristof M. Gleich
Vice President
Vice President
Gregg M. Boland
Vice President
Vice President
Diana R. Podgorny
Secretary
Secretary
Jodie L. Crotteau
Assistant Secretary
Assistant Secretary
Lana M. Lewandowski
AML Compliance Officer
& Assistant Secretary
AML Compliance Officer
& Assistant Secretary
Lora A. Kmieciak
Assistant Treasurer
Assistant Treasurer
John M. Paral
Assistant Treasurer
Assistant Treasurer
Investment Adviser
Harbor Capital Advisors, Inc.
111 South Wacker Drive, 34th Floor
Chicago, IL 60606-4302
312-443-4400
111 South Wacker Drive, 34th Floor
Chicago, IL 60606-4302
312-443-4400
Distributor
Harbor Funds Distributors, Inc.
111 South Wacker Drive, 34th Floor
Chicago, IL 60606-4302
312-443-4600
111 South Wacker Drive, 34th Floor
Chicago, IL 60606-4302
312-443-4600
Shareholder Services
Harbor Services Group, Inc.
P.O. Box 804660
Chicago, IL 60680-4108
800-422-1050
P.O. Box 804660
Chicago, IL 60680-4108
800-422-1050
FD.AR.DE.1020
Annual Report
October 31, 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 2020 fiscal year has been a historic period that will undoubtedly live on in our memories as much as we might like to forget the massive disruptions caused by the coronavirus pandemic and the toll it has taken on human lives.
The period began quietly in investment markets, extending a lengthy stretch of subdued volatility. That relative calm came to a dramatic end in late February when the extent of the pandemic became clear, sending shockwaves across global investment markets. Volatility spiked sharply higher, market liquidity became challenged, and government bond yields plunged in a flight to safety. From its peak on February 19 to its March 23 trough, the S&P 500 tumbled 33.8% for its fastest ever descent into bear-market territory. International markets followed suit, with the MSCI All Country World Ex. US (ND) Index falling 32.9% over the same period. Although U.S. Treasuries served as a ballast during the period, corporate bonds did not escape the sharp selloff, with both investment-grade and high-yield credit indexes experiencing double-digit losses.
Governments and central banks acted swiftly and forcefully to support the global economy with massive fiscal and monetary stimulus. This jolt of liquidity put a floor under markets and set the stage for a sharp rebound. Broad stock and bond indexes gained ground throughout much of the rest of the year, shrugging off concerns about the pandemic, inconsistent policy responses, uncertainty around the U.S. election, and escalating social tensions.
As time marched on, economic data has improved. We see GDP is growing again, unemployment appears to have bottomed, and many market measures ended the fiscal year in positive territory. However, economic and market recovery has been uneven. The re-emergence of volatility has brought about significant dispersion across markets. For example, the difference between the best and worst sectors reached its widest levels in many years. Similarly, growth stocks outperformed value stocks by the widest margin in more than 20 years.
This volatile environment, though challenging, has been welcome news for talented active managers, because it has provided them with more opportunities to add value and distance themselves from the pack. Our research shows that the difference between top performing and bottom performing managers in many categories is at its highest level in 20 years.
Harbor believes there are many ways to seek to reach long-term financial goals. Drawing upon experienced portfolio managers who stay true to a strategy grounded in enduring investment principles is one way we believe offers the potential to achieve positive outcomes over time. Even though volatility is likely to be with us for some time to come, we are confident that all our subadvisers continue to strive to skillfully execute their strategies to benefit shareholders over the long haul.
It is important to acknowledge that while market gyrations provide opportunities for skillful professional managers, they can pose behavioral challenges for the rest of us. The sharp selloff in the first quarter was enough to test the mettle of the calmest investor. However, those who stayed the course and stuck to their long-term plans likely benefitted from the sharp recovery that followed. We will look back on this period as a time that underscored the value of thoughtful active management and timeless investment principles such as diversification, discipline, and a long-term view.
I hope that you and your families continue to fare well during these ongoing challenging times. Thank you for your continued investment in Harbor Funds.
December 21, 2020
Charles F. McCain |
Chairman |
1
Harbor Robeco 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
Equities around the globe ended 2019 with a strong rally in the month of December. The MSCI World (ND) Index rose 3%, as energy stocks profited from a 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 outperformed developed markets as the South Korean and Chinese equity markets had a good month, mainly in the Information Technology sector, making it the strongest sector in emerging markets.
The first quarter of 2020 is one for the history books, mainly due to the weak second half of February and the steep sell-off in March. The MSCI World (ND) 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 sectors 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 (ND) 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 tanked, also under the pressure of a weaker currency.
Markets recovered strongly after the steep sell-off in March, as the massive fiscal stimulus packages around the world and the gradual unlocking of large parts of the world have made investors hopeful that the global recession will be sharp but relatively short. In this recovery, cyclical sectors such as Information Technology and Consumer Discretionary took the lead, rising around 30% in local terms, while defensive sectors such as Utilities and Consumer Staples could only show single-digit returns in the second quarter of 2020. This led low-risk strategies, including Conservative Equities, to lag the market. An underweight in the large three tech trillionaires, Amazon, Microsoft, and Apple, had a particularly strong impact on relative performance. Like developed markets, emerging markets showed a strong recovery in the second quarter. Large Asian markets, such as Taiwan, South Korea, and China, gradually restarted their economies, benefiting Asian stock markets. In general, cyclical stocks such as the large online names clearly outperformed defensive stocks such as telecom and utility stocks.
The third quarter of 2020 was a positive period for global equity markets, although most gains were posted in the first half of the quarter. Market sentiment was alternating between hope and fear. The main positive impact on the market came from the ongoing fiscal and monetary stimulus and optimistic earnings revisions, and the main negative impact remains uncertainty about the trajectory of COVID-19, as parts of Europe started going through a second wave. The tech rally continued in July and August, but clearly faltered in September. Overall, cyclical growth sectors such as Consumer Discretionary, Information Technology, Materials and Industrials posted double-digit returns, causing low-risk strategies, which are typically underweight in these high-beta sectors, to lag the market. Value-like sectors such as Financials and especially the Energy sector struggled, with the big oil stocks losing on average 20% of their market value. Within emerging markets, stock and sector return dispersion were high, with technology
* | Yaowei Xu co-manages the Harbor Robeco Emerging Markets Conservative Equities Fund only. |
2
Harbor Robeco Conservative Equity Funds
Manager’s Commentary—Continued
Manager’s Commentary—Continued
and e-commerce platforms showing, again, stellar returns. As a result, low-risk, value and high dividend strategies lagged the market in the third quarter.
After the brief sell-off of the “Big Tech” in September and a positive start of the month, volatility continued in primarily the second part of October. Regional differences were large: the MSCI Emerging Markets (ND) Index rose 1.5% in local terms, the S&P 500 lost 2.8%, while the MSCI Europe index declined 5.3%. Oil prices dropped in value, leading to the Energy sector being the worst-performing sector. Several stocks in the Information Technology sector declined sharply after their earnings release. Moreover, Apple had a second consecutive negative month, after releasing weak earnings on the last day of the month. On the positive side, Facebook, Alphabet, Alibaba, and Tencent rebounded after their September losses. The plagued industrial conglomerate General Electric unexpectedly reported a profit over the third quarter. Return dispersion was unusually high in the Utilities sector, with positive returns for several large U.S. utility stocks and declines for most European utility companies.
Performance
Emerging Markets Conservative Equities
Since inception on December 1, 2019 until October 31, 2020, Harbor Robeco Emerging Markets Conservative Equities Fund returned -6.48% (Retirement Class), -6.48% (Institutional Class) and -6.81% (Investor Class) while the MSCI Emerging Markets (ND) Index returned 8.40%. Regrettably, the Fund did not provide risk reduction in the negative market environment in the first quarter of 2020 and it lagged in the subsequent market recovery. From a factor perspective, all three of our main factor themes - low-risk, valuation, and momentum - contributed negatively to the relative returns. The main reasons for the underperformance came from poor selection in China, mainly not holding Tencent and having an underweight in Alibaba. Both index heavyweights outperformed the broader market index as they saw an increase in their products and services - video games, online shopping, working from home platforms. In terms of sectors, an underweight in Consumer Discretionary and an overweight in Utilities had the largest negative contribution. On the positive side, the strategy profited from positive stock selection effects within the Financials and Materials sector.
Global Conservative Equities
Since inception on December 1, 2019 until October 31, 2020, Harbor Robeco Global Conservative Equities Fund returned -9.48% (Retirement Class), -9.48% (Institutional Class) and -9.81% (Investor Class) while the MSCI World (ND) Index returned 1.54%. There are three main reasons for the underperformance of the Fund. The first reason is that the Fund held “lockdown-sensitive” groups of normally low-risk stocks, which suffered from the specific effects of the pandemic and the series of lockdowns around the world. These include retail and diversified REITs and retail and restaurants chains. Some insurance stocks have also been hit by lockdowns in multiple ways, including business interruption insurance, real estate insurance, workers compensation schemes and the cancellation of events. Second, our underweight in “online” stocks has been a major headwind, as many of these stocks profited from the move to online (cloud) services and shopping. The most emblematic examples are the U.S. tech giants Amazon, Microsoft and Apple, but many other fast-growing expensive stocks such as Adobe, NVIDIA, Netflix, Tesla and PayPal have also been performing well. Third, the concentration of securities in the Index as compared to the Fund also detracted from the Fund’s relative performance.
International Conservative Equities
Since inception on December 1, 2019 until October 31, 2020, Harbor Robeco International Conservative Equities Fund returned -7.84% (Retirement Class), -7.94% (Institutional Class) and -8.27% (Investor Class) while the MSCI EAFE (ND) Index returned -7.90%. The Fund started 2020 strongly, with an outperformance of 2.81% in January and a further outperformance of 0.50% in February. However, regrettably, the Fund did not provide risk reduction in the negative market environment in March, but it kept up with the market well in the subsequent recovery. From a factor perspective, valuation factors contributed negatively to the relative returns, while low-risk and momentum factors contributed positively, thus offsetting the impact of value. Since inception of the Fund, an underweight in the U.K., and positive selection in Australia and the U.K. contributed most positively, while selection in Japan had the largest negative impact. In terms of sectors, most positive effects came from favorable selection within Consumer Stapes and Financials. An overall underweight in Energy and an overweight in Utilities had the largest positive impact on relative returns.
US Conservative Equities
Since inception on December 1, 2019 until October 31, 2020, Harbor Robeco US Conservative Equities Fund returned -10.82% (Retirement Class), -10.92% (Institutional Class) and -11.15% (Investor Class) while the S&P 500 Index returned 5.87%. There are three main reasons for the underperformance of the Fund. The first reason is that the Fund held “lockdown-sensitive” groups of normally low-risk stocks, which suffered from the specific effects of the pandemic and the series of lockdowns around the world. These include retail and diversified REITs and retail and restaurants chains. Some insurance stocks have also been hit by lockdowns in multiple ways, including business interruption insurance, real estate insurance, workers compensation schemes and the cancellation of (sports) events. Second, our underweight in “online” stocks has been a major headwind, as
3
Harbor Robeco Conservative Equity Funds
Manager’s Commentary—Continued
Manager’s Commentary—Continued
many of these stocks profited from the move to online (cloud) services and shopping. The most emblematic examples are the U.S. tech giants Amazon, Microsoft and Apple, but many other fast-growing expensive stocks such as Adobe, NVIDIA, Netflix, Tesla and PayPal have also been performing well. Third, the concentration of securities in the Index as compared to the Fund also detracted from the Fund’s relative performance.
Outlook
Markets have recovered quite strongly from the March 2020 sell-off, and the trillion-dollar question is whether the bull run will continue or whether a second sell-off is imminent. Bears point to the unprecedented effects of the COVID-19 lockdowns and their lasting economic consequences. Global trade will remain impaired, as part of the demand lost will never come back. Higher unemployment and a negative feedback loop can cause the recession to last much longer than expected. In such a scenario, defensive stocks tend to outperform cyclical stocks which are more sensitive to overall economic conditions. Moreover, bearish investors will point to the risks of the unprecedented monetary and fiscal stimulus and to other risks looming on the horizon, such as the break-up of Big Tech or higher corporate tax rates in the U.S.
Bulls point to the massive stimulus packages initiated by central banks and governments around the world, and to the lack of alternatives given low interest rates globally. Moreover, many large companies have been relatively unaffected by COVID-19 so far. If the bulls are right, markets will continue to rise and low-risk strategies typically lag.
A third scenario is a volatile market without clear direction. Economic and earnings data might provide a mixed picture from time to time and investor’s sentiment will alternate between hope and fear. Moreover, in case of further disappointing economic news central banks and governments will be inclined to step up their efforts to mitigate any COVID-19 related fallout, creating an uncertain balancing act for equity markets. Historically, in such a muddle-through scenario, low-risk stocks tend to do well by losing less in the down periods.
All international and global returns are in U.S. Dollars.
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.
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 —October 31, 2020 (Unaudited)
Fund Summary —October 31, 2020 (Unaudited)
REGION BREAKDOWN (% of investments)
FUND PERFORMANCE
The graph compares a $50,000 investment in the Institutional Class shares of the Fund with the performance of the MSCI Emerging Markets (ND). The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
CHANGE IN A $50,000 INVESTMENT
For the period 12/01/2019 through 10/31/2020
TOTAL RETURNS For the periods ended 10/31/2020 | 1 Year | 5 Years | Unannualized | |||||
Life of Fund | ||||||||
Harbor Robeco Emerging Markets Conservative Equities Fund | ||||||||
Retirement Class1 | N/A | N/A | -6.48% | |||||
Institutional Class1 | N/A | N/A | -6.48 | |||||
Investor Class1 | N/A | N/A | -6.81 | |||||
Comparative Index | ||||||||
MSCI Emerging Markets (ND)1 | N/A | N/A | 8.40% |
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 at harborfunds.com or by calling 800-422-1050.
1 | The “Life of Fund” return as shown reflects the period 12/01/2019 through 10/31/2020. |
5
Harbor Robeco Emerging Markets Conservative Equities Fund
Portfolio of Investments—October 31, 2020
Portfolio of Investments—October 31, 2020
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—97.4% | |||
Shares | Value | ||
AUTO COMPONENTS—1.5% | |||
5,275 | Shandong Linglong Tyre Co. Ltd. (China) | $ 23 | |
5,400 | Weifu High Technology Group Ltd. (China) | 21 | |
44 | |||
AUTOMOBILES—2.4% | |||
766 | KIA Motors Corp. (South Korea) | 34 | |
10,785 | Tofas Turk Otomobil Fabrikasi AS (Turkey) | 35 | |
69 | |||
BANKS—17.4% | |||
73,000 | Agricultural Bank of China Ltd. (China) | 25 | |
18,700 | Bank of Beijing Co. Ltd. (China) | 13 | |
193,000 | Bank of China Ltd. (China) | 61 | |
40,000 | Bank of Communications Co. Ltd. (China) | 20 | |
29,120 | Chang Hwa Commercial Bank Ltd. (Taiwan) | 17 | |
47,000 | China Citic Bank Corp. Ltd. (China) | 19 | |
74,000 | China Construction Bank Corp. (China) | 51 | |
29,000 | China Everbright Bank Co. Ltd. (China) | 10 | |
55,500 | China Minsheng Banking Corp Ltd. (China) | 30 | |
36,000 | CTBC Financial Holding Co. Ltd. (Taiwan) | 23 | |
29,151 | E.Sun Financial Holding Co. Ltd. (Taiwan) | 25 | |
30,900 | First Financial Holding Co. Ltd. (Taiwan) | 22 | |
500 | Hana Financial Group Inc. (South Korea) | 13 | |
29,568 | Hua Nan Financial Holdings Co Ltd. (Taiwan) | 18 | |
18,000 | Huaxia Bank Co. Ltd. (China) | 16 | |
409 | KB Financial Group Inc. (South Korea) | 15 | |
9,800 | Kiatnakin Bank PCL NVDR (Thailand)1 | 12 | |
6,300 | Malayan Banking BHD (Malaysia) | 11 | |
16,460 | Masraf Al Rayan Q.S.C (Qatar) | 19 | |
49,000 | Postal Savings Bank of China (China)2 | 24 | |
484 | Shinhan Financial Group Co. Ltd. (South Korea) | 13 | |
32,000 | SinoPac Financial Holdings Co. Ltd. (Taiwan) | 12 | |
26,601 | Taishin Financial Holding Co. Ltd. (Taiwan) | 12 | |
27,810 | Taiwan Cooperative Financial Holding Co. Ltd. (Taiwan) | 19 | |
11,700 | Thanachart Capital PCL NVDR (Thailand)1 | 10 | |
510 | |||
BEVERAGES—0.9% | |||
3,000 | Arca Continental SAB de CV (Mexico) | 13 | |
404 | Hite Jinro Co. Ltd. (South Korea) | 12 | |
25 | |||
CHEMICALS—0.5% | |||
9,000 | Taiwan Fertilizer Co. Ltd. (Taiwan) | 16 | |
COMMERCIAL SERVICES & SUPPLIES—1.7% | |||
8,000 | Country Garden Services Holdings Co. Ltd. (China) | 50 | |
CONSTRUCTION & ENGINEERING—0.5% | |||
17,400 | China National Chemical Engineering Co. Ltd. (China) | 14 | |
CONSTRUCTION MATERIALS—3.4% | |||
4,500 | Anhui Conch Cement Co. Ltd. (China) | 28 | |
12,000 | Asia Cement Corp. (Taiwan) | 17 | |
22,000 | China Resources Cement Holdings Ltd. (China) | 29 | |
17,850 | Taiwan Cement Corp (Taiwan) | 26 | |
100 | |||
DIVERSIFIED TELECOMMUNICATION SERVICES—3.6% | |||
7,000 | Chunghwa Telecom Co. Ltd. (Taiwan) | 26 | |
31,700 | Digital Telecommunications Infrastructure Fund (Thailand) | 13 | |
1,715 | Hellenic Telecommunications Organization SA (Greece) | 23 | |
2,097 | KT Corp. ADR (South Korea)1 | 20 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
DIVERSIFIED TELECOMMUNICATION SERVICES—Continued | |||
48,200 | Telekomunikasi Indonesia Persero Tbk PT (Indonesia) | $ 8 | |
20,330 | Turk Telekomunikasyon AS (Turkey) | 16 | |
106 | |||
ELECTRIC UTILITIES—1.6% | |||
1,667 | Cia Paranaense de Energia ADR (Brazil)*,1 | 18 | |
5,700 | Transmissora Alianca de Energia Eletrica SA (Brazil)* | 28 | |
46 | |||
ELECTRICAL EQUIPMENT—1.7% | |||
3,700 | WEG SA (Brazil)* | 49 | |
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—1.5% | |||
7,000 | Foxconn Technology Co. Ltd. (Taiwan) | 12 | |
7,000 | Hon Hai Precision Industry Co. Ltd. (Taiwan) | 19 | |
9,000 | Synnex Technology International Corp (Taiwan) | 14 | |
45 | |||
ENTERTAINMENT—1.7% | |||
560 | NetEase Inc. ADR (China)1 | 49 | |
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—0.4% | |||
15,023 | Fortress REIT Ltd. (South Africa) | 12 | |
FOOD & STAPLES RETAILING—2.0% | |||
2,925 | Bim Birlesik Magazalar AS (Turkey) | 23 | |
15,400 | Wal-Mart de Mexico SAB de CV (Mexico) | 37 | |
60 | |||
FOOD PRODUCTS—2.6% | |||
2,200 | Gruma SAB de CV (Mexico) | 23 | |
1,800 | Henan Shuanghui Investment & Development Co Ltd. (China) | 13 | |
77 | NongShim Co. Ltd. (South Korea) | 20 | |
30,000 | Want Want China Holdings Ltd. (China) | 20 | |
76 | |||
HEALTH CARE EQUIPMENT & SUPPLIES—1.7% | |||
8,000 | Shandong Weigao Group Medical Polymer Co Ltd. (China) | 16 | |
16,500 | Top Glove Corp. BHD (Malaysia) | 34 | |
50 | |||
HEALTH CARE PROVIDERS & SERVICES—0.8% | |||
3,250 | Al Hammadi Co. For Development And Investment (Saudi Arabia)* | 24 | |
HOTELS, RESTAURANTS & LEISURE—1.9% | |||
1,175 | Saudi Airlines Catering Co. (Saudi Arabia) | 24 | |
598 | Yum China Holdings Inc. (China) | 32 | |
56 | |||
HOUSEHOLD DURABLES—1.2% | |||
2,200 | Joyoung Co. Ltd. (China) | 12 | |
327 | LG Electronics Inc. (South Korea) | 24 | |
36 | |||
HOUSEHOLD PRODUCTS—0.4% | |||
8,000 | Kimberly-Clark de Mexico SAB de CV (Mexico) | 12 | |
INDEPENDENT POWER AND RENEWABLE ELECTRICITY PRODUCERS—1.1% | |||
5,100 | AES Tiete Energia SA (Brazil) | 13 | |
7,100 | China Yangtze Power Co. Ltd. (China) | 20 | |
33 |
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 | ||
INDUSTRIAL CONGLOMERATES—1.3% | |||
22,000 | CITIC Ltd. (China) | $ 16 | |
73,845 | Dogan Sirketler Grubu Holding AS (Turkey) | 21 | |
37 | |||
INSURANCE—1.3% | |||
3,300 | BB Seguridade Participacoes SA (Brazil) | 14 | |
17,000 | Fubon Financial Holding Co. Ltd. (Taiwan) | 24 | |
38 | |||
INTERACTIVE MEDIA & SERVICES—1.2% | |||
116 | Kakao Corp (South Korea) | 34 | |
INTERNET & DIRECT MARKETING RETAIL—3.9% | |||
378 | Alibaba Group Holding Ltd. ADR (China)*,1 | 115 | |
IT SERVICES—2.9% | |||
5,856 | Infosys Ltd. ADR (India)1 | 84 | |
MARINE—0.4% | |||
7,000 | MISC BHD (Malaysia) | 11 | |
MEDIA—0.5% | |||
9,600 | China South Publishing & Media Group Co Ltd. (China) | 15 | |
METALS & MINING—4.0% | |||
17,800 | Baoshan Iron + Steel Co. (China) | 14 | |
674 | Kumba Iron Ore Ltd. (South Africa) | 20 | |
1,228 | MMC Norilsk Nickel PJSC ADR (Russia)1 | 29 | |
410 | Polyus PJSC GDR (Russia)1 | 40 | |
907 | Severstal PJSC GDR (Russia)1 | 13 | |
116 | |||
OIL, GAS & CONSUMABLE FUELS—5.8% | |||
20,500 | China Shenhua Energy Co. Ltd. (China) | 36 | |
32,000 | CNOOC Ltd. (China) | 29 | |
5,792 | Gazprom PJSC ADR (Russia)1 | 22 | |
680 | LUKOIL PJSC ADR (Russia)1 | 35 | |
168 | Novatek PJSC GDR (Russia)1 | 20 | |
18,126 | Qatar Gas Transport Co. Ltd. (Qatar) | 13 | |
477 | Tatneft PJSC ADR (Russia)1 | 15 | |
170 | |||
PHARMACEUTICALS—1.1% | |||
246 | Dr. Reddy's Laboratories Ltd. ADR (India)1 | 16 | |
4,400 | Shandong Buchang Pharmaceuticals Co. Ltd. (China) | 16 | |
32 | |||
REAL ESTATE MANAGEMENT & DEVELOPMENT—1.5% | |||
30,483 | Aldar Properties PJSC (United Arab Emirates) | 22 | |
8,800 | Highwealth Construction Corp (Taiwan) | 13 | |
6,600 | Jinke Properties Group Co. Ltd. (China) | 8 | |
43 | |||
ROAD & RAIL—0.6% | |||
17,800 | Daqin Railway Co. Ltd. (China) | 17 | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—4.4% | |||
4,000 | Radiant Opto-Electronics Corp (Taiwan) | 16 | |
5,000 | Taiwan Semiconductor Manufacturing Co. Ltd. (Taiwan) | 75 | |
36,000 | United Microelectronics Corp. (Taiwan) | 39 | |
130 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
SPECIALTY RETAIL—1.4% | |||
659 | Jarir Marketing Co. (Saudi Arabia) | $ 30 | |
1,500 | Zhongsheng Group Holdings (China) | 11 | |
41 | |||
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS—7.2% | |||
5,000 | Asustek Computer Inc. (Taiwan) | 43 | |
4,000 | Chicony Electronics Co. Ltd. (Taiwan) | 12 | |
32,000 | Compal Electronics Inc. (Taiwan)* | 21 | |
11,000 | Lite-On Technology Corp. (Taiwan) | 18 | |
15,000 | Pegatron Corp (Taiwan) | 32 | |
11,000 | Quanta Computer Inc. (Taiwan) | 28 | |
778 | Samsung Electronics Co. Ltd. (South Korea) | 39 | |
17,000 | Wistron Corp. (Taiwan) | 17 | |
210 | |||
TRANSPORTATION INFRASTRUCTURE—1.0% | |||
8,000 | Jiangsu Expressway Co Ltd. (China) | 8 | |
13,099 | Shenzhen International Holdings Ltd. (China) | 20 | |
28 | |||
WATER UTILITIES—0.6% | |||
12,000 | Guangdong Investment Ltd. (China) | 18 | |
WIRELESS TELECOMMUNICATION SERVICES—7.8% | |||
3,900 | Advanced Info Service PCL NVDR (Thailand)1 | 22 | |
11,500 | China Mobile Ltd. (China) | 70 | |
7,000 | Far EasTone Telecommunications Co Ltd. (Taiwan)* | 15 | |
1,732 | SK Telecom Co. Ltd. ADR (South Korea)1 | 36 | |
6,000 | Taiwan Mobile Co. Ltd. (Taiwan) | 20 | |
16,486 | Turkcell Iletisim Hizmetleri AS (Turkey) | 29 | |
4,741 | Vodacom Group Ltd. (South Africa) | 36 | |
228 | |||
TOTAL COMMON STOCKS | |||
(Cost $2,901) | 2,849 | ||
PREFERRED STOCKS—1.3% | |||
BANKS—0.5% | |||
10,000 | Itausa - Investimentos Itau SA (Brazil) | 16 | |
DIVERSIFIED TELECOMMUNICATION SERVICES—0.8% | |||
3,186 | Telefonica Brasil SA ADR (Brazil)*,1 | 23 | |
TOTAL PREFERRED STOCKS | |||
(Cost $71) | 39 | ||
TOTAL INVESTMENTS—98.7% | |||
(Cost $2,972) | 2,888 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—1.3% | 37 | ||
TOTAL NET ASSETS—100.0% | $2,925 |
7
Harbor Robeco Emerging Markets Conservative Equities Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
FAIR VALUE MEASUREMENTS
The following table summarizes the Fund’s investments as of October 31, 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 | $ — | $ 68 | $— | $ 68 | ||||
Europe | 174 | 147 | — | 321 | ||||
Latin America | 207 | — | — | 207 | ||||
Middle East/Central Asia | 100 | 132 | — | 232 | ||||
Pacific Basin | 252 | 1,769 | — | 2,021 | ||||
Preferred Stocks | ||||||||
Latin America | 39 | — | — | 39 | ||||
Total Investments in Securities | $772 | $2,116 | $— | $2,888 |
There were no Level 3 investments at October 31, 2020 or December 1, 2019 (inception).
For more information on valuation inputs and their aggregation into the levels used in the table above, please refer to the Fair Value Measurements and Disclosures in Note 2 of the accompanying Notes to Financial Statements.
* | Non-income producing security |
1 | Depositary receipts such as American Depositary Receipts (ADRs), Global Depositary Receipts (GDRs) and other country specific depositary receipts are certificates evidencing ownership of shares of a foreign issuer. These certificates are issued by depositary 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 October 31, 2020, the aggregate value of these securities was $24 or 1% of net assets. |
The accompanying notes are an integral part of the Financial Statements.
8
Harbor Robeco Global Conservative Equities Fund
Fund Summary —October 31, 2020 (Unaudited)
Fund Summary —October 31, 2020 (Unaudited)
REGION BREAKDOWN (% of investments)
FUND PERFORMANCE
The graph compares a $50,000 investment in the Institutional Class shares of the Fund with the performance of the MSCI World (ND) Index. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
CHANGE IN A $50,000 INVESTMENT
For the period 12/01/2019 through 10/31/2020
TOTAL RETURNS For the periods ended 10/31/2020 | 1 Year | 5 Years | Unannualized | |||||
Life of Fund | ||||||||
Harbor Robeco Global Conservative Equities Fund | ||||||||
Retirement Class1 | N/A | N/A | -9.48% | |||||
Institutional Class1 | N/A | N/A | -9.48 | |||||
Investor Class1 | N/A | N/A | -9.81 | |||||
Comparative Index | ||||||||
MSCI World (ND) Index1 | N/A | N/A | 1.54% |
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 at harborfunds.com or by calling 800-422-1050.
1 | The “Life of Fund” return as shown reflects the period 12/01/2019 through 10/31/2020. |
9
Harbor Robeco Global Conservative Equities Fund
Portfolio of Investments—October 31, 2020
Portfolio of Investments—October 31, 2020
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—98.4% | |||
Shares | Value | ||
AEROSPACE & DEFENSE—1.1% | |||
110 | Lockheed Martin Corp. (United States) | $ 38 | |
AUTOMOBILES—0.4% | |||
200 | Toyota Motor Corp. (Japan) | 13 | |
BANKS—4.4% | |||
1,575 | Investors Bancorp Inc. (United States) | 13 | |
588 | JPMorgan Chase & Co. (United States) | 58 | |
668 | National Bank of Canada (Canada) | 32 | |
144 | PNC Financial Services Group Inc. (United States) | 16 | |
2,219 | Skandinaviska Enskilda Banken AB (Sweden)* | 19 | |
561 | Sydbank AS (Denmark)* | 10 | |
148 | |||
BEVERAGES—1.6% | |||
2,697 | Coca-Cola Amatil Ltd. (Australia) | 24 | |
229 | PepsiCo Inc. (United States) | 30 | |
54 | |||
BIOTECHNOLOGY—3.2% | |||
145 | Amgen Inc. (United States) | 31 | |
118 | Biogen Inc. (United States)* | 30 | |
608 | Gilead Sciences Inc. (United States) | 35 | |
79 | United Therapeutics Corp. (United States)* | 11 | |
107 | |||
CAPITAL MARKETS—5.9% | |||
580 | Artisan Partners Asset Management Inc. (United States) | 23 | |
340 | ASX Ltd. (Australia) | 19 | |
1,165 | CI Financial Corp (Canada) | 13 | |
481 | Flow Traders (Netherlands)1 | 16 | |
1,221 | IGM Financial Inc. (Canada) | 27 | |
4,500 | Nomura Holdings Inc. (Japan) | 20 | |
2,800 | Singapore Exchange Ltd. (Singapore) | 18 | |
268 | T Rowe Price Group Inc. (United States) | 34 | |
749 | Virtu Financial Inc. (United States) | 16 | |
896 | Waddell & Reed Financial Inc. (United States) | 14 | |
200 | |||
COMMUNICATIONS EQUIPMENT—1.3% | |||
1,236 | Cisco Systems Inc. (United States) | 44 | |
CONSTRUCTION & ENGINEERING—0.9% | |||
1,532 | Skanska AB Class B (Sweden) | 29 | |
CONTAINERS & PACKAGING—0.7% | |||
655 | Silgan Holdings Inc. (United States) | 23 | |
DISTRIBUTORS—0.4% | |||
276 | D'ieteren SA (Belgium) | 14 | |
DIVERSIFIED FINANCIAL SERVICES—0.4% | |||
694 | Plus500 Ltd. (United Kingdom) | 13 | |
DIVERSIFIED TELECOMMUNICATION SERVICES—5.5% | |||
983 | AT&T Inc. (United States) | 27 | |
1,307 | Deutsche Telekom AG (Germany) | 20 | |
12,000 | HKT Trust & HKT Ltd Stapled Security (Hong Kong) | 15 | |
6,295 | Spark New Zealand Ltd. (New Zealand) | 19 | |
39 | Swisscom AG (Switzerland) | 20 | |
4,315 | Telia Co. AB (Sweden) | 16 | |
1,248 | Verizon Communications Inc. (United States) | 71 | |
188 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
ELECTRIC UTILITIES—3.9% | |||
685 | Endesa SA (Spain) | $ 18 | |
2,082 | Enel SpA (Italy) | 17 | |
981 | Hydro One Ltd. (Canada)1 | 21 | |
2,347 | Iberdrola SA (Spain) | 28 | |
307 | Southern Co. (United States) | 18 | |
1,790 | SSE PLC (United Kingdom) | 29 | |
131 | |||
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—2.6% | |||
992 | Easterly Government Properties Inc. (United States) | 21 | |
1,308 | Lexington Realty Trust (United States) | 13 | |
6,700 | Mapletree Industrial Trust (Singapore)* | 15 | |
7 | Nippon ProLogis REIT Inc. (Japan)* | 23 | |
311 | Terreno Realty Corp (United States) | 17 | |
89 | |||
FOOD & STAPLES RETAILING—4.9% | |||
1,546 | Koninklijke Ahold Delhaize NV (Netherlands) | 42 | |
610 | Kroger Co. (United States) | 20 | |
428 | Metro Inc. (Canada) | 20 | |
839 | Sprouts Farmers Market Inc. (United States)* | 16 | |
400 | Sundrug Co. Ltd. (Japan) | 15 | |
250 | Walmart Inc. (United States) | 35 | |
759 | Woolworths Group Ltd. (Australia) | 20 | |
168 | |||
FOOD PRODUCTS—4.7% | |||
666 | B&G Foods Inc. (United States) | 18 | |
811 | Flowers Foods Inc. (United States) | 19 | |
359 | General Mills Inc. (United States) | 21 | |
404 | Hormel Foods Corp. (United States) | 20 | |
163 | JM Smucker Co. (United States) | 18 | |
200 | Nissin Foods Holdings Co. Ltd. (Japan) | 17 | |
3,989 | Orkla ASA (Norway) | 38 | |
302 | Tootsie Roll Industries Inc. (United States) | 9 | |
160 | |||
GAS UTILITIES—0.6% | |||
3,797 | Snam SpA (Italy) | 19 | |
HEALTH CARE PROVIDERS & SERVICES—0.7% | |||
288 | DaVita Inc. (United States)* | 25 | |
HOUSEHOLD DURABLES—3.8% | |||
193 | Garmin Ltd. (United States) | 20 | |
173 | Helen of Troy Ltd. (United States)* | 33 | |
909 | Persimmon plc (United Kingdom) | 28 | |
471 | PulteGroup Inc. (United States) | 19 | |
1,700 | Sekisui House Ltd. (Japan) | 28 | |
128 | |||
HOUSEHOLD PRODUCTS—4.1% | |||
105 | Clorox Co. (United States) | 22 | |
438 | Procter & Gamble Co. (United States) | 60 | |
655 | Reckitt Benckiser Group plc (United Kingdom) | 57 | |
139 | |||
INDEPENDENT POWER AND RENEWABLE ELECTRICITY PRODUCERS—0.6% | |||
6,304 | Meridian Energy Ltd. (New Zealand) | 22 | |
INSURANCE—8.1% | |||
510 | Admiral Group plc (United Kingdom) | 18 | |
312 | Ageas (Belgium) | 12 |
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 | ||
INSURANCE—Continued | |||
104 | Allianz SE (Germany) | $ 18 | |
327 | Allstate Corp. (United States) | 29 | |
200 | AMERISAFE Inc. (United States) | 12 | |
1,665 | Gjensidige Forsikring ASA (Norway) | 32 | |
774 | Great-West Lifeco Inc. (Canada) | 16 | |
114 | Intact Financial Corp. (Canada) | 12 | |
139 | Muenchener Rueckversicherungs-Gesellschaft AG (Germany) | 32 | |
437 | Sun Life Financial Inc. (Canada) | 17 | |
618 | The Progressive Corp. (United States) | 57 | |
56 | Zurich Insurance Group AG (Switzerland) | 19 | |
274 | |||
INTERNET & DIRECT MARKETING RETAIL—1.2% | |||
853 | eBay Inc. (United States) | 41 | |
IT SERVICES—6.1% | |||
218 | Akamai Technologies Inc. (United States)* | 21 | |
503 | Amdocs Ltd. (United States) | 28 | |
134 | CACI International Inc. (United States)* | 28 | |
300 | Fujitsu Ltd. (Japan) | 35 | |
174 | Jack Henry + Associates Inc. (United States) | 26 | |
228 | ManTech International Corp. (United States) | 15 | |
900 | Nomura Research Institute Ltd. (Japan) | 27 | |
1,457 | Western Union Co. (United States) | 28 | |
208 | |||
LEISURE PRODUCTS—0.9% | |||
500 | Sankyo Co. Ltd. (Japan) | 13 | |
287 | Sturm Ruger & Co. Inc. (United States) | 19 | |
32 | |||
LIFE SCIENCES TOOLS & SERVICES—0.5% | |||
711 | Luminex Corp. (United States) | 16 | |
METALS & MINING—0.9% | |||
2,377 | Fortescue Metals Group Ltd. (Australia) | 29 | |
MULTILINE RETAIL—4.2% | |||
336 | Canadian Tire Corp. (Canada) | 38 | |
265 | Dollar General Corp. (United States) | 55 | |
178 | Target Corp (United States) | 27 | |
707 | Wesfarmers Ltd. (Australia) | 23 | |
143 | |||
MULTI-UTILITIES—1.7% | |||
1,346 | AGL Energy Ltd. (Australia) | 12 | |
274 | Dominion Energy Inc. (United States) | 22 | |
4,113 | Hera SpA (Italy) | 13 | |
938 | National Grid plc (United Kingdom) | 11 | |
58 | |||
PHARMACEUTICALS—5.5% | |||
182 | Eli Lilly and Co. (United States) | 24 | |
1,229 | GlaxoSmithKline plc (United Kingdom) | 20 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
PHARMACEUTICALS—Continued | |||
382 | Merck & Co. Inc. (United States) | $ 29 | |
1,793 | Pfizer Inc. (United States) | 64 | |
154 | Roche Holding AG (Switzerland) | 49 | |
186 | |||
PROFESSIONAL SERVICES—0.6% | |||
270 | Thomson Reuters Corp (Canada) | 21 | |
21 | |||
REAL ESTATE MANAGEMENT & DEVELOPMENT—0.4% | |||
174 | Swiss Prime Site AG (Switzerland) | 15 | |
ROAD & RAIL—0.4% | |||
4,694 | Aurizon Holdings Ltd. (Australia) | 12 | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—2.9% | |||
614 | Intel Corp. (United States) | 27 | |
498 | Texas Instruments Inc. (United States) | 72 | |
99 | |||
SOFTWARE—4.9% | |||
71 | Check Point Software Technologies Ltd. (Israel)* | 8 | |
83 | Citrix Systems Inc. (United States) | 9 | |
364 | Microsoft Corp. (United States) | 74 | |
858 | Oracle Corp. (United States) | 48 | |
63 | Zoom Video Communications Inc. (United States)* | 29 | |
168 | |||
SPECIALTY RETAIL—3.5% | |||
23 | AutoZone Inc. (United States)* | 26 | |
439 | Best Buy Co. Inc. (United States) | 49 | |
711 | JB Hi-Fi Ltd. (Australia) | 24 | |
171 | Murphy USA Inc. (United States) | 21 | |
120 | |||
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS—3.3% | |||
720 | Apple Inc. (United States) | 79 | |
718 | Seagate Technology plc (United States) | 34 | |
113 | |||
TRADING COMPANIES & DISTRIBUTORS—0.6% | |||
900 | ITOCHU Corp. (Japan) | 22 | |
WIRELESS TELECOMMUNICATION SERVICES—1.0% | |||
1,300 | KDDI Corp. (Japan) | 35 | |
TOTAL COMMON STOCKS | |||
(Cost $3,452) | 3,344 | ||
TOTAL INVESTMENTS—98.4% | |||
(Cost $3,452) | 3,344 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—1.6% | 56 | ||
TOTAL NET ASSETS—100.0% | $3,400 |
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 October 31, 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 | $ — | $ 673 | $— | $ 673 | ||||
Middle East/Central Asia | 8 | — | — | 8 | ||||
North America | 2,163 | — | — | 2,163 | ||||
Pacific Basin | — | 500 | — | 500 | ||||
Total Investments in Securities | $2,171 | $1,173 | $— | $3,344 |
There were no Level 3 investments at October 31, 2020 or December 1, 2019 (inception).
For more information on valuation inputs and their aggregation into the levels used in the table above, please refer to the Fair Value Measurements and Disclosures in Note 2 of the accompanying Notes to Financial Statements.
* | Non-income producing security |
1 | Securities purchased in a transaction exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. The Fund has no right to demand registration of these securities. At October 31, 2020, the aggregate value of these securities was $37 or 1% of net assets. |
The accompanying notes are an integral part of the Financial Statements.
12
Harbor Robeco International Conservative Equities Fund
Fund Summary —October 31, 2020 (Unaudited)
Fund Summary —October 31, 2020 (Unaudited)
REGION BREAKDOWN (% of investments)
FUND PERFORMANCE
The graph compares a $50,000 investment in the Institutional Class shares of the Fund with the performance of the MSCI EAFE (ND). The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
CHANGE IN A $50,000 INVESTMENT
For the period 12/01/2019 through 10/31/2020
TOTAL RETURNS For the periods ended 10/31/2020 | 1 Year | 5 Years | Unannualized | |||||
Life of Fund | ||||||||
Harbor Robeco International Conservative Equities Fund | ||||||||
Retirement Class1 | N/A | N/A | -7.84% | |||||
Institutional Class1 | N/A | N/A | -7.94 | |||||
Investor Class1 | N/A | N/A | -8.27 | |||||
Comparative Index | ||||||||
MSCI EAFE (ND) | N/A | N/A | -7.90% |
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 at harborfunds.com or by calling 800-422-1050.
1 | The “Life of Fund” return as shown reflects the period 12/01/2019 through 10/31/2020. |
13
Harbor Robeco International Conservative Equities Fund
Portfolio of Investments—October 31, 2020
Portfolio of Investments—October 31, 2020
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—98.8% | |||
Shares | Value | ||
AEROSPACE & DEFENSE—0.5% | |||
2,839 | BAE Systems plc (United Kingdom) | $ 15 | |
AIR FREIGHT & LOGISTICS—0.7% | |||
1,384 | Bpost SA (Belgium)* | 12 | |
3,475 | CTT-Correios de Portugal SA (Portugal)* | 9 | |
21 | |||
AUTOMOBILES—1.6% | |||
700 | Toyota Motor Corp. (Japan) | 46 | |
BANKS—2.4% | |||
1,202 | DNB ASA (Norway) | 16 | |
1,670 | Mizuho Financial Group Inc. (Japan) | 20 | |
2,454 | Skandinaviska Enskilda Banken AB (Sweden)* | 21 | |
563 | Sydbank AS (Denmark) | 10 | |
67 | |||
BEVERAGES—1.9% | |||
147 | Carlsberg AS (Denmark) | 18 | |
4,081 | Coca-Cola Amatil Ltd. (Australia) | 36 | |
54 | |||
BUILDING PRODUCTS—0.8% | |||
41 | Geberit AG (Switzerland) | 23 | |
CAPITAL MARKETS—3.9% | |||
368 | ASX Ltd. (Australia) | 21 | |
1,154 | CI Financial Corp (Canada) | 13 | |
630 | Flow Traders (Netherlands)1 | 21 | |
2,285 | IG Group Holdings plc (United Kingdom) | 22 | |
628 | IGM Financial Inc. (Canada) | 14 | |
3,000 | Singapore Exchange Ltd. (Singapore) | 19 | |
110 | |||
CHEMICALS—1.4% | |||
8 | Givaudan SA (Switzerland) | 32 | |
554 | Kemira OYJ (Finland) | 7 | |
39 | |||
COMMERCIAL SERVICES & SUPPLIES—0.9% | |||
300 | Secom Co. Ltd. (Japan) | 25 | |
CONSTRUCTION & ENGINEERING—2.4% | |||
1,500 | Kandenko Co. Ltd. (Japan) | 11 | |
800 | Kinden Corp. (Japan) | 13 | |
1,800 | Obayashi Corp. (Japan) | 15 | |
1,494 | Skanska AB Class B (Sweden) | 28 | |
67 | |||
DISTRIBUTORS—0.5% | |||
277 | D'ieteren SA (Belgium) | 14 | |
DIVERSIFIED FINANCIAL SERVICES—1.7% | |||
1,312 | Plus500 Ltd. (United Kingdom) | 25 | |
83 | Sofina SA (Belgium) | 22 | |
47 | |||
DIVERSIFIED TELECOMMUNICATION SERVICES—6.7% | |||
1,776 | Deutsche Telekom AG (Germany) | 27 | |
367 | Elisa OYJ (Finland) | 18 | |
13,000 | HKT Trust & HKT Ltd Stapled Security (Hong Kong) | 17 | |
31,708 | PCCW Ltd. (Hong Kong) | 19 | |
635 | Proximus SADP (Belgium) | 12 | |
6,575 | Spark New Zealand Ltd. (New Zealand) | 20 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
DIVERSIFIED TELECOMMUNICATION SERVICES—Continued | |||
40 | Swisscom AG (Switzerland) | $ 20 | |
6,163 | Telefonica Deutschland Holding AG (Germany) | 16 | |
1,448 | Telenor ASA (Norway) | 22 | |
4,713 | Telia Co. AB (Sweden) | 18 | |
189 | |||
ELECTRIC UTILITIES—5.2% | |||
10,309 | Ausnet Services (Australia) | 14 | |
156 | BKW AG (Switzerland) | 15 | |
732 | Endesa SA (Spain) | 20 | |
4,089 | Enel SpA (Italy) | 33 | |
962 | Hydro One Ltd. (Canada)1 | 21 | |
3,233 | Iberdrola SA (Spain) | 38 | |
1,000 | Power Assets Holdings Ltd. (Hong Kong) | 5 | |
146 | |||
ELECTRICAL EQUIPMENT—0.7% | |||
567 | Signify NV (Netherlands)*,1 | 20 | |
ENTERTAINMENT—1.1% | |||
1,038 | Vivendi SA (France) | 30 | |
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—3.7% | |||
3,888 | BWP Trust (Australia) | 11 | |
9,400 | Mapletree Industrial Trust (Singapore)* | 21 | |
14,600 | Mapletree Logistics Trust (Singapore)* | 21 | |
10 | Mori Trust Sogo Inc. (Japan) | 12 | |
7 | Nippon ProLogis REIT Inc. (Japan)* | 23 | |
444 | Warehouses de Pauw CVA (Belgium) | 15 | |
103 | |||
FOOD & STAPLES RETAILING—9.2% | |||
722 | Axfood AB (Sweden) | 17 | |
2,118 | Coles Group Ltd. (Australia) | 26 | |
453 | ICA Gruppen AB (Sweden) | 21 | |
1,064 | Kesko OYJ Class B (Finland) | 27 | |
1,853 | Koninklijke Ahold Delhaize NV (Netherlands) | 51 | |
300 | Lawson Inc. (Japan) | 14 | |
371 | Loblaw Cos. Ltd. (Canada) | 19 | |
412 | Metro Inc. (Canada) | 19 | |
300 | Sugi Holdings Co. Ltd. (Japan) | 20 | |
500 | Sundrug Co. Ltd. (Japan) | 19 | |
937 | Woolworths Group Ltd. (Australia) | 25 | |
258 | |||
FOOD PRODUCTS—4.0% | |||
3 | Chocoladefabriken Lindt & Spruengli AG (Switzerland) | 24 | |
300 | Nissin Foods Holdings Co. Ltd. (Japan) | 26 | |
3,893 | Orkla ASA (Norway) | 36 | |
500 | Toyo Suisan Kaisha Ltd. (Japan) | 25 | |
111 | |||
GAS UTILITIES—0.7% | |||
4,095 | Snam SpA (Italy) | 20 | |
HEALTH CARE EQUIPMENT & SUPPLIES—0.8% | |||
1,009 | Fisher & Paykel Healthcare Corp. Ltd. (New Zealand) | 23 | |
HEALTH CARE PROVIDERS & SERVICES—1.4% | |||
222 | Galenica AG (Switzerland)1 | 14 | |
977 | Sonic Healthcare Ltd. (Australia) | 24 | |
38 |
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 | ||
HOUSEHOLD DURABLES—2.2% | |||
295 | Berkeley Group Holdings plc (United Kingdom) | $ 16 | |
292 | De'Longhi SpA (Italy)* | 9 | |
100 | Rinnai Corp. (Japan) | 10 | |
1,700 | Sekisui House Ltd. (Japan) | 28 | |
63 | |||
HOUSEHOLD PRODUCTS—2.0% | |||
620 | Reckitt Benckiser Group plc (United Kingdom) | 55 | |
INDEPENDENT POWER AND RENEWABLE ELECTRICITY PRODUCERS—2.3% | |||
703 | Atlantica Sustainable Infrastructure plc (United Kingdom) | 21 | |
6,507 | Meridian Energy Ltd. (New Zealand) | 23 | |
1,602 | TransAlta Renewables Inc (Canada) | 20 | |
64 | |||
INSURANCE—7.3% | |||
675 | Admiral Group plc (United Kingdom) | 24 | |
338 | Ageas (Belgium) | 14 | |
164 | Allianz SE (Germany) | 29 | |
5,018 | Direct Line Insurance Group plc (United Kingdom) | 17 | |
1,586 | Gjensidige Forsikring ASA (Norway) | 30 | |
150 | Muenchener Rueckversicherungs-Gesellschaft AG (Germany) | 35 | |
398 | Sun Life Financial Inc. (Canada) | 16 | |
6,200 | Unipolsai Assicurazioni SpA (Italy) | 14 | |
77 | Zurich Insurance Group AG (Switzerland) | 26 | |
205 | |||
IT SERVICES—0.9% | |||
900 | Nomura Research Institute Ltd. (Japan) | 26 | |
LEISURE PRODUCTS—0.8% | |||
900 | Sankyo Co. Ltd. (Japan) | 23 | |
MACHINERY—2.5% | |||
458 | Alstom SA (France)* | 20 | |
625 | Kone OYJ Class B (Finland) | 50 | |
70 | |||
MEDIA—0.4% | |||
15,300 | Singapore Press Holdings Ltd. (Singapore) | 11 | |
METALS & MINING—3.6% | |||
3,784 | Fortescue Metals Group Ltd. (Australia) | 46 | |
821 | Rio Tinto Ltd. (Australia) | 54 | |
100 | |||
MULTILINE RETAIL—1.6% | |||
1,423 | Wesfarmers Ltd. (Australia) | 46 | |
MULTI-UTILITIES—1.8% | |||
1,442 | AGL Energy Ltd. (Australia) | 13 | |
4,129 | Hera SpA (Italy) | 13 | |
2,099 | National Grid plc (United Kingdom) | 25 | |
51 | |||
PAPER & FOREST PRODUCTS—0.8% | |||
597 | Holmen AB Class B (Sweden) | 23 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
PHARMACEUTICALS—6.8% | |||
1,400 | Astellas Pharma Inc. (Japan) | $ 19 | |
157 | AstraZeneca plc (United Kingdom) | 16 | |
600 | Chugai Pharmaceutical Co. Ltd. (Japan) | 23 | |
1,682 | GlaxoSmithKline plc (United Kingdom) | 28 | |
232 | Novo Nordisk AS (Denmark) | 15 | |
1,100 | Ono Pharmaceutical Co. Ltd. (Japan) | 31 | |
139 | Roche Holding AG (Switzerland) | 45 | |
149 | Sanofi SA (France) | 13 | |
190 | |||
REAL ESTATE MANAGEMENT & DEVELOPMENT—1.4% | |||
600 | Goldcrest Co. Ltd. (Japan) | 8 | |
139 | PSP Swiss Property AG (Switzerland) | 17 | |
186 | Swiss Prime Site AG (Switzerland) | 15 | |
40 | |||
ROAD & RAIL—0.5% | |||
4,989 | Aurizon Holdings Ltd. (Australia) | 13 | |
SOFTWARE—1.2% | |||
296 | Check Point Software Technologies Ltd. (Israel)* | 34 | |
SPECIALTY RETAIL—5.8% | |||
1,124 | Bilia AB Class A (Sweden) | 15 | |
1,400 | EDION Corp (Japan) | 14 | |
142 | Fielmann AG (Germany)* | 11 | |
88 | Hornbach Holding AG & Co. KGAA (Germany) | 9 | |
714 | JB Hi-Fi Ltd. (Australia) | 24 | |
300 | Kohnan Shoji Co. Ltd. (Japan) | 10 | |
1,500 | K's Holdings Corp (Japan) | 19 | |
200 | Nitori Holdings Co. Ltd. (Japan) | 41 | |
200 | Shimamura Co. Ltd. (Japan) | 21 | |
164 | |||
TRADING COMPANIES & DISTRIBUTORS—2.1% | |||
1,051 | Bunzl plc (United Kingdom) | 33 | |
1,100 | ITOCHU Corp. (Japan) | 26 | |
59 | |||
WIRELESS TELECOMMUNICATION SERVICES—2.6% | |||
775 | Freenet AG (Germany) | 14 | |
1,700 | KDDI Corp. (Japan) | 46 | |
9,652 | Vodafone Group plc (United Kingdom) | 13 | |
73 | |||
TOTAL COMMON STOCKS | |||
(Cost $2,844) | 2,776 | ||
TOTAL INVESTMENTS—98.8% | |||
(Cost $2,844) | 2,776 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—1.2% | 35 | ||
TOTAL NET ASSETS—100.0% | $2,811 |
15
Harbor Robeco International 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) | |||||
Mapletree Logistics Trust | 277 | SGD 1.99 | 12/11/2020 | $ — | $— x |
FAIR VALUE MEASUREMENTS
The following table summarizes the Fund’s investments as of October 31, 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 | ||||||||
Europe | $ 21 | $1,453 | $— | $1,474 | ||||
Middle East/Central Asia | 34 | — | — | 34 | ||||
North America | 122 | — | — | 122 | ||||
Pacific Basin | — | 1,146 | — | 1,146 | ||||
Total Investments in Securities | $177 | $2,599 | $— | $2,776 | ||||
Financial Derivatives Instruments - Assets | ||||||||
Rights/Warrants | $ — | $ — | $— | $ — | ||||
Total Investments | $177 | $2,599 | $— | $2,776 |
There were no Level 3 investments at October 31, 2020 or December 1, 2019 (inception).
For more information on valuation inputs and their aggregation into the levels used in the table above, please refer to the Fair Value Measurements and Disclosures in Note 2 of the accompanying Notes to Financial Statements.
* | Non-income producing security |
x | Fair valued in accordance with Harbor Funds' Valuation Procedures. |
1 | Securities purchased in a transaction exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. The Fund has no right to demand registration of these securities. At October 31, 2020, the aggregate value of these securities was $76 or 3% of net assets. |
SGD | Singapore Dollar |
The accompanying notes are an integral part of the Financial Statements.
16
Harbor Robeco US Conservative Equities Fund
Fund Summary —October 31, 2020 (Unaudited)
Fund Summary —October 31, 2020 (Unaudited)
Sector Allocation (% of investments)
FUND PERFORMANCE
The graph compares a $50,000 investment in the Institutional Class shares of the Fund with the performance of the S&P 500 Index. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
CHANGE IN A $50,000 INVESTMENT
For the period 12/01/2019 through 10/31/2020
TOTAL RETURNS For the periods ended 10/31/2020 | 1 Year | 5 Years | Unannualized | |||||
Life of Fund | ||||||||
Harbor Robeco US Conservative Equities Fund | ||||||||
Retirement Class1 | N/A | N/A | -10.82% | |||||
Institutional Class1 | N/A | N/A | -10.92 | |||||
Investor Class1 | N/A | N/A | -11.15 | |||||
Comparative Index | ||||||||
S&P 5001 | N/A | N/A | 5.87% |
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 at harborfunds.com or by calling 800-422-1050.
1 | The “Life of Fund” return as shown reflects the period 12/01/2019 through 10/31/2020. |
17
Harbor Robeco US Conservative Equities Fund
Portfolio of Investments—October 31, 2020
Portfolio of Investments—October 31, 2020
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—99.3% | |||
Shares | Value | ||
AEROSPACE & DEFENSE—1.0% | |||
86 | Lockheed Martin Corp. | $ 30 | |
AIR FREIGHT & LOGISTICS—0.9% | |||
314 | CH Robinson Worldwide Inc. | 28 | |
BANKS—2.6% | |||
1,658 | Investors Bancorp Inc. | 14 | |
455 | JPMorgan Chase & Co. | 45 | |
539 | U.S. Bancorp. | 21 | |
80 | |||
BEVERAGES—1.4% | |||
326 | PepsiCo Inc. | 43 | |
BIOTECHNOLOGY—3.4% | |||
165 | Amgen Inc. | 36 | |
1,001 | Gilead Sciences Inc. | 58 | |
15 | Regeneron Pharmaceuticals Inc.* | 8 | |
102 | |||
BUILDING PRODUCTS—1.2% | |||
616 | Johnson Controls International plc | 26 | |
137 | Simpson Manufacturing Co. Inc. | 12 | |
38 | |||
CAPITAL MARKETS—1.2% | |||
1,402 | Virtu Financial Inc. | 30 | |
491 | Waddell & Reed Financial Inc. | 8 | |
38 | |||
CHEMICALS—0.8% | |||
64 | Newmarket Corp. | 23 | |
COMMERCIAL SERVICES & SUPPLIES—1.5% | |||
527 | Rollins Inc. | 31 | |
148 | Waste Management Inc. | 16 | |
47 | |||
COMMUNICATIONS EQUIPMENT—1.1% | |||
924 | Cisco Systems Inc. | 33 | |
DIVERSIFIED TELECOMMUNICATION SERVICES—5.7% | |||
1,952 | AT&T Inc. | 53 | |
1,662 | Liberty Global plc Class C* | 31 | |
1,551 | Verizon Communications Inc. | 88 | |
172 | |||
ELECTRIC UTILITIES—2.9% | |||
72 | American Electric Power Co. Inc. | 6 | |
316 | Avangrid Inc. | 16 | |
608 | NextEra Energy Inc. | 45 | |
371 | Southern Co. | 21 | |
88 | |||
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—0.6% | |||
255 | Plexus Corp.* | 18 | |
ENTERTAINMENT—1.3% | |||
323 | Electronic Arts Inc.* | 39 | |
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—5.0% | |||
301 | Agree Realty Corp | 19 | |
1,350 | Easterly Government Properties Inc. | 28 | |
88 | EastGroup Properties Inc. | 12 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—Continued | |||
1,023 | Equity Commonwealth | $ 27 | |
2,030 | Lexington Realty Trust | 20 | |
205 | Life Storage Inc. | 23 | |
390 | Terreno Realty Corp | 22 | |
151 | |||
FOOD & STAPLES RETAILING—3.9% | |||
39 | Casey's General Stores Inc. | 7 | |
1,255 | Kroger Co. | 40 | |
1,117 | Sprouts Farmers Market Inc.* | 21 | |
352 | Walmart Inc. | 49 | |
117 | |||
FOOD PRODUCTS—6.3% | |||
1,309 | B&G Foods Inc. | 35 | |
594 | Campbell Soup Co. | 28 | |
931 | Flowers Foods Inc. | 22 | |
166 | General Mills Inc. | 10 | |
169 | Hershey Co. | 23 | |
670 | Hormel Foods Corp. | 32 | |
302 | JM Smucker Co. | 34 | |
113 | John B Sanfilippo & Son Inc. | 8 | |
192 | |||
HEALTH CARE EQUIPMENT & SUPPLIES—1.5% | |||
113 | Baxter International Inc. | 9 | |
356 | Medtronic plc | 36 | |
45 | |||
HEALTH CARE PROVIDERS & SERVICES—2.1% | |||
52 | Chemed Corp. | 25 | |
457 | DaVita Inc.* | 39 | |
64 | |||
HOUSEHOLD DURABLES—2.3% | |||
247 | Garmin Ltd. | 26 | |
160 | Helen of Troy Ltd.* | 30 | |
82 | Whirlpool Corp. | 15 | |
71 | |||
HOUSEHOLD PRODUCTS—4.5% | |||
164 | Church & Dwight Co. Inc. | 14 | |
188 | Colgate-Palmolive Co. | 15 | |
204 | Kimberly-Clark Corp | 27 | |
582 | Procter & Gamble Co. | 80 | |
136 | |||
INSURANCE—4.4% | |||
495 | Aflac Inc. | 17 | |
358 | Allstate Corp. | 32 | |
86 | Erie Indemnity Co. Class A | 20 | |
88 | Everest Re Group Ltd. | 17 | |
165 | Hanover Insurance Group Inc. | 16 | |
106 | Marsh & McLennan Companies | 11 | |
542 | MetLife Inc. | 20 | |
133 | |||
INTERNET & DIRECT MARKETING RETAIL—1.1% | |||
494 | eBay Inc. | 23 | |
294 | PetMed Express Inc. | 9 | |
32 |
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—4.9% | |||
277 | Akamai Technologies Inc.* | $ 26 | |
510 | Amdocs Ltd. | 29 | |
94 | CACI International Inc.* | 20 | |
315 | Genpact Ltd. | 11 | |
404 | ManTech International Corp. | 26 | |
1,877 | Western Union Co. | 36 | |
148 | |||
MEDIA—2.5% | |||
15 | Cable One Inc. | 26 | |
448 | Comcast Corp. | 19 | |
646 | Omnicom Group Inc. | 30 | |
75 | |||
METALS & MINING—0.7% | |||
191 | Reliance Steel & Aluminum Co. | 21 | |
MULTILINE RETAIL—3.8% | |||
293 | Dollar General Corp. | 61 | |
362 | Target Corp | 55 | |
116 | |||
MULTI-UTILITIES—2.3% | |||
267 | Dominion Energy Inc. | 22 | |
437 | Public Service Enterprise Group Inc. | 25 | |
184 | Sempra Energy | 23 | |
70 | |||
PHARMACEUTICALS—8.8% | |||
634 | Johnson & Johnson | 87 | |
1,184 | Merck & Co. Inc. | 89 | |
2,535 | Pfizer Inc. | 90 | |
266 | |||
PROFESSIONAL SERVICES—0.7% | |||
206 | FTI Consulting Inc.* | 20 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
ROAD & RAIL—2.2% | |||
159 | Kansas City Southern | $ 28 | |
192 | Landstar System Inc. | 24 | |
638 | Schneider National Inc. Class B | 14 | |
66 | |||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—1.3% | |||
896 | Intel Corp. | 40 | |
SOFTWARE—7.9% | |||
396 | Microsoft Corp. | 80 | |
1,850 | Nortonlifelock Inc. | 38 | |
1,490 | Oracle Corp. | 84 | |
80 | Zoom Video Communications Inc.* | 37 | |
239 | |||
SPECIALTY RETAIL—3.9% | |||
475 | Best Buy Co. Inc. | 53 | |
602 | Buckle Inc. | 15 | |
191 | Murphy USA Inc. | 23 | |
60 | O'Reilly Automotive Inc.* | 26 | |
117 | |||
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS—3.6% | |||
1,012 | Apple Inc. | 110 | |
TOTAL COMMON STOCKS | |||
(Cost $3,089) | 3,008 | ||
TOTAL INVESTMENTS—99.3% | |||
(Cost $3,089) | 3,008 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—0.7% | 21 | ||
TOTAL NET ASSETS—100.0% | $3,029 |
FAIR VALUE MEASUREMENTS
All investments at October 31, 2020 (as disclosed in the preceding Portfolio of Investments) were classified as Level 1. There were no Level 3 investments at October 31, 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 Robeco Emerging Markets Active Equities Fund
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. 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
Equities around the globe ended 2019 with a strong rally in the month of December. The MSCI Emerging Markets (ND) Index rose 7.5%, as all eleven GICS sectors showed positive returns, and emerging markets outperformed developed markets. Tech giants such as Samsung and Tencent drove the market high, making the Information Technology sector the strongest sector in emerging markets.
However, the first quarter of 2020 showed a completely different story and it is one for the history books. Hit by the COVID-19 outbreak, the MSCI Emerging Markets (ND) 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 tanked, also under the pressure of a weaker currency. Sector return dispersion was high. Growth-like Health Care and Information Technology sectors 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.
Markets recovered strongly after the steep sell-off in March, as the massive fiscal stimulus packages around the world and the gradual unlocking of large parts of the world have made investors hopeful that the global recession will be sharp but relatively short. Like developed markets, emerging markets showed a strong recovery in the second quarter. Large Asian markets, such as Taiwan, South Korea, and China, gradually restarted their economies, benefiting Asian stock markets. Expensive, cyclical stocks, such as the large online names, outperformed defensive stocks such as telecom and utility stocks.
The third quarter of 2020 was a positive period for global equity markets, although most gains were posted in the first half of the quarter. Stock and sector return dispersion were high, with technology and e-commerce platforms showing, again, stellar returns. Contrarily, high-yielding sectors such as Utilities, Financials, Real Estate and Energy lagged the market significantly. As a result, strategies with a value style tilt faced strong headwinds. From a country perspective, the Taiwanese market came out the strongest, but this was entirely attributable to its largest stock, Taiwan Semi. The Indian market was almost as positive, helped by high returns for index heavyweights Reliance Industries, the first Indian firm to reach USD 200 bln market cap, and software company Infosys. Weakest returns were once again posted by Brazilian stocks, such as Itau Unibanco, Petrobras, and Ambev.
In the month of October, emerging markets outperformed developed markets by a wide margin, helped by the high returns of the e-commerce platforms of Meituan Dianping and Pinduoduo. These returns added to their great year-to-date performance, helping the Consumer Discretionary sector to rise 33.7% so far this year. Moreover, Chinese banks bounced back after several weak months, and index heavyweight Tencent posted great returns once again. Commodity-sensitive markets
20
Harbor Robeco Emerging Markets Active Equities Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
such as South Africa and Russia had a difficult month. Sector returns in October reaffirmed year-to-date trends, as the Communication Services and Consumer Discretionary sectors rose in value, while the Real Estate and Energy sectors added to their losses.
Performance
Since inception on December 1, 2019 until October 31, 2020, Harbor Robeco Emerging Markets Active Equities Fund returned 2.63% (Retirement Class), 2.63% (Institutional) and 2.30% (Investor) while the MSCI Emerging Markets (ND) Index returned 8.40%. Broadly speaking, our exposure to the value factor explains most of the underperformance of the Fund. Exposures to the quality and analyst revisions factors also contributed negatively, while the momentum factor and the short-term timing model contributed positively. The positive impact of the latter two factors diversified some, but not all of the severe underperformance of primarily the value factor, resulting in the overall underperformance of the Fund.
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 primarily Health Care, Financials, Materials, and Real Estate was more than offset by poor selection within most other sectors, particularly the consumer sectors. Country allocation had a negligible impact on performance and poor selection within China explains most of the Fund’s underperformance.
Outlook
Markets have recovered strongly from the March 2020 sell-off, and the trillion-dollar question is whether the bull run will continue or whether a second sell-off is imminent. Bears point to the unprecedented effects of the COVID-19 lockdowns and their lasting economic consequences. Global trade will remain impaired, as part of the demand lost will never come back. Higher unemployment and a negative feedback loop can cause the recession to last much longer than expected. In such a scenario, defensive stocks tend to outperform cyclical stocks which are more sensitive to overall economic conditions. Moreover, bearish investors will point to the risks of the unprecedented monetary and fiscal stimulus and to other risks looming on the horizon, such as the break-up of Big Tech or higher corporate tax rates in the U.S.
Bulls point to the massive stimulus packages initiated by central banks and governments around the world, and to the lack of alternatives given low interest rates globally: there is no alternative. Moreover, many large companies have been relatively unaffected by COVID-19 so far. If the bulls are right, markets will continue to rise.
A third scenario is a volatile market without clear direction. Economic and earnings data might provide a mixed picture from time to time and investor’s sentiment will alternate between hope and fear. Moreover, in case of further disappointing economic news central banks and governments will be inclined to step up their efforts to mitigate any COVID-19 related fallout, creating an uncertain balancing act for equity markets.
All international and global returns are in U.S. Dollars.
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 —October 31, 2020 (Unaudited)
Fund Summary —October 31, 2020 (Unaudited)
REGION BREAKDOWN (% of investments)
FUND PERFORMANCE
The graph compares a $50,000 investment in the Institutional Class shares of the Fund with the performance of the MSCI Emerging Markets (ND) Index. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
CHANGE IN A $50,000 INVESTMENT
For the period 12/01/2019 through 10/31/2020
TOTAL RETURNS For the periods ended 10/31/2020 | 1 Year | 5 Years | Unannualized | |||||
Life of Fund | ||||||||
Harbor Robeco Emerging Markets Active Equities Fund | ||||||||
Retirement Class1 | N/A | N/A | 2.63% | |||||
Institutional Class1 | N/A | N/A | 2.63 | |||||
Investor Class1 | N/A | N/A | 2.30 | |||||
Comparative Index | ||||||||
MSCI Emerging Markets (ND)1 | N/A | N/A | 8.40% |
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 at harborfunds.com or by calling 800-422-1050.
1 | The “Life of Fund” return as shown reflects the period 12/01/2019 through 10/31/2020. |
22
Harbor Robeco Emerging Markets Active Equities Fund
Portfolio of Investments—October 31, 2020
Portfolio of Investments—October 31, 2020
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—95.8% | |||
Shares | Value | ||
AEROSPACE & DEFENSE—0.3% | |||
451 | Hanwha Aerospace Co. Ltd. (South Korea)* | $ 10 | |
AUTO COMPONENTS—2.1% | |||
545 | Hankook Tire & Technology Co. Ltd. (South Korea) | 15 | |
53 | Hyundai Mobis Co. Ltd. (South Korea)* | 11 | |
47 | S&T Motiv Co Ltd. (South Korea) | 2 | |
3,469 | Shandong Linglong Tyre Co. Ltd. (China) | 16 | |
14,900 | Sri Trang Agro-Industry PCL NVDR (Thailand)*,1 | 17 | |
4,000 | Tianneng Power International Ltd. (China) | 6 | |
67 | |||
AUTOMOBILES—2.7% | |||
16,500 | Baic Motor Corp. Ltd. (China)2 | 6 | |
500 | Byd Co. Ltd. (China) | 10 | |
11,000 | Great Wall Motor Co. Ltd. Class H (China) | 18 | |
523 | KIA Motors Corp. (South Korea) | 23 | |
1,315 | Mahindra & Mahindra Ltd. GDR (India)1 | 10 | |
1,448 | Tata Motors Ltd. ADR (India)*,1 | 13 | |
861 | Tofas Turk Otomobil Fabrikasi AS (Turkey) | 3 | |
2,000 | Yadea Group Holdings Ltd. (China)2 | 3 | |
86 | |||
BANKS—12.2% | |||
53,000 | Agricultural Bank of China Ltd. (China) | 18 | |
591 | Al Rajhi Bank (Saudi Arabia) | 10 | |
6,700 | AMMB Holdings BHD (Malaysia) | 5 | |
426 | Arab National Bank (Saudi Arabia) | 2 | |
700 | Banco Do Brasil SA (Brazil) | 4 | |
2,483 | Banco Santander Brasil SA ADR (Brazil)*,1 | 14 | |
2,400 | Bangkok Bank PCL (Thailand) | 7 | |
16,900 | Bank Mandiri Persero TBK PT (Indonesia) | 6 | |
8,900 | Bank of Chengdu Co. Ltd. (China) | 14 | |
80,000 | Bank of China Ltd. (China) | 25 | |
26,000 | Bank of Communications Co. Ltd. (China) | 13 | |
15,500 | Bank of Jiangsu Co. Ltd. (China) | 14 | |
3,200 | Bank of Shanghai Co. Ltd. (China) | 4 | |
1,614 | BNK Financial Group Inc. (South Korea) | 8 | |
36,000 | China Citic Bank Corp. Ltd. (China) | 15 | |
53,000 | China Construction Bank Corp. (China) | 36 | |
15,000 | China Everbright Bank Co. Ltd. (China) | 5 | |
31,500 | China Minsheng Banking Corp Ltd. (China) | 17 | |
25,000 | Chongqing Rural Commercial Bank Co. Ltd. (China) | 10 | |
17,000 | CTBC Financial Holding Co. Ltd. (Taiwan) | 11 | |
1,382 | DGB Financial Group Inc. (South Korea) | 8 | |
750 | Hana Financial Group Inc. (South Korea) | 20 | |
500 | ICICI Bank Ltd. ADR (India)*,1 | 5 | |
11,000 | Industrial & Commercial Bank of China Ltd. (China) | 6 | |
1,149,587 | Itau Corpbanca Chile SA (Chile) | 3 | |
674 | KB Financial Group Inc. (South Korea) | 24 | |
9,300 | Kiatnakin Bank PCL NVDR (Thailand)1 | 12 | |
10,889 | Masraf Al Rayan Q.S.C (Qatar) | 13 | |
945 | Moneta Money Bank AS (Czech Republic)2 | 2 | |
6,700 | RHB Bank BHD (Malaysia) | 7 | |
1,282 | Samba Financial Group (Saudi Arabia) | 9 | |
618 | Shinhan Financial Group Co. Ltd. (South Korea) | 17 | |
16,000 | SinoPac Financial Holdings Co. Ltd. (Taiwan) | 6 | |
120 | State Bank of India GDR (India)*,1 | 3 | |
13,700 | Thanachart Capital PCL NVDR (Thailand)1 | 12 | |
836 | VTB Bank PJSC GDR (Russia)1 | 1 | |
386 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
BEVERAGES—0.7% | |||
3,800 | Carabao Group PCL NVDR (Thailand)1 | $ 13 | |
315 | Hite Jinro Co. Ltd. (South Korea) | 10 | |
23 | |||
CAPITAL MARKETS—0.9% | |||
29,500 | China Galaxy Securities Co. Ltd. (China) | 16 | |
5,000 | CSC Financial Co. Ltd. (China)2 | 6 | |
1,600 | GF Securities Co. Ltd. (China) | 2 | |
2,553 | Investec Ltd. (South Africa)* | 5 | |
29 | |||
CHEMICALS—0.4% | |||
46 | Korea Petrochemical Industries Co. Ltd. (South Korea) | 8 | |
101 | LOTTE Fine Chemical Co. Ltd. (South Korea) | 4 | |
12 | |||
COMMERCIAL SERVICES & SUPPLIES—0.2% | |||
4,000 | Ever Sunshine Lifestyle Services Group Ltd. (China) | 7 | |
CONSTRUCTION & ENGINEERING—2.1% | |||
13,600 | China National Chemical Engineering Co. Ltd. (China) | 11 | |
12,500 | China Railway Construction Corp. Ltd. (China) | 9 | |
24,000 | China Railway Group Ltd. (China) | 11 | |
167 | Daelim Industrial Co. Ltd. (South Korea) | 12 | |
364 | HDC Hyundai Development Co-Engineering & Construction (South Korea) | 6 | |
400 | Larsen & Toubro Ltd. GDR (India)1 | 5 | |
9,000 | Metallurgical Corp of China Ltd. (China) | 1 | |
1,001 | Samsung Engineering Co. Ltd. (South Korea)* | 10 | |
65 | |||
CONSTRUCTION MATERIALS—1.5% | |||
2,500 | Anhui Conch Cement Co. Ltd. (China) | 16 | |
1,500 | Asia Cement China Holdings Corp (China) | 1 | |
12,000 | China National Building Material Co. Ltd. (China) | 14 | |
800 | Huaxin Cement Co. Ltd. (China) | 3 | |
14,900 | Tipco Asphalt PCL NVDR (Thailand)1 | 7 | |
46,000 | West China Cement Ltd. (China) | 7 | |
48 | |||
CONSUMER FINANCE—0.2% | |||
500 | AEON Thana Sinsap Thailand PCL NVDR (Thailand)1 | 2 | |
169 | Samsung Card Co. Ltd. (South Korea) | 5 | |
7 | |||
DIVERSIFIED CONSUMER SERVICES—0.1% | |||
6,000 | China New Higher Education Group Ltd. (China)2 | 3 | |
DIVERSIFIED FINANCIAL SERVICES—0.1% | |||
7,000 | Yuanta Financial Holding Co. Ltd. (Taiwan) | 4 | |
DIVERSIFIED TELECOMMUNICATION SERVICES—2.3% | |||
52,000 | China Telecom Corp. Ltd. (China) | 16 | |
24,000 | China Unicom Hong Kong Ltd. (China) | 15 | |
482 | Hellenic Telecommunications Organization SA (Greece) | 6 | |
1,442 | KT Corp. ADR (South Korea)1 | 14 | |
2,841 | Ooredoo QPSC (Qatar) | 5 | |
6,200 | Telekom Malaysia BHD (Malaysia) | 6 | |
12,462 | Turk Telekomunikasyon AS (Turkey) | 10 | |
72 | |||
ELECTRIC UTILITIES—0.9% | |||
1,303 | Cia Paranaense de Energia ADR (Brazil)*,1 | 14 |
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 | |||
83,866 | ENEL Chile SA (Chile) | $ 6 | |
1,400 | Transmissora Alianca de Energia Eletrica SA (Brazil)* | 7 | |
27 | |||
ELECTRICAL EQUIPMENT—0.4% | |||
8,000 | Shanghai Electric Group Co. Ltd. (China) | 2 | |
8,000 | TECO Electric and Machinery Co. Ltd. (Taiwan) | 9 | |
11 | |||
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—2.5% | |||
1,000 | Delta Electronics Thailand PCL NVDR (Thailand)1 | 6 | |
1,500 | Hana Microelectronics PCL NVDR (Thailand)1 | 2 | |
10,000 | Hon Hai Precision Industry Co. Ltd. (Taiwan) | 27 | |
3,500 | Kingboard Holdings Ltd. (China) | 12 | |
800 | Lens Technology Co. Ltd. Class A (China) | 4 | |
115 | LG Innotek Co. Ltd. (South Korea) | 15 | |
3,000 | Tripod Technology Corp (Taiwan) | 12 | |
78 | |||
ENTERTAINMENT—0.7% | |||
6,000 | IGG Inc. (Singapore) | 7 | |
1,000 | Soft World International Corp. (Taiwan) | 3 | |
3,000 | Wuhu Sanqi Interactive Entertainment Network Technology Group Co. Ltd. Class A (China) | 13 | |
23 | |||
FOOD & STAPLES RETAILING—0.5% | |||
166 | Abdullah Al Othaim Markets Co. (Saudi Arabia) | 6 | |
7,114 | Cencosud SA (Chile) | 10 | |
426 | Eurocash SA (Poland)* | 1 | |
17 | |||
FOOD PRODUCTS—3.4% | |||
12,700 | Charoen Pokphand Foods NVDR PCL (Thailand)1 | 10 | |
200 | Chongqing Brewery Co. Ltd. (China) | 3 | |
3,500 | Fujian Sunner Development Co. Ltd. (China)* | 12 | |
1,310 | Gruma SAB de CV (Mexico) | 14 | |
5,400 | Grupo Bimbo SAB de CV (Mexico) | 11 | |
3,000 | Heilongjiang Agriculture (China) | 8 | |
5,000 | Marfrig Global Foods SA (Brazil)* | 12 | |
6,000 | Minerva SA (Brazil) | 10 | |
17 | NongShim Co. Ltd. (South Korea) | 4 | |
18 | Samyang Foods Co. Ltd. (South Korea) | 2 | |
80 | Saudia Dairy & Foodstuff Co. (Saudi Arabia) | 4 | |
1,420 | Savola (Saudi Arabia) | 17 | |
107 | |||
GAS UTILITIES—0.2% | |||
65,400 | Perusahaan Gas Negara TBK PT (Indonesia) | 5 | |
HEALTH CARE EQUIPMENT & SUPPLIES—1.7% | |||
4,600 | Hartalega Holdings BHD (Malaysia)* | 20 | |
6,000 | Supermax Corp. BHD (Malaysia)* | 13 | |
9,600 | Top Glove Corp. BHD (Malaysia) | 20 | |
53 | |||
HEALTH CARE PROVIDERS & SERVICES—1.3% | |||
2,033 | Al Hammadi Co. For Development And Investment (Saudi Arabia)* | 15 | |
2,300 | Qualicorp Consultoria e Corretora de Seguros SA (Brazil)* | 13 | |
8,100 | Shanghai Pharmaceuticals Holding Co. Ltd. (China) | 13 | |
41 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
HOUSEHOLD DURABLES—1.6% | |||
1,700 | Construtora Tenda SA (Brazil) | $ 8 | |
3,000 | Even Construtora e Incorporadora SA (Brazil) | 5 | |
2,500 | Hangzhou Robam Appliances Co. Ltd. (China) | 14 | |
88 | LG Electronics Inc. (South Korea) | 7 | |
11,527 | Skyworth Group Ltd. (China)* | 3 | |
3,200 | Suofeiya Home Collection Co. Ltd. (China) | 13 | |
2,000 | TCL Electronics Holdings Ltd. (China)* | 1 | |
51 | |||
HOUSEHOLD PRODUCTS—0.3% | |||
4,000 | Vinda International Holdings Ltd. (China) | 11 | |
INDEPENDENT POWER AND RENEWABLE ELECTRICITY PRODUCERS—0.3% | |||
34,592 | Colbun SA (Chile) | 5 | |
49,400 | Gunkul Engineering NVDR PCL (Thailand)1 | 3 | |
8 | |||
INDUSTRIAL CONGLOMERATES—0.3% | |||
13,000 | CITIC Ltd. (China) | 9 | |
1,000 | Shanghai Industrial Holdings Ltd. (Hong Kong) | 2 | |
11 | |||
INSURANCE—2.9% | |||
1,600 | BB Seguridade Participacoes SA (Brazil) | 7 | |
32,000 | China Reinsurance Group Corp. (China) | 3 | |
13,000 | Fubon Financial Holding Co. Ltd. (Taiwan) | 18 | |
1,767 | Korean Reinsurance Co. (South Korea) | 11 | |
1,775 | Liberty Holdings Ltd. (South Africa) | 6 | |
1,400 | New China Life Insurance Co Ltd. (China) | 6 | |
28,760 | Old Mutual Ltd. (South Africa) | 17 | |
9,000 | People's Insurance Co Group of China Ltd. (China) | 3 | |
12,000 | PICC Property & Casualty Co. Ltd. (China) | 8 | |
500 | Ping An Insurance Group Co. of China Ltd. (China) | 5 | |
1,600 | Qualitas Controladora SAB de CV (Mexico) | 6 | |
90 | |||
INTERACTIVE MEDIA & SERVICES—6.3% | |||
58 | Naver Corp. (South Korea) | 15 | |
2,400 | Tencent Holdings Ltd. (China) | 183 | |
198 | |||
INTERNET & DIRECT MARKETING RETAIL—11.8% | |||
822 | Alibaba Group Holding Ltd. ADR (China)*,1 | 251 | |
34 | GS Home Shopping Inc. (South Korea) | 4 | |
56 | Hyundai Home Shopping Network Corp. (South Korea) | 4 | |
407 | JD.com Inc. ADR (China)*,1 | 33 | |
1,000 | Meituan Dianping Class B (China)* | 37 | |
221 | Naspers Ltd. (South Africa) | 43 | |
372 | |||
IT SERVICES—2.0% | |||
3,079 | Infosys Ltd. ADR (India)1 | 44 | |
223 | QIWI plc ADR (Russia)1 | 3 | |
250 | WNS Holdings Ltd. ADR (India)*,1 | 15 | |
62 | |||
MACHINERY—0.9% | |||
17,000 | Lonking Holdings Ltd. (China) | 5 | |
4,000 | Sinotruk Hong Kong Ltd. (China) | 10 | |
16,200 | Zoomlion Heavy Industry Science And Technology Co. Ltd. (China) | 14 | |
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 | ||
MARINE—1.2% | |||
15,500 | Cosco Shipping Holdings Co. Ltd. (China)* | $ 10 | |
1,623 | Costamare Inc. (Greece) | 9 | |
6,400 | MISC BHD (Malaysia) | 10 | |
5,000 | SITC International Holdings Co. Ltd. (Hong Kong) | 8 | |
37 | |||
MEDIA—0.0% | |||
6,600 | Astro Malaysia Holdings BHD (Malaysia) | 1 | |
METALS & MINING—3.0% | |||
983 | African Rainbow Minerals Ltd. (South Africa) | 14 | |
129 | Anglo American Platinum Ltd. (South Africa) | 9 | |
749 | CAP SA (Chile) | 6 | |
11,000 | Jiangxi Copper Co. Ltd. (China) | 13 | |
71 | KGHM Polska Miedz SA (Poland)* | 2 | |
1,150 | Koza Altin Isletmeleri AS (Turkey)* | 10 | |
8,589 | Koza Anadolu Metal Madencilik Isletmeleri AS (Turkey)* | 12 | |
524 | Kumba Iron Ore Ltd. (South Africa) | 16 | |
5,990 | Shougang Fushan Resources Group Ltd. (China) | 1 | |
2,000 | Tata Steel Ltd. GDR (India)*,1 | 11 | |
94 | |||
OIL, GAS & CONSUMABLE FUELS—5.4% | |||
87,600 | Adaro Energy TBK PT (Indonesia) | 7 | |
9,000 | China Coal Energy Co. Ltd. (China) | 2 | |
3,500 | China Shenhua Energy Co. Ltd. (China) | 6 | |
25,000 | CNOOC Ltd. (China) | 23 | |
18,000 | COSCO SHIPPING Energy Transportation Co. Ltd. (China) | 7 | |
1,400 | Enauta Participacoes SA (Brazil) | 2 | |
260 | GS Holdings Corp. (South Korea) | 8 | |
3,300 | Indo Tambangraya Megah TBK PT (Indonesia) | 2 | |
384 | LUKOIL PJSC ADR (Russia)1 | 20 | |
754 | Petroleo Brasileiro SA ADR (Brazil)1 | 5 | |
4,400 | PTT Exploration & Production PCL NVDR (Thailand)1 | 11 | |
763 | Reliance Industries Ltd. GDR (India)1,2 | 42 | |
1,039 | Saudi Arabian Oil Co. (Saudi Arabia)2 | 9 | |
19,630 | Shanxi Xishan Coal & Electricity Power Co. Ltd. (China) | 13 | |
18,000 | Yanzhou Coal Mining Co. Ltd. (China) | 13 | |
170 | |||
PHARMACEUTICALS—1.1% | |||
400 | Dr. Reddy's Laboratories Ltd. ADR (India)1 | 26 | |
1,600 | Livzon Pharmaceutical Group Inc. (China) | 7 | |
28,000 | Sihuan Pharmaceutical Holdings Ltd. (China) | 3 | |
36 | |||
REAL ESTATE MANAGEMENT & DEVELOPMENT—2.0% | |||
6,000 | Agile Group Holdings Ltd. (China) | 8 | |
13,700 | Beijing Capital Development Co. Ltd. (China) | 13 | |
11,000 | China Overseas Grand Oceans Group Ltd. (China) | 6 | |
36,000 | Gemdale Corp. (China) | 6 | |
4,000 | Greenland Hong Kong Holdings Ltd. (China) | 1 | |
9,000 | KWG Group Holdings Ltd. (China) | 12 | |
4,500 | KWG Living Group Holdings Ltd. (China)* | 3 | |
8,000 | Logan Property Holdings Co. Ltd. (China) | 13 | |
6,000 | Poly Property Group Co. Ltd. (China) | 2 | |
64 | |||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—8.1% | |||
378 | DB Hitek Co. Ltd. (South Korea) | 11 | |
2,000 | Flat Glass Group Co. Ltd. (China) | 6 | |
2,000 | Kinsus Interconnect Technology Corp. (Taiwan) | 5 | |
1,000 | Realtek Semiconductor Corp. (Taiwan) | 12 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—Continued | |||
13,000 | Taiwan Semiconductor Manufacturing Co. Ltd. (Taiwan) | $ 197 | |
1,000 | Topco Scientific Co. Ltd. (Taiwan) | 4 | |
20,000 | United Microelectronics Corp. (Taiwan) | 21 | |
256 | |||
SOFTWARE—0.5% | |||
166 | Asseco Poland SA (Poland) | 3 | |
200 | G Bits Network Technology Co. Ltd. (China) | 14 | |
17 | |||
SPECIALTY RETAIL—1.9% | |||
2,000 | China Meidong Auto Holdings Ltd. (China) | 8 | |
5,000 | HLA Corp. Ltd. (China) | 5 | |
270 | Jarir Marketing Co. (Saudi Arabia) | 12 | |
400 | JUMBO SA (Greece) | 6 | |
7,700 | Shanghai Yuyuan Tourist Mart Group Co. Ltd. (China) | 10 | |
2,500 | Zhongsheng Group Holdings (China) | 18 | |
59 | |||
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS—6.7% | |||
5,000 | Chicony Electronics Co. Ltd. (Taiwan) | 15 | |
26,000 | Lenovo Group Ltd. (China) | 16 | |
9,000 | Lite-On Technology Corp. (Taiwan) | 15 | |
5,000 | Pegatron Corp (Taiwan) | 11 | |
4,000 | Quanta Computer Inc. (Taiwan) | 10 | |
2,592 | Samsung Electronics Co. Ltd. (South Korea) | 130 | |
15,000 | Wistron Corp. (Taiwan) | 15 | |
212 | |||
TEXTILES, APPAREL & LUXURY GOODS—0.1% | |||
74 | Handsome Co. Ltd. (South Korea) | 2 | |
TRADING COMPANIES & DISTRIBUTORS—0.2% | |||
324 | LG International Corp. (South Korea) | 5 | |
25 | POSCO International Corp (South Korea) | — | |
5 | |||
TRANSPORTATION INFRASTRUCTURE—0.2% | |||
10,000 | Zhejiang Expressway Co. Class H (China) | 7 | |
WIRELESS TELECOMMUNICATION SERVICES—1.6% | |||
4,000 | China Mobile Ltd. (China) | 24 | |
1,564 | Etihad Etisalat Co. (Saudi Arabia)* | 12 | |
145 | Globe Telecom Inc. (Philippines) | 6 | |
73,300 | Jasmine International NVDR PCL (Thailand)1 | 6 | |
152 | PLDT Inc. ADR (Philippines)1 | 4 | |
52 | |||
TOTAL COMMON STOCKS | |||
(Cost $2,883) | 3,025 | ||
EXCHANGE-TRADED FUNDS—1.7% | |||
(Cost $54) | |||
Shares | |||
CAPITAL MARKETS—1.7% | |||
1,573 | iShares MSCI India ETF (India) | 53 | |
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—1.8% | |||
Shares | Value | ||
BANKS—0.3% | |||
2,100 | Banco Estado Rio Grande do Sul SA (Brazil) | $ 4 | |
2,800 | Itausa - Investimentos Itau SA (Brazil) | 5 | |
9 | |||
ELECTRIC UTILITIES—0.5% | |||
8,400 | Cia Energetica de Minas Gerais (Brazil)* | 15 | |
OIL, GAS & CONSUMABLE FUELS—0.4% | |||
2,144 | Petroleo Brasileiro SA ADR (Brazil)1 | 14 | |
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS—0.6% | |||
415 | Samsung Electronics Co Ltd. (South Korea) | 18 |
PREFERRED STOCKS—Continued | |||
Shares | Value | ||
WATER UTILITIES—0.0% | |||
2,400 | Cia de Saneamento do Parana (Brazil)* | $ 2 | |
TOTAL PREFERRED STOCKS | |||
(Cost $83) | 58 | ||
TOTAL INVESTMENTS—99.3% | |||
(Cost $3,020) | 3,136 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—0.7% | 23 | ||
TOTAL NET ASSETS—100.0% | $3,159 |
FAIR VALUE MEASUREMENTS
The following table summarizes the Fund’s investments as of October 31, 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 | $ — | $ 110 | $— | $ 110 | ||||
Europe | 33 | 55 | — | 88 | ||||
Latin America | 142 | 20 | — | 162 | ||||
Middle East/Central Asia | 174 | 114 | — | 288 | ||||
Pacific Basin | 309 | 2,068 | — | 2,377 | ||||
Exchange-Traded Funds | ||||||||
Middle East/Central Asia | 53 | — | — | 53 | ||||
Preferred Stocks | ||||||||
Latin America | 25 | 15 | — | 40 | ||||
Pacific Basin | — | 18 | — | 18 | ||||
Total Investments in Securities | $736 | $2,400 | $— | $3,136 |
There were no Level 3 investments at October 31, 2020 or December 1, 2019 (inception).
For more information on valuation inputs and their aggregation into the levels used in the table above, please refer to the Fair Value Measurements and Disclosures in Note 2 of the accompanying Notes to Portfolios of Investments.
* | Non-income producing security |
1 | Depositary receipts such as American Depositary Receipts (ADRs), Global Depositary Receipts (GDRs) and other country specific depositary receipts are certificates evidencing ownership of shares of a foreign issuer. These certificates are issued by depositary 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 October 31, 2020, the aggregate value of these securities was $71 or 2% of net assets. |
The accompanying notes are an integral part of the Financial Statements.
26
Harbor Robeco Funds
StatementS of Assets and Liabilities—October 31, 2020
StatementS of Assets and Liabilities—October 31, 2020
(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* | $2,972 | $3,452 | $2,844 | $3,089 | $3,020 | |||||
Investments, at value | $2,888 | $3,344 | $2,776 | $3,008 | $3,136 | |||||
Cash | 27 | 25 | — | 9 | — | |||||
Foreign currency, at value (cost: $3,$14,$11,$0 and $9) | 3 | 14 | 12 | — | 8 | |||||
Receivables for: | ||||||||||
Capital shares sold | — | — | — | — | 1 | |||||
Dividends | 5 | 8 | 9 | 4 | 3 | |||||
Withholding tax | — | 2 | 1 | — | — | |||||
Prepaid registration fees | 26 | 26 | 26 | 26 | 26 | |||||
Other assets | 5 | — | 4 | — | 24 | |||||
Total Assets | 2,954 | 3,419 | 2,828 | 3,047 | 3,198 | |||||
LIABILITIES | ||||||||||
Payables for: | ||||||||||
Due to custodian | — | — | 1 | — | 4 | |||||
Accrued expenses: | ||||||||||
Management fees | 2 | 1 | 1 | 1 | 2 | |||||
Other | 27 | 18 | 15 | 17 | 33 | |||||
Total Liabilities | 29 | 19 | 17 | 18 | 39 | |||||
NET ASSETS | $2,925 | $3,400 | $2,811 | $3,029 | $3,159 | |||||
Net Assets Consist of: | ||||||||||
Paid-in capital | $3,131 | $3,925 | $3,078 | $3,355 | $3,087 | |||||
Total distributable earnings/(loss) | (206) | (525) | (267) | (326) | 72 | |||||
$2,925 | $3,400 | $2,811 | $3,029 | $3,159 | ||||||
NET ASSET VALUE PER SHARE BY CLASS | ||||||||||
Retirement Class | ||||||||||
Net assets | $1,462 | $1,762 | $1,371 | $1,429 | $1,540 | |||||
Shares of beneficial interest1 | 157 | 195 | 149 | 161 | 151 | |||||
Net asset value per share2 | $ 9.33 | $ 9.04 | $ 9.21 | $ 8.89 | $10.23 | |||||
Institutional Class | ||||||||||
Net assets | $1,417 | $1,611 | $1,402 | $1,564 | $1,589 | |||||
Shares of beneficial interest1 | 152 | 178 | 153 | 176 | 155 | |||||
Net asset value per share2 | $ 9.33 | $ 9.04 | $ 9.20 | $ 8.89 | $10.23 | |||||
Investor Class | ||||||||||
Net assets | $ 46 | $ 27 | $ 38 | $ 36 | $ 30 | |||||
Shares of beneficial interest1 | 5 | 3 | 4 | 4 | 3 | |||||
Net asset value per share2 | $ 9.30 | $ 9.01 | $ 9.17 | $ 8.87 | $10.20 |
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—Year Ended October 31, 2020
StatementS of Operations—Year Ended October 31, 2020
(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 | $ 128 | $ 103 | $ 100 | $ 72 | $ 102 |
Interest | — | 1 | (2) | — | — |
Foreign taxes withheld | (16) | (7) | (12) | — | (12) |
Total Investment Income | 112 | 97 | 86 | 72 | 90 |
Operating Expenses | |||||
Management fees | 18 | 11 | 11 | 8 | 20 |
12b-1 fees: | |||||
Investor Class | — | — | — | — | — |
Shareholder communications | 8 | 9 | 8 | 8 | 9 |
Custodian fees | 33 | 24 | 32 | 8 | 55 |
Transfer agent fees: | — | — | — | — | — |
Retirement Class | — | — | — | — | — |
Institutional Class | 2 | 2 | 1 | 2 | 2 |
Investor Class | — | — | — | — | — |
Professional fees | 35 | 24 | 24 | 20 | 38 |
Registration fees | 58 | 58 | 58 | 58 | 58 |
Miscellaneous | 9 | 8 | 8 | 8 | 9 |
Total expenses | 163 | 136 | 142 | 112 | 191 |
Transfer agent fees waived | — | — | — | — | — |
Other expenses reimbursed | (142) | (122) | (129) | (101) | (168) |
Net expenses | 21 | 14 | 13 | 11 | 23 |
Net Investment Income/(Loss) | 91 | 83 | 73 | 61 | 67 |
Realized and Change in Net Unrealized Gain/(Loss) on Investment Transactions | |||||
Net realized gain/(loss) on: | |||||
Investments | (204) | (495) | (274) | (300) | (99) |
Foreign currency transactions | (1) | (1) | 4 | — | (3) |
Change in net unrealized appreciation/(depreciation) on: | |||||
Investments | (84) | (108) | (68) | (81) | 117 |
Net gain/(loss) on investment transactions | (289) | (604) | (338) | (381) | 15 |
Net Increase/(Decrease) in Net Assets Resulting from Operations | $(198) | $(521) | $(265) | $(320) | $ 82 |
a | For the period December 1, 2019 (inception) through October 31, 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 October 31, 2020 | December 1, 2019a through October 31, 2020 | ||
INCREASE/(DECREASE) IN NET ASSETS | |||
Operations: | |||
Net investment income/(loss) | $ 91 | $ 83 | |
Net realized gain/(loss) on investments | (205) | (496) | |
Change in net unrealized appreciation/(depreciation) of investments | (84) | (108) | |
Net increase/(decrease) in assets resulting from operations | (198) | (521) | |
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 | 3,131 | 3,925 | |
Net increase/(decrease) in net assets | 2,925 | 3,400 | |
Net Assets | |||
Beginning of period | — | — | |
End of period | $2,925 | $3,400 |
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 October 31, 2020 | December 1, 2019a through October 31, 2020 | December 1, 2019a through October 31, 2020 | ||
$ 73 | $ 61 | $ 67 | ||
(270) | (300) | (102) | ||
(68) | (81) | 117 | ||
(265) | (320) | 82 | ||
(1) | (3) | (5) | ||
(1) | (3) | (5) | ||
— | — | — | ||
(2) | (6) | (10) | ||
3,078 | 3,355 | 3,087 | ||
2,811 | 3,029 | 3,159 | ||
— | — | — | ||
$2,811 | $3,029 | $3,159 |
31
Harbor Robeco Funds
Statements of Changes in Net Assets—Capital Stock Activity
Statements of Changes in Net Assets—Capital Stock Activity
(All amounts in thousands)
Harbor Robeco Emerging Markets Conservative Equities Fund | Harbor Robeco Global Conservative Equities Fund | ||
December 1, 2019a through October 31, 2020 | December 1, 2019a through October 31, 2020 | ||
AMOUNT ($) | |||
Retirement Class | |||
Net proceeds from sale of shares | $1,558 | $2,728 | |
Reinvested distributions | 4 | 2 | |
Cost of shares reacquired | — | (615) | |
Net increase/(decrease) in net assets | $1,562 | $2,115 | |
Institutional Class | |||
Net proceeds from sale of shares | $1,543 | $1,829 | |
Reinvested distributions | 4 | 2 | |
Cost of shares reacquired | (28) | (51) | |
Net increase/(decrease) in net assets | $1,519 | $1,780 | |
Investor Class | |||
Net proceeds from sale of shares | $ 50 | $ 30 | |
Reinvested distributions | — | — | |
Cost of shares reacquired | — | — | |
Net increase/(decrease) in net assets | $ 50 | $ 30 | |
SHARES | |||
Retirement Class | |||
Shares sold | 156 | 271 | |
Shares issued due to reinvestment of distributions | 1 | — | |
Shares reacquired | — | (76) | |
Net increase/(decrease) in shares outstanding | 157 | 195 | |
Institutional Class | |||
Shares sold | 155 | 184 | |
Shares issued due to reinvestment of distributions | — | — | |
Shares reacquired | (3) | (6) | |
Net increase/(decrease) in shares outstanding | 152 | 178 | |
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 October 31, 2020 | December 1, 2019a through October 31, 2020 | December 1, 2019a through October 31, 2020 | ||
$1,624 | $1,588 | $1,500 | ||
1 | 3 | 5 | ||
(111) | (5) | — | ||
$1,514 | $1,586 | $1,505 | ||
$1,523 | $1,764 | $1,577 | ||
1 | 3 | 5 | ||
— | (38) | (30) | ||
$1,524 | $1,729 | $1,552 | ||
$ 40 | $ 108 | $ 30 | ||
— | — | — | ||
— | (68) | — | ||
$ 40 | $ 40 | $ 30 | ||
162 | 161 | 151 | ||
— | — | — | ||
(13) | — | — | ||
149 | 161 | 151 | ||
153 | 180 | 158 | ||
— | — | — | ||
— | (4) | (3) | ||
153 | 176 | 155 | ||
4 | 12 | 3 | ||
— | — | — | ||
— | (8) | — | ||
4 | 4 | 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 | |||
Year Ended October 31, | 2020 f | 2020 f | 2020 f | ||
Net asset value beginning of period | $10.00 | $10.00 | $10.00 | ||
Income from Investment Operations | |||||
Net investment income/(loss)a,e | 0.30 | 0.29 | 0.27 | ||
Net realized and unrealized gain/(loss) on investments | (0.95) | (0.94) | (0.95) | ||
Total from investment operations | (0.65) | (0.65) | (0.68) | ||
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 | 9.33 | 9.33 | 9.30 | ||
Net assets end of period (000s) | $1,462 | $1,417 | $ 46 | ||
Ratios and Supplemental Data (%) | |||||
Total returnb | (6.48)% c | (6.48)% c | (6.81)% c | ||
Ratio of total expenses to average net assets^ | 6.08 d | 6.16 d | 6.53 d | ||
Ratio of net expenses to average net assetsa | 0.75 d | 0.83 d | 1.20 d | ||
Ratio of net investment income to average net assetsa | 3.45 d | 3.35 d | 3.16 d | ||
Portfolio turnover | 28 c | 28 c | 28 c |
HARBOR ROBECO GLOBAL CONSERVATIVE EQUITIES FUND | |||||
Retirement Class | Institutional Class | Investor Class | |||
Year Ended October 31, | 2020 f | 2020 f | 2020 f | ||
Net asset value beginning of period | $10.00 | $10.00 | $10.00 | ||
Income from Investment Operations | |||||
Net investment income/(loss)a,e | 0.23 | 0.22 | 0.19 | ||
Net realized and unrealized gain/(loss) on investments | (1.18) | (1.17) | (1.17) | ||
Total from investment operations | (0.95) | (0.95) | (0.98) | ||
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 | 9.04 | 9.04 | 9.01 | ||
Net assets end of period (000s) | $1,762 | $1,611 | $ 27 | ||
Ratios and Supplemental Data (%) | |||||
Total returnb | (9.48)% c | (9.48)% c | (9.81)% c | ||
Ratio of total expenses to average net assets^ | 4.36 d | 4.44 d | 4.81 d | ||
Ratio of net expenses to average net assetsa | 0.40 d | 0.48 d | 0.85 d | ||
Ratio of net investment income to average net assetsa | 2.74 d | 2.64 d | 2.24 d | ||
Portfolio turnover | 43 c | 43 c | 43 c |
See page 38 for notes to the Financial Highlights.
The accompanying notes are an integral part of the Financial Statements.
34
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 | |||
Year Ended October 31, | 2020 f | 2020 f | 2020 f | ||
Net asset value beginning of period | $10.00 | $10.00 | $10.00 | ||
Income from Investment Operations | �� | ||||
Net investment income/(loss)a,e | 0.24 | 0.24 | 0.21 | ||
Net realized and unrealized gain/(loss) on investments | (1.02) | (1.03) | (1.04) | ||
Total from investment operations | (0.78) | (0.79) | (0.83) | ||
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 | 9.21 | 9.20 | 9.17 | ||
Net assets end of period (000s) | $1,371 | $1,402 | $ 38 | ||
Ratios and Supplemental Data (%) | |||||
Total returnb | (7.84)% c | (7.94)% c | (8.27)% c | ||
Ratio of total expenses to average net assets^ | 5.38 d | 5.46 d | 5.83 d | ||
Ratio of net expenses to average net assetsa | 0.45 d | 0.53 d | 0.90 d | ||
Ratio of net investment income to average net assetsa | 2.83 d | 2.76 d | 2.42 d | ||
Portfolio turnover | 32 c | 32 c | 32 c |
HARBOR ROBECO US CONSERVATIVE EQUITIES FUND | |||||
Retirement Class | Institutional Class | Investor Class | |||
Year Ended October 31, | 2020 f | 2020 f | 2020 f | ||
Net asset value beginning of period | $ 10.00 | $ 10.00 | $ 10.00 | ||
Income from Investment Operations | |||||
Net investment income/(loss)a,e | 0.19 | 0.18 | 0.15 | ||
Net realized and unrealized gain/(loss) on investments | (1.28) | (1.27) | (1.26) | ||
Total from investment operations | (1.09) | (1.09) | (1.11) | ||
Less Distributions | |||||
Dividends from net investment income | (0.02) | (0.02) | — | ||
Distributions from net realized capital gains | — | — | — | ||
Total distributions | (0.02) | (0.02) | (0.02) | ||
Net asset value end of period | 8.89 | 8.89 | 8.87 | ||
Net assets end of period (000s) | $ 1,429 | $ 1,564 | $ 36 | ||
Ratios and Supplemental Data (%) | |||||
Total returnb | (10.82)% c | (10.92)% c | (11.15)% c | ||
Ratio of total expenses to average net assets^ | 4.01 d | 4.09 d | 4.46 d | ||
Ratio of net expenses to average net assetsa | 0.35 d | 0.43 d | 0.80 d | ||
Ratio of net investment income to average net assetsa | 2.24 d | 2.16 d | 1.87 d | ||
Portfolio turnover | 38 c | 38 c | 38 c |
See page 38 for notes to the Financial Highlights.
The accompanying notes are an integral part of the Financial Statements.
36
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 | |||
Year Ended October 31, | 2020 f | 2020 f | 2020 f | ||
Net asset value beginning of period | $10.00 | $10.00 | $10.00 | ||
Income from Investment Operations | |||||
Net investment income/(loss)a,e | 0.22 | 0.22 | 0.18 | ||
Net realized and unrealized gain/(loss) on investments | 0.04 | 0.04 | 0.05 | ||
Total from investment operations | 0.26 | 0.26 | 0.23 | ||
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 | 10.23 | 10.23 | 10.20 | ||
Net assets end of period (000s) | $1,540 | $1,589 | $ 30 | ||
Ratios and Supplemental Data (%) | |||||
Total returnb | 2.63% c | 2.63% c | 2.30% c | ||
Ratio of total expenses to average net assets^ | 6.94 d | 7.02 d | 7.39 d | ||
Ratio of net expenses to average net assetsa | 0.79 d | 0.87 d | 1.24 d | ||
Ratio of net investment income to average net assetsa | 2.50 d | 2.43 d | 2.05 d | ||
Portfolio turnover | 47 c | 47 c | 47 c |
* | 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 average daily shares outstanding during the period. |
f | For the period December 1, 2019 (inception) through October 31, 2020 |
The accompanying notes are an integral part of the Financial Statements.
38
Harbor Robeco Funds
Notes to Financial Statements—October 31, 2020
Notes to Financial Statements—October 31, 2020
Note 1—Organizational Matters
Harbor Funds (the “Trust”) is registered under the Investment Company Act of 1940, as amended (the “Investment Company Act”), as an open-end management investment company. As of October 31, 2020, the Trust consists of 36 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.
Each Fund’s inception date was December 1, 2019.
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) subject to the approval of the Trust’s Board of Trustees (the “Board of Trustees”), certain expenses may be applied differently to each class of shares in accordance with current regulations of the U.S. Securities and Exchange Commission (“SEC”) and the Internal Revenue Service; and (ii) shareholders of a class that bears distribution and service expenses under terms of a distribution plan have exclusive voting rights as to that distribution plan.
Note 2—Significant Accounting Policies
The following is a summary of significant accounting policies followed by the Trust in the preparation of its financial statements. Each Fund follows the investment company reporting requirements under U.S. Generally Accepted Accounting Principles (“U.S. GAAP”), which includes the accounting and reporting guidelines under Accounting Standards Codification (“ASC”) Topic 946, Financial Services-Investment Companies. The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results may differ from those estimates.
Security Valuation
The Trust’s valuation procedures permit the Funds to use a variety of valuation methodologies, consider a number of subjective factors, analyze applicable facts and circumstances and, in general, exercise judgment, when valuing Fund investments. The methodology used for a specific type of investment may vary based on the circumstances and relevant considerations, including available market data.
Equity securities (including common stock, preferred stock, 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.
40
Harbor Robeco Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 2—Significant Accounting Policies—Continued
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.
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.
41
Harbor Robeco Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 2—Significant Accounting Policies—Continued
Investment Income
Dividends declared on portfolio securities are accrued on the ex-dividend date. For foreign securities, certain dividends are recorded after the ex-dividend date, but as soon as the respective Fund is notified of such dividends. Interest income is accrued daily as earned. Discounts and premiums on fixed income securities are amortized over the life of the respective securities (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 U.S. 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 U.S. 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 foreign 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 expected to be taken upon filing the 2020 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.
42
Harbor Robeco 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 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
43
Harbor Robeco Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 2—Significant Accounting Policies—Continued
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 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 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 October 31, 2020 are as follows:
Purchases (000s) | Sales (000s) | ||
CONSERVATIVE EQUITY | |||
Harbor Robeco Emerging Markets Conservative Equities Fund | $3,966 | $ 789 | |
Harbor Robeco Global Conservative Equities Fund | 5,350 | 1,443 | |
Harbor Robeco International Conservative Equities Fund | 4,015 | 897 | |
Harbor Robeco US Conservative Equities Fund | 4,505 | 1,116 | |
CORE EQUITY | |||
Harbor Robeco Emerging Markets Active Equities Fund | $4,513 | $1,384 |
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. This collateral is recognized as the gross liability for securities loaned in the Statements of Assets and Liabilities. Cash collateral is invested in the State Street Navigator Securities Lending Government Money Market Portfolio (the “Navigator Portfolio”), a money market mutual fund that seeks to provide income while maintaining a stable net asset value of $1.00. There is no assurance that the Navigator Portfolio will maintain a stable net asset value and the Funds are subject to the risk of loss on the cash collateral invested. A portion of the earnings generated by the investment of the cash collateral is rebated to the borrower for the use of the cash collateral and these earnings (less any rebate) are then divided between the Fund and the Lending Agent, as a fee for its services, according to agreed-upon rates. The Lending Agent and a Fund will share in any shortfall in the rebate due to the borrower, according to agreed-upon rates.
In addition to receiving a fee from the borrower based on the demand for securities loaned and earning income on the investment of the cash collateral, a Fund receives substitute interest, dividends, or other amounts on the loaned securities, during the term of a loan. Net securities lending income is disclosed as such in the Statements of Operations.
Loans may be terminated at the option of the borrower or the Funds. Upon termination of the loan, the borrower will return to the Fund securities that are identical to the loaned securities. The Funds bear the risk of delay in recovery of, or loss of rights in, the securities loaned and the risk that the value of the collateral falls below the value of the securities on loan. Each Fund seeks to mitigate this risk through the SLA Agreement, which provides that in the event of default, the Lending Agent
44
Harbor Robeco Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 3—Investment Portfolio Transactions—Continued
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.
During the year, Harbor Robeco Global Conservative Equities Fund and Harbor Robeco International Conservative Equities Fund engaged in securities lending. As of October 31, 2020, the Funds had no securities out on loan.
Note 4—FEES AND OTHER Transactions with Affiliates
Investment Adviser
Harbor Capital is a wholly owned subsidiary of ORIX Corporation (“ORIX”). Harbor Capital is the Funds’ investment adviser and is also responsible for administrative and other services.
Each Fund has a separate advisory agreement with Harbor Capital. The agreements provide for management fees based on an annual percentage rate of average daily net assets as follows:
Contractual Rate | Actual Rate | ||
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% |
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.
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.
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
45
Harbor Robeco Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 4—FEES AND OTHER Transactions with Affiliates—Continued
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 period ended October 31, 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
As of October 31, 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 | 95.9% | ||||
Harbor Robeco Global Conservative Equities Fund | 177,147 | 148,692 | 3,003 | 328,842 | 87.4 | ||||
Harbor Robeco International Conservative Equities Fund | 148,599 | 148,590 | 3,001 | 300,190 | 98.3 | ||||
Harbor Robeco US Conservative Equities Fund | 151,758 | 148,799 | 3,005 | 303,562 | 89.1 | ||||
CORE EQUITY | |||||||||
Harbor Robeco Emerging Markets Active Equities Fund | 148,995 | 148,975 | 3,009 | 300,979 | 97.5% |
46
Harbor Robeco Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 4—FEES AND OTHER Transactions with Affiliates—Continued
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.
NOTE 5—TAX INFORMATION
The amount and character of income and net realized gains to be distributed are determined in accordance with income tax rules and regulations, which may differ from U.S. GAAP. Reclassifications, if any are made to each Fund’s capital account to reflect income and net realized gains available for distribution (or available capital loss carryovers) under income tax rules and regulations. There were no reclassification amounts on the Statement of Assets and Liabilities between total distributable earnings/(loss) and paid-in capital for the year ended October 31, 2020.
The tax composition of each Fund’s distributions is as follows:
As of October 31, 2020 | |||||
Ordinary Income (000s) | Long-Term Capital Gains (000s) | Total (000s) | |||
CONSERVATIVE EQUITY | |||||
Harbor Robeco Emerging Markets Conservative Equities Fund | $ 8 | $— | $ 8 | ||
Harbor Robeco Global Conservative Equities Fund | 4 | — | 4 | ||
Harbor Robeco International Conservative Equities Fund | 2 | — | 2 | ||
Harbor Robeco US Conservative Equities Fund | 6 | — | 6 | ||
CORE EQUITY | |||||
Harbor Robeco Emerging Markets Active Equities Fund | $10 | $— | $10 |
47
Harbor Robeco Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
NOTE 5—TAX INFORMATION—Continued
As of October 31, 2020, the components of each Fund’s distributable earnings on a tax basis are as follows:
Undistributed Ordinary Income (000s) | Undistributed Long-Term Capital Gains (000s) | Unrealized Appreciation/ (Depreciation) (000s) | |||
CONSERVATIVE EQUITY | |||||
Harbor Robeco Emerging Markets Conservative Equities Fund | $88 | $— | $ (89) | ||
Harbor Robeco Global Conservative Equities Fund | 79 | — | (109) | ||
Harbor Robeco International Conservative Equities Fund | 95 | — | (83) | ||
Harbor Robeco US Conservative Equities Fund | 51 | — | (80) | ||
CORE EQUITY | |||||
Harbor Robeco Emerging Markets Active Equities Fund | $72 | $— | $ 103 |
At October 31, 2020, the Funds in the following table had capital loss carryforwards for federal tax purposes which will reduce the Funds' taxable income arising from future net realized gains on investments to the extent permitted by the Internal Revenue Code. Use of the capital loss carryforwards will reduce the amount of the distribution to shareholders which would otherwise be necessary to relieve each Fund of any federal tax liability. The capital loss carryforwards do not expire.
Capital Loss Carryforward | |||||
Short-Term (000s) | Long-Term (000s) | Total (000s) | |||
CONSERVATIVE EQUITY | |||||
Harbor Robeco Emerging Markets Conservative Equities Fund | $204 | $— | $204 | ||
Harbor Robeco Global Conservative Equities Fund | 493 | — | 493 | ||
Harbor Robeco International Conservative Equities Fund | 278 | — | 278 | ||
Harbor Robeco US Conservative Equities Fund | 297 | — | 297 | ||
CORE EQUITY | |||||
Harbor Robeco Emerging Markets Active Equities Fund | $103 | $— | $103 |
The identified cost for federal income tax purposes of investments owned by each Fund and its respective gross unrealized appreciation and depreciation at October 31, 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* | $2,980 | $319 | $(408) | $ (89) | |||
Harbor Robeco Global Conservative Equities Fund* | 3,467 | 204 | (313) | (109) | |||
Harbor Robeco International Conservative Equities Fund* | 2,870 | 165 | (248) | (83) | |||
Harbor Robeco US Conservative Equities Fund* | 3,088 | 201 | (281) | (80) | |||
CORE EQUITY | |||||||
Harbor Robeco Emerging Markets Active Equities Fund* | $3,041 | $451 | $(348) | $ 103 |
* | Capital loss carryforwards are available, which may reduce taxable income from future net realized gain on investments. |
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.
48
Harbor Robeco Funds
Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
The Board of Trustees and Shareholders of
Harbor Funds
Harbor Funds
Opinion on the Financial Statements
We have audited the accompanying statements of assets and liabilities of Harbor 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 (collectively referred to as the “Funds”), (five of the funds constituting Harbor Funds (the “Trust”)), including the portfolios of investments, as of October 31, 2020, and the related statements of operations and changes in net assets, and the financial highlights for each of the periods indicated in the table below and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Funds (five of the funds constituting Harbor Funds), at October 31, 2020, the results of their operations, changes in net assets and financial highlights for each of the periods indicated in the table below, in conformity with U.S. generally accepted accounting principles.
Individual fund comprising the Harbor Funds | Statement of operations | Statement of changes in net assets | Financial highlights |
Harbor 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 | For the period from December 1, 2019 (inception) through October 31, 2020 |
Basis for Opinion
These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on each of the Funds’ financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust’s internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2020, by correspondence the custodian. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Harbor Funds investment companies since 2000.
Chicago, Illinois
December 21, 2020
December 21, 2020
49
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 May 1, 2020 through October 31, 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 May 1, 2020 | Ending Account Value October 31, 2020 | |||||
Harbor Robeco Emerging Markets Conservative Equities Fund | ||||||||
Retirement Class | 0.75% | |||||||
Actual | $3.93 | $1,000 | $1,086.15 | |||||
Hypothetical (5% return) | 3.81 | 1,000 | 1,021.27 | |||||
Institutional Class | 0.83% | |||||||
Actual | $4.35 | $1,000 | $1,086.15 | |||||
Hypothetical (5% return) | 4.22 | 1,000 | 1,020.86 | |||||
Investor Class | 1.20% | |||||||
Actual | $6.28 | $1,000 | $1,083.92 | |||||
Hypothetical (5% return) | 6.09 | 1,000 | 1,018.95 | |||||
Harbor Robeco Global Conservative Equities Fund | ||||||||
Retirement Class | 0.40% | |||||||
Actual | $2.07 | $1,000 | $1,061.03 | |||||
Hypothetical (5% return) | 2.03 | 1,000 | 1,023.08 | |||||
Institutional Class | 0.48% | |||||||
Actual | $2.49 | $1,000 | $1,062.28 | |||||
Hypothetical (5% return) | 2.44 | 1,000 | 1,022.66 | |||||
Investor Class | 0.85% | |||||||
Actual | $4.40 | $1,000 | $1,060.00 | |||||
Hypothetical (5% return) | 4.32 | 1,000 | 1,020.76 |
50
Harbor Robeco Funds
Fees and Expenses Example—Continued
Fees and Expenses Example—Continued
Annualized Expense Ratios* | Expenses Paid During Period** | Beginning Account Value May 1, 2020 | Ending Account Value October 31, 2020 | |||||
Harbor Robeco International Conservative Equities Fund | ||||||||
Retirement Class | 0.45% | |||||||
Actual | $2.36 | $1,000 | $1,092.53 | |||||
Hypothetical (5% return) | 2.29 | 1,000 | 1,022.82 | |||||
Institutional Class | 0.53% | |||||||
Actual | $2.78 | $1,000 | $1,091.34 | |||||
Hypothetical (5% return) | 2.69 | 1,000 | 1,022.41 | |||||
Investor Class | 0.90% | |||||||
Actual | $4.72 | $1,000 | $1,089.07 | |||||
Hypothetical (5% return) | 4.57 | 1,000 | 1,020.50 | |||||
Harbor Robeco US Conservative Equities Fund | ||||||||
Retirement Class | 0.35% | |||||||
Actual | $1.80 | $1,000 | $1,043.38 | |||||
Hypothetical (5% return) | 1.78 | 1,000 | 1,023.33 | |||||
Institutional Class | 0.43% | |||||||
Actual | $2.21 | $1,000 | $1,042.20 | |||||
Hypothetical (5% return) | 2.19 | 1,000 | 1,022.92 | |||||
Investor Class | 0.80% | |||||||
Actual | $4.10 | $1,000 | $1,041.08 | |||||
Hypothetical (5% return) | 4.06 | 1,000 | 1,021.01 | |||||
Harbor Robeco Emerging Markets Active Equities Fund | ||||||||
Retirement Class | 0.79% | |||||||
Actual | $4.33 | $1,000 | $1,179.93 | |||||
Hypothetical (5% return) | 4.01 | 1,000 | 1,021.07 | |||||
Institutional Class | 0.87% | |||||||
Actual | $4.77 | $1,000 | $1,181.29 | |||||
Hypothetical (5% return) | 4.42 | 1,000 | 1,020.65 | |||||
Investor Class | 1.24% | |||||||
Actual | $6.79 | $1,000 | $1,179.19 | |||||
Hypothetical (5% return) | 6.29 | 1,000 | 1,018.75 |
* | Reflective of all fee waivers and expense reimbursements |
** | Expenses are equal to the Fund’s annualized net expense ratio, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). |
51
Harbor Robeco Funds
Additional Information (Unaudited)
Additional Information (Unaudited)
Additional Tax Information
The Funds designate the following portions of their distributions from investment company taxable income for the fiscal year ended October 31, 2020 as qualifying for the dividends received deduction for corporate shareholders.
Percentage of Distribution | |
CONSERVATIVE EQUITY | |
Harbor Robeco Global Conservative Equities Fund | 44% |
Harbor Robeco US Conservative Equities Fund | 98% |
For the fiscal year ended October 31, 2020, each Fund designates up to the maximum amount of such dividends allowable pursuant to the Internal Revenue Code as qualified dividend income eligible for reduced tax rates. These lower rates range from 0% to 20% depending on an individual’s tax bracket. If a Fund pays a distribution during calendar year 2020, complete information will be reported in conjunction with Form 1099-DIV.
The Funds designate the following foreign taxes and foreign source earned income for Federal income tax purposes:
Foreign Taxes Paid (000s) | Foreign Source Earned Income (000s) | ||
CONSERVATIVE EQUITY | |||
Harbor Robeco Emerging Markets Conservative Equities Fund | $16 | $128 | |
Harbor Robeco International Conservative Equities Fund | 11 | 98 | |
CORE EQUITY | |||
Harbor Robeco Emerging Markets Active Equities Fund | $12 | $101 |
Shareholders who own shares through a taxable Harbor Funds account and that received distributions from a Fund during calendar year 2020 will receive a Form 1099-DIV in January 2021 that will show the tax character of those distributions.
Proxy Voting
Harbor Funds has adopted Proxy Voting Policies and Procedures under which proxies relating to securities held by the Harbor funds are voted. In addition, Harbor Funds files Form N-PX, with its complete proxy voting record for the 12 months ended June 30th, no later than August 31st of each year. A description of Harbor Funds’ Proxy Voting Policies and Procedures and the proxy voting records (Form N-PX) are available (i) without charge, upon request, by calling Harbor Funds toll-free at 800-422-1050; (ii) on Harbor Funds’ website at harborfunds.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 for their first and third fiscal quarters with the SEC as an exhibit to Form N-PORT. The Funds’ Form N-PORT exhibit is available (i) without charge, upon request, by calling Harbor Funds toll-free at 800-422-1050, (ii) on Harbor Funds’ website at harborfunds.com, and (iii) on the SEC’s website at sec.gov.
52
Harbor Robeco Funds
Additional Information—Continued
Additional Information—Continued
Trustees and Officers
As of December 2020
The business and affairs of the Trust shall be managed by or under the direction of the Trustees, and they shall have all powers necessary or desirable to carry out that responsibility. The Trustees shall have full power and authority to take or refrain from taking any action and to execute any contracts and instruments that they may consider necessary or desirable in the management of the Trust. Any determination made by the Trustees in good faith as to what is in the interests of the Trust shall be conclusive. Information pertaining to the Trustees and Officers of Harbor Funds is set forth below. The address of each Trustee and Officer is: [Name of Trustee or Officer] c/o Harbor Funds, 111 South Wacker Drive, 34th Floor, Chicago, IL 60606-4302.
Harbor Funds' Statement of Additional Information includes additional information about the Trust’s Trustees and is available without charge by calling 800-422-1050 or at the Trust’s website at harborfunds.com.
Name (Age) Position(s) with Fund | Term of Office and Length of Time Served1 | Principal Occupation(s) During Past Five Years | Number of Portfolios In Fund Complex Overseen By Trustee | Other Directorships Of Public Companies and Other Registered Investment Companies Held by Trustee During Past Five Years |
INDEPENDENT TRUSTEES | ||||
Scott M. Amero (57) Trustee | Since 2014 | Chairman (2015-Present) and Trustee (2011-2015), Rare (conservation nonprofit); Trustee, Berkshire School (2014-Present); Trustee, The Nature Conservancy, Massachusetts Chapter (2018-Present); Vice Chairman and Global Chief Investment Officer, Fixed Income (2010), Vice Chairman and Global Chief Investment Officer, Fixed Income, and Co-Head, Fixed Income Portfolio Management (2007-2010), BlackRock, Inc., (publicly traded investment management firm). | 36 | None |
Donna J. Dean (69) Trustee | Since 2010 | Chief Investment Officer of the Rockefeller Foundation (a private foundation) (2001-2019). | 36 | None |
Joseph L. Dowling III (56) Trustee | Since 2017 | Chair & Special Advisor to the University’s President (2020-Present), Chief Executive Officer (2018-2020), Interim Chief Financial Officer (2019-2020), and Chief Investment Officer (2013-2018), Brown University Investment Office; Chief Executive Officer, Jaws Acquisition Corp. (blank check company, 2020-Present); Advisory Board Member, Harbor Funds (2016-2017); and Founder and Managing Member, Narragansett Asset Management (private investment management firm) (1998-2013). | 36 | Director of Integrated Electrical Services (2012-Present);Director of Third Point RE (2019- Present). |
Randall A. Hack (73) Trustee | Since 2010 | Founder and Senior Managing Director of Capstone Capital LLC (private investment firm) (2003-Present); Director of Tower Development Corporation (cell tower developer) (2009-2016); Advisory Director of Berkshire Partners (private equity firm) (2002-2013); Founder and Senior Managing Director of Nassau Capital, LLC (private investment firm, investing solely on behalf of the Princeton Endowment) (1995-2001); and President of The Princeton University Investment Company (1990-1994). | 36 | None |
Robert Kasdin (62) Trustee | Since 2014 | Senior Vice President and Chief Operating Officer (2015-Present) and Chief Financial Officer (2018-Present), Johns Hopkins Medicine; Senior Executive Vice President, Columbia University (2002-2015); Trustee and Member of the Finance Committee, National September 11 Memorial & Museum at the World Trade Center (2005-2019); Director, Apollo Commercial Real Estate Finance, Inc. (2014-Present); Director and Executive Committee Member, The Y in Central Maryland (2018-Present); and Director, Noranda Aluminum Holdings Corp. (2007-2014). | 36 | Director of Apollo Commercial Real Estate Finance, Inc. (2014-Present). |
53
Harbor Robeco Funds
Additional Information—Continued
Additional Information—Continued
Trustees and Officers—Continued
Name (Age) Position(s) with Fund | Term of Office and Length of Time Served1 | Principal Occupation(s) During Past Five Years | Number of Portfolios In Fund Complex Overseen By Trustee | Other Directorships Of Public Companies and Other Registered Investment Companies Held by Trustee During Past Five Years |
INDEPENDENT TRUSTEES—Continued | ||||
Kathryn L. Quirk (68) Trustee | Since 2017 | Retired; Vice President, Senior Compliance Officer and Head, U.S. Regulatory Compliance, Goldman Sachs Asset Management (2013-2017); Deputy Chief Legal Officer, Asset Management, and Vice President and Corporate Counsel, Prudential Insurance Company of America (2010-2012); Co-Chief Legal Officer, Prudential Investment Management, Inc., and Chief Legal Officer, Prudential Investments and Prudential Mutual Funds (2008-2012); Vice President and Corporate Counsel and Chief Legal Officer, Mutual Funds, Prudential Insurance Company of America, and Chief Legal Officer, Prudential Investments (2005-2008); Vice President and Corporate Counsel and Chief Legal Officer, Mutual Funds, Prudential Insurance Company of America (2004-2005); Member, Management Committee (2000-2002), General Counsel and Chief Compliance Officer, Zurich Scudder Investments, Inc. (1997-2002). | 36 | None |
Douglas J. Skinner (58) Trustee | Since 2020 | Professor of Accounting (2005-Present), Deputy Dean for Faculty (2015-2016, 2017-Present), Interim Dean (2016-2017), University of Chicago Booth School of Business. | 36 | None |
Ann M. Spruill (66) Trustee | Since 2014 | Partner (1993-2008), member of Executive Committee (1996-2008), Member Board of Directors (2002-2008), Grantham, Mayo, Van Otterloo & Co, LLC (private investment management firm) (with the firm since 1990); Member Investment Committee and Chair of Global Public Equities, Museum of Fine Arts, Boston (2000-Present); and Trustee, Financial Accounting Foundation (2014-Present). | 36 | None |
INTERESTED TRUSTEE | ||||
Charles F. McCain (51)* Chairman, Trustee and President | Since 2017 | Chief Executive Officer (2017-Present), Director (2007-Present), President and Chief Operating Officer (2017), Executive Vice President and General Counsel (2004-2017), and Chief Compliance Officer (2004-2014), Harbor Capital Advisors, Inc.; Director and Chairperson (2019-Present), Harbor Trust Company, Inc.; Director (2007-Present) and Chief Compliance Officer (2004-2017), Harbor Services Group, Inc.; Chief Executive Officer (2017-Present), Director (2007-Present), Chief Compliance Officer and Executive Vice President (2007-2017), Harbor Funds Distributors, Inc.; and Chief Compliance Officer, Harbor Funds (2004-2017). | 36 | None |
Name (Age) Position(s) with Fund | Term of Office and Length of Time Served1 | Principal Occupation(s) During Past Five Years |
FUND OFFICERS NOT LISTED ABOVE** | ||
Erik D. Ojala (45) Chief Compliance Officer | Since 2017 | Executive Vice President and General Counsel (2017-Present) and Secretary (2010-Present); Senior Vice President and Associate General Counsel (2007-2017), Harbor Capital Advisors, Inc.; Director and Secretary (2019-Present), Harbor Trust Company, Inc.; Director, Executive Vice President and Chief Compliance Officer (2017-Present), Harbor Funds Distributors, Inc.; Director (2017-Present) and Assistant Secretary (2014-Present), Harbor Services Group, Inc.; and AML Compliance Officer (2010-2017) and Vice President and Secretary (2007-2017), Harbor Funds. |
Anmarie S. Kolinski (49) Treasurer | Since 2007 | Executive Vice President and Chief Financial Officer (2007-Present), Harbor Capital Advisors, Inc.; Director and Treasurer (2019-Present), Harbor Trust Company, Inc.; Chief Financial Officer (2007-Present), Harbor Services Group, Inc.; and Chief Financial Officer (2015-Present) and Treasurer (2012-Present), Harbor Funds Distributors, Inc. |
Kristof M. Gleich (41) Vice President | Since 2019 | President (2018-Present) and Chief Investment Officer (2020), Harbor Capital Advisors, Inc.; Director, Vice Chairperson, President (2019-Present) and Chief Investment Officer (2020-Present), Harbor Trust Company, Inc.; and Managing Director, Global Head of Manager Selection (2010-2018), JP Morgan Chase & Co. |
54
Harbor Robeco Funds
Additional Information—Continued
Additional Information—Continued
Trustees and Officers—Continued
Name (Age) Position(s) with Fund | Term of Office and Length of Time Served1 | Principal Occupation(s) During Past Five Years |
FUND OFFICERS NOT LISTED ABOVE**—Continued | ||
Gregg M. Boland (57) Vice President | Since 2019 | Executive Vice President (2020-Present), Vice President (2019-2020), Harbor Capital Advisors, Inc.; President (2019-Present), Senior Vice President – Operations (2016-2019), and Vice President – Operations (2007-2015), Harbor Services Group, Inc.; and Senior Vice President, AML Compliance Officer, and OFAC Officer (2019-Present), Harbor Funds Distributors, Inc. |
Diana R. Podgorny (41) Secretary | Since 2018 | Senior Vice President and Assistant General Counsel (2020-Present), Vice President and Assistant General Counsel (2017-2020), Harbor Capital Advisors, Inc.; Director and Vice President (2020 – Present), Harbor Trust Company, Inc.; Vice President and Counsel, AMG Funds LLC (2016-2017); Assistant Secretary, AMG Funds, AMG Funds I, AMG Funds II and AMG Funds III (2016-2017); Assistant Secretary, AMG Funds IV (2010-2017); and Vice President and Counsel, Aston Asset Management, LLC (2010-2016). |
Jodie L. Crotteau (48) Assistant Secretary | Since 2014 | Senior Vice President and Chief Compliance Officer, Harbor Capital Advisors, Inc. (2014-Present); Chief Compliance Officer and AML/OFAC Officer (2019-Present), Harbor Trust Company, Inc.; Chief Compliance Officer and Secretary (2017-present) and Assistant Secretary (2015-2016), Harbor Services Group, Inc.; Assistant Secretary (2016-present), Harbor Funds Distributors, Inc.; Vice President and Chief Compliance Officer, Grosvenor Registered Funds (2011-2014); and Vice President, Grosvenor Capital Management, L.P. (2010-2014). |
Lana M. Lewandowski (41) AML Compliance Officer and Assistant Secretary | Since 2017 | Legal & Compliance Manager (2016-Present) and Legal Specialist (2012-2015), Harbor Capital Advisors, Inc. |
Lora A. Kmieciak (56) Assistant Treasurer | Since 2017 | Senior Vice President – Fund Administration and Analysis (2017-Present), Senior Vice President - Business Analysis (2015-2017), Harbor Capital Advisors, Inc.; Vice President (2020 – Present), Harbor Trust Company, Inc.; and Assurance Executive Director, Ernst & Young LLP (1999-2015). |
John M. Paral (52) Assistant Treasurer | Since 2013 | Director of Fund Administration and Analysis (2017-Present), Vice President (2012-Present) and Financial Reporting Manager (2007-2017), Harbor Capital Advisors, Inc. |
1 | Each Trustee serves for an indefinite term, until his or her successor is elected. Each Officer is elected annually. |
* | Mr. McCain is deemed an “Interested Trustee” due to his affiliation with the Adviser and Distributor of Harbor Funds. |
** | Officers of the Funds are “interested persons” as defined in the Investment Company Act. |
55
This privacy statement is not part of this report
Harbor’s Privacy Statement
The following privacy statement (“Privacy Statement”) is issued by Harbor Funds and each series of Harbor Funds and its affiliates, Harbor Capital Advisors, Inc., Harbor Services Group, Inc. and Harbor Funds Distributors, Inc. (collectively, “Harbor” “we” or “us”). The measures described in this Privacy Statement reflect the commitments we make to protect the privacy of your personal information. We appreciate the confidence you have shown by entrusting us with your assets.
Personal Information
In the course of providing products and services, we collect personal information about you from the following sources: applications, forms, our website (including any information captured through our use of “cookies”), through mobile applications, by telephone and in correspondence and transactions with us, our affiliates or other parties, including when you contact Shareholder Services or establish an account with us. This Privacy Statement applies to personal information we collect from those sources unless we inform you otherwise.
The personal information collected may include name, address, email address, telephone/fax numbers, account number, social security or taxpayer identification number, investment activity, bank account information, location data (depending on your app settings and device permissions), and other information voluntarily provided by you.
We may also collect certain information automatically when you visit us through our website or a mobile application. For example, we may collect technical and navigational information, such as computer browser type, device type, device ID, Internet protocol address, pages visited average time spent on our website and searches performed on our website. We may use this information to alert you to software compatibility issues; to provide you with or improve or websites, applications, products or services; or to provide you with content that may be of interest to you. We use your IP address to help diagnose problems with our server and to administer our website. Your IP address is also used to gather broad demographic information. This information will be used for internal purposes only. We also collect information in the form of log files that record website and app activity and gather statistics about your browsing habits. These entries are generated automatically, and help us to troubleshoot errors, improve performance and maintain the security of our sites and apps. We use “cookies” and similar files that may be placed on your computer or device for security purposes, to facilitate site navigation and to personalize the appearance of our site. We provide more information regarding cookies and other tracking technologies below.
In addition, we may receive personal information about you that you authorize third parties to provide to us. We also may obtain personal information from third-party service providers to verify your identity, to prevent fraud, or to help us identify products and services that may be of interest to you.
The personal information we collect about you may be transferred to or stored by us or our service providers in the United States or elsewhere, as permitted by law.
If you do not wish to provide personal information to us, we may be unable to provide certain products or services to you.
Information Sharing
We disclose personal information with affiliated and non-affiliated parties: (1) as permitted or required by law or regulation; (2) if we believe that is necessary to: comply with applicable laws, regulations, or industry requirements; respond to requests from a legal, regulatory, or governmental authority; enforce legal terms; detect and resolve any fraud or security concerns, and protect the rights, property, and safety of us, our users, or others; (3) in the event of a merger, acquisition or sale of all or substantially all of our assets; or (4) as otherwise described in this Privacy Statement.
Personal information we collect may be shared with non-affiliated companies that perform support services on our behalf or to other firms that assist us in providing you with products and services (including, without limitation, completing transactions), such as custodians, transfer agents, broker-dealers and marketing service firms (to support our marketing to you), as well as with other financial institutions. We may also share information with affiliates that are engaged in a variety of financial services in order to better service your account(s).
When information is shared with third parties, they are not permitted to use the information for any purpose other than those purposes described in this Privacy Statement or as permitted by law.
If you close your account(s) or if we lose contact with you, we will continue to share information in accordance with our current privacy policy and practices.
If you close your account(s) or if we lose contact with you, we will continue to share information in accordance with our current privacy policy and practices.
56
Harbor’s Privacy Statement—Continued
Security
We maintain physical, electronic and procedural safeguards designed to protect your personal information; however, please be aware that no data security measures can guarantee 100% security.
For shareholders accessing information through our website or a mobile application, various forms of Internet security, such as data encryption firewall barriers, user names and passwords, two-factor authentication, and other tools are used. For additional information regarding our security measures, visit the terms and conditions of use on our website at harborfunds.com.
Linking to
Third Parties
Third Parties
When you visit our website and leave to go to another linked site, we are not responsible for the content or availability of the linked site. Please be advised that if you enter into a transaction on the third-party site, we do not represent either the third party or you. Further, the privacy and security policies of the linked site may differ from those practiced by us.
Cookies and Other Technologies
A cookie is a small text file that is stored on your computer, tablet, or device when you visit a website or a mobile application. Cookies usually store small bits of information about you and what you do on that site or application, which are then used to improve your browsing experience. Some cookies are only used during a single visit, while others are saved on your device until your next visit. Harbor Funds and our third-party providers use both types of cookies to make your visits more productive.
If you are concerned about cookies, they can be blocked from your device, or you can set your browser to notify you when they are being used. Use the Help feature of your browser to learn how.
Our website, mobile application, and emails may use a web beacon. A web beacon helps to measure usage and activity and reports that activity back to the system providers. In some cases, a web beacon triggers the placement of a cookie on your device.
We and our service providers use web beacons and cookies to determine things like if and when you open our emails, what type of device, operating system, email program, or web browser you are using, your IP address, and what links you click within our site or email. These things enable us to gauge the effectiveness, relevance, and value of our content and communications.
We use Google Analytics (which uses a web beacon) to collect information about use of our website and mobile application. For more information on opting out of being tracked by Google Analytics, visit https://tools.google.com/dlpage/gaoptout.
Do Not Track
Our third-party vendors may collect information about users across our website. We do not currently have the capability to respond to a web browser that does not track signals or other mechanisms that provide you with the ability to exercise choice regarding the collection of this information.
Changes to this
Privacy Statement
Privacy Statement
We reserve the right to change or revise this Privacy Statement at any time to reflect changes in the law or our data collection and use practices. New updates to the Privacy Statement will be posted to our website and are include in Harbor Funds’ annual reports to shareholders. Privacy Statement changes will apply to the information collected from the date we post our revised Privacy Statement, as well as to existing information we hold.
Contact Us
If you have any questions or concerns about how we maintain the privacy of your personal information or if you would like to update your personal information on file, please contact us at 800-422-1050 Monday through Friday, between the hours of 8:00 a.m. and 6:00 p.m. Eastern time. You may also write to us at the following postal address:
Harbor Funds
c/o Harbor Services Group, Inc.
PO Box 804660
Chicago, IL 60680-4108
c/o Harbor Services Group, Inc.
PO Box 804660
Chicago, IL 60680-4108
We recommend that you read and retain this notice for your personal files.
Last Updated: December 2020
57
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
Douglas J. Skinner
Trustee
Trustee
Ann M. Spruill
Trustee
Trustee
Erik D. Ojala
Chief Compliance Officer
Chief Compliance Officer
Anmarie S. Kolinski
Treasurer
Treasurer
Kristof M. Gleich
Vice President
Vice President
Gregg M. Boland
Vice President
Vice President
Diana R. Podgorny
Secretary
Secretary
Jodie L. Crotteau
Assistant Secretary
Assistant Secretary
Lana M. Lewandowski
AML Compliance Officer
& Assistant Secretary
AML Compliance Officer
& Assistant Secretary
Lora A. Kmieciak
Assistant Treasurer
Assistant Treasurer
John M. Paral
Assistant Treasurer
Assistant Treasurer
Investment Adviser
Harbor Capital Advisors, Inc.
111 South Wacker Drive, 34th Floor
Chicago, IL 60606-4302
312-443-4400
111 South Wacker Drive, 34th Floor
Chicago, IL 60606-4302
312-443-4400
Distributor
Harbor Funds Distributors, Inc.
111 South Wacker Drive, 34th Floor
Chicago, IL 60606-4302
312-443-4600
111 South Wacker Drive, 34th Floor
Chicago, IL 60606-4302
312-443-4600
Shareholder Services
Harbor Services Group, Inc.
P.O. Box 804660
Chicago, IL 60680-4108
800-422-1050
P.O. Box 804660
Chicago, IL 60680-4108
800-422-1050
FD.AR.HR.1020
Annual Report
October 31, 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 2020 fiscal year has been a historic period that will undoubtedly live on in our memories as much as we might like to forget the massive disruptions caused by the coronavirus pandemic and the toll it has taken on human lives.
The period began quietly in investment markets, extending a lengthy stretch of subdued volatility. That relative calm came to a dramatic end in late February when the extent of the pandemic became clear, sending shockwaves across global investment markets. Volatility spiked sharply higher, market liquidity became challenged, and government bond yields plunged in a flight to safety. From its peak on February 19 to its March 23 trough, the S&P 500 tumbled 33.8% for its fastest ever descent into bear-market territory. International markets followed suit, with the MSCI All Country World Ex. US (ND) Index falling 32.9% over the same period. Although U.S. Treasuries served as a ballast during the period, corporate bonds did not escape the sharp selloff, with both investment-grade and high-yield credit indexes experiencing double-digit losses.
Governments and central banks acted swiftly and forcefully to support the global economy with massive fiscal and monetary stimulus. This jolt of liquidity put a floor under markets and set the stage for a sharp rebound. Broad stock and bond indexes gained ground throughout much of the rest of the year, shrugging off concerns about the pandemic, inconsistent policy responses, uncertainty around the U.S. election, and escalating social tensions.
As time marched on, economic data has improved. We see GDP is growing again, unemployment appears to have bottomed, and many market measures ended the fiscal year in positive territory. However, economic and market recovery has been uneven. The re-emergence of volatility has brought about significant dispersion across markets. For example, the difference between the best and worst sectors reached its widest levels in many years. Similarly, growth stocks outperformed value stocks by the widest margin in more than 20 years.
This volatile environment, though challenging, has been welcome news for talented active managers, because it has provided them with more opportunities to add value and distance themselves from the pack. Our research shows that the difference between top performing and bottom performing managers in many categories is at its highest level in 20 years.
Harbor believes there are many ways to seek to reach long-term financial goals. Drawing upon experienced portfolio managers who stay true to a strategy grounded in enduring investment principles is one way we believe offers the potential to achieve positive outcomes over time. Even though volatility is likely to be with us for some time to come, we are confident that all our subadvisers continue to strive to skillfully execute their strategies to benefit shareholders over the long haul.
It is important to acknowledge that while market gyrations provide opportunities for skillful professional managers, they can pose behavioral challenges for the rest of us. The sharp selloff in the first quarter was enough to test the mettle of the calmest investor. However, those who stayed the course and stuck to their long-term plans likely benefitted from the sharp recovery that followed. We will look back on this period as a time that underscored the value of thoughtful active management and timeless investment principles such as diversification, discipline, and a long-term view.
I hope that you and your families continue to fare well during these ongoing challenging times. Thank you for your continued investment in Harbor Funds.
December 21, 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 (Marathon-London) has subadvised the Fund since 2015.
Investment Objective
The Fund seeks long-term growth of capital.
Management’s Discussion of
Fund Performance
Fund Performance
Market Review
Investor enthusiasm for what appeared to be easing trade tensions between the U.S. and China over the final quarter of 2019 drifted deep into memory as the onslaught of the novel COVID-19 epidemic began to take center stage and rock the foundations of societies, economies and equity markets across the globe.
Following a dramatic drawdown towards the end of the first quarter of 2020, broad equity market indices reversed course sharply over the second quarter, taking some back to where they started at the beginning of the year. The recovery in capital markets was fueled by additional monetary accommodation efforts and record amounts of liquidity provided by central banks alongside fiscal stimulus provided by governments. These efforts have powered money supply relative to economic growth and, in turn, found their way into financial assets. But the debt that has been created will not disappear any time soon. Equity multiples have expanded in this environment and there has been evidence of speculative investment activity, leading to valuation excesses across pockets of the market that have not been seen since the ‘technology bubble’ of the late 1990s.
Through the COVID-induced market drawdown and partial recovery experienced thus far, there also remained little in the way of rotation in market leadership, with growth-oriented investment strategies outperforming their value peers and larger capitalization stocks outperforming the smaller capitalization universe. So-called ‘bond proxy’ shares (i.e. low volatility mega-caps with modest but secure dividends) continued to attract investor appetite through this period of historically low interest rates.
In this environment, it has been a challenge for fundamental, bottom-up equity investors to keep up with indices that have essentially become both narrative and momentum-led. The concentration of equity market returns being anchored around just a handful of mega-cap stocks added to the challenging market dynamics for stock pickers. That said, there were signals of extended performance patterns and market leadership beginning to break down and rotate during the second half of 2020.
Performance
Harbor Diversified International All Cap Fund underperformed the MSCI All Country World Ex. U.S. (ND) Index over the year ended October 31, 2020, returning -6.25% (Retirement Class), -6.33% (Institutional Class), -6.54% (Administrative Class) and -6.58% (Investor Class), while the Index returned -2.61%. While stock selection in Europe was particularly strong, the negative influence due to positioning across the emerging markets (particularly within China) and within Japan more than offset those relative gains. Specifically, the Fund’s material underweight to China, as well as the portfolio’s greater domestic exposure and value orientation in Japan relative to the benchmark index drove the majority of the underperformance experienced over the reporting period.
From a sector standpoint, the Fund’s underweight exposure to the internet and direct marketing retail sub-industry within the Consumer Discretionary sector, as well as stock specific positioning in the Communication Services, Information Technology and Financials sectors, exerted a negative influence on relative returns.
At the stock level, German-listed meal kit delivery company HelloFresh and Danish wind turbine manufacturer Vestas Wind Systems were notable positive contributors. HelloFresh benefited from faster than expected growth and profitability, while Vestas delivered strong revenue growth and reinstated full year guidance leading to continued strong performance of the shares. At the other end of the performance tables, not owning the technology mega-cap heavyweights Tencent and Alibaba contributed negatively.
2
Harbor Diversified International All Cap Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
CHANGE IN A $50,000 INVESTMENT
For the period 11/02/2015 through 10/31/2020
The graph compares a $50,000 investment in the Institutional Class shares of the Fund with the performance of the MSCI All Country World Ex. U.S. (ND) Index. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
TOTAL RETURNS
For the periods ended 10/31/2020
1 Year | 5 Years | Annualized | ||||||
Life of Fund | ||||||||
Harbor Diversified International All Cap Fund | ||||||||
Retirement Class1,2 | -6.25% | N/A | 2.81% | |||||
Institutional Class1 | -6.33 | N/A | 2.75 | |||||
Administrative Class1 | -6.54 | N/A | 2.49 | |||||
Investor Class1 | -6.58 | N/A | 2.38 | |||||
Comparative Index | ||||||||
MSCI All Country World Ex. U.S. (ND)1 | -2.61% | N/A | 4.27% |
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 at harborfunds.com or by calling 800-422-1050.
Outlook & Strategy
Continued monetary accommodation and government stimulus efforts in response to the COVID-19 outbreak, coupled with anecdotal evidence of improving economic conditions relative to that experienced over the first half of the year, drove overall investor appetite for riskier (and higher yielding) assets such as equities, thus further increasing the disconnect between global capital market performance and the economic realities currently faced by populations around the world.
To that end, there has been much discussion about whether this rally is justified given the increase in valuation multiples. To some extent, however, the point may be moot because when emerging from recessions, valuations may appear inflated as markets anticipate a future recovery in earnings. It is as the next year unfolds that we will know whether markets were correct in anticipating such a steep recovery in profits. We believe that the outlook, in other words, rests on earnings living up to expectations that have already been priced in. If this year marked the end of a market cycle and the beginning of a new one, then it would be highly unusual since many of the valuation excesses of recent years have not been unwound, rather they have been extrapolated even further. It is therefore no surprise to see an onslaught of new IPOs and a proliferation of so-called ‘SPACs’ (Special Purpose Acquisition Companies) as private companies seek to take advantage of high valuations in the public market. Meanwhile, the disparity between the performance of growth and value stocks, large caps and small caps has grown ever wider (though with some nuances depending on the market in question).
Given these market dynamics, in our view, empirical data would suggest that the investment pendulum will swing once again and that superior long-term returns are far more likely to come from precisely the opposite ends of the investing spectrum to those now in vogue. Rather than revert to narrative investing or chasing momentum, we continue to focus on, look for, and invest in companies that we believe exhibit favorable supply side dynamics (and with management teams that have a track record of allocating capital efficiently) at valuation levels grounded in evidence-based fundamentals rather than speculative fervor.
1 | The “Life of Fund” return as shown reflects the period 11/02/2015 through 10/31/2020. |
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. |
All international and global returns are in U.S. Dollars.
This report contains the current opinions of Marathon Asset Management LLP as of the date of this report and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Such opinions are subject to change without notice and securities described herein may no longer be included in, or may at any time be removed from, the Fund’s portfolio. This report is distributed for informational purposes only. Information contained herein has been obtained from sources believed reliable, but not guaranteed.
Investing in international and emerging markets poses special risks, including potentially greater price volatility due to social, political and economic factors, as well as currency exchange rate fluctuations. These risks are more severe for securities of issuers in emerging market regions. For information on the different share classes and the risks associated with an investment in the Fund, please refer to the current prospectus.
3
Harbor Diversified International All Cap Fund
Portfolio of Investments—October 31, 2020
Portfolio of Investments—October 31, 2020
REGION BREAKDOWN (% of investments) -Unaudited
(Excludes derivatives)
Portfolio of Investments
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—97.7% | |||
Shares | Value | ||
AEROSPACE & DEFENSE—0.6% | |||
27,836 | Airbus SE (France)* | $ 2,037 | |
318,907 | BAE Systems plc (United Kingdom) | 1,639 | |
134,315 | Embraer SA (Brazil)* | 141 | |
542,358 | Rolls-Royce Holdings plc (United Kingdom)* | 502 | |
10,773 | Thales SA (France) | 702 | |
5,021 | |||
AIR FREIGHT & LOGISTICS—0.2% | |||
117,909 | Grupo Aeroportuario del Pacifico SAB de CV (Mexico) | 982 | |
24,541 | Oesterreichische Post AG (Austria) | 779 | |
1,761 | |||
AIRLINES—0.1% | |||
139,535 | EasyJet plc (United Kingdom) | 915 | |
AUTO COMPONENTS—1.3% | |||
49,000 | Bridgestone Corp. (Japan) | 1,597 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
AUTO COMPONENTS—Continued | |||
169,301 | Gestamp Automocion SA (Spain)1 | $ 518 | |
263,324 | GUD Holdings Ltd. (Australia) | 2,349 | |
38,616 | Hankook Tire & Technology Co. Ltd. (South Korea) | 1,082 | |
15,500 | Koito Manufacturing Co. Ltd. (Japan) | 748 | |
32,340 | Magna International Inc. (Canada) | 1,651 | |
2,527,125 | Nemak SAB de CV (Mexico)1 | 776 | |
40,700 | Sumitomo Electric Industries Ltd. (Japan) | 449 | |
12,800 | Toyota Industries Corp. (Japan) | 827 | |
9,997 | |||
AUTOMOBILES—1.4% | |||
1,441,431 | Baic Motor Corp. Ltd. (China)1 | 533 | |
28,236 | Bayerische Motoren Werke AG (Germany) | 1,930 | |
17,094 | Hyundai Motor Co. (South Korea) | 2,502 | |
216,487 | Mahindra & Mahindra Ltd. (India) | 1,735 | |
67,500 | Toyota Motor Corp. (Japan) | 4,431 | |
11,131 |
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—5.9% | |||
676,244 | Axis Bank Ltd. (India)* | $ 4,469 | |
67,177 | Bancolombia SA ADR (Colombia)2 | 1,712 | |
3,587,800 | Bank Mandiri Persero TBK PT (Indonesia) | 1,398 | |
393,597 | Bank of Ireland Group plc (Ireland)* | 977 | |
765,540 | Bank of The Philippine Islands (Philippines) | 1,161 | |
581,558 | Bankia SA (Spain) | 715 | |
2,136,368 | Barclays plc (United Kingdom) | 2,961 | |
68,130 | BNP Paribas SA (France) | 2,376 | |
912,495 | Cairo Mezz plc (Greece)* | 110 | |
36,690 | Close Brothers Group plc (United Kingdom) | 512 | |
21,756 | Danske Bank AS (Denmark) | 290 | |
34,917 | DBS Group Holdings Ltd. (Singapore) | 520 | |
74,593 | DNB ASA (Norway) | 1,007 | |
10,703,428 | Eurobank Ergasias SA (Greece)* | 3,579 | |
26,300 | Fukuoka Financial Group Inc. (Japan) | 440 | |
6,722,899 | Grupo Financiero Inbursa SAB de CV (Mexico)* | 4,982 | |
44,057 | Hana Financial Group Inc. (South Korea) | 1,190 | |
167,162 | HSBC Holdings plc (Hong Kong)* | 698 | |
263,495 | Intesa Sanpaolo SpA (Italy)* | 437 | |
932,100 | Kasikornbank PCL (Thailand) | 2,276 | |
50,210 | Komercni Banka AS (Czech Republic)* | 1,020 | |
5,909,478 | Lloyds Banking Group plc (United Kingdom)* | 2,152 | |
871,900 | Resona Holdings Inc. (Japan) | 2,875 | |
271,953 | Standard Chartered plc (United Kingdom) | 1,243 | |
70,300 | Sumitomo Mitsui Financial Group Inc. (Japan) | 1,946 | |
21,600 | Sumitomo Mitsui Trust Holdings Inc. (Japan) | 581 | |
230,147 | Svenska Handelsbanken AB (Sweden) | 1,865 | |
252,171 | UniCredit SpA (Italy)* | 1,889 | |
114,882 | United Overseas Bank Ltd. (Singapore) | 1,596 | |
46,977 | |||
BEVERAGES—3.9% | |||
1,046,554 | AmBev SA (Brazil)* | 2,222 | |
37,402 | Anheuser-Busch InBev SA (Belgium) | 1,935 | |
12,700 | Asahi Group Holdings Ltd. (Japan) | 393 | |
17,218 | Carlsberg AS (Denmark) | 2,180 | |
306,027 | Coca-Cola Amatil Ltd. (Australia) | 2,675 | |
32,973 | Coca-Cola European Partners plc (United States) | 1,177 | |
128,652 | Davide Campari-Milano NV (Netherlands) | 1,345 | |
111,230 | Diageo plc (United Kingdom) | 3,595 | |
1,036,134 | East African Breweries Ltd. (Kenya) | 1,428 | |
70,774 | Fomento Economico Mexicano SAB de CV ADR (Mexico)2 | 3,805 | |
43,682 | Heineken NV (Netherlands) | 3,867 | |
232,400 | Kirin Holdings Co. Ltd. (Japan) | 4,190 | |
3,911 | Pernod Ricard SA (France) | 630 | |
18,800 | Suntory Beverage & Food Ltd. (Japan) | 648 | |
96,000 | Tsingtao Brewery Co. Ltd. (China) | 795 | |
30,885 | |||
BUILDING PRODUCTS—1.7% | |||
258,129 | Assa Abloy AB Class B (Sweden) | 5,532 | |
10,365 | Geberit AG (Switzerland) | 5,900 | |
222,429 | GWA Group Ltd. (Australia) | 412 | |
84,900 | LIXIL Group Corp. (Japan) | 1,844 | |
13,688 | |||
CAPITAL MARKETS—2.2% | |||
314,210 | 3i Group plc (United Kingdom) | 3,924 | |
198,448 | Brookfield Asset Management Inc. (Canada) | 5,897 | |
90,300 | Daiwa Securities Group Inc. (Japan) | 366 | |
55,139 | Georgia Capital plc (United Kingdom)* | 263 | |
158,421 | IG Group Holdings plc (United Kingdom) | 1,563 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
CAPITAL MARKETS—Continued | |||
24,700 | JAFCO Co. Ltd. (Japan) | $ 1,117 | |
15,600 | Japan Exchange Group Inc. (Japan) | 381 | |
291,997 | Jupiter Fund Management plc (United Kingdom) | 880 | |
332,800 | Nomura Holdings Inc. (Japan) | 1,490 | |
16,890 | Rathbone Brothers plc (United Kingdom) | 318 | |
82,858 | St. James's Place plc (United Kingdom) | 966 | |
31,410 | UBS Group AG (Switzerland) | 366 | |
17,531 | |||
CHEMICALS—1.7% | |||
35,700 | Air Water Inc. (Japan) | 510 | |
56,462 | BASF SE (Germany) | 3,092 | |
57,918 | Enaex SA (Chile) | 528 | |
12,800 | Nippon Shokubai Co. Ltd. (Japan) | 627 | |
26,900 | Nissan Chemical Corp. (Japan) | 1,428 | |
9,100 | Nitto Denko Corp. (Japan) | 639 | |
239,097 | Orica Ltd. (Australia) | 2,567 | |
77,087 | PhosAgro PJSC GDR (Russia)2 | 888 | |
9,500 | Shin-Etsu Chemical Co. Ltd. (Japan) | 1,269 | |
46,727 | Tikkurila OYJ (Finland) | 747 | |
21,200 | Tokyo Ohka Kogyo Co. Ltd. (Japan) | 1,255 | |
13,550 | |||
COMMERCIAL SERVICES & SUPPLIES—3.0% | |||
10,400 | AEON Delight Co. Ltd. (Japan) | 274 | |
381,835 | Brambles Ltd. (Australia) | 2,575 | |
2,465,000 | Cleanaway Waste Management Ltd. (Australia) | 3,554 | |
42,897 | Elis SA (France)* | 471 | |
778,403 | G4S plc (United Kingdom)* | 2,053 | |
321,830 | HomeServe plc (United Kingdom) | 4,612 | |
75,637 | Ritchie Bros Auctioneers Inc. (Canada) | 4,585 | |
20,659 | S-1 Corp. (South Korea) | 1,485 | |
14,600 | Secom Co. Ltd. (Japan) | 1,233 | |
1,150,107 | Serco Group plc (United Kingdom)* | 1,922 | |
16,600 | Sohgo Security Services Co. Ltd. (Japan) | 773 | |
23,537 | |||
CONSTRUCTION & ENGINEERING—0.9% | |||
47,128 | Boskalis Westminster NV (Netherlands) | 948 | |
20,429 | Ferrovial SA (Spain) | 442 | |
108,600 | Maeda Corp. (Japan) | 782 | |
246,600 | Obayashi Corp. (Japan) | 2,064 | |
190,000 | Penta-Ocean Construction Co. Ltd. (Japan) | 1,205 | |
1,181,767 | Raubex Group Ltd. (South Africa) | 1,452 | |
23,500 | Shimizu Corp. (Japan) | 163 | |
7,056 | |||
CONSTRUCTION MATERIALS—0.7% | |||
16,035 | CRH plc (Ireland) | 563 | |
219,273 | Fletcher Building Ltd. (New Zealand) | 594 | |
5,611 | Imerys SA (France) | 168 | |
96,000 | Taiheiyo Cement Corp. (Japan) | 2,253 | |
8,794 | Vicat SA (France) | 270 | |
79,184 | Wienerberger AG (Austria) | 1,999 | |
5,847 | |||
CONSUMER FINANCE—0.7% | |||
15,200 | AEON Financial Service Co. Ltd. (Japan) | 156 | |
6,293,027 | Gentera SAB de CV (Mexico)* | 1,483 | |
323,214 | International Personal Finance plc (United Kingdom) | 239 | |
329,768 | Non-Standard Finance plc (United Kingdom)1 | 17 |
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 | ||
CONSUMER FINANCE—Continued | |||
194,998 | Provident Financial plc (United Kingdom)* | $ 587 | |
314,509 | Shriram Transport Finance Co. Ltd. (India) | 2,926 | |
5,408 | |||
CONTAINERS & PACKAGING—0.3% | |||
483,623 | DS Smith plc (United Kingdom) | 1,774 | |
85,100 | Toyo Seikan Group Holdings Ltd. (Japan) | 795 | |
2,569 | |||
DISTRIBUTORS—0.1% | |||
159,421 | Inchcape plc (United Kingdom) | 1,023 | |
DIVERSIFIED FINANCIAL SERVICES—0.1% | |||
669,308 | AMP Ltd. (Australia) | 720 | |
1,118,000 | First Pacific Co. Ltd. (Hong Kong) | 348 | |
1,068 | |||
DIVERSIFIED TELECOMMUNICATION SERVICES—1.6% | |||
44,506 | BCE Inc. (Canada) | 1,789 | |
134,765 | Deutsche Telekom AG (Germany) | 2,048 | |
715,387 | Koninklijke KPN NV (Netherlands) | 1,932 | |
196,397 | KT Corp. ADR (South Korea)2 | 1,889 | |
210,900 | Nippon Telegraph & Telephone Corp. (Japan) | 4,436 | |
616,249 | Telkom SA SOC Ltd. (South Africa) | 970 | |
13,064 | |||
ELECTRIC UTILITIES—0.6% | |||
28,185 | Orsted AS (Denmark)1 | 4,473 | |
ELECTRICAL EQUIPMENT—2.9% | |||
51,068 | ABB Ltd. (Switzerland) | 1,239 | |
61,940 | Legrand SA (France) | 4,585 | |
8,100 | Mabuchi Motor Co. Ltd. (Japan) | 334 | |
34,016 | Schneider Electric SE (France) | 4,133 | |
2,004,850 | TECO Electric and Machinery Co. Ltd. (Taiwan) | 2,097 | |
64,202 | Vestas Wind Systems AS (Denmark) | 11,015 | |
23,403 | |||
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—2.3% | |||
18,400 | Azbil Corp. (Japan) | 747 | |
402,000 | Chroma ATE Inc. (Taiwan) | 1,916 | |
726,735 | Delta Electronics Inc. (Taiwan) | 4,835 | |
171,500 | Hitachi Ltd. (Japan) | 5,780 | |
28,000 | Kyocera Corp. (Japan) | 1,542 | |
8,300 | Omron Corp. (Japan) | 599 | |
15,500 | Shimadzu Corp. (Japan) | 443 | |
24,686 | Spectris plc (United Kingdom) | 792 | |
11,000 | TDK Corp. (Japan) | 1,294 | |
17,948 | |||
ENERGY EQUIPMENT & SERVICES—0.3% | |||
170,111 | John Wood Group plc (United Kingdom) | 467 | |
44,119 | Petrofac Ltd. (United Kingdom) | 68 | |
742,702 | Saipem SpA (Italy)* | 1,308 | |
28,433 | TechnipFMC plc (France) | 157 | |
2,000 | |||
ENTERTAINMENT—0.8% | |||
24,507 | CTS Eventim AG & Co. KGaA (Germany) | 1,086 | |
17,300 | Konami Holdings Corp. (Japan) | 677 | |
4,679,100 | Major Cineplex Group PCL (Thailand) | 1,935 | |
13,400 | Makita Corp. (Japan) | 592 | |
35,706 | Modern Times Group MTG AB Class B (Sweden)* | 476 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
ENTERTAINMENT—Continued | |||
21,300 | Nexon Co. Ltd. (Japan) | $ 594 | |
1,200 | Nintendo Co. Ltd. (Japan) | 649 | |
17,000 | Toho Co. Ltd. (Japan) | 673 | |
6,682 | |||
FOOD & STAPLES RETAILING—2.4% | |||
121,691 | Alimentation Couche-Tard Inc. (Canada) | 3,748 | |
104,083 | Koninklijke Ahold Delhaize NV (Netherlands) | 2,853 | |
72,429 | Loblaw Cos. Ltd. (Canada) | 3,605 | |
16,500 | Matsumotokiyoshi Holdings Co. Ltd. (Japan) | 609 | |
364,356 | Metcash Ltd. (Australia) | 756 | |
40,461 | PriceSmart Inc. (United States) | 2,792 | |
66,400 | Seven & I Holdings Co. Ltd. (Japan) | 2,018 | |
16,500 | Sundrug Co. Ltd. (Japan) | 613 | |
654,898 | Tesco plc (United Kingdom) | 1,743 | |
18,737 | |||
FOOD PRODUCTS—3.3% | |||
10,600 | Calbee Inc. (Japan) | 325 | |
288,000 | China Mengniu Dairy Co. Ltd. (China)* | 1,358 | |
3,435,400 | Delfi Ltd. (Singapore) | 1,611 | |
200,048 | Devro plc (United Kingdom) | 391 | |
26,100 | Fuji Oil Holdings Inc. (Japan) | 826 | |
2,429,373 | Grupo Lala SAB de CV (Mexico) | 1,489 | |
546,588 | Industrias Bachoco SAB de CV (Mexico) | 1,699 | |
33,100 | Megmilk Snow Brand Co. Ltd. (Japan) | 717 | |
8,500 | Meiji Holdings Co. Ltd. (Japan) | 616 | |
6,800 | NH Foods Ltd. (Japan) | 279 | |
95,800 | Nippon Suisan Kaisha Ltd. (Japan) | 369 | |
493,770 | Tiger Brands Ltd. (South Africa) | 6,125 | |
1,506,255 | Tingyi Cayman Islands Holding Corp. (China) | 2,756 | |
39,400 | Toyo Suisan Kaisha Ltd. (Japan) | 1,961 | |
351,556 | Ulker Biskuvi Sanayi AS (Turkey) | 848 | |
28,341 | Viscofan SA (Spain) | 1,913 | |
4,607,000 | Want Want China Holdings Ltd. (China) | 3,051 | |
26,334 | |||
GAS UTILITIES—0.1% | |||
24,400 | Tokyo Gas Co. Ltd. (Japan) | 553 | |
HEALTH CARE EQUIPMENT & SUPPLIES—3.5% | |||
52,943 | Coloplast AS Class B (Denmark) | 7,742 | |
1,162,497 | ConvaTec Group plc (United Kingdom)1 | 2,721 | |
100,084 | Demant AS (Denmark)* | 3,160 | |
60,489 | Getinge AB Class B (Sweden) | 1,184 | |
82,148 | GN Store Nord AS (Denmark) | 5,914 | |
10,100 | Hoya Corp. (Japan) | 1,140 | |
19,200 | Japan Lifeline Co. Ltd. (Japan) | 248 | |
61,958 | Koninklijke Philips NV (Netherlands) | 2,870 | |
30,700 | Olympus Corp. (Japan)* | 588 | |
33,908 | Smith & Nephew plc (United Kingdom) | 589 | |
7,494 | Sonova Holding AG (Switzerland)* | 1,779 | |
27,935 | |||
HEALTH CARE PROVIDERS & SERVICES—1.0% | |||
66,900 | Alfresa Holdings Corp. (Japan) | 1,225 | |
24,635 | Amplifon SpA (Italy) | 896 | |
58,488 | Fresenius Medical Care AG & Co. KGaA (Germany) | 4,466 | |
67,800 | MediPAL Holdings Corp. (Japan) | 1,208 | |
8,400 | Ship Healthcare Holdings Inc. (Japan) | 399 | |
418,606 | Sigma Healthcare Ltd. (Australia)* | 156 | |
8,350 |
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—2.9% | |||
1,611,000 | Ajisen China Holdings Ltd. (China) | $ 204 | |
41,466 | Carnival plc (United Kingdom) | 469 | |
304,021 | Compass Group plc (United Kingdom) | 4,161 | |
39,622 | Flutter Entertainment plc (United Kingdom) | 6,865 | |
1,767,600 | Genting Singapore Ltd. (Singapore) | 835 | |
247,954 | GVC Holdings plc (United Kingdom) | 3,106 | |
513,840 | Hongkong & Shanghai Hotels Ltd. (Hong Kong) | 373 | |
6,973 | InterContinental Hotels Group PLC (United Kingdom)* | 354 | |
71,438 | Playtech plc (United Kingdom) | 315 | |
645,100 | SSP Group plc (United Kingdom) | 1,562 | |
509,286 | Tsogo Sun Gaming Ltd. (South Africa) | 109 | |
361,584 | Tsogo Sun Hotels Ltd. (South Africa)* | 30 | |
175,123 | TUI AG (Germany) | 687 | |
80,576 | Yum China Holdings Inc. (China) | 4,289 | |
23,359 | |||
HOUSEHOLD DURABLES—0.9% | |||
87,367 | Barratt Developments plc (United Kingdom) | 546 | |
53,800 | Casio Computer Co. Ltd. (Japan) | 817 | |
190,216 | McCarthy & Stone plc (United Kingdom)1 | 289 | |
704,000 | MRV Engenharia e Participacoes SA (Brazil) | 2,067 | |
7,900 | Rinnai Corp. (Japan) | 779 | |
50,000 | Sekisui Chemical Co. Ltd. (Japan) | 780 | |
24,300 | Sony Corp. (Japan) | 2,026 | |
7,304 | |||
HOUSEHOLD PRODUCTS—0.7% | |||
18,300 | Lion Corp. (Japan) | 373 | |
60,161 | Reckitt Benckiser Group plc (United Kingdom) | 5,300 | |
5,673 | |||
INDEPENDENT POWER AND RENEWABLE ELECTRICITY PRODUCERS—0.0% | |||
1,793,400 | Lopez Holdings Corp. (Philippines)* | 95 | |
INDUSTRIAL CONGLOMERATES—2.0% | |||
240,000 | CK Hutchison Holdings Ltd. (Hong Kong) | 1,450 | |
33,776 | DCC plc (United Kingdom) | 2,195 | |
98,090 | GT Capital Holdings Inc. (Philippines) | 870 | |
101,400 | Jardine Matheson Holdings Ltd. (Hong Kong) | 4,495 | |
45,300 | Jardine Strategic Holdings Ltd. (Singapore) | 981 | |
47,564 | LG Corp. (South Korea) | 2,848 | |
1,294,887 | Quinenco SA (Chile) | 1,708 | |
1,658,500 | Sime Darby Berhad (Malaysia) | 962 | |
15,509 | |||
INSURANCE—4.6% | |||
68,901 | Admiral Group plc (United Kingdom) | 2,454 | |
120,222 | AXA SA (France) | 1,931 | |
235,900 | Dai-ichi Life Holdings Inc. (Japan) | 3,523 | |
17,773 | Fairfax Financial Holdings Ltd. (Canada) | 4,672 | |
110,100 | Great Eastern Holdings Ltd. (Singapore) | 1,434 | |
5,652 | Hannover Rueck SE (Germany) | 821 | |
5,008 | Helvetia Holding AG (Switzerland) | 393 | |
47,329 | Hiscox Ltd. (United Kingdom) | 506 | |
602,644 | Insurance Australia Group Ltd. (Australia) | 2,023 | |
214,800 | Japan Post Holdings Co. Ltd. (Japan)* | 1,474 | |
26,900 | MS&AD Insurance Group Holdings Inc. (Japan) | 736 | |
264,058 | Porto Seguro SA (Brazil)* | 2,182 | |
38,173 | Prudential plc (United Kingdom) | 467 | |
262,904 | QBE Insurance Group Ltd. (Australia) | 1,520 | |
137,774 | Qualitas Controladora SAB de CV (Mexico) | 552 | |
108,928 | Sampo OYJ (Finland) | 4,111 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
INSURANCE—Continued | |||
18,182 | Samsung Fire & Marine Insurance Co. Ltd. (South Korea) | $ 2,875 | |
52,300 | Sompo Holdings Inc. (Japan) | 1,953 | |
54,600 | T&D Holdings Inc. (Japan) | 546 | |
48,000 | Tokio Marine Holdings Inc. (Japan) | 2,145 | |
36,318 | |||
INTERACTIVE MEDIA & SERVICES—2.7% | |||
43,489 | Adevinta ASA (Norway)* | 673 | |
245,985 | Auto Trader Group plc (United Kingdom)1 | 1,849 | |
57,485 | Baidu Inc. ADR (China)*,2 | 7,648 | |
194,020 | Carsales.com Ltd. (Australia) | 2,835 | |
236,559 | Domain Holdings Australia Ltd. (Australia) | 656 | |
938,852 | Rightmove plc (United Kingdom) | 7,514 | |
21,175 | |||
INTERNET & DIRECT MARKETING RETAIL—1.7% | |||
6,613 | GS Home Shopping Inc. (South Korea) | 811 | |
114,966 | HelloFresh SE (Germany)* | 6,143 | |
24,078 | Just Eat Takeaway.com NV (Netherlands)*,1 | 2,668 | |
41,137 | MoneySuperMarket.com Group plc (United Kingdom) | 130 | |
350,520 | PChome Online Inc. (Taiwan) | 1,182 | |
28,930 | Trip.Com Group Ltd. ADR (China)*,2 | 832 | |
2,769 | Zooplus AG (Germany)* | 444 | |
38,100 | ZOZO Inc. (Japan) | 967 | |
13,177 | |||
IT SERVICES—2.0% | |||
14,593 | Alten SA (France)* | 1,168 | |
1,069,250 | Capita plc (United Kingdom)* | 342 | |
75,040 | Edenred (France) | 3,498 | |
95,354 | Genpact Ltd. (United States) | 3,277 | |
29,300 | NEC Corp. (Japan) | 1,476 | |
41,100 | NET One Systems Co. Ltd. (Japan) | 1,229 | |
14,700 | Nomura Research Institute Ltd. (Japan) | 433 | |
247,900 | NTT Data Corp. (Japan) | 2,798 | |
9,600 | Otsuka Corp. (Japan) | 441 | |
28,800 | SCSK Corp. (Japan) | 1,432 | |
16,094 | |||
LEISURE PRODUCTS—2.2% | |||
41,000 | Bandai Namco Holdings Inc. (Japan) | 3,064 | |
619,386 | Giant Manufacturing Co. Ltd. (Taiwan) | 6,119 | |
365,000 | Goodbaby International Holdings Ltd. (Hong Kong)* | 46 | |
459,611 | Merida Industry Co. Ltd. (Taiwan) | 4,481 | |
96,400 | Sega Sammy Holdings Inc. (Japan) | 1,208 | |
1,300 | Shimano Inc. (Japan) | 297 | |
106,889 | Spin Master Corp. (Canada)*,1 | 2,165 | |
17,380 | |||
LIFE SCIENCES TOOLS & SERVICES—0.6% | |||
4,635 | Eurofins Scientific SE (France) | 3,691 | |
7,287 | Gerresheimer AG (Germany) | 732 | |
4,423 | |||
MACHINERY—1.5% | |||
15,024 | Andritz AG (Austria) | 507 | |
376,144 | CNH Industrial NV (Italy) | 2,917 | |
8,300 | Daifuku Co. Ltd. (Japan) | 856 | |
14,052 | Fluidra SA (Spain) | 254 | |
14,594 | GEA Group AG (Germany) | 486 | |
9,300 | Hoshizaki Corp. (Japan) | 743 | |
24,481 | IMI plc (United Kingdom) | 328 |
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 | ||
MACHINERY—Continued | |||
130,118 | Rotork plc (United Kingdom) | $ 474 | |
150,305 | Sandvik AB (Sweden) | 2,679 | |
28,084 | Stabilus SA (Germany) | 1,592 | |
97,785 | Wartsila OYJ Abp (Finland) | 777 | |
9,000 | Yungtay Engineering Co. Ltd. (Taiwan) | 20 | |
11,633 | |||
MARINE—0.3% | |||
59,243,502 | Cia Sud Americana de Vapores SA (Chile)* | 1,726 | |
200,347 | Irish Continental Group plc (Ireland) | 736 | |
2,462 | |||
MEDIA—2.0% | |||
46,505 | Daily Mail & General Trust plc (United Kingdom) | 407 | |
41,498 | Euromoney Institutional Investor plc (United Kingdom) | 443 | |
146,600 | Fuji Media Holdings Inc. (Japan) | 1,410 | |
183,225 | Grupo Televisa SAB ADR (Mexico)*,2 | 1,165 | |
28,700 | Hakuhodo Dy Holdings Inc. (Japan) | 366 | |
���74,035 | Informa plc (United Kingdom) | 402 | |
1,601,349 | ITV plc (United Kingdom) | 1,497 | |
59,662 | JCDecaux SA (France)* | 921 | |
24,854,921 | Media Nusantara Citra TBK PT (Indonesia)* | 1,386 | |
777,413 | Nine Entertainment Co. Holdings Ltd. (Australia) | 1,136 | |
142,020 | Nippon Television Holdings Inc. (Japan) | 1,499 | |
35,957 | Nordic Entertainment Group AB (Sweden) | 1,284 | |
23,692 | Schibsted ASA Class A (Norway)* | 969 | |
20,147 | Schibsted ASA Class B (Norway) | 727 | |
2,189,078 | Sky Network Television Ltd. (New Zealand)* | 215 | |
291,400 | Television Broadcasts Ltd. (Hong Kong) | 234 | |
217,265 | WPP plc (United Kingdom) | 1,735 | |
15,796 | |||
METALS & MINING—4.8% | |||
85,898 | Acerinox SA (Spain) | 682 | |
1,577,473 | Alrosa PJSC (Russia) | 1,416 | |
1,215,699 | Alumina Ltd. (Australia) | 1,228 | |
57,675 | Anglo American Platinum Ltd. (South Africa) | 3,819 | |
72,319 | Anglo American plc (South Africa) | 1,680 | |
136,634 | ArcelorMittal SA (France) | 1,853 | |
253,536 | Barrick Gold Corp. (Canada) | 6,779 | |
34,142 | BHP Group Ltd. (Australia) | 818 | |
198,710 | BlueScope Steel Ltd. (Australia) | 2,052 | |
81,444 | Cia de Minas Buenaventura SAA ADR (Peru)2 | 999 | |
21,930 | Franco-Nevada Corp. (Canada) | 2,989 | |
242,604 | Freeport-McMoRan Inc. (United States) | 4,207 | |
1,085,605 | Glencore plc (United Kingdom) | 2,190 | |
110,677 | Newcrest Mining Ltd. (Australia) | 2,295 | |
98,200 | Nippon Steel Corp. (Japan)* | 953 | |
63,897 | Rio Tinto plc (United Kingdom) | 3,614 | |
12,700 | Sumitomo Metal Mining Co. Ltd. (Japan) | 395 | |
37,969 | |||
MULTILINE RETAIL—0.1% | |||
33,900 | Marui Group Co. Ltd. (Japan) | 613 | |
OIL, GAS & CONSUMABLE FUELS—2.0% | |||
48,518 | Ampol Ltd. (Australia) | 885 | |
1,752,595 | BP plc (United Kingdom) | 4,470 | |
170,146 | Canadian Natural Resources Ltd. (Canada) | 2,708 | |
185,512 | Equinor ASA (Norway) | 2,367 | |
41,700 | INPEX Corp. (Japan) | 198 | |
106,728 | Inter Pipeline Ltd. (Canada) | 950 | |
16,285 | LUKOIL PJSC ADR (Russia)2 | 832 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
OIL, GAS & CONSUMABLE FUELS—Continued | |||
194,252 | Oil Search Ltd. (Australia)* | $ 351 | |
154,952 | PrairieSky Royalty Ltd. (Canada) | 950 | |
985,740 | United Tractors TBK PT (Indonesia) | 1,408 | |
63,353 | Washington H Soul Pattinson & Co. Ltd. (Australia) | 1,128 | |
16,247 | |||
PAPER & FOREST PRODUCTS—0.1% | |||
207,600 | Oji Holdings Corp. (Japan) | 875 | |
PERSONAL PRODUCTS—1.8% | |||
40,857 | AMOREPACIFIC Group (South Korea) | 1,580 | |
821,361 | Asaleo Care Ltd. (Australia) | 547 | |
30,300 | Kao Corp. (Japan) | 2,157 | |
2,600 | Kose Corp. (Japan) | 332 | |
282,459 | L'Occitane International SA (Hong Kong) | 517 | |
15,200 | Mandom Corp. (Japan) | 227 | |
510,961 | Natura & Co Holding SA (Brazil)* | 4,105 | |
82,896 | Unilever plc (United Kingdom) | 4,724 | |
14,189 | |||
PHARMACEUTICALS—3.5% | |||
48,200 | Astellas Pharma Inc. (Japan) | 661 | |
5,162,050 | Genomma Lab Internacional SAB de CV (Mexico)* | 4,604 | |
110,407 | Haw Par Corp. Ltd. (Singapore) | 758 | |
114,619 | Novo Nordisk AS (Denmark) | 7,309 | |
29,600 | Otsuka Holdings Co. Ltd. (Japan) | 1,096 | |
32,258 | Roche Holding AG (Switzerland) | 10,366 | |
6,100 | Sawai Pharmaceutical Co. Ltd. (Japan) | 294 | |
47,600 | Takeda Pharmaceutical Co. Ltd. (Japan) | 1,471 | |
48,900 | Tsumura & Co. (Japan) | 1,435 | |
27,994 | |||
PROFESSIONAL SERVICES—3.2% | |||
56,526 | Adecco Group AG (Switzerland) | 2,772 | |
391,992 | ALS Ltd. (Australia) | 2,594 | |
91,128 | Experian plc (United Kingdom) | 3,338 | |
1,057,521 | Hays plc (United Kingdom) | 1,460 | |
95,544 | Intertek Group plc (United Kingdom) | 6,882 | |
103,970 | IPH Ltd. (Australia) | 482 | |
49,500 | Nomura Co. Ltd. (Japan) | 320 | |
120,935 | PageGroup plc (United Kingdom) | 560 | |
29,400 | Persol Holdings Co. Ltd. (Japan) | 445 | |
10,721 | Randstad NV (Netherlands)* | 535 | |
173,159 | RELX plc (United Kingdom) | 3,426 | |
36,059 | RWS Holdings plc (United Kingdom) | 261 | |
6,200 | TechnoPro Holdings Inc. (Japan) | 386 | |
5,217 | Teleperformance (France) | 1,566 | |
25,027 | |||
REAL ESTATE MANAGEMENT & DEVELOPMENT—0.5% | |||
37,900 | Daiwa House Industry Co. Ltd. (Japan) | 996 | |
254,763 | LOG Commercial Properties e Participacoes SA (Brazil) | 1,392 | |
216,512 | LPS Brasil Consultoria de Imoveis SA (Brazil)* | 178 | |
69,500 | Mitsubishi Estate Co. Ltd. (Japan) | 1,037 | |
78,676 | United Industrial Corp. Ltd. (Singapore) | 126 | |
3,729 | |||
ROAD & RAIL—1.0% | |||
16,262 | Canadian Pacific Railway Ltd. (Canada) | 4,860 | |
30,300 | East Japan Railway Co. (Japan) | 1,584 | |
130,318 | Globaltrans Investment plc GDR (Russia)2 | 738 |
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 | ||
ROAD & RAIL—Continued | |||
158,448 | National Express Group plc (United Kingdom) | $ 307 | |
55,200 | Senko Group Holdings Co. Ltd. (Japan) | 494 | |
7,983 | |||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—3.1% | |||
4,379 | ASML Holding NV (Netherlands) | 1,584 | |
138,700 | Renesas Electronics Corp. (Japan)* | 1,145 | |
21,700 | ROHM Co. Ltd. (Japan) | 1,669 | |
39,116 | SK Hynix Inc. (South Korea) | 2,775 | |
1,137,000 | Taiwan Semiconductor Manufacturing Co. Ltd. (Taiwan) | 17,202 | |
24,375 | |||
SOFTWARE—1.0% | |||
414,192 | Blackberry Ltd. (Canada)* | 1,859 | |
4,061 | Constellation Software Inc. (Canada) | 4,263 | |
22,800 | NS Solutions Corp. (Japan) | 668 | |
1,600 | Oracle Corp. Japan (Japan) | 160 | |
5,931 | Reply SpA (Italy) | 637 | |
75,400 | TOTVS SA (Brazil)* | 355 | |
7,942 | |||
SPECIALTY RETAIL—1.0% | |||
6,100 | ABC-Mart Inc. (Japan) | 309 | |
4,584,400 | Esprit Holdings Ltd. (Hong Kong)* | 475 | |
370,482 | Fourlis Holdings SA (Greece)* | 1,431 | |
198,108 | JUMBO SA (Greece) | 2,777 | |
226,301 | Pets at Home Group plc (United Kingdom) | 1,136 | |
35,400 | USS Co. Ltd. (Japan) | 647 | |
91,025 | WH Smith plc (United Kingdom) | 1,177 | |
7,952 | |||
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS—2.2% | |||
111,133 | King Slide Works Co. Ltd. (Taiwan) | 1,120 | |
32,540 | Logitech International SA (Switzerland) | 2,737 | |
18,945 | Quadient SAS (France) | 247 | |
259,704 | Samsung Electronics Co. Ltd. (South Korea) | 13,054 | |
17,158 | |||
TEXTILES, APPAREL & LUXURY GOODS—2.0% | |||
13,303 | Adidas AG (Germany) | 3,952 | |
87,700 | ASICS Corp. (Japan) | 1,096 | |
40,266 | Cie Financiere Richemont SA (Switzerland) | 2,517 | |
190,465 | Cie Financiere Richemont SA ADR (South Africa)2 | 1,190 | |
30,565 | EssilorLuxottica SA (France) | 3,773 | |
56,791 | Gildan Activewear Inc. (Canada) | 1,176 | |
91,300 | Onward Holdings Co. Ltd. (Japan) | 179 | |
1,849,746 | Stella International Holdings Ltd. (Hong Kong) | 1,895 | |
110,000 | Texwinca Holdings Ltd. (Hong Kong) | 17 | |
15,795 | |||
THRIFTS & MORTGAGE FINANCE—0.3% | |||
103,755 | Housing Development Finance Corp. Ltd. (India) | 2,688 | |
TOBACCO—0.4% | |||
14,178 | British American Tobacco plc (United Kingdom) | 449 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
TOBACCO—Continued | |||
28,100 | Japan Tobacco Inc. (Japan) | $ 529 | |
�� 25,891 | Swedish Match AB (Sweden) | 1,947 | |
2,925 | |||
TRADING COMPANIES & DISTRIBUTORS—1.2% | |||
48,956 | Brenntag AG (Germany) | 3,129 | |
136,006 | Bunzl plc (United Kingdom) | 4,228 | |
104,792 | Finning International Inc. (Canada) | 1,594 | |
36,200 | ITOCHU Corp. (Japan) | 869 | |
9,820 | |||
TRANSPORTATION INFRASTRUCTURE—0.5% | |||
104,737 | Getlink SE (France) | 1,409 | |
476,933 | Global Ports Investments plc GDR (Russia)*,2 | 1,288 | |
3,271,372 | Grindrod Ltd. (South Africa) | 754 | |
34,900 | Mitsubishi Logistics Corp. (Japan) | 918 | |
4,369 | |||
WIRELESS TELECOMMUNICATION SERVICES—1.3% | |||
807,720 | Bharti Airtel Ltd. (India) | 4,712 | |
83,100 | KDDI Corp. (Japan) | 2,248 | |
24,500 | NTT DoCoMo Inc. (Japan) | 912 | |
36,377 | Rogers Communications Inc. (Canada) | 1,478 | |
7,446,900 | Vodafone Idea Ltd. (India)* | 883 | |
10,233 | |||
TOTAL COMMON STOCKS | |||
(Cost $772,106) | 775,724 | ||
PREFERRED STOCKS—0.9% | |||
AUTOMOBILES—0.3% | |||
14,024 | Volkswagen AG (Germany) | 2,043 | |
BANKS—0.3% | |||
291,173 | Banco Bradesco SA (Brazil)* | 1,023 | |
2,685,009 | Grupo Aval Acciones y Valores SA (Colombia) | 618 | |
369,442 | Itausa - Investimentos Itau SA (Brazil) | 585 | |
2,226 | |||
PERSONAL PRODUCTS—0.0% | |||
3,198 | AMOREPACIFIC Group (South Korea)* | 93 | |
TEXTILES, APPAREL & LUXURY GOODS—0.3% | |||
389,867 | Alpargatas SA (Brazil)* | 2,753 | |
TOTAL PREFERRED STOCKS | |||
(Cost $7,569) | 7,115 | ||
TOTAL INVESTMENTS—98.6% | |||
(Cost $779,675) | 782,839 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—1.4% | 11,174 | ||
TOTAL NET ASSETS—100.0% | $794,013 |
9
Harbor Diversified International All Cap Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
RIGHTS/WARRANTS
Description | No. of Contracts | Strike Price | Expiration Date | Cost (000s) | Value (000s) | |||||
Rolls-Royce Holdings plc | 852,983 | GBP 0.32 | 11/11/2020 | $ 1,697 | $431 |
FAIR VALUE MEASUREMENTS
The following table summarizes the Fund’s investments as of October 31, 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 | $ — | $ 17,557 | $— | $ 17,557 | ||||
Europe | 5,272 | 333,415 | — | 338,687 | ||||
Latin America | 36,890 | 3,962 | — | 40,852 | ||||
Middle East/Central Asia | — | 17,413 | — | 17,413 | ||||
North America | 69,171 | — | — | 69,171 | ||||
Pacific Basin | 18,869 | 273,175 | — | 292,044 | ||||
Preferred Stocks | ||||||||
Europe | — | 2,043 | — | 2,043 | ||||
Latin America | 4,979 | — | — | 4,979 | ||||
Pacific Basin | — | 93 | — | 93 | ||||
Total Investments in Securities | $135,181 | $647,658 | $— | $782,839 | ||||
Financial Derivatives Instruments - Assets | ||||||||
Rights/Warrants | $ 431 | $ — | $— | $ 431 | ||||
Total Investments | $135,612 | $647,658 | $— | $783,270 |
For more information on valuation inputs and their aggregation into the levels used in the table above, please refer to the Fair Value Measurements and Disclosures in Note 2 of the accompanying Notes to Financial Statements.
The following is a rollforward of the Fund’s Level 3 investments during the year ended October 31, 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 10/31/2020 (000s) | Unrealized Gain/ Loss as of 10/31/2020 (000s) | ||||||||||
Common Stocks | $— | $— | $ — | $— | $(1,632) | $1,632 | $— | $— | $— | $— | ||||||||||
Preferred Stocks | 15 | — | (15) | — | — | — | — | — | — | — | ||||||||||
$ 15 | $— | $(15) | $— | $(1,632) | $1,632 | $— | $— | $— | $— |
* | Non-income producing security |
1 | Securities purchased in a transaction exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. The Fund has no right to demand registration of these securities. At October 31, 2020, the aggregate value of these securities was $16,009 or 2% of net assets. |
2 | Depositary receipts such as American Depositary Receipts (ADRs), Global Depositary Receipts (GDRs) and other country specific depositary receipts are certificates evidencing ownership of shares of a foreign issuer. These certificates are issued by depositary banks and generally trade on an established market in the U.S. or elsewhere. |
GBP | British Pound |
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
Marathon Asset Management LLP
Orion House
5 Upper St. Martin’s Lane
London, WC2H 9EA
England
London, WC2H 9EA
England
Portfolio Managers
Michael Godfrey, CFA
Since 2020
Since 2020
David Cull, CFA
Since 2020
Since 2020
Marathon Asset Management LLP (operating as Marathon-London in the U.S.) has subadvised the Fund since 2020*.
Investment Objective
The Fund seeks long-term growth of capital.
Management’s Discussion of
Fund Performance
Fund Performance
Market Review
Stock markets across the globe, including those in emerging markets, experienced significant volatility over the course of the fiscal year. The MSCI Emerging Markets (ND) Index ended 2019 with solid gains but sold off sharply in early 2020 as the coronavirus pandemic swept the globe. While emerging Asian countries were the first hit with the virus, they were also the first to get it under control. Consequently, their economies and stock markets recovered as the year progressed, helping to lift the index back into positive territory in the second half of the fiscal year.
For the full 12-month period, the index notched a respectable gain of 8.25%. However, that masked significant divergence between constituent countries. China (which now makes up more than 40% of the index) was the top performing country, jumping 35.19% over the 12-month period. Other Asian stock markets also fared well; for instance, South Korea gained 11.77% and Taiwan rallied 12.27%. Unfortunately, many emerging countries outside of Asia struggled to contain the virus, and their stock markets lost ground as a result. Brazil fell 38.13% over the period, while Russia declined 29.27%, South Africa slipped by 13.31%, and India shed 2.54%.
There was also a sharp divergence between sectors over the period, as those market segments viewed as more insulated from the lockdowns benefited. Those included Communications Services, Consumer Discretionary, Healthcare, and Information Technology, all of which posted double-digit gains. In contrast, those sectors most damaged by the impact of the virus, such as Energy, Financials, and Real Estate experienced substantial losses over the period. This dynamic was also reflected in styles, as growth sectors were viewed more favorably than value — the MSCI Emerging Markets (ND) Growth Index posted a 25.97% gain over the period, while the MSCI Emerging Markets (ND) Value Index fell 8.47%.
Performance
Harbor Emerging Market Equity Fund returned 0.36% (Retirement Class), 0.28% (Institutional Class), 0.09% (Administrative Class), and 0.00% (Investor Class) over the year ended October 31, 2020, underperforming the MSCI Emerging Market (ND) Index’s 8.25% gain.
An overweight and negative stock selection in Brazil was a major detractor over the period. In addition, an underweight to the top performing China stock market also hurt results and was further compounded by poor stock picking. An underweight to the top index name, Alibaba, was particularly hurtful. On the plus side, the fund benefited from strong stock selection in India and Taiwan thanks in part to overweights to Reliance Industries and Taiwan Semiconductor.
From a sector perspective, an underweight and poor stock picking in the Consumer Discretionary sector hurt results over the period, with the underweight to Alibaba being the primary culprit. Poor selection in the Consumer Staples, Industrials and Financials sectors also weighed on results.
One bright spot was stock picking in the Health Care Sector thanks in part to Pharmaron Beijing. Selection in the Materials sector was also a positive, with several holdings contributing to the result, including Anglo Gold, LG Chem and Ganfeng Lithium.
* | Marathon Asset Management LLP was appointed subadviser to the Fund effective September 23, 2020. |
11
Harbor Emerging Markets Equity Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
CHANGE IN A $50,000 INVESTMENT
For the period 11/01/2013 through 10/31/2020
The graph compares a $50,000 investment in the Institutional Class shares of the Fund with the performance of the MSCI Emerging Markets (ND) Index. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
TOTAL RETURNS
For the periods ended 10/31/2020
1 Year | Annualized | |||||||
5 Years | Life of Fund | |||||||
Harbor Emerging Markets Equity Fund | ||||||||
Retirement Class1,2 | 0.36% | 7.89% | 2.13% | |||||
Institutional Class1 | 0.28 | 7.83 | 2.09 | |||||
Administrative Class1 | 0.09 | 7.85 | 2.03 | |||||
Investor Class1 | 0.00 | 7.45 | 1.71 | |||||
Comparative Index | ||||||||
MSCI Emerging Markets (ND)1 | 8.25% | 7.92% | 3.34% |
As stated in the Fund’s prospectus dated March 1, 2020, as supplemented on August 13, 2020, the expense ratios were 0.88% (Net) and 1.12% (Gross) (Retirement Class); 0.96% (Net) and 1.20% (Gross) (Institutional Class); 1.21% (Net) and 1.45% (Gross) (Administrative Class); and 1.33% (Net) and 1.57% (Gross) (Investor Class). The net expense ratios reflect an expense limitation agreement (excluding interest expense, if any) effective through 02/28/2022. 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 at harborfunds.com or by calling 800-422-1050.
Outlook & Strategy
Continued monetary accommodation and government stimulus efforts in response to the COVID-19 outbreak, coupled with anecdotal evidence of improving economic conditions relative to that experienced over the first half of the year, drove overall investor appetite for riskier (and higher yielding) assets such as equities, thus further increasing the disconnect between global capital market performance and the economic realities currently faced by populations around the world.
To that end, there has been much discussion about whether this rally is justified given the increase in valuation multiples. To some extent, however, the point may be moot because when emerging from recessions, valuations may appear inflated as markets anticipate a future recovery in earnings. It is as the next year unfolds that we will know whether markets were correct in anticipating such a steep recovery in profits. The outlook, in other words, rests on earnings living up to expectations that have already been priced in. If this year marked the end of a market cycle and the beginning of a new one, then it would be highly unusual since many of the valuation excesses of recent years have not been unwound, rather they have been extrapolated even further. It is therefore no surprise to see an onslaught of new IPOs and a proliferation of so-called ‘SPACs’ (Special Purpose Acquisition Companies) as private companies seek to take advantage of high valuations in the public market. Meanwhile, the disparity between the performance of growth and value stocks, large caps and small caps has grown ever wider (though with some nuances depending on the market in question).
Given these market dynamics, empirical data would suggest that the investment pendulum will swing once again and that superior long-term returns are far more likely to come from precisely the opposite ends of the investing spectrum to those now in vogue. Rather than revert to narrative investing or chasing momentum, the Fund’s sub-advisor continues to focus on, look for, and invest in companies that exhibit favorable supply side dynamics (and with management teams that have a track record of allocating capital efficiently) at valuation levels grounded in evidence-based fundamentals rather than speculative fervor.
1 | The “Life of Fund” return as shown reflects the period 11/01/2013 through October 31, 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. |
All international and global returns are in U.S. Dollars.
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.
12
Harbor Emerging Markets Equity Fund
Portfolio of Investments—October 31, 2020
Portfolio of Investments—October 31, 2020
REGION BREAKDOWN (% of investments) -Unaudited
Portfolio of Investments
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—97.1% | |||
Shares | Value | ||
AEROSPACE & DEFENSE—0.1% | |||
34,287 | Embraer SA (Brazil)* | $ 36 | |
AIR FREIGHT & LOGISTICS—0.5% | |||
27,251 | Grupo Aeroportuario del Pacifico SAB de CV (Mexico) | 227 | |
AUTO COMPONENTS—0.9% | |||
9,100 | Hankook Tire & Technology Co. Ltd. (South Korea) | 255 | |
551,490 | Nemak SAB de CV (Mexico)1 | 169 | |
424 | |||
AUTOMOBILES—2.2% | |||
334,500 | Baic Motor Corp. Ltd. (China)1 | 124 | |
3,958 | Hyundai Motor Co. (South Korea) | 579 | |
49,197 | Mahindra & Mahindra Ltd. (India) | 394 | |
1,097 | |||
BANKS—10.0% | |||
155,799 | Axis Bank Ltd. (India)* | 1,030 | |
15,447 | Bancolombia SA ADR (Colombia)2 | 394 | |
837,800 | Bank Mandiri Persero TBK PT (Indonesia) | 326 | |
178,390 | Bank of The Philippine Islands (Philippines) | 270 | |
165,666 | Cairo Mezz plc (Greece)* | 20 | |
2,350,186 | Eurobank Ergasias SA (Greece)* | 786 | |
1,523,598 | Grupo Financiero Inbursa SAB de CV (Mexico)* | 1,129 | |
10,427 | Hana Financial Group Inc. (South Korea) | 282 | |
207,700 | Kasikornbank PCL (Thailand) | 507 | |
11,365 | Komercni Banka AS (Czech Republic)* | 231 | |
4,975 | |||
BEVERAGES—4.5% | |||
247,412 | AmBev SA (Brazil)* | 525 | |
216,400 | East African Breweries Ltd. (Kenya) | 298 | |
15,850 | Fomento Economico Mexicano SAB de CV ADR (Mexico)2 | 852 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
BEVERAGES—Continued | |||
847,300 | Thai Beverage PCL (Thailand) | $ 361 | |
22,000 | Tsingtao Brewery Co. Ltd. (China) | 182 | |
2,218 | |||
CAPITAL MARKETS—0.1% | |||
12,461 | Georgia Capital plc (United Kingdom)* | 59 | |
CHEMICALS—0.4% | |||
17,868 | PhosAgro PJSC GDR (Russia)2 | 206 | |
2,684,000 | Tianhe Chemicals Group Ltd. (Hong Kong)*,1 | — x | |
206 | |||
COMMERCIAL SERVICES & SUPPLIES—0.7% | |||
4,676 | S-1 Corp. (South Korea) | 336 | |
CONSTRUCTION & ENGINEERING—0.4% | |||
143,752 | Raubex Group Ltd. (South Africa) | 177 | |
CONSUMER FINANCE—2.1% | |||
1,442,997 | Gentera SAB de CV (Mexico)* | 340 | |
72,842 | Shriram Transport Finance Co. Ltd. (India) | 678 | |
1,018 | |||
DIVERSIFIED TELECOMMUNICATION SERVICES—1.3% | |||
21,862 | KT Corp. (South Korea) | 427 | |
139,611 | Telkom SA SOC Ltd. (South Africa) | 220 | |
647 | |||
ELECTRICAL EQUIPMENT—1.0% | |||
482,000 | TECO Electric and Machinery Co. Ltd. (Taiwan) | 504 | |
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—3.1% | |||
91,000 | Chroma ATE Inc. (Taiwan) | 434 | |
166,000 | Delta Electronics Inc. (Taiwan) | 1,104 | |
1,538 |
13
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 | ||
ENTERTAINMENT—0.8% | |||
1,000,000 | Major Cineplex Group PCL (Thailand) | $ 414 | |
FOOD & STAPLES RETAILING—1.3% | |||
9,142 | PriceSmart Inc. (United States) | 631 | |
FOOD PRODUCTS—8.6% | |||
65,000 | China Mengniu Dairy Co. Ltd. (China)* | 306 | |
744,500 | Delfi Ltd. (Singapore) | 349 | |
541,977 | Grupo Lala SAB de CV (Mexico) | 332 | |
122,166 | Industrias Bachoco SAB de CV (Mexico) | 380 | |
108,025 | Tiger Brands Ltd. (South Africa) | 1,340 | |
360,000 | Tingyi Cayman Islands Holding Corp. (China) | 659 | |
79,597 | Ulker Biskuvi Sanayi AS (Turkey) | 192 | |
1,056,000 | Want Want China Holdings Ltd. (China) | 699 | |
4,257 | |||
HEALTH CARE PROVIDERS & SERVICES—1.7% | |||
303,874 | Kangji Medical Holdings Ltd. (China)*,3 | 830 | |
HOTELS, RESTAURANTS & LEISURE—2.1% | |||
356,000 | Ajisen China Holdings Ltd. (China) | 45 | |
114,786 | Tsogo Sun Gaming Ltd. (South Africa) | 25 | |
18,619 | Yum China Holdings Inc. (China) | 991 | |
1,061 | |||
HOUSEHOLD DURABLES—1.0% | |||
162,800 | MRV Engenharia e Participacoes SA (Brazil) | 478 | |
INDUSTRIAL CONGLOMERATES—3.0% | |||
23,420 | GT Capital Holdings Inc. (Philippines) | 208 | |
11,242 | LG Corp. (South Korea) | 673 | |
289,394 | Quinenco SA (Chile) | 382 | |
397,200 | Sime Darby Berhad (Malaysia) | 230 | |
1,493 | |||
INSURANCE—2.6% | |||
60,953 | Porto Seguro SA (Brazil)* | 504 | |
31,747 | Qualitas Controladora SAB de CV (Mexico) | 127 | |
4,253 | Samsung Fire & Marine Insurance Co. Ltd. (South Korea) | 672 | |
1,303 | |||
INTERACTIVE MEDIA & SERVICES—3.6% | |||
13,310 | Baidu Inc. ADR (China)*,2 | 1,771 | |
INTERNET & DIRECT MARKETING RETAIL—1.4% | |||
1,506 | GS Home Shopping Inc. (South Korea) | 185 | |
91,000 | PChome Online Inc. (Taiwan) | 307 | |
6,816 | Trip.Com Group Ltd. ADR (China)*,2 | 196 | |
688 | |||
IT SERVICES—1.5% | |||
21,601 | Genpact Ltd. (United States) | 742 | |
742 | |||
LEISURE PRODUCTS—4.8% | |||
140,628 | Giant Manufacturing Co. Ltd. (Taiwan) | 1,389 | |
104,000 | Merida Industry Co. Ltd. (Taiwan) | 1,014 | |
2,403 | |||
MARINE—0.8% | |||
12,795,847 | Cia Sud Americana de Vapores SA (Chile)* | 373 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
MEDIA—1.2% | |||
43,283 | Grupo Televisa SAB ADR (Mexico)*,2 | $ 275 | |
5,822,400 | Media Nusantara Citra TBK PT (Indonesia)* | 325 | |
600 | |||
METALS & MINING—5.7% | |||
363,157 | Alrosa PJSC (Russia) | 326 | |
13,231 | Anglo American Platinum Ltd. (South Africa) | 876 | |
16,377 | Anglo American plc (South Africa) | 381 | |
18,847 | Cia de Minas Buenaventura SAA ADR (Peru)2 | 231 | |
57,676 | Freeport-McMoRan Inc. (United States) | 1,000 | |
2,814 | |||
OIL, GAS & CONSUMABLE FUELS—1.1% | |||
3,755 | Lukoil PJSC ADR (Russia)2 | 192 | |
234,500 | United Tractors TBK PT (Indonesia) | 335 | |
527 | |||
PERSONAL PRODUCTS—2.7% | |||
9,663 | AMOREPACIFIC Group (South Korea) | 374 | |
118,600 | Natura & Co Holding SA (Brazil)* | 953 | |
1,327 | |||
PHARMACEUTICALS—2.0% | |||
1,121,697 | Genomma Lab Internacional SAB de CV (Mexico)* | 1,000 | |
REAL ESTATE MANAGEMENT & DEVELOPMENT—0.7% | |||
58,411 | LOG Commercial Properties e Participacoes SA (Brazil) | 319 | |
54,100 | LPS Brasil Consultoria de Imoveis SA (Brazil)* | 45 | |
364 | |||
ROAD & RAIL—0.3% | |||
29,751 | Globaltrans Investment plc GDR (Russia)2 | 168 | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—9.3% | |||
9,244 | SK Hynix Inc. (South Korea) | 656 | |
261,000 | Taiwan Semiconductor Manufacturing Co. Ltd. (Taiwan) | 3,949 | |
4,605 | |||
SOFTWARE—0.2% | |||
17,900 | TOTVS SA (Brazil)* | 84 | |
SPECIALTY RETAIL—1.9% | |||
81,586 | Fourlis Holdings SA (Greece)* | 315 | |
43,505 | JUMBO SA (Greece) | 610 | |
925 | |||
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS—6.6% | |||
26,000 | King Slide Works Co. Ltd. (Taiwan) | 262 | |
60,136 | Samsung Electronics Co. Ltd. (South Korea) | 3,023 | |
3,285 | |||
TEXTILES, APPAREL & LUXURY GOODS—1.0% | |||
43,987 | Cie Financiere Richemont SA ADR (South Africa)2 | 275 | |
235,000 | Stella International Holdings Ltd. (Hong Kong) | 241 | |
516 | |||
THRIFTS & MORTGAGE FINANCE—1.2% | |||
23,261 | Housing Development Finance Corp. Ltd. (India) | 603 | |
TRANSPORTATION INFRASTRUCTURE—0.3% | |||
685,132 | Grindrod Ltd. (South Africa) | 158 |
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 | ||
WIRELESS TELECOMMUNICATION SERVICES—2.4% | |||
205,844 | Bharti Airtel Ltd. (India) | $ 1,201 | |
TOTAL COMMON STOCKS | |||
(Cost $46,534) | 48,083 | ||
PREFERRED STOCKS—2.3% | |||
BANKS—1.0% | |||
66,800 | Banco Bradesco SA (Brazil)* | 235 | |
616,347 | Grupo Aval Acciones y Valores SA (Colombia) | 142 | |
88,100 | Itausa - Investimentos Itau SA (Brazil) | 139 | |
516 | |||
TEXTILES, APPAREL & LUXURY GOODS—1.3% | |||
88,700 | Alpargatas SA (Brazil)* | 626 | |
TOTAL PREFERRED STOCKS | |||
(Cost $1,114) | 1,142 | ||
TOTAL INVESTMENTS—99.4% | |||
(Cost $47,648) | 49,225 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—0.6% | 301 | ||
TOTAL NET ASSETS—100.0% | $49,526 |
15
Harbor Emerging Markets Equity Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
FAIR VALUE MEASUREMENTS
The following table summarizes the Fund’s investments as of October 31, 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 | $ — | $ 3,094 | $— | $ 3,094 | ||||
Europe | 720 | 3,041 | — | 3,761 | ||||
Latin America | 8,400 | 755 | — | 9,155 | ||||
Middle East/Central Asia | — | 3,906 | — | 3,906 | ||||
North America | 2,373 | — | — | 2,373 | ||||
Pacific Basin | 3,879 | 21,915 | — | 25,794 | ||||
Preferred Stocks | ||||||||
Latin America | 1,142 | — | — | 1,142 | ||||
Total Investments in Securities | $16,514 | $32,711 | $— | $49,225 |
For more information on valuation inputs and their aggregation into the levels used in the table above, please refer to the Fair Value Measurements and Disclosures in Note 2 of the accompanying Notes to Financial Statements.
The following is a rollforward of the Fund’s Level 3 investments during the year ended October 31, 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 10/31/2020 (000s) | Unrealized Gain/ Loss as of 10/31/2020 (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 10/31/2020 (000s) | Valuation Technique | Unobservable Input(s) | Input Value(s) | ||||
Investments in Securities | ||||||||
Common Stocks | ||||||||
Tianhe Chemicals Group Ltd. (Hong Kong)*,1 | $— | Market Approach | Estimated Recovery Value | HKD 0.00 |
* | Non-income producing security |
x | Fair valued in accordance with Harbor Funds' Valuation Procedures. |
1 | Securities purchased in a transaction exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. The Fund has no right to demand registration of these securities. At October 31, 2020, the aggregate value of these securities was $293 or 1% of net assets. |
2 | Depositary receipts such as American Depositary Receipts (ADRs), Global Depositary Receipts (GDRs) and other country specific depositary receipts are certificates evidencing ownership of shares of a foreign issuer. These certificates are issued by depositary banks and generally trade on an established market in the U.S. or elsewhere. |
3 | Security was purchased on June 22, 2020 at a net cost of $550 in an initial public offering with a sales restriction of 180 days. At October 31, 2020, the value of the security was $830 or 2% of net assets. |
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
Richard Mercado, CFA
Since 2019
Since 2019
Laure Négiar, CFA
Since 2019
Since 2019
Zak Smerczak, CFA
Since 2019
Since 2019
Alexandre Narboni
Since 2019
Since 2019
Comgest Asset Management International Limited has subadvised the Fund since 2019.
Investment Objective
The Fund seeks long-term growth of capital.
Laure Négiar, CFA
Zak Smerczak, CFA
Alexandre Narboni
Richard Mercado, CFA
Management’s Discussion of
Fund Performance
Fund Performance
Market Review
Over the twelve-month period ending October 31, 2020, financial markets experienced volatility accentuated by the ongoing Coronavirus pandemic, business closures and U.S. presidential election uncertainty. The broad international market, as measured by the MSCI All Country World Ex. U.S. (ND) Index, ultimately finished the period down 2.61%, though its path in getting there was far from linear. Emerging markets performed best, led by China. This dynamic was bolstered by strong returns from the Information Technology sector, particularly within Asia. However, even this relatively simple dynamic is best viewed in increments given the market swings experienced over the period.
We believe it is best to catalog the months of November and December of 2019 as pre-COVID-19 markets, focusing instead on the quarterly progression of 2020. As we moved into 2020 and the full force of social lockdowns began to be absorbed, coupled with uncertainty over the duration of the pandemic, the index tumbled 23.36% by the end of the first quarter. As optimism returned in the second quarter, markets responded positively in anticipation of a V-shaped recovery, evolving consumer patterns, and durable changes to economic efficiency. This hope fueled markets to recover 16.12% in the second quarter, despite continued uncertainty and corporates remaining hesitant to offer visibility on future revenues and profits. In hindsight, investors should not have been overly surprised by the market’s drop in the first quarter, nor its optimism-fueled bounce in the second quarter. However, this all led to the final four months of the period being important for the future direction of markets. As companies and investors had more time to adapt and become more accustomed to the elongated pandemic, there was an expectation for this four-month period to be more reflective of reality. However, as many questions remained unanswered, the index’s combined return of 3.96% over the months of July, August, September, and October was not enough to push the full fiscal year’s return into positive territory.
Performance
The Harbor Focused International Fund returned 11.46% (Retirement Class), 11.40% (Institutional Class) and 11.03% (Investor Class), while the MSCI All Country World Ex. U.S. (ND) Index returned -2.61% during the year ended October 31, 2020. The performance of the Fund has been more resilient and less volatile than the markets during the period under review. The Fund outperformed the benchmark in all regions, with the strongest outperformance coming from Emerging Markets and Japan. The Fund had positive stock selection across all invested sectors, except for Information Technology and Consumer Discretionary. Investments in Communication Services, Materials and Healthcare were the Fund’s top performers, while the Financials and Consumer Staples sectors provided its greatest positive impact relative to the Index.
We determined early on to manage through the uncertainty was to establish a playbook consisting of 1) confirming the balance sheet strength of our invested companies, 2) assessing their potential for earnings to recover, and 3) upgrading the quality of the portfolio where possible. As a result, the Fund continues to reflect our assessment of the highest quality growth companies with strong competitive advantages, structural growth drivers, good corporate cultures, and robust balance sheets. We believe the companies owned in the Fund are well-positioned to defend and grow their market share, maintaining their potential to emerge from this period of uncertainty even stronger and capable of compounding their earnings growth.
17
Harbor Focused International Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
CHANGE IN A $50,000 INVESTMENT
For the period 06/01/2019 through 10/31/2020
The graph compares a $50,000 investment in the Institutional Class shares of the Fund with the performance of the MSCI All Country World Ex. U.S. (ND) Index. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
TOTAL RETURNS
For the periods ended 10/31/2020
1 Year | 5 Years | Annualized | ||||||
Life of Fund | ||||||||
Harbor Focused International Fund | ||||||||
Retirement Class1 | 11.46% | N/A | 13.82% | |||||
Institutional Class1 | 11.40 | N/A | 13.78 | |||||
Investor Class1 | 11.03 | N/A | 13.36 | |||||
Comparative Index | ||||||||
MSCI All Country World Ex. U.S. (ND)1 | -2.61% | N/A | 3.46% |
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 at harborfunds.com or by calling 800-422-1050.
Among the Fund’s top contributors were Taiwan Semiconductor Manufacturing Co. (TSMC) and Inner Mongolia Yili Industrial Group. We believe that TSMC, the world’s leading chip foundry, remains well-positioned to capture the growth of electronics in our everyday lives, benefitting from the accelerated e-commerce trends resulting from economic lockdowns. Inner Mongolia Yili, China’s largest dairy producer, is seeing growth from the greater adoption of dairy across China and is benefitting from the Government’s touting of the health benefits of dairy. Amadeus, a leading platform that facilitates travel-related bookings was a detractor given its ties to industries most impacted by the pandemic, along with Fomento Economic Mexicano SAB (FEMSA), given the ongoing struggles in Latin America.
As many Asian economies appear to be outpacing Western peers in their recovery and ability to limit the impact of the virus, we continue to benefit from Comgest’s long-standing presence and expertise in Asia. This is most on display in China and Japan, where we continue to find what we consider to be global leaders and underappreciated growth stories – Inner Mongolia Yili, Tencent, Alibaba, Kweichow Moutai, NetEase, Hoya, Keyence, Pan Pacific International, and Hamamatsu Photonics stand out as prime examples. Extending across Asia, we can include TSMC (Taiwan) and Housing Development Finance Corp (HDFC of India).
Outlook & Strategy
At Comgest, attempts at gaming presidential elections, predicting the timing of vaccines or forecasting the future trajectory of financial markets is not where our ability to add value lies. Instead we remain focused on finding and confirming the structural advantages of company-specific business models and the soundness of their balance sheets to withstand prolonged uncertainty. When we find this combination, at what we believe to be an attractive valuation, we are able to act with conviction, believing that we are putting the Fund in a favorable position for compound earnings growth and risk-adjusted returns. We endeavor to study such companies from a bottom-up perspective, following a research process that may take years and embracing the differences of opinions that result from a diverse and tenured team. We will continue to pursue our quality growth approach in a disciplined manner so that the Fund remains comprised of what we assess to be those select companies capable of delivering attractive long-term returns.
1 | The “Life of Fund” return as shown reflects the period 06/01/2019 through 10/31/2020. |
All international and global returns are in U.S. Dollars.
This report contains the current opinions of Comgest Asset Management International Limited as of the date of this report and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Such opinions are subject to change without notice and securities described herein may no longer be included in, or may at any time be removed from, the Fund’s portfolio. This report is distributed for informational purposes only. Information contained herein has been obtained from sources believed reliable, but not guaranteed.
Investing in international and emerging markets poses special risks, including potentially greater price volatility due to social, political and economic factors, as well as currency exchange rate fluctuations. These risks are more severe for securities of issuers in emerging market regions. For information on the different share classes and the risks associated with an investment in the Fund, please refer to the current prospectus.
18
Harbor Focused International Fund
Portfolio of Investments—October 31, 2020
Portfolio of Investments—October 31, 2020
REGION BREAKDOWN (% of investments) -Unaudited
Portfolio of Investments
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—94.3% | |||
Shares | Value | ||
AEROSPACE & DEFENSE—1.4% | |||
3,185 | MTU Aero Engines AG (Germany) | $ 545 | |
BEVERAGES—6.5% | |||
10,401 | Heineken NV (Netherlands) | 921 | |
2,336 | Kweichow Moutai Co. Ltd. Class A (China) | 584 | |
6,099 | Pernod Ricard SA (France) | 982 | |
2,487 | |||
BUILDING PRODUCTS—2.5% | |||
5,000 | Daikin Industries Ltd. (Japan) | 936 | |
CHEMICALS—3.1% | |||
8,800 | Shin-Etsu Chemical Co. Ltd. (Japan) | 1,176 | |
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—4.7% | |||
20,400 | Hamamatsu Photonics KK (Japan) | 1,027 | |
1,700 | Keyence Corp. (Japan) | 771 | |
1,798 | |||
ENTERTAINMENT—3.4% | |||
14,901 | NetEase Inc. ADR (China)1 | 1,293 | |
FOOD PRODUCTS—5.0% | |||
318,538 | Inner Mongolia Yili Industrial Group Co. Ltd. Class A (China) | 1,893 | |
HEALTH CARE EQUIPMENT & SUPPLIES—6.8% | |||
15,000 | Hoya Corp. (Japan) | 1,693 | |
865 | Straumann Holding AG (Switzerland) | 903 | |
2,596 | |||
INSURANCE—7.0% | |||
115,945 | AIA Group Ltd. (Hong Kong) | 1,104 | |
151,266 | Ping An Insurance Group Co. of China Ltd. (China) | 1,564 | |
2,668 | |||
INTERACTIVE MEDIA & SERVICES—6.9% | |||
11,975 | Autohome Inc. ADR Class A (China)*,1 | 1,144 | |
19,108 | Tencent Holdings Ltd. (China) | 1,460 | |
2,604 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
INTERNET & DIRECT MARKETING RETAIL—3.7% | |||
4,665 | Alibaba Group Holding Ltd. ADR (China)*,1 | $ 1,421 | |
IT SERVICES—2.5% | |||
19,605 | Amadeus IT Group SA Class A (Spain) | 934 | |
MULTILINE RETAIL—1.8% | |||
32,700 | Pan Pacific International Holdings Corp. (Japan) | 694 | |
PERSONAL PRODUCTS—6.2% | |||
3,950 | L'Oreal SA (France) | 1,276 | |
18,664 | Unilever plc (United Kingdom) | 1,064 | |
2,340 | |||
PHARMACEUTICALS—7.6% | |||
18,604 | Novo Nordisk AS (Denmark) | 1,186 | |
5,249 | Roche Holding AG (Switzerland) | 1,687 | |
2,873 | |||
PROFESSIONAL SERVICES—3.3% | |||
34,623 | Experian plc (United Kingdom) | 1,268 | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—4.8% | |||
21,830 | Taiwan Semiconductor Manufacturing Co. Ltd. ADR (Taiwan)1 | 1,831 | |
SOFTWARE—2.9% | |||
10,341 | SAP SE (Germany) | 1,103 | |
SPECIALTY RETAIL—7.1% | |||
1,800 | Fast Retailing Co. Ltd. (Japan) | 1,255 | |
6,100 | Hikari Tsushin Inc. (Japan) | 1,431 | |
2,686 | |||
TEXTILES, APPAREL & LUXURY GOODS—3.6% | |||
7,061 | EssilorLuxottica SA (France) | 872 | |
1,036 | LVMH Moet Hennessy Louis Vuitton SE (France) | 485 | |
1,357 |
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 | ||
THRIFTS & MORTGAGE FINANCE—3.5% | |||
51,490 | Housing Development Finance Corp. Ltd. (India) | $ 1,334 | |
TOTAL COMMON STOCKS | |||
(Cost $30,951) | 35,837 | ||
TOTAL INVESTMENTS—94.3% | |||
(Cost $30,951) | 35,837 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—5.7% | 2,170 | ||
TOTAL NET ASSETS—100.0% | $38,007 |
FAIR VALUE MEASUREMENTS
The following table summarizes the Fund’s investments as of October 31, 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 | $ — | $13,226 | $— | $13,226 | ||||
Middle East/Central Asia | — | 1,334 | — | 1,334 | ||||
Pacific Basin | 5,689 | 15,588 | — | 21,277 | ||||
Total Investments in Securities | $5,689 | $30,148 | $— | $35,837 |
There were no Level 3 Investments at October 31, 2020 or 2019.
For more information on valuation inputs and their aggregation into the levels used in the table above, please refer to the Fair Value Measurements and Disclosures in Note 2 of the accompanying Notes to Financial Statements.
* | Non-income producing security |
1 | Depositary receipts such as American Depositary Receipts (ADRs), Global Depositary Receipts (GDRs) and other country specific depositary receipts are certificates evidencing ownership of shares of a foreign issuer. These certificates are issued by depositary 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) posted gains for the 12-month period ended October 31, 2020, despite the global economic devastation caused by the coronavirus pandemic, which ended the decade-long bull market. Growth equities for the period benefited from both technical and fundamental tailwinds, as low rates bolstered the value of future earnings, and as the recessionary environment put a premium on the growth generated by tech and tech-enabled businesses. Massive global fiscal and monetary stimulus, positioning and fear-of-missing-out dynamics also contributed to the rise. While equities rebounded from March lows, the end of the period saw stocks pressured once again from persistent concerns surrounding new virus outbreaks, increasing geopolitical tensions and de-globalization, and the November election in the U.S. For the period, the U.S./Canada and Emerging Asia were the top regional contributors, while Western Europe and Latin America were the top detractors from global equity returns. Gains were led by the fast-growing Information Technology and Consumer Discretionary sectors while Financials and Energy were the largest sector detractors.
Performance
Over the year ended October 31, 2020, Harbor Global Leaders Fund returned 16.56% (Retirement Class), 16.46% (Institutional Class), 16.13% (Administrative Class), and 16.01% (Investor Class) versus the 4.89% return for the MSCI All Country World (ND) Index. The Fund’s excess return for the quarter 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 Communication Services contributed most to relative results, while Consumer Discretionary and Materials were the top relative detractors.
On an absolute basis, the largest individual contributors to the Fund’s investment results were Sea, MonotaRO, Adobe, Keyence, and Lonza.
Lonza continues to deliver strong results amid the global pandemic, with additional demand for its outsourced services related to COVID-19 therapeutics and vaccines. As a contract development and manufacturing organization (CDMO), Lonza provides solutions that help pharmaceutical and biotechnology companies offload fixed costs, mitigate risk, increase research and development efficiency, and tap external expertise. The firm’s CDMO business, representing 80 percent of total group sales, performed well in a challenging first half of 2020, with 11 percent year-over-year revenue growth and EBITDA margin of 34 percent. With a narrowed focus on its profit engine and new growth drivers from strategic initiatives related to COVID-19, we expect that Lonza will continue to experience sustained growth, margin expansion, and an above-average return on its invested capital in the coming years.
The largest absolute individual detractors from investment results were Safran, HDFC Bank, Live Nation, TransDigm, and Bank Central Asia.
Safran, an aircraft and aerospace company, has been hurt by this year’s drop in global air travel. The company reported weak results for the first half of the year—with recurring operating margins contracting approximately five percent year-over-year to 11 percent—as the decline in aircraft flight cycles and utilization led to lower demand for aftermarket engine parts (the subsegment of the business with the highest margin). However, global air traffic has begun to stabilize and even improve somewhat in key geographies. In our view, Safran was able to leverage the downturn to bolster its balance sheet and aggressively reduce costs. While the near-term environment should remain challenging for the company—as airlines repair balance sheets and delay engine shop visits by shuffling engines on excess aircraft—we do
21
Harbor Global Leaders Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
CHANGE IN A $50,000 INVESTMENT
For the period 11/01/2010 through 10/31/2020
The graph compares a $50,000 investment in the Institutional Class shares of the Fund with the performance of the MSCI All Country World (ND) Index. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
TOTAL RETURNS
For the periods ended 10/31/2020
1 Year | Annualized | |||||||
5 Years | 10 Years | |||||||
Harbor Global Leaders Fund | ||||||||
Retirement Class1 | 16.56% | 13.74% | 12.55% | |||||
Institutional Class | 16.46 | 13.66 | 12.51 | |||||
Administrative Class | 16.13 | 13.37 | 12.23 | |||||
Investor Class | 16.01 | 13.24 | 12.10 | |||||
Comparative Index | ||||||||
MSCI All Country World (ND) | 4.89% | 8.11% | 7.90% |
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 at harborfunds.com or by calling 800-422-1050.
not see any material changes to Safran’s structural advantages in its core commercial aerospace market. We continue to view Safran as an oligopoly in the narrow-body engine market and expect trends such as rising incomes in emerging markets to drive increasingly higher demand for narrow-body air travel over the long term.
Outlook & Strategy
There has been very little transaction activity or repositioning in the Fund, and, on a relative basis, investment results have remained strong. These two points together reflect, we believe, the underlying durability and quality of the franchises in which the Fund invests. We continue, 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.
COVID-19 will likely have a lasting impact on economies, business spaces, behaviors, and geopolitics. It is accelerating existing trends and ending others, and we expect that the gap between winners and losers will widen. In our view, earnings drive equity returns over the long run, and only a select few businesses are capable of sustaining above-average growth. With a focus on its long-term investment horizon, Sands Capital has conviction that leadership, innovation, and competitive advantage will distinguish the winning businesses even more in the years ahead.
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. |
All international and global returns are in U.S. Dollars.
This report contains the current opinions of Sands Capital Management, LLC as of the date of this report and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Such opinions are subject to change without notice and securities described herein may no longer be included in, or may at any time be removed from, the Fund’s portfolio. This report is distributed for informational purposes only. Information contained herein has been obtained from sources believed reliable, but not guaranteed.
Investing in international and emerging markets poses special risks, including potentially greater price volatility due to social, political and economic factors, as well as currency exchange rate fluctuations. These risks are more severe for securities of issuers in emerging market regions. For information on the different share classes and the risks associated with an investment in the Fund, please refer to the current prospectus.
22
Harbor Global Leaders Fund
Portfolio of Investments—October 31, 2020
Portfolio of Investments—October 31, 2020
REGION BREAKDOWN (% of investments) -Unaudited
(Excludes derivatives)
Portfolio of Investments
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—108.7% | |||
Shares | Value | ||
AEROSPACE & DEFENSE—5.3% | |||
22,483 | Safran SA (France)* | $ 2,372 | |
8,297 | TransDigm Group Inc. (United States)* | 3,961 | |
6,333 | |||
AUTO COMPONENTS—2.6% | |||
32,137 | Aptiv plc (United States) | 3,101 | |
BANKS—3.3% | |||
68,094 | HDFC Bank Ltd. ADR (India)*,1 | 3,911 | |
BIOTECHNOLOGY—3.5% | |||
20,317 | CSL Ltd. (Australia) | 4,113 | |
CAPITAL MARKETS—2.6% | |||
32,800 | Intercontinental Exchange Inc. (United States) | 3,096 | |
COMMERCIAL SERVICES & SUPPLIES—2.8% | |||
490,454 | Rentokil Initial plc (United Kingdom) | 3,339 | |
DIVERSIFIED CONSUMER SERVICES—6.8% | |||
19,687 | Bright Horizons Family Solutions Inc. (United States)* | 3,112 | |
67,094 | Chegg Inc. (United States)* | 4,927 | |
8,039 | |||
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—4.6% | |||
11,960 | Keyence Corp. (Japan) | 5,428 | |
ENTERTAINMENT—5.4% | |||
35,162 | Live Nation Entertainment Inc. (United States)* | 1,716 | |
29,864 | Sea Ltd. ADR (Singapore)*,1 | 4,710 | |
6,426 | |||
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—2.5% | |||
4,054 | Equinix Inc. (United States) | 2,964 | |
FOOD & STAPLES RETAILING—3.8% | |||
145,306 | Alimentation Couche-Tard Inc. (Canada) | 4,475 | |
HEALTH CARE EQUIPMENT & SUPPLIES—2.6% | |||
90,458 | Boston Scientific Corp. (United States)* | 3,100 | |
HEALTH CARE PROVIDERS & SERVICES—2.4% | |||
9,334 | UnitedHealth Group Inc. (United States) | 2,848 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
INDUSTRIAL CONGLOMERATES—3.2% | |||
10,314 | Roper Technologies Inc. (United States) | $ 3,830 | |
INSURANCE—3.6% | |||
443,300 | AIA Group Ltd. (Hong Kong) | 4,219 | |
INTERACTIVE MEDIA & SERVICES—4.3% | |||
13,612 | Naver Corp. (South Korea) | 3,483 | |
205,204 | Rightmove plc (United Kingdom) | 1,642 | |
5,125 | |||
IT SERVICES—3.9% | |||
25,496 | Visa Inc. (United States) | 4,633 | |
LIFE SCIENCES TOOLS & SERVICES—5.7% | |||
21,350 | Iqvia Holdings Inc. (United States)* | 3,288 | |
5,749 | Lonza Group AG (Switzerland) | 3,483 | |
6,771 | |||
MEDIA—4.4% | |||
8,689 | Charter Communications Inc. (United States)* | 5,247 | |
MULTILINE RETAIL—3.9% | |||
13,281 | Dollar General Corp. (United States) | 2,772 | |
89,300 | Pan Pacific International Holdings Corp. (Japan) | 1,895 | |
4,667 | |||
PHARMACEUTICALS—2.8% | |||
21,068 | Zoetis Inc. (United States) | 3,340 | |
PROFESSIONAL SERVICES—6.7% | |||
5,317 | CoStar Group Inc. (United States)* | 4,379 | |
92,750 | Recruit Holdings Co. Ltd. (Japan) | 3,529 | |
7,908 | |||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—7.6% | |||
50,853 | Taiwan Semiconductor Manufacturing Co. Ltd. ADR (Taiwan)1 | 4,265 | |
33,255 | Texas Instruments Inc. (United States) | 4,808 | |
9,073 | |||
SOFTWARE—11.2% | |||
7,681 | Adobe Inc. (United States)* | 3,434 |
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 | |||
12,954 | Intuit Inc. (United States) | $ 4,077 | |
19,762 | Microsoft Corp. (United States) | 4,001 | |
16,528 | Temenos AG (Switzerland) | 1,776 | |
13,288 | |||
TRADING COMPANIES & DISTRIBUTORS—3.2% | |||
68,300 | Monotaro Co. Ltd. (Japan) | 3,778 | |
TOTAL COMMON STOCKS | |||
(Cost $101,659) | 129,052 | ||
TOTAL INVESTMENTS—108.7% | |||
(Cost $101,659) | 129,052 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—(8.7)% | (10,297) | ||
TOTAL NET ASSETS—100.0% | $118,755 |
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 Company | IDR 4,344,035 | $ 296 | 11/02/2020 | $ (1) |
FAIR VALUE MEASUREMENTS
The following table summarizes the Fund’s investments as of October 31, 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 | ||||||||
Europe | $ — | $12,612 | $— | $ 12,612 | ||||
Middle East/Central Asia | 3,911 | — | — | 3,911 | ||||
North America | 77,109 | — | — | 77,109 | ||||
Pacific Basin | 8,975 | 26,445 | — | 35,420 | ||||
Total Investments in Securities | $89,995 | $39,057 | $— | $129,052 | ||||
Liability Category | ||||||||
Financial Derivative Instruments - Liabilities | ||||||||
Forward Currency Contracts | $ — | $ (1) | $— | $ (1) | ||||
Total Investments | $89,995 | $39,056 | $— | $129,051 |
There were no Level 3 investments at October 31, 2020 or 2019.
For more information on valuation inputs and their aggregation into the levels used in the table above, please refer to the Fair Value Measurements and Disclosures in Note 2 of the accompanying Notes to Financial Statements.
* | Non-income producing security |
1 | Depositary receipts such as American Depositary Receipts (ADRs), Global Depositary Receipts (GDRs) and other country specific depositary receipts are certificates evidencing ownership of shares of a foreign issuer. These certificates are issued by depositary banks and generally trade on an established market in the U.S. or elsewhere. |
IDR | Indonesian Rupiah |
The accompanying notes are an integral part of the Financial Statements.
24
Harbor International Fund
Manager’s Commentary (Unaudited)
Manager’s Commentary (Unaudited)
Subadviser
Marathon Asset Management LLP
Orion House
5 Upper St. Martin’s Lane
London, WC2H 9EA
England
London, WC2H 9EA
England
Portfolio Managers
Neil M. Ostrer
Since 2018
Since 2018
Charles Carter
Since 2018
Since 2018
Nick Longhurst
Since 2018
Since 2018
William J. Arah
Since 2018
Since 2018
Simon Somerville
Since 2018
Since 2018
Michael Nickson, CFA
Since 2018
Since 2018
Michael Godfrey, CFA
Since 2018
Since 2018
David Cull, CFA
Since 2018
Since 2018
Marathon Asset Management LLP (Marathon-London) has subadvised the Fund since 2018.
Investment Objective
The Fund seeks long-term total return, principally from growth of capital.
Management’s Discussion of
Fund Performance
Fund Performance
MARKET REVIEW
Investor enthusiasm for what appeared to be easing trade tensions between the U.S. and China over the final quarter of 2019 drifted deep into memory as the onslaught of the novel coronavirus began to take center stage and rock the foundations of societies, economies and equity markets across the globe.
Following a dramatic drawdown towards the end of the first quarter of 2020, broad equity market indices reversed course sharply over the second quarter, taking some back to where they started at the beginning of the year. The recovery in capital markets was fueled by additional monetary accommodation efforts and record amounts of liquidity provided by central banks alongside fiscal stimulus provided by governments. These efforts have powered money supply relative to economic growth and, in turn, found their way into financial assets. But the debt that has been created will not disappear any time soon. Equity multiples have expanded in this environment and there has been evidence of speculative investment activity, leading to valuation excesses across pockets of the market that have not been seen since the ‘technology bubble’ of the late 1990s.
Through the COVID-19-induced market drawdown and partial recovery experienced thus far, there also remained little in the way of rotation in market leadership, with growth-oriented investment strategies outperforming their value peers and larger capitalization stocks outperforming the smaller capitalization universe. So-called ‘bond proxy’ shares (i.e. low volatility mega-caps with modest but secure dividends) continued to attract investor appetite through this period of historically low interest rates.
In this environment, it has been a challenge for fundamental, bottom-up equity investors to keep up with indices that have essentially become both narrative and momentum-led. The concentration of equity market returns being anchored around just a handful of mega-cap stocks added to the challenging market dynamics for stock pickers. That said, there were signals of extended performance patterns and market leadership beginning to break down and rotate during the second half of 2020.
PERFORMANCE
Harbor International Fund outperformed the MSCI EAFE (ND) Index over the year ended October 31, 2020, returning -3.35% (Retirement Class), -3.43% (Institutional Class), -3.67% (Administrative Class) and -3.79% (Investor Class) while the Index returned -6.86%. Stock selection (particularly within Europe) and, to a lesser extent, the portfolio’s limited out-of-benchmark exposure to a select few Asian emerging markets (namely Taiwan, China and Korea) were two of the primary drivers of the relative outperformance of the Fund. Conversely, stock selection in Japan (where the Fund has a more pronounced domestic and value orientation relative to the index) weighed on relative performance.
From a sector standpoint, the Fund’s stock specific exposure in the Health Care sector and notable underweight exposure to the Financials, Energy and Real Estate sectors provided a positive contribution to relative performance. However, the Fund’s underweight exposure to the Materials sector and stock specific exposure in that sector partially offset those relative gains.
At the stock level, German-listed meal kit delivery company HelloFresh and Danish wind turbine manufacturer Vestas Wind Systems were notable positive contributors. HelloFresh benefited from faster than expected growth and profitability, while Vestas delivered strong revenue growth and reinstated full year guidance leading to continued strong performance of the shares. At the other end of the performance tables, not owning “bond-proxy” Nestlé was one of the largest negative contributors, as was the portfolio’s overweight position to a handful of niche travel and leisure-related companies impacted by the pandemic outbreak
25
Harbor International Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
CHANGE IN A $50,000 INVESTMENT
For the period 11/01/2010 through 10/31/2020
The graph compares a $50,000 investment in the Institutional Class shares of the Fund with the performance of the MSCI EAFE (ND) Index. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
TOTAL RETURNS
For the periods ended 10/31/2020
1 Year | Annualized | |||||||
5 Years | 10 Years | |||||||
Harbor International Fund | ||||||||
Retirement Class1 | -3.35% | 1.51% | 2.88% | |||||
Institutional Class | -3.43 | 1.44 | 2.84 | |||||
Administrative Class | -3.67 | 1.19 | 2.58 | |||||
Investor Class | -3.79 | 1.06 | 2.46 | |||||
Comparative Index | ||||||||
MSCI EAFE (ND) | -6.86% | 2.85% | 3.82% |
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 at harborfunds.com or by calling 800-422-1050.
and subsequent ‘lock down’ measures imposed by governments across the globe. These include outsourced catering and food service providers Compass Group and SSP Group.
26
Harbor International Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
OUTLOOK & STRATEGY
Continued monetary accommodation and government stimulus efforts in response to the COVID-19 outbreak, coupled with anecdotal evidence of improving economic conditions relative to that experienced over the first half of the year, drove overall investor appetite for riskier (and higher yielding) assets such as equities, thus further increasing the disconnect between global capital market performance and the economic realities currently faced by populations around the world.
To that end, there has been much discussion about whether this rally is justified given the increase in valuation multiples. To some extent, however, the point is moot because when emerging from recessions, valuations may appear inflated as markets anticipate a future recovery in earnings. We believe that as the next year unfolds, we will know whether markets were correct in anticipating such a steep recovery in profits. The outlook, in other words, rests on earnings living up to expectations that have already been priced in. In our view, if this year marked the end of a market cycle and the beginning of a new one, then it would be unusual since many of the valuation excesses of recent years have not been unwound, rather they have been extrapolated even further. It is therefore no surprise to see an onslaught of new IPOs and a proliferation of so-called ‘SPACs’ (Special Purpose Acquisition Companies) as private companies seek to take advantage of high valuations in the public market. Meanwhile, the disparity between the performance of growth and value stocks, large caps and small caps has grown ever wider (though with some nuances depending on the market in question).
Given these market dynamics, we believe empirical data would suggest that the investment pendulum will swing once again and that superior long-term returns are far more likely to come from precisely the opposite ends of the investing spectrum to those now in vogue. Rather than revert to narrative investing or chasing momentum, the Fund’s subadviser continues to seek to invest in companies that in its view exhibit favorable supply side dynamics (and with management teams that have a track record of allocating capital efficiently) at valuation levels grounded in evidence-based fundamentals rather than speculative fervor.
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. |
All international and global returns are in U.S. Dollars.
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.
27
Harbor International Fund
Portfolio of Investments—October 31, 2020
Portfolio of Investments—October 31, 2020
REGION BREAKDOWN (% of investments) -Unaudited
(Excludes derivatives)
Portfolio of Investments
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—99.6% | |||
Shares | Value | ||
AEROSPACE & DEFENSE—1.0% | |||
216,250 | Airbus SE (France)* | $ 15,822 | |
2,452,706 | BAE Systems plc (United Kingdom) | 12,608 | |
4,203,504 | Rolls-Royce Holdings plc (United Kingdom)* | 3,891 | |
98,464 | Thales SA (France) | 6,416 | |
38,737 | |||
AIR FREIGHT & LOGISTICS—0.1% | |||
186,150 | Oesterreichische Post AG (Austria) | 5,912 | |
AIRLINES—0.2% | |||
1,029,073 | EasyJet plc (United Kingdom) | 6,748 | |
AUTO COMPONENTS—1.0% | |||
368,300 | Bridgestone Corp. (Japan) | 12,005 | |
1,345,645 | Gestamp Automocion SA (Spain)1 | 4,115 | |
751,743 | GUD Holdings Ltd. (Australia) | 6,706 | |
84,454 | Hankook Tire & Technology Co. Ltd. (South Korea) | 2,366 | |
117,600 | Koito Manufacturing Co. Ltd. (Japan) | 5,671 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
AUTO COMPONENTS—Continued | |||
305,000 | Sumitomo Electric Industries Ltd. (Japan) | $ 3,367 | |
96,000 | Toyota Industries Corp. (Japan) | 6,204 | |
40,434 | |||
AUTOMOBILES—1.5% | |||
2,895,764 | Baic Motor Corp. Ltd. (China)1 | 1,071 | |
217,245 | Bayerische Motoren Werke AG (Germany) | 14,846 | |
30,363 | Hyundai Motor Co. (South Korea) | 4,445 | |
565,667 | Mahindra & Mahindra Ltd. (India) | 4,534 | |
509,900 | Toyota Motor Corp. (Japan) | 33,473 | |
58,369 | |||
BANKS—5.2% | |||
1,177,504 | Axis Bank Ltd. (India)* | 7,781 | |
757,700 | Bangkok Bank PCL (Thailand) | 2,347 | |
7,990,400 | Bank Mandiri Persero TBK PT (Indonesia) | 3,112 | |
3,042,957 | Bank of Ireland Group plc (Ireland)* | 7,550 | |
2,134,090 | Bank of The Philippine Islands (Philippines) | 3,237 | |
4,487,850 | Bankia SA (Spain) | 5,521 | |
17,737,604 | Barclays plc (United Kingdom) | 24,586 |
28
Harbor International Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—Continued | |||
Shares | Value | ||
BANKS—Continued | |||
523,158 | BNP Paribas SA (France) | $ 18,245 | |
282,881 | Close Brothers Group plc (United Kingdom) | 3,944 | |
164,533 | Danske Bank AS (Denmark) | 2,193 | |
556,501 | DNB ASA (Norway) | 7,515 | |
195,700 | Fukuoka Financial Group Inc. (Japan) | 3,274 | |
99,839 | Hana Financial Group Inc. (South Korea) | 2,697 | |
657,569 | HSBC Holdings plc (Hong Kong)* | 2,747 | |
1,992,533 | Intesa Sanpaolo SpA (Italy)* | 3,308 | |
2,091,200 | Kasikornbank PCL (Thailand) | 5,106 | |
45,905,768 | Lloyds Banking Group plc (United Kingdom)* | 16,715 | |
6,486,900 | Resona Holdings Inc. (Japan) | 21,387 | |
258,174 | Shinhan Financial Group Co. Ltd. (South Korea) | 7,005 | |
1,047,140 | Standard Chartered plc (United Kingdom) | 4,785 | |
536,200 | Sumitomo Mitsui Financial Group Inc. (Japan) | 14,843 | |
161,600 | Sumitomo Mitsui Trust Holdings Inc. (Japan) | 4,345 | |
1,771,832 | Svenska Handelsbanken AB (Sweden) | 14,357 | |
1,961,760 | UniCredit SpA (Italy)* | 14,692 | |
341,500 | United Overseas Bank Ltd. (Singapore) | 4,745 | |
206,037 | |||
BEVERAGES—4.2% | |||
286,460 | Anheuser-Busch InBev SA (Belgium) | 14,817 | |
96,600 | Asahi Group Holdings Ltd. (Japan) | 2,989 | |
129,976 | Carlsberg AS (Denmark) | 16,458 | |
1,030,824 | Coca-Cola Amatil Ltd. (Australia) | 9,011 | |
260,112 | Coca-Cola European Partners plc (United Kingdom) | 9,289 | |
972,977 | Davide Campari-Milano NV (Netherlands) | 10,169 | |
852,737 | Diageo plc (United Kingdom) | 27,559 | |
333,971 | Heineken NV (Netherlands) | 29,562 | |
1,738,600 | Kirin Holdings Co. Ltd. (Japan) | 31,344 | |
29,551 | Pernod Ricard SA (France) | 4,761 | |
141,500 | Suntory Beverage & Food Ltd. (Japan) | 4,880 | |
7,608,600 | Thai Beverage PCL (Thailand) | 3,236 | |
290,000 | Tsingtao Brewery Co. Ltd. (China) | 2,403 | |
166,478 | |||
BUILDING PRODUCTS—2.6% | |||
1,976,839 | Assa Abloy AB Class B (Sweden) | 42,368 | |
79,507 | Geberit AG (Switzerland) | 45,253 | |
967,580 | GWA Group Ltd. (Australia) | 1,793 | |
632,800 | LIXIL Group Corp. (Japan) | 13,741 | |
103,155 | |||
CAPITAL MARKETS—2.2% | |||
2,390,562 | 3i Group plc (United Kingdom) | 29,857 | |
670,500 | Daiwa Securities Group Inc. (Japan) | 2,717 | |
1,230,634 | IG Group Holdings plc (United Kingdom) | 12,144 | |
183,900 | JAFCO Co. Ltd. (Japan) | 8,317 | |
117,200 | Japan Exchange Group Inc. (Japan) | 2,861 | |
2,264,792 | Jupiter Fund Management plc (United Kingdom) | 6,823 | |
2,497,000 | Nomura Holdings Inc. (Japan) | 11,183 | |
127,742 | Rathbone Brothers plc (United Kingdom) | 2,405 | |
643,658 | St. James's Place plc (United Kingdom) | 7,502 | |
237,550 | UBS Group AG (Switzerland) | 2,766 | |
86,575 | |||
CHEMICALS—1.9% | |||
238,500 | Air Water Inc. (Japan) | 3,408 | |
434,435 | BASF SE (Germany) | 23,789 | |
95,600 | Nippon Shokubai Co. Ltd. (Japan) | 4,682 | |
219,600 | Nissan Chemical Corp. (Japan) | 11,654 | |
68,000 | Nitto Denko Corp. (Japan) | 4,777 | |
799,025 | Orica Ltd. (Australia) | 8,577 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
CHEMICALS—Continued | |||
72,700 | Shin-Etsu Chemical Co. Ltd. (Japan) | $ 9,710 | |
158,200 | Tokyo Ohka Kogyo Co. Ltd. (Japan) | 9,367 | |
75,964 | |||
COMMERCIAL SERVICES & SUPPLIES—2.8% | |||
76,800 | AEON Delight Co. Ltd. (Japan) | 2,022 | |
1,277,432 | Brambles Ltd. (Australia) | 8,615 | |
9,007,152 | Cleanaway Waste Management Ltd. (Australia) | 12,985 | |
328,867 | Elis SA (France)* | 3,607 | |
6,014,209 | G4S plc (United Kingdom)* | 15,859 | |
2,452,144 | HomeServe plc (United Kingdom) | 35,143 | |
43,182 | S-1 Corp. (South Korea) | 3,104 | |
110,600 | Secom Co. Ltd. (Japan) | 9,343 | |
8,833,352 | Serco Group plc (United Kingdom)* | 14,764 | |
125,000 | Sohgo Security Services Co. Ltd. (Japan) | 5,824 | |
111,266 | |||
CONSTRUCTION & ENGINEERING—1.1% | |||
362,114 | Boskalis Westminster NV (Netherlands) | 7,282 | |
154,362 | Ferrovial SA (Spain) | 3,343 | |
819,500 | Maeda Corp. (Japan) | 5,900 | |
1,884,300 | Obayashi Corp. (Japan) | 15,768 | |
1,420,400 | Penta-Ocean Construction Co. Ltd. (Japan) | 9,007 | |
175,800 | Shimizu Corp. (Japan) | 1,221 | |
42,521 | |||
CONSTRUCTION MATERIALS—1.1% | |||
121,262 | CRH plc (Ireland) | 4,255 | |
885,807 | Fletcher Building Ltd. (New Zealand) | 2,399 | |
43,198 | Imerys SA (France) | 1,291 | |
719,100 | Taiheiyo Cement Corp. (Japan) | 16,879 | |
66,780 | Vicat SA (France) | 2,053 | |
597,796 | Wienerberger AG (Austria) | 15,091 | |
41,968 | |||
CONSUMER FINANCE—0.2% | |||
115,200 | AEON Financial Service Co. Ltd. (Japan) | 1,180 | |
2,465,338 | International Personal Finance plc (United Kingdom) | 1,822 | |
2,643,997 | Non-Standard Finance plc (United Kingdom)1 | 133 | |
1,126,166 | Provident Financial plc (United Kingdom)* | 3,391 | |
327,522 | Shriram Transport Finance Co. Ltd. (India) | 3,047 | |
9,573 | |||
CONTAINERS & PACKAGING—0.5% | |||
3,721,001 | DS Smith plc (United Kingdom) | 13,649 | |
639,000 | Toyo Seikan Group Holdings Ltd. (Japan) | 5,970 | |
19,619 | |||
DISTRIBUTORS—0.2% | |||
1,349,120 | Inchcape plc (United Kingdom) | 8,654 | |
DIVERSIFIED FINANCIAL SERVICES—0.1% | |||
3,858,760 | AMP Ltd. (Australia) | 4,152 | |
5,088,000 | First Pacific Co. Ltd. (Hong Kong) | 1,581 | |
5,733 | |||
DIVERSIFIED TELECOMMUNICATION SERVICES—1.7% | |||
1,046,856 | Deutsche Telekom AG (Germany) | 15,911 | |
5,504,782 | Koninklijke KPN NV (Netherlands) | 14,867 | |
506,618 | KT Corp. ADR (South Korea)2 | 4,874 | |
1,575,700 | Nippon Telegraph & Telephone Corp. (Japan) | 33,146 | |
68,798 |
29
Harbor International Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—Continued | |||
Shares | Value | ||
ELECTRIC UTILITIES—0.9% | |||
216,909 | Orsted AS (Denmark)1 | $ 34,425 | |
ELECTRICAL EQUIPMENT—4.4% | |||
385,940 | ABB Ltd. (Switzerland) | 9,365 | |
475,816 | Legrand SA (France) | 35,219 | |
61,700 | Mabuchi Motor Co. Ltd. (Japan) | 2,544 | |
286,291 | Schneider Electric SE (France) | 34,786 | |
6,981,000 | TECO Electric and Machinery Co. Ltd. (Taiwan) | 7,301 | |
492,333 | Vestas Wind Systems AS (Denmark) | 84,467 | |
173,682 | |||
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—2.6% | |||
137,300 | Azbil Corp. (Japan) | 5,572 | |
1,773,000 | Chroma ATE Inc. (Taiwan) | 8,448 | |
1,714,000 | Delta Electronics Inc. (Taiwan) | 11,404 | |
1,299,200 | Hitachi Ltd. (Japan) | 43,789 | |
211,500 | Kyocera Corp. (Japan) | 11,648 | |
62,300 | Omron Corp. (Japan) | 4,498 | |
117,100 | Shimadzu Corp. (Japan) | 3,348 | |
170,384 | Spectris plc (United Kingdom) | 5,469 | |
82,800 | TDK Corp. (Japan) | 9,737 | |
103,913 | |||
ENERGY EQUIPMENT & SERVICES—0.4% | |||
1,296,358 | John Wood Group plc (United Kingdom) | 3,559 | |
343,740 | Petrofac Ltd. (United Kingdom) | 5,29 | |
5,078,143 | Saipem SpA (Italy)* | 8,947 | |
215,037 | TechnipFMC plc (France) | 1,186 | |
14,221 | |||
ENTERTAINMENT—1.0% | |||
190,387 | CTS Eventim AG & Co. KGaA (Germany) | 8,439 | |
130,000 | Konami Holdings Corp. (Japan) | 5,088 | |
5,117,500 | Major Cineplex Group PCL (Thailand) | 2,117 | |
100,200 | Makita Corp. (Japan) | 4,429 | |
271,466 | Modern Times Group MTG AB Class B (Sweden)* | 3,616 | |
161,100 | Nexon Co. Ltd. (Japan) | 4,490 | |
9,100 | Nintendo Co. Ltd. (Japan) | 4,920 | |
128,000 | Toho Co. Ltd. (Japan) | 5,069 | |
38,168 | |||
FOOD & STAPLES RETAILING—1.6% | |||
795,576 | Koninklijke Ahold Delhaize NV (Netherlands) | 21,811 | |
124,900 | Matsumotokiyoshi Holdings Co. Ltd. (Japan) | 4,611 | |
1,357,875 | Metcash Ltd. (Australia) | 2,817 | |
494,100 | Seven & I Holdings Co. Ltd. (Japan) | 15,018 | |
124,100 | Sundrug Co. Ltd. (Japan) | 4,608 | |
5,040,733 | Tesco plc (United Kingdom) | 13,416 | |
62,281 | |||
FOOD PRODUCTS—1.9% | |||
80,700 | Calbee Inc. (Japan) | 2,476 | |
1,547,000 | China Mengniu Dairy Co. Ltd. (China)* | 7,293 | |
1,552,714 | Devro plc (United Kingdom) | 3,039 | |
195,600 | Fuji Oil Holdings Inc. (Japan) | 6,189 | |
248,500 | Megmilk Snow Brand Co. Ltd. (Japan) | 5,385 | |
64,100 | Meiji Holdings Co. Ltd. (Japan) | 4,644 | |
51,100 | NH Foods Ltd. (Japan) | 2,093 | |
716,700 | Nippon Suisan Kaisha Ltd. (Japan) | 2,761 | |
4,232,000 | Tingyi Cayman Islands Holding Corp. (China) | 7,744 | |
294,700 | Toyo Suisan Kaisha Ltd. (Japan) | 14,666 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
FOOD PRODUCTS—Continued | |||
218,208 | Viscofan SA (Spain) | $ 14,732 | |
9,272,000 | Want Want China Holdings Ltd. (China) | 6,140 | |
77,162 | |||
GAS UTILITIES—0.1% | |||
184,700 | Tokyo Gas Co. Ltd. (Japan) | 4,185 | |
HEALTH CARE EQUIPMENT & SUPPLIES—5.4% | |||
407,891 | Coloplast AS Class B (Denmark) | 59,651 | |
8,399,617 | ConvaTec Group plc (United Kingdom)1 | 19,663 | |
768,647 | Demant AS (Denmark)* | 24,269 | |
469,875 | Getinge AB Class B (Sweden) | 9,200 | |
629,184 | GN Store Nord AS (Denmark) | 45,299 | |
76,300 | Hoya Corp. (Japan) | 8,611 | |
144,700 | Japan Lifeline Co. Ltd. (Japan) | 1,867 | |
481,490 | Koninklijke Philips NV (Netherlands) | 22,301 | |
233,100 | Olympus Corp. (Japan)* | 4,463 | |
261,442 | Smith & Nephew plc (United Kingdom) | 4,540 | |
58,226 | Sonova Holding AG (Switzerland)* | 13,821 | |
213,685 | |||
HEALTH CARE PROVIDERS & SERVICES—1.6% | |||
500,800 | Alfresa Holdings Corp. (Japan) | 9,170 | |
193,583 | Amplifon SpA (Italy) | 7,038 | |
447,986 | Fresenius Medical Care AG & Co. KGaA (Germany) | 34,209 | |
505,600 | MediPAL Holdings Corp. (Japan) | 9,013 | |
63,400 | Ship Healthcare Holdings Inc. (Japan) | 3,008 | |
62,438 | |||
HOTELS, RESTAURANTS & LEISURE—3.7% | |||
3,530,000 | Ajisen China Holdings Ltd. (China) | 447 | |
317,366 | Carnival plc (United Kingdom) | 3,588 | |
2,335,349 | Compass Group plc (United Kingdom) | 31,966 | |
302,314 | Flutter Entertainment plc (United Kingdom) | 52,376 | |
5,231,300 | Genting Singapore Ltd. (Singapore) | 2,470 | |
1,899,627 | GVC Holdings plc (United Kingdom) | 23,797 | |
53,751 | InterContinental Hotels Group PLC (United Kingdom)* | 2,731 | |
549,187 | Playtech plc (United Kingdom) | 2,422 | |
5,052,325 | SSP Group plc (United Kingdom) | 12,234 | |
1,351,253 | TUI AG (Germany) | 5,304 | |
168,980 | Yum China Holdings Inc. (China) | 8,995 | |
146,330 | |||
HOUSEHOLD DURABLES—1.0% | |||
660,718 | Barratt Developments plc (United Kingdom) | 4,130 | |
404,800 | Casio Computer Co. Ltd. (Japan) | 6,150 | |
1,454,215 | McCarthy & Stone plc (United Kingdom)1 | 2,212 | |
59,100 | Rinnai Corp. (Japan) | 5,824 | |
375,100 | Sekisui Chemical Co. Ltd. (Japan) | 5,847 | |
182,800 | Sony Corp. (Japan) | 15,239 | |
39,402 | |||
HOUSEHOLD PRODUCTS—1.1% | |||
137,900 | Lion Corp. (Japan) | 2,812 | |
460,474 | Reckitt Benckiser Group plc (United Kingdom) | 40,562 | |
43,374 | |||
INDEPENDENT POWER AND RENEWABLE ELECTRICITY PRODUCERS—0.0% | |||
7,568,300 | Lopez Holdings Corp. (Philippines)* | 402 | |
INDUSTRIAL CONGLOMERATES—1.3% | |||
933,500 | CK Hutchison Holdings Ltd. (Hong Kong) | 5,638 | |
255,982 | DCC plc (United Kingdom) | 16,634 |
30
Harbor International Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—Continued | |||
Shares | Value | ||
INDUSTRIAL CONGLOMERATES—Continued | |||
368,400 | Jardine Matheson Holdings Ltd. (Hong Kong) | $ 16,330 | |
133,100 | Jardine Strategic Holdings Ltd. (Singapore) | 2,882 | |
92,949 | LG Corp. (South Korea) | 5,566 | |
4,428,100 | Sime Darby Berhad (Malaysia) | 2,568 | |
49,618 | |||
INSURANCE—4.7% | |||
530,068 | Admiral Group plc (United Kingdom) | 18,883 | |
933,203 | AXA SA (France) | 14,987 | |
1,808,900 | Dai-ichi Life Holdings Inc. (Japan) | 27,017 | |
347,400 | Great Eastern Holdings Ltd. (Singapore) | 4,525 | |
42,746 | Hannover Rueck SE (Germany) | 6,212 | |
37,893 | Helvetia Holding AG (Switzerland) | 2,971 | |
354,173 | Hiscox Ltd. (United Kingdom) | 3,785 | |
1,750,483 | Insurance Australia Group Ltd. (Australia) | 5,876 | |
1,623,000 | Japan Post Holdings Co. Ltd. (Japan)* | 11,136 | |
202,600 | MS&AD Insurance Group Holdings Inc. (Japan) | 5,544 | |
288,698 | Prudential plc (United Kingdom) | 3,531 | |
1,318,139 | QBE Insurance Group Ltd. (Australia) | 7,622 | |
835,053 | Sampo OYJ (Finland) | 31,512 | |
57,887 | Samsung Fire & Marine Insurance Co. Ltd. (South Korea) | 9,153 | |
389,900 | Sompo Holdings Inc. (Japan) | 14,557 | |
410,700 | T&D Holdings Inc. (Japan) | 4,105 | |
361,000 | Tokio Marine Holdings Inc. (Japan) | 16,135 | |
187,551 | |||
INTERACTIVE MEDIA & SERVICES—2.7% | |||
346,957 | Adevinta ASA (Norway)* | 5,370 | |
1,865,395 | Auto Trader Group plc (United Kingdom)1 | 14,025 | |
134,552 | Baidu Inc. ADR (China)*,2 | 17,902 | |
757,372 | Carsales.com Ltd. (Australia) | 11,065 | |
967,480 | Domain Holdings Australia Ltd. (Australia) | 2,684 | |
7,201,953 | Rightmove plc (United Kingdom) | 57,638 | |
108,684 | |||
INTERNET & DIRECT MARKETING RETAIL—2.1% | |||
14,678 | GS Home Shopping Inc. (South Korea) | 1,801 | |
883,964 | HelloFresh SE (Germany)* | 47,236 | |
183,411 | Just Eat Takeaway.com NV (Netherlands)*,1 | 20,404 | |
961,000 | PChome Online Inc. (Taiwan) | 3,240 | |
57,941 | Trip.Com Group Ltd. ADR (China)*,2 | 1,666 | |
20,940 | Zooplus AG (Germany)* | 3,357 | |
288,700 | ZOZO Inc. (Japan) | 7,324 | |
85,028 | |||
IT SERVICES—2.6% | |||
112,645 | Alten SA (France)* | 9,019 | |
7,856,833 | Capita plc (United Kingdom)* | 2,510 | |
567,315 | Edenred (France) | 26,445 | |
137,995 | Genpact Ltd. (United States) | 4,743 | |
216,700 | NEC Corp. (Japan) | 10,915 | |
313,600 | NET One Systems Co. Ltd. (Japan) | 9,376 | |
110,800 | Nomura Research Institute Ltd. (Japan) | 3,266 | |
1,838,600 | NTT Data Corp. (Japan) | 20,751 | |
72,600 | Otsuka Corp. (Japan) | 3,336 | |
215,900 | SCSK Corp. (Japan) | 10,735 | |
101,096 | |||
LEISURE PRODUCTS—1.2% | |||
307,100 | Bandai Namco Holdings Inc. (Japan) | 22,951 | |
1,235,000 | Giant Manufacturing Co. Ltd. (Taiwan) | 12,200 | |
1,035,000 | Goodbaby International Holdings Ltd. (Hong Kong)* | 132 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
LEISURE PRODUCTS—Continued | |||
66,000 | Merida Industry Co. Ltd. (Taiwan) | $ 643 | |
736,900 | Sega Sammy Holdings Inc. (Japan) | 9,235 | |
9,900 | Shimano Inc. (Japan) | 2,264 | |
47,425 | |||
LIFE SCIENCES TOOLS & SERVICES—0.8% | |||
35,396 | Eurofins Scientific SE (France) | 28,186 | |
55,109 | Gerresheimer AG (Germany) | 5,540 | |
33,726 | |||
MACHINERY—2.2% | |||
113,620 | Andritz AG (Austria) | 3,832 | |
2,874,385 | CNH Industrial NV (Italy) | 22,287 | |
62,100 | Daifuku Co. Ltd. (Japan) | 6,403 | |
107,304 | Fluidra SA (Spain) | 1,939 | |
110,373 | GEA Group AG (Germany) | 3,676 | |
69,900 | Hoshizaki Corp. (Japan) | 5,582 | |
186,145 | IMI plc (United Kingdom) | 2,496 | |
984,140 | Rotork plc (United Kingdom) | 3,586 | |
1,153,000 | Sandvik AB (Sweden) | 20,552 | |
216,755 | Stabilus SA (Germany) | 12,288 | |
742,520 | Wartsila OYJ Abp (Finland) | 5,901 | |
24,000 | Yungtay Engineering Co. Ltd. (Taiwan) | 54 | |
88,596 | |||
MARINE—0.2% | |||
1,518,265 | Irish Continental Group plc (Ireland) | 5,576 | |
4,560,332 | Wan Hai Lines Ltd. (Taiwan) | 4,183 | |
9,759 | |||
MEDIA—2.4% | |||
353,127 | Daily Mail & General Trust plc (United Kingdom) | 3,092 | |
315,105 | Euromoney Institutional Investor plc (United Kingdom) | 3,364 | |
1,099,600 | Fuji Media Holdings Inc. (Japan) | 10,575 | |
198,000 | Hakuhodo Dy Holdings Inc. (Japan) | 2,523 | |
559,927 | Informa plc (United Kingdom) | 3,038 | |
12,398,166 | ITV plc (United Kingdom) | 11,587 | |
335,211 | JCDecaux SA (France)* | 5,174 | |
33,455,600 | Media Nusantara Citra TBK PT (Indonesia)* | 1,866 | |
2,879,619 | Nine Entertainment Co. Holdings Ltd. (Australia) | 4,209 | |
1,075,500 | Nippon Television Holdings Inc. (Japan) | 11,349 | |
271,466 | Nordic Entertainment Group AB (Sweden) | 9,691 | |
186,760 | Schibsted ASA Class A (Norway)* | 7,634 | |
158,814 | Schibsted ASA Class B (Norway) | 5,730 | |
6,336,280 | Sky Network Television Ltd. (New Zealand)* | 624 | |
1,428,400 | Television Broadcasts Ltd. (Hong Kong) | 1,148 | |
1,697,813 | WPP plc (United Kingdom) | 13,561 | |
95,165 | |||
METALS & MINING—2.4% | |||
665,578 | Acerinox SA (Spain) | 5,284 | |
5,106,364 | Alumina Ltd. (Australia) | 5,158 | |
1,056,696 | ArcelorMittal SA (France) | 14,329 | |
128,671 | BHP Group Ltd. (Australia) | 3,084 | |
506,114 | BlueScope Steel Ltd. (Australia) | 5,227 | |
8,345,032 | Glencore plc (United Kingdom) | 16,834 | |
422,898 | Newcrest Mining Ltd. (Australia) | 8,770 | |
730,700 | Nippon Steel Corp. (Japan)* | 7,087 | |
493,907 | Rio Tinto plc (United Kingdom) | 27,936 | |
97,000 | Sumitomo Metal Mining Co. Ltd. (Japan) | 3,015 | |
96,724 |
31
Harbor International Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—Continued | |||
Shares | Value | ||
MULTILINE RETAIL—0.1% | |||
254,900 | Marui Group Co. Ltd. (Japan) | $ 4,607 | |
OIL, GAS & CONSUMABLE FUELS—1.6% | |||
143,829 | Ampol Ltd. (Australia) | 2,622 | |
13,537,977 | BP plc (United Kingdom) | 34,531 | |
1,441,568 | Equinor ASA (Norway) | 18,394 | |
316,700 | INPEX Corp. (Japan) | 1,502 | |
1,308,038 | Oil Search Ltd. (Australia)* | 2,362 | |
205,683 | Washington H Soul Pattinson & Co. Ltd. (Australia) | 3,663 | |
63,074 | |||
PAPER & FOREST PRODUCTS—0.2% | |||
1,552,000 | Oji Holdings Corp. (Japan) | 6,541 | |
PERSONAL PRODUCTS—1.6% | |||
106,443 | AMOREPACIFIC Group (South Korea) | 4,118 | |
3,668,276 | Asaleo Care Ltd. (Australia) | 2,443 | |
228,400 | Kao Corp. (Japan) | 16,262 | |
19,600 | Kose Corp. (Japan) | 2,499 | |
1,118,250 | L'Occitane International SA (Hong Kong) | 2,047 | |
113,200 | Mandom Corp. (Japan) | 1,686 | |
636,323 | Unilever plc (United Kingdom) | 36,263 | |
65,318 | |||
PHARMACEUTICALS—4.4% | |||
362,600 | Astellas Pharma Inc. (Japan) | 4,972 | |
325,900 | Haw Par Corp. Ltd. (Singapore) | 2,238 | |
874,813 | Novo Nordisk AS (Denmark) | 55,783 | |
223,300 | Otsuka Holdings Co. Ltd. (Japan) | 8,270 | |
249,119 | Roche Holding AG (Switzerland) | 80,050 | |
45,800 | Sawai Pharmaceutical Co. Ltd. (Japan) | 2,208 | |
356,000 | Takeda Pharmaceutical Co. Ltd. (Japan) | 11,001 | |
366,900 | Tsumura & Co. (Japan) | 10,769 | |
175,291 | |||
PROFESSIONAL SERVICES—4.7% | |||
436,228 | Adecco Group AG (Switzerland) | 21,390 | |
1,270,580 | ALS Ltd. (Australia) | 8,408 | |
40,456 | DKSH Holding AG (Switzerland) | 2,603 | |
716,096 | Experian plc (United Kingdom) | 26,233 | |
8,186,770 | Hays plc (United Kingdom) | 11,305 | |
773,738 | Intertek Group plc (United Kingdom) | 55,733 | |
419,540 | IPH Ltd. (Australia) | 1,944 | |
369,500 | Nomura Co. Ltd. (Japan) | 2,386 | |
932,490 | PageGroup plc (United Kingdom) | 4,320 | |
219,400 | Persol Holdings Co. Ltd. (Japan) | 3,323 | |
81,071 | Randstad NV (Netherlands)* | 4,045 | |
1,331,197 | RELX plc (United Kingdom) | 26,342 | |
330,669 | RWS Holdings plc (United Kingdom) | 2,392 | |
45,900 | TechnoPro Holdings Inc. (Japan) | 2,855 | |
40,997 | Teleperformance (France) | 12,306 | |
185,585 | |||
REAL ESTATE MANAGEMENT & DEVELOPMENT—0.4% | |||
286,500 | Daiwa House Industry Co. Ltd. (Japan) | 7,528 | |
522,800 | Mitsubishi Estate Co. Ltd. (Japan) | 7,798 | |
15,326 | |||
ROAD & RAIL—0.5% | |||
226,900 | East Japan Railway Co. (Japan) | 11,866 | |
1,197,086 | National Express Group plc (United Kingdom) | 2,322 | |
417,300 | Senko Group Holdings Co. Ltd. (Japan) | 3,732 | |
17,920 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—1.7% | |||
33,115 | ASML Holding NV (Netherlands) | $ 11,981 | |
1,056,000 | Renesas Electronics Corp. (Japan)* | 8,717 | |
161,100 | ROHM Co. Ltd. (Japan) | 12,386 | |
114,019 | SK Hynix Inc. (South Korea) | 8,089 | |
1,656,000 | Taiwan Semiconductor Manufacturing Co. Ltd. (Taiwan) | 25,055 | |
66,228 | |||
SOFTWARE—0.3% | |||
171,200 | NS Solutions Corp. (Japan) | 5,014 | |
11,800 | Oracle Corp. Japan (Japan) | 1,179 | |
46,382 | Reply SpA (Italy) | 4,983 | |
11,176 | |||
SPECIALTY RETAIL—0.7% | |||
44,900 | ABC-Mart Inc. (Japan) | 2,277 | |
16,830,300 | Esprit Holdings Ltd. (Hong Kong)* | 1,743 | |
1,754,809 | Pets at Home Group plc (United Kingdom) | 8,813 | |
267,200 | USS Co. Ltd. (Japan) | 4,887 | |
697,907 | WH Smith plc (United Kingdom) | 9,022 | |
26,742 | |||
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS—1.3% | |||
103,000 | King Slide Works Co. Ltd. (Taiwan) | 1,038 | |
255,708 | Logitech International SA (Switzerland) | 21,512 | |
148,037 | Quadient SAS (France) | 1,929 | |
529,329 | Samsung Electronics Co. Ltd. (South Korea) | 26,607 | |
51,086 | |||
TEXTILES, APPAREL & LUXURY GOODS—2.5% | |||
102,323 | Adidas AG (Germany) | 30,401 | |
663,100 | ASICS Corp. (Japan) | 8,284 | |
308,933 | Cie Financiere Richemont SA (Switzerland) | 19,310 | |
411,068 | Cie Financiere Richemont SA ADR (South Africa)2 | 2,567 | |
234,420 | EssilorLuxottica SA (France) | 28,941 | |
682,400 | Onward Holdings Co. Ltd. (Japan) | 1,336 | |
360,218 | Shenzhou International Group Holdings Ltd. (China) | 6,268 | |
2,193,000 | Stella International Holdings Ltd. (Hong Kong) | 2,247 | |
99,354 | |||
THRIFTS & MORTGAGE FINANCE—0.1% | |||
208,427 | Housing Development Finance Corp. Ltd. (India) | 5,400 | |
TOBACCO—0.6% | |||
107,224 | British American Tobacco plc (United Kingdom) | 3,399 | |
215,400 | Japan Tobacco Inc. (Japan) | 4,055 | |
195,341 | Swedish Match AB (Sweden) | 14,686 | |
22,140 | |||
TRADING COMPANIES & DISTRIBUTORS—1.6% | |||
375,136 | Brenntag AG (Germany) | 23,977 | |
1,046,078 | Bunzl plc (United Kingdom) | 32,519 | |
274,400 | ITOCHU Corp. (Japan) | 6,591 | |
63,087 | |||
TRANSPORTATION INFRASTRUCTURE—0.5% | |||
813,603 | Getlink SE (France) | 10,943 | |
265,500 | Mitsubishi Logistics Corp. (Japan) | 6,987 | |
17,930 | |||
WIRELESS TELECOMMUNICATION SERVICES—0.9% | |||
1,772,299 | Bharti Airtel Ltd. (India) | 10,339 | |
624,700 | KDDI Corp. (Japan) | 16,901 |
32
Harbor International Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—Continued | |||
Shares | Value | ||
WIRELESS TELECOMMUNICATION SERVICES—Continued | |||
184,400 | NTT DoCoMo Inc. (Japan) | $ 6,866 | |
19,203,577 | Vodafone Idea Ltd. (India)* | 2,278 | |
36,384 | |||
TOTAL COMMON STOCKS | |||
(Cost $4,004,280) | 3,946,770 | ||
PREFERRED STOCKS—0.4% | |||
AUTOMOBILES—0.4% | |||
107,510 | Volkswagen AG (Germany) | 15,660 |
PREFERRED STOCKS—Continued | |||
Shares | Value | ||
PERSONAL PRODUCTS—0.0% | |||
12,672 | AMOREPACIFIC Group (South Korea)* | $ 368 | |
TOTAL PREFERRED STOCKS | |||
(Cost $17,981) | 16,028 | ||
TOTAL INVESTMENTS—100% | |||
(Cost $4,022,261) | 3,962,798 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—(0.0)% | (720) | ||
TOTAL NET ASSETS—100.0% | $3,962,078 |
RIGHTS/WARRANTS
Description | No. of Contracts | Strike Price | Expiration Date | Cost (000s) | Value (000s) | |||||
Rolls-Royce Holdings plc | 6,547,040 | GBP 0.32 | 11/11/2020 | $ 14,945 | $3,308 |
FAIR VALUE MEASUREMENTS
The following table summarizes the Fund’s investments as of October 31, 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 | $ 9,289 | $2,482,062 | $— | $2,491,351 | ||||
Middle East/Central Asia | — | 33,379 | — | 33,379 | ||||
North America | 4,743 | — | — | 4,743 | ||||
Pacific Basin | 43,007 | 1,374,290 | — | 1,417,297 | ||||
Preferred Stocks | ||||||||
Europe | — | 15,660 | — | 15,660 | ||||
Pacific Basin | — | 368 | — | 368 | ||||
Total Investments in Securities | $57,039 | $3,905,759 | $— | $3,962,798 | ||||
Financial Derivatives Instruments - Assets | ||||||||
Rights/Warrants | $ 3,308 | $ — | $— | $ 3,308 | ||||
Total Investments | $60,347 | $3,905,759 | $— | $3,966,106 |
For more information on valuation inputs and their aggregation into the levels used in the table above, please refer to the Fair Value Measurements and Disclosures in Note 2 of the accompanying Notes to Financial Statements.
The following is a rollforward of the Fund’s Level 3 investments during the year ended October 31, 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 10/31/2020 (000s) | Unrealized Gain/ Loss as of 10/31/2020 (000s) | ||||||||||
Common Stocks | $ — | $— | $ — | $— | $(17,166) | $17,166 | $— | $— | $— | $— | ||||||||||
Preferred Stocks | 162 | — | (162) | — | — | — | — | — | — | — | ||||||||||
$162 | $— | $(162) | $— | $(17,166) | $17,166 | $— | $— | $— | $— |
33
Harbor International 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 October 31, 2020, the aggregate value of these securities was $96,048 or 2% of net assets. |
2 | Depositary receipts such as American Depositary Receipts (ADRs), Global Depositary Receipts (GDRs) and other country specific depositary receipts are certificates evidencing ownership of shares of a foreign issuer. These certificates are issued by depositary banks and generally trade on an established market in the U.S. or elsewhere. |
GBP | British Pound |
The accompanying notes are an integral part of the Financial Statements.
34
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
During the period, the performance of international equities can be characterized as falling into three broad periods: a relatively steady period between the end of October 2019 and the onset of the coronavirus pandemic in February 2020, a sharp fall from late February 2020 until late March 2020, and then a gradual recovery from that point until the end of October 2020. Stimulus measures were put in place in several of the major international economies to provide support during a period of weakness induced by the pandemic.
Looking beyond the headlines and the uncertainties created by the coronavirus, trade negotiations between the U.K. and the European Union have continued in the hope of reaching an agreement before the current transitional arrangement comes to a close at the end of 2020. In Japan, the country’s reforming Prime Minister, Shinzo Abe, stood down and was replaced by his cabinet colleague Yoshihide Suga.
Performance
Harbor International Growth Fund returned 20.56% (Retirement Class), 20.42% (Institutional Class), 20.17% (Administrative Class), and 20.06% (Investor Class) for the twelve months ended October 31, 2020, outperforming the -2.61% return of the MSCI All Country World Ex. U.S. (ND) Index.
Baillie Gifford employs a fundamental long-term investment strategy, focused on bottom-up stock selection. Baillie Gifford’s endeavours not to be distracted by short term market movements and wider economic issues. Instead, it aims to find what it believes are good quality stocks that can produce above average earnings and that have the potential to outperform over the long term. The Fund’s performance during the period was primarily driven by stock selection.
The Fund outperformed in each of the regions that make up the benchmark index, led by Europe.
Where sectors are concerned, the main positive contributors to the Fund’s relative performance were Information Technology, Industrials, and Consumer Discretionary. The Fund was overweight in each of these sectors during the period. The main sector detractors from performance were Materials, Consumer Staples, and Utilities; the Fund was overweight in the Consumer Staples sector, underweight in the Materials sector and had no exposure at all to Utilities.
Baillie Gifford’s regional and sectoral positions are outputs of its bottom-up investment process. Given this fundamental approach, it is particularly relevant to consider the individual company holdings that impacted performance. The largest individual contributors to performance included Shopify, Sartorius, and Zalando. The main stock detractors during the period included Shiseido, Treasury Wine Estates, and Raia Drogasil.
Shopify is a Canadian e-commerce company that provides software to enable businesses to operate and sell their products online. It has continued to report positive results this year, making encouraging progress in offering facilities such as faster checkouts and improved shipping arrangements to its merchant base. Sartorius is a German manufacturer of single-use equipment for the pharmaceutical industry, with a particular focus on the needs of manufacturers of biological drugs. The company has benefited from additional demand for its products during the pandemic and has continued to make strategic acquisitions to complement its existing
35
Harbor International Growth Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
CHANGE IN A $50,000 INVESTMENT
For the period 11/01/2010 through 10/31/2020
The graph compares a $50,000 investment in the Institutional Class shares of the Fund with the performance of the MSCI All Country World Ex. U.S. (ND) Index. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
TOTAL RETURNS
For the periods ended 10/31/2020
1 Year | Annualized | |||||||
5 Years | 10 Years | |||||||
Harbor International Growth Fund | ||||||||
Retirement Class1 | 20.56% | 9.87% | 6.59% | |||||
Institutional Class | 20.42 | 9.79 | 6.55 | |||||
Administrative Class | 20.17 | 9.51 | 6.27 | |||||
Investor Class | 20.06 | 9.39 | 6.15 | |||||
Comparative Index | ||||||||
MSCI All Country World Ex. U.S. (ND) | -2.61% | 4.26% | 3.43% |
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 at harborfunds.com or by calling 800-422-1050.
business. Zalando, the leading online fashion retailer, has also benefited from increased demand during a challenging period for conventional retailing businesses. In addition, the company has increasingly seen the benefits of its investment in logistics infrastructure, through which it can supply customers with garments produced by the brands with which it partners.
Shiseido is a Japanese cosmetics manufacturer. A significant portion of its business comes from selling to Chinese tourists in Japan and through Duty Free channels, and both of these have been negatively affected by limits on travel associated with the pandemic. Treasury Wine Estates is an Australian wine producer that has seen challenges in its US business as well as a more general reduction in consumption demand recently. Raia Drogasil is a Brazilian operator of pharmacies which is gradually rolling out a large number of stores across Brazil; the company’s weaker performance this year partially reflects the more challenging economic environment in the country.
Outlook & Strategy
The coronavirus pandemic has created anxieties around the world. While not seeking to diminish the seriousness of these, Baillie Gifford strives to maintain its focus on the long term. Its bottom-up approach remains one of seeking to find well managed, good quality companies that will perform well over meaningful time periods. Although the portfolio was not constructed with the pandemic in mind, the Fund’s holdings do include a number of capital light, disruptive businesses that have been able to perform well operationally in this environment. The Manager is optimistic that the international businesses held by the Fund have the potential to deliver attractive growth for investors.
1 | Retirement Class shares commenced operations on March 1, 2016. The performance attributed to the Retirement Class shares prior to that date is that of the Institutional Class shares. Performance prior to March 1, 2016 has not been adjusted to reflect the lower expenses of Retirement Class shares. During this period, Retirement Class shares would have had returns similar to, but potentially higher than, Institutional Class shares due to the fact that Retirement Class shares represent interests in the same portfolio as Institutional Class shares but are subject to lower expenses. |
All international and global returns are in U.S. Dollars.
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.
36
Harbor International Growth Fund
Portfolio of Investments—October 31, 2020
Portfolio of Investments—October 31, 2020
REGION BREAKDOWN (% of investments) -Unaudited
Portfolio of Investments
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—96.8% | |||
Shares | Value | ||
AUTO COMPONENTS—0.6% | |||
109,300 | Denso Corp. (Japan) | $ 5,093 | |
AUTOMOBILES—1.0% | |||
188,500 | Suzuki Motor Corp. (Japan) | 8,096 | |
BANKS—1.0% | |||
590,627 | United Overseas Bank Ltd. (Singapore) | 8,206 | |
BEVERAGES—4.2% | |||
69,621 | Remy Cointreau SA (France) | 11,754 | |
5,679,500 | Thai Beverage PCL (Thailand) | 2,415 | |
627,670 | Treasury Wine Estates Ltd. (Australia) | 4,046 | |
1,466,000 | Tsingtao Brewery Co. Ltd. (China) | 12,148 | |
471,766 | United Spirits Ltd. (India)* | 3,210 | |
33,573 | |||
BUILDING PRODUCTS—3.2% | |||
165,103 | Kingspan Group plc (Ireland) | 14,409 | |
459,881 | Nibe Industrier AB (Sweden) | 11,073 | |
25,482 | |||
CAPITAL MARKETS—1.3% | |||
601,033 | Hargreaves Lansdown plc (United Kingdom) | 10,552 | |
CHEMICALS—2.4% | |||
478,646 | Asian Paints Ltd. (India)* | 14,267 | |
183,486 | Johnson Matthey plc (United Kingdom) | 5,108 | |
19,375 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
COMMERCIAL SERVICES & SUPPLIES—0.7% | |||
399,941 | HomeServe plc (United Kingdom) | $ 5,732 | |
DIVERSIFIED FINANCIAL SERVICES—0.9% | |||
125,431 | Investor AB Class B (Sweden) | 7,518 | |
ELECTRICAL EQUIPMENT—2.4% | |||
116,756 | Contemporary Amperex Technology Co. Ltd. (China)* | 4,288 | |
142,700 | Nidec Corp. (Japan) | 14,413 | |
18,701 | |||
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—2.8% | |||
21,900 | Keyence Corp. (Japan) | 9,939 | |
178,900 | Murata Manufacturing Co. Ltd. (Japan) | 12,546 | |
22,485 | |||
ENERGY EQUIPMENT & SERVICES—0.2% | |||
660,928 | John Wood Group plc (United Kingdom) | 1,814 | |
ENTERTAINMENT—2.6% | |||
49,726 | Spotify Technology SA (Sweden)* | 11,929 | |
101,558 | Ubisoft Entertainment SA (France)* | 8,971 | |
20,900 | |||
FOOD & STAPLES RETAILING—3.0% | |||
493,535 | Jeronimo Martins SGPS SA (Portugal) | 7,839 | |
1,959,100 | Raia Drogasil SA (Brazil)* | 8,215 |
37
Harbor International Growth Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—Continued | |||
Shares | Value | ||
FOOD & STAPLES RETAILING—Continued | |||
66,300 | Sugi Holdings Co. Ltd. (Japan) | $ 4,378 | |
1,289,067 | Wal-Mart de Mexico SAB de CV (Mexico)* | 3,121 | |
23,553 | |||
HEALTH CARE EQUIPMENT & SUPPLIES—5.1% | |||
85,470 | Cochlear Ltd. (Australia) | 12,757 | |
728,300 | Olympus Corp. (Japan)* | 13,943 | |
148,300 | Sysmex Corp. (Japan) | 13,929 | |
40,629 | |||
HOUSEHOLD PRODUCTS—0.9% | |||
148,100 | Pigeon Corp. (Japan) | 6,820 | |
INDUSTRIAL CONGLOMERATES—0.8% | |||
20,300 | Jardine Matheson Holdings Ltd. (Singapore) | 900 | |
251,100 | Jardine Strategic Holdings Ltd. (Singapore) | 5,437 | |
6,337 | |||
INSURANCE—3.3% | |||
1,275,800 | AIA Group Ltd. (Hong Kong) | 12,142 | |
12,505 | Fairfax Financial Holdings Ltd. (Canada) | 3,288 | |
225,956 | ICICI Lombard General Insurance Co Ltd. (India)*,1 | 3,778 | |
695,500 | Ping An Insurance Group Co. of China Ltd. (China) | 7,191 | |
26,399 | |||
INTERACTIVE MEDIA & SERVICES—6.7% | |||
1,630,543 | Auto Trader Group plc (United Kingdom)1 | 12,259 | |
42,393 | Baidu Inc. ADR (China)*,2 | 5,640 | |
269,600 | Kakaku.com Inc. (Japan) | 7,125 | |
28,634 | Naver Corp. (South Korea) | 7,327 | |
1,798,592 | Rightmove plc (United Kingdom)* | 14,394 | |
437,967 | SEEK Ltd (Australia) | 6,629 x | |
53,374 | |||
INTERNET & DIRECT MARKETING RETAIL—14.7% | |||
93,354 | Alibaba Group Holding Ltd. ADR (China)*,2 | 28,444 | |
101,374 | ASOS plc (United Kingdom)* | 5,784 | |
104,915 | MakeMyTrip Ltd. (India)* | 1,969 | |
452,600 | Meituan Dianping Class B (China)* | 16,873 | |
9,331 | MercadoLibre Inc. (Argentina)* | 11,328 | |
70,887 | Naspers Ltd. (South Africa) | 13,839 | |
67,894 | Prosus NV (Netherlands)* | 6,778 | |
1,507,920 | Trainline plc (United Kingdom)*,1 | 5,376 | |
149,696 | Trip.Com Group Ltd. ADR (China)*,2 | 4,305 | |
236,719 | Zalando SE (Germany)*,1 | 22,045 | |
116,741 | |||
IT SERVICES—5.7% | |||
90,809 | Bechtle AG (Germany) | 15,593 | |
32,614 | Shopify Inc. (Canada)* | 30,182 | |
45,775 | |||
LEISURE PRODUCTS—1.5% | |||
50,600 | Shimano Inc. (Japan) | 11,573 | |
LIFE SCIENCES TOOLS & SERVICES—1.8% | |||
14,719 | Mettler-Toledo International Inc. (Switzerland)* | 14,688 | |
MACHINERY—8.8% | |||
233,624 | Atlas Copco AB Class A (Sweden) | 10,312 | |
94,144 | Atlas Copco AB Class B (Sweden) | 3,607 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
MACHINERY—Continued | |||
45,582 | Epiroc AB Class A (Sweden) | $ 681 | |
486,443 | Epiroc AB Class B (Sweden) | 6,964 | |
138,133 | Kone OYJ Class B (Finland) | 10,997 | |
9,912 | Rational AG (Germany) | 7,435 | |
25,400 | SMC Corp. (Japan) | 13,510 | |
931,000 | Techtronic Industries Co. Ltd. (Hong Kong) | 12,540 | |
209,010 | Weir Group plc (United Kingdom) | 3,883 | |
69,929 | |||
PERSONAL PRODUCTS—2.3% | |||
88,300 | Kao Corp. (Japan) | 6,287 | |
188,000 | Shiseido Co. Ltd. (Japan) | 11,638 | |
17,925 | |||
PROFESSIONAL SERVICES—1.1% | |||
116,323 | Intertek Group plc (United Kingdom) | 8,379 | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—6.1% | |||
47,284 | ASML Holding NV (Netherlands) | 17,107 | |
370,617 | Taiwan Semiconductor Manufacturing Co. Ltd. ADR (Taiwan)2 | 31,084 | |
48,191 | |||
SOFTWARE—2.1% | |||
83,739 | Nemetschek SE (Germany) | 6,063 | |
137,468 | Xero Ltd. (New Zealand)* | 10,665 | |
16,728 | |||
SPECIALTY RETAIL—1.2% | |||
373,987 | Industria de Diseno Textil SA (Spain) | 9,234 | |
TEXTILES, APPAREL & LUXURY GOODS—6.0% | |||
35,237 | Adidas AG (Germany) | 10,469 | |
254,830 | Burberry Group plc (United Kingdom) | 4,475 | |
134,174 | Cie Financiere Richemont SA (Switzerland) | 8,386 | |
13,021 | Kering SA (France) | 7,869 | |
1,775,500 | Li Ning Co. Ltd. (China)* | 9,254 | |
16,036 | LVMH Moet Hennessy Louis Vuitton SE (France) | 7,517 | |
47,970 | |||
THRIFTS & MORTGAGE FINANCE—1.3% | |||
409,173 | Housing Development Finance Corp. Ltd. (India) | 10,601 | |
WIRELESS TELECOMMUNICATION SERVICES—1.1% | |||
135,700 | SoftBank Group Corp. (Japan) | 8,839 | |
TOTAL COMMON STOCKS | |||
(Cost $583,009) | 771,212 | ||
PREFERRED STOCKS—2.1% | |||
(Cost $5,746) | |||
HEALTH CARE EQUIPMENT & SUPPLIES—2.1% | |||
39,037 | Sartorius AG (Germany) | 16,524 | |
TOTAL INVESTMENTS—98.9% | |||
(Cost $588,755) | 787,736 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—1.1% | 8,970 | ||
TOTAL NET ASSETS—100.0% | $796,706 |
38
Harbor International Growth Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
FAIR VALUE MEASUREMENTS
The following table summarizes the Fund’s investments as of October 31, 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 | $ — | $ 13,839 | $ — | $ 13,839 | ||||
Europe | 26,617 | 290,377 | — | 316,994 | ||||
Latin America | 22,664 | — | — | 22,664 | ||||
Middle East/Central Asia | 1,969 | 31,856 | — | 33,825 | ||||
North America | 33,470 | — | — | 33,470 | ||||
Pacific Basin | 73,761 | 270,030 | 6,629 | 350,420 | ||||
Preferred Stocks | ||||||||
Europe | — | 16,524 | — | 16,524 | ||||
Total Investments in Securities | $158,481 | $622,626 | $6,629 | $787,736 |
For more information on valuation inputs and their aggregation into the levels used in the table above, please refer to the Fair Value Measurements and Disclosures in Note 2 of the accompanying Notes to Financial Statements.
The following is a rollforward of the Fund’s Level 3 investments during the year ended October 31, 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 3h (000s) | Transfers Out of Level 3 (000s) | Ending Balance as of 10/31/2020 (000s) | Unrealized Gain/ Loss as of 10/31/2020 (000s) | ||||||||||
Common Stocks | $— | $— | $— | $— | $— | $— | $6,629 | $— | $6,629 | $1,046 |
The following is a summary of significant unobservable inputs used in the fair valuations of assets and liabilities categorized within Level 3 of the fair value hierarchy.
Valuation Descriptions | Ending Balance as of 10/31/2020 (000s) | Valuation Technique | Unobservable Input(s) | Input Value(s) | ||||
Investments in Securities | ||||||||
Common Stocks | ||||||||
SEEK Ltd (Australia) | $6,629 | Market Approach | Last Price | AUD 21.53 |
* | Non-income producing security |
x | Fair valued in accordance with Harbor Funds' Valuation Procedures. |
1 | Securities purchased in a transaction exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. The Fund has no right to demand registration of these securities. At October 31, 2020, the aggregate value of these securities was $43,458 or 5% of net assets. |
2 | Depositary receipts such as American Depositary Receipts (ADRs), Global Depositary Receipts (GDRs) and other country specific depositary receipts are certificates evidencing ownership of shares of a foreign issuer. These certificates are issued by depositary 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 |
AUD | Australian Dollar |
The accompanying notes are an integral part of the Financial Statements.
39
Harbor International Small Cap Fund
Manager’s Commentary (Unaudited)
Manager’s Commentary (Unaudited)
Subadviser
Cedar Street Asset Management LLC
455 North Cityfront Plaza Drive
Suite 1710
Suite 1710
Chicago, IL 60611
Portfolio Managers
Jonathan P. Brodsky
Since 2019
Since 2019
Waldemar A. Mozes
Since 2019
Since 2019
Cedar Street has subadvised the Fund since 2019.
Investment Objective
The Fund seeks long-term growth of capital.
Jonathan P. Brodsky
Waldemar A. Mozes
Management’s Discussion of
Fund Performance
Fund Performance
Market Review
During the fiscal year ended October 31, 2020, the MSCI EAFE Small Cap (ND) Index declined by 1.36%. But this modest absolute value hardly reflects the tumult and volatility brought on by the COVID-19 pandemic, in our view. Global GDP is expected to decline by 4% in 2020, the most significant decline since World War II. And in Europe, the performance gap between best and worst performing equity markets during the first three calendar quarters of 2020 was 58 percentage points versus just 18 percentage points in the same period in 2019. Outperforming equity markets like Denmark are perceived to be doing a relatively better job of mitigating the economic fallout of the virus, while countries like the U.K. are lagging due to worsening conditions. Despite dramatically loose monetary conditions and fiscal stimulus, until the COVID-19 virus itself is brought under control, we believe market volatility is likely to persist.
Given this backdrop, momentum factors have continued to widen their relative performance spread versus value factors to, what we believe to be, unprecedented levels as global investors crowd into the same narrow sub-set of COVID-19 “winners” in a quest for virus-proof secular growth. This has tended to favor larger cap stocks over small caps and, within the MSCI EAFE Small Cap (ND) Index, the Technology, Health Care, and Consumer Staples sectors. The Real Estate, Financials, and Energy sectors have lagged on a relative basis due to perceived economic sensitivity. We note that Technology sector performance relative to underperforming sectors is now greater than even the dot-com era of the late 1990s.
Performance
Harbor International Small Cap Fund underperformed the return of the MSCI EAFE Small Cap (ND) Index during the period. The Fund returned -6.36% (Retirement Class), -6.48% (Institutional Class), -6.65% (Administrative Class), and -6.76% (Investor Class) compared to the MSCI EAFE Small Cap (ND) Index return of -1.36%.
The negative relative return over the period primarily reflects negative stock selection effects in the U.K., offset somewhat by positive stock selection effects in Japan and Hong Kong. From a sector perspective, stock selection in Technology and Industrials were the main contributors to the negative relative return, offset somewhat by the lack of exposure to the Real Estate sector.
During the period under review, the most significant detractors to Fund performance were primarily U.K.-listed names such as Senior and N Brown. Senior’s negative performance was due to its exposure to the aerospace industry which has come under significant pressure due to both the Boeing 737 MAX grounding and overall COVID-19 travel bans. N Brown, is a retailer of plus-sized women’s and men’s apparel with a significant credit book. As with many apparel retailers, N Brown faces a challenging retail market due to COVID-19 lockdowns while also dealing with balance sheet issues stemming from a regulatory change to its credit book. Both stocks faced company-specific issues, but an equally important element of their detraction from Fund performance was their U.K. domicile. Small cap equities in the U.K. have been under significant pressure due to COVID-19 challenges, continuing Brexit uncertainty, and structural challenges that we believe are specific to U.K. small caps.
Elders, an Australian agricultural services firm, was the top contributor to Fund performance. Devastating wildfires and drought conditions in rural Australia at the end of 2019 gave way to sustained rains at the start of 2020. Elders benefitted from increased spending on replacement products for farms, increased services fees from insurance and real estate products, and increased feed, fertilizers, and seeds as farmers rushed to take advantage of much-improved conditions. COVID-19 lockdowns also increased demand for basic staples, further boosting sales for Elders. Draegerwerk, a German personal safety and medical device company, is one of a handful of direct beneficiaries of the COVID-19 pandemic. Its high-end ventilators are in high demand by hospitals treating the most severe COVID-19 cases, its N95 masks are in high demand by frontline workers in every field, and other professional-grade safety masks for firefighters, divers, and other workers in harsh conditions are also being upgraded.
40
Harbor International Small Cap Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
CHANGE IN A $50,000 INVESTMENT
For the period 02/01/2016 through 10/31/2020
The graph compares a $50,000 investment in the Institutional Class shares of the Fund with the performance of the MSCI EAFE Small Cap (ND) Index. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
TOTAL RETURNS
For the periods ended 10/31/2020
1 Year | 5 Years | Annualized | ||||||
Life of Fund | ||||||||
Harbor International Small Cap Fund | ||||||||
Retirement Class1 | -6.36% | N/A | 4.85% | |||||
Institutional Class1 | -6.48 | N/A | 4.78 | |||||
Administrative Class1 | -6.65 | N/A | 4.51 | |||||
Investor Class1 | -6.76 | N/A | 4.39 | |||||
Comparative Index | ||||||||
MSCI EAFE Small Cap (ND)1 | -1.36% | N/A | 7.34% |
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 at harborfunds.com or by calling 800-422-1050.
Sector allocations within the Fund are dependent on bottom-up stock selection. During the period under review, we significantly reduced our Industrials weighting to within a few percentage points of the benchmark. The Fund’s modest overweight position in the Industrials sector reflects our conviction around specific holdings rather than top-down sector allocation decisions. Assets were redeployed into Information Technology, Consumer Discretionary, and Materials sectors. We continue to maintain an active, zero-weight (0%) allocation to Real Estate and Utilities sectors due to a lack of stock-specific opportunities. We note that our lack of Real Estate exposure has been a source of relative outperformance during the period under review.
From a geographic perspective, again, allocations are highly dependent on bottom-up stock selection. Weightings in the U.K. and Germany decreased moderately during the period as we consolidated our U.K. holdings and harvested profits in Germany. We increased weights in France, Netherlands, Ireland, and Italy due mainly to new opportunities. In Japan we harvested profits and redeployed assets to other geographies such as Australia due to stock-specific factors.
Outlook & Strategy
The COVID-19 pandemic will likely shape the direction of global equity markets in the near-term. At the same time, heightened geopolitical tensions are no less significant. The U.S. presidential election, Brexit negotiations, and China’s rising influence may present opportunities for surprise. With this backdrop, continued market volatility should be expected, in our view.
Still, we believe central banks and governments have flooded the global economy with plenty of liquidity, low interest rates, and other supports to keep commerce flowing. We also believe a widely distributed vaccine is likely sometime in the next 12 months likely limiting structural damage from the virus. At present, our view is that markets continue to be positioned in favor of global mega-cap tech stocks that are direct COVID-19 beneficiaries. This one-sided trade could unwind quickly and perhaps unkindly to overly concentrated portfolios, in our view.
1 | The “Life of Fund” return as shown reflects the period 02/01/2016 through 10/31/2020. |
All international and global returns are in U.S. Dollars.
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.
41
Harbor International Small Cap Fund
Portfolio of Investments—October 31, 2020
Portfolio of Investments—October 31, 2020
REGION BREAKDOWN (% of investments) -Unaudited
Portfolio of Investments
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—88.5% | |||
Shares | Value | ||
AEROSPACE & DEFENSE—0.9% | |||
1,682 | MTU Aero Engines AG (Germany) | $ 287 | |
AIR FREIGHT & LOGISTICS—3.7% | |||
300,800 | Kerry Logistics Network Ltd. (Hong Kong) | 628 | |
26,390 | Kintetsu World Express Inc. (Japan) | 561 | |
���1,189 | |||
BANKS—1.5% | |||
388,147 | Virgin Money UK plc (United Kingdom)* | 471 | |
BEVERAGES—0.9% | |||
141,900 | C&C Group plc (Ireland)* | 297 | |
CAPITAL MARKETS—2.4% | |||
16,868 | JAFCO Co. Ltd. (Japan) | 763 | |
CHEMICALS—4.6% | |||
29,500 | KH Neochem Co. Ltd. (Japan) | 690 | |
53,700 | Neo Performance Materials Inc. (Canada) | 469 | |
12,615 | Victrex plc (United Kingdom)* | 302 | |
1,461 | |||
COMMERCIAL SERVICES & SUPPLIES—2.7% | |||
32,257 | ISS AS (Denmark)* | 419 | |
11,372 | Loomis AB (Sweden)* | 254 | |
135,918 | Mears Group PLC (United Kingdom)* | 185 | |
858 | |||
CONSTRUCTION & ENGINEERING—5.3% | |||
27,865 | Arcadis NV (Netherlands) | 648 | |
334,115 | Maire Tecnimont SpA (Italy)* | 452 | |
41,653 | Raito Kogyo Co. Ltd. (Japan) | 591 | |
1,691 | |||
CONSUMER FINANCE—1.2% | |||
85,102 | Resurs Holding AB (Sweden)1 | 389 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
CONTAINERS & PACKAGING—1.5% | |||
30,105 | BillerudKorsnas AB (Sweden) | $ 470 | |
DISTRIBUTORS—1.6% | |||
77,740 | Inchcape plc (United Kingdom) | 499 | |
ELECTRICAL EQUIPMENT—3.0% | |||
281,500 | Johnson Electric Holdings Ltd. (Hong Kong) | 583 | |
14,891 | Mersen SA (France)* | 386 | |
969 | |||
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—5.9% | |||
20,350 | Amano Corp. (Japan) | 479 | |
7,134 | Daiwabo Holdings Co. Ltd. (Japan) | 467 | |
9,018 | Landis+Gyr Group AG (Switzerland)* | 504 | |
20,900 | Nohmi Bosai Ltd. (Japan) | 452 | |
1,902 | |||
FOOD PRODUCTS—5.9% | |||
519,909 | Aryzta AG (Switzerland)* | 261 | |
9,427 | Ebro Foods SA (Spain)* | 211 | |
64,872 | Elders Ltd. (Australia) | 512 | |
39,573 | Glanbia plc (Ireland) | 376 | |
1,104,100 | Japfa Ltd. (Singapore) | 522 | |
1,882 | |||
HEALTH CARE PROVIDERS & SERVICES—3.7% | |||
20,777 | BML Inc. (Japan) | 584 | |
253,863 | Healius Ltd. (Australia) | 602 | |
1,186 | |||
HOTELS, RESTAURANTS & LEISURE—1.4% | |||
32,914 | Resorttrust Inc. (Japan) | 464 | |
INSURANCE—4.3% | |||
19,778 | ASR Nederland NV (Netherlands) | 600 | |
50,808 | Coface SA (France) | 397 | |
256,742 | Mapfre SA (Spain) | 387 | |
1,384 |
42
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% | |||
48,803 | Takkt AG (Germany) | $ 519 | |
IT SERVICES—2.7% | |||
4,913 | Alten SA (France)* | 393 | |
76,720 | Indra Sistemas SA (Spain)* | 460 | |
853 | |||
LEISURE PRODUCTS—1.1% | |||
17,798 | Spin Master Corp. (Canada)*,1 | 360 | |
MACHINERY—2.8% | |||
7,810 | Krones AG (Germany) | 446 | |
29,400 | OSG Corp. (Japan) | 441 | |
887 | |||
MARINE—1.5% | |||
18,205 | Clarkson plc (United Kingdom) | 474 | |
MEDIA—3.1% | |||
42,075 | Criteo SA ADR (France)*,2 | 722 | |
7,179 | RTL Group SA (Luxembourg)* | 273 | |
995 | |||
METALS & MINING—1.4% | |||
15,400 | DOWA Holdings Co. Ltd. (Japan) | 441 | |
MULTILINE RETAIL—2.0% | |||
30,074 | Ryohin Keikaku Co. Ltd. (Japan) | 631 | |
OIL, GAS & CONSUMABLE FUELS—2.6% | |||
496,929 | Beach Energy Ltd. (Australia) | 412 | |
366,340 | Viva Energy Group Ltd. (Australia)1 | 433 | |
845 | |||
PAPER & FOREST PRODUCTS—1.3% | |||
190,266 | Navigator Co. SA (Portugal)* | 419 | |
PERSONAL PRODUCTS—2.7% | |||
41,117 | Ontex Group NV (Belgium) | 455 | |
37,840 | Qol Holdings Co. Ltd. (Japan) | 413 | |
868 | |||
PROFESSIONAL SERVICES—1.5% | |||
7,475 | DKSH Holding AG (Switzerland) | 481 | |
ROAD & RAIL—1.5% | |||
202,522 | Redde Northgate plc (United Kingdom) | 466 | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—4.6% | |||
39,698 | Sumco Corp. (Japan) | 605 | |
24,625 | Tower Semiconductor Ltd. (Israel)* | 520 | |
95,225 | X-Fab Silicon Foundries SE (Belgium)*,1 | 354 | |
1,479 | |||
SOFTWARE—1.4% | |||
68,283 | TomTom NV (Netherlands)* | 459 | |
SPECIALTY RETAIL—1.7% | |||
47,373 | Matas AS (Denmark)* | 529 | |
TEXTILES, APPAREL & LUXURY GOODS—1.6% | |||
677,485 | Coats Group plc (United Kingdom)* | 499 | |
TRADING COMPANIES & DISTRIBUTORS—1.7% | |||
26,250 | Kanamoto Co. Ltd. (Japan) | 541 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
TRANSPORTATION INFRASTRUCTURE—1.2% | |||
173,942 | SATS Ltd. (Singapore) | $ 379 | |
TOTAL COMMON STOCKS | |||
(Cost $30,416) | 28,287 | ||
PREFERRED STOCKS—0.2% | |||
(Cost $42) | |||
HEALTH CARE EQUIPMENT & SUPPLIES—0.2% | |||
745 | Draegerwerk AG & Co KGaA (Germany) | 60 | |
TOTAL INVESTMENTS—88.7% | |||
(Cost $30,458) | 28,347 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—11.3% | 3,625 | ||
TOTAL NET ASSETS—100.0% | $31,972 |
43
Harbor International Small Cap Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
FAIR VALUE MEASUREMENTS
The following table summarizes the Fund’s investments as of October 31, 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 | $ 722 | $14,022 | $— | $14,744 | ||||
Middle East/Central Asia | 520 | — | — | 520 | ||||
North America | 829 | — | — | 829 | ||||
Pacific Basin | — | 12,194 | — | 12,194 | ||||
Preferred Stocks | ||||||||
Europe | — | 60 | — | 60 | ||||
Total Investments in Securities | $2,071 | $26,276 | $— | $28,347 |
There were no Level 3 investments at October 31, 2020 or 2019.
For more information on valuation inputs and their aggregation into the levels used in the table above, please refer to the Fair Value Measurements and Disclosures in Note 2 of the accompanying Notes to Financial Statements.
* | Non-income producing security |
1 | Securities purchased in a transaction exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. The Fund has no right to demand registration of these securities. At October 31, 2020, the aggregate value of these securities was $1,536 or 5% of net assets. |
2 | Depositary receipts such as American Depositary Receipts (ADRs), Global Depositary Receipts (GDRs) and other country specific depositary receipts are certificates evidencing ownership of shares of a foreign issuer. These certificates are issued by depositary 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.
44
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
Global equity markets started the decade on an upbeat note, against a backdrop of thawing U.S.-China trade tensions and improving economic data. Nevertheless, positive sentiment was quickly dashed as the Coronavirus outbreak evolved into a global pandemic. The first quarter of 2020 represented a turning point and was the worst quarter since the depths of the 2008 global financial crisis. Coronavirus fallout around the world was swift and precipitous, as a highly globalized economy set the stage for domino effect-like damage in many markets. 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. The International Monetary Fund slashed most countries’ growth forecasts, inciting recessionary fears globally. Markets rebounded in the second and third quarters of 2020, despite pervasive uncertainty about the speed and scope of a global economic recovery. Investors appeared sufficiently mollified by policy support in response to the COVID-19 crisis, obscuring the grim reality of the virus’ human and economic toll worldwide and the likely prolonged recovery. Entering the third quarter, new waves of contagion – particularly in Europe – threatened nascent economic gains. Markets struggled to price in vast amounts of conflicting information and disentangle the effects of central bank and government stimulus from uncertain signs of a sustainable rebound. In addition to the Coronavirus-induced slowdown, a weakening dollar further dragged on many export-driven economies.
PERFORMANCE
For the year ended October 31, 2020, Harbor Overseas Fund returned 0.64% (Retirement Class), 0.48% (Institutional Class), and 0.14% (Investor Class) compared to the MSCI EAFE (ND) Index return of -6.86%. 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 mispricings 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 selections in Australian Materials and French Health Care, respectively led by positions in Fortescue Metals and Sartorius Stedim Biotech. Fortescue Metals’ benefitted from climbing iron ore prices while Sartorius Stedim Biotech’s stock prices rose on upgraded mid-year fiscal 2020 guidance due to expectations for robust demand. Selection and an underweight to U.K. Energy also proved successful. Conversely, selection in Japan proved costly, most notably positions in banks and a lack of exposure to conglomerate SoftBank, which rose over the year in response to share buybacks and sale of Arm to Nvidia.
45
Harbor Overseas Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
CHANGE IN A $50,000 INVESTMENT
For the 03/01/2019 through 10/31/2020
The graph compares a $50,000 investment in the Institutional Class shares of the Fund with the performance of the MSCI EAFE (ND) Index. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
TOTAL RETURNS
For the periods ended 10/31/2020
1 Year | 5 Years | Annualized | ||||||
Life of Fund | ||||||||
Harbor Overseas Fund | ||||||||
Retirement Class1 | 0.64% | N/A | 2.24% | |||||
Institutional Class1 | 0.48 | N/A | 2.14 | |||||
Investor Class1 | 0.14 | N/A | 1.76 | |||||
Comparative Index | ||||||||
MSCI EAFE (ND)1 | -6.86% | N/A | -0.25% |
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 at harborfunds.com or by calling 800-422-1050.
In following a systematic investment process, Acadian continually evaluates the effectiveness of stock selection based on attributes we believe predict future stock prices. Acadian prefers to invest in stocks that are cheaper than their peers because we believe that prices deviate from intrinsic values due to investor irrationality and market frictions. For this period, our views on stock valuations faced headwinds. However, these were more than offset by successful exposure to other fundamental attributes, such as balance sheet quality that favors stocks generating sustainable profits.
OUTLOOK & STRATEGY
The global economic outlook remains uncertain, with outcomes strongly intertwined with the evolution of the pandemic, the measures required to contain it, and the time until an effective vaccine is deployed. COVID-19 continues to reach grim new milestones and new cases continue to rise, led by some emerging market countries and a second wave in Europe. Though progress has been made on the development of a vaccine, there remain many unknowns around accessibility, adoption rate, and degree of protection any vaccine can provide.
We believe that overall risks remain skewed to the downside and extend beyond new waves of contagion. Additional key risks include policy miscalculations, debt sustainability, deteriorating U.S.-China relations, a lasting shift in consumer and business behavior, and the outcome of the U.S. presidential election which hangs in the balance. Effective, substantive, and well-targeted policy responses remain critical to ensuring a full and durable recovery with minimal long-term scarring while premature budgetary tightening, as occurred in the aftermath of the global financial crisis in many countries, could stifle growth, in our view. Unfortunately, adequate policy support comes with a price tag, and stimulus packages have increased budget deficits and debt burdens.
Acadian continuously updates our investment process across model enhancements, risk controls and implementation. We believe our targeted focus, along with our disciplined and granular process, will allow us to add value for our clients.
1 | The “Life of Fund” return as shown reflects the period 03/01/2019 through 10/31/2020. |
All international and global returns are in U.S. Dollars.
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.
46
Harbor Overseas Fund
Portfolio of Investments—October 31, 2020
Portfolio of Investments—October 31, 2020
REGION BREAKDOWN (% of investments) -Unaudited
(Excludes short-term investments)
Portfolio of Investments
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—98.4% | |||
Shares | Value | ||
AEROSPACE & DEFENSE—0.0% | |||
30 | ECA (France) | $ 1 | |
AIR FREIGHT & LOGISTICS—0.6% | |||
3,946 | Deutsche Post AG (Germany) | 175 | |
AUTO COMPONENTS—0.4% | |||
108,000 | Chaowei Power Holdings Ltd. (China) | 37 | |
1,692 | DTR Automotive Corp. (South Korea) | 33 | |
1,100 | HI-LEX CORP. (Japan) | 12 | |
400 | Linamar Corp. (Canada) | 13 | |
95 | |||
AUTOMOBILES—3.2% | |||
4,656 | Bayerische Motoren Werke AG (Germany) | 318 | |
5,519 | Daimler AG (Germany) | 285 | |
14,687 | Peugeot SA (France) | 264 | |
867 | |||
BANKS—2.2% | |||
4,416 | Bank of Georgia Group plc (United Kingdom)* | 51 | |
195,200 | Bank Pembangunan Daerah Jawa Timur TBK PT (Indonesia) | 8 | |
7,842 | BNK Financial Group Inc. (South Korea) | 38 | |
4,148 | BNP Paribas SA (France) | 145 | |
38,668 | Faisal Islamic Bank of Egypt (Egypt) | 39 | |
34,200 | Japan Post Bank Co. Ltd. (Japan)* | 273 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
BANKS—Continued | |||
6,010 | SpareBank 1 BV (Norway) | $ 22 | |
593 | Sparebanken Sor (Norway)* | 6 | |
582 | |||
BEVERAGES—0.2% | |||
296 | Carlsberg AS (Denmark) | 38 | |
16,198 | Ginebra San Miguel Inc. (Philippines) | 15 | |
53 | |||
BIOTECHNOLOGY—0.2% | |||
364 | Galapagos NV (Belgium)* | 42 | |
23 | Genmab AS (Denmark)* | 8 | |
50 | |||
BUILDING PRODUCTS—0.6% | |||
668 | FM Mattsson Mora Group AB (Sweden) | 11 | |
1,880 | Inwido AB (Sweden) | 20 | |
1,621 | Nederman Holding AB (Sweden)* | 22 | |
5,888 | Norcros plc (United Kingdom) | 13 | |
2,477 | Systemair AB (Sweden)* | 69 | |
465 | Zehnder Group AG (Switzerland) | 22 | |
157 | |||
CAPITAL MARKETS—2.5% | |||
273 | Altamir (France) | 6 | |
308,300 | Asia Plus Group Holdings PCL NVDR (Thailand)1 | 16 | |
8,452 | Banca Generali SpA (Italy) | 241 |
47
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—Continued | |||
1,451 | Equita Group Spa (Italy) | $ 3 | |
2,082 | Fiducian Group Ltd. (Australia) | 8 | |
28,000 | Maybank Kim ENG Securities Thailand PCL NVDR (Thailand)1 | 6 | |
10,890 | St. James's Place plc (United Kingdom) | 127 | |
588 | Titanium OYJ (Finland) | 8 | |
21,766 | UBS Group AG (Switzerland) | 253 | |
668 | |||
CHEMICALS—0.3% | |||
4,900 | 5N Plus Inc. (Canada)* | 7 | |
405 | Alzchem Group AG (Germany) | 9 | |
574 | KPX Chemical Co. Ltd. (South Korea) | 24 | |
886 | Noroo Holdings Co. Ltd. (South Korea) | 7 | |
2,041 | Palram Industries 1990 Ltd. (Israel) | 17 | |
3,068 | Thrace Plastics Holding And Co. (Greece) | 9 | |
727 | Tikkurila OYJ (Finland) | 12 | |
85 | |||
COMMERCIAL SERVICES & SUPPLIES—0.6% | |||
1,400 | DAI Nippon Printing Co. Ltd. (Japan) | 26 | |
262 | Orell Fuessli Holding AG (Switzerland) | 26 | |
300 | Secom Co. Ltd. (Japan) | 25 | |
404 | Securitas AB (Sweden)* | 6 | |
6,100 | Transcontinental Inc. (Canada) | 72 | |
155 | |||
COMMUNICATIONS EQUIPMENT—2.1% | |||
16,839 | Ericsson (LM) Telephone SP ADR (Sweden)1 | 189 | |
2,500 | EXFO Inc. (Canada)* | 6 | |
9,715 | Nokia Corp. Sponsored ADR (Finland)*,1 | 33 | |
66,692 | Nokia OYJ (Finland)* | 225 | |
10,067 | Telefonaktiebolaget LM Ericsson (Sweden) | 112 | |
8,412 | Telit Communications plc (United Kingdom)* | 15 | |
580 | |||
CONSTRUCTION & ENGINEERING—0.2% | |||
58,000 | Analogue Holdings Ltd. (Hong Kong) | 8 | |
41,300 | Boustead Singapore Ltd. (Singapore) | 21 | |
305 | Burkhalter Holding AG (Switzerland) | 20 | |
49 | |||
CONSTRUCTION MATERIALS—0.0% | |||
19,932 | Steppe Cement Ltd. (Malaysia) | 7 | |
CONSUMER FINANCE—0.6% | |||
14,100 | AEON Financial Service Co. Ltd. (Japan) | 145 | |
4,289 | H&T Group plc (United Kingdom) | 12 | |
157 | |||
CONTAINERS & PACKAGING—0.3% | |||
1,530 | Groupe Guillin (France) | 37 | |
64,100 | Hanwell Holdings Ltd. (Singapore) | 13 | |
10,611 | Mpact Ltd. (South Africa)* | 7 | |
11,718 | Orora Ltd. (Australia) | 21 | |
78 | |||
DISTRIBUTORS—0.6% | |||
11,500 | Jardine Cycle & Carriage Ltd. (Singapore) | 150 | |
DIVERSIFIED CONSUMER SERVICES—0.0% | |||
7,627 | Shine Corporate Ltd. (Australia) | 5 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
DIVERSIFIED FINANCIAL SERVICES—0.1% | |||
1,012 | ABC Arbitrage (France) | $ 8 | |
16,843 | M&G plc (United Kingdom) | 32 | |
40 | |||
DIVERSIFIED TELECOMMUNICATION SERVICES—2.4% | |||
254,878 | Bredband2 I Skandinavien AB (Sweden) | 47 | |
118,589 | BT Group plc (United Kingdom)* | 156 | |
604 | Magyar Telekom Telecommunications plc ADR (Hungary)1 | 3 | |
21,600 | Nippon Telegraph & Telephone Corp. (Japan) | 455 | |
113 | Telefonica SA (Spain) | — | |
661 | |||
ELECTRIC UTILITIES—0.7% | |||
23,923 | OPG Power Ventures plc (United Kingdom)* | 3 | |
55,200 | Tokyo Electric Power Co. (Japan)* | 143 | |
6,200 | Transmissora Alianca de Energia Eletrica SA (Brazil) | 30 | |
176 | |||
ELECTRICAL EQUIPMENT—0.6% | |||
28,000 | Johnson Electric Holdings Ltd. (Hong Kong) | 58 | |
116 | Legrand SA (France) | 9 | |
1,700 | Mitsubishi Electric Corp. (Japan) | 22 | |
77 | Siemens Energy AG (Germany)* | 2 | |
205 | Somfy SA (France) | 28 | |
5,546 | Zumtobel Group AG (Austria) | 31 | |
150 | |||
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—0.9% | |||
77,905 | Datatec Ltd. (South Africa)* | 106 | |
10,065 | Eroad Ltd. (New Zealand)* | 27 | |
13,314 | Hon Hai Precision Industry Co. Ltd. GDR (Taiwan)1 | 70 | |
531 | Kapsch Trafficcom AG (Austria) | 7 | |
1,200 | Tomen Devices Corp (Japan) | 41 | |
251 | |||
ENERGY EQUIPMENT & SERVICES—0.0% | |||
149,000 | Hilong Holding Ltd. (Hong Kong) | 3 | |
ENTERTAINMENT—3.1% | |||
10,000 | IGG Inc. (Singapore) | 11 | |
982 | Nintendo Co. Ltd. (Japan) | 531 | |
1,763 | TEN Square Games SA (Poland) | 282 | |
672 | Vivendi SA (France) | 19 | |
843 | |||
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—0.0% | |||
6,426 | Yeni Gimat Gayrimenkul Ortakligi AS (Turkey) | 10 | |
FOOD & STAPLES RETAILING—2.5% | |||
1,832 | Amsterdam Commodities NV (Netherlands) | 38 | |
3,800 | Empire Co. Ltd. Class A (Canada) | 104 | |
336 | Hawesko Holding AG (Germany) | 16 | |
18,464 | Koninklijke Ahold Delhaize NV (Netherlands) | 506 | |
664 | |||
FOOD PRODUCTS—0.5% | |||
5,300 | BRF SA (Brazil)* | 16 | |
18,055 | Finsbury Food Group plc (United Kingdom) | 13 | |
900 | Maeil Holdings Co. Ltd. (South Korea) | 6 | |
663 | Nestlé SA (Switzerland) | 75 |
48
Harbor Overseas Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—Continued | |||
Shares | Value | ||
FOOD PRODUCTS—Continued | |||
119 | Neto ME Holdings Ltd. (Israel)* | $ 5 | |
13,265 | PGG Wrightson Ltd. (New Zealand) | 26 | |
141 | |||
HEALTH CARE EQUIPMENT & SUPPLIES—4.8% | |||
146 | BioMerieux (France) | 22 | |
22,257 | Fisher & Paykel Healthcare Corp. Ltd. (New Zealand) | 515 | |
12,359 | Getinge AB Class B (Sweden) | 242 | |
114 | GN Store Nord AS (Denmark) | 8 | |
429 | Ion Beam Applications (Belgium) | 6 | |
10,589 | Koninklijke Philips NV (Netherlands) | 490 | |
22 | Sonova Holding AG (Switzerland)* | 5 | |
1,288 | |||
HEALTH CARE PROVIDERS & SERVICES—0.4% | |||
6,834 | GHP Specialty Care AB (Sweden)* | 15 | |
6,266 | Humana AB (Sweden)* | 37 | |
6,322 | Oriola Corp. Class A (Finland) | 15 | |
25,000 | Oriola OYJ (Finland) | 53 | |
120 | |||
HEALTH CARE TECHNOLOGY—0.3% | |||
610 | Cegedim SA (France)* | 16 | |
1,114 | Nexus AG (Germany) | 62 | |
78 | |||
HOTELS, RESTAURANTS & LEISURE—0.2% | |||
24,133 | Ainsworth Game Technology Ltd. (Australia)* | 5 | |
410 | Evolution Gaming Group AB ADR (Sweden)1 | 30 | |
558 | Groupe Partouche SA (France)* | 11 | |
83,100 | Jaya Bersama Indo TBK PT (Indonesia)* | 2 | |
600 | Pollard Banknote Ltd. (Canada) | 9 | |
57 | |||
HOUSEHOLD DURABLES—1.3% | |||
477 | Amica SA (Poland) | 17 | |
2,002 | De'Longhi SpA (Italy)* | 64 | |
1,300 | Funai Electric Co. Ltd. (Japan)* | 5 | |
265 | HEXAOM (France)* | 9 | |
1,661 | Husqvarna AB (Sweden) | 17 | |
2,516 | Hwasung Industrial Co. Ltd. (South Korea) | 27 | |
9,600 | Lii Hen Industries BHD (Malaysia) | 9 | |
501 | Sabaf SpA (Italy) | 7 | |
9,700 | Sekisui House Ltd. (Japan) | 161 | |
1,056 | Surteco Group SE (Germany) | 27 | |
109 | V-ZUG Holding AG (Switzerland)* | 8 | |
351 | |||
HOUSEHOLD PRODUCTS—1.1% | |||
8,196 | Essity AB (Sweden)2 | 237 | |
429 | Leifheit AG (Germany) | 17 | |
29,635 | McBride plc (United Kingdom)* | 24 | |
4,127 | Suominen OYJ (Finland) | 23 | |
301 | |||
INDUSTRIAL CONGLOMERATES—0.2% | |||
7,118 | KOC Holding AS (Turkey) | 12 | |
104 | MBB SE (Germany) | 9 | |
2,998 | Volati AB (Sweden)* | 23 | |
44 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
INSURANCE—5.1% | |||
4,920 | Ageas (Belgium) | $ 198 | |
12,315 | Assicurazioni Generali SpA (Italy) | 165 | |
1,629 | Aviva plc (United Kingdom) | 5 | |
19,881 | Avivasa Emeklilik VE Hayat AS (Turkey) | 31 | |
4,223 | European Reliance General Insurance Co. SA (Greece) | 19 | |
2,000 | Great Eastern Holdings Ltd. (Singapore) | 26 | |
2,200 | iA Financial Corp. Inc. (Canada) | 77 | |
33,600 | Japan Post Holdings Co. Ltd. (Japan)* | 231 | |
100,114 | Legal & General Group plc (United Kingdom) | 240 | |
900 | Manulife Financial Corp. (Canada) | 12 | |
156 | NN Group NV (Netherlands) | 5 | |
75 | Sun Life Financial Inc. (Canada) | 3 | |
21,800 | T&D Holdings Inc. (Japan) | 218 | |
66,066 | Unipolsai Assicurazioni SpA (Italy) | 154 | |
1,384 | |||
INTERACTIVE MEDIA & SERVICES—0.2% | |||
436 | Baidu Inc. ADR (China)*,1 | 58 | |
INTERNET & DIRECT MARKETING RETAIL—0.9% | |||
15,600 | Hai-O Enterprise Bhd (Malaysia) | 8 | |
475 | Lastminute.com NV (Netherlands)* | 8 | |
7,591 | Verkkokauppa.Com Oyj (Finland) | 44 | |
6,700 | ZOZO Inc. (Japan) | 170 | |
230 | |||
IT SERVICES—4.3% | |||
300 | Business Engineering Corp. (Japan) | 11 | |
819 | Comarch SA (Poland) | 40 | |
9,500 | CSU Cardsystem SA (Brazil)* | 22 | |
1,861 | Digia OYJ (Finland) | 15 | |
6,844 | Eckoh plc (United Kingdom) | 6 | |
4,400 | Fujitsu Ltd. (Japan) | 520 | |
2,058 | Gofore OYJ (Finland) | 32 | |
241,419 | Hi Sun Technology China Ltd. (China)* | 26 | |
4,709 | Infosys Ltd. ADR (India)1 | 67 | |
345 | Know It AB (Sweden)* | 9 | |
945 | Neurones (France) | 26 | |
7,900 | Otsuka Corp. (Japan) | 363 | |
976 | Pushpay Holdings Ltd. (New Zealand)* | 6 | |
164 | Sopra Steria Group SA (France)* | 19 | |
1,162 | |||
LEISURE PRODUCTS—0.7% | |||
6,336 | Harvia OYJ (Finland) | 127 | |
1,500 | Sankyo Co. Ltd. (Japan) | 38 | |
1,250 | Sanlorenzo Spa/Ameglia (Italy)* | 22 | |
187 | |||
LIFE SCIENCES TOOLS & SERVICES—3.5% | |||
4,402 | Ergomed plc (United Kingdom)* | 42 | |
2,238 | ICON plc (Ireland)* | 404 | |
1,305 | Sartorius Stedim Biotech (France) | 495 | |
941 | |||
MACHINERY—5.5% | |||
164 | Atlas Copco AB Class A (Sweden) | 7 | |
2,600 | Daihatsu Diesel Manufacturing Co Ltd. (Japan) | 10 | |
12,947 | Emak SpA (Italy)* | 12 | |
15,915 | Epiroc AB Class A (Sweden) | 238 | |
35,869 | Famur SA (Poland)* | 12 | |
4,421 | Groupe SFPI (France)* | 6 | |
5,196 | Kone OYJ Class B (Finland) | 414 |
49
Harbor Overseas Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—Continued | |||
Shares | Value | ||
MACHINERY—Continued | |||
1,224 | Nilfisk Holding AS (Denmark)* | $ 17 | |
371 | Palfinger AG (Austria) | 9 | |
464 | Schindler Holding AG (Switzerland) | 119 | |
16,897 | Skellerup Holdings Ltd. (New Zealand) | 34 | |
59,900 | Sunningdale Tech Ltd. (Singapore) | 68 | |
350 | Technotrans SE (Germany)* | 7 | |
5,571 | Valmet OYJ (Finland) | 133 | |
20,072 | Volvo AB (Sweden)* | 390 | |
1,476 | |||
MARINE—0.8% | |||
129 | AP Moller - Maersk AS (Denmark) | 207 | |
9,771 | Wallenius Wilhelmsen ASA (Norway)* | 18 | |
225 | |||
MEDIA—2.1% | |||
1,634 | 4imprint Group plc (United Kingdom) | 44 | |
4,842 | Bloomsbury Publishing plc (United Kingdom) | 16 | |
195 | Cogeco Communications Inc. (Canada) | 14 | |
300 | Cogeco Inc. (Canada) | 18 | |
4,472 | Corus Entertainment Inc. (Canada) | 12 | |
8,800 | Dentsu Inc. (Japan) | 254 | |
1,900 | FAN Communications Inc. (Japan) | 8 | |
85 | GTN Ltd. (Australia) | — | |
6,700 | Hakuhodo Dy Holdings Inc. (Japan) | 85 | |
2,451 | HighCo SA (France)* | 12 | |
1,767 | Italian Exhibition Group SpA (Italy)* | 4 | |
1,298 | KT Skylife Co. Ltd. (South Korea) | 11 | |
10,318 | North Media AS (Denmark)* | 103 | |
581 | |||
METALS & MINING—7.9% | |||
94,785 | Arcelormittal South Africa Ltd. (South Africa)* | 2 | |
22,947 | Base Resources Ltd. (Australia)* | 4 | |
13,750 | BHP Group Ltd. (Australia) | 330 | |
1,840 | BHP Group plc (United Kingdom) | 36 | |
1,177 | Deterra Royalties Ltd. (Australia)* | 3 | |
27,813 | Evraz plc (United Kingdom) | 130 | |
51,205 | Fortescue Metals Group Ltd. (Australia) | 626 | |
1,177 | Iluka Resources Ltd. (Australia) | 4 | |
26,518 | Maca Ltd. (Australia) | 15 | |
5,239 | Newcrest Mining Ltd. (Australia) | 109 | |
4,701 | Rio Tinto Ltd. (Australia) | 306 | |
875 | Rio Tinto plc (United Kingdom) | 49 | |
4,108 | Rio Tinto plc Sponsored ADR (United Kingdom)1 | 233 | |
179,625 | South32 Ltd. (Australia) | 256 | |
140 | Stalprodukt SA (Poland)* | 6 | |
12,083 | Trans-Siberian Gold PLC (United Kingdom) | 15 | |
143,000 | Xiwang Special Steel Co. Ltd. (Hong Kong)* | 8 | |
2,132 | |||
MULTI-UTILITIES—0.0% | |||
1,697 | Hera SpA (Italy) | 5 | |
PAPER & FOREST PRODUCTS—0.2% | |||
1,311 | Midway Ltd. (Australia)* | 1 | |
146,000 | Shandong Chenming Paper Holdings Ltd. Class H (China) | 58 | |
59 | |||
PERSONAL PRODUCTS—0.0% | |||
18 | Paul Hartmann AG (Germany) | 7 | |
93 | Unilever NV (Netherlands) | 5 | |
12 |
COMMON STOCKS—Continued | |||
Shares | Value | ||
PHARMACEUTICALS—11.6% | |||
13,563 | AFT Pharmaceuticals Ltd. (New Zealand)* | $ 45 | |
589 | AstraZeneca plc ADR (United Kingdom)1 | 30 | |
3,379 | Bayer AG (Germany) | 159 | |
558 | GlaxoSmithKline plc (United Kingdom) | 9 | |
245 | Merck KGaA (Germany) | 36 | |
9,449 | Novartis AG (Switzerland) | 736 | |
9,612 | Novo Nordisk AS (Denmark) | 613 | |
284 | Orion OYJ Class A (Finland) | 12 | |
2,777 | Roche Holding AG (Switzerland) | 892 | |
2,223 | Sanofi SA (France) | 201 | |
3,527 | UCB SA (Belgium) | 349 | |
562 | Vetoquinol SA (France) | 53 | |
3,135 | |||
PROFESSIONAL SERVICES—3.2% | |||
5,491 | Adecco Group AG (Switzerland) | 269 | |
3,100 | Altech Corp. (Japan) | 57 | |
1,745 | Impellam Group plc (United Kingdom)* | 5 | |
218 | RELX plc (United Kingdom) | 5 | |
2,871 | SEMCOM AB (Sweden) | 21 | |
6,315 | Wolters Kluwer NV (Netherlands) | 511 | |
868 | |||
REAL ESTATE MANAGEMENT & DEVELOPMENT—0.5% | |||
10,641 | CFE Capital S de RL de CV (Mexico) | 13 | |
8,000 | China Overseas Grand Oceans Group Ltd. (China) | 5 | |
1,476 | Elanders AB Class B (Sweden)* | 13 | |
116,681 | Ever Reach Group Holdings Co. Ltd. (Hong Kong)* | 14 | |
120,899 | K Wah International Holdings Ltd. (Hong Kong) | 57 | |
400 | Mainstreet Equity Corp. (Canada)* | 19 | |
2,500 | Melcor Developments Ltd. (Canada) | 11 | |
28,100 | MKH BHD (Malaysia) | 8 | |
20,963 | Modern Land China Co. Ltd. (Hong Kong) | 3 | |
9,213 | Real Estate Investors PLC (United Kingdom) | 4 | |
147 | |||
ROAD & RAIL—0.1% | |||
36,495 | FNM SpA (Italy)* | 20 | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—1.4% | |||
414 | Chipmos Technologies Inc. ADR (Taiwan)1 | 8 | |
522 | Dialog Semiconductor plc (Germany)* | 20 | |
3,300 | ROHM Co. Ltd. (Japan) | 254 | |
3,016 | STMicroelectronics NV (Netherlands) | 92 | |
264 | Tower Semiconductor Ltd. (Israel)* | 5 | |
379 | |||
SOFTWARE—3.9% | |||
1,239 | Atlassian Corp. plc (Australia)* | 237 | |
282 | Atoss Software AG (Germany) | 39 | |
1,624 | Check Point Software Technologies Ltd. (Israel)* | 184 | |
4,783 | F-Secure OYJ (Finland)* | 20 | |
105 | Infotel SA (France) | 4 | |
3,315 | IVU Traffic Technologies AG (Germany) | 53 | |
205 | Linedata Services (France) | 6 | |
144 | MiX Telematics Ltd. ADR (South Africa)1 | 1 | |
2,048 | NICE Ltd. ADR (Israel)*,1 | 468 | |
32,434 | RPMGlobal Holdings Ltd. (Australia)* | 25 | |
628 | Sage Group plc (United Kingdom) | 5 | |
620 | USU Software AG (Germany) | 16 | |
1,058 |
50
Harbor Overseas Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
COMMON STOCKS—Continued | |||
Shares | Value | ||
SPECIALTY RETAIL—2.5% | |||
5,578 | Adairs Ltd. (Australia) | $ 15 | |
1,100 | BMTC Group Inc. (Canada) | 7 | |
49,365 | Kingfisher plc (United Kingdom)* | 184 | |
7,200 | K's Holdings Corp (Japan) | 92 | |
1,800 | Nitori Holdings Co. Ltd. (Japan) | 370 | |
20 | Samse SA (France) | 3 | |
671 | |||
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS—2.8% | |||
5,130 | Doro AB (Sweden)* | 24 | |
2,804 | Logitech International SA (Switzerland) | 236 | |
530 | Nedap N.V. (Netherlands) | 28 | |
9,300 | Samsung Electronics Co. Ltd. (South Korea) | 467 | |
755 | |||
TEXTILES, APPAREL & LUXURY GOODS—0.2% | |||
6,810 | New Wave Group AB (Sweden)* | 31 | |
1,472 | Ratti SpA (Italy) | 6 | |
600 | Rhythm Watch Co. Ltd. (Japan) | 3 | |
344 | Samyang Tongsang Co. Ltd. (South Korea) | 19 | |
13,679 | VRG SA (Poland)* | 7 | |
66 | |||
TOBACCO—1.6% | |||
5,923 | Swedish Match AB (Sweden) | 445 | |
TRADING COMPANIES & DISTRIBUTORS—1.9% | |||
1,081 | Bunzl plc (United Kingdom) | 34 | |
900 | Cervus Equipment Corp. (Canada) | 5 | |
3,603 | Ferguson plc (Jersey) | 358 | |
2,400 | Parker Corp (Japan) | 10 | |
10,203 | Rexel SA (France)* | 107 | |
1,165 | Sanistal AS (Denmark)* | 10 | |
524 | |||
TRANSPORTATION INFRASTRUCTURE—0.1% | |||
35,000 | Qilu Expressway Co. Ltd. (China)* | 7 | |
23,631 | Stalexport Autostrady SA (Poland) | 16 | |
23 | |||
WIRELESS TELECOMMUNICATION SERVICES—3.7% | |||
19,500 | KDDI Corp. (Japan) | 528 | |
34,600 | Softbank Corp. (Japan) | 403 | |
500 | Trilogy International Partners Inc. (Canada)* | — | |
44,137 | Vodafone Group plc (United Kingdom) | 59 | |
990 | |||
TOTAL COMMON STOCKS | |||
(Cost $25,566) | 26,625 | ||
PREFERRED STOCKS—1.1% | |||
HOUSEHOLD DURABLES—0.9% | |||
495 | Einhell Germany AG (Germany) | 45 | |
7,084 | LG Electronics Inc. (South Korea) | 202 | |
247 | |||
HOUSEHOLD PRODUCTS—0.0% | |||
325,985 | McBride plc (United Kingdom)* | — x |
PREFERRED STOCKS—Continued | |||
Shares | Value | ||
MACHINERY—0.2% | |||
220 | Jungheinrich AG (Germany) | $ 8 | |
173 | KSB SE & Co KGaA (Germany) | 36 | |
44 | |||
TRADING COMPANIES & DISTRIBUTORS—0.0% | |||
97 | Brodrene A&O Johansen AS (Denmark) | 9 | |
TOTAL PREFERRED STOCKS | |||
(Cost $295) | 300 | ||
SHORT-TERM INVESTMENTS—0.6% | |||
(Cost $164) | |||
INVESTMENT COMPANY-SECURITIES LENDING INVESTMENT FUND—0.2% | |||
164,441 | State Street Navigator Securities Lending Government Money Market Portfolio (1-day yield of 0.090%)3 | 164 | |
TOTAL INVESTMENTS—100.1% | |||
(Cost $26,025) | 27,089 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—(0.1%) | (38) | ||
TOTAL NET ASSETS—100.0% | $27,051 |
51
Harbor Overseas Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
FAIR VALUE MEASUREMENTS
The following table summarizes the Fund’s investments as of October 31, 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 | $ 1 | $ 154 | $— | $ 155 | ||||
Europe | 924 | 14,823 | — | 15,747 | ||||
Latin America | 81 | — | — | 81 | ||||
Middle East/Central Asia | 724 | 22 | — | 746 | ||||
North America | 389 | — | — | 389 | ||||
Pacific Basin | 306 | 9,201 | — | 9,507 | ||||
Preferred Stocks | ||||||||
Europe | — | 98 | — | 98 | ||||
Pacific Basin | — | 202 | — | 202 | ||||
Short-Term Investments | ||||||||
Investment Company-Securities Lending Investment Fund | 164 | — | — | 164 | ||||
Total Investments in Securities | $2,589 | $24,500 | $— | $27,089 |
For more information on valuation inputs and their aggregation into the levels used in the table above, please refer to the Fair Value Measurements and Disclosures in Note 2 of the accompanying Notes to Financial Statements.
The following is a rollforward of the Fund’s Level 3 investments during the year ended October 31, 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 3h (000s) | Transfers Out of Level 3 (000s) | Ending Balance as of 10/31/2020 (000s) | Unrealized Gain/ Loss as of 10/31/2020 (000s) | ||||||||||
Common Stocks | $ 7 | $— | $(11) | $— | $ 3 | $ 1 | $— | $— | $— | $— | ||||||||||
Preferred Stocks | — | — | — | — | — | — | — | — | — | — | ||||||||||
$ 7 | $— | $(11) | $— | $ 3 | $ 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 10/31/2020 (000s) | Valuation Technique | Unobservable Input(s) | Input Value(s) | ||||
Investments in Securities | ||||||||
Preferred Stocks | ||||||||
McBride plc (United Kingdom)* | $— | Market Approach | Redemption Price | GBP 0.00 |
* | Non-income producing security |
x | Fair valued in accordance with Harbor Funds' Valuation Procedures. |
1 | Depositary receipts such as American Depositary Receipts (ADRs), Global Depositary Receipts (GDRs) and other country specific depositary receipts are certificates evidencing ownership of shares of a foreign issuer. These certificates are issued by depositary banks and generally trade on an established market in the U.S. or elsewhere. |
2 | All or a portion of this security was out on loan as of October 31, 2020. |
3 | 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 |
GBP | British Pound |
The accompanying notes are an integral part of the Financial Statements.
52
Harbor International & Global Funds
StatementS of Assets and Liabilities—October 31, 2020
StatementS of Assets and Liabilities—October 31, 2020
(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 | $779,675 | $47,648 | $30,951 | $101,659 | $4,022,261 | $588,755 | $30,458 | $26,025 |
Investments, at value (Including securities loaned of $0, $0, $0, $0, $0, $0, $0 and $153) | $782,839 | $49,225 | $35,837 | $129,052 | $3,962,798 | $787,736 | $28,347 | $27,089 |
Cash | 7,003 | 480 | 2,178 | 1,687 | 50,702 | 69,836 | 2,093 | 38 |
Foreign currency, at value (cost: $1,963, $249, $0, $0, $9,808, $0, $1,425 and $5) | 1,965 | 250 | — | — | 9,797 | — | 1,417 | 5 |
Receivables for: | ||||||||
Investments sold | 4,342 | — | — | 462 | 28,183 | 2,292 | 103 | — |
Capital shares sold | 289 | 6 | — | 142 | 2,484 | 246 | — | — |
Unrealized appreciation on foreign currency spot contracts | 2 | — | — | — | 20 | 7 | — | — |
Dividends | 1,774 | 48 | 44 | 57 | 12,399 | 650 | 49 | 66 |
Interest | — | — | — | 1 | — | — | — | — |
Purchased options, at value (cost: $1,697, $0, $0, $0, $14,945, $0, $0 and $0) | 431 | — | — | — | 3,308 | — | — | — |
Withholding tax | 554 | — | 15 | 8 | 18,099 | 319 | 45 | 40 |
Prepaid registration fees | 26 | 25 | 1 | 1 | 23 | 21 | 1 | 1 |
Other assets | 100 | 91 | — | 16 | 4,411 | 115 | 22 | 31 |
Total Assets | 799,325 | 50,125 | 38,075 | 131,426 | 4,092,224 | 861,222 | 32,077 | 27,270 |
LIABILITIES | ||||||||
Payables for: | ||||||||
Investments purchased | 4,304 | 363 | — | — | 31,741 | 62,908 | 47 | — |
Unrealized depreciation on foreign currency spot contracts | — | — | — | — | 4 | 20 | — | — |
Capital shares reacquired | 148 | — | — | 12,538 | 50,094 | 244 | 2 | — |
Collateral for securities loaned | — | — | — | — | — | — | — | 164 |
Unrealized depreciation on open forward currency contracts | — | — | — | 1 | — | — | — | — |
Accrued expenses: | ||||||||
Tax compliance fee payable (see Note 2) | — | — | — | — | 39,400 | — | — | — |
Management fees | 518 | 37 | 25 | 81 | 2,675 | 487 | 24 | 18 |
12b-1 fees | 3 | 1 | — | 5 | 76 | 7 | — | — |
Transfer agent fees | 28 | 3 | 2 | 11 | 303 | 51 | 1 | 1 |
Trustees' fees and expenses | 46 | 7 | 1 | 8 | 4,181 | 98 | 4 | 1 |
Other | 265 | 188 | 40 | 27 | 1,672 | 701 | 27 | 35 |
Total Liabilities | 5,312 | 599 | 68 | 12,671 | 130,146 | 64,516 | 105 | 219 |
NET ASSETS | $794,013 | $49,526 | $38,007 | $118,755 | $3,962,078 | $796,706 | $31,972 | $27,051 |
Net Assets Consist of: | ||||||||
Paid-in capital | $836,811 | $36,973 | $32,550 | $ 81,784 | $4,705,553 | $605,403 | $35,914 | $26,831 |
Total distributable earnings/(loss) | (42,798) | 12,553 | 5,457 | 36,971 | (743,475) | 191,303 | (3,942) | 220 |
$794,013 | $49,526 | $38,007 | $118,755 | $3,962,078 | $796,706 | $31,972 | $27,051 | |
The accompanying notes are an integral part of the Financial Statements.
54
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 | $533,318 | $28,935 | $17,928 | $17,703 | $ 871,743 | $163,202 | $ 5,525 | $13,790 | ||||||||
Shares of beneficial interest1 | 52,022 | 2,656 | 1,502 | 522 | 23,872 | 8,544 | 486 | 1,363 | ||||||||
Net asset value per share2 | $ 10.25 | $ 10.89 | $ 11.94 | $ 33.89 | $ 36.52 | $ 19.10 | $ 11.37 | $ 10.12 | ||||||||
Institutional Class | ||||||||||||||||
Net assets | $247,212 | $16,009 | $20,040 | $78,120 | $2,750,824 | $600,240 | $25,716 | $13,226 | ||||||||
Shares of beneficial interest1 | 24,114 | 1,470 | 1,679 | 2,311 | 75,071 | 31,456 | 2,261 | 1,308 | ||||||||
Net asset value per share2 | $ 10.25 | $ 10.89 | $ 11.93 | $ 33.80 | $ 36.64 | $ 19.08 | $ 11.37 | $ 10.11 | ||||||||
Administrative Class | ||||||||||||||||
Net assets | $ 6,446 | $ 21 | N/A | $ 2,067 | $ 15,825 | $ 507 | $ 333 | N/A | ||||||||
Shares of beneficial interest1 | 631 | 2 | N/A | 63 | 430 | 26 | 29 | N/A | ||||||||
Net asset value per share2 | $ 10.22 | $ 11.15 | N/A | $ 33.10 | $ 36.78 | $ 19.05 | $ 11.34 | N/A | ||||||||
Investor Class | ||||||||||||||||
Net assets | $ 7,037 | $ 4,561 | $ 39 | $20,865 | $ 323,686 | $ 32,757 | $ 398 | $ 35 | ||||||||
Shares of beneficial interest1 | 692 | 420 | 3 | 640 | 8,937 | 1,731 | 35 | 4 | ||||||||
Net asset value per share2 | $ 10.17 | $ 10.85 | $ 11.89 | $ 32.59 | $ 36.22 | $ 18.93 | $ 11.34 | $ 10.08 |
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. |
55
Harbor International & Global Funds
StatementS of Operations—Year Ended October 31, 2020
StatementS of Operations—Year Ended October 31, 2020
(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 | $ 17,491 | $ 2,211 | $ 437 | $ 1,029 | $ 171,934 | $ 6,720 | $ 648 | $ 734 |
Interest | 61 | 11 | 10 | 14 | 28,552 | 39 | 6 | — |
Net securities lending income | 58 | — | — | — | 307 | 22 | — | — |
Foreign taxes withheld | (1,670) | (273) | (46) | (36) | (8,965) | (642) | (58) | (73) |
Total Investment Income | 15,940 | 1,949 | 401 | 1,007 | 191,828 | 6,139 | 596 | 661 |
Operating Expenses | ||||||||
Management fees | 5,921 | 929 | 237 | 873 | 35,092 | 4,726 | 304 | 198 |
12b-1 fees: | ||||||||
Administrative Class | 17 | — | N/A | 6 | 80 | 1 | 1 | N/A |
Investor Class | 20 | 10 | — | 52 | 961 | 81 | 1 | — |
Shareholder communications | 19 | 11 | 8 | 15 | 312 | 28 | 8 | 8 |
Custodian fees | 429 | 106 | 21 | 36 | 832 | 165 | 55 | 68 |
Transfer agent fees: | ||||||||
Retirement Class | 104 | 9 | 3 | 3 | 214 | 30 | 2 | 3 |
Institutional Class | 254 | 51 | 16 | 79 | 3,192 | 449 | 25 | 13 |
Administrative Class | 7 | — | N/A | 2 | 32 | — | — | N/A |
Investor Class | 17 | 8 | — | 46 | 845 | 72 | 1 | — |
Tax compliance fee (see Note 2) | — | — | — | — | 39,400 | — | — | — |
Professional fees | 83 | 88 | 8 | 22 | 448 | 46 | 40 | 21 |
Trustees' fees and expenses | 37 | 5 | 2 | 6 | 217 | 29 | 2 | 1 |
Registration fees | 70 | 59 | 38 | 59 | 144 | 75 | 65 | 46 |
Miscellaneous | 20 | 10 | — | 10 | 92 | 17 | 9 | 9 |
Total expenses | 6,998 | 1,286 | 333 | 1,209 | 81,861 | 5,719 | 513 | 367 |
Management fees waived | (536) | (139) | — | (58) | — | — | — | — |
Transfer agent fees waived | (23) | (3) | (1) | (4) | (130) | (20) | (1) | (1) |
Other expenses reimbursed | (668) | (173) | (76) | (74) | (5,486) | (341) | (174) | (152) |
Custodian fees reduction | — | — | — | — | (2) | — | — | — |
Net expenses | 5,771 | 971 | 256 | 1,073 | 76,243 | 5,358 | 338 | 214 |
Net Investment Income/(Loss) | 10,169 | 978 | 145 | (66) | 115,585 | 781 | 258 | 447 |
Realized and Change in Net Unrealized Gain/(Loss) on Investment Transactions | ||||||||
Net realized gain/(loss) on: | ||||||||
Investments(net of foreign capital gains tax: $0, $319, $0, $0, $0, $82, $0 and $0) | (28,022) | 13,686 | 484 | 13,901 | (90,527) | 5,302 | (1,253) | (436) |
In-kind redemption | — | — | — | — | 9,616 | — | — | — |
Foreign currency transactions | 100 | (42) | (23) | 4 | 1,086 | (15) | 26 | (2) |
Change in net unrealized appreciation/(depreciation) on: | ||||||||
Investments(net of foreign capital gains tax accrual: $0, $80, $22, $0, $0, $563, $0 and $0) | (19,489) | (8,083) | 3,062 | 7,804 | (227,164) | 118,508 | (2,227) | 104 |
Forward currency contracts | — | — | — | (1) | — | — | — | — |
Purchased options | (1,270) | — | — | — | (11,680) | — | — | — |
Translations of assets and liabilities in foreign currencies | 13 | 2 | 1 | 1 | 823 | (5) | (10) | — |
Net gain/(loss) on investment transactions | (48,668) | 5,563 | 3,524 | 21,709 | (317,846) | 123,790 | (3,464) | (334) |
Net Increase/(Decrease) in Net Assets Resulting from Operations | $(38,499) | $ 6,541 | $3,669 | $21,643 | $(202,261) | $124,571 | $(3,206) | $ 113 |
The accompanying notes are an integral part of the Financial Statements.
56
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 October 31, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through October 31, 2020 | June 1, 2019a through October 31, 2019 | |||
INCREASE/(DECREASE) IN NET ASSETS | ||||||||
Operations: | ||||||||
Net investment income/(loss) | $ 10,169 | $ 17,441 | $ 978 | $ 1,291 | $ 145 | $ 61 | ||
Net realized gain/(loss) on investments | (27,922) | (12,713) | 13,644 | 398 | 461 | 102 | ||
Change in net unrealized appreciation/(depreciation) of investments | (20,746) | 76,189 | (8,081) | 11,588 | 3,063 | 1,801 | ||
Net increase/(decrease) in assets resulting from operations | (38,499) | 80,917 | 6,541 | 13,277 | 3,669 | 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 | 76,764 | 50,721 | (55,020) | 15,648 | 6,947 | 25,599 | ||
Net increase/(decrease) in net assets | 20,943 | 103,354 | (49,941) | 28,187 | 10,444 | 27,563 | ||
Net Assets | ||||||||
Beginning of period | 773,070 | 669,716 | 99,467 | 71,280 | 27,563 | — | ||
End of period | $794,013 | $773,070 | $ 49,526 | $99,467 | $38,007 | $27,563 |
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 October 31, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through October 31, 2020 | March 1, 2019a through October 31, 2019 | ||||
$ (66) | $ 238 | $ 115,585 | $ 162,153 | $ 781 | $ 9,650 | $ 258 | $ 1,034 | $ 447 | $ 610 | ||||
13,905 | 6,732 | (79,825) | (672,620) | 5,287 | (2,753) | (1,227) | (551) | (438) | (786) | ||||
7,804 | 9,378 | (238,021) | 1,073,176 | 118,503 | 86,012 | (2,237) | 1,905 | 104 | 962 | ||||
21,643 | 16,348 | (202,261) | 562,709 | 124,571 | 92,909 | (3,206) | 2,388 | 113 | 786 | ||||
(750) | (165) | (41,892) | (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) | (13,236) | (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) | — | ||||
(2,882) | 37,494 | (1,356,901) | (3,648,830) | 90,510 | (23,133) | (9,575) | (13,683) | 1,365 | 25,466 | ||||
12,283 | 52,525 | (1,733,565) | (6,570,584) | 204,274 | 66,151 | (13,978) | (13,549) | 799 | 26,252 | ||||
106,472 | 53,947 | 5,695,643 | 12,266,227 | 592,432 | 526,281 | 45,950 | 59,499 | 26,252 | — | ||||
$118,755 | $106,472 | $ 3,962,078 | $ 5,695,643 | $796,706 | $592,432 | $ 31,972 | $ 45,950 | $27,051 | $26,252 |
59
Harbor International & Global Funds
Statements of Changes in Net Assets—Capital Stock Activity
Statements of Changes in Net Assets—Capital Stock Activity
(All amounts in thousands)
Harbor Diversified International All Cap Fund | Harbor Emerging Markets Equity Fund | Harbor Focused International Fund | ||||||
November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through October 31, 2020 | June 1, 2019a through October 31, 2019 | |||
AMOUNT ($) | ||||||||
Retirement Class | ||||||||
Net proceeds from sale of shares | $ 166,286 | $ 152,301 | $ 4,762 | $ 35,106 | $2,612 | $12,725 | ||
Reinvested distributions | 11,169 | 17,966 | 746 | 149 | 89 | — | ||
Cost of shares reacquired | (108,051) | (123,556) | (26,083) | (3,054) | (109) | (7) | ||
Net increase/(decrease) in net assets | $ 69,404 | $ 46,711 | $(20,575) | $ 32,201 | $2,592 | $12,718 | ||
Institutional Class | ||||||||
Net proceeds from sale of shares | $ 58,607 | $ 50,697 | $ 22,713 | $ 16,850 | $4,606 | $12,849 | ||
Reinvested distributions | 5,290 | 9,578 | 703 | 580 | 83 | — | ||
Cost of shares reacquired | (55,658) | (59,775) | (62,021) | (33,526) | (337) | — | ||
Cost of shares reacquired through in-kind redemption | — | — | — | — | — | — | ||
Net increase/(decrease) in net assets | $ 8,239 | $ 500 | $(38,605) | $(16,096) | $4,352 | $12,849 | ||
Administrative Class | ||||||||
Net proceeds from sale of shares | $ 1,450 | $ 1,450 | $ 17 | $ 30 | N/A | N/A | ||
Reinvested distributions | 134 | 227 | — | 1 | N/A | N/A | ||
Cost of shares reacquired | (1,447) | (1,097) | (1) | (301) | N/A | N/A | ||
Net increase/(decrease) in net assets | $ 137 | $ 580 | $ 16 | $ (270) | N/A | N/A | ||
Investor Class | ||||||||
Net proceeds from sale of shares | $ 1,427 | $ 3,854 | $ 5,465 | $ 214 | $ 14 | $ 32 | ||
Reinvested distributions | 171 | 196 | 6 | 3 | — | — | ||
Cost of shares reacquired | (2,614) | (1,120) | (1,327) | (404) | (11) | — | ||
Net increase/(decrease) in net assets | $ (1,016) | $ 2,930 | $ 4,144 | $ (187) | $ 3 | $ 32 |
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 October 31, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through October 31, 2020 | March 1, 2019a through October 31, 2019 | ||||
$ 5,614 | $ 4,290 | $ 135,529 | $ 257,506 | $ 11,059 | $ 40,186 | $ 4,323 | $ 16,458 | $ 799 | $12,695 | ||||
750 | 165 | 40,800 | 850,774 | 2,567 | 754 | 453 | 325 | 345 | — | ||||
(2,238) | (855) | (508,810) | (1,812,424) | (19,502) | (9,981) | (16,747) | (5,791) | (143) | (2) | ||||
$ 4,126 | $ 3,600 | $ (332,481) | $ (704,144) | $ (5,876) | $ 30,959 | $(11,971) | $ 10,992 | $1,001 | $12,693 | ||||
$ 55,015 | $ 48,658 | $ 549,667 | $ 460,391 | $ 244,495 | $ 83,460 | $ 2,135 | $ 14,852 | $ 229 | $12,807 | ||||
4,295 | 773 | 108,612 | 2,078,310 | 6,488 | 2,429 | 640 | 1,876 | 333 | — | ||||
(65,489) | (20,776) | (1,217,444) | (5,342,349) | (147,966) | (136,828) | (404) | (41,253) | (203) | (64) | ||||
— | — | (257,053) | — | — | — | — | — | — | — | ||||
$ (6,179) | $ 28,655 | $ (816,218) | $(2,803,648) | $ 103,017 | $ (50,939) | $ 2,371 | $(24,525) | $ 359 | $12,743 | ||||
$ 1,519 | $ 1,787 | $ 3,497 | $ 17,911 | $ 170 | $ 98 | $ — | $ 32 | N/A | N/A | ||||
108 | 26 | 1,870 | 32,597 | 6 | 2 | 9 | 10 | N/A | N/A | ||||
(2,774) | (153) | (59,746) | (42,730) | (128) | (100) | — | — | N/A | N/A | ||||
$ (1,147) | $ 1,660 | $ (54,379) | $ 7,778 | $ 48 | $ — | $ 9 | $ 42 | N/A | N/A | ||||
$ 7,868 | $ 6,208 | $ 20,346 | $ 46,031 | $ 3,835 | $ 4,712 | $ 55 | $ 21 | $ 10 | $ 31 | ||||
1,182 | 307 | 13,114 | 282,826 | 523 | 117 | 11 | 21 | 1 | — | ||||
(8,732) | (2,936) | (187,283) | (477,673) | (11,037) | (7,982) | (50) | (234) | (6) | (1) | ||||
$ 318 | $ 3,579 | $ (153,823) | $ (148,816) | $ (6,679) | $ (3,153) | $ 16 | $ (192) | $ 5 | $ 30 |
61
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 October 31, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through October 31, 2020 | June 1, 2019a through October 31, 2019 | |||
SHARES | ||||||||
Retirement Class | ||||||||
Shares sold | 17,039 | 14,562 | 481 | 3,460 | 234 | 1,271 | ||
Shares issued due to reinvestment of distributions | 965 | 1,876 | 65 | 16 | 8 | — | ||
Shares reacquired | (10,692) | (12,080) | (2,346) | (289) | (11) | — | ||
Net increase/(decrease) in shares outstanding | 7,312 | 4,358 | (1,800) | 3,187 | 231 | 1,271 | ||
Institutional Class | ||||||||
Shares sold | 6,153 | 4,900 | 2,555 | 1,646 | 419 | 1,284 | ||
Shares issued due to reinvestment of distributions | 457 | 998 | 62 | 62 | 7 | — | ||
Shares reacquired | (5,585) | (5,715) | (5,680) | (3,262) | (31) | — | ||
Shares reacquired through in-kind redemption | — | — | — | — | — | — | ||
Net increase/(decrease) in shares outstanding | 1,025 | 183 | (3,063) | (1,554) | 395 | 1,284 | ||
Administrative Class | ||||||||
Shares sold | 156 | 140 | 1 | 3 | N/A | N/A | ||
Shares issued due to reinvestment of distributions | 11 | 24 | — | — | N/A | N/A | ||
Shares reacquired | (147) | (105) | — | (28) | N/A | N/A | ||
Net increase/(decrease) in shares outstanding | 20 | 59 | 1 | (25) | N/A | N/A | ||
Investor Class | ||||||||
Shares sold | 150 | 387 | 494 | 21 | 1 | 3 | ||
Shares issued due to reinvestment of distributions | 15 | 21 | — | — | — | — | ||
Shares reacquired | (296) | (113) | (121) | (38) | (1) | — | ||
Net increase/(decrease) in shares outstanding | (131) | 295 | 373 | (17) | — | 3 |
a | Inception |
The accompanying notes are an integral part of the Financial Statements.
62
Harbor Global Leaders Fund | Harbor International Fund | Harbor International Growth Fund | Harbor International Small Cap Fund | Harbor Overseas Fund | |||||||||
November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through October 31, 2020 | March 1, 2019a through October 31, 2019 | ||||
174 | 151 | 4,230 | 6,796 | 663 | 2,641 | 359 | 1,336 | 75 | 1,269 | ||||
24 | 7 | 1,021 | 25,283 | 151 | 58 | 35 | 30 | 33 | — | ||||
(73) | (29) | (14,706) | (45,116) | (1,146) | (671) | (1,462) | (475) | (14) | — | ||||
125 | 129 | (9,455) | (13,037) | (332) | 2,028 | (1,068) | 891 | 94 | 1,269 | ||||
1,894 | 1,728 | 15,423 | 11,073 | 14,511 | 5,773 | 183 | 1,262 | 22 | 1,281 | ||||
140 | 32 | 2,706 | 61,525 | 383 | 188 | 49 | 171 | 31 | — | ||||
(2,078) | (722) | (33,390) | (122,208) | (9,143) | (9,476) | (34) | (3,439) | (19) | (7) | ||||
— | — | (7,166) | — | — | — | — | — | — | — | ||||
(44) | 1,038 | (22,427) | (49,610) | 5,751 | (3,515) | 198 | (2,006) | 34 | 1,274 | ||||
49 | 61 | 95 | 419 | 10 | 7 | — | 3 | N/A | N/A | ||||
4 | 1 | 46 | 959 | — | — | — | 1 | N/A | N/A | ||||
(91) | (5) | (1,519) | (1,120) | (7) | (7) | — | — | N/A | N/A | ||||
(38) | 57 | (1,378) | 258 | 3 | — | — | 4 | N/A | N/A | ||||
267 | 224 | 573 | 1,183 | 238 | 322 | 5 | 2 | 1 | 3 | ||||
40 | 13 | 329 | 8,448 | 31 | 9 | 1 | 2 | — | — | ||||
(298) | (108) | (5,167) | (11,963) | (677) | (564) | (5) | (20) | — | — | ||||
9 | 129 | (4,265) | (2,332) | (408) | (233) | 1 | (16) | 1 | 3 |
63
Harbor International & Global Funds Financial Highlights
Selected Data for a Share Outstanding for the Periods Presented
Selected Data for a Share Outstanding for the Periods Presented
HARBOR DIVERSIFIED INTERNATIONAL ALL CAP FUND | |||||
Retirement Class | |||||
Year Ended October 31, | 2020 | 2019 | 2018 | 2017 | 2016 f |
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 | 0.14 | 0.26 | 0.21 | 0.14 | 0.06 |
Net realized and unrealized gain/(loss) on investments | (0.81) | 0.92 | (1.19) | 2.01 | 0.50 |
Total from investment operations | (0.67) | 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 | 10.25 | 11.17 | 10.41 | 11.79 | 9.77 |
Net assets end of period (000s) | $533,318 | $499,288 | $420,056 | $92,442 | $1,786 |
Ratios and Supplemental Data (%) | |||||
Total returnb | (6.25)% | 11.99% | (8.55)% | 22.35% | 6.08% c |
Ratio of total expenses to average net assets^ | 0.85 | 0.87 | 0.90 | 0.99 | 1.17 d |
Ratio of net expenses to average net assetsa | 0.70 | 0.68 | 0.74 | 0.77 | 0.80 d |
Ratio of net investment income/(loss) to average net assetsa | 1.32 | 2.42 | 1.87 | 1.27 | 0.97 d |
Portfolio turnover | 25 | 22 | 42 | 46 | 68 c |
Administrative Class | |||||
Year Ended October 31, | 2020 | 2019 | 2018 | 2017 | 2016 g |
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 | 0.10 | 0.22 | 0.22 | 0.14 | 0.13 |
Net realized and unrealized gain/(loss) on investments | (0.80) | 0.92 | (1.22) | 1.97 | (0.38) |
Total from investment operations | (0.70) | 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 | 10.22 | 11.14 | 10.39 | 11.76 | 9.75 |
Net assets end of period (000s) | $ 6,446 | $ 6,800 | $ 5,734 | $ 310 | $ 246 |
Ratios and Supplemental Data (%) | |||||
Total returnb | (6.54)% | 11.58% | (8.76)% | 21.91% | (2.49)% c |
Ratio of total expenses to average net assets^ | 1.18 | 1.20 | 1.23 | 1.32 | 1.46 d |
Ratio of net expenses to average net assetsa | 1.03 | 1.01 | 1.06 | 1.10 | 1.10 d |
Ratio of net investment income/(loss) to average net assetsa | 0.99 | 2.06 | 1.96 | 1.29 | 1.39 d |
Portfolio turnover | 25 | 22 | 42 | 46 | 68 c |
See page 78 for notes to the Financial Highlights.
The accompanying notes are an integral part of the Financial Statements.
64
Institutional Class | ||||
2020 | 2019 | 2018 | 2017 | 2016 g |
$ 11.17 | $ 10.41 | $ 11.79 | $ 9.77 | $ 10.00 |
0.13 | 0.25 | 0.20 | 0.17 | 0.20 |
(0.81) | 0.92 | (1.18) | 1.98 | (0.42) |
(0.68) | 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) |
10.25 | 11.17 | 10.41 | 11.79 | 9.77 |
$247,212 | $257,860 | $238,470 | $225,473 | $150,263 |
(6.33)% | 11.90% | (8.62)% | 22.29% | (2.25)% c |
0.93 | 0.95 | 0.98 | 1.07 | 1.22 d |
0.78 | 0.76 | 0.82 | 0.85 | 0.85 d |
1.25 | 2.34 | 1.72 | 1.59 | 2.13 d |
25 | 22 | 42 | 46 | 68 c |
Investor Class | ||||
2020 | 2019 | 2018 | 2017 | 2016 g |
$ 11.08 | $ 10.33 | $ 11.71 | $ 9.74 | $ 10.00 |
0.09 | 0.21 | 0.15 | 0.14 | 0.12 |
(0.80) | 0.91 | (1.17) | 1.96 | (0.38) |
(0.71) | 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) | — |
10.17 | 11.08 | 10.33 | 11.71 | 9.74 |
$ 7,037 | $ 9,122 | $ 5,456 | $ 5,195 | $ 329 |
(6.58)% | 11.43% | (8.93)% | 21.82% | (2.60)% c |
1.30 | 1.32 | 1.35 | 1.44 | 1.59 d |
1.15 | 1.13 | 1.19 | 1.22 | 1.22 d |
0.86 | 1.99 | 1.34 | 1.31 | 1.28 d |
25 | 22 | 42 | 46 | 68 c |
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 EMERGING MARKETS EQUITY FUND | |||||
Retirement Class | |||||
Year Ended October 31, | 2020 n | 2019 | 2018 | 2017 | 2016 f |
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 | 0.07 | 0.21 | 0.12 | 0.13 | 0.05 |
Net realized and unrealized gain/(loss) on investments | (0.02) | 1.32 | (1.27) | 2.21 | 1.64 |
Total from investment operations | 0.05 | 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 | 10.89 | 11.01 | 9.57 | 10.83 | 8.59 |
Net assets end of period (000s) | $28,935 | $49,052 | $12,146 | $4,232 | $1,335 |
Ratios and Supplemental Data (%) | |||||
Total returnb | 0.36% | 16.21% | (10.71)% | 27.62% | 24.49% c |
Ratio of total expenses to average net assets^ | 1.25 | 1.22 | 1.26 | 1.35 | 1.45 d |
Ratio of net expenses to average net assetsa | 0.93 | 1.02 | 1.07 | 1.08 | 1.10 d |
Ratio of net investment income/(loss) to average net assetsa | 0.63 | 2.05 | 1.16 | 1.32 | 0.95 d |
Portfolio turnover | 122 | 53 | 56 | 59 | 49 c |
Administrative Class | |||||
Year Ended October 31, | 2020 n | 2019 | 2018 | 2017 | 2016 |
Net asset value beginning of period | $ 11.14 | $ 9.55 | $ 10.80 | $ 8.58 | $ 7.87 |
Income from Investment Operations | |||||
Net investment income/(loss)a,e | (0.01) | 0.02 | 0.08 | 0.08 | 0.05 |
Net realized and unrealized gain/(loss) on investments | 0.02 | 1.62 | (1.25) | 2.22 | 0.71 |
Total from investment operations | 0.01 | 1.64 | (1.17) | 2.30 | 0.76 |
Less Distributions | |||||
Dividends from net investment income | — | (0.05) | (0.08) | (0.08) | (0.05) |
Distributions from net realized capital gains | — | — | — | — | — |
Total distributions | — | (0.05) | (0.08) | (0.08) | (0.05) |
Net asset value end of period | 11.15 | 11.14 | 9.55 | 10.80 | 8.58 |
Net assets end of period (000s) | $ 21 | $ 5 | $ 249 | $ 275 | $ 217 |
Ratios and Supplemental Data (%) | |||||
Total returnb | 0.09% | 17.30% | (10.91)% | 27.04% | 9.81% |
Ratio of total expenses to average net assets^ | 1.56 | 1.54 | 1.59 | 1.68 | 1.74 |
Ratio of net expenses to average net assetsa | 1.25 | 1.40 | 1.40 | 1.40 | 1.40 |
Ratio of net investment income/(loss) to average net assetsa | (0.12) | 0.16 | 0.77 | 0.85 | 0.69 |
Portfolio turnover | 122 | 53 | 56 | 59 | 49 |
See page 78 for notes to the Financial Highlights.
The accompanying notes are an integral part of the Financial Statements.
66
Institutional Class | ||||
2020 n | 2019 | 2018 | 2017 | 2016 |
$ 11.01 | $ 9.57 | $ 10.83 | $ 8.59 | $ 7.89 |
0.08 | 0.12 | 0.14 | 0.11 | 0.07 |
(0.04) | 1.41 | (1.30) | 2.22 | 0.71 |
0.04 | 1.53 | (1.16) | 2.33 | 0.78 |
(0.16) | (0.09) | (0.10) | (0.09) | (0.08) |
— | — | — | — | — |
(0.16) | (0.09) | (0.10) | (0.09) | (0.08) |
10.89 | 11.01 | 9.57 | 10.83 | 8.59 |
$16,009 | $49,891 | $58,271 | $51,849 | $36,390 |
0.28% | 16.13% | (10.77)% | 27.54% | 9.99% |
1.33 | 1.30 | 1.34 | 1.43 | 1.49 |
1.01 | 1.12 | 1.15 | 1.15 | 1.15 |
0.74 | 1.13 | 1.28 | 1.13 | 0.93 |
122 | 53 | 56 | 59 | 49 |
Investor Class | ||||
2020 n | 2019 | 2018 | 2017 | 2016 |
$ 10.96 | $ 9.53 | $ 10.78 | $ 8.56 | $ 7.85 |
0.01 | 0.09 | 0.09 | 0.07 | 0.05 |
— | 1.39 | (1.27) | 2.22 | 0.70 |
0.01 | 1.48 | (1.18) | 2.29 | 0.75 |
(0.12) | (0.05) | (0.07) | (0.07) | (0.04) |
— | — | — | — | — |
(0.12) | (0.05) | (0.07) | (0.07) | (0.04) |
10.85 | 10.96 | 9.53 | 10.78 | 8.56 |
$ 4,561 | $ 519 | $ 614 | $ 700 | $ 482 |
0.00% | 15.56% | (11.03)% | 27.00% | 9.69% |
1.69 | 1.67 | 1.71 | 1.80 | 1.86 |
1.37 | 1.49 | 1.52 | 1.52 | 1.52 |
0.14 | 0.87 | 0.82 | 0.75 | 0.69 |
122 | 53 | 56 | 59 | 49 |
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 FOCUSED INTERNATIONAL FUND | |||||
Retirement Class | Institutional Class | ||||
Year Ended October 31, | 2020 | 2019 j | 2020 | 2019 j | |
Net asset value beginning of period | $ 10.78 | $ 10.00 | $ 10.78 | $ 10.00 | |
Income from Investment Operations | |||||
Net investment income/(loss)a,e | 0.06 | 0.03 | 0.05 | 0.02 | |
Net realized and unrealized gain/(loss) on investments | 1.17 | 0.75 | 1.16 | 0.76 | |
Total from investment operations | 1.23 | 0.78 | 1.21 | 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 | 11.94 | 10.78 | 11.93 | 10.78 | |
Net assets end of period (000s) | $17,928 | $13,696 | $20,040 | $13,833 | |
Ratios and Supplemental Data (%) | |||||
Total returnb | 11.46% | 7.80% c | 11.40% | 7.80% c | |
Ratio of total expenses to average net assets^ | 1.01 | 2.15 d | 1.09 | 2.23 d | |
Ratio of net expenses to average net assetsa | 0.77 | 0.77 d | 0.85 | 0.85 d | |
Ratio of net investment income/(loss) to average net assetsa | 0.50 | 0.60 d | 0.41 | 0.52 d | |
Portfolio turnover | 33 | 23 c | 33 | 23 c |
See page 78 for notes to the Financial Highlights.
The accompanying notes are an integral part of the Financial Statements.
68
Investor Class | |
2020 | 2019 j |
$10.76 | $10.00 |
0.01 | 0.01 |
1.17 | 0.75 |
1.18 | 0.76 |
— | — |
(0.05) | — |
(0.05) | — |
11.89 | 10.76 |
$ 39 | $ 34 |
11.03% | 7.60% c |
1.46 | 2.60 d |
1.22 | 1.22 d |
0.08 | 0.15 d |
33 | 23 c |
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 GLOBAL LEADERS FUND | |||||
Retirement Class | |||||
Year Ended October 31, | 2020 | 2019 | 2018 | 2017 k | 2016 f |
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 | 0.02 | 0.13 | 0.02 | 0.08 | (0.03) |
Net realized and unrealized gain/(loss) on investments | 4.89 | 5.76 | 2.40 | 4.96 | 0.53 |
Total from investment operations | 4.91 | 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 | 33.89 | 30.81 | 25.52 | 25.33 | 20.29 |
Net assets end of period (000s) | $17,703 | $12,245 | $6,846 | $4,376 | $1,713 |
Ratios and Supplemental Data (%) | |||||
Total returnb | 16.56% | 23.72% | 10.01% | 24.84% | 2.53% c |
Ratio of total expenses to average net assets^ | 0.90 | 0.92 | 0.96 | 1.13 | 1.00 d |
Ratio of net expenses to average net assetsa | 0.78 | 0.80 | 0.82 | 0.83 | 0.85 d |
Ratio of net investment income/(loss) to average net assetsa | 0.07 | 0.46 | 0.09 | 0.32 | (0.18) d |
Portfolio turnover | 55 | 47 | 20 | 123 | 76 c |
Administrative Class | |||||
Year Ended October 31, | 2020 | 2019 | 2018 | 2017 k | 2016 |
Net asset value beginning of period | $ 30.15 | $ 25.06 | $24.97 | $20.06 | $21.65 |
Income from Investment Operations | |||||
Net investment income/(loss)a,e | (0.08) | 0.06 | (0.05) | (0.04) | (0.05) |
Net realized and unrealized gain/(loss) on investments | 4.77 | 5.63 | 2.34 | 4.95 | (0.82) |
Total from investment operations | 4.69 | 5.69 | 2.29 | 4.91 | (0.87) |
Less Distributions | |||||
Dividends from net investment income | — | — | — | — | — |
Distributions from net realized capital gains | (1.74) | (0.60) | (2.20) | — | (0.72) |
Total distributions | (1.74) | (0.60) | (2.20) | — | (0.72) |
Net asset value end of period | 33.10 | 30.15 | 25.06 | 24.97 | 20.06 |
Net assets end of period (000s) | $ 2,067 | $ 3,050 | $1,111 | $1,204 | $1,253 |
Ratios and Supplemental Data (%) | |||||
Total returnb | 16.13% | 23.35% | 9.61% | 24.48% | (4.17)% |
Ratio of total expenses to average net assets^ | 1.23 | 1.25 | 1.29 | 1.46 | 1.29 |
Ratio of net expenses to average net assetsa | 1.11 | 1.13 | 1.15 | 1.15 | 1.15 |
Ratio of net investment income/(loss) to average net assetsa | (0.25) | 0.22 | (0.21) | (0.13) | (0.23) |
Portfolio turnover | 55 | 47 | 20 | 123 | 76 |
See page 78 for notes to the Financial Highlights.
The accompanying notes are an integral part of the Financial Statements.
70
Institutional Class | ||||
2020 | 2019 | 2018 | 2017 k | 2016 |
$ 30.75 | $ 25.49 | $ 25.31 | $ 20.29 | $ 21.83 |
— * | 0.11 | 0.01 | 0.03 | 0.01 |
4.86 | 5.75 | 2.38 | 4.99 | (0.83) |
4.86 | 5.86 | 2.39 | 5.02 | (0.82) |
(0.07) | — | (0.01) | — | — |
(1.74) | (0.60) | (2.20) | — | (0.72) |
(1.81) | (0.60) | (2.21) | — | (0.72) |
33.80 | 30.75 | 25.49 | 25.31 | 20.29 |
$78,120 | $72,429 | $33,574 | $29,034 | $25,471 |
16.46% | 23.63% | 9.90% | 24.74% | (3.90)% |
0.98 | 1.00 | 1.04 | 1.21 | 1.04 |
0.86 | 0.88 | 0.90 | 0.90 | 0.90 |
0.01 | 0.37 | 0.03 | 0.14 | 0.04 |
55 | 47 | 20 | 123 | 76 |
Investor Class | ||||
2020 | 2019 | 2018 | 2017 k | 2016 |
$ 29.74 | $ 24.76 | $ 24.72 | $ 19.89 | $ 21.49 |
(0.11) | (0.01) | (0.09) | (0.06) | (0.07) |
4.70 | 5.59 | 2.33 | 4.89 | (0.81) |
4.59 | 5.58 | 2.24 | 4.83 | (0.88) |
— | — | — | — | — |
(1.74) | (0.60) | (2.20) | — | (0.72) |
(1.74) | (0.60) | (2.20) | — | (0.72) |
32.59 | 29.74 | 24.76 | 24.72 | 19.89 |
$20,865 | $18,748 | $12,416 | $11,364 | $10,659 |
16.01% | 23.18% | 9.50% | 24.28% | (4.25)% |
1.35 | 1.37 | 1.41 | 1.58 | 1.41 |
1.23 | 1.25 | 1.27 | 1.27 | 1.27 |
(0.35) | (0.03) | (0.35) | (0.25) | (0.35) |
55 | 47 | 20 | 123 | 76 |
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 FUND | |||||
Retirement Class | |||||
Year Ended October 31, | 2020 | 2019 | 2018 l | 2017 | 2016 f |
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 | 0.91 | 0.91 | 1.21 | 0.94 | 0.68 |
Net realized and unrealized gain/(loss) on investments | (2.10) | 1.62 | (8.51) | 9.85 | 2.50 |
Total from investment operations | (1.19) | 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 | 36.52 | 39.00 | 58.31 | 69.91 | 60.32 |
Net assets end of period (000s) | $871,743 | $1,299,776 | $2,703,360 | $2,657,442 | $739,842 |
Ratios and Supplemental Data (%) | |||||
Total returnb | (3.35)% | 10.29% | (11.24)% | 18.30% | 5.57% c |
Ratio of total expenses to average net assets^ | 1.61 o | 0.80 | 0.74 | 0.74 | 0.74 d |
Ratio of net expenses to average net assetsa | 1.49 o | 0.67 | 0.64 | 0.73 | 0.72 d |
Ratio of net expenses to average net assets excluding tax compliance feea | 0.69 | 0.67 | 0.64 | 0.73 | 0.72 d |
Ratio of net investment income/(loss) to average net assetsa | 2.52 o | 2.33 | 1.80 | 1.42 | 1.68 d |
Portfolio turnover | 12 | 12 | 64 | 13 | 14 c |
Administrative Class | |||||
Year Ended October 31, | 2020 | 2019 | 2018 l | 2017 | 2016 |
Net asset value beginning of period | $ 39.26 | $ 58.08 | $ 69.57 | $ 59.99 | $ 65.32 |
Income from Investment Operations | |||||
Net investment income/(loss)a,e | 0.47 | 0.76 | 0.88 | 0.79 | 0.79 |
Net realized and unrealized gain/(loss) on investments | (1.81) | 1.70 | (8.37) | 9.77 | (3.44) |
Total from investment operations | (1.34) | 2.46 | (7.49) | 10.56 | (2.65) |
Less Distributions | |||||
Dividends from net investment income | (1.14) | (0.41) | (1.00) | (0.98) | (0.91) |
Distributions from net realized capital gains | — | (20.87) | (3.00) | — | (1.77) |
Total distributions | (1.14) | (21.28) | (4.00) | (0.98) | (2.68) |
Net asset value end of period | 36.78 | 39.26 | 58.08 | 69.57 | 59.99 |
Net assets end of period (000s) | $ 15,825 | $ 70,981 | $ 90,009 | $ 398,584 | $510,575 |
Ratios and Supplemental Data (%) | |||||
Total returnb | (3.67)% | 9.94% | (11.53)% | 17.93% | (3.97)% |
Ratio of total expenses to average net assets^ | 1.65 o | 1.13 | 1.07 | 1.06 | 1.04 |
Ratio of net expenses to average net assetsa | 1.53 o | 1.00 | 0.97 | 1.05 | 1.02 |
Ratio of net expenses to average net assets excluding tax compliance feea | 1.02 | 1.00 | 0.97 | 1.05 | 1.02 |
Ratio of net investment income/(loss) to average net assetsa | 1.25 o | 1.94 | 1.30 | 1.22 | 1.33 |
Portfolio turnover | 12 | 12 | 64 | 13 | 14 |
See page 78 for notes to the Financial Highlights.
The accompanying notes are an integral part of the Financial Statements.
72
Institutional Class | ||||
2020 | 2019 | 2018 l | 2017 | 2016 |
$ 39.12 | $ 58.31 | $ 69.90 | $ 60.30 | $ 65.67 |
0.92 | 0.84 | 1.04 | 0.97 | 0.99 |
(2.15) | 1.67 | (8.39) | 9.79 | (3.51) |
(1.23) | 2.51 | (7.35) | 10.76 | (2.52) |
(1.25) | (0.83) | (1.24) | (1.16) | (1.08) |
— | (20.87) | (3.00) | — | (1.77) |
(1.25) | (21.70) | (4.24) | (1.16) | (2.85) |
36.64 | 39.12 | 58.31 | 69.90 | 60.30 |
$2,750,824 | $3,814,616 | $8,577,147 | $27,401,853 | $33,201,899 |
(3.43)% | 10.18% | (11.31)% | 18.24% | (3.74)% |
1.76 o | 0.88 | 0.82 | 0.81 | 0.79 |
1.64 o | 0.75 | 0.72 | 0.80 | 0.77 |
0.77 | 0.75 | 0.72 | 0.80 | 0.77 |
2.52 o | 2.11 | 1.53 | 1.51 | 1.66 |
12 | 12 | 64 | 13 | 14 |
Investor Class | ||||
2020 | 2019 | 2018 l | 2017 | 2016 |
$ 38.65 | $ 57.66 | $ 69.14 | $ 59.61 | $ 64.86 |
0.75 | 0.70 | 0.81 | 0.72 | 0.73 |
(2.12) | 1.65 | (8.33) | 9.71 | (3.43) |
(1.37) | 2.35 | (7.52) | 10.43 | (2.70) |
(1.06) | (0.49) | (0.96) | (0.90) | (0.78) |
— | (20.87) | (3.00) | — | (1.77) |
(1.06) | (21.36) | (3.96) | (0.90) | (2.55) |
36.22 | 38.65 | 57.66 | 69.14 | 59.61 |
$ 323,686 | $ 510,270 | $ 895,711 | $ 1,798,228 | $ 2,188,360 |
(3.79)% | 9.80% | (11.65)% | 17.79% | (4.09)% |
2.10 o | 1.25 | 1.19 | 1.18 | 1.16 |
1.98 o | 1.12 | 1.09 | 1.17 | 1.14 |
1.14 | 1.12 | 1.09 | 1.17 | 1.14 |
2.06 o | 1.80 | 1.21 | 1.13 | 1.23 |
12 | 12 | 64 | 13 | 14 |
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 GROWTH FUND | |||||
Retirement Class | |||||
Year Ended October 31, | 2020 | 2019 | 2018 | 2017 | 2016 f |
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 | 0.03 | 0.30 | 0.17 | 0.17 | 0.09 |
Net realized and unrealized gain/(loss) on investments | 3.25 | 2.25 | (1.99) | 2.81 | 1.05 |
Total from investment operations | 3.28 | 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 | 19.10 | 16.14 | 13.70 | 15.71 | 12.90 |
Net assets end of period (000s) | $163,202 | $143,276 | $93,815 | $24,872 | $2,360 |
Ratios and Supplemental Data (%) | |||||
Total returnb | 20.56% | 18.81% | (11.74)% | 23.52% | 9.69% c |
Ratio of total expenses to average net assets^ | 0.83 | 0.83 | 0.81 | 0.84 | 0.86 d |
Ratio of net expenses to average net assetsa | 0.77 | 0.77 | 0.77 | 0.77 | 0.80 d |
Ratio of net investment income/(loss) to average net assetsa | 0.19 | 2.01 | 1.07 | 1.19 | 1.06 d |
Portfolio turnover | 24 | 16 | 17 | 13 | 19 c |
Administrative Class | |||||
Year Ended October 31, | 2020 | 2019 | 2018 | 2017 | 2016 |
Net asset value beginning of period | $ 16.10 | $ 13.66 | $ 15.67 | $ 12.87 | $12.63 |
Income from Investment Operations | |||||
Net investment income/(loss)a,e | (0.02) | 0.22 | 0.08 | 0.09 | 0.16 |
Net realized and unrealized gain/(loss) on investments | 3.24 | 2.28 | (1.95) | 2.84 | 0.12 |
Total from investment operations | 3.22 | 2.50 | (1.87) | 2.93 | 0.28 |
Less Distributions | |||||
Dividends from net investment income | (0.27) | (0.06) | (0.14) | (0.13) | (0.04) |
Distributions from net realized capital gains | — | — | — | — | — |
Total distributions | (0.27) | (0.06) | (0.14) | (0.13) | (0.04) |
Net asset value end of period | 19.05 | 16.10 | 13.66 | 15.67 | 12.87 |
Net assets end of period (000s) | $ 507 | $ 390 | $ 330 | $ 466 | $ 333 |
Ratios and Supplemental Data (%) | |||||
Total returnb | 20.17% | 18.45% | (12.03)% | 23.08% | 2.21% |
Ratio of total expenses to average net assets^ | 1.16 | 1.16 | 1.14 | 1.16 | 1.15 |
Ratio of net expenses to average net assetsa | 1.10 | 1.10 | 1.10 | 1.10 | 1.10 |
Ratio of net investment income/(loss) to average net assetsa | (0.15) | 1.50 | 0.51 | 0.66 | 1.25 |
Portfolio turnover | 24 | 16 | 17 | 13 | 19 |
See page 78 for notes to the Financial Highlights.
The accompanying notes are an integral part of the Financial Statements.
74
Institutional Class | ||||
2020 | 2019 | 2018 | 2017 | 2016 |
$ 16.13 | $ 13.69 | $ 15.69 | $ 12.89 | $ 12.71 |
0.02 | 0.26 | 0.13 | 0.13 | 0.17 |
3.24 | 2.28 | (1.95) | 2.84 | 0.14 |
3.26 | 2.54 | (1.82) | 2.97 | 0.31 |
(0.31) | (0.10) | (0.18) | (0.17) | (0.13) |
— | — | — | — | — |
(0.31) | (0.10) | (0.18) | (0.17) | (0.13) |
19.08 | 16.13 | 13.69 | 15.69 | 12.89 |
$600,240 | $414,528 | $399,911 | $362,035 | $277,638 |
20.42% | 18.73% | (11.75)% | 23.38% | 2.46% |
0.91 | 0.91 | 0.89 | 0.91 | 0.90 |
0.85 | 0.85 | 0.85 | 0.85 | 0.85 |
0.11 | 1.75 | 0.84 | 0.92 | 1.36 |
24 | 16 | 17 | 13 | 19 |
Investor Class | ||||
2020 | 2019 | 2018 | 2017 | 2016 |
$ 16.00 | $ 13.58 | $ 15.57 | $ 12.79 | $ 12.60 |
(0.04) | 0.21 | 0.11 | 0.07 | 0.12 |
3.22 | 2.26 | (1.98) | 2.82 | 0.15 |
3.18 | 2.47 | (1.87) | 2.89 | 0.27 |
(0.25) | (0.05) | (0.12) | (0.11) | (0.08) |
— | — | — | — | — |
(0.25) | (0.05) | (0.12) | (0.11) | (0.08) |
18.93 | 16.00 | 13.58 | 15.57 | 12.79 |
$ 32,757 | $ 34,238 | $ 32,225 | $ 14,913 | $ 13,466 |
20.06% | 18.29% | (12.12)% | 22.89% | 2.15% |
1.28 | 1.28 | 1.26 | 1.28 | 1.27 |
1.22 | 1.22 | 1.22 | 1.22 | 1.22 |
(0.27) | 1.40 | 0.69 | 0.54 | 0.99 |
24 | 16 | 17 | 13 | 19 |
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 INTERNATIONAL SMALL CAP FUND | |||||
Retirement Class | |||||
Year Ended October 31, | 2020 | 2019 m | 2018 | 2017 | 2016 h |
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 | 0.07 | 0.24 | 0.17 | 0.08 | 0.06 |
Net realized and unrealized gain/(loss) on investments | (0.82) | 0.35 | (1.50) | 3.18 | 0.71 |
Total from investment operations | (0.75) | 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 | 11.37 | 12.49 | 12.38 | 13.90 | 10.77 |
Net assets end of period (000s) | $5,525 | $19,408 | $8,213 | $7,671 | $ 629 |
Ratios and Supplemental Data (%) | |||||
Total returnb | (6.36)% | 5.23% | (9.71)% | 30.67% | 7.70% c |
Ratio of total expenses to average net assets^ | 1.37 | 1.24 | 1.07 | 1.35 | 2.50 d |
Ratio of net expenses to average net assetsa | 0.88 | 0.88 | 0.87 | 0.87 | 0.90 d |
Ratio of net investment income/(loss) to average net assetsa | 0.64 | 1.98 | 1.19 | 0.60 | 0.73 d |
Portfolio turnover | 39 | 178 | 53 | 44 | 35 c |
Administrative Class | |||||
Year Ended October 31, | 2020 | 2019 m | 2018 | 2017 | 2016 h |
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 | 0.06 | 0.15 | 0.11 | 0.07 | 0.09 |
Net realized and unrealized gain/(loss) on investments | (0.85) | 0.40 | (1.49) | 3.15 | 0.66 |
Total from investment operations | (0.79) | 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 | 11.34 | 12.46 | 12.34 | 13.87 | 10.75 |
Net assets end of period (000s) | $ 333 | $ 356 | $ 309 | $ 371 | $ 263 |
Ratios and Supplemental Data (%) | |||||
Total returnb | (6.65)% | 4.90% | (10.06)% | 30.25% | 7.50% c |
Ratio of total expenses to average net assets^ | 1.70 | 1.57 | 1.40 | 1.67 | 2.80 d |
Ratio of net expenses to average net assetsa | 1.21 | 1.21 | 1.20 | 1.20 | 1.20 d |
Ratio of net investment income/(loss) to average net assetsa | 0.49 | 1.25 | 0.76 | 0.59 | 1.16 d |
Portfolio turnover | 39 | 178 | 53 | 44 | 35 c |
See page 78 for notes to the Financial Highlights.
The accompanying notes are an integral part of the Financial Statements.
76
Institutional Class | ||||
2020 | 2019 m | 2018 | 2017 | 2016 h |
$ 12.49 | $ 12.37 | $ 13.90 | $ 10.77 | $ 10.00 |
0.09 | 0.19 | 0.15 | 0.10 | 0.11 |
(0.86) | 0.40 | (1.50) | 3.15 | 0.66 |
(0.77) | 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) | — |
11.37 | 12.49 | 12.37 | 13.90 | 10.77 |
$25,716 | $25,758 | $50,358 | $38,818 | $17,509 |
(6.48)% | 5.25% | (9.83)% | 30.59% | 7.70% c |
1.45 | 1.32 | 1.15 | 1.42 | 2.55 d |
0.96 | 0.96 | 0.95 | 0.95 | 0.95 d |
0.76 | 1.60 | 1.05 | 0.81 | 1.40 d |
39 | 178 | 53 | 44 | 35 c |
Investor Class | ||||
2020 | 2019 m | 2018 | 2017 | 2016 h |
$ 12.45 | $ 12.34 | $ 13.86 | $ 10.74 | $ 10.00 |
0.04 | 0.13 | 0.10 | 0.06 | 0.10 |
(0.84) | 0.40 | (1.48) | 3.14 | 0.64 |
(0.80) | 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) | — |
11.34 | 12.45 | 12.34 | 13.86 | 10.74 |
$ 398 | $ 428 | $ 619 | $ 540 | $ 287 |
(6.76)% | 4.70% | (10.08)% | 30.10% | 7.40% c |
1.82 | 1.69 | 1.52 | 1.79 | 2.92 d |
1.33 | 1.33 | 1.32 | 1.32 | 1.32 d |
0.36 | 1.10 | 0.73 | 0.53 | 1.33 d |
39 | 178 | 53 | 44 | 35 c |
77
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 | ||||
Year Ended October 31, | 2020 | 2019 i | 2020 | 2019 i | |
Net asset value beginning of period | $ 10.31 | $ 10.00 | $ 10.31 | $ 10.00 | |
Income from Investment Operations | |||||
Net investment income/(loss)a,e | 0.17 | 0.24 | 0.17 | 0.24 | |
Net realized and unrealized gain/(loss) on investments | (0.09) | 0.07 | (0.11) | 0.07 | |
Total from investment operations | 0.08 | 0.31 | 0.06 | 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 | 10.12 | 10.31 | 10.11 | 10.31 | |
Net assets end of period (000s) | $13,790 | $13,090 | $13,226 | $13,131 | |
Ratios and Supplemental Data (%) | |||||
Total returnb | 0.64% | 3.10% c | 0.48% | 3.10% c | |
Ratio of total expenses to average net assets^ | 1.35 | 1.79 d | 1.43 | 1.87 d | |
Ratio of net expenses to average net assetsa | 0.77 | 0.77 d | 0.85 | 0.85 d | |
Ratio of net investment income/(loss) to average net assetsa | 1.73 | 3.61 d | 1.65 | 3.54 d | |
Portfolio turnover | 80 | 73 c | 80 | 73 c |
* | 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 average daily 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. |
n | Effective September 23, 2020, the Board of Trustees appointed Marathon Asset Management LLP as subadviser to Harbor Emerging Markets Equity Fund. |
o | The net investment income ratio includes dividends and interest income and related tax compliance fee and interest expense, from foreign tax reclaims and interest received by the Fund. The total and net expense ratios include the tax compliance fee and related interest expense due to this receipt of foreign tax reclaims and interest income by the Fund. (see the “Taxes” section in the Note 2 of the accompanying Notes to Financial Statements). |
The accompanying notes are an integral part of the Financial Statements.
78
Investor Class | |
2020 | 2019 i |
$10.28 | $10.00 |
0.14 | 0.21 |
(0.11) | 0.07 |
0.03 | 0.28 |
(0.23) | — |
— | — |
(0.23) | — |
10.08 | 10.28 |
$ 35 | $ 31 |
0.14% | 2.80% c |
1.80 | 2.24 d |
1.22 | 1.22 d |
1.41 | 3.17 d |
80 | 73 c |
79
Harbor International & Global Funds
Notes to Financial Statements—October 31, 2020
Notes to Financial Statements—October 31, 2020
Note 1—Organizational Matters
Harbor Funds (the “Trust”) is registered under the Investment Company Act of 1940, as amended (the “Investment Company Act”), as an open-end management investment company. As of October 31, 2020, the Trust consists of 36 separate portfolios. The portfolios covered by this report are: Harbor Diversified International All Cap Fund, Harbor Emerging Markets Equity Fund, Harbor Focused International Fund, Harbor Global Leaders Fund, Harbor International Fund, Harbor International Growth Fund, Harbor International Small Cap Fund, and Harbor Overseas Fund (individually or collectively referred to as a “Fund” or the “Funds," respectively). Harbor Capital Advisors, Inc. (the “Adviser” or “Harbor Capital”) is the investment adviser for the Funds.
The Funds currently offer four classes of shares, designated as Retirement Class, Institutional Class, Administrative Class and Investor Class. The shares of each class represent an interest in the same portfolio of investments of the Funds and have equal rights with respect to voting, redemptions, dividends, and liquidations, except that: (i) subject to the approval of the Trust’s Board of Trustees (the “Board of Trustees”), certain expenses may be applied differently to each class of shares in accordance with current regulations of the U.S. Securities and Exchange Commission (“SEC”) and the Internal Revenue Service; and (ii) shareholders of a class that bears distribution and service expenses under terms of a distribution plan have exclusive voting rights as to that distribution plan.
Note 2—Significant Accounting Policies
The following is a summary of significant accounting policies followed by the Trust in the preparation of its financial statements. Each Fund follows the investment company reporting requirements under U.S. Generally Accepted Accounting Principles (“U.S. GAAP”), which includes the accounting and reporting guidelines under Accounting Standards Codification (“ASC”) Topic 946, Financial Services-Investment Companies. The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results may differ from those estimates.
Security Valuation
The Trust’s valuation procedures permit the Funds to use a variety of valuation methodologies, consider a number of subjective factors, analyze applicable facts and circumstances and, in general, exercise judgment, when valuing Fund investments. The methodology used for a specific type of investment may vary based on the circumstances and relevant considerations, including available market data.
Equity securities (including common stock, preferred stock, 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
80
Harbor International & Global Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 2—Significant Accounting Policies—Continued
using its own proprietary models. Depending on the instrument and the terms of the transaction, the value of the derivative instrument can be determined by a pricing vendor or subadviser using a series of techniques, including simulation pricing models. The pricing models use inputs, such as issuer details, indices, spreads, interest rates, yield curves, dividends and exchange rates, that are observed from actively quoted markets. Derivative instruments that use valuation techniques and inputs similar to those described above are normally categorized as Level 2 in the fair value hierarchy.
A Fund may also use fair value pricing if the value of some or all of the Fund’s securities have been materially affected by events occurring before the Fund’s pricing time but after the close of the primary markets or exchanges on which the security is traded. This most commonly occurs with foreign securities, but may occur with other securities as well. In such cases, the Fund may apply a fair value factor supplied by the pricing vendor to a foreign security’s market close value to reflect changes in value that may have occurred between the close of the primary market or exchange on which the security is traded and the Fund’s pricing time. That factor may be derived using observable inputs such as a comparison of the trading patterns of a foreign security to intraday trading in the U.S. markets that are highly correlated to the foreign security or other information that becomes available after the close of the foreign market on which the security principally traded. When fair value pricing is employed, the prices of securities used by a Fund to calculate its net asset value may differ from market quotations, official closing prices or evaluated prices for the same securities, which means that the Fund may value those securities higher or lower than another given fund that uses market quotations, official closing prices or evaluated prices supplied by a pricing vendor in its calculation of net asset value. Securities valued using observable inputs, such as those described above, are normally categorized as Level 2 of the fair value hierarchy.
When reliable market quotations or evaluated prices supplied by a pricing vendor are not readily available or are not believed to accurately reflect fair value, securities are priced at their fair value as determined by the Trust’s Valuation Committee (the “Valuation Committee”) pursuant to procedures adopted, and subject to oversight, by the Board of Trustees. The Valuation Committee is comprised of a trustee and officers of the Trust and employees of Harbor Capital with relevant experience or responsibilities. Each security for which the Valuation Committee determines a fair value, including the basis for the fair value decision, is reviewed by the Board of Trustees at its regularly scheduled board meetings. Securities valued using fair valuation methods that incorporate significant unobservable inputs are normally categorized as Level 3 in the fair value hierarchy.
Fair Value Measurements and Disclosures
Various inputs may be used to determine the value of each Fund’s investments, which are summarized in three broad categories defined as Level 1, Level 2, and Level 3. The inputs or methodologies used for valuing securities are not necessarily indicative of the risk associated with investing in those securities. The assignment of an investment to Levels 1, 2, or 3 is based on the lowest level of significant inputs used to determine its fair value.
Level 1– | Quoted prices in active markets for identical securities. |
Level 2– | Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). |
Level 3– | Significant unobservable inputs are used in situations where quoted prices or other observable inputs are not available or are deemed unreliable. Significant unobservable inputs may include each Fund’s own assumptions. |
The categorization of investments into Levels 1, 2, or 3, and a summary of significant unobservable inputs used for Level 3 investments, when applicable, can be found at the end of each Fund’s Portfolio of Investments schedule. For fair valuations using significant unobservable inputs, if any, a reconciliation of the beginning to ending balances for reported fair values is provided at the end of each Fund’s Portfolio of Investments schedule that presents changes attributable to realized and unrealized gains and losses and purchases, sales, and transfers in/out of the Level 3 category during the year.
Each Fund used observable inputs in its valuation methodologies whenever they were available and deemed reliable.
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
81
Harbor International & Global 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 U.S. 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 U.S. 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 foreign 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, 2017–2019), including all positions expected to be taken upon filing the 2020 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.
On August 24, 2020, Harbor International Fund received a payment, including interest, from a member country of the European Union based on foreign tax reclaims relating to amounts withheld on dividends received by the Fund during fiscal years October 31, 2009 through 2014. The foreign tax reclaims and related interest of $72,667,000 and $28,414,000 are included in dividend and interest income, respectively, in the Fund’s Statement of Operations. A portion of the foreign tax reclaims and interest received is due to the Internal Revenue Service (“IRS”), in the form of a tax compliance fee and that amount is based on the percentage of foreign tax credits previously passed through to the Fund’s shareholders in the years dividends were received by the Fund. The estimated amount due to the IRS, including interest is approximately $39,400,000, and is included in tax compliance fee payable and tax compliance fee in the Fund’s Statement of Asset and Liabilities and Statement of Operations,
82
Harbor International & Global Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 2—Significant Accounting Policies—Continued
respectively. The Fund is planning to enter into a closing agreement with the IRS and will remit the tax compliance fee and related interest once the closing agreement is finalized. The actual tax compliance and related interest due to the IRS may differ from the estimates upon the finalization of the closing agreement.
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 year, 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 year, 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.
Foreign Currency Translations
Purchases and sales of securities are translated into U.S. dollars at the current exchange rate on the respective dates of the transactions. Income and withholding taxes are translated at the prevailing exchange rate when accrued or incurred. The accounting records of the Funds are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency, when applicable, are translated into U.S. dollars based on the current exchange rates at year end.
Reported net realized gains and losses on foreign currency transactions, when applicable, represent net gains and losses from sales and maturities of foreign currency contracts, disposition of foreign currencies, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of investment income accrued and tax reclaims receivable and the U.S. dollar amount actually received. The effects of changes in foreign currency exchange rates on investments in securities, when applicable, are included in the net realized and unrealized gain or loss on investments in the Statements of Operations.
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.
83
Harbor International & Global Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 2—Significant Accounting Policies—Continued
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 year, if any, are disclosed at the end of each applicable Fund’s Portfolio of Investments and are included in “Purchased options” in the Statements of Assets and Liabilities. Realized gain/(loss) and unrealized appreciation/(depreciation) recognized during the year are included in “Purchased options” in the Statements of Operations.
During the year, Harbor Diversified International All Cap Fund, Harbor Emerging Markets Equity 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.
Note 3—Investment Portfolio Transactions
Investment Portfolio Transactions
Purchases and sales of investments, other than short-term securities, for each Fund for the year ended October 31, 2020 are as follows:
Purchases (000s) | Sales (000s) | ||
Harbor Diversified International All Cap Fund | $262,610 | $ 191,018 | |
Harbor Emerging Markets Equity Fund | 113,307 | 167,533 | |
Harbor Focused International Fund | 16,222 | 9,899 | |
Harbor Global Leaders Fund | 65,489 | 62,639 | |
Harbor International Fund | 550,512 | 1,543,529* | |
Harbor International Growth Fund | 226,681 | 148,184 | |
Harbor International Small Cap Fund | 13,246 | 24,513 | |
Harbor Overseas Fund | 21,980 | 20,787 |
* | Sales for this Fund include $241,400 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, a Fund recognizes a gain or loss on the securities distributed related to the in-kind redemption. Such Fund-level gains and losses on in-kind redemptions are not taxable to shareholders. For the year ended October 31, 2020, Harbor International Fund realized gains of $9,616,000 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.
84
Harbor International & Global Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 3—Investment Portfolio Transactions—Continued
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 loans are subject to termination by the Fund or the borrower at any time, the remaining contractual maturities of each securities lending transaction is considered to be overnight and continuous.
The following table shows the Funds that engaged in securities lending during the year and summarizes the value of equity securities loaned and related cash at October 31, 2020.
Value of Securities on Loan (000s) | Cash Collateral (000s) | ||
Harbor Diversified International All Cap Fund | $ — | $ — | |
Harbor Global Leaders Fund | — | — | |
Harbor International Fund | — | — | |
Harbor International Growth Fund | — | — | |
Harbor Overseas Fund | 153 | 164 |
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.
85
Harbor International & Global Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 4—FEES AND OTHER Transactions with Affiliates—Continued
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 | 0.68% | |
Harbor Emerging Markets Equity Fund | 0.85 b | 0.80 | |
Harbor Focused International Fund | 0.75 | 0.75 | |
Harbor Global Leaders Fund | 0.75 c | 0.70 | |
Harbor International Fund | 0.75 d | 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 through October 31, 2020, the adviser voluntarily waived a portion of its management fee. |
b | For the period November 1, 2019 through September 22, 2020, the management fee rate was 0.95% and the adviser contractually agreed to waive 0.15% of the management fee rate. Effective September 23, 2020, the management fee rate was reduced from 0.95% to 0.85%. |
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 year, the following expense limitation agreements were in effect:
Retirement Class | Institutional Class | Administrative Class | Investor Class | Expense Limitation Agreement Expiration Date | |||||
Harbor Diversified International All Cap Fund | 0.72% | 0.80% | 1.05% | 1.17% | 02/28/2021 | ||||
Harbor Emerging Markets Equity Fund1 | 0.88 | 0.96 | 1.21 | 1.33 | 02/28/2022 | ||||
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 |
1 | For the period November 1, 2019 through September 22, 2020, Harbor Capital contractually agreed to limit the operating expenses, excluding interest expense (if any), to 0.93%, 1.01%, 1.26%, and 1.38% for the Retirement Class, Institutional Class, Administrative Class, and Investor Class, respectively. |
All expense limitation agreements include the transfer agent fee waiver discussed in the Transfer Agent note.
Distributor
Harbor Funds Distributors, Inc. (the “Distributor”), a wholly-owned subsidiary of Harbor Capital, is the distributor for Harbor Funds’ shares. Under the Trust’s current distribution plan pursuant to Rule 12b-1 under the Investment Company Act with respect to each Fund’s Administrative and Investor Class shares (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.
86
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 year ended October 31, 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 year, the Funds did not enter into any transactions with any other Harbor fund.
Shareholders
As of October 31, 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 | 121,328 | — | — | — | 121,328 | 0.2% | |||||
Harbor Emerging Markets Equity Fund | 51,237 | — | — | — | 51,237 | 1.1 | |||||
Harbor Focused International Fund | 1,267,189 | 1,255,718 | — | 3,015 | 2,525,922 | 79.3 | |||||
Harbor Global Leaders Fund | 35,847 | 413,152 | — | — | 448,999 | 12.7 | |||||
Harbor International Fund | 19,018 | — | — | — | 19,018 | 0.0 | |||||
Harbor International Growth Fund | 95,391 | — | — | — | 95,391 | 0.2 | |||||
Harbor International Small Cap Fund | 43,136 | 1,591,970 | 26,644 | 26,500 | 1,688,250 | 60.0 | |||||
Harbor Overseas Fund | 1,289,627 | 1,279,249 | — | 3,064 | 2,571,940 | 96.2 |
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
87
Harbor International & Global Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 4—FEES AND OTHER Transactions with Affiliates—Continued
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.
NOTE 5—TAX INFORMATION
The amount and character of income and net realized gains to be distributed are determined in accordance with income tax rules and regulations, which may differ from U.S. GAAP. These differences are attributable to permanent book and tax accounting differences that were primarily due to the use of equalization and redemption in-kind distributions. Reclassifications, if any, are made to each Fund’s capital account to reflect income and net realized gains available for distribution (or available capital loss carryovers) under income tax rules and regulations. The amounts reclassified on the Statements of Assets and Liabilities for the year ended October 31, 2020 are as follows:
Total Distributable Earnings/(Loss) (000s) | Paid in Capital (000s) | ||
Harbor Diversified International All Cap Fund | $ — | $ — | |
Harbor Emerging Markets Equity Fund | (1,552) | 1,552 | |
Harbor Focused International Fund | (4) | 4 | |
Harbor Global Leaders Fund | (4,080) | 4,080 | |
Harbor International Fund | (8,496) | 8,496 | |
Harbor International Growth Fund | — | — | |
Harbor International Small Cap Fund | — | — | |
Harbor Overseas Fund | — | — |
The tax composition of each Fund’s distributions is as follows:
As of October 31, 2020 | As of October 31, 2019 | ||||||||||
Ordinary Income (000s) | Long-Term Capital Gains (000s) | Total (000s) | Ordinary Income (000s) | Long-Term Capital Gains (000s) | Total (000s) | ||||||
Harbor Diversified International All Cap Fund | $ 17,322 | $ — | $ 17,322 | $ 10,152 | $ 18,132 | $ 28,284 | |||||
Harbor Emerging Markets Equity Fund | 1,462 | — | 1,462 | 738 | — | 738 | |||||
Harbor Focused International Fund | 172 | — | 172 | — | — | — | |||||
Harbor Global Leaders Fund | 221 | 6,257 | 6,478 | — | 1,317 | 1,317 | |||||
Harbor International Fund | 174,403 | — | 174,403 | 133,695 | 3,350,768 | 3,484,463 | |||||
Harbor International Growth Fund | 10,807 | — | 10,807 | 3,625 | — | 3,625 | |||||
Harbor International Small Cap Fund | 1,197 | — | 1,197 | 435 | 1,819 | 2,254 | |||||
Harbor Overseas Fund | 679 | — | 679 | — | — | — |
88
Harbor International & Global Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
NOTE 5—TAX INFORMATION—Continued
As of October 31, 2020, the components of each Fund’s distributable earnings on a tax basis are as follows:
Undistributed Ordinary Income (000s) | Undistributed Long-Term Capital Gains (000s) | Unrealized Appreciation/ (Depreciation) (000s) | |||
Harbor Diversified International All Cap Fund | $ 8,587 | $ — | $ (33,145) | ||
Harbor Emerging Markets Equity Fund | 4,974 | 6,249 | 1,342 | ||
Harbor Focused International Fund | 307 | 307 | 4,847 | ||
Harbor Global Leaders Fund | 1,503 | 8,700 | 26,776 | ||
Harbor International Fund | 47,871 | — | (166,082) | ||
Harbor International Growth Fund | 5,482 | — | 188,740 | ||
Harbor International Small Cap Fund | 408 | — | (2,353) | ||
Harbor Overseas Fund | 411 | — | 1,042 |
At October 31, 2020, the Funds in the following table had capital loss carryforwards for federal tax purposes which will reduce the Funds' taxable income arising from future net realized gains on investments to the extent permitted by the Internal Revenue Code. Use of the capital loss carryforwards will reduce the amount of the distribution to shareholders which would otherwise be necessary to relieve each Fund of any federal tax liability. The capital loss carryforwards do not expire.
Capital Loss Carryforward | |||||
Short-Term (000s) | Long-Term (000s) | Total (000s) | |||
Harbor Diversified International All Cap Fund | $ 2,047 | $15,992 | $ 18,039 | ||
Harbor International Fund | 596,644 | 86,302 | 682,946 | ||
Harbor International Growth Fund | 2,785 | — | 2,785 | ||
Harbor International Small Cap Fund | 370 | 1,619 | 1,989 | ||
Harbor Overseas Fund | 1,223 | — | 1,223 |
The identified cost for federal income tax purposes of investments owned by each Fund and its respective gross unrealized appreciation and depreciation at October 31, 2020 are as follows:
Identified Cost (000s) | Gross Unrealized | Net Unrealized Appreciation/ (Depreciation) (000s) | |||||
Appreciation (000s) | (Depreciation) (000s) | ||||||
Harbor Diversified International All Cap Fund* | $ 818,425 | $ 78,273 | $(111,418) | $ (33,145) | |||
Harbor Emerging Markets Equity Fund | 48,054 | 3,404 | (2,062) | 1,342 | |||
Harbor Focused International Fund | 30,968 | 6,077 | (1,230) | 4,847 | |||
Harbor Global Leaders Fund | 102,277 | 28,668 | (1,892) | 26,776 | |||
Harbor International Fund* | 4,143,054 | 627,947 | (794,029) | (166,082) | |||
Harbor International Growth Fund* | 598,431 | 223,553 | (34,813) | 188,740 | |||
Harbor International Small Cap Fund* | 32,120 | 2,328 | (4,681) | (2,353) | |||
Harbor Overseas Fund* | 26,054 | 3,380 | (2,338) | 1,042 |
* | Capital loss carryforwards are available, which may reduce taxable income from future net realized gain on investments. |
89
Harbor International & Global Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 6—Derivatives
Each Fund’s derivative holdings do not qualify for hedge accounting treatment and as such are recorded at current fair value. For a discussion of risks related to these investments please refer to the descriptions of each type of derivative instrument in Note 2— Significant Accounting Policies.
Each Fund’s derivative instruments outstanding as of the year ended October 31, 2020, if any, as disclosed in the Portfolio of Investments, and the related amounts of net realized and changes in net unrealized gains and losses on derivative instruments during the year as disclosed in the Statement of Operations, are indicators of the volume of derivative activity for each Fund.
Derivative Instruments
At October 31, 2020, the fair values of derivatives, by primary risk exposure, were reflected in the Statement of Assets and Liabilities as follows:
HARBOR DIVERSIFIED INTERNATIONAL ALL CAP FUND
Statement of Assets and Liabilities Caption | Equity Contracts (000s) | |
Purchased options (rights/warrants) | $431 |
HARBOR GLOBAL LEADERS FUND
Statement of Assets and Liabilities Caption | Foreign Exchange Contracts (000s) | |
Unrealized depreciation on open forward currency contracts | $(1) |
HARBOR INTERNATIONAL FUND
Statement of Assets and Liabilities Caption | Equity Contracts (000s) | |
Purchased options (rights/warrants) | $3,308 |
Net realized gain/(loss) and the change in net unrealized appreciation/(depreciation) on derivatives, by primary risk exposure, for the year ended October 31, 2020, were:
HARBOR DIVERSIFIED INTERNATIONAL ALL CAP FUND
Change in net unrealized appreciation/(depreciation) on derivatives | Equity Contracts (000s) | |
Purchased options (rights/warrants) | $(1,270) |
HARBOR GLOBAL LEADERS FUND
Change in net unrealized appreciation/(depreciation) on derivatives | Foreign Exchange Contracts (000s) | |
Forward currency contracts | $(1) |
90
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) | $(11,680) |
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.
91
Harbor International & Global Funds
Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
The Board of Trustees and Shareholders of
Harbor Funds
Harbor Funds
Opinion on the Financial Statements
We have audited the accompanying statements of assets and liabilities of Harbor Diversified International All Cap Fund, Harbor Emerging Markets Equity Fund, Harbor Focused International Fund, Harbor Global Leaders Fund, Harbor International Fund, Harbor International Growth Fund, Harbor International Small Cap Fund and Harbor Overseas Fund (collectively referred to as the “Funds”), (eight of the funds constituting Harbor Funds (the “Trust”)), including the portfolios of investments, as of October 31, 2020, and the related statements of operations and changes in net assets, and the financial highlights for each of the periods indicated in the table below and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Funds (eight of the funds constituting Harbor Funds), at October 31, 2020, the results of their operations, changes in net assets and financial highlights for each of the periods indicated in the table below, in conformity with U.S. generally accepted accounting principles.
Individual fund comprising the Harbor Funds | Statement of operations | Statement of changes in net assets | Financial highlights |
Harbor Diversified International All Cap Fund | For the year ended October 31, 2020 | For each of the two years in the period ended October 31, 2020 | For each of the four years in the period ended October 31, 2020 and the period from November 2, 2015 (inception) through October 31, 2016 |
Harbor Emerging Markets Equity Fund Harbor Global Leaders Fund Harbor International Fund Harbor International Growth Fund | For the year ended October 31, 2020 | For each of the two years in the period ended October 31, 2020 | For each of the five years in the period ended October 31, 2020 |
Harbor Focused International Fund | For the year ended October 31, 2020 | For the year ended October 31, 2020 and the period from June 1, 2019 (inception) through October 31, 2019 | For the year ended October 31, 2020 and the period from June 1, 2019 (inception) through October 31, 2019 |
Harbor International Small Cap Fund | For the year ended October 31, 2020 | For each of the two years in the period ended October 31, 2020 | For each of the four years in the period ended October 31, 2020 and the period from February 1, 2016 (inception) through October 31, 2016 |
Harbor Overseas Fund | For the year ended October 31, 2020 | For the year ended October 31, 2020 and the period from March 1, 2019 (inception) through October 31, 2019 | For the year ended October 31, 2020 and the period from March 1, 2019 (inception) through October 31, 2019 |
Basis for Opinion
These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on each of the Funds’ financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust’s internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2020, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Harbor Funds investment companies since 2000.
Chicago, Illinois
December 21, 2020
December 21, 2020
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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 May 1, 2020 through October 31, 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 May 1, 2020 | Ending Account Value October 31, 2020 | |||||
Harbor Diversified International All Cap Fund | ||||||||
Retirement Class | 0.70% | |||||||
Actual | $3.75 | $1,000 | $1,130.10 | |||||
Hypothetical (5% return) | 3.56 | 1,000 | 1,021.53 | |||||
Institutional Class | 0.77% | |||||||
Actual | $4.17 | $1,000 | $1,128.85 | |||||
Hypothetical (5% return) | 3.96 | 1,000 | 1,021.12 | |||||
Administrative Class | 1.03% | |||||||
Actual | $5.51 | $1,000 | $1,128.04 | |||||
Hypothetical (5% return) | 5.23 | 1,000 | 1,019.83 | |||||
Investor Class | 1.15% | |||||||
Actual | $6.15 | $1,000 | $1,127.49 | |||||
Hypothetical (5% return) | 5.84 | 1,000 | 1,019.21 |
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Harbor International & Global Funds
Fees and Expenses Example—Continued
Fees and Expenses Example—Continued
Annualized Expense Ratios* | Expenses Paid During Period** | Beginning Account Value May 1, 2020 | Ending Account Value October 31, 2020 | |||||
Harbor Emerging Markets Equity Fund | ||||||||
Retirement Class | 0.93% | |||||||
Actual | $5.13 | $1,000 | $1,192.77 | |||||
Hypothetical (5% return) | 4.72 | 1,000 | 1,020.34 | |||||
Institutional Class | 1.01% | |||||||
Actual | $5.57 | $1,000 | $1,192.77 | |||||
Hypothetical (5% return) | 5.13 | 1,000 | 1,019.93 | |||||
Administrative Class | 1.25% | |||||||
Actual | $6.88 | $1,000 | $1,191.24 | |||||
Hypothetical (5% return) | 6.34 | 1,000 | 1,018.69 | |||||
Investor Class | 1.37% | |||||||
Actual | $7.54 | $1,000 | $1,189.69 | |||||
Hypothetical (5% return) | 6.95 | 1,000 | 1,018.08 | |||||
Harbor Focused International Fund | ||||||||
Retirement Class | 0.77% | |||||||
Actual | $4.21 | $1,000 | $1,172.14 | |||||
Hypothetical (5% return) | 3.92 | 1,000 | 1,017.30 | |||||
Institutional Class | 0.85% | |||||||
Actual | $4.65 | $1,000 | $1,171.71 | |||||
Hypothetical (5% return) | 4.33 | 1,000 | 1,016.48 | |||||
Investor Class | 1.22% | |||||||
Actual | $6.66 | $1,000 | $1,167.08 | |||||
Hypothetical (5% return) | 6.21 | 1,000 | 1,012.69 | |||||
Harbor Global Leaders Fund | ||||||||
Retirement Class | 0.78% | |||||||
Actual | $4.30 | $1,000 | $1,194.15 | |||||
Hypothetical (5% return) | 3.96 | 1,000 | 1,021.12 | |||||
Institutional Class | 0.86% | |||||||
Actual | $4.74 | $1,000 | $1,193.86 | |||||
Hypothetical (5% return) | 4.37 | 1,000 | 1,020.70 | |||||
Administrative Class | 1.11% | |||||||
Actual | $6.12 | $1,000 | $1,191.93 | |||||
Hypothetical (5% return) | 5.63 | 1,000 | 1,019.42 | |||||
Investor Class | 1.23% | |||||||
Actual | $6.77 | $1,000 | $1,191.59 | |||||
Hypothetical (5% return) | 6.24 | 1,000 | 1,018.80 | |||||
Harbor International Fund | ||||||||
Retirement Class | 0.69% | |||||||
Actual | $3.71 | $1,000 | $1,140.18 | |||||
Hypothetical (5% return) | 3.51 | 1,000 | 1,021.58 | |||||
Institutional Class | 0.77% | |||||||
Actual | $4.14 | $1,000 | $1,139.66 | |||||
Hypothetical (5% return) | 3.91 | 1,000 | 1,021.17 | |||||
Administrative Class | 1.02% | |||||||
Actual | $5.48 | $1,000 | $1,138.35 | |||||
Hypothetical (5% return) | 5.18 | 1,000 | 1,019.88 | |||||
Investor Class | 1.14% | |||||||
Actual | $6.12 | $1,000 | $1,137.56 | |||||
Hypothetical (5% return) | 5.79 | 1,000 | 1,019.26 |
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Harbor International & Global Funds
Fees and Expenses Example—Continued
Fees and Expenses Example—Continued
Annualized Expense Ratios* | Expenses Paid During Period** | Beginning Account Value May 1, 2020 | Ending Account Value October 31, 2020 | |||||
Harbor International Growth Fund | ||||||||
Retirement Class | 0.77% | |||||||
Actual | $4.43 | $1,000 | $1,289.67 | |||||
Hypothetical (5% return) | 3.91 | 1,000 | 1,021.17 | |||||
Institutional Class | 0.85% | |||||||
Actual | $4.89 | $1,000 | $1,289.19 | |||||
Hypothetical (5% return) | 4.32 | 1,000 | 1,020.76 | |||||
Administrative Class | 1.10% | |||||||
Actual | $6.33 | $1,000 | $1,288.03 | |||||
Hypothetical (5% return) | 5.58 | 1,000 | 1,019.47 | |||||
Investor Class | 1.22% | |||||||
Actual | $7.01 | $1,000 | $1,268.88 | |||||
Hypothetical (5% return) | 6.19 | 1,000 | 1,018.85 | |||||
Harbor International Small Cap Fund | ||||||||
Retirement Class | 0.88% | |||||||
Actual | $4.69 | $1,000 | $1,122.41 | |||||
Hypothetical (5% return) | 4.47 | 1,000 | 1,020.60 | |||||
Institutional Class | 0.96% | |||||||
Actual | $5.13 | $1,000 | $1,122.41 | |||||
Hypothetical (5% return) | 4.87 | 1,000 | 1,020.19 | |||||
Administrative Class | 1.21% | |||||||
Actual | $6.45 | $1,000 | $1,121.66 | |||||
Hypothetical (5% return) | 6.14 | 1,000 | 1,018.90 | |||||
Investor Class | 1.33% | |||||||
Actual | $7.09 | $1,000 | $1,120.55 | |||||
Hypothetical (5% return) | 6.75 | 1,000 | 1,018.28 | |||||
Harbor Overseas Fund | ||||||||
Retirement Class | 0.77% | |||||||
Actual | $4.08 | $1,000 | $1,106.01 | |||||
Hypothetical (5% return) | 3.92 | 1,000 | 1,021.23 | |||||
Institutional Class | 0.85% | |||||||
Actual | $4.49 | $1,000 | $1,104.92 | |||||
Hypothetical (5% return) | 4.33 | 1,000 | 1,020.81 | |||||
Investor Class | 1.22% | |||||||
Actual | $6.45 | $1,000 | $1,102.84 | |||||
Hypothetical (5% return) | 6.21 | 1,000 | 1,018.90 |
* | Reflective of all fee waivers and expense reimbursements |
** | Expenses are equal to the Fund’s annualized net expense ratio, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). |
95
Harbor International & Global Funds
Additional Information (Unaudited)
Additional Information (Unaudited)
Additional Tax Information
The Funds designate the following portions of their distributions from investment company taxable income for the fiscal year ended October 31, 2020 as qualifying for the dividends received deduction for corporate shareholders.
Percentage of Distribution | |
Harbor Global Leaders Fund | 32% |
Pursuant to Section 852 of the Internal Revenue Code, the Funds designate the following capital gain dividends for the fiscal year ended October 31, 2020:
Amount (000s) | |
Harbor Emerging Markets Equity Fund | $ 864 |
Harbor Focused International Fund | 2 |
Harbor Global Leaders Fund | 9,736 |
For the fiscal year ended October 31, 2020, each Fund designates up to the maximum amount of such dividends allowable pursuant to the Internal Revenue Code as qualified dividend income eligible for reduced tax rates. These lower rates range from 0% to 20% depending on an individual’s tax bracket. If a Fund pays a distribution during calendar year 2020, complete information will be reported in conjunction with Form 1099-DIV.
The Funds designate the following foreign taxes paid and foreign source income for Federal income tax purposes:
Foreign Taxes Paid (000s) | Foreign Source Earned Income (000s) | ||
Harbor Diversified International All Cap Fund | $1,467 | $16,446 | |
Harbor Emerging Markets Equity Fund | 593 | 4,337 | |
Harbor Focused International Fund | 41 | 436 | |
Harbor International Fund | 8,302 | 99,210 | |
Harbor International Growth Fund | 624 | 6,808 | |
Harbor International Small Cap Fund | 62 | 648 | |
Harbor Overseas Fund | 74 | 734 |
Shareholders who own shares through a taxable Harbor Funds account and that received distributions from a Fund during calendar year 2020 will receive a Form 1099-DIV in January 2021 that will show the tax character of those distributions.
Proxy Voting
Harbor Funds has adopted Proxy Voting Policies and Procedures under which proxies relating to securities held by the Harbor funds are voted. In addition, Harbor Funds files Form N-PX, with its complete proxy voting record for the 12 months ended June 30th, no later than August 31st of each year. A description of Harbor Funds’ Proxy Voting Policies and Procedures and the proxy voting records (Form N-PX) are available (i) without charge, upon request, by calling Harbor Funds toll-free at 800-422-1050; (ii) on Harbor Funds’ website at harborfunds.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.
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Harbor International & Global Funds
Additional Information—Continued
Additional Information—Continued
Quarterly Portfolio Disclosures
The Funds file a complete portfolio of investments for their first and third fiscal quarters with the SEC as an exhibit to Form N-PORT. The Funds’ Form N-PORT exhibit is available (i) without charge, upon request, by calling Harbor Funds toll-free at 800-422-1050, (ii) on Harbor Funds’ website at harborfunds.com, and (iii) on the SEC’s website at sec.gov.
ADVISORY AGREEMENT APPROVALS
FACTORS CONSIDERED BY THE TRUSTEES IN APPROVING THE INVESTMENT ADVISORY AGREEMENT AND SUBADVISORY AGREEMENT OF harbor emerging markets equity fund
The Investment Company Act of 1940, as amended, requires that the subadvisory agreement be approved initially, and following an initial two-year term, at least annually, by the Harbor Funds Board of Trustees (the “Board” or the “Trustees”), including a majority of the Independent Trustees voting separately.
At a meeting of the Board held on August 9-11, 2020, the Board, including the Independent Trustees voting separately, unanimously determined, in the exercise of their business judgment, that it was in the best interests of Harbor Emerging Markets Equity Fund (the “Fund”) and its shareholders that Oaktree Capital Management, L.P. (“Oaktree”) be replaced by Marathon Asset Management LLP (“Marathon-London”) as subadviser to the Fund and that the terms of the new subadvisory agreement among Harbor Funds, on behalf of the Fund, Harbor Capital Advisors, Inc. (the “Adviser” or “Harbor Capital”) and Marathon-London were fair and reasonable. Accordingly, the Trustees approved the new subadvisory agreement for an initial two-year term. In connection with their approval of the new subadvisory agreement, the Trustees also approved an amended and restated Investment Advisory Agreement for the Fund with Harbor Capital to reduce the contractual management fee rate payable by the Fund. In their deliberations, the Independent Trustees had the opportunity to meet privately without representatives of Harbor Capital or Marathon-London present and were represented throughout the process by legal counsel to the Independent Trustees and the Fund.
The Trustees considered that over several recent months, Harbor Capital had discussed with the Board its assessment with respect to Oaktree continuing to serve as subadviser to the Fund following the January 2020 announcement that one of the portfolio managers would retire in June 2020. This assessment was based on ongoing monitoring and research Harbor Capital had performed to evaluate Oaktree as investment subadviser to the Fund since the Fund’s inception and its assessment of Oaktree continuing to do so following the changes to its investment team. Harbor Capital noted the Fund’s inconsistent portfolio returns since the Fund’s inception as well as the substantially untested partnership between the Fund’s new portfolio managers.
The Trustees considered that, in recommending Marathon-London, Harbor Capital had conducted extensive research on asset managers across the emerging markets equities universe and also relied on knowledge built from its ongoing monitoring of managers comparable to its subadvisers. That research led to the identification of Marathon-London as a firm in which Harbor Capital has a high degree of investment conviction. Harbor Capital believes that Marathon-London will provide the investment approach needed to help the Fund become both sustainable and vibrant over the long term. At a meeting held on February 16-17, 2020 and at this meeting, the Trustees received presentations by Marathon-London containing information about the firm and its experience, investment philosophy and process, operational and trading capabilities, and, at this meeting, Marathon-London’s proposed approach to managing the Fund’s assets, among other things.
The Trustees reviewed materials furnished by Harbor Capital and Marathon-London, including information provided by Harbor Capital regarding its assessment of the potential impact over the long term of the recent changes to Oaktree’s portfolio management team and information regarding Marathon-London, its investment philosophy and strategies, past performance, financial condition, operational capabilities and personnel. The Trustees also took into account their knowledge of Marathon-London resulting from its role as subadviser to Harbor Diversified International All Cap Fund and Harbor International Fund, and they considered Harbor Capital’s rationale for its recommendation to appoint Marathon-London to succeed Oaktree as the Fund’s subadviser.
The Trustees considered that, in recommending Marathon-London, Harbor Capital had conducted an extensive search for an emerging markets investment adviser and believed Marathon-London had the potential to add value for the Fund’s shareholders.
Specific Factors
In considering the approval of the new subadvisory agreement, the Board, including the Independent Trustees, evaluated a number of factors relevant to their determination. They did not identify any single factor as all-important or controlling, and individual Trustees did not necessarily attribute the same weight or importance to each factor.
Among the factors considered by the Trustees in approving the new subadvisory agreement were the following:
97
Harbor International & Global Funds
Additional Information—Continued
Additional Information—Continued
ADVISORY AGREEMENT APPROVALS—Continued
The nature, extent, and quality of the services proposed to be provided by Marathon-London, including the background, education, expertise and experience of the investment professionals of Marathon-London who would provide investment management services to the Fund;
The favorable history, reputation, qualifications and background of Marathon-London, as well as the reputations, qualifications and background of Marathon-London’s personnel;
The proposed fee to be charged by Marathon-London to Harbor Capital for subadvisory services, including the impact of any differences between the current and proposed subadvisory fees on the portion of the advisory fee to be retained by Harbor Capital, after payment of Marathon-London’s fee, for the subadviser oversight, administration and manager-of-managers services Harbor Capital provides;
That Harbor Capital had agreed to (i) reduce its contractual management fee rate and (ii) lower the Fund’s expense caps through February 28, 2022, resulting in a reduction in the Fund’s net expense ratios;
The investment performance of Marathon-London in managing other accounts in a style similar to the style to be utilized in managing the Fund relative to the performance of a benchmark index and the performance of the Fund under Oaktree;
The expected impact of the implementation of the subadvisory agreement and the new investment advisory agreement on the profitability of Harbor Capital with respect to the Fund; and
Any “fall out” benefits that might inure to Harbor Capital, Marathon-London and their affiliates as a result of the implementation of the new subadvisory agreement.
The Trustees considered the nature, extent and quality of the services proposed to be provided by Marathon-London in relation to the services provided by Oaktree since the inception of the Fund on November 1, 2013. In their deliberations, the Trustees were mindful of the fact that, by choosing to invest in the Fund, the Fund’s shareholders entrusted Harbor Capital with the responsibility, subject to the approval of the Trustees, for selecting the Fund’s subadviser, overseeing and monitoring that subadviser’s performance and replacing the subadviser if necessary. The Trustees also considered as relevant to their determination the depth, knowledge and experience level of the investment team, the quality of the investment process and the culture of Marathon-London.
The Board discussed the presentations by Marathon-London and the merits of appointing Marathon-London as subadviser to the Fund. The Board reviewed the historical performance record of Marathon-London’s emerging markets equity strategy since its inception in 2013, noting that it had outperformed its benchmark index, the MSCI Emerging Markets (ND) Index, on an annualized basis for certain periods, and that on a calendar year basis since inception, the strategy had outperformed its benchmark index in some years and underperformed its benchmark index in others. The Trustees noted Harbor Capital’s belief that one of the competitive advantages of Marathon-London is its capital cycle approach to investing and its portfolio management structure, and that the Fund could benefit over the long term from Marathon-London’s broadly diversified exposure to emerging markets companies across the market capitalization spectrum.
The Board considered the potential tax and financial impacts of liquidating portfolio holdings and realizing gains and incurring brokerage costs in transitioning the portfolio, and potential options for mitigating the tax consequences to Fund shareholders. The Trustees evaluated the tax ramifications of a subadviser change with respect to the estimated level of net realized and unrealized gains in the portfolio following the portfolio transition based on certain assumptions with respect to the market value of the portfolio securities and expected redemptions in the portfolio. The Board considered the portion of portfolio holdings that will likely be replaced as a result of the proposed engagement of Marathon-London and noted that portfolio transition would be handled by Marathon-London.
The Trustees also discussed other potential replacement subadvisers and other potential options.
Subadvisory Fee
In considering the proposed subadvisory fee payable to Marathon-London pursuant to the new subadvisory agreement, the Trustees compared the proposed fee to the fee payable to Oaktree under the prior subadvisory agreement. The Trustees noted that, based on the Fund’s assets at the time of their review, the effective annual fee rate for the Fund under the prior subadvisory agreement with Oaktree was higher than the effective annual fee rate to be paid by the Adviser under the new subadvisory agreement with Marathon-London. The Trustees also considered that the reduction in subadvisory fee will enable Harbor Capital to, effective September 23, 2020, (i) reduce the Fund’s contractual management fee rate and (ii) lower the Fund’s expense caps through February 28, 2022, which will collectively result in a reduction in the Fund’s net expense ratios.
98
Harbor International & Global Funds
Additional Information—Continued
Additional Information—Continued
ADVISORY AGREEMENT APPROVALS—Continued
The Trustees noted that, although they were being asked to approve the amended and restated Investment Advisory Agreement for the Fund to implement the advisory fee reduction, the Trustees would nonetheless have the opportunity to perform a full review of such agreement in connection with their annual review of investment advisory and subadvisory agreements, at which time the Trustees would consider the nature, extent and quality of services provided; investment performance; advisory fees and expense ratios; profitability; any “fall out” benefits; and economies of scale.
As a result of these deliberations, the Trustees agreed that the prior subadvisory agreement should be terminated and voted to approve the new subadvisory agreement with Marathon-London and the amended and restated Investment Advisory Agreement for the Fund.
FACTORS CONSIDERED BY THE TRUSTEES IN APPROVING THE amended subadvisory agreements of harbor international fund and harbor diversified international all cap fund
At a meeting of the Board held on August 9-11, 2020, the Board, including the Independent Trustees voting separately, approved amended and restated Subadvisory Agreements with Marathon-London (the “Amended Agreements”) for Harbor International Fund and Harbor Diversified International All Cap Fund to make certain changes to the terms. The Trustees noted that they were being asked to approve the Amended Agreements in connection with the appointment of Marathon-London to serve as replacement subadviser to Harbor Emerging Markets Equity Fund and that the changes would, among other things, clarify the assets to be aggregated for purposes of determining the fee rates payable thereunder. The Trustees noted that, although they were being asked to approve the Amended Agreements, the Trustees would nonetheless have the opportunity to perform a full review of such agreements in connection with their annual review of investment advisory and subadvisory agreements, at which time the Trustees would consider the nature, extent and quality of services provided; investment performance; advisory fees and expense ratios; profitability; any “fall out” benefits; and economies of scale.
99
Harbor International & Global Funds
Additional Information—Continued
Additional Information—Continued
Trustees and Officers
As of December 2020
The business and affairs of the Trust shall be managed by or under the direction of the Trustees, and they shall have all powers necessary or desirable to carry out that responsibility. The Trustees shall have full power and authority to take or refrain from taking any action and to execute any contracts and instruments that they may consider necessary or desirable in the management of the Trust. Any determination made by the Trustees in good faith as to what is in the interests of the Trust shall be conclusive. Information pertaining to the Trustees and Officers of Harbor Funds is set forth below. The address of each Trustee and Officer is: [Name of Trustee or Officer] c/o Harbor Funds, 111 South Wacker Drive, 34th Floor, Chicago, IL 60606-4302.
Harbor Funds' Statement of Additional Information includes additional information about the Trust’s Trustees and is available without charge by calling 800-422-1050 or at the Trust’s website at harborfunds.com.
Name (Age) Position(s) with Fund | Term of Office and Length of Time Served1 | Principal Occupation(s) During Past Five Years | Number of Portfolios In Fund Complex Overseen By Trustee | Other Directorships Of Public Companies and Other Registered Investment Companies Held by Trustee During Past Five Years |
INDEPENDENT TRUSTEES | ||||
Scott M. Amero (57) Trustee | Since 2014 | Chairman (2015-Present) and Trustee (2011-2015), Rare (conservation nonprofit); Trustee, Berkshire School (2014-Present); Trustee, The Nature Conservancy, Massachusetts Chapter (2018-Present); Vice Chairman and Global Chief Investment Officer, Fixed Income (2010), Vice Chairman and Global Chief Investment Officer, Fixed Income, and Co-Head, Fixed Income Portfolio Management (2007-2010), BlackRock, Inc., (publicly traded investment management firm). | 36 | None |
Donna J. Dean (69) Trustee | Since 2010 | Chief Investment Officer of the Rockefeller Foundation (a private foundation) (2001-2019). | 36 | None |
Joseph L. Dowling III (56) Trustee | Since 2017 | Chair & Special Advisor to the University’s President (2020-Present), Chief Executive Officer (2018-2020), Interim Chief Financial Officer (2019-2020), and Chief Investment Officer (2013-2018), Brown University Investment Office; Chief Executive Officer, Jaws Acquisition Corp. (blank check company, 2020-Present); Advisory Board Member, Harbor Funds (2016-2017); and Founder and Managing Member, Narragansett Asset Management (private investment management firm) (1998-2013). | 36 | Director of Integrated Electrical Services (2012-Present);Director of Third Point RE (2019- Present). |
Randall A. Hack (73) Trustee | Since 2010 | Founder and Senior Managing Director of Capstone Capital LLC (private investment firm) (2003-Present); Director of Tower Development Corporation (cell tower developer) (2009-2016); Advisory Director of Berkshire Partners (private equity firm) (2002-2013); Founder and Senior Managing Director of Nassau Capital, LLC (private investment firm, investing solely on behalf of the Princeton Endowment) (1995-2001); and President of The Princeton University Investment Company (1990-1994). | 36 | None |
Robert Kasdin (62) Trustee | Since 2014 | Senior Vice President and Chief Operating Officer (2015-Present) and Chief Financial Officer (2018-Present), Johns Hopkins Medicine; Senior Executive Vice President, Columbia University (2002-2015); Trustee and Member of the Finance Committee, National September 11 Memorial & Museum at the World Trade Center (2005-2019); Director, Apollo Commercial Real Estate Finance, Inc. (2014-Present); Director and Executive Committee Member, The Y in Central Maryland (2018-Present); and Director, Noranda Aluminum Holdings Corp. (2007-2014). | 36 | Director of Apollo Commercial Real Estate Finance, Inc. (2014-Present). |
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Harbor International & Global Funds
Additional Information—Continued
Additional Information—Continued
Trustees and Officers—Continued
Name (Age) Position(s) with Fund | Term of Office and Length of Time Served1 | Principal Occupation(s) During Past Five Years | Number of Portfolios In Fund Complex Overseen By Trustee | Other Directorships Of Public Companies and Other Registered Investment Companies Held by Trustee During Past Five Years |
INDEPENDENT TRUSTEES—Continued | ||||
Kathryn L. Quirk (68) Trustee | Since 2017 | Retired; Vice President, Senior Compliance Officer and Head, U.S. Regulatory Compliance, Goldman Sachs Asset Management (2013-2017); Deputy Chief Legal Officer, Asset Management, and Vice President and Corporate Counsel, Prudential Insurance Company of America (2010-2012); Co-Chief Legal Officer, Prudential Investment Management, Inc., and Chief Legal Officer, Prudential Investments and Prudential Mutual Funds (2008-2012); Vice President and Corporate Counsel and Chief Legal Officer, Mutual Funds, Prudential Insurance Company of America, and Chief Legal Officer, Prudential Investments (2005-2008); Vice President and Corporate Counsel and Chief Legal Officer, Mutual Funds, Prudential Insurance Company of America (2004-2005); Member, Management Committee (2000-2002), General Counsel and Chief Compliance Officer, Zurich Scudder Investments, Inc. (1997-2002). | 36 | None |
Douglas J. Skinner (58) Trustee | Since 2020 | Professor of Accounting (2005-Present), Deputy Dean for Faculty (2015-2016, 2017-Present), Interim Dean (2016-2017), University of Chicago Booth School of Business. | 36 | None |
Ann M. Spruill (66) Trustee | Since 2014 | Partner (1993-2008), member of Executive Committee (1996-2008), Member Board of Directors (2002-2008), Grantham, Mayo, Van Otterloo & Co, LLC (private investment management firm) (with the firm since 1990); Member Investment Committee and Chair of Global Public Equities, Museum of Fine Arts, Boston (2000-Present); and Trustee, Financial Accounting Foundation (2014-Present). | 36 | None |
INTERESTED TRUSTEE | ||||
Charles F. McCain (51)* Chairman, Trustee and President | Since 2017 | Chief Executive Officer (2017-Present), Director (2007-Present), President and Chief Operating Officer (2017), Executive Vice President and General Counsel (2004-2017), and Chief Compliance Officer (2004-2014), Harbor Capital Advisors, Inc.; Director and Chairperson (2019-Present), Harbor Trust Company, Inc.; Director (2007-Present) and Chief Compliance Officer (2004-2017), Harbor Services Group, Inc.; Chief Executive Officer (2017-Present), Director (2007-Present), Chief Compliance Officer and Executive Vice President (2007-2017), Harbor Funds Distributors, Inc.; and Chief Compliance Officer, Harbor Funds (2004-2017). | 36 | None |
Name (Age) Position(s) with Fund | Term of Office and Length of Time Served1 | Principal Occupation(s) During Past Five Years |
FUND OFFICERS NOT LISTED ABOVE** | ||
Erik D. Ojala (45) Chief Compliance Officer | Since 2017 | Executive Vice President and General Counsel (2017-Present) and Secretary (2010-Present); Senior Vice President and Associate General Counsel (2007-2017), Harbor Capital Advisors, Inc.; Director and Secretary (2019-Present), Harbor Trust Company, Inc.; Director, Executive Vice President and Chief Compliance Officer (2017-Present), Harbor Funds Distributors, Inc.; Director (2017-Present) and Assistant Secretary (2014-Present), Harbor Services Group, Inc.; and AML Compliance Officer (2010-2017) and Vice President and Secretary (2007-2017), Harbor Funds. |
Anmarie S. Kolinski (49) Treasurer | Since 2007 | Executive Vice President and Chief Financial Officer (2007-Present), Harbor Capital Advisors, Inc.; Director and Treasurer (2019-Present), Harbor Trust Company, Inc.; Chief Financial Officer (2007-Present), Harbor Services Group, Inc.; and Chief Financial Officer (2015-Present) and Treasurer (2012-Present), Harbor Funds Distributors, Inc. |
Kristof M. Gleich (41) Vice President | Since 2019 | President (2018-Present) and Chief Investment Officer (2020), Harbor Capital Advisors, Inc.; Director, Vice Chairperson, President (2019-Present) and Chief Investment Officer (2020-Present), Harbor Trust Company, Inc.; and Managing Director, Global Head of Manager Selection (2010-2018), JP Morgan Chase & Co. |
101
Harbor International & Global Funds
Additional Information—Continued
Additional Information—Continued
Trustees and Officers—Continued
Name (Age) Position(s) with Fund | Term of Office and Length of Time Served1 | Principal Occupation(s) During Past Five Years |
FUND OFFICERS NOT LISTED ABOVE**—Continued | ||
Gregg M. Boland (57) Vice President | Since 2019 | Executive Vice President (2020-Present), Vice President (2019-2020), Harbor Capital Advisors, Inc.; President (2019-Present), Senior Vice President – Operations (2016-2019), and Vice President – Operations (2007-2015), Harbor Services Group, Inc.; and Senior Vice President, AML Compliance Officer, and OFAC Officer (2019-Present), Harbor Funds Distributors, Inc. |
Diana R. Podgorny (41) Secretary | Since 2018 | Senior Vice President and Assistant General Counsel (2020-Present), Vice President and Assistant General Counsel (2017-2020), Harbor Capital Advisors, Inc.; Director and Vice President (2020 – Present), Harbor Trust Company, Inc.; Vice President and Counsel, AMG Funds LLC (2016-2017); Assistant Secretary, AMG Funds, AMG Funds I, AMG Funds II and AMG Funds III (2016-2017); Assistant Secretary, AMG Funds IV (2010-2017); and Vice President and Counsel, Aston Asset Management, LLC (2010-2016). |
Jodie L. Crotteau (48) Assistant Secretary | Since 2014 | Senior Vice President and Chief Compliance Officer, Harbor Capital Advisors, Inc. (2014-Present); Chief Compliance Officer and AML/OFAC Officer (2019-Present), Harbor Trust Company, Inc.; Chief Compliance Officer and Secretary (2017-present) and Assistant Secretary (2015-2016), Harbor Services Group, Inc.; Assistant Secretary (2016-present), Harbor Funds Distributors, Inc.; Vice President and Chief Compliance Officer, Grosvenor Registered Funds (2011-2014); and Vice President, Grosvenor Capital Management, L.P. (2010-2014). |
Lana M. Lewandowski (41) AML Compliance Officer and Assistant Secretary | Since 2017 | Legal & Compliance Manager (2016-Present) and Legal Specialist (2012-2015), Harbor Capital Advisors, Inc. |
Lora A. Kmieciak (56) Assistant Treasurer | Since 2017 | Senior Vice President – Fund Administration and Analysis (2017-Present), Senior Vice President - Business Analysis (2015-2017), Harbor Capital Advisors, Inc.; Vice President (2020 – Present), Harbor Trust Company, Inc.; and Assurance Executive Director, Ernst & Young LLP (1999-2015). |
John M. Paral (52) Assistant Treasurer | Since 2013 | Director of Fund Administration and Analysis (2017-Present), Vice President (2012-Present) and Financial Reporting Manager (2007-2017), Harbor Capital Advisors, Inc. |
1 | Each Trustee serves for an indefinite term, until his or her successor is elected. Each Officer is elected annually. |
* | Mr. McCain is deemed an “Interested Trustee” due to his affiliation with the Adviser and Distributor of Harbor Funds. |
** | Officers of the Funds are “interested persons” as defined in the Investment Company Act. |
102
This privacy statement is not part of this report
Harbor’s Privacy Statement
The following privacy statement (“Privacy Statement”) is issued by Harbor Funds and each series of Harbor Funds and its affiliates, Harbor Capital Advisors, Inc., Harbor Services Group, Inc. and Harbor Funds Distributors, Inc. (collectively, “Harbor” “we” or “us”). The measures described in this Privacy Statement reflect the commitments we make to protect the privacy of your personal information. We appreciate the confidence you have shown by entrusting us with your assets.
Personal Information
In the course of providing products and services, we collect personal information about you from the following sources: applications, forms, our website (including any information captured through our use of “cookies”), through mobile applications, by telephone and in correspondence and transactions with us, our affiliates or other parties, including when you contact Shareholder Services or establish an account with us. This Privacy Statement applies to personal information we collect from those sources unless we inform you otherwise.
The personal information collected may include name, address, email address, telephone/fax numbers, account number, social security or taxpayer identification number, investment activity, bank account information, location data (depending on your app settings and device permissions), and other information voluntarily provided by you.
We may also collect certain information automatically when you visit us through our website or a mobile application. For example, we may collect technical and navigational information, such as computer browser type, device type, device ID, Internet protocol address, pages visited average time spent on our website and searches performed on our website. We may use this information to alert you to software compatibility issues; to provide you with or improve or websites, applications, products or services; or to provide you with content that may be of interest to you. We use your IP address to help diagnose problems with our server and to administer our website. Your IP address is also used to gather broad demographic information. This information will be used for internal purposes only. We also collect information in the form of log files that record website and app activity and gather statistics about your browsing habits. These entries are generated automatically, and help us to troubleshoot errors, improve performance and maintain the security of our sites and apps. We use “cookies” and similar files that may be placed on your computer or device for security purposes, to facilitate site navigation and to personalize the appearance of our site. We provide more information regarding cookies and other tracking technologies below.
In addition, we may receive personal information about you that you authorize third parties to provide to us. We also may obtain personal information from third-party service providers to verify your identity, to prevent fraud, or to help us identify products and services that may be of interest to you.
The personal information we collect about you may be transferred to or stored by us or our service providers in the United States or elsewhere, as permitted by law.
If you do not wish to provide personal information to us, we may be unable to provide certain products or services to you.
Information Sharing
We disclose personal information with affiliated and non-affiliated parties: (1) as permitted or required by law or regulation; (2) if we believe that is necessary to: comply with applicable laws, regulations, or industry requirements; respond to requests from a legal, regulatory, or governmental authority; enforce legal terms; detect and resolve any fraud or security concerns, and protect the rights, property, and safety of us, our users, or others; (3) in the event of a merger, acquisition or sale of all or substantially all of our assets; or (4) as otherwise described in this Privacy Statement.
Personal information we collect may be shared with non-affiliated companies that perform support services on our behalf or to other firms that assist us in providing you with products and services (including, without limitation, completing transactions), such as custodians, transfer agents, broker-dealers and marketing service firms (to support our marketing to you), as well as with other financial institutions. We may also share information with affiliates that are engaged in a variety of financial services in order to better service your account(s).
When information is shared with third parties, they are not permitted to use the information for any purpose other than those purposes described in this Privacy Statement or as permitted by law.
If you close your account(s) or if we lose contact with you, we will continue to share information in accordance with our current privacy policy and practices.
If you close your account(s) or if we lose contact with you, we will continue to share information in accordance with our current privacy policy and practices.
103
Harbor’s Privacy Statement—Continued
Security
We maintain physical, electronic and procedural safeguards designed to protect your personal information; however, please be aware that no data security measures can guarantee 100% security.
For shareholders accessing information through our website or a mobile application, various forms of Internet security, such as data encryption firewall barriers, user names and passwords, two-factor authentication, and other tools are used. For additional information regarding our security measures, visit the terms and conditions of use on our website at harborfunds.com.
Linking to
Third Parties
Third Parties
When you visit our website and leave to go to another linked site, we are not responsible for the content or availability of the linked site. Please be advised that if you enter into a transaction on the third-party site, we do not represent either the third party or you. Further, the privacy and security policies of the linked site may differ from those practiced by us.
Cookies and Other Technologies
A cookie is a small text file that is stored on your computer, tablet, or device when you visit a website or a mobile application. Cookies usually store small bits of information about you and what you do on that site or application, which are then used to improve your browsing experience. Some cookies are only used during a single visit, while others are saved on your device until your next visit. Harbor Funds and our third-party providers use both types of cookies to make your visits more productive.
If you are concerned about cookies, they can be blocked from your device, or you can set your browser to notify you when they are being used. Use the Help feature of your browser to learn how.
Our website, mobile application, and emails may use a web beacon. A web beacon helps to measure usage and activity and reports that activity back to the system providers. In some cases, a web beacon triggers the placement of a cookie on your device.
We and our service providers use web beacons and cookies to determine things like if and when you open our emails, what type of device, operating system, email program, or web browser you are using, your IP address, and what links you click within our site or email. These things enable us to gauge the effectiveness, relevance, and value of our content and communications.
We use Google Analytics (which uses a web beacon) to collect information about use of our website and mobile application. For more information on opting out of being tracked by Google Analytics, visit https://tools.google.com/dlpage/gaoptout.
Do Not Track
Our third-party vendors may collect information about users across our website. We do not currently have the capability to respond to a web browser that does not track signals or other mechanisms that provide you with the ability to exercise choice regarding the collection of this information.
Changes to this
Privacy Statement
Privacy Statement
We reserve the right to change or revise this Privacy Statement at any time to reflect changes in the law or our data collection and use practices. New updates to the Privacy Statement will be posted to our website and are include in Harbor Funds’ annual reports to shareholders. Privacy Statement changes will apply to the information collected from the date we post our revised Privacy Statement, as well as to existing information we hold.
Contact Us
If you have any questions or concerns about how we maintain the privacy of your personal information or if you would like to update your personal information on file, please contact us at 800-422-1050 Monday through Friday, between the hours of 8:00 a.m. and 6:00 p.m. Eastern time. You may also write to us at the following postal address:
Harbor Funds
c/o Harbor Services Group, Inc.
PO Box 804660
Chicago, IL 60680-4108
c/o Harbor Services Group, Inc.
PO Box 804660
Chicago, IL 60680-4108
We recommend that you read and retain this notice for your personal files.
Last Updated: December 2020
104
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
Douglas J. Skinner
Trustee
Trustee
Ann M. Spruill
Trustee
Trustee
Erik D. Ojala
Chief Compliance Officer
Chief Compliance Officer
Anmarie S. Kolinski
Treasurer
Treasurer
Kristof M. Gleich
Vice President
Vice President
Gregg M. Boland
Vice President
Vice President
Diana R. Podgorny
Secretary
Secretary
Jodie L. Crotteau
Assistant Secretary
Assistant Secretary
Lana M. Lewandowski
AML Compliance Officer
& Assistant Secretary
AML Compliance Officer
& Assistant Secretary
Lora A. Kmieciak
Assistant Treasurer
Assistant Treasurer
John M. Paral
Assistant Treasurer
Assistant Treasurer
Investment Adviser
Harbor Capital Advisors, Inc.
111 South Wacker Drive, 34th Floor
Chicago, IL 60606-4302
312-443-4400
111 South Wacker Drive, 34th Floor
Chicago, IL 60606-4302
312-443-4400
Distributor
Harbor Funds Distributors, Inc.
111 South Wacker Drive, 34th Floor
Chicago, IL 60606-4302
312-443-4600
111 South Wacker Drive, 34th Floor
Chicago, IL 60606-4302
312-443-4600
Shareholder Services
Harbor Services Group, Inc.
P.O. Box 804660
Chicago, IL 60680-4108
800-422-1050
P.O. Box 804660
Chicago, IL 60680-4108
800-422-1050
FD.AR.IG.1020
Annual Report
October 31, 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 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 2020 fiscal year has been a historic period that will undoubtedly live on in our memories as much as we might like to forget the massive disruptions caused by the coronavirus pandemic and the toll it has taken on human lives.
The period began quietly in investment markets, extending a lengthy stretch of subdued volatility. That relative calm came to a dramatic end in late February when the extent of the pandemic became clear, sending shockwaves across global investment markets. Volatility spiked sharply higher, market liquidity became challenged, and government bond yields plunged in a flight to safety. From its peak on February 19 to its March 23 trough, the S&P 500 tumbled 33.8% for its fastest ever descent into bear-market territory. International markets followed suit, with the MSCI All Country World Ex. US (ND) Index falling 32.9% over the same period. Although U.S. Treasuries served as a ballast during the period, corporate bonds did not escape the sharp selloff, with both investment-grade and high-yield credit indexes experiencing double-digit losses.
Governments and central banks acted swiftly and forcefully to support the global economy with massive fiscal and monetary stimulus. This jolt of liquidity put a floor under markets and set the stage for a sharp rebound. Broad stock and bond indexes gained ground throughout much of the rest of the year, shrugging off concerns about the pandemic, inconsistent policy responses, uncertainty around the U.S. election, and escalating social tensions.
As time marched on, economic data has improved. We see GDP is growing again, unemployment appears to have bottomed, and many market measures ended the fiscal year in positive territory. However, economic and market recovery has been uneven. The re-emergence of volatility has brought about significant dispersion across markets. For example, the difference between the best and worst sectors reached its widest levels in many years. Similarly, growth stocks outperformed value stocks by the widest margin in more than 20 years.
This volatile environment, though challenging, has been welcome news for talented active managers, because it has provided them with more opportunities to add value and distance themselves from the pack. Our research shows that the difference between top performing and bottom performing managers in many categories is at its highest level in 20 years.
Harbor believes there are many ways to seek to reach long-term financial goals. Drawing upon experienced portfolio managers who stay true to a strategy grounded in enduring investment principles is one way we believe offers the potential to achieve positive outcomes over time. Even though volatility is likely to be with us for some time to come, we are confident that all our subadvisers continue to strive to skillfully execute their strategies to benefit shareholders over the long haul.
It is important to acknowledge that while market gyrations provide opportunities for skillful professional managers, they can pose behavioral challenges for the rest of us. The sharp selloff in the first quarter was enough to test the mettle of the calmest investor. However, those who stayed the course and stuck to their long-term plans likely benefitted from the sharp recovery that followed. We will look back on this period as a time that underscored the value of thoughtful active management and timeless investment principles such as diversification, discipline, and a long-term view.
I hope that you and your families continue to fare well during these ongoing challenging times. Thank you for your continued investment in Harbor Funds.
December 21, 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.
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. 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.
Risk appetites improved considerably throughout the second half of the fiscal year following positive developments in the macro backdrop, including the easing of lockdown measures, some improvement in economic data, as well as continued fiscal and monetary policy support.
Global equities rallied with the S&P 500 reaching new highs, credit spreads tightened considerably, and the dollar weakened. Sovereign yield moves were broadly mixed, overall remaining anchored at lower levels, and U.S. 10-year Treasury yields were little changed.
After months of lockdowns, several regions around the world began easing restrictions, including those combatting the highest infection rates. Concerns persisted, however, about vulnerabilities related to the path of the virus as several regions reported a resurgence in the pace of new infections.
Labor market data in the U.S. indicated gradual improvement and core inflation rose whereas consumer sentiment continued to lag and small businesses largely struggled to re-open.
Geopolitical developments were numerous in the final months of the fiscal year and included a re-escalation of tensions between the U.S. and China on several fronts. Brexit headlines as well as ongoing election news in the U.S. also contributed to political uncertainty.
PERFORMANCE
Harbor Bond Fund outperformed the Bloomberg Barclays U.S. Aggregate Bond Index for the 12 months ended October 31, 2020. The Fund returned 6.82% (Retirement Class), 6.72% (Institutional Class) and 6.44% (Administrative Class) for the fiscal year, compared with the benchmark’s return of 6.19%.
The following strategies were positive for returns during fiscal year 2020:
• | U.S. duration strategies, including an average overweight, as U.S. rates fell over the fiscal year and a focus on front-end rates, as front-end rates fell more than intermediate and long-end rates. |
• | An underweight to investment grade credit as this sector underperformed like-duration Treasuries. |
• | Security selection within the securitized credit sector including select Agency and Non-Agency mortgage-backed securities holdings. |
2
Harbor Bond Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
CHANGE IN A $10,000 INVESTMENT
For the period 11/01/2010 through 10/31/2020
The graph compares a $10,000 investment in the Institutional Class shares of the Fund with the performance of the Bloomberg Barclays U.S. Aggregate Bond Index. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
TOTAL RETURNS
For the periods ended 10/31/2020
1 Year | Annualized | |||||||
5 Years | 10 Years | |||||||
Harbor Bond Fund | ||||||||
Retirement Class1 | 6.82% | 4.61% | 3.74% | |||||
Institutional Class | 6.72 | 4.59 | 3.73 | |||||
Administrative Class | 6.44 | 4.32 | 3.47 | |||||
Comparative Index | ||||||||
Bloomberg Barclays U.S. Aggregate Bond | 6.19% | 4.08% | 3.55% |
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 at harborfunds.com or by calling 800-422-1050.
The following strategies were negative or neutral for returns:
• | Country selection in the Eurozone, particularly a preference for Italian duration. |
• | An allocation to U.S. inflation-linked bonds, as inflation expectations moved lower over the fiscal year. |
OUTLOOK & STRATEGY
We forecast above-trend growth for a couple of years as the global economy emerges from the COVID-19 recession. However, we think concerns that “economic scarring” will weigh on potential output growth are warranted.
We believe three factors are likely to weigh on longer-term productivity growth: longer spells of unemployment may imply an erosion of individuals’ skills, higher uncertainty may depress business investment for a long time, and an increasing “zombification” of the corporate sector is expected due to massive government and central bank support.
The two key swing factors that could produce upside or downside surprises are the state of the pandemic and the degree to which fiscal policy stays active or retreats.
Given the difficult near-term and longer-term economic backdrop, and with disruption likely to lead to repeated bouts of volatility in financial markets, we expect monetary policy rates in most advanced economies to stay low or go even lower for much or all of the next three to five years.
We view negative rates as a desperate tool with adverse side effects that become larger the longer rates stay negative. However, with bond yields already low or negative and yield curves flat, more central banks are likely to venture into negative (or more deeply negative) territory in response to future adverse shocks, along with further purchases across a wide spectrum of financial assets, in our view.
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
This report contains the current opinions of Pacific Investment Management Company LLC (PIMCO) as of the date of this report and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Such opinions are subject to change without notice and securities described herein may no longer be included in, or may at any time be removed from, the Fund’s portfolio. This report is distributed for informational purposes only. Information contained herein has been obtained from sources believed reliable, but not guaranteed.
Fixed income investments are affected by interest rate changes and the creditworthiness of the issues held by the Fund. A rise in interest rates will cause a decrease in the value of fixed income securities. Such an event would have an adverse effect on the Fund. The use of derivative instruments may add additional risk. There may be a greater risk that the Fund could lose money due to prepayment and extension risks because the Fund invests heavily at times in mortgage-related securities. The Fund may engage in active and frequent trading to achieve its principal investment strategies. References to securities that are backed by the full faith and credit of the U.S. Government do not apply to the shares of the Fund. For information on the different share classes and the risks associated with an investment in the Fund, please refer to the current prospectus.
4
Harbor Bond Fund
Portfolio of Investments—October 31, 2020
Portfolio of Investments—October 31, 2020
Investment Allocation (% of investments) - Unaudited
(Excludes short-term investments and derivative positions)
Portfolio of Investments
Value, Cost, and Principal Amounts in Thousands
ASSET-BACKED SECURITIES—9.4% | |||
Principal Amount | Value | ||
Air Canada Pass-Through Trust | |||
Series 2017-1AA Cl. PTT | |||
$ | 3,770 | 3.300%—07/15/20311 | $ 3,559 |
Alaska Airlines Pass-Through Trust | |||
Series 2020-TR Cl. EETC | |||
3,600 | 4.800%—02/15/20291 | 3,796 | |
American Airlines Pass-Through Trust | |||
Series 15-2 Cl. AA | |||
1,644 | 3.600%—03/22/2029 | 1,590 | |
Anchorage Capital CLO Ltd.2 | |||
Series 2020-16A Cl. A | |||
4,100 | 1.601% (3 Month USD Libor + 1.400) 10/20/20311,3 | 4,101 | |
Argent Securities Inc. | |||
Series 2006-W4 Cl. A2C | |||
6,171 | 0.309% (1 Month USD Libor + 0.160) 05/25/20363 | 2,407 | |
Series 2005-W2 Cl. A2C | |||
523 | 0.509% (1 Month USD Libor + 0.360) 10/25/20353 | 523 | |
Series 2004-W11 Cl. M3 | |||
939 | 1.274% (1 Month USD Libor + 0.750) 11/25/20343 | 935 | |
3,865 | |||
Asset Backed Securities Corp. Home Equity Loan Trust | |||
Series 2003-HE4 Cl. M1 | |||
4,507 | 1.393% (1 Month USD Libor + 0.830) 08/15/20333 | 4,500 | |
CBAM CLO Management2 | |||
Series 2017-2A Cl. A | |||
6,100 | 1.458% (3 Month USD Libor + 1.240) 10/17/20291,3 | 6,061 | |
Cent CLO Ltd.2 | |||
Series 2015-24A Cl. A1R | |||
4,821 | 1.307% (3 Month USD Libor + 1.070) 10/15/20261,3 | 4,801 | |
Countrywide Asset-Backed Certificates | |||
Series 2006-21 Cl. 2A3 | |||
596 | 0.299% (1 Month USD Libor + 0.150) 05/25/20373 | 594 |
ASSET-BACKED SECURITIES—Continued | |||
Principal Amount | Value | ||
Series 2006-ABC1 Cl. A3 | |||
$ | 4,326 | 0.389% (1 Month USD Libor + 0.240) 05/25/20363 | $ 3,448 |
Series 2006-2 Cl. M1 | |||
1,200 | 0.549% (1 Month USD Libor + 0.400) 06/25/20363 | 1,177 | |
5,219 | |||
Credit Acceptance Auto Loan Trust | |||
Series 2018-2A Cl. A | |||
3,088 | 3.470%—05/17/20271 | 3,117 | |
Crown Point CLO Ltd.2 | |||
Series 2018-5A Cl. A | |||
5,070 | 1.158% (3 Month USD Libor + 0.940) 07/17/20281,3 | 5,008 | |
Dryden XXV Senior Loan Fund | |||
Series 2012-25A Cl. ARR | |||
4,628 | 1.137% (3 Month USD Libor + 0.900) 10/15/20271,3 | 4,589 | |
Evergreen Credit Card Trust | |||
Series 2019-2 Cl. A | |||
6,000 | 1.900%—09/16/20241 | 6,165 | |
First Franklin Mortgage Loan Trust | |||
Series 2006-FF14 Cl. A6 | |||
8,000 | 0.459% (1 Month USD Libor + 0.310) 10/25/20363 | 6,349 | |
Galaxy CLO Ltd.2 | |||
Series 2013-15A Cl. AR | |||
6,100 | 1.437% (3 Month USD Libor + 1.200) 10/15/20301,3 | 6,045 | |
GSAA Home Equity Trust | |||
Series 2006-20 Cl. 1A2 | |||
3,959 | 0.329% (1 Month USD Libor + 0.180) 12/25/20463 | 1,740 | |
Series 2007-9 Cl. A1A | |||
777 | 6.000%—08/25/2047 | 744 | |
2,484 | |||
GSAMP Trust | |||
Series 2007-FM1 Cl. 2A2 | |||
105 | 0.219% (1 Month USD Libor + 0.070) 12/25/20363 | 63 |
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 | ||
HSI Asset Securitization Corp. Trust | |||
Series 2006-HE2 Cl. 2A3 | |||
$ | 4,863 | 0.319% (1 Month USD Libor + 0.170) 12/25/20363 | $ 1,962 |
IXIS Real Estate Capital Trust | |||
Series 2005-HE1 Cl. M4 | |||
1,742 | 1.199% (1 Month USD Libor + 1.050) 06/25/20353 | 1,702 | |
JPMorgan Mortgage Acquisition Corp. | |||
Series 2006-ACC1 Cl. M1 | |||
463 | 0.419% (1 Month USD Libor + 0.270) 05/25/20363 | 462 | |
Series 2006-HE1 Cl. A4 | |||
1,637 | 0.729% (1 Month USD Libor + 0.290) 01/25/20363 | 1,627 | |
Series 2007-HE1 Cl. AF3 | |||
800 | 4.214%—05/25/20354 | 642 | |
2,731 | |||
LoanCore Ltd. | |||
Series 2018-CRE1 Cl. A | |||
4,651 | 1.278% (1 Month USD Libor + 1.130) 05/15/20281,3 | 4,634 | |
MASTR Asset Backed Securities Trust | |||
Series 2006-HE2 Cl. A4 | |||
5,085 | 0.389% (1 Month USD Libor + 0.240) 06/25/20363 | 2,963 | |
MF1 Multi Family Housing Mortgage Trust | |||
Series 2020-FL4 Cl. A | |||
5,100 | 1.851% (1 Month USD Libor + 1.700) 11/15/20351,3 | 5,099 x | |
MidOcean Credit CLO2 | |||
Series 2016-6A Cl. AR | |||
4,100 | 1.468% (3 Month USD Libor + 1.250) 01/20/20291,3 | 4,082 | |
Mid-State Capital Corp Trust | |||
Series 2004-1 Cl. A | |||
748 | 6.005%—08/15/2037 | 800 | |
Monarch Grove CLO2 | |||
Series 2018-1A Cl. A1 | |||
3,298 | 1.095% (3 Month USD Libor + 0.880) 01/25/20281,3 | 3,263 | |
Morgan Stanley Capital Inc. | |||
Series 2007-HE1 Cl. A2C | |||
1,937 | 0.299% (1 Month USD Libor + 0.150) 11/25/20363 | 1,383 | |
4,247 | 0.329% (1 Month USD Libor + 0.180) 05/25/20373 | 3,697 | |
5,080 | |||
Morgan Stanley Dean Witter Capital I Inc. Trust | |||
Series 2002-HE1 Cl. M1 | |||
112 | 1.049% (1 Month USD Libor + 0.600) 07/25/20323 | 112 | |
Mountain View CLO Ltd.2 | |||
Series 2014-1A Cl. ARR | |||
2,064 | 1.037% (3 Month USD Libor + 0.800) 10/15/20261,3 | 2,053 | |
Nassau Ltd. | |||
Series 2020-1A Cl. A1 | |||
3,000 | 2.383% (3 Month USD Libor + 2.150) 07/20/20291,3 | 3,007 | |
Oak Hill Credit Partners | |||
Series 2019-3A Cl. A1 | |||
5,900 | 1.538% (3 Month USD Libor + 1.320) 07/20/20321,3 | 5,898 |
ASSET-BACKED SECURITIES—Continued | |||
Principal Amount | Value | ||
OneMain Financial Issuance Trust | |||
Series 2017-1A Cl. A1 | |||
$ | 1,493 | 2.370%—09/14/20321 | $ 1,495 |
Option One Mortgage Loan Trust | |||
Series 2007-6 Cl. 2A4 | |||
4,177 | 0.399% (1 Month USD Libor + 0.250) 07/25/20373 | 3,335 | |
Ozlm Funding Ltd. | |||
Series 2012-1A Cl. A1R2 | |||
4,153 | 1.446% (3 Month USD Libor + 1.230) 07/22/20291,3 | 4,115 | |
Palmer Square Loan Funding Ltd. | |||
Series 2020-3A Cl. A1 | |||
5,112 | 1.918% (3 Month USD Libor + 1.700) 07/20/20281,3 | 5,118 | |
Park Place Securities Inc. | |||
Series 2005-WCW3 Cl. M1 | |||
3,494 | 0.629% (1 Month USD Libor + 0.480) 08/25/20353 | 3,513 | |
People's Financial Realty Mortgage Securities Trust | |||
Series 2006-1 Cl. 1A2 | |||
4,612 | 0.279% (1 Month USD Libor + 0.130) 09/25/20363 | 1,391 | |
RAMP Trust | |||
Series 2004-RS8 Cl. MII1 | |||
245 | 1.049% (1 Month USD Libor + 0.600) 08/25/20343 | 245 | |
Santander Drive Auto Receivables Trust | |||
Series 2020-2 Cl. A2A | |||
1,900 | 0.620%—05/15/2023 | 1,902 | |
Series 2020-2 Cl. A3 | |||
1,000 | 0.670%—04/15/2024 | 1,004 | |
2,906 | |||
Santander Retail Auto Lease Trust | |||
Series 2019-B Cl. A2A | |||
2,257 | 2.290%—04/20/20221 | 2,276 | |
Saxon Asset Securities Trust | |||
Series 2006-3 Cl. A3 | |||
4,114 | 0.319% (1 Month USD Libor + 0.170) 10/25/20463 | 4,019 | |
Securitized Asset Backed Receivables LLC Trust | |||
Series 2005-FR5 Cl. M1 | |||
6,787 | 0.809% (1 Month USD Libor + 0.440) 08/25/20353 | 5,194 | |
Small Business Administration Participation Certificates | |||
Series 2003-20I Cl. 1 | |||
22 | 5.130%—09/01/2023 | 22 | |
Series 2009-20A Cl. 1 | |||
1,288 | 5.720%—01/01/2029 | 1,427 | |
Series 2008-20H Cl. 1 | |||
2,540 | 6.020%—08/01/2028 | 2,797 | |
Series 2001-20A Cl. 1 | |||
9 | 6.290%—01/01/2021 | 9 | |
4,255 | |||
Specialty Underwriting & Residential Finance Trust | |||
Series 2006-BC4 Cl. A2B | |||
2,818 | 0.258% (1 Month USD Libor + 0.110) 09/25/20373 | 1,486 |
6
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 | ||
Structured Asset Securities Co. | |||
Series 2007-MN1A Cl. A1 | |||
$ | 19,921 | 0.379% (1 Month USD Libor + 0.230) 01/25/20371,3 | $ 13,593 |
Telos CLO Ltd.2 | |||
Series 2014 Cl. 6A | |||
1,623 | 1.488% (3 Month USD Libor + 1.270) 01/17/20271,3 | 1,620 | |
TPG Real Estate Finance Trust | |||
Series 2019-Fl3 Cl. A | |||
5,000 | 1.297% (1 Month USD Libor + 1.150) 10/15/20341,3 | 4,932 | |
Tralee CLO V Ltd.2 | |||
Series 2018-5A Cl. A1 | |||
5,900 | 1.328% (3 Month USD Libor + 1.110) 10/20/20281,3 | 5,875 | |
Trestles CLO Ltd.2 | |||
Series 2017-1A Cl. A1A | |||
6,100 | 1.505% (3 Month USD Libor + 1.290) 07/25/20291,3 | 6,077 | |
Venture XVI CLO Ltd.2 | |||
Series 2014-16A Cl. ARR | |||
4,242 | 1.087% (3 Month USD Libor + 0.850) 01/15/20281,3 | 4,211 | |
TOTAL ASSET-BACKED SECURITIES | |||
(Cost $189,050) | 190,354 | ||
COLLATERALIZED MORTGAGE OBLIGATIONS—11.1% | |||
Adjustable Rate Mortgage Trust | |||
Series 2006-3 Cl. 4A2 | |||
2,555 | 0.269% (1 Month USD Libor + 0.120) 08/25/20363 | 1,261 | |
Alba plc | |||
Series 2007-1 Cl. A3 | |||
GBP | 2,326 | 0.223% (3 Month GBP Libor + 0.170) 03/17/20393 | 2,877 |
Arbor Multifamily Mortgage Trust | |||
Series 2020-MF1 Cl. A5 | |||
$ | 2,900 | 2.756%—05/15/20531 | 3,138 |
Banc of America Alternative Loan Trust | |||
Series 2006 -7 Cl. A3 | |||
8,176 | 5.913%—10/25/20363 | 3,630 | |
Banc of America Funding Corp. | |||
Series 2007-C Cl. 7A5 | |||
704 | 0.451% (1 Month USD Libor + 0.300) 05/20/20473 | 677 | |
Bancorp Commercial Mortgage Trust | |||
Series 2018-CRE4 Cl. A | |||
1,009 | 1.048% (1 Month USD Libor + 0.900) 09/15/20351,3 | 1,001 | |
BCAP LLC Trust | |||
Series 2007-AA2 Cl. 12A1 | |||
4,978 | 0.359% (1 Month USD Libor + 0.210) 05/25/20473 | 4,611 | |
Series 2011-RR5 Cl. 12A1 | |||
377 | 4.850%—03/26/20371,4 | 379 | |
Series 2011-RR4 Cl. 8A1 | |||
1,705 | 5.250%—02/26/20361,3 | 1,139 | |
6,129 | |||
Bear Stearns Adjustable Rate Mortgage Trust | |||
Series 2000-2 Cl. A1 | |||
14 | 2.781%—11/25/20303 | 14 |
COLLATERALIZED MORTGAGE OBLIGATIONS—Continued | |||
Principal Amount | Value | ||
Series 2006-4 Cl. 1A1 | |||
$ | 214 | 3.374%—10/25/20363 | $ 211 |
Series 2004-10 Cl. 12A3 | |||
21 | 3.565%—01/25/20353 | 21 | |
Series 2004-1 Cl. 12A5 | |||
247 | 3.777%—04/25/20343 | 241 | |
487 | |||
Bear Stearns Alt-A Trust | |||
Series 2005-4 Cl. 1A1 | |||
3 | 0.589% (1 Month USD Libor + 0.220) 07/25/20353 | 3 | |
Benchmark Mortgage Trust | |||
Series 2019-B9 Cl. A5 | |||
5,200 | 4.016%—03/15/2052 | 6,099 | |
Chase Mortgage Finance Corp Trust | |||
Series 2006-A1 Cl. 4A1 | |||
1,174 | 3.133%—09/25/20363 | 1,049 | |
Citigroup Commercial Mortgage Trust | |||
Series 2015-GC33 Cl. A4 | |||
4,900 | 3.778%—09/10/2058 | 5,462 | |
Citigroup Mortgage Loan Trust | |||
Series 2007-10 Cl.2A | |||
3,404 | 3.363%—09/25/20373 | 3,254 | |
Comm Mortgage Trust | |||
Series 2016-787S Cl. A | |||
5,400 | 3.545%—02/10/20361 | 5,858 | |
Countrywide Alternative Loan Trust | |||
Series 2006-6BC Cl. 1A2 | |||
2,620 | 0.549% (1 Month USD Libor + 0.400) 05/25/20363 | 2,136 | |
Series 2005-84 Cl. 1A1 | |||
1,669 | 3.103%—02/25/20363 | 1,461 | |
Series 2005-20CB Cl. 2A5 | |||
1,714 | 5.500%—07/25/2035 | 1,485 | |
Series 2006-36T2 Cl. 1A4 | |||
1,137 | 5.750%—12/25/2036 | 704 | |
Series 2006-1R Cl.2A3 | |||
3,509 | 6.000%—08/25/2037 | 2,739 | |
8,525 | |||
Countrywide Home Loan Mortgage Pass Through Trust | |||
Series 2007-HY5 Cl. 1A1 | |||
693 | 3.345%—09/25/20473 | 629 | |
Credit Suisse First Boston Mortgage Securities Corp. | |||
Series 2006-C2 Cl. A3 | |||
283 | 6.000%—11/25/2035 | 222 | |
DC Office Trust | |||
Series 2019-MTC Cl. A | |||
4,900 | 2.965%—09/15/20451 | 5,342 | |
Deutsche Alt-A Securities Inc. Mortgage Loan Trust | |||
Series 2007-AR2 Cl. A1 | |||
4,032 | 0.299% (1 Month USD Libor + 0.150) 03/25/20373 | 3,895 | |
DSLA Mortgage Loan Trust | |||
Series 2006-AR1 Cl. 1A1A | |||
1,657 | 1.802% (Fed 12 Month Treasury Average Constant Maturity Treasury + 0.920) 3/19/20463 | 1,464 | |
Eurohome UK Mortgages plc | |||
Series 2007-1 Cl. A | |||
GBP | 1,831 | 0.209% (3 Month GBP Libor + 0.150) 06/15/20443 | 2,280 |
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 | ||
Exantas Capital Corp. | |||
Series 2020-RSO9 Cl. A | |||
$ | 3,509 | 2.647% (1 Month USD Libor + 2.500) 04/17/20371,3 | $ 3,517 |
First Horizon Asset Securities Inc. | |||
Series 2005-AR6 Cl. 4A1 | |||
527 | 3.394%—02/25/20363 | 487 | |
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 | 6,894 | |
GSMPS Mortgage Loan Trust | |||
Series 2006-RP2 Cl. 1AF1 | |||
4,285 | 0.549% (1 Month USD Libor + 0.400) 04/25/20361,3 | 3,737 | |
GSR Mortgage Loan Trust | |||
Series 2005-AR7 Cl. 6A1 | |||
182 | 2.947%—11/25/20353 | 181 | |
Series 2005-AR3 Cl. 3A1 | |||
358 | 3.660%—05/25/20353 | 308 | |
489 | |||
HarborView Mortgage Loan Trust | |||
Series 2004-8 Cl. 2A3 | |||
495 | 0.967% (1 Month USD Libor + 0.410) 11/19/20343 | 438 | |
Hawksmoor Mortgages | |||
Series 2019-1A Cl. A | |||
GBP | 21,894 | 1.112% (3 Month Sonia + 1.050) 05/25/20531,3 | 28,407 |
HomeBanc Mortgage Trust | |||
Series 2006-H2 Cl. A2 | |||
$ | 1,890 | 0.329% (1 Month USD Libor + 0.180) 12/25/20363 | 1,852 |
IndyMac ARM Trust | |||
Series 2001-H2 Cl. A2 | |||
2 | 1.762%—01/25/20323 | 2 | |
IndyMac IMSC Mortgage Loan Trust | |||
Series 2007-F2 Cl. 2A1 | |||
2,941 | 6.500%—07/25/2037 | 1,594 | |
IndyMac INDX Mortgage Loan Trust | |||
Series 2007-AR13 Cl. 4A1 | |||
12,288 | 3.031%—07/25/20373 | 9,845 | |
Series 2005-AR31 Cl. 1A1 | |||
897 | 3.338%—01/25/20363 | 840 | |
10,685 | |||
JP Morgan Mortgage Trust | |||
Series 2006-A6 Cl. 1A4L | |||
1,600 | 3.328%—10/25/20363 | 1,403 | |
Series 2006-S1 Cl. 3A1 | |||
347 | 5.500%—04/25/2036 | 364 | |
1,767 | |||
JP Morgan Resecuritization Trust | |||
Series 2009-7 Cl. 11A1 | |||
10 | 3.302%—09/27/20361,3 | 10 | |
JPMDB Commercial Mortgage Securities Trust | |||
Series 2016-C2 Cl. A4 | |||
4,225 | 3.144%—06/15/2049 | 4,599 | |
Manhattan West | |||
Series 2020-1MW Cl. A | |||
4,900 | 2.130%—09/10/20391 | 5,062 |
COLLATERALIZED MORTGAGE OBLIGATIONS—Continued | |||
Principal Amount | Value | ||
Mansard Mortgages plc | |||
Series 2007-2X Cl. A1 | |||
GBP | 884 | 0.709% (3 Month GBP Libor + 0.650) 12/15/20493 | $ 1,120 |
Merrill Lynch Alternative Note Asset Trust | |||
Series 2007-F1 Cl. 2A6 | |||
$ | 531 | 6.000%—03/25/2037 | 331 |
MetLife Securitization Trust | |||
Series 2018-1A Cl. A | |||
4,274 | 3.750%—03/25/20571,3 | 4,603 | |
Morgan Stanley Bank of America Merrill Lynch Trust | |||
Series 2015-C22 Cl. ASB | |||
5,459 | 3.040%—04/15/2048 | 5,699 | |
Onslow Bay Financial LLC | |||
Series 2018-1 Cl. A2 | |||
4,977 | 0.799% (1 Month USD Libor + 0.700) 06/25/20571,3 | 4,977 | |
Ready Capital Mortgage Financing LLC | |||
Series 2020-FL4 Cl. A | |||
5,800 | 2.299% (1 Month USD Libor + 2.150) 02/25/20351,3 | 5,807 | |
Residential Accredit Loans Inc. | |||
Series 2007-QS4 Cl. 3A9 | |||
2,731 | 6.000%—03/25/2037 | 2,622 | |
Residential Asset Securitization Trust | |||
Series 2007-A8 Cl. 2A1 | |||
17,933 | 6.250%—08/25/2037 | 7,150 | |
Residential Funding Mortgage Securities I | |||
Series 2007-SA1 Cl. 2A2 | |||
212 | 4.174%—02/25/20373 | 170 | |
Series 2006-SA1 Cl. 2A1 | |||
216 | 4.550%—02/25/20363 | 189 | |
359 | |||
Ripon Mortgages plc | |||
Series 1A Cl. A1 | |||
GBP | 6,229 | 0.868% (3 Month GBP Libor + 0.800) 08/20/20561,3 | 8,057 |
RMAC Securities plc | |||
Series 2006-NS4X Cl. A3A | |||
1,534 | 0.230% (3 Month GBP Libor + 0.170) 06/12/20443 | 1,887 | |
Structured Adjustable Rate Mortgage Loan Trust | |||
Series 2007-1 Cl. 1A1 | |||
$ | 1,510 | 0.449% (1 Month USD Libor + 0.150) 02/25/20373 | 1,440 |
Series 2005-21A Cl. 3A1 | |||
328 | 2.984%—04/25/20353 | 325 | |
1,765 | |||
Structured Asset Mortgage Investments Inc. | |||
Series 2005-AR5 Cl. A2 | |||
299 | 0.397% (1 Month USD Libor + 0.250) 07/19/20353 | 285 | |
Suntrust Adjustable Rate Mortgage Loan Trust | |||
Series 2007-S1 Cl. 1A | |||
429 | 3.523%—01/25/20373 | 386 | |
Towd Point Mortgage Funding plc | |||
Series 2019-A13A Cl. A1 | |||
GBP | 15,706 | 0.954% (3 Month Sonia + 0.900) 07/20/20451,3 | 20,321 |
Series 2020-14X Cl.A | |||
5,358 | 0.963% (3 Month Sonia + 0.900) 05/20/2045 | 6,914 |
8
Harbor Bond Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
COLLATERALIZED MORTGAGE OBLIGATIONS—Continued | |||
Principal Amount | Value | ||
Series 2019-GR4A Cl. A1 | |||
GBP | 5,452 | 1.073% (3 Month GBP Libor + 1.025) 10/20/20511,3 | $ 7,076 |
34,311 | |||
Washington Mutual Mortgage Pass Through Certificates Trust | |||
Series 2005-AR13 Cl. A1A1 | |||
$ | 146 | 0.439% (1 Month USD Libor + 0.290) 10/25/20453 | 145 |
Series 2005-AR6 Cl. 2A1A | |||
299 | 0.609% (1 Month USD Libor + 0.230) 04/25/20453 | 300 | |
Series 2006-AR11 Cl. 3A1A | |||
1,529 | 1.802% (Fed 12 Month Treasury Average Constant Maturity Treasury + 0.920) 09/25/20463 | 1,459 | |
Series 2006-AR8 Cl. 1A4 | |||
2,295 | 3.107%—08/25/20463 | 2,192 | |
4,096 | |||
Wells Fargo Commercial Mortgage Trust | |||
Series 2018-C48 | |||
7,117 | 4.302%—01/15/2052 | 8,387 | |
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS | |||
(Cost $218,261) | 224,664 | ||
CORPORATE BONDS & NOTES—41.1% | |||
AEROSPACE & DEFENSE—0.4% | |||
Boeing Co. | |||
6,100 | 1.950%—02/01/2024 | 6,081 | |
Raytheon Technologies Corp. | |||
2,800 | 2.800%—03/15/20221 | 2,883 | |
8,964 | |||
AIRLINES—0.2% | |||
Jetblue Airways Corp. | |||
4,500 | 4.000%—05/15/2034 | 4,653 | |
AUTOMOBILES—3.5% | |||
BMW Finance NV | |||
4,900 | 2.250%—08/12/20221 | 5,049 | |
Daimler Finance North America LLC | |||
5,900 | 2.550%—08/15/20221 | 6,091 | |
Ford Motor Credit Co. LLC | |||
3,400 | 2.343%—11/02/2020 | 3,400 | |
1,550 | 3.200%—01/15/2021 | 1,553 | |
5,000 | 3.370%—11/17/2023 | 4,962 | |
3,800 | 5.596%—01/07/2022 | 3,901 | |
2,700 | 5.875%—08/02/2021 | 2,761 | |
16,577 | |||
Ford Motor Credit Co. LLC MTN5 | |||
EUR | 5,000 | 1.744%—07/19/2024 | 5,507 |
General Motors Financial Co. Inc. | |||
$ | 6,600 | 2.450%—11/06/2020 | 6,601 |
Nissan Motor Acceptance Corp. | |||
2,600 | 2.550%—03/08/20211 | 2,611 | |
1,900 | 3.875%—09/21/20231 | 1,985 | |
4,596 | |||
Nissan Motor Co. Ltd. | |||
5,100 | 4.345%—09/17/20271 | 5,118 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
AUTOMOBILES—Continued | |||
Volkswagen Bank GmbH MTN5 | |||
EUR | 2,000 | 0.000% (3 Month EUR Libor + 1.550) 06/15/20213 | $ 2,331 |
Volkswagen Group of America Finance LLC | |||
$ | 6,500 | 1.024% (3 Month USD Libor + 0.770) 11/13/20201,3 | 6,501 |
4,700 | 3.350%—05/13/20251 | 5,115 | |
4,800 | 4.750%—11/13/20281 | 5,736 | |
17,352 | |||
Volkswagen International Finance NV | |||
EUR | 1,800 | 1.069% (3 Month EUR Libor + 1.550) 11/16/20243 | 2,151 |
71,373 | |||
BANKS—9.3% | |||
Banco Bilbao Vizcaya Argentaria SA | |||
$ | 1,600 | 0.875%—09/18/2023 | 1,598 |
1,500 | 1.125%—09/18/2025 | 1,493 | |
3,091 | |||
Banco Espirito Santo SA MTN5 | |||
EUR | 3,500 | 0.000%—01/15/2049* | 798 |
Banco Santander SA | |||
700 | 6.750%—12/31/20996,7 | 844 | |
Bank of America Corp. MTN5 | |||
$ | 4,800 | 0.981%—09/25/20257 | 4,799 |
Banque Federative du Credit Mutuel SA | |||
6,300 | 3.750%—07/20/20231 | 6,824 | |
Barclays plc | |||
4,200 | 3.684%—01/10/2023 | 4,341 | |
3,700 | 4.610%—02/15/20237 | 3,877 | |
1,000 | 7.875%—12/29/20496,7 | 1,033 | |
EUR | 2,900 | 8.000%—12/15/20206,7 | 3,403 |
12,654 | |||
Barclays plc MTN5 | |||
GBP | 4,000 | 3.250%—02/12/2027 | 5,585 |
BBVA Bancomer SA/Texas | |||
$ | 289 | 6.500%—03/10/2021 | 294 |
BBVA USA | |||
2,900 | 2.500%—08/27/2024 | 3,024 | |
BNP Paribas SA | |||
400 | 7.625%—12/29/20496,7 | 405 | |
Canadian Imperial Bank of Commerce | |||
2,100 | 0.950%—06/23/2023 | 2,125 | |
Citigroup Inc. | |||
4,700 | 2.572% (SOFR + 210.700) 06/03/20313 | 4,897 | |
Credit Suisse Group AG | |||
5,100 | 2.997%—12/14/20231,7 | 5,324 | |
300 | 7.125%—12/31/20996,7 | 312 | |
2,500 | 7.500%—12/29/20496,7 | 2,722 | |
8,358 | |||
Deutsche Bank AG/New York | |||
6,000 | 3.150%—01/22/2021 | 6,029 | |
1,500 | 3.300%—11/16/2022 | 1,558 | |
5,000 | 3.547%—09/18/20317 | 5,053 | |
9,000 | 3.961%—11/26/20257 | 9,632 | |
3,200 | 4.250%—10/14/2021 | 3,292 | |
25,564 | |||
Deutsche Bank AG/New York MTN5 | |||
EUR | 3,200 | 1.750%—01/17/2028 | 3,789 |
Intesa Sanpaolo SpA | |||
$ | 2,800 | 4.000%—09/23/20291 | 3,064 |
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 | ||
BANKS—Continued | |||
Lloyds Banking Group plc | |||
$ | 6,000 | 2.858%—03/17/20237 | $ 6,173 |
2,900 | 4.450%—05/08/2025 | 3,289 | |
9,462 | |||
Lloyds Banking Group plc MTN5 | |||
EUR | 1,500 | 3.500%—04/01/20267 | 1,969 |
Marriott International Inc. | |||
$ | 5,000 | 3.500%—10/15/2032 | 4,939 |
Mitsubishi UFJ Financial Group Inc. | |||
5,800 | 1.412%—07/17/2025 | 5,899 | |
2,100 | 2.623%—07/18/2022 | 2,179 | |
1,200 | 3.455%—03/02/2023 | 1,283 | |
9,361 | |||
Mizuho Financial Group Inc. | |||
5,100 | 0.849%—09/08/20247 | 5,091 | |
3,900 | 2.201%—07/10/20317 | 3,944 | |
4,900 | 2.555%—09/13/20257 | 5,149 | |
14,184 | |||
NatWest Group PLC | |||
700 | 1.750% (3 Month USD Libor + 1.470) 05/15/20233 | 705 | |
4,700 | 3.073%—05/22/20287 | 4,967 | |
200 | 4.519%—06/25/20247 | 217 | |
200 | 4.892%—05/18/20297 | 235 | |
3,600 | 8.625% (USD Swap Semi 30/360 5Y + 7.598) 12/29/20493,6 | 3,724 | |
9,848 | |||
NatWest Group PLC MTN5 | |||
EUR | 600 | 2.000%—03/04/20257 | 731 |
Nordea Bank Abp | |||
$ | 2,500 | 3.750%—08/30/20231 | 2,696 |
Oversea-Chinese Banking Corp. Ltd. | |||
3,700 | 0.730% (3 Month USD Libor + 0.450) 05/17/20211,3 | 3,702 | |
Santander Holdings USA | |||
5,400 | 3.450%—06/02/2025 | 5,828 | |
Societe Generale SA MTN5 | |||
4,900 | 4.250%—09/14/20231 | 5,322 | |
Sumitomo Mitsui Financial Group Inc. | |||
5,000 | 1.474%—07/08/2025 | 5,097 | |
Synchrony Bank | |||
3,000 | 3.650%—05/24/2021 | 3,038 | |
UniCredit SpA MTN5 | |||
10,600 | 7.830%—12/04/20231 | 12,436 | |
Wells Fargo & Co. | |||
3,100 | 1.444% (3 Month USD Libor + 1.230) 10/31/20233 | 3,143 | |
Wells Fargo & Co. MTN5 | |||
EUR | 3,300 | 1.741%—05/04/20307 | 4,098 |
$ | 5,600 | 3.550%—09/29/2025 | 6,237 |
10,335 | |||
188,206 | |||
BEVERAGES—0.7% | |||
Anheuser-Busch InBev Worldwide Inc. | |||
5,100 | 4.500%—06/01/2050 | 6,046 | |
Bacardi Ltd. | |||
4,700 | 4.450%—05/15/20251 | 5,273 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
BEVERAGES—Continued | |||
Constellation Brands Inc. | |||
$ | 2,600 | 3.700%—12/06/2026 | $ 2,965 |
14,284 | |||
BIOTECHNOLOGY—0.2% | |||
Regeneron Pharmaceutical | |||
3,300 | 1.750%—09/15/2030 | 3,184 | |
BUILDING PRODUCTS—0.6% | |||
CRH America Finance Inc. | |||
3,200 | 3.950%—04/04/20281 | 3,651 | |
3,200 | 4.500%—04/04/20481 | 3,725 | |
7,376 | |||
Fortune Brands Home & Security Inc. | |||
4,700 | 3.250%—09/15/2029 | 5,194 | |
Owens Corning | |||
300 | 4.200%—12/01/2024 | 331 | |
12,901 | |||
CAPITAL MARKETS—2.7% | |||
BGC Partners Inc. | |||
6,300 | 5.375%—07/24/2023 | 6,696 | |
Block Financial LLC Co. | |||
3,600 | 3.875%—08/15/2030 | 3,713 | |
Credit Agricole SA MTN5 | |||
4,900 | 3.750%—04/24/20231 | 5,269 | |
Credit Suisse Group Funding Guernsey Ltd. | |||
4,900 | 3.750%—03/26/2025 | 5,428 | |
4,845 | 3.800%—09/15/2022 | 5,125 | |
10,553 | |||
GE Capital International Funding Co. Unlimited Co. | |||
4,800 | 4.418%—11/15/2035 | 5,195 | |
Goldman Sachs Group Inc. | |||
7,700 | 0.994% (3 Month USD Libor + 0.780) 10/31/20223 | 7,731 | |
Moody's Corp. | |||
300 | 2.625%—01/15/2023 | 314 | |
Platin 1426 GmbH | |||
EUR | 2,700 | 6.875%—06/15/20231 | 3,065 |
UBS Group AG | |||
$ | 5,100 | 1.476% (3 Month USD Libor + 1.220) 05/23/20231,3 | 5,155 |
4,900 | 2.859%—08/15/20231 | 5,079 | |
1,100 | 6.875%—12/29/20496,7 | 1,116 | |
11,350 | |||
53,886 | |||
CHEMICALS—0.2% | |||
International Flavors & Fragrances Inc. | |||
3,700 | 3.200%—05/01/2023 | 3,862 | |
CONSUMER FINANCE—1.3% | |||
American Express Co. | |||
2,500 | 3.700%—08/03/2023 | 2,715 | |
Daimler Finance North America LLC | |||
4,861 | 2.200%—10/30/20211 | 4,942 | |
5,300 | 3.350%—05/04/20211 | 5,376 | |
5,300 | 3.700%—05/04/20231 | 5,675 | |
15,993 | |||
Harley-Davidson Financial Services Inc. | |||
5,300 | 3.550%—05/21/20211 | 5,376 |
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 | ||
CONSUMER FINANCE—Continued | |||
Springleaf Finance Corp. | |||
$ | 2,800 | 6.875%—03/15/2025 | $ 3,085 |
27,169 | |||
DIVERSIFIED CONSUMER SERVICES—0.3% | |||
Emory University | |||
3,800 | 2.143%—09/01/2030 | 3,923 | |
Mitsubishi UFJ Lease & Finance Co. Ltd. MTN5 | |||
1,500 | 2.250%—09/07/2021 | 1,519 | |
5,442 | |||
DIVERSIFIED FINANCIAL SERVICES—2.0% | |||
AXA Equitable Holdings Inc. | |||
3,200 | 3.900%—04/20/2023 | 3,442 | |
Cantor Fitzgerald LP | |||
5,400 | 6.500%—06/17/20221 | 5,831 | |
Guardian Life Global Funding | |||
4,000 | 3.400%—04/25/20231 | 4,305 | |
Imperial Brands Finance plc | |||
2,100 | 3.500%—02/11/20231 | 2,199 | |
5,600 | 3.875%—07/26/20291 | 6,169 | |
8,368 | |||
Intercontinental Exchange | |||
3,600 | 1.850%—09/15/2032 | 3,567 | |
Reckitt Benckiser Treasury Services plc | |||
3,400 | 2.375%—06/24/20221 | 3,498 | |
Rio Oil Finance Trust | |||
1,219 | 9.250%—07/06/20241 | 1,346 | |
5,297 | 9.750%—01/06/20271 | 6,091 | |
7,437 | |||
Syngenta Finance NV | |||
4,500 | 3.933%—04/23/20211 | 4,558 | |
41,006 | |||
DIVERSIFIED TELECOMMUNICATION SERVICES—1.8% | |||
Altice France SA | |||
1,000 | 7.375%—05/01/20261 | 1,045 | |
AT&T Inc. | |||
4,900 | 1.650%—02/01/2028 | 4,855 | |
5,700 | 2.300%—06/01/2027 | 5,923 | |
5,000 | 3.000%—06/30/2022 | 5,191 | |
15,969 | |||
British Telecommunications plc | |||
1,300 | 4.500%—12/04/2023 | 1,436 | |
T-Mobile USA Inc. | |||
3,500 | 2.050%—02/15/20281 | 3,546 | |
Verizon Communications Inc. | |||
12,695 | 3.376%—02/15/2025 | 14,097 | |
36,093 | |||
ELECTRIC UTILITIES—3.4% | |||
Baltimore Gas & Electric | |||
3,400 | 3.350%—07/01/2023 | 3,629 | |
Duke Energy Corp. | |||
2,600 | 0.765% (3 Month USD Libor + 0.500) 05/14/20211,3 | 2,606 | |
4,536 | 3.750%—04/15/2024 | 4,982 | |
7,588 | |||
Evergy Inc. | |||
5,000 | 2.450%—09/15/2024 | 5,304 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
ELECTRIC UTILITIES—Continued | |||
Exelon Corp. | |||
$ | 3,100 | 4.050%—04/15/2030 | $ 3,590 |
FirstEnergy Corp. | |||
1,100 | 2.850%—07/15/2022 | 1,130 | |
Greenko Solar Mauritius Ltd. | |||
4,900 | 5.550%—01/29/20251 | 5,049 | |
Interstate Power & Light Co. | |||
4,800 | 3.250%—12/01/2024 | 5,252 | |
Nextera Energy Capital Holdings Inc. | |||
5,000 | 1.950%—09/01/2022 | 5,149 | |
6,000 | 2.250%—06/01/2030 | 6,212 | |
1,624 | 2.800%—01/15/2023 | 1,702 | |
4,800 | 3.200%—02/25/2022 | 4,980 | |
18,043 | |||
Pacific Gas & Electric Co. | |||
3,800 | 1.750%—06/16/2022 | 3,801 | |
2,900 | 3.150%—01/01/2026 | 2,964 | |
300 | 3.300%—12/01/2027 | 304 | |
1,700 | 3.400%—08/15/2024 | 1,767 | |
2,000 | 3.450%—07/01/2025 | 2,085 | |
1,800 | 3.500%—06/15/2025 | 1,878 | |
1,500 | 4.250%—08/01/2023 | 1,591 | |
600 | 4.550%—07/01/2030 | 645 | |
15,035 | |||
Sempra Energy | |||
2,500 | 0.700% (3 Month USD Libor + 0.450) 03/15/20213 | 2,503 | |
Virginia Electric & Power Co. | |||
1,100 | 2.950%—01/15/2022 | 1,126 | |
68,249 | |||
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—0.1% | |||
Arrow Electronics Inc. | |||
2,100 | 3.500%—04/01/2022 | 2,166 | |
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—3.7% | |||
Agree LP Co. | |||
1,400 | 2.900%—10/01/2030 | 1,438 | |
Alexandria Real Estate Equities Inc. | |||
2,100 | 2.750%—12/15/2029 | 2,257 | |
American Tower Corp. | |||
5,000 | 2.750%—01/15/2027 | 5,363 | |
AvalonBay Communities Inc. MTN5 | |||
4,700 | 2.300%—03/01/2030 | 4,921 | |
300 | 3.450%—06/01/2025 | 334 | |
5,255 | |||
Boston Properties LP | |||
4,905 | 2.750%—10/01/2026 | 5,261 | |
Brandywine Operating Partnership LP | |||
5,000 | 4.100%—10/01/2024 | 5,254 | |
CBL & Associates LP | |||
2,700 | 4.600%—10/15/2024 | 989 | |
6,600 | 5.950%—12/15/2026 | 2,491 | |
3,480 | |||
Crown Castle International Corp. | |||
4,000 | 3.700%—06/15/2026 | 4,459 | |
Digital Realty Trust LP | |||
5,500 | 4.450%—07/15/2028 | 6,508 |
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 | ||
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—Continued | |||
EPR Properties | |||
$ | 1,900 | 4.500%—06/01/2027 | $ 1,705 |
600 | 4.950%—04/15/2028 | 539 | |
2,244 | |||
Equinix Inc. | |||
5,000 | 1.000%—09/15/2025 | 4,981 | |
GLP Capital LP / GLP Financing II Inc. | |||
4,500 | 4.000%—01/15/2030 | 4,690 | |
Highwoods Realty LP | |||
2,500 | 2.600%—02/01/2031 | 2,474 | |
OMEGA Healthcare Investors Inc. | |||
2,300 | 4.375%—08/01/2023 | 2,464 | |
Physicians Realty LP | |||
1,400 | 3.950%—01/15/2028 | 1,462 | |
Scentre Group Trust | |||
5,700 | 4.375%—05/28/20301 | 6,330 | |
Service Properties Trust | |||
4,800 | 4.350%—10/01/2024 | 4,254 | |
Spirit Realty LP | |||
4,700 | 3.400%—01/15/2030 | 4,797 | |
Washington Prime Group LP | |||
5,800 | 6.450%—08/15/2024 | 3,017 | |
75,988 | |||
FOOD & STAPLES RETAILING—0.0% | |||
CVS Pass-Through Trust | |||
484 | 6.943%—01/10/2030 | 581 | |
GAS UTILITIES—0.0% | |||
Southern California Gas Co. | |||
900 | 3.200%—06/15/2025 | 987 | |
HEALTH CARE EQUIPMENT & SUPPLIES—0.3% | |||
Boston Scientific Corp. | |||
5,700 | 2.650%—06/01/2030 | 5,991 | |
HEALTH CARE PROVIDERS & SERVICES—0.4% | |||
CVS Health Corp. | |||
3,900 | 4.125%—04/01/2040 | 4,423 | |
HCA Inc. | |||
4,000 | 5.375%—09/01/2026 | 4,502 | |
100 | 5.875%—02/01/2029 | 118 | |
4,620 | |||
9,043 | |||
HOTELS, RESTAURANTS & LEISURE—0.5% | |||
Wynn Las Vegas LLC / Wynn Las Vegas Capital Corp. | |||
5,200 | 4.250%—05/30/20231 | 4,969 | |
4,800 | 5.500%—03/01/20251 | 4,605 | |
9,574 | |||
HOUSEHOLD DURABLES—0.3% | |||
Whirlpool Corp. | |||
4,900 | 4.600%—05/15/2050 | 6,067 | |
INDUSTRIAL CONGLOMERATES—0.2% | |||
Textron Inc. | |||
3,800 | 2.450%—03/15/2031 | 3,776 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
INSURANCE—0.7% | |||
AIA Group Ltd. | |||
$ | 5,900 | 0.747% (3 Month USD Libor + 0.520) 09/20/20211,3 | $ 5,888 |
2,700 | 3.375%—04/07/20301 | 3,022 | |
8,910 | |||
Ambac LSNI LLC | |||
765 | 6.000% (3 Month USD Libor + 5.000) 02/12/20231,3 | 762 | |
American International Group | |||
3,800 | 2.500%—06/30/2025 | 4,082 | |
13,754 | |||
IT SERVICES—0.5% | |||
Amdocs Ltd. | |||
3,600 | 2.538%—06/15/2030 | 3,666 | |
Paypal Holdings Inc. | |||
5,000 | 2.850%—10/01/2029 | 5,448 | |
9,114 | |||
MACHINERY—0.1% | |||
CNH Industrial Capital LLC | |||
500 | 3.875%—10/15/2021 | 513 | |
2,200 | 4.375%—11/06/2020 | 2,200 | |
2,713 | |||
MEDIA—0.7% | |||
Charter Communications Operating LLC | |||
4,800 | 4.464%—07/23/2022 | 5,088 | |
COX Communications Inc. | |||
4,700 | 3.250%—12/15/20221 | 4,952 | |
Walt Disney Co. | |||
3,900 | 2.650%—01/13/2031 | 4,191 | |
14,231 | |||
MORTGAGE REAL ESTATE INVESTMENT TRUSTS (REITs)—0.1% | |||
ERP Operating LP | |||
2,100 | 3.375%—06/01/2025 | 2,325 | |
OIL, GAS & CONSUMABLE FUELS—1.2% | |||
EQM Midstream Partners LP | |||
1,550 | 4.750%—07/15/2023 | 1,544 | |
Equinor ASA | |||
200 | 3.125%—04/06/2030 | 221 | |
MPLX LP | |||
3,300 | 4.900%—04/15/2058 | 3,291 | |
Occidental Petroleum Corp. | |||
3,900 | 2.900%—08/15/2024 | 3,253 | |
Odebrecht Drilling Norbe VIII/IX Ltd. | |||
456 | 6.350%—12/01/2021 | 411 | |
3,449 | 7.350%—12/01/2026 | 905 | |
9 | 7.350%—12/01/20261 | 2 | |
1,318 | |||
Odebrecht Offshore Drilling Finance Ltd. | |||
565 | 6.720%—12/01/2022 | 518 | |
3,595 | 7.720%—12/01/2026 | 443 | |
961 | |||
Odebrecht Oil & Gas Finance Ltd. | |||
2,183 | 0.000%—09/12/20991,6,8 | 12 | |
Rio Oil Finance Trust | |||
1,857 | 9.250%—07/06/2024 | 2,050 |
12
Harbor Bond Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
OIL, GAS & CONSUMABLE FUELS—Continued | |||
Sabine Pass Liquefaction | |||
$ | 900 | 4.200%—03/15/2028 | $ 976 |
5,100 | 4.500%—05/15/20301 | 5,707 | |
6,683 | |||
Shell International Finance BV | |||
5,200 | 2.750%—04/06/2030 | 5,610 | |
24,943 | |||
PHARMACEUTICALS—2.1% | |||
Abbvie Inc. | |||
5,000 | 2.150%—11/19/20211 | 5,089 | |
4,900 | 2.600%—11/21/20241 | 5,217 | |
1,000 | 3.200%—11/06/2022 | 1,049 | |
2,200 | 3.450%—03/15/20221 | 2,278 | |
13,633 | |||
Bayer US Finance II LLC | |||
6,300 | 3.875%—12/15/20231 | 6,866 | |
2,800 | 4.250%—12/15/20251 | 3,186 | |
10,052 | |||
Johnson + Johnson | |||
3,400 | 0.950%—09/01/2027 | 3,391 | |
Mylan NV | |||
EUR | 5,100 | 2.250%—11/22/2024 | 6,369 |
Takeda Pharmaceutical Co. Ltd. | |||
$ | 1,500 | 2.050%—03/31/2030 | 1,510 |
1,000 | 4.400%—11/26/2023 | 1,110 | |
2,620 | |||
Teva Pharmaceutical Finance Netherlands II BV | |||
EUR | 2,200 | 3.250%—04/15/2022 | 2,570 |
Teva Pharmaceutical Finance Netherlands III BV | |||
$ | 3,000 | 6.750%—03/01/2028 | 3,157 |
41,792 | |||
REAL ESTATE MANAGEMENT & DEVELOPMENT—0.2% | |||
Tesco Property Finance 5 plc | |||
GBP | 2,251 | 5.661%—10/13/2041 | 3,878 |
ROAD & RAIL—0.3% | |||
ERAC USA Finance LLC | |||
$ | 2,600 | 3.300%—10/15/20221 | 2,729 |
Penske Truck Leasing Co. LP | |||
3,800 | 2.700%—03/14/20231 | 3,969 | |
6,698 | |||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—1.1% | |||
Broadcom Corp. / Broadcom Cayman Finance Ltd. | |||
3,800 | 3.875%—01/15/2027 | 4,202 | |
Broadcom Inc. Co. | |||
6,000 | 3.150%—11/15/2025 | 6,476 | |
5,107 | 3.459%—09/15/2026 | 5,562 | |
12,038 | |||
NXP BV / NXP Funding LLC / NXP USA Inc. | |||
4,600 | 3.875%—06/18/20261 | 5,173 | |
21,413 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
SOFTWARE—0.4% | |||
Oracle Corp. | |||
$ | 400 | 2.950%—04/01/2030 | $ 440 |
3,500 | 3.600%—04/01/2040 | 3,898 | |
4,338 | |||
VMware Inc. | |||
3,600 | 4.650%—05/15/2027 | 4,175 | |
8,513 | |||
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS—0.4% | |||
Dell International LLC | |||
4,000 | 5.450%—06/15/20231 | 4,404 | |
Dell International LLC / EMC Corp. | |||
1,600 | 5.850%—07/15/20251 | 1,881 | |
NetApp Inc. | |||
1,500 | 1.875%—06/22/2025 | 1,551 | |
7,836 | |||
THRIFTS & MORTGAGE FINANCE—0.3% | |||
Nationwide Building Society | |||
5,300 | 4.363%—08/01/20241,7 | 5,747 | |
TOBACCO—0.3% | |||
Altria Group Inc. | |||
1,600 | 2.350%—05/06/2025 | 1,689 | |
Japan Tobacco Inc. MTN5 | |||
5,000 | 2.000%—04/13/2021 | 5,026 | |
6,715 | |||
TRADING COMPANIES & DISTRIBUTORS—0.4% | |||
AerCap Ireland Capital DAC / AerCap Global Aviation Trust | |||
2,000 | 3.500%—05/26/2022 | 2,033 | |
Aviation Capital Group LLC | |||
5,300 | 4.125%—08/01/20251 | 5,181 | |
7,214 | |||
TRANSPORTATION INFRASTRUCTURE—0.1% | |||
Central Nippon Expressway Co. Ltd. | |||
1,150 | 2.849%—03/03/2022 | 1,183 | |
WIRELESS TELECOMMUNICATION SERVICES—0.1% | |||
Sprint Communications Inc. | |||
800 | 6.000%—11/15/2022 | 857 | |
Sprint Corp. | |||
1,390 | 7.250%—09/15/2021 | 1,450 | |
2,307 | |||
TOTAL CORPORATE BONDS & NOTES | |||
(Cost $809,505) | 833,821 | ||
ESCROW— 0.0% | |||
(Cost $12) | |||
Shares | |||
36,000 | General Motors Co. Escrow | — x | |
13
Harbor Bond Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
FOREIGN GOVERNMENT OBLIGATIONS—5.0% | |||
Principal Amount | Value | ||
Abu Dhabi Government International Bond MTN5 | |||
$ | 3,600 | 3.125%—04/16/20301 | $ 4,014 |
Brazil Letras Do Tesouro Nacional | |||
BRL | 218,000 | 0.000%—04/01/2021-10/01/20218 | 37,300 |
Israel Government International Bond | |||
$ | 4,800 | 2.750%—07/03/2030 | 5,257 |
4,600 | 3.875%—07/03/2050 | 5,350 | |
10,607 | |||
Japan International Cooperation Agency | |||
6,900 | 2.750%—04/27/2027 | 7,657 | |
Peruvian Government International Bond | |||
5,600 | 2.783%—01/23/2031 | 6,079 | |
PER | 5,600 | 8.200%—08/12/2026 | 2,084 |
8,163 | |||
Province of Ontario Canada | |||
CAD | 5,600 | 3.150%—06/02/2022 | 4,391 |
Province of Quebec Canada | |||
3,800 | 3.500%—12/01/2022 | 3,039 | |
13,900 | 4.250%—12/01/2021 | 10,882 | |
13,921 | |||
Provincia de Buenos Aires/Government Bonds | |||
ARS | 310 | 33.381% (Argentina Deposit Rates Badlar Private Banks ARS 30 to 35 Days + 3.750) 04/12/20251 | 3 |
Qatar Government International Bond | |||
$ | 5,500 | 3.375%—03/14/2024 | 5,934 |
2,000 | 4.500%—01/20/2022 | 2,095 | |
8,029 | |||
Republic of Peru | |||
PER | 8,600 | 5.940%—02/12/2029 | 2,823 |
15,000 | 6.350%—08/12/2028 | 5,059 | |
7,882 | |||
TOTAL FOREIGN GOVERNMENT OBLIGATIONS | |||
(Cost $106,157) | 101,967 | ||
MORTGAGE PASS-THROUGH—44.4% | |||
Federal Home Loan Mortgage Corp. | |||
$ | 981 | 2.000%—07/01/2050-08/01/2050 | 1,012 |
22 | 2.673% (U.S. Treasury Yield Curve Rate T Note 1 Year Constant Maturity Treasury + 2.250) 08/01/20353 | 22 | |
5,900 | 2.700%—08/01/2023 | 5,946 | |
2 | 3.469% (U.S. Treasury Yield Curve Rate T Note 1 Year Constant Maturity Treasury + 2.209) 06/01/20243 | 2 | |
775 | 3.500%—01/01/2026-02/01/2035 | 820 | |
4,165 | 4.000%—03/01/2025-01/01/2049 | 4,450 | |
260 | 4.500%—12/01/2040-09/01/2041 | 292 | |
723 | 5.500%—02/01/2038-07/01/2038 | 843 | |
2,607 | 6.000%—01/01/2029-05/01/2040 | 3,066 | |
16,453 | |||
Federal Home Loan Mortgage Corp. Multifamily Structured Pass Through Certificates | |||
17,631 | 1.224%—08/25/20223 | 307 | |
Federal Home Loan Mortgage Corp. REMIC9 | |||
5,254 | 0.505% (1 Month USD Libor + 0.700) 08/15/2040-10/15/20403 | 5,262 | |
3,819 | 0.548% (1 Month USD Libor + 0.400) 06/15/20413 | 3,844 |
MORTGAGE PASS-THROUGH—Continued | |||
Principal Amount | Value | ||
$ | 14 | 0.598% (1 Month USD Libor + 0.450) 11/15/20303 | $ 14 |
16 | 8.000%—08/15/2022 | 17 | |
— | 9.000%—12/15/2020 | — | |
9,137 | |||
Federal Home Loan Mortgage Corp. Structured Pass Through Certificates | |||
Series T-63 Cl. 1A1 | |||
73 | 2.220% (Fed 12 Month Treasury Average Constant Maturity Treasury + 1.200) 02/25/20453 | 74 | |
Series E3 Cl. A | |||
18 | 3.985%—08/15/20323 | 19 | |
93 | |||
Federal National Mortgage Association | |||
144 | 2.283% (Fed 12 Month Treasury Average Constant Maturity Treasury + 1.400) 10/01/20403 | 145 | |
5,177 | 2.310%—08/01/2022 | 5,295 | |
433 | 2.643% (12 Month USD Libor + 3.367) 05/01/2035-08/01/20353 | 439 | |
443 | 2.693% (12 Month USD Libor + 1.715) 06/01/20353 | 465 | |
106 | 3.000%—02/01/2021-11/01/2025 | 111 | |
11,466 | 3.500%—10/01/2021-04/01/2045 | 12,191 | |
18,717 | 4.000%—09/01/2023-06/01/2049 | 20,240 | |
5,828 | 4.500%—12/01/2020-10/01/2042 | 6,292 | |
1,860 | 5.000%—10/01/2031-06/01/2044 | 2,093 | |
19,019 | 5.500%—01/01/2025-09/01/2041 | 22,189 | |
6,139 | 6.000%—07/01/2023-06/01/2040 | 7,115 | |
76,575 | |||
Federal National Mortgage Association REMIC9 | |||
Series 2015-38 Cl. DF | |||
3,198 | 0.465% (1 Month USD Libor + 0.310) 06/25/20553 | 3,189 | |
Series 2020-M1 Cl. A2 | |||
4,400 | 2.444%—10/25/2029 | 4,691 | |
Series 2006-5 Cl. 3A2 | |||
41 | 3.059%—05/25/20353 | 42 | |
Series 2011-98 Cl. ZL | |||
73,665 | 3.500%—10/25/2041 | 77,688 | |
Series 2003-25 Cl. KP | |||
368 | 5.000%—04/25/2033 | 420 | |
Series 2003-W1 Cl. 1A1 | |||
137 | 5.226%—12/25/20423 | 151 | |
86,181 | |||
Federal National Mortgage Association TBA10 | |||
117,000 | 2.000%—01/14/2051 | 120,126 | |
178,500 | 2.500%—12/14/2050-01/14/2051 | 185,615 | |
157,300 | 3.000%—12/12/2049 | 164,453 | |
64,900 | 3.500%—11/13/2049-12/12/2049 | 68,547 | |
3,600 | 4.500%—11/13/2048 | 3,894 | |
1,000 | 5.500%—12/13/2048 | 1,113 | |
543,748 | |||
Government National Mortgage Association | |||
1,650 | 3.000%—11/15/2049 | 1,712 | |
4,194 | 5.000%—08/15/2033-11/20/2049 | 4,696 | |
6,408 |
14
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 | ||
Government National Mortgage Association II | |||
$ | 65 | 2.250% (U.S. Treasury Yield Curve Rate T Note 1 Year Constant Maturity Treasury + 1.500) 08/20/2022-07/20/20273 | $ 67 |
16 | 2.875% (U.S. Treasury Yield Curve Rate T Note 1 Year Constant Maturity Treasury + 1.500) 05/20/20243 | 16 | |
200 | 3.000% (U.S. Treasury Yield Curve Rate T Note 1 Year Constant Maturity Treasury + 1.500) 01/20/2025-02/20/20323 | 209 | |
64 | 3.125% (U.S. Treasury Yield Curve Rate T Note 1 Year Constant Maturity Treasury + 1.500) 10/20/2025-11/20/20293 | 66 | |
3,489 | 4.000%—06/20/2047 | 3,770 | |
6,894 | 4.500%—06/20/2048-02/20/2049 | 7,435 | |
11,589 | 5.000%—01/20/2049-10/20/2049 | 12,555 | |
24,118 | |||
Government National Mortgage Association II TBA10 | |||
600 | 3.000%—12/19/2049 | 626 | |
10,000 | 3.500%—12/21/2046 | 10,544 | |
3,100 | 4.000%—11/21/2046 | 3,297 | |
86,500 | 4.500%—11/20/2049 | 92,808 | |
107,275 | |||
Government National Mortgage Association TBA10 | |||
5,000 | 4.000%—11/20/2047 | 5,278 | |
23,500 | 5.000%—11/19/2048 | 25,720 | |
30,998 | |||
TOTAL MORTGAGE PASS-THROUGH | |||
(Cost $892,046) | 901,293 | ||
MUNICIPAL BONDS—0.5% | |||
Chicago Transit Authority | |||
75 | 6.300%—12/01/2021 | 77 | |
City of Chicago, IL | |||
816 | 7.750%—01/01/2042 | 874 | |
New Jersey Transportation Trust Fund Authority | |||
1,400 | 2.551%—06/15/2023 | 1,413 | |
New York State Urban Development Corp. | |||
3,900 | 1.496%—03/15/2027 | 3,903 | |
University of California | |||
3,600 | 1.316%—05/15/2027 | 3,598 | |
TOTAL MUNICIPAL BONDS | |||
(Cost $9,775) | 9,865 | ||
PREFERRED STOCKS—1.0% | |||
Shares | Value | ||
656,033 | AT&T Mobility II LLC | $ 17,513x | |
3,000,000 | Depository Trust & Clearing Corp.1 | 2,851 | |
TOTAL PREFERRED STOCKS | |||
(Cost $20,730) | 20,364 | ||
U.S. GOVERNMENT OBLIGATIONS—18.8% | |||
Principal Amount | |||
U.S. Treasury Bonds | |||
$ | 32,500 | 2.500%—02/15/2045 | 38,685 |
7,300 | 2.875%—05/15/2043-08/15/2045 | 9,272 | |
5,700 | 3.000%—02/15/2048 | 7,466 | |
70,000 | 3.125%—08/15/2044 | 92,307 | |
13,400 | 3.375%—05/15/2044 | 18,330 | |
4,200 | 4.250%—05/15/2039 | 6,263 | |
172,323 | |||
U.S. Treasury Notes | |||
52,500 | 1.375%—08/15/2050 | 48,948 | |
21,000 | 1.750%—09/30/202211 | 21,643 | |
25,100 | 1.875%—07/31/202211 | 25,857 | |
41,000 | 2.000%—08/31/2021 | 41,635 | |
49,500 | 2.000%—10/31/2021-12/31/202111 | 50,543 | |
18,800 | 2.625%—02/15/2029 | 21,619 | |
210,245 | |||
TOTAL U.S. GOVERNMENT OBLIGATIONS | |||
(Cost $355,810) | 382,568 | ||
SHORT-TERM INVESTMENTS—0.8% | |||
(Cost $16,200) | |||
REPURCHASE AGREEMENTS | |||
16,200 | Repurchase Agreement with HSBC dated October 30, 2020 due November 02, 2020 at 0.110% collateralized by U.S. Treasury Notes (value $16,516) | 16,200 | |
TOTAL INVESTMENTS—132.1% | |||
(Cost $2,617,546) | 2,681,096 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—(32.1)% | (651,093) | ||
TOTAL NET ASSETS—100.0% | $2,030,003 |
FUTURES CONTRACTS
Description | Number of Contracts | Expiration Date | Current Notional Value (000s) | Unrealized Appreciation/ (Depreciation) (000s) | ||||
Euro-Bund Futures (Short) | 10 | 12/08/2020 | EUR 1,761 | $ (29) | ||||
Euro-Buxl Futures (Long) | 16 | 12/08/2020 | 3,660 | 273 | ||||
U.S. Treasury Bond Futures 30 year (Short) | 178 | 12/21/2020 | $ 30,699 | 386 | ||||
U.S. Treasury Note Futures 5 year (Short) | 428 | 12/31/2020 | 53,757 | 97 | ||||
U.S. Treasury Note Futures 10 year (Long) | 308 | 12/21/2020 | 42,571 | (292) |
15
Harbor Bond Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
FUTURES CONTRACTS—Continued
Description | Number of Contracts | Expiration Date | Current Notional Value (000s) | Unrealized Appreciation/ (Depreciation) (000s) | ||||
Ultra U.S. Treasury Bond Futures 30 year (Long) | 1 | 12/21/2020 | $ 215 | $ (8) | ||||
Total Futures Contracts | $ 427 |
WRITTEN OPTIONS
WRITTEN OPTIONS NOT SETTLED THROUGH VARIATION MARGIN
Description | Counterparty | Strike Price | Expiration Date | Number of Contracts/ Notional | Premiums Received (000s) | Value (000s) | ||||||
Federal National Mortgage Association Future Option 30 year (Call) | JP Morgan Chase Bank NA | $ 101.34 | 12/07/2020 | 9,900,000 | $ 49 | $ (46) | ||||||
Federal National Mortgage Association Future Option 30 year (Call) | JP Morgan Chase Bank NA | 102.44 | 11/05/2020 | 6,100,000 | 45 | (47) | ||||||
Federal National Mortgage Association Future Option 30 year (Call) | JP Morgan Chase Bank NA | 103.46 | 12/07/2020 | 13,700,000 | 43 | (32) | ||||||
Federal National Mortgage Association Future Option 30 year (Call) | JP Morgan Chase Bank NA | 103.94 | 12/07/2020 | 6,000,000 | 12 | (9) | ||||||
Federal National Mortgage Association Future Option 30 year (Put) | JP Morgan Chase Bank NA | 99.94 | 11/05/2020 | 7,200,000 | 50 | (20) | ||||||
Federal National Mortgage Association Future Option 30 year (Put) | JP Morgan Chase Bank NA | 101.94 | 12/07/2020 | 6,000,000 | 22 | (8) | ||||||
Federal National Mortgage Association Future Option 30 year (Put) | JP Morgan Chase Bank NA | 102.44 | 11/05/2020 | 6,100,000 | 45 | (4) | ||||||
Federal National Mortgage Association Future Option 30 year (Put) | JP Morgan Chase Bank NA | 102.46 | 12/07/2020 | 13,700,000 | 67 | (34) | ||||||
Total Written Options Not Settled Through Variation Margin | 333 | (200) | ||||||||||
Total Written Options | $333 | $(200) |
FORWARD CURRENCY CONTRACTS
Counterparty | Amount to be Delivered (000s) | Amount to be Received (000s) | Settlement Date | Unrealized Appreciation/ (Depreciation) (000s) | ||||
Citibank NA | BRL 109,000 | $ 19,362 | 04/05/2021 | $ 471 | ||||
JP Morgan Chase Bank NA | BRL 109,000 | $ 19,165 | 10/04/2021 | 536 | ||||
Barclays Bank plc | $ 1,699 | GBP 1,297 | 11/17/2020 | (19) | ||||
Barclays Bank plc | GBP 4,329 | $ 5,714 | 11/17/2020 | 105 | ||||
Citibank NA | GBP 1,647 | $ 2,163 | 11/17/2020 | 29 | ||||
HSBC Bank USA NA | GBP 65,601 | $ 85,792 | 11/17/2020 | 796 | ||||
BNP Paribas SA | $ 3,750 | CAD 4,990 | 11/03/2020 | (4) | ||||
HSBC Bank USA NA | $ 4,738 | CAD 6,315 | 11/03/2020 | 2 | ||||
JP Morgan Chase Bank NA | $ 3,490 | CAD 4,666 | 11/03/2020 | 13 | ||||
UBS AG | $ 7,167 | CAD 9,518 | 11/03/2020 | (24) | ||||
BNP Paribas SA | CAD 4,990 | $ 3,750 | 12/02/2020 | 4 | ||||
Citibank NA | CAD 25,490 | $ 19,055 | 11/03/2020 | (77) | ||||
HSBC Bank USA NA | CAD 6,315 | $ 4,738 | 12/02/2020 | (2) | ||||
JP Morgan Chase Bank NA | CAD 4,666 | $ 3,490 | 12/02/2020 | (13) | ||||
UBS AG | CAD 9,518 | $ 7,167 | 12/02/2020 | 22 | ||||
BNP Paribas SA | EUR 922 | $ 9,081 | 11/17/2020 | 138 | ||||
JP Morgan Chase Bank NA | EUR 2,340 | $ 10,787 | 11/17/2020 | 192 | ||||
UBS AG | EUR 6,007 | $ 19,342 | 11/17/2020 | 325 | ||||
BNP Paribas SA | $ 133 | INR 10,030 | 12/16/2020 | 1 | ||||
JP Morgan Chase Bank NA | JPY 156,600 | $ 1,475 | 11/17/2020 | (21) | ||||
Total Forward Currency Contracts | $2,474 |
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) | |||||||||
CME Group | Brazil CETIP Interbank Deposit | Pay | 3.360% | At maturity | 01/03/2022 | BRL 924,000 | $ 27 | $ 324 | $ (297) | |||||||||
LCH Group | SONIA O/N Deposit Rates Swap | Receive | 1.000 | Annual | 12/16/2050 | GBP 27,300 | (1,394) | (3,205) | 1,811 |
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) | |||||||||
CME Group | British Bankers' Association LIBOR JPY 6-Month | Receive | 0.300% | Semi-annual | 03/18/2026 | JPY 10,510,000 | $(1,825) | $ (564) | $(1,261) | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Receive | 0.300 | Semi-annual | 03/18/2026 | 5,900,000 | (1,014) | (350) | (664) | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Pay | (0.095) | Semi-annual | 09/13/2026 | 1,190,000 | (47) | — | (47) | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Pay | (0.092) | Semi-annual | 09/13/2026 | 590,000 | (22) | — | (22) | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Pay | (0.068) | Semi-annual | 09/18/2026 | 990,000 | (25) | — | (25) | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Pay | (0.062) | Semi-annual | 09/18/2026 | 1,580,000 | (35) | (1) | (34) | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Pay | (0.064) | Semi-annual | 09/19/2026 | 595,000 | (14) | — | (14) | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Pay | (0.063) | Semi-annual | 09/19/2026 | 595,000 | (13) | — | (13) | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Pay | (0.087) | Semi-annual | 09/20/2026 | 297,000 | (11) | — | (11) | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Pay | (0.097) | Semi-annual | 09/24/2026 | 723,000 | (31) | 1 | (32) | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Receive | 0.300 | Semi-annual | 09/20/2027 | 2,180,000 | (449) | (113) | (336) | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Receive | 0.300 | Semi-annual | 03/20/2028 | 1,020,000 | (219) | 73 | (292) | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Pay | 0.380 | Semi-annual | 06/18/2028 | 5,480,000 | 1,574 | 209 | 1,365 | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Receive | 0.399 | Semi-annual | 06/18/2028 | 770,000 | (232) | — | (232) | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Receive | 0.450 | Semi-annual | 03/20/2029 | 660,000 | (231) | (49) | (182) | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Pay | 0.036 | Semi-annual | 03/10/2038 | 196,000 | (61) | — | (61) | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Pay | 0.040 | Semi-annual | 03/10/2038 | 196,000 | (59) | — | (59) | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Receive | 0.750 | Semi-annual | 03/20/2038 | 1,204,000 | (1,048) | (15) | (1,033) | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Receive | 0.800 | Semi-annual | 10/22/2038 | 220,000 | (211) | — | (211) | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Receive | 0.705 | Semi-annual | 10/31/2038 | 640,000 | (531) | 40 | (571) | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Receive | 0.785 | Semi-annual | 11/12/2038 | 320,000 | (309) | 1 | (310) | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Receive | 0.750 | Semi-annual | 12/20/2038 | 1,847,800 | (1,663) | 100 | (1,763) | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Pay | 0.122 | Semi-annual | 08/22/2039 | 1,310,000 | (299) | 107 | (406) | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Pay | 0.123 | Semi-annual | 08/22/2039 | 1,020,000 | (233) | 27 | (260) | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Pay | 0.103 | Semi-annual | 08/28/2039 | 190,000 | (50) | — | (50) | |||||||||
LCH Group | British Bankers' Association LIBOR JPY 6-Month | Pay | 1.000 | Semi-annual | 03/21/2048 | 230,000 | 373 | 561 | (188) | |||||||||
CME Group | British Bankers' Association LIBOR USD 3-Month | Pay | 2.800 | Semi-annual | 08/22/2023 | $ 86,000 | 6,517 | (1,932) | 8,449 | |||||||||
CME Group | Federal Funds Effective Rate US | Pay | 0.184 | Quarterly | 10/21/2025 | 123 | 123 | 123 | — | |||||||||
CME Group | USD-SOFR-COMPOUND | Receive | 1.000 | Quarterly | 10/21/2025 | 123 | 123 | 123 | — | |||||||||
Centrally Cleared Interest Rate Swaps | 3,251 | |||||||||||||||||
Interest Rate Swaps | $ 3,251 |
17
Harbor Bond Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
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 Amount (000s)e | Value f (000s) | Upfront Premiums (Received)/ Paid (000s) | Unrealized Appreciation/ (Depreciation) (000s) | ||||||||||
ICE Group | Rolls-Royce PLC 2.125% due 06/18/2021 | Sell | 1.000% | 06/20/2025 | 4.342% | Quarterly | EUR 5,000 | $(796) | $(892) | $ 96 | ||||||||||
ICE Group | TESCO PLC 6.000% due 12/14/2029 | Sell | 1.000 | 06/20/2022 | 0.270 | Quarterly | EUR 2,300 | 36 | (112) | 148 | ||||||||||
ICE Group | AT&T Inc. 2.450% due 06/30/2020 | Sell | 1.000 | 12/20/2020 | 0.335 | Quarterly | $ 3,100 | 7 | 21 | (14) | ||||||||||
ICE Group | General Electric Company 2.700% due 10/09/2022 | Sell | 1.000 | 12/20/2023 | 0.926 | Quarterly | 2,700 | 9 | (120) | 129 | ||||||||||
ICE Group | General Electric Company 2.700% due 10/09/2022 | Sell | 1.000 | 06/20/2024 | 1.108 | Quarterly | 1,200 | (3) | (3) | — | ||||||||||
ICE Group | General Electric Company 2.700% due 10/09/2022 | Sell | 1.000 | 12/20/2024 | 1.244 | Quarterly | 2,600 | (23) | (37) | 14 | ||||||||||
ICE Group | The Boeing Company 8.750% due 08/15/2021 | Sell | 1.000 | 12/20/2020 | 1.523 | Quarterly | 5,100 | 2 | 29 | (27) | ||||||||||
Centrally Cleared Credit Default Swaps | $346 |
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 Amount (000s)e | Value f (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 | 0.748% | Quarterly | $ 4,200 | $33 | $(114) | $ 147 | ||||||||||
Credit Default Swaps | $ 493 | |||||||||||||||||||
Total Swaps | $3,744 |
FIXED INCOME INVESTMENTS SOLD SHORT — (0.7)%
Principal Amount (000s) | Security | Proceeds (000s) | Value (000s) | |||
$ 9,000 | Federal National Mortgage Association TBA10 6.000%—11/12/2050 | $ 10,271 | $ (10,042) | |||
4,400 | Federal National Mortgage Association TBA10 5.000%—11/12/2050 | 4,825 | (4,834) | |||
Total Fixed Income Investments Sold Short | $ 15,096 | $ (14,876) |
FAIR VALUE MEASUREMENTS
The following table summarizes the Fund’s investments as of October 31, 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 | $— | $185,255 | $ 5,099 | $190,354 | ||||
Collateralized Mortgage Obligations | — | 224,664 | — | 224,664 | ||||
Corporate Bonds & Notes | — | 833,821 | — | 833,821 | ||||
Escrow | — | — | — | — | ||||
Foreign Government Obligations | — | 101,967 | — | 101,967 | ||||
Mortgage Pass-Through | — | 901,293 | — | 901,293 | ||||
Municipal Bonds | — | 9,865 | — | 9,865 | ||||
Preferred Stocks | — | 2,851 | 17,513 | 20,364 | ||||
U.S. Government Obligations | — | 382,568 | — | 382,568 |
18
Harbor Bond Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
FAIR VALUE MEASUREMENTS—Continued
Asset Category | Quoted Prices Level 1 (000s) | Other Significant Observable Inputs Level 2 (000s) | Significant Unobservable Inputs Level 3 (000s) | Total (000s) | ||||
Short-Term Investments | ||||||||
Repurchase Agreements | $ — | $ 16,200 | $ — | $ 16,200 | ||||
Total Investments in Securities | $ — | $2,658,484 | $22,612 | $2,681,096 | ||||
Financial Derivative Instruments - Assets | ||||||||
Forward Currency Contracts | $ — | $ 2,634 | $ — | $ 2,634 | ||||
Futures Contracts | 756 | — | — | 756 | ||||
Swap Agreements | — | 12,159 | — | 12,159 | ||||
Total Financial Derivative Instruments - Assets | $ 756 | $ 14,793 | $ — | $ 15,549 | ||||
Liability Category | ||||||||
Fixed Income Investments Sold Short | $ — | $ (14,876) | $ — | $ (14,876) | ||||
Financial Derivative Instruments - Liabilities | ||||||||
Forward Currency Contracts | $ — | $ (160) | $ — | $ (160) | ||||
Futures Contracts | (329) | — | — | (329) | ||||
Swap Agreements | — | (8,415) | — | (8,415) | ||||
Written Options | — | (200) | — | (200) | ||||
Total Financial Derivative Instruments - Liabilities | $(329) | $ (8,775) | $ — | $ (9,104) | ||||
Total Investments | $ 427 | $2,649,626 | $22,612 | $2,672,665 |
For more information on valuation inputs and their aggregation into the levels used in the table above, please refer to the Fair Value Measurements and Disclosures in Note 2 of the accompanying Notes to Financial Statements.
The following is a rollforward of the Fund’s Level 3 investments during the year ended October 31, 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 10/31/2020 (000s) | Unrealized Gain/(Loss) as of 10/31/2020 (000s) | ||||||||||
Asset-Backed Securities | $ — | $ 5,100 | $ — | $ — | $— | $ (1) | $— | $— | $ 5,099 | $ (1) | ||||||||||
Bank Loan Obligations | 5,198 | — | (5,174) | (26) | — | 2 | — | — | — | — | ||||||||||
Escrow | — | — | — | — | (3) | 3 | — | — | — | (12) | ||||||||||
Preferred Stocks | — | 17,744 | — | — | — | (231) | — | — | 17,513 | (231) | ||||||||||
$5,198 | $22,844 | $(5,174) | $(26) | $ (3) | $(227) | $— | $— | $22,612 | $(244) |
The following is a summary of significant unobservable inputs used in the fair valuations of assets and liabilities categorized within Level 3 of the fair value hierarchy.
Valuation Descriptions | Ending Balance as of 10/31/2020 (000s) | Valuation Technique | Unobservable Input(s) | Input Value(s) | ||||
Investments in Securities | ||||||||
Asset-Backed Securities | ||||||||
MF1 Multi Family Housing Mortgage Trust Series 2020-FL4 Cl. A | $ 5,099 | Benchmarking | Base Price | $ 99.98 | ||||
Escrow | ||||||||
General Motors Co. Escrow | — | Cash Available in Relation to Claims | Estimated Recovery Value | $ 0.00 | ||||
Preferred Stocks | ||||||||
AT&T Mobility II LLC | $ 17,513 | Market Approach | Trade Price | $ 26.70 | ||||
$ 22,612 |
19
Harbor Bond Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
* | Security in default |
x | Fair valued in accordance with Harbor Funds' Valuation Procedures. |
1 | Securities purchased in a transaction exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. The Fund has no right to demand registration of these securities. At October 31, 2020, the aggregate value of these securities was $514,038 or 26% of net assets. |
2 | CLO after the name of a security stands for Collateralized Loan Obligation. |
3 | Variable or floating rate security; the stated rate represents the rate in effect at October 31, 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. |
4 | Step coupon security; the stated rate represents the rate in effect at October 31, 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 | 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, except for perpetuity bonds. |
8 | Zero coupon bond |
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 October 31, 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 | At October 31, 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 $11,038 or 1% of net assets. |
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. |
ARS | Argentine Peso |
BRL | Brazilian Real |
CAD | Canadian Dollar |
EUR | Euro |
GBP | British Pound |
INR | Indian Rupee |
JPY | Japanese Yen |
PER | Peruvian Nuevosol |
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
During the fiscal year ended October 31, 2020, the overall market experienced an unprecedented set of circumstances with the realization that COVID-19 had reached pandemic proportions and consequent negative effects on everyday life in both the U.S. and global economies.
After setting an interim high in the S&P 500 Index (the “S&P”) of 3,386.15 on February 19, 2020, uncertainty for the economy amid fears relating to the spreading virus and resulting volatility saw the S&P set a 12-month low of 2,237.40 on March 23, 2020.
Subsequently, spurred by optimism for the gradual reopening of the U.S. economy and buoyed by continued U.S. Federal Reserve monetary intervention and U.S. government fiscal stimulus, the S&P continued to rally over the course of the next several months before setting an all-time high of 3,580.84 on September 2, 2020, only to close the fiscal year at 3,269.96 (a gain of 9.70% for the twelve months ended October 31, 2020). The pullback from the September high was primarily due to mounting concerns for the renewal of fiscal stimulus amid an increasingly contentious U.S. presidential election and uncertainty regarding the possible contagion effect of COVID-19 due to the reopening of schools and the loosening of social distancing standards.
The highlight in the convertibles market during the fiscal year has been the increased surge of new issuance with 184 deals raising $93.8 billion. This compares favorably with the preceding three-year average issuance of 120 deals raising $46.5 billion each year. Notably, in a shift from issuers primarily in the Information Technology and Healthcare sectors looking to raise additional growth capital by selling in to a rising equity market, the new issue market has been bolstered by more mature non-traditional issuers looking to take advantage of benign monetary conditions to issue convertibles in combination with simultaneous offerings of equity and/or debt.
Performance
During the fiscal year ended October 31, 2020, Harbor Convertible Securities Fund returned 19.93% (Retirement Class), 19.63% (Institutional Class), 19.48% (Administrative Class), and 19.33% (Investor Class) while the ICE BofA U.S. Convertible Ex Mandatory Index (“V0A0” or the “Index”) returned 31.18% during the same period. Performance on a sector basis was somewhat mixed with growth-oriented sectors such as Consumer Services, Healthcare, Consumer Discretionary, and Information Technology positive, and more mature/cyclical sectors including Energy, Industrials, and Financials negative.
The principal differential between the Fund and the Index was an underweight in the most equity-like section of the marketplace (i.e., those convertibles trading with an investment premium of 100% or more). Stylistically, we tend to lighten/sell these securities due to their extreme equity sensitivity and lack of downside protection. During the fiscal year, the Fund’s average weighting in the 100% investment premium bucket was 4.64%, returning 85.47% with a contribution of +420 basis points (“bps”). The Index’s average weighting of 21.99% returned 83.78% with a contribution of +1611 bps, more than accounting for the performance differential between the Fund and the Index for the fiscal year.
The best performing industries in the Fund relative to the Index were banks, hotels & leisure, internet marketing, oil & gas, and metals and mining. In banks, the Fund had no exposure to the perpetual preferred securities of Bank of America and Wells Fargo. In hotels & leisure,
21
Harbor Convertible Securities Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
CHANGE IN A $10,000 INVESTMENT
For the period 05/01/2011 through 10/31/2020
The graph compares a $10,000 investment in the Institutional Class shares of the Fund with the performance of the ICE BofAML U.S. Convertible Ex Mandatory Index. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
TOTAL RETURNS
For the periods ended 10/31/2020
1 Year | Annualized | |||||||
5 Years | Life of Fund | |||||||
Harbor Convertible Securities Fund | ||||||||
Retirement Class2 | 19.93% | 8.87% | 6.82% | |||||
Institutional Class1 | 19.63 | 8.77 | 6.77 | |||||
Administrative Class1 | 19.48 | 8.46 | 6.48 | |||||
Investor Class1 | 19.33 | 8.39 | 6.38 | |||||
Comparative Index | ||||||||
ICE BofA U.S. Convertible Ex Mandatory1 | 31.18% | 14.10% | 11.07% |
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 at harborfunds.com or by calling 800-422-1050. The Fund charges a redemption fee of 1% on redemption of Fund shares that are held for less than 90 days.
the Fund benefitted primarily by having sold its position in Carnival Corporation. Internet marketing contributed to relative performance as a result of an overweight position in Etsy, an e-commerce provider of handmade and vintage items, and an out of Index position in MercadoLibre, an online trading site for the Latin American markets. Each of these companies was the beneficiary of the stay/work at home phenomenon. In oil & gas, the Fund benefited from having no exposure to Chesapeake Energy (which filed for bankruptcy) and metals and mining, which had an Index return of -10.01%.
The Fund’s underweight in automobiles significantly detracted from relative performance during the fiscal year. The Fund sold its remaining position in Tesla during the second calendar quarter due to its extreme equity sensitivity. Tesla, with three tranches outstanding, each trading at a multiple of par with an average Index weight of 6.04%, returned 407.52% and contributed +1066 bps, or 34.2% of the Index’s fiscal year return. The average weight for Tesla in the Fund during the fiscal year was 0.45% with a 280.92% return and a contribution of +144 bps. The software, semiconductors, biotechnology, and healthcare technology industries also detracted from relative performance. Although each of these industries had a positive total return and a combined contribution of +927 bps, or 47.2% of the Fund’s fiscal year performance, each of these industries had a negative attribution effect due to underweights or lack of exposure to the most equity-like tranches in their respective industries.
The resurgence of the convertible new issue calendar, combined with the sustained rally in underlying equities, has provided the Fund with opportunities to sell securities with declining or diminishing optionality, lighten or sell positions that had materially appreciated, and to further diversify the Fund by selectively adding what we believed were credit worthy names with a balanced convertible profile.
Outlook & Strategy
Given recent market upheaval and renewed volatility, we continue to believe that prospects remain constructive for convertible securities. Prospects include the balanced posture of the current convertible market with an emphasis on credit, primary issuer base with long term growth characteristics, and the new issue conduit for backed up corporate and/or equity issuers looking to shore up their balance sheets.
1 | The “Life of Fund” return as shown reflects the period 05/01/2011 through 10/31/2020. |
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—October 31, 2020
Portfolio of Investments—October 31, 2020
SECTOR ALLOCATION (% of investments) - Unaudited
Portfolio of Investments
Value, Cost, and Principal Amounts in Thousands
CONVERTIBLE BONDS—97.5% | |||
Principal Amount | Value | ||
AIRLINES—0.8% | |||
Southwest Airlines Co. | |||
$ | 930 | 1.250%—05/01/2025 | $ 1,256 |
AUTO COMPONENTS—0.5% | |||
CIE Generale des Etablissements Michelin SCA | |||
800 | 0.000%—01/10/20221 | 790 | |
AUTOMOBILES—0.6% | |||
Winnebago Industries Inc. | |||
864 | 1.500%—04/01/20252 | 893 | |
BANKS—0.4% | |||
BofA Finance LLC MTN3 | |||
643 | 0.250%—05/01/2023 | 640 | |
BIOTECHNOLOGY—3.9% | |||
BioMarin Pharmaceutical Inc. | |||
2,515 | 0.599%—08/01/2024 | 2,593 | |
Coherus Biosciences Inc. | |||
586 | 1.500%—04/15/20262 | 659 | |
Exact Sciences Corp. | |||
756 | 0.375%—03/15/2027 | 996 | |
382 | 1.000%—01/15/2025 | 680 | |
1,676 | |||
Ionis Pharmaceuticals Inc. | |||
560 | 0.125%—12/15/20242 | 520 | |
Neurocrine Biosciences Inc. | |||
414 | 2.250%—05/15/2024 | 581 | |
6,029 | |||
CAPITAL MARKETS—0.9% | |||
Ares Capital Corp. | |||
1,191 | 3.750%—02/01/2022 | 1,200 | |
233 | 4.625%—03/01/2024 | 243 | |
1,443 | |||
COMMUNICATIONS EQUIPMENT—1.6% | |||
InterDigital Inc. | |||
612 | 2.000%—06/01/2024 | 628 | |
Lumentum Holdings Inc. | |||
1,583 | 0.500%—12/15/20262 | 1,784 | |
2,412 |
CONVERTIBLE BONDS—Continued | |||
Principal Amount | Value | ||
CONSTRUCTION & ENGINEERING—1.0% | |||
Vinci SA | |||
$ | 1,400 | 0.375%—02/16/2022 | $ 1,483 |
CONSUMER FINANCE—0.3% | |||
LendingTree Inc. | |||
423 | 0.500%—07/15/20252 | 422 | |
DIVERSIFIED CONSUMER SERVICES—1.0% | |||
Chegg Inc. | |||
1,583 | 0.000%—09/01/20261,2 | 1,605 | |
DIVERSIFIED TELECOMMUNICATION SERVICES—2.2% | |||
Liberty Broadband Corp. | |||
1,124 | 2.750%—09/30/20502 | 1,208 | |
Liberty Latin America Ltd. | |||
1,999 | 2.000%—07/15/2024 | 1,753 | |
Vonage Holdings Corp. | |||
410 | 1.750%—06/01/2024 | 402 | |
3,363 | |||
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—0.7% | |||
II-VI Inc. | |||
919 | 0.250%—09/01/2022 | 1,100 | |
ENTERTAINMENT—7.3% | |||
Bilibili Inc. | |||
1,277 | 1.250%—06/15/20272 | 1,634 | |
iQIYI Inc. | |||
868 | 2.000%—04/01/2025 | 874 | |
Liberty Media Corp. | |||
702 | 1.000%—01/30/2023 | 835 | |
251 | 1.375%—10/15/2023 | 282 | |
2,061 | 2.125%—03/31/20482 | 2,095 | |
3,212 | |||
Live Nation Entertainment Inc. | |||
1,499 | 2.000%—02/15/20252 | 1,317 | |
1,387 | 2.500%—03/15/2023 | 1,490 | |
2,807 | |||
Sea Ltd. | |||
522 | 2.375%—12/01/20252 | 995 |
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 | |||
Zynga Inc. | |||
$ | 1,335 | 0.250%—06/01/2024 | $ 1,685 |
11,207 | |||
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—0.6% | |||
IH Merger Sub LLC | |||
729 | 3.500%—01/15/2022 | 927 | |
HEALTH CARE EQUIPMENT & SUPPLIES—5.3% | |||
CONMED Corp. | |||
975 | 2.625%—02/01/2024 | 1,115 | |
Dexcom Inc. | |||
1,466 | 0.250%—11/15/20252 | 1,417 | |
Insulet Corp. | |||
1,406 | 0.375%—09/01/2026 | 1,724 | |
281 | 1.375%—11/15/2024 | 677 | |
2,401 | |||
Integra Lifesciences Holdings Corp. | |||
808 | 0.500%—08/15/20252 | 741 | |
Nuvasive Inc. | |||
1,881 | 1.000%—06/01/20232 | 1,782 | |
Tandem Diabetes Care Inc. | |||
564 | 1.500%—05/01/20252 | 710 | |
8,166 | |||
HEALTH CARE TECHNOLOGY—1.9% | |||
Allscripts Healthcare Solutions Inc. | |||
1,209 | 0.875%—01/01/20272 | 1,233 | |
Tabula Rasa Healthcare Inc. | |||
364 | 1.750%—02/15/20262 | 320 | |
Teladoc Health Inc. | |||
1,205 | 1.250%—06/01/20272 | 1,409 | |
2,962 | |||
HOTELS, RESTAURANTS & LEISURE—2.7% | |||
Huazhu Group Ltd. | |||
1,145 | 3.000%—05/01/20262 | 1,323 | |
Marriott Vacations Worldwide Corp. | |||
2,027 | 1.500%—09/15/2022 | 2,005 | |
NCL Corp. Ltd. | |||
678 | 5.375%—08/01/20252 | 788 | |
4,116 | |||
INDEPENDENT POWER AND RENEWABLE ELECTRICITY PRODUCERS—0.6% | |||
SolarEdge Technologies Inc. | |||
770 | 0.000%—09/15/20251,2 | 948 | |
INTERACTIVE MEDIA & SERVICES—4.8% | |||
IAC FinanceCo 3 Inc. | |||
1,103 | 2.000%—01/15/20302 | 1,762 | |
K12 Inc. | |||
998 | 1.125%—09/01/20272 | 821 | |
Snap Inc. | |||
509 | 0.750%—08/01/2026 | 949 | |
Twitter Inc. | |||
1,429 | 0.250%—06/15/2024 | 1,564 | |
Zillow Group Inc. | |||
1,438 | 2.750%—05/15/2025 | 2,262 | |
7,358 |
CONVERTIBLE BONDS—Continued | |||
Principal Amount | Value | ||
INTERNET & DIRECT MARKETING RETAIL—5.1% | |||
Booking Holdings Inc. | |||
$ | 1,691 | 0.750%—05/01/20252 | $ 2,123 |
Etsy Inc. | |||
476 | 0.125%—10/01/2026 | 748 | |
1,275 | 0.125%—09/01/20272 | 1,327 | |
2,075 | |||
Fiverr International Ltd. | |||
595 | 0.000%—11/01/20251,2 | 611 | |
MercadoLibre Inc. | |||
382 | 2.000%—08/15/2028 | 1,075 | |
Shopify Inc. | |||
502 | 0.125%—11/01/2025 | 552 | |
Wayfair Inc. | |||
1,438 | 0.625%—10/01/20252 | 1,378 | |
7,814 | |||
IT SERVICES—8.5% | |||
Akamai Technologies Inc. | |||
693 | 0.125%—05/01/2025 | 813 | |
1,625 | 0.375%—09/01/2027 | 1,741 | |
2,554 | |||
Euronet Worldwide Inc. | |||
1,576 | 0.750%—03/15/2049 | 1,520 | |
Insight Enterprises Inc. | |||
1,217 | 0.750%—02/15/2025 | 1,247 | |
KBR Inc. | |||
632 | 2.500%—11/01/2023 | 702 | |
Nice Ltd. | |||
1,472 | 0.000%—09/15/20251,2 | 1,506 | |
Okta Inc. | |||
1,860 | 0.375%—06/15/20262 | 2,111 | |
Parsons Corp. | |||
840 | 0.250%—08/15/20252 | 821 | |
Sabre GLBL Inc. | |||
299 | 4.000%—04/15/20252 | 353 | |
Square Inc. | |||
993 | 0.125%—03/01/20252 | 1,462 | |
Wix.com Ltd. | |||
845 | 0.000%—08/15/20251,2 | 830 | |
13,106 | |||
LIFE SCIENCES TOOLS & SERVICES—1.2% | |||
Illumina Inc. | |||
1,154 | 0.000%—08/15/20231 | 1,228 | |
227 | 0.500%—06/15/2021 | 281 | |
1,509 | |||
Repligen Corp. | |||
269 | 0.375%—07/15/2024 | 420 | |
1,929 | |||
MACHINERY—1.5% | |||
Fortive Corp. | |||
761 | 0.875%—02/15/2022 | 760 | |
Greenbrier Cos. Inc. | |||
866 | 2.875%—02/01/2024 | 785 | |
Meritor Inc. | |||
708 | 3.250%—10/15/2037 | 770 | |
2,315 |
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—2.1% | |||
Dish Network Corp. | |||
$ | 3,061 | 3.375%—08/15/2026 | $ 2,713 |
Liberty Interactive LLC | |||
168 | 1.750%—09/30/20462 | 301 | |
Pandora Media LLC | |||
269 | 1.750%—12/01/2023 | 305 | |
3,319 | |||
MORTGAGE REAL ESTATE INVESTMENT TRUSTS (REITs)—1.6% | |||
Blackstone Mortgage Trust Inc. | |||
2,362 | 4.750%—03/15/2023 | 2,286 | |
Starwood Property Trust Inc. | |||
165 | 4.375%—04/01/2023 | 159 | |
2,445 | |||
OIL, GAS & CONSUMABLE FUELS—2.3% | |||
Equities Corp. | |||
773 | 1.750%—05/01/20262 | 991 | |
Pioneer Natural Resource Co. | |||
717 | 0.250%—05/15/20252 | 768 | |
Total SA MTN3 | |||
1,800 | 0.500%—12/02/2022 | 1,772 | |
3,531 | |||
PERSONAL PRODUCTS—0.5% | |||
Herbalife Nutrition Ltd. | |||
816 | 2.625%—03/15/2024 | 814 | |
PHARMACEUTICALS—2.5% | |||
Ironwood Pharmaceuticals Inc. | |||
460 | 0.750%—06/15/2024 | 470 | |
451 | 1.500%—06/15/2026 | 462 | |
932 | |||
Jazz Investments I Ltd. | |||
200 | 1.500%—08/15/2024 | 205 | |
1,857 | 2.000%—06/15/20262 | 2,231 | |
2,436 | |||
Supernus Pharmaceuticals Inc. | |||
448 | 0.625%—04/01/2023 | 416 | |
3,784 | |||
PROFESSIONAL SERVICES—0.5% | |||
FTI Consulting Inc. | |||
660 | 2.000%—08/15/2023 | 781 | |
REAL ESTATE MANAGEMENT & DEVELOPMENT—0.3% | |||
Redfin Corp. | |||
437 | 0.000%—10/15/20251,2 | 412 | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—6.9% | |||
Enphase Energy Inc. | |||
1,159 | 0.250%—03/01/20252 | 1,661 | |
Inphi Corp. | |||
511 | 0.750%—04/15/20252 | 656 | |
Microchip Technology Inc. | |||
1,673 | 1.625%—02/15/2027 | 2,607 | |
ON Semiconductor Corp. | |||
1,887 | 1.625%—10/15/2023 | 2,693 | |
Silicon Laboratories Inc. | |||
1,934 | 0.625%—06/15/20252 | 2,160 |
CONVERTIBLE BONDS—Continued | |||
Principal Amount | Value | ||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—Continued | |||
STMicroelectronics NV | |||
$ | 600 | 0.250%—07/03/2024 | $ 925 |
10,702 | |||
SOFTWARE—23.3% | |||
Altair Engineering Inc. | |||
298 | 0.250%—06/01/2024 | 336 | |
Alteryx Inc. | |||
773 | 0.500%—08/01/2024 | 808 | |
326 | 1.000%—08/01/2026 | 341 | |
1,149 | |||
Atlassian Inc. | |||
161 | 0.625%—05/01/2023 | 378 | |
Blackline Inc. | |||
1,014 | 0.125%—08/01/2024 | 1,496 | |
Coupa Software Inc. | |||
835 | 0.375%—06/15/20262 | 973 | |
CyberArk Software Ltd. | |||
1,599 | 0.000%—11/15/20241,2 | 1,539 | |
Datadog Inc. | |||
759 | 0.125%—06/15/20252 | 952 | |
DocuSign Inc. | |||
107 | 0.500%—09/15/2023 | 304 | |
Envestnet Inc. | |||
498 | 0.750%—08/15/20252 | 500 | |
686 | 1.750%—06/01/2023 | 873 | |
1,373 | |||
FireEye Inc. | |||
1,094 | 0.875%—06/01/2024 | 1,053 | |
Five9 Inc. | |||
979 | 0.500%—06/01/20252 | 1,300 | |
HubSpot Inc. | |||
562 | 0.375%—06/01/20252 | 706 | |
J2 Global Inc. | |||
423 | 1.750%—11/01/20262 | 380 | |
448 | 3.250%—06/15/2029 | 509 | |
889 | |||
Medallia Inc. | |||
1,163 | 0.125%—09/15/20252 | 1,201 | |
New Relic Inc. | |||
257 | 0.500%—05/01/2023 | 248 | |
NortonLifeLock Inc. | |||
775 | 2.000%—08/15/20222 | 921 | |
Nuance Communications Inc. | |||
716 | 1.000%—12/15/2035 | 1,020 | |
Palo Alto Networks Inc. | |||
2,154 | 0.750%—07/01/2023 | 2,315 | |
Pegasystems Inc. | |||
1,410 | 0.750%—03/01/20252 | 1,576 | |
Proofpoint Inc. | |||
1,111 | 0.250%—08/15/2024 | 1,077 | |
Q2 Holdings Inc. | |||
547 | 0.750%—06/01/2026 | 679 | |
Rapid7 Inc. | |||
1,180 | 2.250%—05/01/20252 | 1,493 | |
Realpage Inc. | |||
1,042 | 1.500%—05/15/2025 | 1,076 | |
RingCentral Inc. | |||
2,484 | 0.000%—03/01/2025-03/15/20261,2 | 2,578 | |
Sailpoint Technologies Holdings Inc. | |||
697 | 0.125%—09/15/20242 | 1,101 |
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 | ||
SOFTWARE—Continued | |||
Slack Technologies Inc. | |||
$ | 823 | 0.500%—04/15/20252 | $ 943 |
Splunk Inc. | |||
160 | 0.500%—09/15/2023 | 231 | |
1,707 | 1.125%—06/15/20272 | 1,887 | |
2,118 | |||
Varonis System Inc. | |||
690 | 1.250%—08/15/20252 | 990 | |
Workday Inc. | |||
607 | 0.250%—10/01/2022 | 916 | |
Workiva Inc. | |||
652 | 1.125%—08/15/2026 | 649 | |
Zendesk Inc. | |||
1,046 | 0.625%—06/15/20252 | 1,313 | |
Zscaler Inc. | |||
1,044 | 0.125%—07/01/20252 | 1,213 | |
35,875 | |||
SPECIALTY RETAIL—3.2% | |||
American Eagle Outfitter Inc. | |||
483 | 3.750%—04/15/20252 | 850 | |
Burlington Stores Inc. | |||
1,387 | 2.250%—04/15/20252 | 1,594 |
CONVERTIBLE BONDS—Continued | |||
Principal Amount | Value | ||
SPECIALTY RETAIL—Continued | |||
Guess Inc. | |||
$ | 573 | 2.000%—04/15/2024 | $ 469 |
National Vision Holdings | |||
611 | 2.500%—05/15/20252 | 900 | |
RH | |||
599 | 0.000%—06/15/20231 | 1,078 | |
4,891 | |||
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS—0.9% | |||
Pure Storage Inc. | |||
1,357 | 0.125%—04/15/2023 | 1,331 | |
TOTAL CONVERTIBLE BONDS | |||
(Cost $137,069) | 150,169 | ||
TOTAL INVESTMENTS—97.5% | |||
(Cost $137,069) | 150,169 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—2.5% | 3,897 | ||
TOTAL NET ASSETS—100.0% | $154,066 |
FAIR VALUE MEASUREMENTS
All investments at October 31, 2020 (as disclosed in the preceding Portfolio of Investments) were classified as Level 2. There were no Level 3 investments at October 31, 2020 or 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 | Securities purchased in a transaction exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. The Fund has no right to demand registration of these securities. At October 31, 2020, the aggregate value of these securities was $72,998 or 47% 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.
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, firm market tone and positive sentiment elevated risk assets. At the October meeting, the Federal Reserve (Fed cut the federal funds target range by 25 basis points (bps) for the third time that year. A stabilization in global tensions pushed yields higher. 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 fixed-income market. The Fed cut the funds rate twice by a total of 150 bps 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. During the first quarter of 2020, the sharp drop in energy prices, combined with recession concerns, drove down inflation expectations, and the 5-year breakeven rate declined by 116 bps to 0.53%. As states prematurely opened the economic rebound was mixed. The Fed not only expressed a willingness to extend current accommodations for as long as needed, but also announced that it would allow inflation to moderately surpass its 2% target following extended periods of sub-2% inflation. Congress remained locked in an impasse on a fourth stimulus package amid signs of an improving economy. Equity markets reached new highs, but as global coronavirus cases climbed, tensions between the U.S. and China escalated, and the U.S. presidential election came into focus, the rally in risk assets began to lose steam. The varied tone pushed the Treasury curve modestly steeper, with the 10-year and 30-year rate, closing the fiscal year at 0.88% and 1.66%, respectively. Investment-grade corporate supply totaled roughly $80 billion in October, above expectations of $75 billion, but less than half of the prior month’s total. Investment-grade corporate spreads ended October at 125 bps, and fixed income largely outperformed equities, as investor demand remained robust despite higher-than-expected supply and a softer market tone.
Performance
During the year ended October 31, 2020, Harbor Core Bond Fund returned 7.36% (Retirement Class) and 7.28% (Institutional Class) outperforming the Bloomberg Barclays U.S. Aggregate Bond Index, with the index posting positive absolute returns of 6.19%.
On an absolute basis, the portfolio’s allocation to credit contributed the most to its one-year return. More specifically, the portfolio’s exposure to the Industrials, Financials and Utilities sectors were the top performers. Additionally, the portfolio’s securitized sectors performed well on an absolute basis and provided nice diversification and stability amidst the periodic volatility. From a detractor perspective, a small allocation to Small Business Administrations and Taxable Munis posted negative returns. Holdings that drove positive performance in the fund included JP Morgan Chase, Toyota, and Hyundai Capital America, while detractors included Occidental Petroleum, United Airlines and American Airlines. We were able to opportunistically trim some of our OXY and AAL exposure during the time period.
Compared to the Bloomberg Barclays Aggregate Index, the Fund holds an approximately 24% underweight to Government securities and an overweight to spread sectors, with an approximately 8% Credit overweight and an approximately 15% 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 to, what we believe are, 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.
27
Harbor Core Bond Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
CHANGE IN A $10,000 INVESTMENT
For the period 06/01/2018 through 10/31/2020
The graph compares a $10,000 investment in the Institutional Class shares of the Fund with the performance of the Bloomberg Barclays U.S. Aggregate Bond Index. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
TOTAL RETURNS
For the periods ended 10/31/2020
1 Year | 5 Years | Annualized | ||||||
Life of Fund | ||||||||
Harbor Core Bond Fund | ||||||||
Retirement Class1 | 7.36% | N/A | 7.34% | |||||
Institutional Class1 | 7.28 | N/A | 7.26 | |||||
Comparative Index | ||||||||
Bloomberg Barclays U.S. Aggregate Bond1 | 6.19% | N/A | 6.84% |
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 at harborfunds.com or by calling 800-422-1050.
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.
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 we believe show resilience in tough economic conditions and represent attractive relative value, in our view.
Our portfolio construction process is focused on creating portfolios that provide attractive returns, reasonable risk exposure, and necessary liquidity. 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 what we feel are 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 expect to continue to deploy liquidity and increase credit risk in our portfolios, favoring industries and companies that we believe show resilience in tough economic conditions and represent attractive relative value, in our view.
1 | The “Life of Fund” return as shown reflects the period 06/01/2018 through 10/31/2020. |
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. For information on the different share classes and the risks associated with an investment in the Fund, please refer to the current prospectus.
28
Harbor Core Bond Fund
Portfolio of Investments—October 31, 2020
Portfolio of Investments—October 31, 2020
Investment Allocation (% of investments) - Unaudited
Portfolio of Investments
Value, Cost and Principal Amounts in Thousands
ASSET-BACKED SECURITIES—11.4% | |||
Principal Amount | Value | ||
Air Canada Pass-Through Trust | |||
Series 2015-1 Cl. A | |||
$ | 307 | 3.600%—03/15/20271 | $ 290 |
American Airlines Pass-Through Trust | |||
Series 2015-1 Cl. A | |||
542 | 3.375%—05/01/2027 | 410 | |
Series 2013-2 Cl. A | |||
33 | 4.950%—01/15/2023 | 28 | |
438 | |||
AMSR Trust | |||
Series 2020-SFR4 Cl. A | |||
479 | 1.355%—11/17/20371 | 480 | |
CF Hippolyta Issuer LLC | |||
Series 2020-1 Cl. A1 | |||
335 | 1.690%—07/15/20601 | 339 | |
CNH Equipment Trust | |||
Series 2018-A Cl. A3 | |||
375 | 3.120%—07/17/2023 | 380 | |
Series 2018-B Cl. A3 | |||
207 | 3.190%—11/15/2023 | 211 | |
591 | |||
CVS Pass-Through Trust | |||
267 | 5.773%—01/10/20331 | 305 | |
119 | 5.880%—01/10/2028 | 134 | |
Series 2009 Cl. CE | |||
501 | 8.353%—07/10/20311 | 657 | |
1,096 | |||
DB Master Finance LLC | |||
Series 2017-1A Cl. A2I | |||
244 | 3.629%—11/20/20471 | 251 | |
173 | 3.787%—05/20/20491 | 179 | |
430 | |||
Delta Air Lines Pass-Through Trust | |||
Series 2015-1 Cl. AA | |||
282 | 3.625%—07/30/2027 | 283 | |
DLL Securitization Trust | |||
Series 2017-A Cl. A3 | |||
24 | 2.140%—12/15/20211 | 24 | |
Domino's Pizza Master Issuer LLC | |||
Series 2017-1A Cl. A2I | |||
243 | 1.465% (3 Month USD Libor + 1.360) 07/25/20471,2 | 244 |
ASSET-BACKED SECURITIES—Continued | |||
Principal Amount | Value | ||
Series 2019-1A Cl. A2 | |||
$ | 59 | 3.668%—10/25/20491 | $ 63 |
307 | |||
FirstKey Homes Trust | |||
Series 2020-SFR2 Cl. A | |||
364 | 1.266%—10/19/2037 | 362 | |
Series 2020-SFR1 Cl. A | |||
280 | 1.339%—09/17/20251 | 281 | |
643 | |||
Ford Credit Auto Owner Trust | |||
Series 2020-1 Cl. A | |||
500 | 2.040%—08/15/20311 | 524 | |
GM Financial Automobile Leasing Trust | |||
Series 2019-1 Cl. A3 | |||
295 | 2.980%—12/20/2021 | 297 | |
Home Partners of America Trust | |||
Series 2020-2 Cl. A | |||
349 | 1.532%—01/17/20411 | 349 x | |
MMAF Equipment Finance LLC | |||
Series 2019-A Cl. A3 | |||
334 | 2.840%—11/13/20231 | 344 | |
Nextgear Floorplan Master Owner Trust | |||
Series 2019-2A Cl. A2 | |||
880 | 2.070%—10/15/20241 | 904 | |
Progress Residential Trust | |||
Series 2019-SFR3 Cl. A | |||
443 | 2.271%—09/17/20361 | 452 | |
Sabey Data Center Issuer LLC | |||
Series 2020-1 Cl. A2 | |||
202 | 3.812%—04/20/20451 | 209 | |
Stack Infrastructure Issuer LLC | |||
Series 2019-2A Cl. A2 | |||
185 | 3.080%—10/25/20441 | 189 | |
Store Master Funding I-VII | |||
Series 2019-1 Cl. A1 | |||
169 | 2.820%—11/20/20491 | 170 | |
Series 2018-1A Cl. A1 | |||
198 | 3.960%—10/20/20481 | 208 | |
378 | |||
United Airlines Pass-Through Trust | |||
Series 2014-1 Cl. A | |||
756 | 4.000%—04/11/2026 | 728 |
29
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 | ||
Vantage Data Centers LLC | |||
Series 2020-1A Cl. A2 | |||
$ | 567 | 1.645%—09/15/20451 | $ 565 |
Verizon Owner Trust | |||
Series 2019-B Cl. A1A | |||
374 | 2.330%—12/20/2023 | 383 | |
Series 2018-A Cl. A1A | |||
501 | 3.230%—04/20/2023 | 508 | |
891 | |||
Wendy's Funding LLC | |||
Series 2019-1A Cl. A2I | |||
174 | 3.783%—06/15/20491 | 184 | |
Wheels SPV LLC | |||
Series 2017-1A Cl. A2 | |||
30 | 3.060%—04/20/20271 | 30 | |
World Omni Auto Receivables Trust | |||
Series 2020-A Cl. A3 | |||
1,012 | 1.700%—01/17/2023 | 1,032 | |
Series 2017-B Cl. A3 | |||
195 | 1.950%—02/15/2023 | 197 | |
Series 2019-A Cl. A3 | |||
273 | 3.040%—05/15/2024 | 279 | |
Series 2018-D Cl. A3 | |||
713 | 3.330%—04/15/2024 | 730 | |
2,238 | |||
TOTAL ASSET-BACKED SECURITIES | |||
(Cost $13,068) | 13,203 | ||
COLLATERALIZED MORTGAGE OBLIGATIONS—12.0% | |||
BANK 2019-BNK16 | |||
Series 2019-BN16 Cl. ASB | |||
651 | 3.898%—02/15/2052 | 747 | |
Barclays Commerical Mortgage Securities LLC | |||
Series 2012-C2 Cl. A4 | |||
517 | 3.525%—05/10/2063 | 532 | |
BBCMS Mortgage Trust | |||
Series 2020-C6 Cl. A2 | |||
380 | 2.690%—02/15/2053 | 399 | |
Benchmark Mortgage Trust | |||
Series 2019-B15 Cl. A5 | |||
212 | 2.928%—12/15/2072 | 233 | |
BX Commercial Mortgage Trust | |||
Series 2019-XL Cl. A | |||
531 | 1.068% (1 Month USD Libor + 0.920) 10/15/20361,2 | 532 | |
CIM Trust Corp. | |||
Series 2020-INV1 Cl. A2 | |||
251 | 2.500%—04/25/20501,2 | 258 | |
Commercial Mortgage Pass-Through Certificates | |||
Series 2014-CR14 Cl. A2 | |||
206 | 3.147%—02/10/2047 | 208 | |
Series 2014-CR21 Cl. A3 | |||
243 | 3.528%—12/10/2047 | 262 | |
Series 2014-UBS3 Cl. A3 | |||
443 | 3.546%—06/10/2047 | 475 | |
Series 2013-CR8 Cl. A5 | |||
502 | 3.612%—06/10/2046 | 534 | |
1,479 | |||
Flagstar Mortgage Trust | |||
Series 2018-1 Cl. A5 | |||
39 | 3.500%—03/25/20481,2 | 39 |
COLLATERALIZED MORTGAGE OBLIGATIONS—Continued | |||
Principal Amount | Value | ||
Freddie Mac Seasoned Credit Risk Transfer Trust | |||
Series 2020-2 Cl. MA | |||
$ | 272 | 2.000%—11/25/2059 | $ 279 |
Series 2020-3 Cl. MA | |||
315 | 2.000%—05/25/2060 | 327 x | |
Series 2020-1 Cl. MA | |||
303 | 2.500%—08/25/2059 | 316 | |
Series 2018-1 Cl. MA | |||
217 | 3.000%—05/25/2057 | 231 | |
Series 2018-4 Cl. MA | |||
563 | 3.500%—03/25/2058 | 606 | |
Series 2019-2 Cl. MA | |||
318 | 3.500%—08/25/2058 | 345 | |
2,104 | |||
Freddie Mac Structured Pass-Through Certificates | |||
Series 2020-K087 Cl. A2 | |||
268 | 3.771%—12/25/2028 | 319 | |
Series 2020-K082 Cl. A2 | |||
337 | 3.920%—09/25/20282 | 404 | |
723 | |||
FRESB Mortgage Trust | |||
Series 2019-SB63 Cl. A5H | |||
314 | 2.550% (1 Month USD Libor + 0.918) 02/25/20392 | 326 | |
GS Mortgage Backed Securities Trust | |||
Series 2020-INV1 Cl. A14 | |||
479 | 3.000%—08/25/20501,2 | 490 | |
Series 2020-PJ4 Cl. A2 | |||
321 | 3.000%—01/25/20511,2 | 331 | |
Series 2020-PJ1 Cl. A6 | |||
258 | 3.500%—05/25/20501,2 | 263 | |
1,084 | |||
GS Mortgage Securities Trust | |||
Series 2012-GCJ7 Cl. A4 | |||
324 | 3.377%—05/10/2045 | 329 | |
Series 2012-GC6 Cl. A3 | |||
386 | 3.482%—01/10/2045 | 393 | |
722 | |||
Invitation Homes Trust | |||
Series 2018-SFR1 Cl. A | |||
108 | 0.847% (1 Month USD Libor + 2.065) 03/17/20371,2 | 108 | |
JPMBB Commercial Mortgage Securities Trust | |||
Series 2015-C32 Cl. A2 | |||
293 | 2.816%—11/15/2048 | 293 | |
JPMorgan Chase Commercial Mortgage Securities Trust | |||
Series 2019-COR5 Cl. A2 | |||
635 | 3.150%—06/13/2052 | 668 | |
Series 2012-CBX Cl. A4 | |||
293 | 3.483%—06/15/2045 | 299 | |
967 | |||
JPMorgan Mortgage Trust | |||
Series 2016-4 Cl. A5 | |||
90 | 3.500%—10/25/20461,2 | 91 | |
Series 2018-4 Cl. A5 | |||
128 | 3.500%—10/25/20481,2 | 130 | |
221 | |||
Morgan Stanley Bank of America Merrill Lynch Trust | |||
Series 2015-C22 Cl.A4 | |||
532 | 3.306%—04/15/2048 | 575 |
30
Harbor Core Bond Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost and Principal Amounts in Thousands
COLLATERALIZED MORTGAGE OBLIGATIONS—Continued | |||
Principal Amount | Value | ||
Series 2013-C11 Cl. A4 | |||
$ | 284 | 4.152%—08/15/20462 | $ 305 |
880 | |||
Morgan Stanley Capital I Trust | |||
Series 2012-C4 Cl. A4 | |||
319 | 3.244%—03/15/2045 | 324 | |
Progress Residential Trust | |||
Series 2018-SFR3 Cl. A | |||
433 | 3.880%—10/17/20351 | 445 | |
PSMC Trust | |||
Series 2020-2 Cl. A2 | |||
386 | 3.000%—05/25/20501,2 | 394 | |
Series 2019-2 Cl. A3 | |||
102 | 3.500%—10/25/20491,2 | 103 | |
497 | |||
Tricon American Homes Trust | |||
Series 2020-SFR1 Cl. A | |||
335 | 1.499%—07/17/20381 | 337 | |
Wells Fargo Mortgage Backed Securities Trust | |||
Series 2019-2 Cl. A3 | |||
— | 4.000%—04/25/20491,2 | — | |
WF RBS Commercial Mortgage Trust | |||
Series 2012-C10 Cl. A3 | |||
244 | 2.875%—12/15/2045 | 251 | |
Series 2011-C4 Cl. A4 | |||
400 | 4.902%—06/15/20441,2 | 404 | |
655 | |||
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS | |||
(Cost $13,711) | 13,905 | ||
CORPORATE BONDS & NOTES—36.6% | |||
AEROSPACE & DEFENSE—1.6% | |||
BAE Systems Holdings Inc. | |||
200 | 3.400%—04/15/20301 | 222 | |
489 | 3.800%—10/07/20241 | 544 | |
766 | |||
General Dynamics Corp. | |||
59 | 4.250%—04/01/2050 | 77 | |
Lockheed Martin Corp. | |||
198 | 2.800%—06/15/2050 | 205 | |
225 | 4.700%—05/15/2046 | 305 | |
510 | |||
Northrop Grumman Corp. | |||
107 | 5.250%—05/01/2050 | 153 | |
Textron Inc. | |||
370 | 3.000%—06/01/2030 | 389 | |
1,895 | |||
AIR FREIGHT & LOGISTICS—0.4% | |||
FedEx Corp. | |||
270 | 4.050%—02/15/2048 | 311 | |
United Parcel Service Inc. | |||
73 | 5.300%—04/01/2050 | 105 | |
416 | |||
AUTOMOBILES—2.0% | |||
General Motors Co. | |||
248 | 5.400%—10/02/2023 | 275 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
AUTOMOBILES—Continued | |||
Hyundai Capital America Co. | |||
$ | 468 | 5.750%—04/06/20231 | $ 519 |
Toyota Motor Credit Corp. MTN3 | |||
572 | 3.000%—04/01/2025 | 628 | |
197 | 3.375%—04/01/2030 | 228 | |
856 | |||
Volkswagen Group of America Finance LLC | |||
413 | 2.900%—05/13/20221 | 426 | |
240 | 4.625%—11/13/20251 | 278 | |
704 | |||
2,354 | |||
BANKS—4.7% | |||
Bank of America Corp. MTN3 | |||
500 | 3.500%—04/19/2026 | 560 | |
206 | 4.330%—03/15/20504 | 260 | |
820 | |||
Bank of Nova Scotia | |||
349 | 1.625%—05/01/2023 | 359 | |
Barclays Bank PLC | |||
293 | 1.700%—05/12/2022 | 299 | |
Capital One Financial Corp. | |||
450 | 3.300%—10/30/2024 | 488 | |
Citigroup Inc. | |||
421 | 3.400%—05/01/2026 | 468 | |
169 | 3.520%—10/27/20284 | 188 | |
279 | 4.412%—03/31/20314 | 331 | |
987 | |||
JPMorgan Chase & Co. | |||
300 | 3.200%—01/25/2023 | 319 | |
476 | 4.203%—07/23/20294 | 560 | |
330 | 4.493%—03/24/20314 | 399 | |
1,278 | |||
Lloyds Banking Group plc | |||
300 | 2.438% (U.S. Treasury 1 Year Constant Maturity Yield + 1.071) 02/05/20262 | 313 | |
PNC Bank NA | |||
250 | 3.500%—06/08/2023 | 269 | |
Toronto Dominion Bank MTN3 | |||
600 | 0.750%—09/11/2025 | 597 | |
5,410 | |||
BEVERAGES—0.5% | |||
Anheuser-Busch Cos. LLC / Anheuser-Busch InBev Worldwide Inc. | |||
358 | 4.900%—02/01/2046 | 439 | |
PepsiCo Inc. | |||
145 | 3.625%—03/19/2050 | 175 | |
614 | |||
CAPITAL MARKETS—4.5% | |||
Apollo Management Holdings LP | |||
250 | 4.000%—05/30/20241 | 277 | |
Blackstone Holdings Finance Co. LLC | |||
223 | 2.800%—09/30/20501 | 222 | |
205 | 3.150%—10/02/20271 | 227 | |
286 | 3.500%—09/10/20491 | 310 | |
759 |
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 | ||
CAPITAL MARKETS—Continued | |||
Goldman Sachs Group Inc. | |||
$ | 291 | 3.800%—03/15/2030 | $ 336 |
420 | 5.750%—01/24/2022 | 447 | |
783 | |||
KKR Group Finance Co. II LLC | |||
456 | 5.500%—02/01/20431 | 571 | |
KKR Group Finance Co. III LLC | |||
140 | 5.125%—06/01/20441 | 171 | |
Macquarie Group Ltd. | |||
165 | 3.189%—11/28/20231,4 | 173 | |
Macquarie Group Ltd. MTN3 | |||
250 | 4.150%—03/27/20241,4 | 268 | |
Morgan Stanley MTN3 | |||
645 | 3.125%—07/27/2026 | 713 | |
285 | 3.622%—04/01/20314 | 327 | |
252 | 3.875%—01/27/2026 | 286 | |
1,326 | |||
State Street Corp. | |||
110 | 2.901%—03/30/20261,4 | 119 x | |
95 | 3.152%—03/30/20311,4 | 108 x | |
227 | |||
UBS AG London | |||
246 | 1.750%—04/21/20221 | 250 | |
UBS Group AG | |||
300 | 4.125%—04/15/20261 | 345 | |
5,150 | |||
CONSUMER FINANCE—1.3% | |||
American Express Co. | |||
250 | 3.375%—05/17/2021 | 254 | |
150 | 3.400%—02/27/2023 | 160 | |
414 | |||
GE Capital International Funding Co. Unlimited Co. | |||
415 | 2.342%—11/15/2020 | 415 | |
General Motors Financial Co. Inc. | |||
444 | 4.150%—06/19/2023 | 473 | |
Mastercard Inc. | |||
130 | 3.350%—03/26/2030 | 151 | |
71 | 3.850%—03/26/2050 | 88 | |
239 | |||
1,541 | |||
DIVERSIFIED FINANCIAL SERVICES—0.8% | |||
Cooperatieve Rabobank U.A. | |||
400 | 3.875%—09/26/20231 | 437 | |
Moody's Corp. | |||
248 | 2.550%—08/18/2060 | 222 | |
Voya Financial Inc. | |||
200 | 3.125%—07/15/2024 | 216 | |
875 | |||
DIVERSIFIED TELECOMMUNICATION SERVICES—1.6% | |||
AT&T Inc. | |||
664 | 1.429% (3 Month USD Libor + 0.627) 06/12/20242 | 679 | |
306 | 3.500%—06/01/2041 | 310 | |
989 | |||
Broadcom Inc. | |||
272 | 4.110%—09/15/2028 | 304 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
DIVERSIFIED TELECOMMUNICATION SERVICES—Continued | |||
Verizon Communications Inc. | |||
$ | 162 | 4.500%—08/10/2033 | $ 201 |
247 | 4.522%—09/15/2048 | 317 | |
518 | |||
1,811 | |||
ELECTRIC UTILITIES—2.8% | |||
Berkshire Hathaway Energy Co. | |||
195 | 4.050%—04/15/20251 | 222 | |
525 | 6.125%—04/01/2036 | 750 | |
972 | |||
Duke Energy Carolinas, LLC | |||
111 | 3.950%—03/15/2048 | 134 | |
Eversource Energy | |||
260 | 2.750%—03/15/2022 | 268 | |
200 | 2.900%—10/01/2024 | 215 | |
483 | |||
Exelon Corp. | |||
82 | 4.700%—04/15/2050 | 104 | |
368 | 5.100%—06/15/2045 | 477 | |
581 | |||
Southern Co. | |||
430 | 3.250%—07/01/2026 | 479 | |
Virginia Electric & Power Co. | |||
305 | 3.150%—01/15/2026 | 339 | |
Xcel Energy Inc. | |||
220 | 3.400%—06/01/2030 | 250 | |
3,238 | |||
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—1.6% | |||
Boston Properties LP | |||
468 | 4.500%—12/01/2028 | 548 | |
Digital Realty Trust LP | |||
491 | 3.700%—08/15/2027 | 553 | |
Federal Realty Investment Trust | |||
582 | 1.250%—02/15/2026 | 581 | |
HCP Inc. | |||
188 | 4.250%—11/15/2023 | 206 | |
1,888 | |||
FOOD & STAPLES RETAILING—0.2% | |||
Walmart Inc. | |||
166 | 3.950%—06/28/2038 | 207 | |
HEALTH CARE PROVIDERS & SERVICES—1.4% | |||
Cigna Corp. | |||
495 | 3.400%—03/01/2027 | 551 | |
CommonSpirit Health | |||
225 | 3.910%—10/01/2050 | 221 | |
232 | 4.187%—10/01/2049 | 240 | |
461 | |||
PeaceHealth Obligated Group | |||
580 | 1.375%—11/15/2025 | 587 | |
1,599 | |||
HOTELS, RESTAURANTS & LEISURE—0.2% | |||
McDonald's Corp. MTN3 | |||
225 | 3.500%—07/01/2027 | 255 |
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 | ||
HOUSEHOLD DURABLES—0.4% | |||
Home Depot Inc. | |||
$ | 220 | 3.300%—04/15/2040 | $ 249 |
Lowe's Cos Inc. | |||
59 | 5.000%—04/15/2040 | 78 | |
84 | 5.125%—04/15/2050 | 117 | |
195 | |||
444 | |||
HOUSEHOLD PRODUCTS—0.2% | |||
Procter & Gamble Co. | |||
169 | 3.550%—03/25/2040 | 208 | |
INSURANCE—2.1% | |||
American International Group Inc. | |||
465 | 4.125%—02/15/2024 | 515 | |
Equitable Financial Life Global Funding | |||
425 | 1.400%—07/07/20251 | 434 | |
Five Corners Funding Trust | |||
250 | 4.419%—11/15/20231 | 277 | |
Liberty Mutual Group Inc. | |||
400 | 4.569%—02/01/20291 | 483 | |
Lincoln National Corp. | |||
266 | 3.400%—01/15/2031 | 294 | |
173 | 3.625%—12/12/2026 | 195 | |
489 | |||
Mass Mutual Life Insurance Co. | |||
170 | 3.375%—04/15/20501 | 173 | |
2,371 | |||
MEDIA—2.7% | |||
Charter Communications Operating LLC / Charter Communications Operating Capital | |||
478 | 6.384%—10/23/2035 | 646 | |
Comcast Cable Communication Co. | |||
200 | 9.455%—11/15/2022 | 237 | |
Comcast Corp. | |||
470 | 3.000%—02/01/2024 | 506 | |
146 | 3.300%—04/01/2027 | 164 | |
392 | 3.400%—04/01/2030 | 447 | |
1,117 | |||
COX Communications Inc. | |||
390 | 1.800%—10/01/20301 | 381 | |
300 | 2.950%—06/30/20231 | 315 | |
200 | 3.250%—12/15/20221 | 211 | |
907 | |||
Walt Disney Co. | |||
164 | 4.700%—03/23/2050 | 216 | |
3,123 | |||
MULTI-UTILITIES—0.3% | |||
WEC Energy Group Inc. | |||
348 | 1.375%—10/15/2027 | 347 | |
OIL, GAS & CONSUMABLE FUELS—2.5% | |||
BP Capital Markets America Inc. | |||
169 | 2.937%—04/06/2023 | 178 | |
Chevron Corp. | |||
179 | 1.995%—05/11/2027 | 188 | |
Dominion Energy Gas Holdings LLC | |||
170 | 2.500%—11/15/2024 | 181 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
OIL, GAS & CONSUMABLE FUELS—Continued | |||
Exxon Mobil Corp. | |||
$ | 291 | 2.992%—03/19/2025 | $ 317 |
Occidental Petroleum Corp. | |||
1,313 | 0.000%—10/10/20365 | 598 | |
Phillips 66 Partners LP | |||
250 | 3.605%—02/15/2025 | 265 | |
Schlumberger Holdings Corp. | |||
252 | 3.900%—05/17/20281 | 269 | |
Shell International Finance BV | |||
267 | 2.375%—04/06/2025 | 285 | |
Southern Co. Gas Capital Corp. | |||
220 | 1.750%—01/15/2031 | 218 | |
Sunoco Logistics Partners Operations LP | |||
375 | 3.900%—07/15/2026 | 387 | |
2,886 | |||
PHARMACEUTICALS—0.6% | |||
Abbvie Inc. | |||
300 | 4.500%—05/14/2035 | 365 | |
Pfizer Inc. | |||
297 | 2.550%—05/28/2040 | 305 | |
670 | |||
ROAD & RAIL—1.6% | |||
Canadian National Railway Co. | |||
172 | 3.650%—02/03/2048 | 204 | |
Canadian Pacific Railway Co. | |||
190 | 6.125%—09/15/2115 | 284 | |
Norfolk Southern Corp. | |||
310 | 4.837%—10/01/2041 | 404 | |
Penske Truck Leasing Co. LP / PTL Finance Corp. | |||
500 | 3.900%—02/01/20241 | 544 | |
Ryder System Inc. MTN3 | |||
360 | 3.650%—03/18/2024 | 392 | |
1,828 | |||
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—0.6% | |||
LAM Research Corp. | |||
110 | 2.875%—06/15/2050 | 113 | |
NXP BV / NXP Funding LLC | |||
251 | 4.625%—06/01/20231 | 275 | |
NXP BV / NXP Funding LLC / NXP USA Inc | |||
255 | 2.700%—05/01/20251 | 272 | |
660 | |||
SOFTWARE—0.6% | |||
Oracle Corp. | |||
443 | 2.500%—04/01/2025 | 475 | |
Verisk Analytics Inc. | |||
243 | 3.625%—05/15/2050 | 269 | |
744 | |||
TEXTILES, APPAREL & LUXURY GOODS—0.3% | |||
Nike Inc. | |||
202 | 2.750%—03/27/2027 | 222 | |
158 | 3.250%—03/27/2040 | 179 | |
401 | |||
TRADING COMPANIES & DISTRIBUTORS—0.8% | |||
AerCap Ireland Capital DAC / AerCap Global Aviation Trust | |||
272 | 4.125%—07/03/2023 | 280 |
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 | ||
TRADING COMPANIES & DISTRIBUTORS—Continued | |||
Air Lease Corp. | |||
$ | 374 | 3.875%—07/03/2023 | $ 390 |
Ferguson Finance plc | |||
236 | 4.500%—10/24/20281 | 280 | |
950 | |||
WATER UTILITIES—0.2% | |||
Aquarion Co. | |||
238 | 4.000%—08/15/20241 | 260 | |
WIRELESS TELECOMMUNICATION SERVICES—0.1% | |||
T-Mobile USA Inc. | |||
132 | 3.500%—04/15/20251 | 145 | |
TOTAL CORPORATE BONDS & NOTES | |||
(Cost $38,720) | 42,290 | ||
MORTGAGE PASS-THROUGH—22.5% | |||
Federal Home Loan Mortgage Corp. | |||
608 | 2.000%—06/01/2050-08/01/2050 | 634 | |
3,196 | 2.500%—08/01/2030-10/01/2050 | 3,348 | |
3,907 | 3.000%—06/01/2034-09/01/2050 | 4,190 | |
3,077 | 3.500%—01/01/2048-05/01/2050 | 3,302 | |
1,130 | 4.000%—02/01/2046-05/01/2049 | 1,221 | |
438 | 4.500%—03/01/2049 | 476 | |
13,171 | |||
Federal National Mortgage Association | |||
1,785 | 2.000%—08/01/2050-10/01/2050 | 1,848 | |
1,455 | 2.500%—08/01/2035-10/01/2050 | 1,527 | |
1,782 | 3.500%—10/01/2037-09/01/2049 | 1,955 | |
2,032 | 4.000%—04/01/2045-04/01/2050 | 2,209 | |
1,267 | 4.500%—05/01/2046-11/01/2047 | 1,411 | |
879 | 5.000%—08/01/2049 | 978 | |
9,928 | |||
Government National Mortgage Association | |||
711 | 4.000%—09/20/2041-09/15/2046 | 785 | |
1,870 | 4.500%—01/15/2042-08/20/2047 | 2,074 | |
2,859 | |||
TOTAL MORTGAGE PASS-THROUGH | |||
(Cost $25,200) | 25,958 | ||
MUNICIPAL BONDS—2.7% | |||
City & County of Denver Co. Airport System | |||
375 | 1.722%—11/15/2027 | 372 | |
Florida State Board of Administration Finance Corp. | |||
595 | 1.258%—07/01/2025 | 602 | |
Metropolitan Transportation Authority | |||
195 | 5.871%—11/15/2039 | 215 | |
Metropolitan Water Reclamation District of Greater Chicago | |||
145 | 5.720%—12/01/2038 | 202 |
MUNICIPAL BONDS—Continued | |||
Principal Amount | Value | ||
New York State Urban Development Corp. | |||
$ | 555 | 5.770%—03/15/2039 | $ 692 |
Port Authority of New York and New Jersey | |||
555 | 1.086%—07/01/2023 | 561 | |
State of California | |||
300 | 7.500%—04/01/2034 | 488 | |
TOTAL MUNICIPAL BONDS | |||
(Cost $2,983) | 3,132 | ||
U.S. GOVERNMENT OBLIGATIONS—14.1% | |||
U.S. Small Business Administration | |||
Series 2012-20C Cl. 1 | |||
145 | 2.510%—03/01/2032 | 150 | |
Series 2017-20H Cl. 1 | |||
152 | 2.750%—08/01/2037 | 165 | |
Series 2014-20K Cl. 1 | |||
330 | 2.800%—11/01/2034 | 351 | |
Series 2016-20L Cl. 1 | |||
1,072 | 2.810%—12/01/2036 | 1,140 | |
Series 2015-20H Cl. 1 | |||
355 | 2.820%—08/01/2035 | 382 | |
Series 2017-20J Cl. 1 | |||
236 | 2.850%—10/01/2037 | 250 | |
Series 2018-20B Cl. 1 | |||
301 | 3.220%—02/01/2038 | 328 | |
Series 2018-20G Cl. 1 | |||
440 | 3.540%—07/01/2038 | 483 | |
Series 2018-20F Cl. 1 | |||
668 | 3.600%—06/01/2038 | 736 | |
3,985 | |||
U.S. Treasury Bonds | |||
348 | 0.125%—07/31/2022 | 348 | |
310 | 0.625%—08/15/2030 | 303 | |
763 | 1.125%—08/15/2040 | 723 | |
2,417 | 3.000%—02/15/2048-08/15/2048 | 3,171 | |
854 | 3.500%—02/15/2039 | 1,165 | |
5,710 | |||
U.S. Treasury Inflation Index Notes6 | |||
2,517 | 0.125%—10/15/2024-01/15/2030 | 2,671 | |
U.S. Treasury Notes | |||
2,417 | 1.125%—05/15/2040 | 2,297 | |
691 | 1.250%—05/15/2050 | 624 | |
1,079 | 1.375%—08/15/2050 | 1,006 | |
3,927 | |||
TOTAL U.S. GOVERNMENT OBLIGATIONS | |||
(Cost $15,254) | 16,293 | ||
TOTAL INVESTMENTS—99.3% | |||
(Cost $108,936) | 114,781 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—0.7% | 820 | ||
TOTAL NET ASSETS—100.0% | $115,601 |
34
Harbor Core Bond Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
FAIR VALUE MEASUREMENTS
At October 31, 2020, the investments in Home Partners of America Trust and Freddie Mac Seasoned Credit Risk Transfer Trust (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 year ended October 31, 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 10/31/2020 (000s) | Unrealized Gain/(Loss) as of 10/31/2020 (000s) | ||||||||||
Asset-Backed Securities | $— | $349 | $— | $— | $— | $— | $— | $— | $349 | $— | ||||||||||
Collateralized Mortgage Obligations | — | 327 | — | — | — | — | — | — | 327 | $— | ||||||||||
$— | $676 | $— | $— | $— | $— | $— | $— | $676 | $— |
The following is a summary of significant unobservable inputs used in the fair valuations of assets and liabilities categorized within Level 3 of the fair value hierarchy.
Valuation Descriptions | Ending Balance as of 10/31/2020 (000s) | Valuation Technique | Unobservable Input(s) | Input Value(s) | ||||
Investments in Securities | ||||||||
Asset-Backed Securities | ||||||||
Home Partners of America Trust Series 2020-2 Cl. A | $ 349 | Market Approach | Trade Price | $ 99.99 | ||||
Collateralized Mortgage Obligations | ||||||||
Freddie Mac Seasoned Credit Risk Transfer Trust Series 2020-3 Cl. MA | $ 327 | Market Approach | Trade Price | $ 103.84 | ||||
$ 676 |
x | Fair valued in accordance with Harbor Funds' Valuation Procedures. |
1 | Securities purchased in a transaction exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. The Fund has no right to demand registration of these securities. At October 31, 2020, the aggregate value of these securities was $21,174 or 18% of net assets. |
2 | Variable or floating rate security; the stated rate represents the rate in effect at October 31, 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 | 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. |
5 | Zero coupon bond |
6 | 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. |
The accompanying notes are an integral part of the Financial Statements.
35
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
The dominant theme for the fiscal year ended October 31, 2020, has been the rapid market movements related to the news on the COVID-19 pandemic and related government actions. The rapid market moves from December through May were emblematic of the year. The fiscal year began with a risk on rally in late 2019 and in December, the ICE BofA U.S. Non-Distressed High Yield Index (the “H0ND” or the “Index”) hit the tightest yield spread to U.S. Treasury bonds it has experienced in the last 10 years. The rally rapidly unwound in March when COVID-19 related lockdowns moved the spread on the Index to the widest spreads seen in the past decade. Overall, the H0ND increased from a spread over Treasuries of 262 basis points (“bps”) to 938 bps in just over three months. As government stimulus and the U.S. Federal Reserve (“Fed”) driven liquidity were introduced in late March, the market began one of its most rapid and dramatic recoveries ever. By the end of May, the Index’s spread had clawed its way back and was at approximately 414 bps, which is in line with its 10-year average.
In addition to these significant price swings, since March the high yield bond asset class has undergone significant transformation due to record new issuance, debt retirements, defaults, and fallen angels (investment grade bonds that have been downgraded). The H0ND posted a return of 3.07% during the fiscal year, while the broader market, as measured by the ICE BofA U.S. High Yield Index (“H0A0”), returned 2.54% over the same period. The riskiest segments of the market materially underperformed as evidenced by the ICE BofA CCC & Lower U.S. High Yield Index’s (“H0A3”) -5.03% return during the period.
From March through October 2020, more than $350 billion in new issues and over $200 billion in fallen angel credits have entered the market, both near record levels. Simultaneously, the default rate has eclipsed 6.3% after averaging below 3% for the prior three years. The majority of both new issuance and fallen angels were rated BB by at least one rating agency and the majority of defaults were rated CCC. We believe it is unusual to see both defaults and new issuance have such a significant increase in the same year, but it highlights some of the polarization between strong and weak credits in the high yield bond market. This activity has changed the characteristics of the market, generally strengthening the credit quality as the BB rated debt segment has increased from 49% to 56% during the fiscal year. The average duration and maturity have lengthened as well. There have been increases to industry weightings in Energy and Automotive. Additionally, many companies that have had access to the financing markets have pushed off upcoming maturities. We estimate the amount of debt in the high yield bond market that was set to mature in 2021-23 has been reduced by 40% since the beginning of the year. While the economy is facing many challenges the overall credit quality of the high yield bond market has appeared to improve meaningfully during the past 12 months.
performance
Harbor High-Yield Bond Fund returned 2.18% (Retirement Class), 2.09% (Institutional Class), 1.82% (Administrative Class), and 1.59% (Investor Class) for the year ended October 31, 2020, while the H0ND returned 3.07%, and the ICE BofA U.S. High Yield Index (H0A0) returned 2.54% during the same period. The Fund benefitted on a relative performance basis
36
Harbor High-Yield Bond Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
CHANGE IN A $10,000 INVESTMENT
For the period 11/01/2010 through 10/31/2020
The graph compares a $10,000 investment in the Institutional Class shares of the Fund with the performance of the ICE BofAML U.S. Non-Distressed High Yield Index and the ICE BofAML U.S. High Yield Index (H0A0). The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
TOTAL RETURNS
For the periods ended 10/31/2020
1 Year | Annualized | |||||||
5 Years | 10 Years | |||||||
Harbor High-Yield Bond Fund | ||||||||
Retirement Class1 | 2.18% | 4.89% | 4.97% | |||||
Institutional Class | 2.09 | 4.82 | 4.93 | |||||
Administrative Class | 1.82 | 4.55 | 4.68 | |||||
Investor Class | 1.59 | 4.39 | 4.54 | |||||
Comparative Indices | ||||||||
ICE BofA U.S. Non-Distressed High Yield | 3.07% | 6.06% | 6.26% | |||||
ICE BofA U.S. High Yield (H0A0) | 2.54 | 6.14 | 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 at harborfunds.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.
due to weighting and selection in the midstream and managed heathcare industries. The Fund also benefitted from selection in single B rated positions. During this period of higher than average volatility, the Fund increased out of benchmark positions in BBB rated issues, bank loans, and convertible bonds, which all contributed to relative performance. Detracting from relative performance was selection in oil & gas, an underweighting and selection in automotive, and an average underweight and selection in BB rated bonds.
Outlook & Strategy
We believe the overall credit quality of the high yield bond market is stronger than it has been when compared to the last five years. We believe the better-quality portion of the market could experience pricing improvement over the next year if the economy continues to show gradual gains as it adapts to the COVID-19 crisis and interest rates remain low. However, we believe that the polarization in the market is likely to continue as those weaker credits in the market are likely to see an escalation in the deterioration of their results and the default rate is likely to stay elevated over the historical average. In this type of scenario, we believe a high yield bond portfolio constructed with careful credit selection should be able to perform well.
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.
37
Harbor High-Yield Bond Fund
Portfolio of Investments—October 31, 2020
Portfolio of Investments—October 31, 2020
SECTOR ALLOCATION (% of investments) - Unaudited
Portfolio of Investments
Value, Cost, and Principal Amounts in Thousands
BANK LOAN OBLIGATIONS—3.7% | |||
Principal Amount | Value | ||
CAPITAL MARKETS—0.5% | |||
Refinitiv US Holdings Inc. | |||
Initial Term Loan B | |||
$ | 2,049 | 3.398% (1 Month USD Libor + 3.250) 10/01/20251 | $ 2,022 |
CHEMICALS—0.1% | |||
Solenis International LP | |||
Initial First-Lien Term Loan | |||
427 | 4.256% (3 Month USD Libor + 4.000) 06/26/20251 | 417 | |
COMMERCIAL SERVICES & SUPPLIES—0.3% | |||
Garda World Security Corp. | |||
First Lien Term Loan B | |||
1,240 | 4.900% (1 Month USD Libor + 4.750) 10/30/20261 | 1,239 | |
CONTAINERS & PACKAGING—0.3% | |||
Flex Acquisition Co. Inc. | |||
Term Loan | |||
442 | 4.000% (1 Month USD Libor + 3.000) 12/29/20231 | 432 | |
Mauser Packaging Solutions Holding Co. | |||
Term Loan B | |||
1,117 | 3.480% (2 Month USD Libor + 3.250) 04/03/20241 | 1,047 | |
1,479 | |||
ENTERTAINMENT—0.3% | |||
William Morris Endeavor Entertainment LLC | |||
First-Lien Term Loan B | |||
1,494 | 2.900% (1 Month USD Libor + 2.750) 05/18/20251 | 1,288 | |
HEALTH CARE PROVIDERS & SERVICES—0.6% | |||
AHP Health Partners Inc. | |||
Term Loan B | |||
1,428 | 5.500% (1 Month USD Libor + 4.500) 06/28/20251 | 1,425 | |
LifePoint Health Inc. | |||
First-Lien Term Loan B | |||
813 | 3.898% (1 Month USD Libor + 3.750) 11/16/20251 | 791 | |
Surgery Center Holdings Inc. | |||
Initial Term Loan | |||
155 | 4.250% (1 Month USD Libor + 3.250) 08/31/20241 | 147 | |
2,363 | |||
HEALTH CARE TECHNOLOGY—0.6% | |||
Milano Acquisition Corp. | |||
Term Loan B | |||
495 | 4.750% (3 Month USD Libor + 4.000) 10/01/20271 | 487 |
BANK LOAN OBLIGATIONS—Continued | |||
Principal Amount | Value | ||
HEALTH CARE TECHNOLOGY—Continued | |||
Verscend Holding Corp. | |||
Term Loan B | |||
$ | 1,341 | 4.648% (1 Month USD Libor + 4.500) 08/27/20251 | $ 1,318 |
VVC Holding Corp. | |||
Term Loan B | |||
637 | 4.750% (3 Month USD Libor + 4.500) 02/11/20261 | 626 | |
2,431 | |||
HOTELS, RESTAURANTS & LEISURE—0.4% | |||
Caesars Resort Collection LLC | |||
Term Loan | |||
800 | 4.648% (1 Month USD Libor + 4.500) 07/20/20251 | 776 | |
Playtika Holding Corp. | |||
Term Loan B | |||
942 | 7.000% (6 Month USD Libor + 6.000) 12/10/20241 | 944 | |
1,720 | |||
MACHINERY—0.3% | |||
Navistar Inc. | |||
Term Loan B | |||
1,421 | 3.650% (1 Month USD Libor + 3.500) 11/06/20241 | 1,412 | |
MEDIA—0.0% | |||
Univision Communications Inc. | |||
Term Loan | |||
205 | 3.750% (1 Month USD Libor + 2.750) 03/15/20241 | 199 | |
SOFTWARE—0.3% | |||
Informatica LLC | |||
Second-Lien Term Loan | |||
290 | 7.125%—02/25/2025 | 295 | |
TIBCO Software Inc. | |||
Second-Lien Term Loan | |||
350 | 7.400% (1 Month USD Libor + 7.250) 03/04/20281 | 343 | |
Ultimate Software Group Inc. | |||
Term Loan B | |||
540 | 4.750% (3 Month USD Libor + 4.000) 05/03/20261 | 537 | |
1,175 | |||
TOTAL BANK LOAN OBLIGATIONS | |||
(Cost $15,947) | 15,745 | ||
38
Harbor High-Yield Bond Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
CONVERTIBLE BONDS—3.2% | |||
Principal Amount | Value | ||
DIVERSIFIED CONSUMER SERVICES—0.1% | |||
Chegg Inc. | |||
$ | 400 | 0.000%—09/01/20262,3 | $ 406 |
DIVERSIFIED TELECOMMUNICATION SERVICES—0.4% | |||
Liberty Latin America Ltd. | |||
1,250 | 2.000%—07/15/2024 | 1,096 | |
Vonage Holdings Corp. | |||
450 | 1.750%—06/01/2024 | 441 | |
1,537 | |||
HEALTH CARE EQUIPMENT & SUPPLIES—0.2% | |||
Dexcom Inc. | |||
225 | 0.250%—11/15/20253 | 217 | |
Integra Lifesciences Holdings Corp. | |||
440 | 0.500%—08/15/20253 | 404 | |
Nuvasive Inc. | |||
440 | 1.000%—06/01/20233 | 417 | |
1,038 | |||
INTERACTIVE MEDIA & SERVICES—0.1% | |||
K12 Inc. | |||
475 | 1.125%—09/01/20273 | 391 | |
INTERNET & DIRECT MARKETING RETAIL—0.3% | |||
Etsy Inc. | |||
650 | 0.125%—09/01/20273 | 677 | |
Wayfair Inc. | |||
625 | 0.625%—10/01/20253 | 599 | |
1,276 | |||
IT SERVICES—0.4% | |||
Euronet Worldwide Inc. | |||
450 | 0.750%—03/15/2049 | 434 | |
Okta Inc. | |||
415 | 0.375%—06/15/20263 | 471 | |
Parsons Corp. | |||
470 | 0.250%—08/15/20253 | 460 | |
Wix.com Ltd. | |||
425 | 0.000%—08/15/20252,3 | 417 | |
1,782 | |||
MACHINERY—0.1% | |||
Fortive Corp. | |||
430 | 0.875%—02/15/2022 | 429 | |
MEDIA—0.2% | |||
Dish Network Corp. | |||
1,100 | 3.375%—08/15/2026 | 975 | |
PHARMACEUTICALS—0.2% | |||
BioMarin Pharmaceutical Inc. | |||
650 | 1.250%—05/15/20273 | 628 | |
SOFTWARE—1.1% | |||
CyberArk Software Ltd. | |||
440 | 0.000%—11/15/20242,3 | 423 | |
J2 Global Inc. | |||
1,170 | 1.750%—11/01/20263 | 1,052 | |
Palo Alto Networks Inc. | |||
580 | 0.750%—07/01/2023 | 623 | |
Pegasystems Inc. | |||
420 | 0.750%—03/01/20253 | 470 | |
Proofpoint Inc. | |||
430 | 0.250%—08/15/2024 | 417 |
CONVERTIBLE BONDS—Continued | |||
Principal Amount | Value | ||
SOFTWARE—Continued | |||
RingCentral Inc. | |||
$ | 825 | 0.000%—03/01/2025-03/15/20262,3 | $ 836 |
Splunk Inc. | |||
420 | 1.125%—06/15/20273 | 464 | |
Zscaler Inc. | |||
400 | 0.125%—07/01/20253 | 465 | |
4,750 | |||
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS—0.1% | |||
Pure Storage Inc. | |||
430 | 0.125%—04/15/2023 | 422 | |
TOTAL CONVERTIBLE BONDS | |||
(Cost $13,487) | 13,634 | ||
CORPORATE BONDS & NOTES—90.6% | |||
AEROSPACE & DEFENSE—2.5% | |||
Bombardier Inc. | |||
365 | 5.750%—03/15/20223 | 347 | |
212 | 6.000%—10/15/20223 | 193 | |
1,205 | 7.875%—04/15/20273 | 880 | |
1,420 | |||
Howmet Aerospace Inc. | |||
272 | 5.900%—02/01/2027 | 299 | |
429 | 5.950%—02/01/2037 | 468 | |
275 | 6.875%—05/01/2025 | 306 | |
1,073 | |||
Rolls-Royce plc | |||
474 | 5.750%—10/15/20273 | 481 | |
Spirit Aerosystems Inc. | |||
330 | 7.500%—04/15/20253 | 333 | |
TransDigm Inc. | |||
2,778 | 6.250%—03/15/20263 | 2,900 | |
1,026 | 8.000%—12/15/20253 | 1,110 | |
4,010 | |||
TransDigm UK Holdings plc | |||
1,445 | 6.875%—05/15/2026 | 1,442 | |
Triumph Group Inc. | |||
1,000 | 7.750%—08/15/2025 | 649 | |
1,085 | 8.875%—06/01/20243 | 1,154 | |
1,803 | |||
10,562 | |||
AIR FREIGHT & LOGISTICS—1.6% | |||
XPO Logistics Inc. | |||
1,000 | 6.125%—09/01/20233 | 1,014 | |
1,945 | 6.250%—05/01/20253 | 2,071 | |
2,800 | 6.500%—06/15/20223 | 2,816 | |
1,000 | 6.750%—08/15/20243 | 1,059 | |
6,960 | |||
AIRLINES—0.4% | |||
Western Global Airlines LLC | |||
1,455 | 10.375%—08/15/20253 | 1,510 |
39
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 | ||
AUTO COMPONENTS—1.6% | |||
Adient US LLC | |||
$ | 345 | 7.000%—05/15/20263 | $ 369 |
673 | 9.000%—04/15/20253 | 741 | |
1,110 | |||
Allison Transmission Inc. | |||
625 | 5.000%—10/01/20243 | 631 | |
American Axle & Manufacturing Inc. | |||
865 | 6.875%—07/01/2028 | 882 | |
Dana Financing Luxembourg Sarl | |||
683 | 5.750%—04/15/20253 | 709 | |
Goodyear Tire & Rubber Co. | |||
590 | 5.125%—11/15/2023 | 588 | |
1,826 | 9.500%—05/31/2025 | 2,006 | |
2,594 | |||
Group 1 Automotive Inc. | |||
465 | 4.000%—08/15/20283 | 466 | |
Penske Automotive Group Inc. | |||
553 | 3.500%—09/01/2025 | 559 | |
6,951 | |||
AUTOMOBILES—2.6% | |||
Ford Motor Co. | |||
1,150 | 9.000%—04/22/2025 | 1,355 | |
1,000 | 9.625%—04/22/2030 | 1,344 | |
2,699 | |||
Ford Motor Credit Co. | |||
2,535 | 4.063%—11/01/2024 | 2,545 | |
Ford Motor Credit Co. LLC | |||
225 | 3.087%—01/09/2023 | 223 | |
200 | 3.664%—09/08/2024 | 199 | |
655 | 3.810%—01/09/2024 | 655 | |
1,185 | 4.125%—08/17/2027 | 1,169 | |
600 | 4.250%—09/20/2022 | 609 | |
465 | 5.125%—06/16/2025 | 485 | |
295 | 5.750%—02/01/2021 | 298 | |
3,638 | |||
Jaguar Land Rover Automotive plc | |||
600 | 4.500%—10/01/20273 | 509 | |
1,239 | 7.750%—10/15/20253 | 1,238 | |
1,747 | |||
Winnebago Industries Inc. | |||
490 | 6.250%—07/15/20283 | 519 | |
11,148 | |||
BANKS—0.4% | |||
CIT Group Inc. | |||
1,534 | 3.929%—06/19/20241 | 1,593 | |
BEVERAGES—0.3% | |||
Cott Holdings Inc. | |||
1,425 | 5.500%—04/01/20253 | 1,473 | |
BUILDING PRODUCTS—0.2% | |||
Forterra Finance LLC / FRTA Finance Corp. | |||
590 | 6.500%—07/15/20253 | 624 | |
Standard Industries Inc. | |||
163 | 4.750%—01/15/20283 | 171 | |
795 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
CAPITAL MARKETS—0.8% | |||
Refinitiv US Holdings Inc. | |||
$ | 2,060 | 6.250%—05/15/20263 | $ 2,204 |
996 | 8.250%—11/15/20263 | 1,087 | |
3,291 | |||
CHEMICALS—1.9% | |||
Axalta Coating Systems LLC | |||
680 | 4.875%—08/15/20243 | 695 | |
Axalta Coating Systems LLC / Axalta Coating Systems Dutch Holding B BV | |||
560 | 4.750%—06/15/20273 | 587 | |
Element Solutions Inc. | |||
600 | 3.875%—09/01/20283 | 594 | |
HB Fuller Co. | |||
408 | 4.250%—10/15/2028 | 414 | |
Illuminate Buyer LLC / Illuminate Holdings IV Inc. | |||
875 | 9.000%—07/01/20283 | 937 | |
NOVA Chemicals Corp. | |||
130 | 4.875%—06/01/20243 | 129 | |
535 | 5.250%—08/01/20233 | 534 | |
663 | |||
Olin Corp. | |||
416 | 9.500%—06/01/20253 | 493 | |
PolyOne Corp. | |||
506 | 5.750%—05/15/20253 | 533 | |
Standard Industries Inc. | |||
228 | 4.375%—07/15/20303 | 235 | |
Trinseo LLC | |||
783 | 5.375%—09/01/20253 | 796 | |
Tronox Inc. | |||
1,680 | 6.500%—05/01/2025-04/15/20263 | 1,724 | |
WR Grace & Co. | |||
602 | 4.875%—06/15/20273 | 628 | |
8,299 | |||
COMMERCIAL SERVICES & SUPPLIES—2.4% | |||
Advanced Disposal Services Inc. | |||
88 | 5.625%—11/15/20243 | 90 | |
Allied Universal Holdco LLC | |||
2,072 | 6.625%—07/15/20263 | 2,170 | |
1,200 | 9.750%—07/15/20273 | 1,282 | |
3,452 | |||
Covanta Holding Corp. | |||
390 | 5.000%—09/01/2030 | 399 | |
487 | 5.875%—07/01/2025 | 506 | |
905 | |||
Garda World Security Corp. | |||
367 | 9.500%—11/01/20273 | 392 | |
GFL Environmental Inc. | |||
1,835 | 7.000%—06/01/20263 | 1,916 | |
594 | 8.500%—05/01/20273 | 649 | |
2,565 | |||
KAR Auction Services Inc. | |||
1,395 | 5.125%—06/01/20253 | 1,407 | |
LABL Escrow Issuer LLC | |||
670 | 6.750%—07/15/20263 | 704 | |
336 | 10.500%—07/15/20273 | 362 | |
1,066 |
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 | ||
COMMERCIAL SERVICES & SUPPLIES—Continued | |||
Stericycle Inc. | |||
$ | 517 | 5.375%—07/15/20243 | $ 539 |
10,416 | |||
COMMUNICATIONS EQUIPMENT—0.2% | |||
CommScope Inc. | |||
595 | 6.000%—03/01/20263 | 618 | |
CommScope Technologies LLC | |||
50 | 5.000%—03/15/20273 | 47 | |
293 | 6.000%—06/15/20253 | 291 | |
338 | |||
956 | |||
CONSTRUCTION & ENGINEERING—1.2% | |||
AECOM | |||
600 | 5.125%—03/15/2027 | 658 | |
337 | 5.875%—10/15/2024 | 372 | |
1,030 | |||
KBR Inc. | |||
1,029 | 4.750%—09/30/20283 | 1,043 | |
Picasso Finance Sub Inc. | |||
627 | 6.125%—06/15/20253 | 662 | |
Pike Corp. | |||
934 | 5.500%—09/01/20283 | 958 | |
Weekley Homes LLC / Weekley Finance Corp. | |||
993 | 4.875%—09/15/20283 | 1,008 | |
Williams Scotsman International Inc. | |||
285 | 4.625%—08/15/20283 | 290 | |
4,991 | |||
CONSTRUCTION MATERIALS—0.3% | |||
New Enterprise Stone & Lime Co. Inc. | |||
242 | 6.250%—03/15/20263 | 251 | |
Summit Materials LLC / Summit Materials Finance Corp. | |||
580 | 5.250%—01/15/20293 | 598 | |
300 | 6.500%—03/15/20273 | 315 | |
913 | |||
��1,164 | |||
CONSUMER FINANCE—1.7% | |||
Ally Financial Inc. | |||
555 | 5.750%—11/20/2025 | 631 | |
1,685 | 8.000%—11/01/2031 | 2,330 | |
2,961 | |||
Navient Corp. | |||
206 | 5.875%—10/25/2024 | 205 | |
708 | 6.500%—06/15/2022 | 724 | |
92 | 6.625%—07/26/2021 | 94 | |
667 | 7.250%—09/25/2023 | 700 | |
1,723 | |||
Navient Corp. MTN4 | |||
227 | 5.500%—01/25/2023 | 227 | |
1,080 | 5.625%—08/01/2033 | 928 | |
117 | 7.250%—01/25/2022 | 121 | |
1,276 | |||
Springleaf Finance Corp. | |||
301 | 6.875%—03/15/2025 | 332 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
CONSUMER FINANCE—Continued | |||
$ | 700 | 7.750%—10/01/2021 | $ 735 |
220 | 8.875%—06/01/2025 | 242 | |
1,309 | |||
7,269 | |||
CONTAINERS & PACKAGING—1.0% | |||
Ardagh Packaging Finance plc | |||
855 | 5.250%—04/30/20253 | 896 | |
221 | 6.000%—02/15/20253 | 228 | |
1,124 | |||
Canpack SA / Eastern Pa Land Investment Holding LLC | |||
825 | 3.125%—11/01/20253 | 836 | |
Cascades Inc./ Cascades USA Inc. | |||
580 | 5.125%—01/15/20263 | 608 | |
Flex Acquisition Co. Inc. | |||
1,344 | 6.875%—01/15/20253 | 1,326 | |
315 | 7.875%—07/15/20263 | 319 | |
1,645 | |||
4,213 | |||
DIVERSIFIED CONSUMER SERVICES—0.3% | |||
Frontdoor Inc. | |||
1,117 | 6.750%—08/15/20263 | 1,195 | |
DIVERSIFIED FINANCIAL SERVICES—0.4% | |||
Compass Group Diversified Holdings LLC | |||
1,535 | 8.000%—05/01/20263 | 1,619 | |
DIVERSIFIED TELECOMMUNICATION SERVICES—3.5% | |||
Altice Financing SA | |||
1,647 | 7.500%—05/15/20263 | 1,721 | |
Cablevision Lightpath LLC | |||
1,450 | 3.875%—09/15/20273 | 1,441 | |
1,515 | 5.625%—09/15/20283 | 1,533 | |
2,974 | |||
CenturyLink Inc. | |||
1,315 | 6.750%—12/01/2023 | 1,432 | |
564 | 6.875%—01/15/2028 | 628 | |
2,060 | |||
Connect Finco Sarl / Connect US Finco LLC | |||
1,619 | 6.750%—10/01/20263 | 1,633 | |
Consolidated Communications Inc. | |||
704 | 6.500%—10/01/20283 | 725 | |
Frontier Communications Corp. | |||
948 | 5.875%—10/15/20273 | 968 | |
Nexstar Broadcasting Inc. | |||
530 | 4.750%—11/01/20283 | 535 | |
Switch Ltd. | |||
640 | 3.750%—09/15/20283 | 642 | |
Telecom Italia Capital SA | |||
1,215 | 6.000%—09/30/2034 | 1,417 | |
200 | 6.375%—11/15/2033 | 237 | |
215 | 7.721%—06/04/2038 | 292 | |
1,946 | |||
Zayo Group Holdings Inc. | |||
174 | 4.000%—03/01/20273 | 171 | |
1,050 | 6.125%—03/01/20283 | 1,061 | |
1,232 |
41
Harbor High-Yield Bond Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
Value, Cost, and Principal Amounts in Thousands
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
DIVERSIFIED TELECOMMUNICATION SERVICES—Continued | |||
Ziggo Bond Finance BV | |||
$ | 400 | 6.000%—01/15/20273 | $ 416 |
14,852 | |||
ELECTRIC UTILITIES—0.6% | |||
NRG Energy Inc. | |||
955 | 5.250%—06/15/20293 | 1,037 | |
1,400 | 7.250%—05/15/2026 | 1,482 | |
2,519 | |||
ELECTRICAL EQUIPMENT—0.5% | |||
Sensata Technologies Inc. | |||
895 | 3.750%—02/15/20313 | 887 | |
196 | 4.375%—02/15/20303 | 205 | |
1,092 | |||
Sensata Technologies UK Financing Co. plc | |||
960 | 6.250%—02/15/20263 | 996 | |
2,088 | |||
ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS—0.0% | |||
CDW LLC/CDW Finance Co. | |||
116 | 4.125%—05/01/2025 | 121 | |
ENERGY EQUIPMENT & SERVICES—0.8% | |||
Archrock Partners LP / Archrock Partners Finance Corp. | |||
900 | 6.250%—04/01/20283 | 871 | |
Indigo Natural Resources LLC | |||
825 | 6.875%—02/15/20263 | 813 | |
Transocean Inc. | |||
950 | 7.500%—01/15/20263 | 204 | |
Transocean Poseidon Ltd. | |||
655 | 6.875%—02/01/20273 | 493 | |
USA Compression Partners LP / USA Compression Finance Corp. | |||
895 | 6.875%—09/01/2027 | 901 | |
3,282 | |||
ENTERTAINMENT—1.1% | |||
Lions Gate Capital Holdings LLC | |||
70 | 5.875%—11/01/20243 | 66 | |
2,032 | 6.375%—02/01/20243 | 1,957 | |
2,023 | |||
Live Nation Entertainment Inc. | |||
1,497 | 4.750%—10/15/20273 | 1,379 | |
30 | 5.625%—03/15/20263 | 29 | |
1,408 | |||
Netflix Inc. | |||
133 | 4.875%—06/15/20303 | 152 | |
784 | 5.875%—11/15/2028 | 938 | |
300 | 6.375%—05/15/2029 | 368 | |
1,458 | |||
4,889 | |||
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—2.9% | |||
Diversified Healthcare Trust | |||
233 | 4.750%—02/15/2028 | 207 | |
1,446 | 9.750%—06/15/2025 | 1,593 | |
1,800 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
EQUITY REAL ESTATE INVESTMENT TRUSTS (REITs)—Continued | |||
Iron Mountain Inc. | |||
$ | 270 | 4.500%—02/15/20313 | $ 269 |
189 | 4.875%—09/15/20293 | 190 | |
94 | 5.250%—07/15/20303 | 97 | |
2,568 | 5.625%—07/15/20323 | 2,658 | |
3,214 | |||
MPT Operating Partnership LP / MPT Finance Corp. | |||
2,500 | 6.375%—03/01/2024 | 2,563 | |
Sabra Health Care LP | |||
241 | 3.900%—10/15/2029 | 243 | |
1,030 | 5.125%—08/15/2026 | 1,124 | |
1,367 | |||
SBA Communications Corp. | |||
1,250 | 4.000%—10/01/2022 | 1,263 | |
Service Properties Trust | |||
257 | 4.350%—10/01/2024 | 228 | |
335 | 4.950%—02/15/2027 | 282 | |
655 | 7.500%—09/15/2025 | 687 | |
1,197 | |||
Uniti Group LP / Uniti Fiber Holdings Inc / CSL Capital LLC | |||
745 | 7.875%—02/15/20253 | 791 | |
VICI Properties LP / VICI Note Co. Inc. | |||
241 | 3.750%—02/15/20273 | 242 | |
12,437 | |||
FOOD & STAPLES RETAILING—1.1% | |||
Albertsons Companies LLC | |||
945 | 3.250%—03/15/20263 | 929 | |
510 | 4.625%—01/15/20273 | 530 | |
741 | 4.875%—02/15/20303 | 788 | |
400 | 5.750%—03/15/2025 | 414 | |
745 | 5.875%—02/15/20283 | 789 | |
430 | 7.500%—03/15/20263 | 477 | |
3,927 | |||
Ingles Markets Inc. | |||
227 | 5.750%—06/15/2023 | 230 | |
US Foods Inc. | |||
346 | 6.250%—04/15/20253 | 362 | |
4,519 | |||
FOOD PRODUCTS—1.4% | |||
Kraft Heinz Foods Co. | |||
315 | 3.750%—04/01/20303 | 331 | |
473 | 4.250%—03/01/20313 | 513 | |
812 | 4.375%—06/01/2046 | 832 | |
113 | 4.875%—10/01/20493 | 119 | |
1,890 | 5.200%—07/15/2045 | 2,089 | |
655 | 5.500%—06/01/20503 | 746 | |
4,630 | |||
Lamb Weston Holdings Inc. | |||
455 | 4.875%—05/15/20283 | 494 | |
Post Holdings Inc. | |||
436 | 4.625%—04/15/20303 | 448 | |
321 | 5.500%—12/15/20293 | 347 | |
795 | |||
5,919 |
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 | ||
GAS UTILITIES—0.3% | |||
AmeriGas Partners LP | |||
$ | 1,050 | 5.750%—05/20/2027 | $ 1,154 |
HEALTH CARE EQUIPMENT & SUPPLIES—0.2% | |||
Teleflex Inc. | |||
400 | 4.250%—06/01/20283 | 418 | |
401 | 4.625%—11/15/2027 | 424 | |
842 | |||
HEALTH CARE PROVIDERS & SERVICES—7.5% | |||
Acadia Healthcare Co. Inc. | |||
975 | 5.500%—07/01/20283 | 1,016 | |
347 | 5.625%—02/15/2023 | 349 | |
729 | 6.500%—03/01/2024 | 748 | |
2,113 | |||
AMN Healthcare Inc. | |||
810 | 4.625%—10/01/20273 | 830 | |
Centene Corp. | |||
4,645 | 3.000%—10/15/2030 | 4,829 | |
883 | 4.625%—12/15/2029 | 963 | |
81 | 4.750%—01/15/2025 | 83 | |
3,079 | 5.375%—06/01/20263 | 3,244 | |
9,119 | |||
DaVita Inc. | |||
560 | 3.750%—02/15/20313 | 539 | |
1,410 | 4.625%—06/01/20303 | 1,435 | |
1,974 | |||
Encompass Health Corp. | |||
192 | 4.625%—04/01/2031 | 198 | |
435 | 4.750%—02/01/2030 | 454 | |
325 | 5.750%—09/15/2025 | 336 | |
988 | |||
Global Medical Response Inc. | |||
1,067 | 6.500%—10/01/20253 | 1,055 | |
HCA Inc. | |||
655 | 3.500%—09/01/2030 | 670 | |
265 | 5.375%—02/01/2025 | 294 | |
540 | 5.625%—09/01/2028 | 629 | |
1,150 | 5.875%—02/15/2026-02/01/2029 | 1,319 | |
1,610 | 7.690%—06/15/2025 | 1,926 | |
793 | 8.360%—04/15/2024 | 926 | |
5,764 | |||
HCA Inc. MTN4 | |||
428 | 7.580%—09/15/2025 | 507 | |
LifePoint Health Inc. | |||
1,065 | 6.750%—04/15/20253 | 1,129 | |
Molina Healthcare Inc. | |||
1,537 | 4.375%—06/15/20283 | 1,577 | |
890 | 4.875%—06/15/20253 | 911 | |
1,500 | 5.375%—11/15/2022 | 1,562 | |
4,050 | |||
MPH Acquisition Holdings LLC | |||
824 | 5.750%—11/01/20283 | 809 | |
Regionalcare Hospital Partners Holdings Inc. / LifePoint Health Inc. | |||
527 | 9.750%—12/01/20263 | 569 | |
Tenet Healthcare Corp. | |||
330 | 4.625%—06/15/20283 | 336 | |
1,200 | 6.125%—10/01/20283 | 1,168 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
HEALTH CARE PROVIDERS & SERVICES—Continued | |||
$ | 235 | 6.250%—02/01/20273 | $ 244 |
1,389 | 7.500%—04/01/20253 | 1,498 | |
3,246 | |||
32,153 | |||
HEALTH CARE TECHNOLOGY—1.0% | |||
Change Healthcare Holdings LLC | |||
3,173 | 5.750%—03/01/20253 | 3,175 | |
Verscend Escrow Corp. | |||
1,050 | 9.750%—08/15/20263 | 1,131 | |
4,306 | |||
HOTELS, RESTAURANTS & LEISURE—6.6% | |||
Aramark Services Inc. | |||
805 | 6.375%—05/01/20253 | 845 | |
Boyd Gaming Corp. | |||
240 | 6.375%—04/01/2026 | 249 | |
340 | 8.625%—06/01/20253 | 373 | |
622 | |||
Cedar Fair LP / Canada's Wonderland Co. / Magnum Management Corp. / Millennium Op | |||
933 | 6.500%—10/01/20283 | 911 | |
Hilton Domestic Operating Co. Inc. | |||
320 | 5.750%—05/01/20283 | 336 | |
Host Hotels & Resorts LP | |||
889 | 3.500%—09/15/2030 | 853 | |
Hyatt Hotels Corp. | |||
1,050 | 5.375%—04/23/2025 | 1,140 | |
450 | 5.750%—04/23/2030 | 509 | |
1,649 | |||
International Game Technology plc | |||
609 | 5.250%—01/15/20293 | 604 | |
1,700 | 6.250%—02/15/20223 | 1,743 | |
2,347 | |||
Marriott International Inc. | |||
605 | 0.898%—03/08/20211 | 604 | |
439 | 4.625%—06/15/2030 | 469 | |
400 | 5.750%—05/01/2025 | 446 | |
1,519 | |||
Marriott Ownership Resorts Inc. | |||
1,072 | 6.125%—09/15/20253 | 1,120 | |
Marriott Ownership Resorts Inc. / ILG LLC | |||
1,171 | 6.500%—09/15/2026 | 1,208 | |
MGM Resorts International | |||
952 | 4.750%—10/15/2028 | 933 | |
517 | 6.000%—03/15/2023 | 537 | |
2,092 | 7.750%—03/15/2022 | 2,201 | |
3,671 | |||
NCL Corp. Ltd. | |||
785 | 10.250%—02/01/20263 | 809 | |
New Red Finance Inc. | |||
909 | 4.000%—10/15/20303 | 904 | |
135 | 4.250%—05/15/20243 | 138 | |
395 | 5.000%—10/15/20253 | 405 | |
1,447 | |||
Scientific Games International Inc. | |||
477 | 7.250%—11/15/20293 | 474 |
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 | ||
HOTELS, RESTAURANTS & LEISURE—Continued | |||
$ | 340 | 8.250%—03/15/20263 | $ 345 |
995 | 8.625%—07/01/20253 | 1,036 | |
1,855 | |||
Six Flags Theme Parks Inc. | |||
379 | 7.000%—07/01/20253 | 402 | |
Stars Group Holdings BV / Stars Group US Co. Borrower LLC | |||
4,843 | 7.000%—07/15/20263 | 5,129 | |
Tripadvisor Inc. | |||
1,159 | 7.000%—07/15/20253 | 1,208 | |
Vail Resorts Inc. | |||
395 | 6.250%—05/15/20253 | 415 | |
VOC Escrow Ltd. | |||
629 | 5.000%—02/15/20283 | 546 | |
Wyndham Destinations Inc. | |||
305 | 3.900%—03/01/2023 | 296 | |
390 | 5.650%—04/01/2024 | 400 | |
645 | 6.625%—07/31/20263 | 687 | |
1,383 | |||
28,275 | |||
HOUSEHOLD DURABLES—1.7% | |||
Lennar Corp. | |||
500 | 4.750%—04/01/2021 | 506 | |
1,000 | 4.875%—12/15/2023 | 1,084 | |
125 | 5.250%—06/01/2026 | 142 | |
1,732 | |||
M/I Homes Inc. | |||
671 | 4.950%—02/01/2028 | 697 | |
400 | 5.625%—08/01/2025 | 412 | |
1,109 | |||
Newell Brands Inc. | |||
560 | 4.875%—06/01/2025 | 607 | |
Pulte Group Inc. | |||
300 | 5.000%—01/15/2027 | 344 | |
605 | 6.375%—05/15/2033 | 774 | |
1,118 | |||
Shea Homes LP / Shea Homes Funding Corp. | |||
1,760 | 4.750%—02/15/2028-04/01/20293 | 1,787 | |
Taylor Morrison Communities Inc. | |||
387 | 5.125%—08/01/20303 | 421 | |
Toll Brothers Finance Corp. | |||
165 | 4.350%—02/15/2028 | 181 | |
Tri Pointe Group Inc. | |||
245 | 5.875%—06/15/2024 | 266 | |
7,221 | |||
HOUSEHOLD PRODUCTS—0.2% | |||
Energizer Holdings Inc. | |||
574 | 4.375%—03/31/20293 | 580 | |
Prestige Brands Inc. | |||
400 | 6.375%—03/01/20243 | 410 | |
990 | |||
INDEPENDENT POWER AND RENEWABLE ELECTRICITY PRODUCERS—0.6% | |||
AES Corp. | |||
500 | 5.500%—04/15/2025 | 515 | |
930 | 6.000%—05/15/2026 | 976 | |
1,491 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
INDEPENDENT POWER AND RENEWABLE ELECTRICITY PRODUCERS—Continued | |||
Talen Energy Supply LLC | |||
$ | 298 | 7.250%—05/15/20273 | $ 299 |
735 | 7.625%—06/01/20283 | 721 | |
1,020 | |||
2,511 | |||
INSURANCE—1.1% | |||
Acrisure LLC / Acrisure Finance Inc. | |||
680 | 8.125%—02/15/20243 | 713 | |
GTCR AP Finance Inc. | |||
815 | 8.000%—05/15/20273 | 870 | |
Hub International Ltd. | |||
520 | 7.000%—05/01/20263 | 533 | |
NFP Corp. | |||
2,600 | 6.875%—08/15/20283 | 2,525 | |
4,641 | |||
INTERACTIVE MEDIA & SERVICES—0.6% | |||
Match Group Inc. | |||
605 | 4.625%—06/01/20283 | 627 | |
Twitter Inc. | |||
1,831 | 3.875%—12/15/20273 | 1,923 | |
2,550 | |||
INTERNET & DIRECT MARKETING RETAIL—1.2% | |||
Expedia Group Inc. | |||
93 | 4.625%—08/01/20273 | 98 | |
1,216 | 6.250%—05/01/20253 | 1,338 | |
120 | 7.000%—05/01/20253 | 129 | |
1,565 | |||
QVC Inc. | |||
933 | 4.375%—03/15/2023-09/01/2028 | 962 | |
905 | 4.750%—02/15/2027 | 925 | |
1,850 | 5.450%—08/15/2034 | 1,831 | |
3,718 | |||
5,283 | |||
IT SERVICES—1.3% | |||
Avaya Inc. | |||
644 | 6.125%—09/15/20283 | 663 | |
Gartner Inc. | |||
870 | 4.500%—07/01/20283 | 909 | |
Presidio Holdings Inc. | |||
745 | 8.250%—02/01/20283 | 792 | |
Shift4 Payments LLC / Shift4 Payments Finance Sub Inc. | |||
286 | 4.625%—11/01/20263 | 291 | |
Verisign Inc. | |||
515 | 4.750%—07/15/2027 | 547 | |
WEX Inc. | |||
2,315 | 4.750%—02/01/20233 | 2,323 | |
5,525 | |||
LEISURE PRODUCTS—0.5% | |||
Michaels Stores Inc. | |||
1,190 | 4.750%—10/01/20273 | 1,165 | |
Yum! Brands Inc. | |||
694 | 7.750%—04/01/20253 | 763 | |
1,928 |
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 | ||
LIFE SCIENCES TOOLS & SERVICES—1.0% | |||
Avantor Funding Inc. | |||
$ | 1,793 | 4.625%—07/15/20283 | $ 1,860 |
Charles River Laboratories International Inc. | |||
215 | 4.250%—05/01/20283 | 225 | |
IQVIA Inc. | |||
1,000 | 5.000%—05/15/20273 | 1,050 | |
Jaguar Holding Co II / PPD Development LP | |||
965 | 5.000%—06/15/20283 | 1,007 | |
4,142 | |||
MACHINERY—1.2% | |||
Colfax Corp. | |||
1,105 | 6.000%—02/15/20243 | 1,152 | |
EnPro Industries Inc. | |||
650 | 5.750%—10/15/2026 | 685 | |
Hillenbrand Inc. | |||
210 | 5.750%—06/15/2025 | 224 | |
Meritor Inc. | |||
371 | 6.250%—06/01/20253 | 389 | |
Navistar International Corp. | |||
670 | 6.625%—11/01/20253 | 693 | |
1,008 | 9.500%—05/01/20253 | 1,119 | |
1,812 | |||
Vertical U.S. Newco Inc. | |||
1,035 | 5.250%—07/15/20273 | 1,067 | |
5,329 | |||
MEDIA—9.1% | |||
Altice France Holding SA | |||
1,080 | 6.000%—02/15/20283 | 1,038 | |
Altice France SA | |||
1,200 | 7.375%—05/01/20263 | 1,254 | |
3,385 | 8.125%—02/01/20273 | 3,685 | |
4,939 | |||
AMC Networks Inc. | |||
1,037 | 5.000%—04/01/2024 | 1,043 | |
Block Communications Inc. | |||
66 | 4.875%—03/01/20283 | 68 | |
Cable One Inc. | |||
1,010 | 4.000%—11/15/20303 | 1,028 | |
CCO Holdings LLC / CCO Holdings Capital Corp. | |||
1,055 | 4.250%—02/01/20313 | 1,080 | |
898 | 4.500%—05/01/20323 | 928 | |
850 | 5.375%—06/01/20293 | 921 | |
581 | 5.500%—05/01/20263 | 605 | |
62 | 5.750%—02/15/20263 | 65 | |
3,599 | |||
CSC Holdings LLC | |||
530 | 4.625%—12/01/20303 | 531 | |
830 | 6.500%—02/01/20293 | 922 | |
290 | 7.500%—04/01/20283 | 318 | |
1,771 | |||
Diamond Sports Group LLC / Diamond Sports Finance Co. | |||
1,346 | 5.375%—08/15/20263 | 787 | |
DISH DBS Corp. | |||
2,480 | 7.750%—07/01/2026 | 2,632 | |
EW Scripps Co. | |||
375 | 5.125%—05/15/20253 | 358 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
MEDIA—Continued | |||
GCI LLC | |||
$ | 1,071 | 4.750%—10/15/20283 | $ 1,107 |
Hughes Satellite Systems Corp. | |||
1,043 | 5.250%—08/01/2026 | 1,122 | |
1,002 | 6.625%—08/01/2026 | 1,089 | |
3,000 | 7.625%—06/15/2021 | 3,086 | |
5,297 | |||
MDC Partners Inc. | |||
460 | 6.500%—05/01/20243 | 441 | |
Meredith Corp. | |||
625 | 6.500%—07/01/20253 | 644 | |
1,602 | 6.875%—02/01/2026 | 1,331 | |
1,975 | |||
Quebecor Media Inc. | |||
600 | 5.750%—01/15/2023 | 646 | |
Radiate Holdco LLC / Radiate Finance Inc. | |||
985 | 4.500%—09/15/20263 | 992 | |
1,400 | 6.500%—09/15/20283 | 1,446 | |
2,438 | |||
Sirius XM Radio Inc. | |||
570 | 5.500%—07/01/20293 | 621 | |
SSL Robotics LLC | |||
585 | 9.750%—12/31/20233 | 652 | |
Tegna Inc. | |||
610 | 4.750%—03/15/20263 | 627 | |
Telesat Canada / Telesat LLC | |||
525 | 4.875%—06/01/20273 | 536 | |
1,056 | 6.500%—10/15/20273 | 1,052 | |
1,588 | |||
Univision Communications Inc. | |||
749 | 6.625%—06/01/20273 | 759 | |
Viasat Inc. | |||
2,113 | 5.625%—09/15/20253 | 2,128 | |
1,180 | 6.500%—07/15/20283 | 1,220 | |
3,348 | |||
Virgin Media Finance plc | |||
1,230 | 5.000%—07/15/20303 | 1,225 | |
Virgin Media Secured Finance plc | |||
670 | 5.500%—08/15/2026-05/15/20293 | 708 | |
Virgin Media Vendor Financing Notes IV DAC | |||
200 | 5.000%—07/15/20283 | 200 | |
38,895 | |||
METALS & MINING—1.7% | |||
Colt Merger Sub Inc. | |||
1,934 | 6.250%—07/01/20253 | 1,988 | |
892 | 8.125%—07/01/20273 | 932 | |
2,920 | |||
FMG Resources August 2006 Pty Ltd. | |||
1,000 | 4.750%—05/15/20223 | 1,025 | |
600 | 5.125%—03/15/20233 | 628 | |
1,653 | |||
Freeport-McMoRan Inc. | |||
525 | 4.375%—08/01/2028 | 549 | |
627 | 4.625%—08/01/2030 | 671 | |
260 | 5.450%—03/15/2043 | 297 | |
1,517 |
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 | ||
METALS & MINING—Continued | |||
Grinding Media Inc. | |||
$ | 1,193 | 7.375%—12/15/20233 | $ 1,208 |
7,298 | |||
MORTGAGE REAL ESTATE INVESTMENT TRUSTS (REITs)—0.3% | |||
Ladder Capital Finance Corp. | |||
210 | 5.875%—08/01/20213 | 210 | |
Lithia Motors Inc. | |||
762 | 4.375%—01/15/20313 | 788 | |
Starwood Property Trust Inc. | |||
175 | 3.625%—02/01/2021 | 175 | |
1,173 | |||
MULTILINE RETAIL—0.1% | |||
Spectrum Brands Inc. | |||
450 | 5.750%—07/15/2025 | 464 | |
OIL, GAS & CONSUMABLE FUELS—8.6% | |||
Alliance Resource Operating Partners LP | |||
720 | 7.500%—05/01/20253 | 479 | |
Antero Midstream Partners LP / Antero Midstream Finance Corp. | |||
1,060 | 5.750%—03/01/2027-01/15/20283 | 952 | |
Apache Corp. | |||
285 | 4.250%—01/15/2044 | 242 | |
945 | 4.750%—04/15/2043 | 839 | |
230 | 5.100%—09/01/2040 | 212 | |
135 | 5.250%—02/01/2042 | 125 | |
1,418 | |||
Buckeye Partners LP | |||
690 | 3.950%—12/01/2026 | 642 | |
770 | 4.500%—03/01/20283 | 733 | |
377 | 5.600%—10/15/2044 | 326 | |
145 | 5.850%—11/15/2043 | 129 | |
1,830 | |||
Cheniere Energy Partners LP | |||
400 | 5.250%—10/01/2025 | 408 | |
240 | 5.625%—10/01/2026 | 246 | |
654 | |||
CNX Midstream Partners LP | |||
600 | 6.500%—03/15/20263 | 611 | |
CNX Resources Corp. Co. | |||
1,225 | 7.250%—03/14/20273 | 1,294 | |
Continental Resources Inc. | |||
395 | 4.900%—06/01/2044 | 328 | |
Crestwood Midstream Partners LP / Crestwood Midstream Finance Corp. | |||
460 | 5.625%—05/01/20273 | 404 | |
Crownrock LP | |||
1,090 | 5.625%—10/15/20253 | 1,074 | |
Endeavor Energy Resources LP / EER Finance Inc. | |||
417 | 5.500%—01/30/20263 | 420 | |
EQM Midstream Partners LP | |||
310 | 6.000%—07/01/20253 | 318 | |
305 | 6.500%—07/01/20273 | 320 | |
638 | |||
Equities Corp. | |||
1,058 | 5.000%—01/15/2029 | 1,058 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
OIL, GAS & CONSUMABLE FUELS—Continued | |||
Genesis Energy LP | |||
$ | 255 | 6.000%—05/15/2023 | $ 232 |
899 | 7.750%—02/01/2028 | 747 | |
979 | |||
Hilcorp Energy I LP / Hilcorp Finance Co. | |||
455 | 5.000%—12/01/20243 | 422 | |
221 | 5.750%—10/01/20253 | 205 | |
113 | 6.250%—11/01/20283 | 104 | |
731 | |||
Jagged Peak Energy LLC | |||
190 | 5.875%—05/01/2026 | 196 | |
Magnolia Oil & Gas Operating LLC / Magnolia Oil & Gas Finance Corp. | |||
635 | 6.000%—08/01/20263 | 610 | |
Methanex Corp. | |||
671 | 5.125%—10/15/2027 | 684 | |
Moss Creek Resources Holdings Inc. | |||
1,738 | 7.500%—01/15/20263 | 869 | |
741 | 10.500%—05/15/20273 | 384 | |
1,253 | |||
Murphy Oil Corp. | |||
730 | 5.750%—08/15/2025 | 602 | |
261 | 6.375%—12/01/2042 | 195 | |
797 | |||
NGL Energy Partners LP | |||
500 | 7.500%—11/01/2023 | 271 | |
NGPL Pipeco LLC | |||
555 | 4.375%—08/15/20223 | 576 | |
NuStar Logistics LP | |||
745 | 5.750%—10/01/2025 | 751 | |
250 | 6.750%—02/01/2021 | 253 | |
1,004 | |||
Occidental Petroleum Corp. | |||
905 | 3.500%—08/15/2029 | 654 | |
383 | 4.200%—03/15/2048 | 254 | |
1,026 | 4.300%—08/15/2039 | 702 | |
1,105 | 4.400%—04/15/2046 | 745 | |
630 | 5.875%—09/01/2025 | 555 | |
764 | 6.200%—03/15/2040 | 622 | |
945 | 6.375%—09/01/2028 | 829 | |
248 | 6.450%—09/15/2036 | 201 | |
1,128 | 6.625%—09/01/2030 | 990 | |
130 | 8.500%—07/15/2027 | 125 | |
2,140 | 8.875%—07/15/2030 | 2,099 | |
7,776 | |||
Parkland Fuel Corp. | |||
430 | 5.875%—07/15/20273 | 445 | |
1,050 | 6.000%—04/01/20263 | 1,086 | |
1,531 | |||
Parsley Energy LLC / Parsley Finance Corp. | |||
415 | 5.625%—10/15/20273 | 442 | |
QEP Resources Inc. | |||
981 | 5.250%—05/01/2023 | 781 | |
1,166 | 5.625%—03/01/2026 | 743 | |
1,524 | |||
Rattler Midstream LP | |||
480 | 5.625%—07/15/20253 | 494 |
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* | $ 30 |
SM Energy Co. | |||
1,903 | 5.000%—01/15/2024 | 956 | |
262 | 6.125%—11/15/2022 | 199 | |
957 | 6.750%—09/15/2026 | 372 | |
100 | 10.000%—01/15/20253 | 95 | |
1,622 | |||
Southwestern Energy Co. | |||
513 | 8.375%—09/15/2028 | 537 | |
Sunoco LP / Sunoco Finance Corp. | |||
335 | 4.875%—01/15/2023 | 339 | |
Tallgrass Energy Partners LP / Tallgrass Energy Finance Corp. | |||
785 | 4.750%—10/01/20233 | 748 | |
199 | 5.500%—09/15/20243 | 192 | |
510 | 6.000%—03/01/20273 | 483 | |
650 | 7.500%—10/01/20253 | 658 | |
2,081 | |||
Targa Resources Partners LP / Targa Resources Partners Finance Corp. | |||
307 | 5.500%—03/01/20303 | 309 | |
140 | 6.500%—07/15/2027 | 147 | |
456 | |||
WPX Energy Inc. | |||
865 | 5.250%—09/15/2024-10/15/2027 | 871 | |
990 | 5.875%—06/15/2028 | 1,014 | |
1,885 | |||
36,978 | |||
PHARMACEUTICALS—2.9% | |||
Bausch Health Americas Company | |||
128 | 8.500%—01/31/20273 | 140 | |
215 | 9.250%—04/01/20263 | 237 | |
377 | |||
Bausch Health Cos. Inc. | |||
758 | 5.500%—03/01/20233 | 759 | |
821 | 5.750%—08/15/20273 | 882 | |
113 | 5.875%—05/15/20233 | 113 | |
1,795 | 6.250%—02/15/20293 | 1,852 | |
4,263 | 7.000%—03/15/20243 | 4,422 | |
485 | 7.250%—05/30/20293 | 523 | |
8,551 | |||
Catalent Pharma Solutions Inc. | |||
808 | 5.000%—07/15/20273 | 844 | |
Elanco Animal Health Inc. | |||
1,439 | 5.900%—08/28/2028 | 1,679 | |
Teva Pharmaceutical Finance Netherlands III BV | |||
1,020 | 2.200%—07/21/2021 | 1,006 | |
12,457 | |||
PROFESSIONAL SERVICES—1.3% | |||
Nielsen Co. Luxembourg Sarl | |||
431 | 5.500%—10/01/20213 | 433 | |
Nielsen Finance LLC / Nielsen Finance Co. | |||
1,105 | 5.000%—04/15/20223 | 1,107 | |
115 | 5.625%—10/01/20283 | 119 | |
414 | 5.875%—10/01/20303 | 436 | |
1,662 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
PROFESSIONAL SERVICES—Continued | |||
Tempo Acquisition LLC / Tempo Acquisition Finance Corp. | |||
$ | 54 | 5.750%—06/01/20253 | $ 57 |
3,320 | 6.750%—06/01/20253 | 3,373 | |
3,430 | |||
5,525 | |||
REAL ESTATE MANAGEMENT & DEVELOPMENT—0.6% | |||
Greystar Real Estate Partners LLC | |||
231 | 5.750%—12/01/20253 | 235 | |
Kennedy-Wilson Inc. | |||
1,450 | 5.875%—04/01/2024 | 1,401 | |
Newmark Group Inc. | |||
500 | 6.125%—11/15/2023 | 530 | |
Realogy Group LLC / Realogy Co. | |||
419 | 7.625%—06/15/20253 | 443 | |
2,609 | |||
ROAD & RAIL—0.1% | |||
Avis Budget Car Rental LLC / Avis Budget Finance Inc. | |||
505 | 5.750%—07/15/20273 | 480 | |
SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT—0.5% | |||
Entegris Inc. | |||
760 | 4.375%—04/15/20283 | 792 | |
Microchip Technology Inc. | |||
800 | 4.250%—09/01/20253 | 830 | |
On Semiconductor Corp. | |||
469 | 3.875%—09/01/20283 | 478 | |
2,100 | |||
SOFTWARE—1.7% | |||
Banff Merger Sub Inc. | |||
978 | 9.750%—09/01/20263 | 1,029 | |
Black Knight Infoserv LLC | |||
723 | 3.625%—09/01/20283 | 733 | |
Boxer Parent Co. Inc. | |||
512 | 7.125%—10/02/20253 | 550 | |
BY Crown Parent LLC / BY Bond Finance Inc. | |||
590 | 4.250%—01/31/20263 | 598 | |
CDK Global Inc. | |||
213 | 5.000%—10/15/2024 | 233 | |
346 | 5.250%—05/15/20293 | 371 | |
604 | |||
Genesys Telecommunications Laboratories Inc. | |||
930 | 10.000%—11/30/20243 | 982 | |
Open Text Corp. | |||
376 | 3.875%—02/15/20283 | 383 | |
Open Text Holdings Inc. | |||
627 | 4.125%—02/15/20303 | 652 | |
Solera LLC | |||
1,523 | 10.500%—03/01/20243 | 1,583 | |
7,114 | |||
SPECIALTY RETAIL—0.2% | |||
L Brands Inc. | |||
1,034 | 6.875%—11/01/2035 | 1,051 | |
TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS—2.8% | |||
Dell International LLC / EMC Corp. | |||
440 | 6.100%—07/15/20273 | 523 | |
1,000 | 6.200%—07/15/20303 | 1,225 |
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 | |||
$ | 3,860 | 7.125%—06/15/20243 | $ 4,004 |
620 | 8.350%—07/15/20463 | 845 | |
6,597 | |||
Diebold Nixdorf Inc. | |||
1,267 | 9.375%—07/15/20253 | 1,347 | |
NCR Corp. | |||
434 | 5.000%—10/01/20283 | 431 | |
579 | 5.250%—10/01/20303 | 574 | |
805 | 6.125%—09/01/20293 | 845 | |
1,216 | 8.125%—04/15/20253 | 1,339 | |
3,189 | |||
Seagate HDD Cayman Co. | |||
845 | 5.750%—12/01/2034 | 963 | |
12,096 | |||
TEXTILES, APPAREL & LUXURY GOODS—0.3% | |||
PVH Corp. | |||
436 | 4.625%—07/10/2025 | 460 | |
William Carter Co. | |||
895 | 5.500%—05/15/20253 | 942 | |
1,402 | |||
THRIFTS & MORTGAGE FINANCE—0.9% | |||
Level 3 Financing Inc. | |||
427 | 3.625%—01/15/20293 | 414 | |
Nationstar Mortgage Holdings Inc. | |||
1,060 | 5.500%—08/15/20283 | 1,060 | |
Quicken Loans LLC / Quicken Loans Co-Issuer Inc. | |||
196 | 3.625%—03/01/20293 | 193 | |
1,033 | 3.875%—03/01/20313 | 1,019 | |
1,212 | |||
United Shore Financial Services LLC | |||
1,191 | 5.500%—11/15/20253 | 1,207 | |
3,893 | |||
TRADING COMPANIES & DISTRIBUTORS—0.5% | |||
Ashtead Capital Inc. | |||
97 | 4.250%—11/01/20293 | 104 | |
1,000 | 5.250%—08/01/20263 | 1,061 | |
1,165 |
CORPORATE BONDS & NOTES—Continued | |||
Principal Amount | Value | ||
TRADING COMPANIES & DISTRIBUTORS—Continued | |||
United Rentals North America Inc. | |||
$ | 519 | 5.875%—09/15/2026 | $ 547 |
WESCO Distribution Inc. Co. | |||
440 | 7.250%—06/15/20283 | 482 | |
2,194 | |||
WIRELESS TELECOMMUNICATION SERVICES—2.3% | |||
LCPR Senior Secured Financing DAC | |||
458 | 6.750%—10/15/20273 | 487 | |
Sprint Capital Corp. | |||
890 | 6.875%—11/15/2028 | 1,126 | |
2,983 | 8.750%—03/15/2032 | 4,467 | |
5,593 | |||
Sprint Corp. | |||
330 | 7.125%—06/15/2024 | 380 | |
443 | 7.875%—09/15/2023 | 507 | |
887 | |||
T-Mobile USA Inc. | |||
600 | 4.000%—04/15/2022 | 621 | |
170 | 5.125%—04/15/2025 | 175 | |
1,046 | 6.000%—03/01/2023 | 1,047 | |
1,094 | 6.500%—01/15/2026 | 1,141 | |
2,984 | |||
9,951 | |||
TOTAL CORPORATE BONDS & NOTES | |||
(Cost $383,480) | 387,561 | ||
TOTAL INVESTMENTS—97.5% | |||
(Cost $412,914) | 416,940 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—2.5% | 10,728 | ||
TOTAL NET ASSETS—100.0% | $427,668 |
FAIR VALUE MEASUREMENTS
All investments at October 31, 2020 (as disclosed in the preceding Portfolio of Investments) were classified as Level 2. There were no Level 3 investments at October 31, 2020 or 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.
48
Harbor High-Yield Bond Fund
Portfolio of Investments—Continued
Portfolio of Investments—Continued
* | Security in default |
1 | Variable or floating rate security; the stated rate represents the rate in effect at October 31, 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 | Zero coupon bond |
3 | Securities purchased in a transaction exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. The Fund has no right to demand registration of these securities. At October 31, 2020, the aggregate value of these securities was $257,911 or 60% of net assets. |
4 | MTN after the name of a security stands for Medium Term Note. |
The accompanying notes are an integral part of the Financial Statements.
49
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
In the waning weeks of 2019, markets were focused on a pronounced slowdown in global growth with weakness evident in Europe and Asia. These challenges were quickly eclipsed by the COVID-19 pandemic that spread around the globe during the first quarter of 2020. Economic growth collapsed as countries adopted travel restrictions and business closures in an attempt to slow the spread of the deadly coronavirus. The impact was devastating and drove the global economy into recession by mid-year. Monetary and fiscal authorities across the globe acted to provide emergency stimulus measures to reverse the downward spiral. Several central banks, challenged to provide monetary stimulus with interest rates already in negative territory, reinstituted non-traditional, crisis-era stimulus measures in an effort to stabilize markets. Fiscal authorities passed large stimulus packages to support individuals and businesses negatively impacted by viral restrictions.
The U.S. Federal Reserve (“Fed”) acted swiftly to stabilize markets by reducing interest rates back to the near zero lows of the previous cycle and increasing balance sheet purchases. These actions were followed by a series of programs designed to improve liquidity and provide support to specific market sectors. In the weeks and months to follow, markets responded positively with equity markets slowly rebounding and credit spreads tightening. Risk-assets experienced a near full recovery by the end of the fiscal period. Markets are currently forecasting a patient Fed holding interest rates stable for the next year. Fed Chair Powell continues to endorse additional fiscal stimulus measures in the U.S. to sustain the recovery.
Short-term U.S. Treasury Note yields closely tracked the decline in monetary policy rates during the fiscal year and have remained anchored near the zero lower boundary since March. Money market yields trended slightly above zero in the high single digits in basis point terms. The decline back to near-zero percent money market yields is an unwelcomed sign for investors who previously endured low interest rates during the last decade. We believe that money market yields will remain at current levels for the next year as Fed policy remains on-hold for an extended period.
PerformancE
For the year ended October 31, 2020, Harbor Money Market Fund returned 0.64% (Institutional Class) and 0.51% (Administrative Classes), underperforming the return of the Fund’s benchmark, the ICE BofA 3-Month U.S. Treasury Bill Index of 0.92%. 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 30 and 50 days as the path of monetary policy changed dramatically.
50
Harbor Money Market Fund
Manager’s Commentary—Continued
Manager’s Commentary—Continued
TOTAL RETURNS
For the periods ended 10/31/2020
1 Year | Annualized | |||||||
5 Years | 10 Years | |||||||
Harbor Money Market Fund | ||||||||
Institutional Class | 0.64% | 1.02% | 0.55% | |||||
Administrative Class | 0.51 | 0.93 | 0.51 | |||||
Comparative Index | ||||||||
ICE BofA U.S. 3-Month Treasury Bill | 0.92% | 1.20% | 0.64% |
Current 7-day subsidizeda SEC yield for period ended 10/31/2020: | Institutional Class: 0.04% | Administrative Class: 0.04% |
Current 7-day unsubsidizedb SEC yield for period ended 10/31/2020: | Institutional Class: (0.14)% | Administrative Class: (0.39)% |
As stated in the Fund’s prospectus dated March 1, 2020, the expense ratios were 0.28% (Net) and 0.35% (Gross) (Institutional Class); 0.53% (Net) and 0.60%(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 at harborfunds.com or by calling 800-422-1050. Current yield excludes gains and losses as defined by the Securities and Exchange Commission. The current yield more closely reflects the current earnings of the Fund than the total return.
Outlook & Strategy
Looking ahead, we do not expect any changes in monetary policy during the coming year. Interest rates are likely to remain at the zero lower bound through 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 continue to recover at a slow pace as the economic challenges of the pandemic subside. While the U.S. economy may not be able to avoid a negative growth rate in 2020, we expect growth in 2021 to exceed the trend rate. The recovery will likely benefit from a rebound in personal expenditures and business investment, in our view. This view hinges upon a containment of the COVID-19 virus in the coming year. While we remain optimistic that one of the vaccines in late stage testing will receive positive results and FDA approval, it is concerning that several countries are experiencing a resurgence of virus cases and a second round of business closures.
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. Under a new policy framework, the Fed will allow for realized inflation to exceed their target, for a period of time, to offset the current undershoot. The next interest rate 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 in our view provide opportunities to tactically adjust the Fund’s duration profile as conditions evolve.
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.
51
Harbor Money Market Fund
Portfolio of Investments—October 31, 2020
Portfolio of Investments—October 31, 2020
Total Investments (% of investments) - Unaudited
Portfolio of Investments
Value, Cost, and Principal Amounts in Thousands
GOVERNMENT AGENCY DEBT—7.5%† | |||
(Cost $7,399) | |||
Principal Amount | Value | ||
Federal Home Loan Bank Discount Notes | |||
$ | 7,400 | 0.110%—12/16/2020-01/06/2021 | $ 7,399 |
TREASURY DEBT—92.5%† | |||
U.S. Treasury Bills | |||
7,500 | 0.081%—01/14/2021 | 7,499 | |
11,200 | 0.083%—12/17/2020 | 11,199 | |
10,200 | 0.087%—12/24/2020 | 10,199 | |
10,000 | 0.088%—01/21/2021 | 9,998 | |
11,250 | 0.090%—11/05/2020 | 11,250 | |
10,000 | 0.091%—01/07/2021 | 9,998 |
TREASURY DEBT—Continued | |||
Principal Amount | Value | ||
$ | 10,950 | 0.093%—12/10/2020 | $10,949 |
11,000 | 0.096%—12/31/2020 | 10,998 | |
9,300 | 0.099%—11/27/2020 | 9,299 | |
TOTAL TREASURY DEBT | |||
(Cost $91,389) | 91,389 | ||
TOTAL INVESTMENTS—100.0% | |||
(Cost $98,788) | 98,788 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—0.0% | (18) | ||
TOTAL NET ASSETS—100.0% | $98,770 |
FAIR VALUE MEASUREMENTS
All investments at October 31, 2020 (as disclosed in the preceding Portfolio of Investments) were classified as Level 2. There were no Level 3 investments at October 31, 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.
52
Harbor Fixed Income Funds
StatementS of Assets and Liabilities—October 31, 2020
StatementS of Assets and Liabilities—October 31, 2020
(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 Money Market Fund | |
ASSETS | |||||
Investments, at identified cost | $2,617,546* | $137,069 | $108,936 | $412,914 | $98,788 |
Investments, at value | $ 2,664,896 | $150,169 | $114,781 | $416,940 | $98,788 |
Repurchase agreements | 16,200 | — | — | — | — |
Due from brokers | 4,291 | — | — | — | — |
Cash | 15,231 | 3,222 | 1,331 | 9,456 | 188 |
Foreign currency, at value (cost: $3,761, $0, $0, $0, and $0) | 3,952 | — | — | — | — |
Receivables for: | |||||
Investments sold | 713,902 | 485 | 6 | 3,530 | — |
Capital shares sold | 986 | 225 | 12 | 215 | 152 |
Interest | 11,947 | 407 | 534 | 6,034 | — |
Unrealized appreciation on open forward currency contracts | 2,634 | — | — | — | — |
Unrealized appreciation on OTC swap agreements | 147 | — | — | — | — |
Variation margin on options and futures contracts | 648 | — | — | — | — |
Variation margin on centrally cleared swap agreements | 2,466 | — | — | — | — |
Prepaid registration fees | 16 | 1 | 1 | 25 | 13 |
Other assets | 557 | 26 | — | 171 | 18 |
Total Assets | 3,437,873 | 154,535 | 116,665 | 436,371 | 99,159 |
LIABILITIES | |||||
Payables for: | |||||
Due to brokers | 2,447 | — | — | — | — |
Investments purchased | 1,387,725 | 324 | 1,007 | 6,283 | — |
Capital shares reacquired | 722 | 12 | — | 1,996 | 340 |
Investments sold short, at value (proceeds: $15,096, $0, $0, $0, and $0) | 14,876 | — | — | — | — |
Written options not settled through variation margin, at value (premiums received: $333, $0, $0, $0, and $0) | 200 | — | — | — | — |
Swap premiums received on OTC swap agreements | 114 | — | — | — | — |
Unrealized depreciation on open forward currency contracts | 160 | — | — | — | — |
Accrued expenses: | |||||
Management fees | 785 | 81 | 34 | 185 | 4 |
12b-1 fees | 4 | 1 | — | 6 | — |
Transfer agent fees | 148 | 10 | 7 | 29 | — |
Trustees' fees and expenses | 560 | 27 | 4 | 174 | 19 |
Other | 129 | 14 | 12 | 30 | 26 |
Total Liabilities | 1,407,870 | 469 | 1,064 | 8,703 | 389 |
NET ASSETS | $ 2,030,003 | $154,066 | $115,601 | $427,668 | $98,770 |
Net Assets Consist of: | |||||
Paid-in capital | $ 1,957,635 | $126,228 | $106,895 | $522,316 | $98,736 |
Total distributable earnings/(loss) | 72,368 | 27,838 | 8,706 | (94,648) | 34 |
$ 2,030,003 | $154,066 | $115,601 | $427,668 | $98,770 | |
The accompanying notes are an integral part of the Financial Statements.
53
Harbor Bond Fund | Harbor Convertible Securities Fund | Harbor Core Bond Fund | Harbor High-Yield Bond Fund | Harbor Money Market Fund | ||||||
NET ASSET VALUE PER SHARE BY CLASS | ||||||||||
Retirement Class | ||||||||||
Net assets | $ 166,740 | $ 34,307 | $29,428 | $114,145 | N/A | |||||
Shares of beneficial interest1 | 13,501 | 2,748 | 2,661 | 11,958 | N/A | |||||
Net asset value per share2 | $ 12.35 | $ 12.49 | $ 11.06 | $ 9.55 | N/A | |||||
Institutional Class | ||||||||||
Net assets | $1,844,961 | $117,269 | $86,173 | $287,242 | $95,159 | |||||
Shares of beneficial interest1 | 149,269 | 9,396 | 7,790 | 30,090 | 95,158 | |||||
Net asset value per share2 | $ 12.36 | $ 12.48 | $ 11.06 | $ 9.55 | $ 1.00 | |||||
Administrative Class | ||||||||||
Net assets | $ 18,302 | $ 70 | N/A | $ 668 | $ 3,611 | |||||
Shares of beneficial interest1 | 1,479 | 6 | N/A | 70 | 3,611 | |||||
Net asset value per share2 | $ 12.37 | $ 12.46 | N/A | $ 9.59 | $ 1.00 | |||||
Investor Class | ||||||||||
Net assets | N/A | $ 2,420 | N/A | $ 25,613 | N/A | |||||
Shares of beneficial interest1 | N/A | 194 | N/A | 2,675 | N/A | |||||
Net asset value per share2 | N/A | $ 12.46 | N/A | $ 9.57 | 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. |
54
Harbor Fixed Income Funds
StatementS of Operations—Year Ended October 31, 2020
StatementS of Operations—Year Ended October 31, 2020
(All amounts in thousands)
Harbor Bond Fund | Harbor Convertible Securities Fund | Harbor Core Bond Fund | Harbor High-Yield Bond Fund | Harbor Money Market Fund | |
Investment Income | |||||
Interest | $ 63,987 | $ 1,889 | $2,795 | $ 23,631 | $1,054 |
Foreign taxes withheld | 8 | — | — | — | — |
Consent fee income | 2 | 5 | — | 122 | — |
Total Investment Income | 63,997 | 1,894 | 2,795 | 23,753 | 1,054 |
Operating Expenses | |||||
Management fees | 9,619 | 941 | 341 | 2,594 | 233 |
12b-1 fees: | |||||
Administrative Class | 46 | — | N/A | 2 | 9 |
Investor Class | N/A | 5 | N/A | 54 | N/A |
Shareholder communications | 136 | 3 | 9 | 22 | 20 |
Custodian fees | 193 | 21 | 15 | 33 | 21 |
Transfer agent fees: | |||||
Retirement Class | 24 | 6 | 3 | 16 | N/A |
Institutional Class | 1,866 | 112 | 84 | 328 | 113 |
Administrative Class | 19 | — | N/A | 1 | 3 |
Investor Class | N/A | 5 | N/A | 48 | N/A |
Professional fees | 91 | 6 | 4 | 20 | 14 |
Trustees' fees and expenses | 93 | 7 | 5 | 18 | 6 |
Registration fees | 93 | 58 | 33 | 65 | 37 |
Miscellaneous | 35 | 10 | 7 | 15 | 7 |
Expenses before interest expense | 12,215 | 1,174 | 501 | 3,216 | 463 |
Interest expense | 2,217 | — | — | — | — |
Total expenses | 14,432 | 1,174 | 501 | 3,216 | 463 |
Management fees waived | (502) | (72) | — | (398) | (84) |
12b-1 fees waived | — | — | — | — | (4) |
Transfer agent fees waived | (59) | (5) | (3) | (12) | (48) |
Other expenses reimbursed | (1,482) | — | (60) | — | (104) |
Custodian fees reduction | (1) | — | — | — | (1) |
Net expenses | 12,388 | 1,097 | 438 | 2,806 | 222 |
Net Investment Income/(Loss) | 51,609 | 797 | 2,357 | 20,947 | 832 |
Realized and Change in Net Unrealized Gain/(Loss) on Investment Transactions | |||||
Net realized gain/(loss) on: | |||||
Investments | 72,606 | 16,732 | 2,883 | (15,626) | — |
Foreign currency transactions | (14,688) | — | — | — | — |
Investments sold short | (899) | — | — | — | — |
Swap agreements | (3,787) | — | — | — | — |
Futures contracts | (136) | — | — | — | — |
Purchased options | (181) | — | — | — | — |
Written options | 1,823 | — | — | — | — |
Change in net unrealized appreciation/(depreciation) on: | |||||
Investments | 3,160 | 8,343 | 1,657 | (232) | — |
Forward currency contracts | 9,828 | — | — | — | — |
Investments sold short | 336 | — | — | — | — |
Swap agreements | 5,924 | — | — | — | — |
Futures contracts | 1,828 | — | — | — | — |
Purchased options | 132 | — | — | — | — |
Written options | (835) | — | — | — | — |
Translations of assets and liabilities in foreign currencies | 287 | — | — | — | — |
Net gain/(loss) on investment transactions | 75,398 | 25,075 | 4,540 | (15,858) | — |
Net Increase/(Decrease) in Net Assets Resulting from Operations | $127,007 | $25,872 | $6,897 | $ 5,089 | $ 832 |
The accompanying notes are an integral part of the Financial Statements.
55
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 October 31, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | |||
INCREASE/(DECREASE) IN NET ASSETS | ||||||||
Operations: | ||||||||
Net investment income/(loss) | $ 51,609 | $ 62,549 | $ 797 | $ 1,157 | $ 2,357 | $ 2,229 | ||
Net realized gain/(loss) on investments | 54,738 | 43,239 | 16,732 | 4,662 | 2,883 | 955 | ||
Change in net unrealized appreciation/(depreciation) of investments | 20,660 | 91,835 | 8,343 | 6,316 | 1,657 | 5,019 | ||
Net increase/(decrease) in assets resulting from operations | 127,007 | 197,623 | 25,872 | 12,135 | 6,897 | 8,203 | ||
Distributions to Shareholders | ||||||||
Retirement Class | (2,761) | (328) | (842) | (1,614) | (440) | (145) | ||
Institutional Class | (52,640) | (59,992) | (4,208) | (5,977) | (2,582) | (2,015) | ||
Administrative Class | (470) | (878) | (2) | (3) | N/A | N/A | ||
Investor Class | N/A | N/A | (68) | (111) | N/A | N/A | ||
Total distributions to shareholders | (55,871) | (61,198) | (5,120) | (7,705) | (3,022) | (2,160) | ||
Net Increase/(Decrease) Derived from Capital Share Transactions | (32,033) | (83,237) | (7,638) | 15,772 | 26,970 | 23,403 | ||
Net increase/(decrease) in net assets | 39,103 | 53,188 | 13,114 | 20,202 | 30,845 | 29,446 | ||
Net Assets | ||||||||
Beginning of period | 1,990,900 | 1,937,712 | 140,952 | 120,750 | 84,756 | 55,310 | ||
End of period | $2,030,003 | $1,990,900 | $154,066 | $140,952 | $115,601 | $84,756 |
The accompanying notes are an integral part of the Financial Statements.
56
Harbor High-Yield Bond Fund | Harbor Money Market Fund | |||
November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | |
$ 20,947 | $ 30,652 | $ 832 | $ 3,111 | |
(15,626) | (14,481) | — | — | |
(232) | 24,504 | — | — | |
5,089 | 40,675 | 832 | 3,111 | |
(4,327) | (8,772) | N/A | N/A | |
(17,235) | (23,233) | (815) | (3,012) | |
(32) | (44) | (17) | (99) | |
(1,053) | (1,147) | N/A | N/A | |
(22,647) | (33,196) | (832) | (3,111) | |
(46,449) | (322,558) | (22,397) | (10,745) | |
(64,007) | (315,079) | (22,397) | (10,745) | |
491,675 | 806,754 | 121,167 | 131,912 | |
$427,668 | $ 491,675 | $ 98,770 | $121,167 |
57
Harbor Fixed Income Funds
Statements of Changes in Net Assets—Capital Stock Activity
Statements of Changes in Net Assets—Capital Stock Activity
(All amounts in thousands)
Harbor Bond Fund | Harbor Convertible Securities Fund | Harbor Core Bond Fund | ||||||
November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | |||
AMOUNT ($) | ||||||||
Retirement Class | ||||||||
Net proceeds from sale of shares | $ 179,495 | $ 6,756 | $ 28,873 | $ 246 | $ 23,906 | $ 3,158 | ||
Net proceeds from redemption fees | — | — | — | — | — | — | ||
Reinvested distributions | 2,761 | 328 | 842 | 1,614 | 440 | 128 | ||
Cost of shares reacquired | (33,651) | (2,022) | (24,767) | (3,434) | (831) | (1,473) | ||
Net increase/(decrease) in net assets | $ 148,605 | $ 5,062 | $ 4,948 | $ (1,574) | $ 23,515 | $ 1,813 | ||
Institutional Class | ||||||||
Net proceeds from sale of shares | $ 431,694 | $ 288,671 | $ 16,717 | $ 36,943 | $ 19,108 | $ 31,811 | ||
Net proceeds from redemption fees | — | — | 1 | 1 | — | — | ||
Reinvested distributions | 49,880 | 56,920 | 4,157 | 5,898 | 2,581 | 2,015 | ||
Cost of shares reacquired | (660,371) | (420,202) | (33,534) | (25,631) | (18,234) | (12,236) | ||
Net increase/(decrease) in net assets | $(178,797) | $ (74,611) | $(12,659) | $ 17,211 | $ 3,455 | $ 21,590 | ||
Administrative Class | ||||||||
Net proceeds from sale of shares | $ 2,092 | $ 6,129 | $ — | $ — | N/A | N/A | ||
Net proceeds from redemption fees | — | — | — | — | N/A | N/A | ||
Reinvested distributions | 469 | 878 | 2 | 3 | N/A | N/A | ||
Cost of shares reacquired | (4,402) | (20,695) | — | — | N/A | N/A | ||
Net increase/(decrease) in net assets | $ (1,841) | $ (13,688) | $ 2 | $ 3 | N/A | N/A | ||
Investor Class | ||||||||
Net proceeds from sale of shares | N/A | N/A | $ 764 | $ 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 | 68 | 111 | N/A | N/A | ||
Cost of shares reacquired | N/A | N/A | (761) | (1,191) | N/A | N/A | ||
Net increase/(decrease) in net assets | N/A | N/A | $ 71 | $ 132 | N/A | N/A |
The accompanying notes are an integral part of the Financial Statements.
58
Harbor High-Yield Bond Fund | Harbor Money Market Fund | |||
November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | |
$ 72,410 | $ 15,713 | N/A | N/A | |
30 | 5 | N/A | N/A | |
4,187 | 8,598 | N/A | N/A | |
(34,927) | (254,561) | N/A | N/A | |
$ 41,700 | $(230,245) | N/A | N/A | |
$ 92,313 | $ 80,070 | $ 209,776 | $ 375,658 | |
96 | 12 | — | — | |
16,946 | 22,836 | 810 | 2,986 | |
(204,679) | (181,784) | (233,459) | (390,438) | |
$ (95,324) | $ (78,866) | $ (22,873) | $ (11,794) | |
$ 121 | $ 79 | $ 3,992 | $ 21,058 | |
— | — | — | — | |
31 | 42 | 17 | 99 | |
(148) | (822) | (3,533) | (20,108) | |
$ 4 | $ (701) | $ 476 | $ 1,049 | |
$ 21,719 | $ 6,096 | N/A | N/A | |
9 | 1 | N/A | N/A | |
1,043 | 1,133 | N/A | N/A | |
(15,600) | (19,976) | N/A | N/A | |
$ 7,171 | $ (12,746) | N/A | N/A |
59
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 October 31, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | |||
SHARES | ||||||||
Retirement Class | ||||||||
Shares sold | 14,981 | 603 | 2,624 | 24 | 2,200 | 316 | ||
Shares issued due to reinvestment of distributions | 226 | 29 | 78 | 166 | 41 | 12 | ||
Shares reacquired | (2,782) | (180) | (2,237) | (334) | (78) | (141) | ||
Net increase/(decrease) in shares outstanding | 12,425 | 452 | 465 | (144) | 2,163 | 187 | ||
Institutional Class | ||||||||
Shares sold | 35,572 | 25,078 | 1,508 | 3,514 | 1,764 | 3,140 | ||
Shares issued due to reinvestment of distributions | 4,166 | 4,986 | 386 | 606 | 241 | 196 | ||
Shares reacquired | (54,936) | (36,786) | (3,041) | (2,496) | (1,684) | (1,176) | ||
Net increase/(decrease) in shares outstanding | (15,198) | (6,722) | (1,147) | 1,624 | 321 | 2,160 | ||
Administrative Class | ||||||||
Shares sold | 172 | 537 | — | — | N/A | N/A | ||
Shares issued due to reinvestment of distributions | 39 | 77 | 1 | — | N/A | N/A | ||
Shares reacquired | (368) | (1,779) | — | — | N/A | N/A | ||
Net increase/(decrease) in shares outstanding | (157) | (1,165) | 1 | — | N/A | N/A | ||
Investor Class | ||||||||
Shares sold | N/A | N/A | 65 | 114 | N/A | N/A | ||
Shares issued due to reinvestment of distributions | N/A | N/A | 6 | 12 | N/A | N/A | ||
Shares reacquired | N/A | N/A | (68) | (113) | N/A | N/A | ||
Net increase/(decrease) in shares outstanding | N/A | N/A | 3 | 13 | N/A | N/A |
The accompanying notes are an integral part of the Financial Statements.
60
Harbor High-Yield Bond Fund | Harbor Money Market Fund | |||
November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | |
7,783 | 1,616 | N/A | N/A | |
448 | 898 | N/A | N/A | |
(3,729) | (26,404) | N/A | N/A | |
4,502 | (23,890) | N/A | N/A | |
9,729 | 8,195 | 209,775 | 375,658 | |
1,821 | 2,362 | 810 | 2,986 | |
(21,780) | (18,795) | (233,459) | (390,438) | |
(10,230) | (8,238) | (22,874) | (11,794) | |
13 | 8 | 3,992 | 21,058 | |
3 | 4 | 17 | 99 | |
(15) | (84) | (3,533) | (20,108) | |
1 | (72) | 476 | 1,049 | |
2,344 | 623 | N/A | N/A | |
111 | 117 | N/A | N/A | |
(1,697) | (2,073) | N/A | N/A | |
758 | (1,333) | N/A | N/A |
61
Harbor Fixed Income Funds Financial Highlights
Selected Data for a Share Outstanding for the Periods Presented
Selected Data for a Share Outstanding for the Periods Presented
HARBOR BOND FUND | |||
Retirement Class | |||
Year Ended October 31, | 2020 | 2019 | 2018 g |
Net asset value beginning of period | $ 11.90 | $ 11.09 | $11.28 |
Income from Investment Operations | |||
Net investment income/(loss)a,e | 0.31 | 0.38 | 0.16 |
Net realized and unrealized gain/(loss) on investments | 0.49 | 0.80 | (0.16) |
Total from investment operations | 0.80 | 1.18 | — * |
Less Distributions | |||
Dividends from net investment income | (0.35) | (0.37) | (0.19) |
Distributions from net realized capital gains | — | — | — |
Total distributions | (0.35) | (0.37) | (0.19) |
Net asset value end of period | 12.35 | 11.90 | 11.09 |
Net assets end of period (000s) | $166,740 | $12,802 | $6,921 |
Ratios and Supplemental Data (%) | |||
Total returnb | 6.82% | 10.84% | 0.01% c |
Ratio of total expenses to average net assets^ | 0.58 | 1.06 | 1.16 d |
Ratio of net expenses to average net assetsa | 0.48 | 0.96 | 1.06 d |
Ratio of net expenses excluding interest expense to average net assetsa | 0.43 | 0.43 | 0.43 d |
Ratio of net investment income/(loss) to average net assetsa | 2.56 | 3.30 | 3.44 d |
Portfolio turnover | 558 | 644 | 674 c |
Administrative Class | |||||
Year Ended October 31, | 2020 | 2019 | 2018 | 2017 | 2016 |
Net asset value beginning of period | $ 11.92 | $ 11.11 | $ 11.69 | $ 11.89 | $ 11.93 |
Income from Investment Operations | |||||
Net investment income/(loss)a,e | 0.28 | 0.35 | 0.31 | 0.34 | 0.34 |
Net realized and unrealized gain/(loss) on investments | 0.48 | 0.79 | (0.53) | (0.05) | 0.16 |
Total from investment operations | 0.76 | 1.14 | (0.22) | 0.29 | 0.50 |
Less Distributions | |||||
Dividends from net investment income | (0.31) | (0.33) | (0.36) | (0.32) | (0.45) |
Distributions from net realized capital gains | — | — | — | (0.17) | (0.09) |
Total distributions | (0.31) | (0.33) | (0.36) | (0.49) | (0.54) |
Net asset value end of period | 12.37 | 11.92 | 11.11 | 11.69 | 11.89 |
Net assets end of period (000s) | $18,302 | $19,498 | $31,111 | $30,376 | $37,887 |
Ratios and Supplemental Data (%) | |||||
Total returnb | 6.44% | 10.44% | (1.88)% | 2.56% | 4.42% |
Ratio of total expenses to average net assets^ | 0.97 | 1.39 | 1.16 | 0.88 | 0.85 |
Ratio of net expenses to average net assetsa | 0.87 | 1.29 | 1.06 | 0.79 | 0.78 |
Ratio of net expenses excluding interest expense to average net assetsa | 0.76 | 0.76 | 0.76 | 0.76 | 0.76 |
Ratio of net investment income/(loss) to average net assetsa | 2.32 | 3.01 | 2.69 | 2.90 | 2.89 |
Portfolio turnover | 558 | 644 | 674 | 654 | 592 |
See page 70 for notes to the Financial Highlights.
The accompanying notes are an integral part of the Financial Statements.
62
Institutional Class | ||||
2020 | 2019 | 2018 | 2017 | 2016 |
$ 11.91 | $ 11.10 | $ 11.68 | $ 11.88 | $ 11.92 |
0.31 | 0.37 | 0.33 | 0.36 | 0.37 |
0.48 | 0.80 | (0.52) | (0.04) | 0.16 |
0.79 | 1.17 | (0.19) | 0.32 | 0.53 |
(0.34) | (0.36) | (0.39) | (0.35) | (0.48) |
— | — | — | (0.17) | (0.09) |
(0.34) | (0.36) | (0.39) | (0.52) | (0.57) |
12.36 | 11.91 | 11.10 | 11.68 | 11.88 |
$1,844,961 | $1,958,600 | $1,899,680 | $2,159,390 | $2,438,815 |
6.72% | 10.74% | (1.63)% | 2.82% | 4.70% |
0.73 | 1.14 | 0.90 | 0.63 | 0.60 |
0.62 | 1.04 | 0.80 | 0.54 | 0.53 |
0.51 | 0.51 | 0.51 | 0.51 | 0.51 |
2.58 | 3.23 | 2.93 | 3.15 | 3.16 |
558 | 644 | 674 | 654 | 592 |
63
Harbor Fixed Income Funds Financial Highlights—Continued
Selected Data for a Share Outstanding for the Periods Presented
Selected Data for a Share Outstanding for the Periods Presented
HARBOR CONVERTIBLE SECURITIES FUND | |||||
Retirement Class | |||||
Year Ended October 31, | 2020 | 2019 | 2018 | 2017 | 2016 f |
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 | 0.07 | 0.10 | 0.10 | 0.14 | 0.08 |
Net realized and unrealized gain/(loss) on investments | 2.02 | 0.92 | 0.19 | 0.78 | 0.75 |
Total from investment operations | 2.09 | 1.02 | 0.29 | 0.92 | 0.83 |
Less Distributions | |||||
Dividends from net investment income | (0.09) | (0.18) | (0.09) | (0.18) | (0.08) |
Distributions from net realized capital gains | (0.33) | (0.49) | (1.00) | — | — |
Total distributions | (0.42) | (0.67) | (1.09) | (0.18) | (0.08) |
Proceeds from redemption fees | — * | — * | — * | — * | — |
Net asset value end of period | 12.49 | 10.82 | 10.47 | 11.27 | 10.53 |
Net assets end of period (000s) | $34,307 | $24,697 | $25,412 | $24,585 | $2,215 |
Ratios and Supplemental Data (%) | |||||
Total returnb | 19.93% | 10.48% | 2.80% | 8.81% | 8.51% c |
Ratio of total expenses to average net assets^ | 0.74 | 0.74 | 0.74 | 0.72 | 0.73 d |
Ratio of net expenses to average net assetsa | 0.69 | 0.69 | 0.69 | 0.67 | 0.71 d |
Ratio of net investment income/(loss) to average net assetsa | 0.60 | 0.98 | 0.95 | 1.24 | 1.13 d |
Portfolio turnover | 101 | 74 | 94 | 102 | 102 c |
Administrative Class | |||||
Year Ended October 31, | 2020 | 2019 | 2018 | 2017 | 2016 |
Net asset value beginning of period | $ 10.80 | $ 10.44 | $ 11.26 | $ 10.53 | $10.62 |
Income from Investment Operations | |||||
Net investment income/(loss)a,e | 0.03 | 0.07 | 0.07 | 0.10 | 0.09 |
Net realized and unrealized gain/(loss) on investments | 2.01 | 0.91 | 0.17 | 0.77 | 0.20 |
Total from investment operations | 2.04 | 0.98 | 0.24 | 0.87 | 0.29 |
Less Distributions | |||||
Dividends from net investment income | (0.05) | (0.13) | (0.06) | (0.14) | (0.19) |
Distributions from net realized capital gains | (0.33) | (0.49) | (1.00) | — | (0.19) |
Total distributions | (0.38) | (0.62) | (1.06) | (0.14) | (0.38) |
Proceeds from redemption fees | — * | — * | — * | — * | — * |
Net asset value end of period | 12.46 | 10.80 | 10.44 | 11.26 | 10.53 |
Net assets end of period (000s) | $ 70 | $ 59 | $ 53 | $ 395 | $ 392 |
Ratios and Supplemental Data (%) | |||||
Total returnb | 19.48% | 10.11% | 2.27% | 8.37% | 2.96% |
Ratio of total expenses to average net assets^ | 1.07 | 1.07 | 1.07 | 1.04 | 1.02 |
Ratio of net expenses to average net assetsa | 1.02 | 1.02 | 1.01 | 1.00 | 1.01 |
Ratio of net investment income/(loss) to average net assetsa | 0.29 | 0.64 | 0.63 | 0.93 | 0.90 |
Portfolio turnover | 101 | 74 | 94 | 102 | 102 |
See page 70 for notes to the Financial Highlights.
The accompanying notes are an integral part of the Financial Statements.
64
Institutional Class | ||||
2020 | 2019 | 2018 | 2017 | 2016 |
$ 10.83 | $ 10.48 | $ 11.27 | $ 10.53 | $ 10.63 |
0.06 | 0.09 | 0.09 | 0.13 | 0.12 |
2.00 | 0.92 | 0.20 | 0.78 | 0.19 |
2.06 | 1.01 | 0.29 | 0.91 | 0.31 |
(0.08) | (0.17) | (0.08) | (0.17) | (0.22) |
(0.33) | (0.49) | (1.00) | — | (0.19) |
(0.41) | (0.66) | (1.08) | (0.17) | (0.41) |
— * | — * | — * | — * | — * |
12.48 | 10.83 | 10.48 | 11.27 | 10.53 |
$117,269 | $114,130 | $93,424 | $87,391 | $421,671 |
19.63% | 10.39% | 2.82% | 8.74% | 3.12% |
0.82 | 0.82 | 0.82 | 0.79 | 0.77 |
0.77 | 0.77 | 0.76 | 0.76 | 0.76 |
0.55 | 0.89 | 0.88 | 1.18 | 1.15 |
101 | 74 | 94 | 102 | 102 |
Investor Class | ||||
2020 | 2019 | 2018 | 2017 | 2016 |
$ 10.80 | $ 10.45 | $ 11.25 | $ 10.52 | $ 10.61 |
0.02 | 0.05 | 0.05 | 0.09 | 0.08 |
2.00 | 0.92 | 0.19 | 0.77 | 0.20 |
2.02 | 0.97 | 0.24 | 0.86 | 0.28 |
(0.03) | (0.13) | (0.04) | (0.13) | (0.18) |
(0.33) | (0.49) | (1.00) | — | (0.19) |
(0.36) | (0.62) | (1.04) | (0.13) | (0.37) |
— * | — * | — * | — * | — * |
12.46 | 10.80 | 10.45 | 11.25 | 10.52 |
$ 2,420 | $ 2,066 | $ 1,861 | $ 2,015 | $ 2,039 |
19.33% | 9.99% | 2.35% | 8.26% | 2.85% |
1.19 | 1.19 | 1.19 | 1.16 | 1.14 |
1.14 | 1.14 | 1.13 | 1.12 | 1.13 |
0.17 | 0.52 | 0.51 | 0.81 | 0.77 |
101 | 74 | 94 | 102 | 102 |
65
Harbor Fixed Income Funds Financial Highlights—Continued
Selected Data for a Share Outstanding for the Periods Presented
Selected Data for a Share Outstanding for the Periods Presented
HARBOR CORE BOND FUND | |||
Retirement Class | |||
Year Ended October 31, | 2020 | 2019 | 2018 g |
Net asset value beginning of period | $ 10.64 | $ 9.84 | $10.00 |
Income from Investment Operations | |||
Net investment income/(loss)a,e | 0.26 | 0.31 | 0.12 |
Net realized and unrealized gain/(loss) on investments | 0.50 | 0.79 | (0.19) |
Total from investment operations | 0.76 | 1.10 | (0.07) |
Less Distributions | |||
Dividends from net investment income | (0.27) | (0.30) | (0.09) |
Distributions from net realized capital gains | (0.07) | — | — |
Total distributions | (0.34) | (0.30) | (0.09) |
Net asset value end of period | 11.06 | 10.64 | 9.84 |
Net assets end of period (000s) | $29,428 | $5,298 | $3,061 |
Ratios and Supplemental Data (%) | |||
Total returnb | 7.36% | 11.34% | (0.73)% c |
Ratio of total expenses to average net assets^ | 0.43 | 0.45 | 0.77 d |
Ratio of net expenses to average net assetsa | 0.37 | 0.37 | 0.37 d |
Ratio of net investment income/(loss) to average net assetsa | 2.35 | 2.98 | 2.98 d |
Portfolio turnover | 70 | 61 | 97 c |
See page 70 for notes to the Financial Highlights.
The accompanying notes are an integral part of the Financial Statements.
66
Institutional Class | ||
2020 | 2019 | 2018 g |
$ 10.64 | $ 9.84 | $ 10.00 |
0.26 | 0.30 | 0.12 |
0.50 | 0.79 | (0.19) |
0.76 | 1.09 | (0.07) |
(0.27) | (0.29) | (0.09) |
(0.07) | — | — |
(0.34) | (0.29) | (0.09) |
11.06 | 10.64 | 9.84 |
$86,173 | $79,458 | $52,249 |
7.28% | 11.26% | (0.75)% c |
0.51 | 0.53 | 0.85 d |
0.45 | 0.45 | 0.45 d |
2.35 | 2.89 | 2.86 d |
70 | 61 | 97 c |
67
Harbor Fixed Income Funds Financial Highlights—Continued
Selected Data for a Share Outstanding for the Periods Presented
Selected Data for a Share Outstanding for the Periods Presented
HARBOR HIGH-YIELD BOND FUND | |||||
Retirement Class | |||||
Year Ended October 31, | 2020 | 2019 | 2018 | 2017 | 2016 f |
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 | 0.47 | 0.54 | 0.54 | 0.55 | 0.36 |
Net realized and unrealized gain/(loss) on investments | (0.28) | 0.22 | (0.49) | 0.25 | 0.61 |
Total from investment operations | 0.19 | 0.76 | 0.05 | 0.80 | 0.97 |
Less Distributions | |||||
Dividends from net investment income | (0.52) | (0.57) | (0.58) | (0.58) | (0.37) |
Distributions from net realized capital gains | — | — | — | — | — |
Total distributions | (0.52) | (0.57) | (0.58) | (0.58) | (0.37) |
Proceeds from redemption fees | — * | — * | — * | — * | — * |
Net asset value end of period | 9.55 | 9.88 | 9.69 | 10.22 | 10.00 |
Net assets end of period (000s) | $114,145 | $73,676 | $303,627 | $41,975 | $1,828 |
Ratios and Supplemental Data (%) | |||||
Total returnb | 2.18% | 8.13% | 0.54% | 8.23% | 10.49% c |
Ratio of total expenses to average net assets^ | 0.66 | 0.65 | 0.61 | 0.65 | 0.66 d |
Ratio of net expenses to average net assetsa | 0.57 | 0.56 | 0.53 | 0.61 | 0.61 d |
Ratio of net investment income/(loss) to average net assetsa | 4.88 | 5.53 | 5.50 | 5.44 | 5.38 d |
Portfolio turnover | 128 | 80 | 53 | 56 | 58 c |
Administrative Class | |||||
Year Ended October 31, | 2020 | 2019 | 2018 | 2017 | 2016 |
Net asset value beginning of period | $ 9.92 | $ 9.71 | $ 10.25 | $ 10.01 | $10.02 |
Income from Investment Operations | |||||
Net investment income/(loss)a,e | 0.44 | 0.50 | 0.52 | 0.53 | 0.51 |
Net realized and unrealized gain/(loss) on investments | (0.28) | 0.25 | (0.51) | 0.25 | (0.02) |
Total from investment operations | 0.16 | 0.75 | 0.01 | 0.78 | 0.49 |
Less Distributions | |||||
Dividends from net investment income | (0.49) | (0.54) | (0.55) | (0.54) | (0.50) |
Distributions from net realized capital gains | — | — | — | — | — |
Total distributions | (0.49) | (0.54) | (0.55) | (0.54) | (0.50) |
Proceeds from redemption fees | — * | — * | — * | — * | — * |
Net asset value end of period | 9.59 | 9.92 | 9.71 | 10.25 | 10.01 |
Net assets end of period (000s) | $ 668 | $ 686 | $ 1,374 | $ 1,753 | $4,631 |
Ratios and Supplemental Data (%) | |||||
Total returnb | 1.82% | 7.91% | 0.10% | 7.98% | 5.18% |
Ratio of total expenses to average net assets^ | 0.99 | 0.98 | 0.94 | 0.97 | 0.95 |
Ratio of net expenses to average net assetsa | 0.90 | 0.89 | 0.86 | 0.92 | 0.91 |
Ratio of net investment income/(loss) to average net assetsa | 4.60 | 5.13 | 5.18 | 5.20 | 5.20 |
Portfolio turnover | 128 | 80 | 53 | 56 | 58 |
See page 70 for notes to the Financial Highlights.
The accompanying notes are an integral part of the Financial Statements.
68
Institutional Class | ||||
2020 | 2019 | 2018 | 2017 | 2016 |
$ 9.88 | $ 9.68 | $ 10.21 | $ 9.99 | $ 10.00 |
0.46 | 0.52 | 0.54 | 0.55 | 0.53 |
(0.28) | 0.25 | (0.51) | 0.24 | (0.02) |
0.18 | 0.77 | 0.03 | 0.79 | 0.51 |
(0.51) | (0.57) | (0.57) | (0.57) | (0.52) |
— | — | — | — | — |
(0.51) | (0.57) | (0.57) | (0.57) | (0.52) |
— * | — * | 0.01 | — * | — * |
9.55 | 9.88 | 9.68 | 10.21 | 9.99 |
$287,242 | $398,320 | $470,204 | $1,387,213 | $1,817,902 |
2.09% | 8.16% | 0.45% | 8.16% | 5.46% |
0.74 | 0.73 | 0.69 | 0.72 | 0.70 |
0.65 | 0.64 | 0.62 | 0.67 | 0.66 |
4.86 | 5.35 | 5.40 | 5.43 | 5.43 |
128 | 80 | 53 | 56 | 58 |
Investor Class | ||||
2020 | 2019 | 2018 | 2017 | 2016 |
$ 9.91 | $ 9.71 | $ 10.24 | $ 10.01 | $ 10.02 |
0.43 | 0.49 | 0.50 | 0.52 | 0.49 |
(0.29) | 0.24 | (0.49) | 0.24 | (0.02) |
0.14 | 0.73 | 0.01 | 0.76 | 0.47 |
(0.48) | (0.53) | (0.54) | (0.53) | (0.48) |
— | — | — | — | — |
(0.48) | (0.53) | (0.54) | (0.53) | (0.48) |
— * | — * | — * | — * | — * |
9.57 | 9.91 | 9.71 | 10.24 | 10.01 |
$ 25,613 | $ 18,993 | $ 31,549 | $ 42,753 | $ 87,155 |
1.59% | 7.72% | 0.08% | 7.79% | 5.02% |
1.11 | 1.10 | 1.06 | 1.09 | 1.07 |
1.02 | 1.01 | 0.98 | 1.04 | 1.03 |
4.44 | 5.00 | 5.05 | 5.08 | 5.09 |
128 | 80 | 53 | 56 | 58 |
69
Harbor Fixed Income Funds Financial Highlights—Continued
Selected Data for a Share Outstanding for the Periods Presented
Selected Data for a Share Outstanding for the Periods Presented
HARBOR MONEY MARKET FUND | |||||
Institutional Class | |||||
Year Ended October 31, | 2020 | 2019 | 2018 | 2017 | 2016 |
Net asset value beginning of period | $ 1.00 | $ 1.00 | $ 1.00 | $ 1.00 | $ 1.00 |
Income from Investment Operations | |||||
Net investment income/(loss)a,e | 0.01 | 0.02 | 0.01 | 0.01 | — * |
Net realized and unrealized gain/(loss) 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 |
Net assets end of period (000s) | $95,159 | $118,032 | $129,826 | $169,637 | $136,986 |
Ratios and Supplemental Data (%) | |||||
Total returnb | 0.64% | 2.02% | 1.44% | 0.73% | 0.30% |
Ratio of total expenses to average net assets^ | 0.39 | 0.35 | 0.35 | 0.35 | 0.36 |
Ratio of net expenses to average net assetsa | 0.19 | 0.28 | 0.20 | — | — |
Ratio of net investment income/(loss) to average net assetsa | 0.72 | 2.01 | 1.42 | 0.72 | 0.27 |
* | 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 average daily 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 |
The accompanying notes are an integral part of the Financial Statements.
70
Administrative Class | ||||
2020 | 2019 | 2018 | 2017 | 2016 |
$ 1.00 | $ 1.00 | $ 1.00 | $ 1.00 | $ 1.00 |
0.01 | 0.02 | 0.01 | 0.01 | — * |
— | — | — | — | — |
0.01 | 0.02 | 0.01 | 0.01 | — * |
(0.01) | (0.02) | (0.01) | (0.01) | — * |
— | — | — | — | — |
(0.01) | (0.02) | (0.01) | (0.01) | — * |
1.00 | 1.00 | 1.00 | 1.00 | 1.00 |
$3,611 | $3,135 | $2,086 | $1,545 | $2,267 |
0.51% | 1.76% | 1.36% | 0.73% | 0.30% |
0.64 | 0.60 | 0.60 | 0.60 | 0.61 |
0.29 | 0.53 | 0.29 | — | — |
0.49 | 1.79 | 1.36 | 0.70 | 0.28 |
71
Harbor Fixed Income Funds
Notes to Financial Statements—October 31, 2020
Notes to Financial Statements—October 31, 2020
Note 1—Organizational Matters
Harbor Funds (the “Trust”) is registered under the Investment Company Act of 1940, as amended (the “Investment Company Act”), as an open-end management investment company. As of October 31, 2020, the Trust consists of 36 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, and Harbor Money Market Fund (individually or collectively referred to as a “Fund” or the “Funds," respectively). Harbor Capital Advisors, Inc. (the “Adviser” or “Harbor Capital”) is the investment adviser for the Funds.
The Funds currently offer up to four classes of shares, designated as Retirement Class, Institutional Class, Administrative Class and Investor Class. The shares of each class represent an interest in the same portfolio of investments of the Funds and have equal rights with respect to voting, redemptions, dividends, and liquidations, except that: (i) subject to the approval of the Trust’s Board of Trustees (the “Board of Trustees”), certain expenses may be applied differently to each class of shares in accordance with current regulations of the U.S. Securities and Exchange Commission (“SEC”) and the Internal Revenue Service; and (ii) shareholders of a class that bears distribution and service expenses under terms of a distribution plan have exclusive voting rights as to that distribution plan.
Note 2—Significant Accounting Policies
The following is a summary of significant accounting policies followed by the Trust in the preparation of its financial statements. Each Fund follows the investment company reporting requirements under U.S. Generally Accepted Accounting Principles (“U.S. GAAP”), which includes the accounting and reporting guidelines under Accounting Standards Codification (“ASC”) Topic 946, Financial Services-Investment Companies. The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results may differ from those estimates.
Security Valuation
The Trust’s valuation procedures permit the Funds to use a variety of valuation methodologies, consider a number of subjective factors, analyze applicable facts and circumstances and, in general, exercise judgment, when valuing Fund investments. The methodology used for a specific type of investment may vary based on the circumstances and relevant considerations, including available market data.
Equity securities (including common stock, preferred stock, 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 inherent in the security taking into account criteria such as credit quality, payment history, liquidity and market conditions,
72
Harbor Fixed Income Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 2—Significant Accounting Policies—Continued
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.
73
Harbor Fixed Income Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 2—Significant Accounting Policies—Continued
Fair Value Measurements and Disclosures
Various inputs may be used to determine the value of each Fund’s investments, which are summarized in three broad categories defined as Level 1, Level 2, and Level 3. The inputs or methodologies used for valuing securities are not necessarily indicative of the risk associated with investing in those securities. The assignment of an investment to Levels 1, 2, or 3 is based on the lowest level of significant inputs used to determine its fair value.
Level 1– | Quoted prices in active markets for identical securities. |
Level 2– | Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). |
Level 3– | Significant unobservable inputs are used in situations where quoted prices or other observable inputs are not available or are deemed unreliable. Significant unobservable inputs may include each Fund’s own assumptions. |
The categorization of investments into Levels 1, 2, or 3, and a summary of significant unobservable inputs used for Level 3 investments, when applicable, can be found at the end of each Fund’s Portfolio of Investments schedule. For fair valuations using significant unobservable inputs, if any, a reconciliation of the beginning to ending balances for reported fair values is provided at the end of each Fund’s Portfolio of Investments schedule that presents changes attributable to realized and unrealized gains and losses and purchases, sales, and transfers in/out of the Level 3 category during the year.
Each Fund used observable inputs in its valuation methodologies whenever they were available and deemed reliable.
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.
74
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 U.S. 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 U.S. 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 foreign 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, 2017–2019), including all positions expected to be taken upon filing the 2020 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 year, Harbor Bond Fund used foreign currency spot contracts to facilitate transactions in foreign securities or to convert foreign currency receipts into U.S. dollars 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 counter party 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 year end.
Reported net realized gains and losses on foreign currency transactions, when applicable, represent net gains and losses from sales and maturities of foreign currency contracts, disposition of foreign currencies, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of investment income accrued and tax reclaims receivable and the U.S. dollar amount actually received. The effects of changes in foreign currency exchange rates on investments in securities, when applicable, are included in the net realized and unrealized gain or loss on investments in the Statements of Operations.
75
Harbor Fixed Income Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 2—Significant Accounting Policies—Continued
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 October 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2020-08, Codification Improvements to Subtopic 310-20, Receivables - Nonrefundable Fees and Other Costs. This ASU amends FASB ASU 2017-08, Premium Amortization on Purchased Callable Debt Securities, which provides guidance related to the amortization period for certain purchase callable debt securities held at a premium. ASU 2020-08 addresses premium amortization for callable debt securities with multiple call dates, clarifying that an entity should reevaluate whether a callable debt security purchased at a premium is in scope for each reporting period. ASU 2020-08 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, and should be applied on a prospective basis as of the beginning of the period of adoption for existing or newly purchased debt securities. At this time, management is still evaluating the implications of these changes on the financial statements.
In March 2020, FASB issued ASU 2020-04, Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The main objective of this ASU is to provide optional guidance to ease the potential accounting burden associated with transitioning away from the London Interbank Offered Rate and other reference rates that are expected to be discontinued. The ASU was effective immediately upon release of the update on March 12, 2020, and can generally be applied through December 31, 2022. At this time, management is still evaluating the implications of these changes on the financial statements.
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 agreements to purchase securities on a when-issued basis 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.
76
Harbor Fixed Income Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 2—Significant Accounting Policies—Continued
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 year, Harbor Bond Fund purchased and sold securities on a forward commitment basis, including “TBA” (to be announced) purchase and sale commitments.
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 year, 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 year, Harbor Bond Fund and Harbor High-Yield Bond Fund invested in loan participations and assignments.
Harbor High-Yield Bond Fund entered into unfunded loan commitments during the year, which are contractual obligations for future funding. Unfunded loan commitments may include revolving credit facilities, which may obligate the Fund to supply additional cash to the borrower on demand. Unfunded loan commitments represent a future obligation in full, even though a percentage of the notional loan amounts will never be utilized by the borrower. The funded portion of these credit agreements are presented on the Portfolio of Investments. Unfunded loan commitments are marked to market daily and any unrealized appreciation or depreciation is included in the Statement of Assets and Liabilities and the Statement of Operations.
Harbor High-Yield Bond Fund may receive a commitment fee based on the undrawn portion of the underlying line of credit portion of an unfunded loan commitment. In certain circumstances, a Fund that has entered into an unfunded loan commitment may receive a prepayment penalty fee upon the prepayment of a loan by a borrower. Fees earned are recorded as a component of interest income on the Statement of Operations.
As of October 31, 2020, Harbor High-Yield Bond Fund had no 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.
77
Harbor Fixed Income Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 2—Significant Accounting Policies—Continued
Early repayment of principal on some mortgage-related securities may expose a Fund to a lower rate of return upon reinvestment of principal. The value of these securities may fluctuate in response to the market’s perception of the creditworthiness of the issuers. Additionally, although mortgages and mortgage-related securities are generally supported by some form of government or private guarantee and/or insurance, there is no assurance that private guarantors or insurers will meet their obligations.
During the year, Harbor Bond Fund 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 payment of principal and interest on securities issued by institutions approved by GNMA and backed by pools of mortgages insured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs. Government-related guarantors are not backed by the full faith and credit of the U.S. government and include the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation.
During the year, Harbor Bond Fund, Harbor Core Bond Fund, and Harbor Money Market Fund invested in U.S. government securities.
Repurchase Agreements
In a repurchase agreement, a Fund buys a security at one price and simultaneously agrees to sell it back at a higher price. Such agreements must be adequately collateralized to cover the counterparty’s obligation to a Fund to close out the repurchase agreement. Each repurchase agreement counterparty must meet the minimum credit quality requirements applicable to the respective Fund and any other appropriate counterparty criteria as determined by a Fund’s subadviser. The minimum credit quality requirements are those applicable to a Fund’s purchase of securities such that if a Fund is permitted to only purchase securities that are rated investment-grade (or the equivalent if unrated), a Fund could only enter into repurchase agreements with counterparties that have debt outstanding that is rated investment-grade (or the equivalent if unrated). The securities are regularly monitored to ensure that the collateral is adequate. A Fund seeks to further mitigate its counterparty risk by entering into master repurchase agreements with its counterparties. The master repurchase agreements provide that, in the event of a counterparty’s default, including bankruptcy, a Fund may terminate any repurchase agreements with that counterparty, determine the net amount owned, and sell or retain the collateral up to the net amount owed to a Fund. A counterparty’s default may cause a Fund to suffer losses, including loss of interest on or principal of the securities and costs associated with delay and enforcement of the terms of the master repurchase agreement.
During the year, Harbor Bond Fund entered into repurchase agreements with domestic or foreign banks or with a member firm of the Financial Industry Regulatory Authority, Inc., or an affiliate of a member firm that is a primary dealer in U.S. government securities.
Reverse Repurchase Agreements
A reverse repurchase agreement involves the delivery of a portfolio security in exchange for cash by a Fund, coupled with an agreement to repurchase the same or substantially the same security at a specified time and price. Until the security is repurchased, a Fund is obligated to pay interest, based upon market rates of the time of issuance, on the value of the repurchase agreement. While a reverse repurchase agreement is outstanding, a Fund continues to receive principal and interest payments on the underlying security. Cash received in exchange for securities delivered plus accrued interest payments to be made by a Fund to counterparties is reflected as a liability on the Statements of Assets and Liabilities. Interest payments based upon the reverse repurchase agreement term made by a Fund to counterparties are recorded as a component of interest expense on the Statements of Operations. To cover its obligations under reverse repurchase agreements, a Fund will segregate cash or liquid securities, which are marked-to-market daily, with 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
78
Harbor Fixed Income Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 2—Significant Accounting Policies—Continued
the repurchase price of the securities and, if the proceeds from the reverse repurchase agreement are invested in securities, that the fair value of the securities purchased may decline below the repurchase price of the securities delivered. In periods of increased demand for the security, a Fund may receive a fee for use of the security by the counterparty, which may result in interest income to a Fund.
During the year, Harbor Bond Fund entered into reverse repurchase agreements. The average amount of borrowings outstanding for the Fund was $75,121,000 at a weighted average interest rate of 1.663%. Average debt outstanding and average interest rate during the year is calculated based on calendar days.
Sale-Buybacks
A “sale-buyback” financing transaction consists of a sale of a portfolio security by a Fund to a financial institution (the counterparty) with a simultaneous agreement to repurchase the same or substantially the same security at an agreed-upon price and date. A Fund is not entitled to receive principal and interest payments, if any, made on the security sold to the counterparty during the term of the agreement.
The agreed-upon proceeds for securities to be repurchased by a Fund are reflected as a liability on the Statements of Assets and Liabilities. A Fund will recognize net income represented by the price differential between the price received for the transferred security and the agreed-upon repurchase price. This is commonly referred to as the “price drop.” A price drop consists of two components: (i) the foregone interest and inflationary income adjustments, if any, a Fund would have otherwise received had the security not been sold, and (ii) the negotiated financing terms between a Fund and counterparty. Foregone interest and inflationary income adjustments, if any, are recorded as components of interest income on the Statements of Operations. Interest payments based upon negotiated financing terms made by a Fund to counterparties are recorded as a component of interest expense on the Statements of Operations. To cover its obligations under sale-buyback transactions, a Fund will segregate cash or liquid securities, which are marked-to-market daily, with the Fund’s custodian, or set aside or restrict assets in the subadviser’s records or systems relating to a Fund, in an amount not less than the repurchase price, including accrued interest, of the underlying security. Sale-buyback transactions involve the risk that the fair value of the securities sold by a Fund may decline below the repurchase price of the securities and, if the proceeds from the sale-buyback transactions are invested in securities, that the fair value of the securities purchased may decline below the repurchase price of the securities sold. In periods of increased demand for a security, a Fund may receive a fee for use of the security by the counterparty, which may result in additional interest income to a Fund.
During the year, Harbor Bond Fund entered into sale-buyback transactions. The average amount of borrowings outstanding for the Fund was $23,697,000 at a weighted average interest rate of 1.866%. Average debt outstanding and average interest rate during the year is calculated based on calendar days.
Short Sales
Short-selling obligates a Fund to replace a borrowed security by purchasing it at the market price at the time of replacement. Until the security is replaced, such Fund is required to pay any accrued interest or dividends to the lender and also may be required to pay a premium. A Fund would realize a gain if the security declines in price between the date of the short sale and the date on which such Fund replaces the borrowed security. A Fund would incur a loss as a result of the short sale if the price of the security increases between those dates. Until a Fund replaces the borrowed security, subject to pre-arranged exposure levels, it will maintain cash or liquid securities sufficient to cover its short position in a segregated account with the Fund’s custodian or set aside or restricted in the subadviser’s records or systems relating to the Fund. Short sales involve the risk of an unlimited increase in the market price of the borrowed security.
During the year, Harbor Bond Fund engaged in short-selling.
Futures Contracts
A futures contract is an agreement between two parties to buy or sell a specified financial instrument at a set price on a future date. Futures contracts tend to increase or decrease a Fund’s exposure to the underlying instrument or can be used to hedge other Fund investments.
79
Harbor Fixed Income Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 2—Significant Accounting Policies—Continued
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 continue making daily cash payments to maintain its required margin. If a Fund has insufficient cash, it may have to sell portfolio securities to meet daily margin requirements at a time when the Fund would not otherwise elect to do so. In addition, a Fund may be required to deliver or take delivery of instruments. The maximum potential loss on a long futures contract is the U.S. dollar value of the notional amount at the time the contract is opened. The potential loss on a short futures contract is unlimited. There is minimal counterparty risk with futures contracts as they are traded on an exchange and the exchange’s clearinghouse, as counterparty to all exchange-traded futures, guarantees the futures contracts against default.
During the year, Harbor Bond Fund used futures contracts to gain exposure to the fixed income asset class with greater efficiency and lower cost than was possible through direct investment, to add value when these securities were attractively priced, or to adjust the portfolio’s sensitivity to changes in interest rates or currency exchange rates.
Options
An option, including 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.
80
Harbor Fixed Income Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 2—Significant Accounting Policies—Continued
During the year, Harbor Bond Fund 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.
Upon entering a swap agreement, any payments received or made at the beginning of the measurement period are reflected as such on the Statements of Assets and Liabilities and represent a reconciling value to compensate for differences between the stated terms of the swap agreement and prevailing market conditions (such as credit spreads, currency exchange rates, interest rates, and other relevant factors). These upfront payments are recorded as realized gains or losses on the Statements of Operations upon termination or maturity of the swap. If a liquidation payment is received or made at the termination of the swap, it is recorded as realized gain or loss on the Statements of Operations. Net periodic payments received or paid by a Fund are included as part of realized gains or losses on the Statements of Operations. A Fund will only enter into swap agreements with counterparties that meet the minimum credit quality requirements applicable to a Fund and any other appropriate counterparty criteria as determined by a Fund’s subadviser. The minimum credit quality requirements are similar to those applicable to a Fund’s purchase of securities, such that if a Fund is permitted to only purchase securities that are rated investment-grade (or the equivalent if unrated), a Fund could only enter into one of the below referenced transactions with counterparties that have debt outstanding that is rated investment-grade (or the equivalent if unrated). Entering into swap agreements involves, to varying degrees, elements of credit risk, market risk and interest rate risk in excess of the amount recognized in the Statements of Assets and Liabilities. Such risks include the possibility that there is not a liquid market for these agreements, that the counterparty to the agreements may default on its obligation to perform, or that there may be unfavorable changes in market conditions or interest rates. A Fund’s maximum risk of loss from counterparty credit risk is the discounted value of the net cash flows to be received from the counterparty over the contract’s remaining life or the value of the contract. This risk is typically mitigated by entering into swap agreements with highly-rated counterparties, the existence of a master netting arrangement between a Fund and the counterparty, and the posting of collateral by the counterparty.
Interest Rate Swaps are agreements between counterparties to exchange cash flows or an exchange of commitments to pay or receive interest with respect to the notional amount of principal. Changes in interest rates can have an effect on the value of bond holdings, the amount of interest income earned and the value of the interest rate swaps held.
During the year, Harbor Bond Fund used interest rate swap agreements to manage its exposure to interest rate changes.
Credit Default Swaps are agreements between counterparties to buy or sell protection on a debt security, a basket of securities, or an index of obligations against a defined credit event. Under the terms of a credit default swap, the buyer of protection receives credit protection in exchange for making periodic payments to the seller of protection based on a given percentage applied to a notional principal amount. In return for these payments, the seller acts as the guarantor of the creditworthiness of a reference entity, obligation or index. An issuer may represent either a single issuer, a “basket” of issuers, or a credit index. A credit index is a basket of credit instruments or exposures designed to be representative of some part of the credit market as a whole.
The buyer in a credit default contract is obligated to pay the seller a periodic stream of payments over the term of the contract provided that no credit event occurs. Credit events may include bankruptcy, failure to pay principal, maturity extension, rating downgrade, or write-down. As a seller, if an underlying credit event occurs, a Fund will either pay the buyer an amount equal to the notional amount of the swap and take delivery of the reference obligation (or underlying securities comprising an index), or pay a net settlement amount of cash equal to the notional amount of the swap less the recovery value of the reference obligation (or underlying securities comprising an index). As a buyer, if an underlying credit event occurs, a Fund will either receive from the seller an amount equal to the notional amount of the swap and deliver the reference obligation (or underlying securities comprising an index) or receive a net settlement.
81
Harbor Fixed Income Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 2—Significant Accounting Policies—Continued
During the year, Harbor Bond Fund 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 October 31, 2020, the maximum exposure to loss of the notional value as the seller of credit default swaps outstanding for the Fund was $27,402,000.
Note 3—Investment Portfolio Transactions
Investment Portfolio Transactions
Purchases and sales of investments, other than short-term securities, for each Fund for the year ended October 31, 2020 are as follows:
Purchases (000s) | Sales (000s) | ||||||
U.S. Government | Other | U.S. Government | Other | ||||
Harbor Bond Fund | $14,778,004 | $586,483 | $15,132,902 | $647,854 | |||
Harbor Convertible Securities Fund | — | 141,371 | — | 150,830 | |||
Harbor Core Bond Fund | 69,214 | 35,785 | 57,628 | 11,925 | |||
Harbor High-Yield Bond Fund | — | 533,952 | — | 572,754 |
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 | 0.65 b | 0.60 | |
Harbor Core Bond Fund | 0.34 | 0.34 | |
Harbor High-Yield Bond Fund | 0.60 c | 0.51 | |
Harbor Money Market Fund | 0.20 d | 0.13 | |
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. |
82
Harbor Fixed Income Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 4—FEES AND OTHER Transactions with Affiliates—Continued
Harbor Capital has from time to time voluntarily or contractually agreed not to impose a portion of its management fees and/or to bear a portion of the expenses incurred in the operation of certain Funds in order to limit Fund expenses. Such waivers, if any, are reflected on the accompanying Statements of Operations. Interest expense, if any, is excluded from contractual limitations. During the year, the following expense limitation agreements were in effect:
Retirement Class | Institutional Class | Administrative Class | Investor Class | Expense Limitation Agreement Expiration Date | |||||
Harbor 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 Money Market Fund1 | N/A | 0.28 | 0.53 | N/A | 02/28/2021 | ||||
1 | Effective April 30, 2020, Harbor Capital voluntarily began waiving additional expenses below the limits described in the table above resulting in annualized expense ratios for the year ended October 31, 2020 of 0.19% and 0.29% for the Institutional Class and Administrative Class, respectively. |
All expense limitation agreements include the transfer agent fee waiver discussed in the Transfer Agent note.
Distributor
Harbor Funds Distributors, Inc. (the “Distributor”), a wholly-owned subsidiary of Harbor Capital, is the distributor for Harbor Funds’ shares. Under the Trust’s current distribution plan pursuant to Rule 12b-1 under the Investment Company Act with respect to each Fund’s Administrative and Investor Class shares (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. The fee has been waived in its entirety effective April 30, 2020 through October 31, 2020 for the Harbor Money Market Fund.
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 |
83
Harbor Fixed Income Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 4—FEES AND OTHER Transactions with Affiliates—Continued
Harbor Services Group has voluntarily waived a portion of its transfer agent fees during the year ended October 31, 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 year, the Funds did not enter into any transactions with any other Harbor fund.
Shareholders
As of October 31, 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 | 79,367 | — | — | N/A | 79,367 | 0.0% | |||||
Harbor Convertible Securities Fund | 60,952 | — | — | — | 60,952 | 0.5 | |||||
Harbor Core Bond Fund | 54,278 | 4,675,504 | N/A | N/A | 4,729,782 | 45.3 | |||||
Harbor High-Yield Bond Fund | 112,581 | — | — | — | 112,581 | 0.3 | |||||
Harbor Money Market Fund | N/A | 7,490,420 | 26,376 | N/A | 7,516,796 | 7.6 |
Independent Trustees
The fees and expenses of the Independent Trustees are included in “Trustees’ fees and expenses” on each Fund’s Statement of Operations.
The Board of Trustees has adopted a Deferred Compensation Plan for Independent Trustees (the “Plan”), which enables Trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from the Trust. For purposes of determining the amount owed to a Trustee under the Plan, deferred amounts are treated as though they had been invested in shares of the Fund(s) selected by the Trustee. While not required to do so, each Fund makes an investment equal to the Trustee’s investment election. The deferred compensation liability and the offsetting deferred compensation investment asset are included as a component of “Accrued expenses – Trustees’ fees and expenses” and “Other assets”, respectively, in the Statements of Assets and Liabilities. Such amounts fluctuate with changes in the value of the selected Fund(s). The deferred compensation and related mark-to-market impact liability and an offsetting investment asset will remain on each Fund’s Statement of Assets and Liabilities until distributed in accordance with the Plan.
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.
84
Harbor Fixed Income Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 4—FEES AND OTHER Transactions with Affiliates—Continued
Redemption Fee
During the year ended October 31, 2020, a 1% redemption fee was charged on shares of Harbor Convertible Securities Fund and Harbor High-Yield Bond Fund that were redeemed within 90 days from their date of purchase. All redemption fees are recorded by the Fund as paid-in capital. For the year ended October 31, 2020 redemption fee proceeds were as follows:
Amount (000s) | |
Harbor Convertible Securities Fund | $ 1 |
Harbor High-Yield Bond Fund | 135 |
85
Harbor Fixed Income Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
NOTE 5—TAX INFORMATION
The amount and character of income and net realized gains to be distributed are determined in accordance with income tax rules and regulations, which may differ from U.S. GAAP. These differences are attributable to permanent book and tax accounting differences that were primarily due to the tax treatment of bonds in default and the use of equalization. Reclassifications, if any, are made to each Fund’s capital account to reflect income and net realized gains available for distribution (or available capital loss carryovers) under income tax rules and regulations. The amounts reclassified on the Statements of Assets and Liabilities for the year ended October 31, 2020 are as follows:
Total Distributable Earnings/(Loss) (000s) | Paid-In Capital (000s) | ||
Harbor Bond Fund | $ (513) | $ 513 | |
Harbor Convertible Securities Fund | (1,508) | 1,508 | |
Harbor Core Bond Fund | (262) | 262 | |
Harbor High-Yield Bond Fund | (88) | 88 | |
Harbor Money Market Fund | — | — |
The tax composition of each Fund’s distributions is as follows:
As of October 31, 2020 | As of October 31, 2019 | ||||||||||
Ordinary Income (000s) | Long-Term Capital Gains (000s) | Total (000s) | Ordinary Income (000s) | Long-Term Capital Gains (000s) | Total (000s) | ||||||
Harbor Bond Fund | $55,871 | $ — | $55,871 | $61,198 | $ — | $61,198 | |||||
Harbor Convertible Securities Fund | 3,667 | 1,453 | 5,120 | 6,185 | 1,520 | 7,705 | |||||
Harbor Core Bond Fund | 2,588 | 434 | 3,022 | 2,160 | — | 2,160 | |||||
Harbor High-Yield Bond Fund | 22,647 | — | 22,647 | 33,196 | — | 33,196 | |||||
Harbor Money Market Fund | 832 | — | 832 | 3,111 | — | 3,111 |
As of October 31, 2020, the components of each Fund’s distributable earnings on a tax basis are as follows:
Undistributed Ordinary Income (000s) | Undistributed Long-Term Capital Gains (000s) | Unrealized Appreciation/ (Depreciation) (000s) | |||
Harbor Bond Fund | $27,488 | $ — | $45,225 | ||
Harbor Convertible Securities Fund | 11,959 | 3,161 | 12,735 | ||
Harbor Core Bond Fund | 1,333 | 1,534 | 5,840 | ||
Harbor High-Yield Bond Fund | 2,499 | — | 2,992 | ||
Harbor Money Market Fund | 48 | — | — |
At October 31, 2020, the Funds in the following table had capital loss carryforwards for federal tax purposes which will reduce each Fund’s taxable income arising from future net realized gains on investments to the extent permitted by the Internal Revenue Code. Use of the capital loss carryforwards will reduce the amount of the distribution to shareholders which would otherwise be necessary to relieve each Fund of any federal tax liability. The capital loss carryforwards do not expire.
Capital Loss Carryforward | |||||
Short-Term (000s) | Long- Term (000s) | Total (000s) | |||
Harbor High-Yield Bond Fund | $4,451 | $95,570 | $100,021 |
86
Harbor Fixed Income Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
NOTE 5—TAX INFORMATION—Continued
The identified cost for federal income tax purposes of investments owned by each Fund and its respective gross unrealized appreciation and depreciation at October 31, 2020 are as follows:
Identified Cost (000s) | Gross Unrealized | Net Unrealized Appreciation/ (Depreciation) (000s) | |||||
Appreciation (000s) | (Depreciation) (000s) | ||||||
Harbor Bond Fund | $2,655,473 | $96,877 | $(51,652) | $45,225 | |||
Harbor Convertible Securities Fund | 137,434 | 15,844 | (3,109) | 12,735 | |||
Harbor Core Bond Fund | 108,941 | 6,420 | (580) | 5,840 | |||
Harbor High-Yield Bond Fund* | 413,948 | 11,065 | (8,073) | 2,992 | |||
Harbor Money Market Fund | 98,788 | — | — | — |
* | Capital loss carryforwards are available, which may reduce taxable income from future net realized gain on investments. |
Note 6—Derivatives
Each Fund’s derivative holdings do not qualify for hedge accounting treatment and as such are recorded at current fair value. For a discussion of risks related to these investments please refer to the descriptions of each type of derivative instrument in Note 2— Significant Accounting Policies.
Each Fund’s derivative instruments outstanding as of the year ended October 31, 2020, if any, as disclosed in the Portfolio of Investments, and the related amounts of net realized and changes in net unrealized gains and losses on derivative instruments during the year as disclosed in the Statement of Operations, are indicators of the volume of derivative activity for each Fund.
Derivative Instruments
As of October 31, 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 | $ — | $2,634 | $ — | $ 2,634 | ||||||||
Unrealized appreciation on OTC swap agreementsb | — | — | 147 | 147 | ||||||||
Variation margin on centrally cleared swap agreementsa,b | 11,625 | — | 387 | 12,012 | ||||||||
Variation margin on options and futures contracts (futures)a | 756 | — | — | 756 | ||||||||
Liabilities | ||||||||||||
Unrealized depreciation on open forward currency contracts | $ — | $ (160) | $ — | $ (160) | ||||||||
Variation margin on centrally cleared swap agreementsa,b | (8,374) | — | (41) | (8,415) | ||||||||
Variation margin on options and futures contracts (futures)a | (329) | — | — | (329) | ||||||||
Written options, at value | (200) | — | — | (200) |
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 $(5,768) |
87
Harbor Fixed Income Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 6—Derivatives—Continued
Net realized gain/(loss) and the change in net unrealized appreciation/(depreciation) on derivatives, by primary risk exposure, for the year ended October 31, 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 | $ — | $(664) | $ — | $ (664) | ||||
Futures contracts | (136) | — | — | (136) | ||||
Purchased options | (181) | — | — | (181) | ||||
Written options | 1,805 | — | 18 | 1,823 | ||||
Swap agreements | (4,878) | — | 1,091 | (3,787) | ||||
Net realized gain/(loss) on derivatives | $(3,390) | $(664) | $1,109 | $(2,945) |
Change in net unrealized appreciation/(depreciation) on derivatives | Interest Rate Contracts (000s) | Foreign Exchange Contracts (000s) | Credit Contracts (000s) | Total (000s) | ||||
Forward currency contracts | $ — | $9,828 | $ — | $ 9,828 | ||||
Futures contracts | 1,828 | — | — | 1,828 | ||||
Purchased options | 132 | — | — | 132 | ||||
Written options | (835) | — | — | (835) | ||||
Swap agreements | 6,734 | — | (810) | 5,924 | ||||
Change in net unrealized appreciation/(depreciation) on derivatives | $7,859 | $9,828 | $(810) | $16,877 |
Note 7—OFFSETTING ASSETS AND LIABILITIES
Master Netting Arrangements
As described in further detail below, each Fund may enter into Master Netting Arrangements that govern the terms of certain transactions. Master Netting Arrangements are designed to reduce the counterparty risk associated with relevant transactions by establishing credit protection mechanisms and providing standardization as a means of improving legal certainty. As Master Netting Arrangements are specific to the unique operations of different asset types, they allow a Fund to close out and net its total exposure to a counterparty in the event of a default with respect to all of the transactions governed under a single agreement with that counterparty. Master Netting Arrangements can also help reduce counterparty risk by specifying collateral posting requirements at pre-arranged exposure levels. Securities and cash pledged as collateral are reflected as assets in the Statements of Assets and Liabilities as either a component of investments at value (securities) or due from broker. Cash collateral received is not typically held in a segregated account and, as such, is reflected as a liability in the Statements of Assets and Liabilities as due to broker. The fair value of any securities received as collateral is not reflected as a component of net asset value.
For the year ended October 31, 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 October 31, 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 October 31, 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 October 31, 2020, Harbor Bond Fund had investment exposures subject to the terms of these agreements.
88
Harbor Fixed Income Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 7—OFFSETTING ASSETS AND LIABILITIES—Continued
The following is a summary by counterparty of the gross value of material Borrowings and Other Financing Transactions and collateral (received)/pledged as of October 31, 2020:
HARBOR BOND FUND
Counterparty | Payable for Short Sale (000s) | Total Borrowings and Other Financing Transactions (000s) | Collateral (Received)/ Pledged (000s) | Net Exposure (000s) | ||||||||
Master Securities Forward Transactions Agreements | ||||||||||||
Credit Suisse AG | $ (4,834) | $— | $— | $ (4,834) | ||||||||
J.P. Morgan Securities LLC | (10,042) | — | — | (10,042) | ||||||||
Total Borrowings and Other Financing Transactions | $(14,876) |
The following is a summary by counterparty of the value of OTC financial derivative instruments and collateral (received)/pledged as governed by International Swaps and Derivatives Association, Inc. master agreements as of October 31, 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) | Swap Agreements (000s) | Total Over-the- Counter (000s) | Forward Currency Contracts (000s) | Written Options (000s) | Total Over-the- Counter (000s) | ||||||||||||
Barclays Bank plc | $ 105 | $ — | $ 105 | $ (19) | $ — | $ (19) | $ 86 | $— | $ 86 | |||||||||
BNP Paribas SA | 143 | — | 143 | (4) | — | (4) | 139 | — | 139 | |||||||||
Citibank NA | 500 | 147 | 647 | (77) | — | (77) | 570 | — | 570 | |||||||||
HSBC Bank USA NA | 798 | — | 798 | (2) | — | (2) | 796 | — | 796 | |||||||||
JP Morgan Chase Bank NA | 741 | — | 741 | (34) | (200) | (234) | 507 | — | 507 | |||||||||
UBS AG | 347 | — | 347 | (24) | — | (24) | 323 | — | 323 | |||||||||
Total Over-the-Counter Exposure | $2,634 | $147 | $2,781 | $(160) | $(200) | $(360) |
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.
89
Harbor Fixed Income Funds
Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
The Board of Trustees and Shareholders of
Harbor Funds
Harbor Funds
Opinions on the Financial Statements
We have audited the accompanying statements of assets and liabilities of Harbor Bond Fund, Harbor Convertible Securities Fund, Harbor Core Bond Fund, Harbor High-Yield Bond Fund, and Harbor Money Market Fund (collectively referred to as the “Funds”), (five of the funds constituting the Harbor Funds (the “Trust”)), including the portfolios of investments, as of October 31, 2020, and the related statements of operations and changes in net assets, and the financial highlights for each of the periods indicated in the table below and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Funds, (five of the funds constituting the Harbor Funds), at October 31, 2020, the results of their operations, changes in net assets and financial highlights for each of the periods indicated in the table below, in conformity with U.S. generally accepted accounting principles.
Individual fund comprising the Harbor Funds | Statement of operations | Statement of changes in net assets | Financial highlights |
Harbor Bond Fund Harbor Convertible Securities Fund Harbor High-Yield Bond Fund Harbor Money Market Fund | For the year ended October 31, 2020 | For each of the two years in the period ended October 31, 2020 | For each of the five years in the period ended October 31, 2020 |
Harbor Core Bond Fund | For the year ended October 31, 2020 | For each of the two years in the period ended October 31, 2020 | For each of the two years in the period ended October 31, 2020 and the period from June 1, 2018 (inception) through October 31, 2018 |
Basis for Opinion
These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on each of the Funds’ financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust’s internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2020, by correspondence with the custodian, agent banks and brokers or by other appropriate auditing procedures where replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Harbor Funds investment companies since 2000.
Chicago, Illinois
December 21, 2020
December 21, 2020
90
Harbor Fixed Income Funds
Fees and Expenses Example (Unaudited)
Fees and Expenses Example (Unaudited)
Example
As a shareholder of a Fund, you incur two types of costs: (1) transaction costs, including redemption fees (if any) and (2) ongoing costs, including management fees, distribution and service (12b-1) fees (if any), and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in a Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period May 1, 2020 through October 31, 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 May 1, 2020 | Ending Account Value October 31, 2020 | |||||
Harbor Bond Fund | ||||||||
Retirement Class | 0.48% | |||||||
Actual | $2.45 | $1,000 | $1,031.29 | |||||
Hypothetical (5% return) | 2.44 | 1,000 | 1,022.66 | |||||
Institutional Class | 0.62% | |||||||
Actual | $3.17 | $1,000 | $1,032.56 | |||||
Hypothetical (5% return) | 3.15 | 1,000 | 1,021.94 | |||||
Administrative Class | 0.87% | |||||||
Actual | $4.44 | $1,000 | $1,031.27 | |||||
Hypothetical (5% return) | 4.42 | 1,000 | 1,020.65 | |||||
Harbor Convertible Securities Fund | ||||||||
Retirement Class | 0.69% | |||||||
Actual | $3.83 | $1,000 | $1,206.37 | |||||
Hypothetical (5% return) | 3.51 | 1,000 | 1,021.58 | |||||
Institutional Class | 0.77% | |||||||
Actual | $4.27 | $1,000 | $1,204.95 | |||||
Hypothetical (5% return) | 3.91 | 1,000 | 1,021.17 | |||||
Administrative Class | 1.02% | |||||||
Actual | $5.65 | $1,000 | $1,203.94 | |||||
Hypothetical (5% return) | 5.18 | 1,000 | 1,019.26 | |||||
Investor Class | 1.14% | |||||||
Actual | $6.31 | $1,000 | $1,203.31 | |||||
Hypothetical (5% return) | 5.79 | 1,000 | 1,019.26 |
91
Harbor Fixed Income Funds
Fees and Expenses Example—Continued
Fees and Expenses Example—Continued
Annualized Expense Ratios* | Expenses Paid During Period** | Beginning Account Value May 1, 2020 | Ending Account Value October 31, 2020 | |||||
Harbor Core Bond Fund | ||||||||
Retirement Class | 0.37% | |||||||
Actual | $1.89 | $1,000 | $1,027.41 | |||||
Hypothetical (5% return) | 1.88 | 1,000 | 1,023.23 | |||||
Institutional Class | 0.45% | |||||||
Actual | $2.29 | $1,000 | $1,026.99 | |||||
Hypothetical (5% return) | 2.29 | 1,000 | 1,022.82 | |||||
Harbor High-Yield Bond Fund | ||||||||
Retirement Class | 0.57% | |||||||
Actual | $3.00 | $1,000 | $1,090.44 | |||||
Hypothetical (5% return) | 2.90 | 1,000 | 1,022.20 | |||||
Institutional Class | 0.65% | |||||||
Actual | $3.42 | $1,000 | $1,089.98 | |||||
Hypothetical (5% return) | 3.30 | 1,000 | 1,021.79 | |||||
Administrative Class | 0.90% | |||||||
Actual | $4.72 | $1,000 | $1,088.25 | |||||
Hypothetical (5% return) | 4.57 | 1,000 | 1,020.50 | |||||
Investor Class | 1.02% | |||||||
Actual | $5.35 | $1,000 | $1,086.87 | |||||
Hypothetical (5% return) | 5.18 | 1,000 | 1,019.88 | |||||
Harbor Money Market Fund | ||||||||
Institutional Class | 0.05% | |||||||
Actual | $0.25 | $1,000 | $1,000.33 | |||||
Hypothetical (5% return) | 0.25 | 1,000 | 1,024.88 | |||||
Administrative Class | 0.05% | |||||||
Actual | $0.25 | $1,000 | $1,000.33 | |||||
Hypothetical (5% return) | 0.25 | 1,000 | 1,024.88 |
* | Reflective of all fee waivers and expense reimbursements |
** | Expenses are equal to the Fund’s annualized net expense ratio, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). |
92
Harbor Fixed Income Funds
Additional Information (Unaudited)
Additional Information (Unaudited)
Additional Tax Information
The Funds designate the following portions of their distributions from investment company taxable income for the fiscal year ended October 31, 2020 as qualifying for the dividends received deduction for corporate shareholders.
Percentage of Distribution | |
Harbor Convertible Securities Fund | 4% |
For the fiscal year ended October 31, 2020, the Funds designate up to the maximum amount of such dividends allowable pursuant to the Internal Revenue Code 163 (j) as interest income eligible for income inclusion for corporate shareholders. If the Funds pay a distribution during calendar year 2020, complete information will be reported in conjunction with Form 1099-DIV.
Pursuant to Section 852 of the Internal Revenue Code, the Funds designate the following capital gain dividends for the fiscal year ended October 31, 2020:
Amount (000s) | |
Harbor Convertible Securities Fund | $1,769 |
Harbor Core Bond Fund | 574 |
For the fiscal year ended October 31, 2020, each Fund designates up to the maximum amount of such dividends allowable pursuant to the Internal Revenue Code as qualified dividend income eligible for reduced tax rates. These lower rates range from 0% to 20% depending on an individual’s tax bracket. If a Fund pays a distribution during calendar year 2020, complete information will be reported in conjunction with Form 1099-DIV.
Shareholders who own shares through a taxable Harbor Funds account and that received distributions from a Fund during calendar year 2020 will receive a Form 1099-DIV in January 2021 that will show the tax character of those distributions.
Proxy Voting
Harbor Funds has adopted Proxy Voting Policies and Procedures under which proxies relating to securities held by the Harbor funds are voted. In addition, Harbor Funds files Form N-PX, with its complete proxy voting record for the 12 months ended June 30th, no later than August 31st of each year. A description of Harbor Funds’ Proxy Voting Policies and Procedures and the proxy voting records (Form N-PX) are available (i) without charge, upon request, by calling Harbor Funds toll-free at 800-422-1050; (ii) on Harbor Funds’ website at harborfunds.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 for their first and third fiscal quarters with the SEC as an exhibit to Form N-PORT. The Funds’ Form N-PORT exhibit is available (i) without charge, upon request, by calling Harbor Funds toll-free at 800-422-1050, (ii) on Harbor Funds’ website at harborfunds.com, and (iii) on the SEC’s website at sec.gov.
93
Harbor Fixed Income Funds
Additional Information—Continued
Additional Information—Continued
Trustees and Officers
As of December 2020
The business and affairs of the Trust shall be managed by or under the direction of the Trustees, and they shall have all powers necessary or desirable to carry out that responsibility. The Trustees shall have full power and authority to take or refrain from taking any action and to execute any contracts and instruments that they may consider necessary or desirable in the management of the Trust. Any determination made by the Trustees in good faith as to what is in the interests of the Trust shall be conclusive. Information pertaining to the Trustees and Officers of Harbor Funds is set forth below. The address of each Trustee and Officer is: [Name of Trustee or Officer] c/o Harbor Funds, 111 South Wacker Drive, 34th Floor, Chicago, IL 60606-4302.
Harbor Funds' Statement of Additional Information includes additional information about the Trust’s Trustees and is available without charge by calling 800-422-1050 or at the Trust’s website at harborfunds.com.
Name (Age) Position(s) with Fund | Term of Office and Length of Time Served1 | Principal Occupation(s) During Past Five Years | Number of Portfolios In Fund Complex Overseen By Trustee | Other Directorships Of Public Companies and Other Registered Investment Companies Held by Trustee During Past Five Years |
INDEPENDENT TRUSTEES | ||||
Scott M. Amero (57) Trustee | Since 2014 | Chairman (2015-Present) and Trustee (2011-2015), Rare (conservation nonprofit); Trustee, Berkshire School (2014-Present); Trustee, The Nature Conservancy, Massachusetts Chapter (2018-Present); Vice Chairman and Global Chief Investment Officer, Fixed Income (2010), Vice Chairman and Global Chief Investment Officer, Fixed Income, and Co-Head, Fixed Income Portfolio Management (2007-2010), BlackRock, Inc., (publicly traded investment management firm). | 36 | None |
Donna J. Dean (69) Trustee | Since 2010 | Chief Investment Officer of the Rockefeller Foundation (a private foundation) (2001-2019). | 36 | None |
Joseph L. Dowling III (56) Trustee | Since 2017 | Chair & Special Advisor to the University’s President (2020-Present), Chief Executive Officer (2018-2020), Interim Chief Financial Officer (2019-2020), and Chief Investment Officer (2013-2018), Brown University Investment Office; Chief Executive Officer, Jaws Acquisition Corp. (blank check company, 2020-Present); Advisory Board Member, Harbor Funds (2016-2017); and Founder and Managing Member, Narragansett Asset Management (private investment management firm) (1998-2013). | 36 | Director of Integrated Electrical Services (2012-Present);Director of Third Point RE (2019- Present). |
Randall A. Hack (73) Trustee | Since 2010 | Founder and Senior Managing Director of Capstone Capital LLC (private investment firm) (2003-Present); Director of Tower Development Corporation (cell tower developer) (2009-2016); Advisory Director of Berkshire Partners (private equity firm) (2002-2013); Founder and Senior Managing Director of Nassau Capital, LLC (private investment firm, investing solely on behalf of the Princeton Endowment) (1995-2001); and President of The Princeton University Investment Company (1990-1994). | 36 | None |
Robert Kasdin (62) Trustee | Since 2014 | Senior Vice President and Chief Operating Officer (2015-Present) and Chief Financial Officer (2018-Present), Johns Hopkins Medicine; Senior Executive Vice President, Columbia University (2002-2015); Trustee and Member of the Finance Committee, National September 11 Memorial & Museum at the World Trade Center (2005-2019); Director, Apollo Commercial Real Estate Finance, Inc. (2014-Present); Director and Executive Committee Member, The Y in Central Maryland (2018-Present); and Director, Noranda Aluminum Holdings Corp. (2007-2014). | 36 | Director of Apollo Commercial Real Estate Finance, Inc. (2014-Present). |
94
Harbor Fixed Income Funds
Additional Information—Continued
Additional Information—Continued
Trustees and Officers—Continued
Name (Age) Position(s) with Fund | Term of Office and Length of Time Served1 | Principal Occupation(s) During Past Five Years | Number of Portfolios In Fund Complex Overseen By Trustee | Other Directorships Of Public Companies and Other Registered Investment Companies Held by Trustee During Past Five Years |
INDEPENDENT TRUSTEES—Continued | ||||
Kathryn L. Quirk (68) Trustee | Since 2017 | Retired; Vice President, Senior Compliance Officer and Head, U.S. Regulatory Compliance, Goldman Sachs Asset Management (2013-2017); Deputy Chief Legal Officer, Asset Management, and Vice President and Corporate Counsel, Prudential Insurance Company of America (2010-2012); Co-Chief Legal Officer, Prudential Investment Management, Inc., and Chief Legal Officer, Prudential Investments and Prudential Mutual Funds (2008-2012); Vice President and Corporate Counsel and Chief Legal Officer, Mutual Funds, Prudential Insurance Company of America, and Chief Legal Officer, Prudential Investments (2005-2008); Vice President and Corporate Counsel and Chief Legal Officer, Mutual Funds, Prudential Insurance Company of America (2004-2005); Member, Management Committee (2000-2002), General Counsel and Chief Compliance Officer, Zurich Scudder Investments, Inc. (1997-2002). | 36 | None |
Douglas J. Skinner (58) Trustee | Since 2020 | Professor of Accounting (2005-Present), Deputy Dean for Faculty (2015-2016, 2017-Present), Interim Dean (2016-2017), University of Chicago Booth School of Business. | 36 | None |
Ann M. Spruill (66) Trustee | Since 2014 | Partner (1993-2008), member of Executive Committee (1996-2008), Member Board of Directors (2002-2008), Grantham, Mayo, Van Otterloo & Co, LLC (private investment management firm) (with the firm since 1990); Member Investment Committee and Chair of Global Public Equities, Museum of Fine Arts, Boston (2000-Present); and Trustee, Financial Accounting Foundation (2014-Present). | 36 | None |
INTERESTED TRUSTEE | ||||
Charles F. McCain (51)* Chairman, Trustee and President | Since 2017 | Chief Executive Officer (2017-Present), Director (2007-Present), President and Chief Operating Officer (2017), Executive Vice President and General Counsel (2004-2017), and Chief Compliance Officer (2004-2014), Harbor Capital Advisors, Inc.; Director and Chairperson (2019-Present), Harbor Trust Company, Inc.; Director (2007-Present) and Chief Compliance Officer (2004-2017), Harbor Services Group, Inc.; Chief Executive Officer (2017-Present), Director (2007-Present), Chief Compliance Officer and Executive Vice President (2007-2017), Harbor Funds Distributors, Inc.; and Chief Compliance Officer, Harbor Funds (2004-2017). | 36 | None |
Name (Age) Position(s) with Fund | Term of Office and Length of Time Served1 | Principal Occupation(s) During Past Five Years |
FUND OFFICERS NOT LISTED ABOVE** | ||
Erik D. Ojala (45) Chief Compliance Officer | Since 2017 | Executive Vice President and General Counsel (2017-Present) and Secretary (2010-Present); Senior Vice President and Associate General Counsel (2007-2017), Harbor Capital Advisors, Inc.; Director and Secretary (2019-Present), Harbor Trust Company, Inc.; Director, Executive Vice President and Chief Compliance Officer (2017-Present), Harbor Funds Distributors, Inc.; Director (2017-Present) and Assistant Secretary (2014-Present), Harbor Services Group, Inc.; and AML Compliance Officer (2010-2017) and Vice President and Secretary (2007-2017), Harbor Funds. |
Anmarie S. Kolinski (49) Treasurer | Since 2007 | Executive Vice President and Chief Financial Officer (2007-Present), Harbor Capital Advisors, Inc.; Director and Treasurer (2019-Present), Harbor Trust Company, Inc.; Chief Financial Officer (2007-Present), Harbor Services Group, Inc.; and Chief Financial Officer (2015-Present) and Treasurer (2012-Present), Harbor Funds Distributors, Inc. |
Kristof M. Gleich (41) Vice President | Since 2019 | President (2018-Present) and Chief Investment Officer (2020), Harbor Capital Advisors, Inc.; Director, Vice Chairperson, President (2019-Present) and Chief Investment Officer (2020-Present), Harbor Trust Company, Inc.; and Managing Director, Global Head of Manager Selection (2010-2018), JP Morgan Chase & Co. |
95
Harbor Fixed Income Funds
Additional Information—Continued
Additional Information—Continued
Trustees and Officers—Continued
Name (Age) Position(s) with Fund | Term of Office and Length of Time Served1 | Principal Occupation(s) During Past Five Years |
FUND OFFICERS NOT LISTED ABOVE**—Continued | ||
Gregg M. Boland (57) Vice President | Since 2019 | Executive Vice President (2020-Present), Vice President (2019-2020), Harbor Capital Advisors, Inc.; President (2019-Present), Senior Vice President – Operations (2016-2019), and Vice President – Operations (2007-2015), Harbor Services Group, Inc.; and Senior Vice President, AML Compliance Officer, and OFAC Officer (2019-Present), Harbor Funds Distributors, Inc. |
Diana R. Podgorny (41) Secretary | Since 2018 | Senior Vice President and Assistant General Counsel (2020-Present), Vice President and Assistant General Counsel (2017-2020), Harbor Capital Advisors, Inc.; Director and Vice President (2020 – Present), Harbor Trust Company, Inc.; Vice President and Counsel, AMG Funds LLC (2016-2017); Assistant Secretary, AMG Funds, AMG Funds I, AMG Funds II and AMG Funds III (2016-2017); Assistant Secretary, AMG Funds IV (2010-2017); and Vice President and Counsel, Aston Asset Management, LLC (2010-2016). |
Jodie L. Crotteau (48) Assistant Secretary | Since 2014 | Senior Vice President and Chief Compliance Officer, Harbor Capital Advisors, Inc. (2014-Present); Chief Compliance Officer and AML/OFAC Officer (2019-Present), Harbor Trust Company, Inc.; Chief Compliance Officer and Secretary (2017-present) and Assistant Secretary (2015-2016), Harbor Services Group, Inc.; Assistant Secretary (2016-present), Harbor Funds Distributors, Inc.; Vice President and Chief Compliance Officer, Grosvenor Registered Funds (2011-2014); and Vice President, Grosvenor Capital Management, L.P. (2010-2014). |
Lana M. Lewandowski (41) AML Compliance Officer and Assistant Secretary | Since 2017 | Legal & Compliance Manager (2016-Present) and Legal Specialist (2012-2015), Harbor Capital Advisors, Inc. |
Lora A. Kmieciak (56) Assistant Treasurer | Since 2017 | Senior Vice President – Fund Administration and Analysis (2017-Present), Senior Vice President - Business Analysis (2015-2017), Harbor Capital Advisors, Inc.; Vice President (2020 – Present), Harbor Trust Company, Inc.; and Assurance Executive Director, Ernst & Young LLP (1999-2015). |
John M. Paral (52) Assistant Treasurer | Since 2013 | Director of Fund Administration and Analysis (2017-Present), Vice President (2012-Present) and Financial Reporting Manager (2007-2017), Harbor Capital Advisors, Inc. |
1 | Each Trustee serves for an indefinite term, until his or her successor is elected. Each Officer is elected annually. |
* | Mr. McCain is deemed an “Interested Trustee” due to his affiliation with the Adviser and Distributor of Harbor Funds. |
** | Officers of the Funds are “interested persons” as defined in the Investment Company Act. |
96
This privacy statement is not part of this report
Harbor’s Privacy Statement
The following privacy statement (“Privacy Statement”) is issued by Harbor Funds and each series of Harbor Funds and its affiliates, Harbor Capital Advisors, Inc., Harbor Services Group, Inc. and Harbor Funds Distributors, Inc. (collectively, “Harbor” “we” or “us”). The measures described in this Privacy Statement reflect the commitments we make to protect the privacy of your personal information. We appreciate the confidence you have shown by entrusting us with your assets.
Personal Information
In the course of providing products and services, we collect personal information about you from the following sources: applications, forms, our website (including any information captured through our use of “cookies”), through mobile applications, by telephone and in correspondence and transactions with us, our affiliates or other parties, including when you contact Shareholder Services or establish an account with us. This Privacy Statement applies to personal information we collect from those sources unless we inform you otherwise.
The personal information collected may include name, address, email address, telephone/fax numbers, account number, social security or taxpayer identification number, investment activity, bank account information, location data (depending on your app settings and device permissions), and other information voluntarily provided by you.
We may also collect certain information automatically when you visit us through our website or a mobile application. For example, we may collect technical and navigational information, such as computer browser type, device type, device ID, Internet protocol address, pages visited average time spent on our website and searches performed on our website. We may use this information to alert you to software compatibility issues; to provide you with or improve or websites, applications, products or services; or to provide you with content that may be of interest to you. We use your IP address to help diagnose problems with our server and to administer our website. Your IP address is also used to gather broad demographic information. This information will be used for internal purposes only. We also collect information in the form of log files that record website and app activity and gather statistics about your browsing habits. These entries are generated automatically, and help us to troubleshoot errors, improve performance and maintain the security of our sites and apps. We use “cookies” and similar files that may be placed on your computer or device for security purposes, to facilitate site navigation and to personalize the appearance of our site. We provide more information regarding cookies and other tracking technologies below.
In addition, we may receive personal information about you that you authorize third parties to provide to us. We also may obtain personal information from third-party service providers to verify your identity, to prevent fraud, or to help us identify products and services that may be of interest to you.
The personal information we collect about you may be transferred to or stored by us or our service providers in the United States or elsewhere, as permitted by law.
If you do not wish to provide personal information to us, we may be unable to provide certain products or services to you.
Information Sharing
We disclose personal information with affiliated and non-affiliated parties: (1) as permitted or required by law or regulation; (2) if we believe that is necessary to: comply with applicable laws, regulations, or industry requirements; respond to requests from a legal, regulatory, or governmental authority; enforce legal terms; detect and resolve any fraud or security concerns, and protect the rights, property, and safety of us, our users, or others; (3) in the event of a merger, acquisition or sale of all or substantially all of our assets; or (4) as otherwise described in this Privacy Statement.
Personal information we collect may be shared with non-affiliated companies that perform support services on our behalf or to other firms that assist us in providing you with products and services (including, without limitation, completing transactions), such as custodians, transfer agents, broker-dealers and marketing service firms (to support our marketing to you), as well as with other financial institutions. We may also share information with affiliates that are engaged in a variety of financial services in order to better service your account(s).
When information is shared with third parties, they are not permitted to use the information for any purpose other than those purposes described in this Privacy Statement or as permitted by law.
If you close your account(s) or if we lose contact with you, we will continue to share information in accordance with our current privacy policy and practices.
If you close your account(s) or if we lose contact with you, we will continue to share information in accordance with our current privacy policy and practices.
97
Harbor’s Privacy Statement—Continued
Security
We maintain physical, electronic and procedural safeguards designed to protect your personal information; however, please be aware that no data security measures can guarantee 100% security.
For shareholders accessing information through our website or a mobile application, various forms of Internet security, such as data encryption firewall barriers, user names and passwords, two-factor authentication, and other tools are used. For additional information regarding our security measures, visit the terms and conditions of use on our website at harborfunds.com.
Linking to
Third Parties
Third Parties
When you visit our website and leave to go to another linked site, we are not responsible for the content or availability of the linked site. Please be advised that if you enter into a transaction on the third-party site, we do not represent either the third party or you. Further, the privacy and security policies of the linked site may differ from those practiced by us.
Cookies and Other Technologies
A cookie is a small text file that is stored on your computer, tablet, or device when you visit a website or a mobile application. Cookies usually store small bits of information about you and what you do on that site or application, which are then used to improve your browsing experience. Some cookies are only used during a single visit, while others are saved on your device until your next visit. Harbor Funds and our third-party providers use both types of cookies to make your visits more productive.
If you are concerned about cookies, they can be blocked from your device, or you can set your browser to notify you when they are being used. Use the Help feature of your browser to learn how.
Our website, mobile application, and emails may use a web beacon. A web beacon helps to measure usage and activity and reports that activity back to the system providers. In some cases, a web beacon triggers the placement of a cookie on your device.
We and our service providers use web beacons and cookies to determine things like if and when you open our emails, what type of device, operating system, email program, or web browser you are using, your IP address, and what links you click within our site or email. These things enable us to gauge the effectiveness, relevance, and value of our content and communications.
We use Google Analytics (which uses a web beacon) to collect information about use of our website and mobile application. For more information on opting out of being tracked by Google Analytics, visit https://tools.google.com/dlpage/gaoptout.
Do Not Track
Our third-party vendors may collect information about users across our website. We do not currently have the capability to respond to a web browser that does not track signals or other mechanisms that provide you with the ability to exercise choice regarding the collection of this information.
Changes to this
Privacy Statement
Privacy Statement
We reserve the right to change or revise this Privacy Statement at any time to reflect changes in the law or our data collection and use practices. New updates to the Privacy Statement will be posted to our website and are include in Harbor Funds’ annual reports to shareholders. Privacy Statement changes will apply to the information collected from the date we post our revised Privacy Statement, as well as to existing information we hold.
Contact Us
If you have any questions or concerns about how we maintain the privacy of your personal information or if you would like to update your personal information on file, please contact us at 800-422-1050 Monday through Friday, between the hours of 8:00 a.m. and 6:00 p.m. Eastern time. You may also write to us at the following postal address:
Harbor Funds
c/o Harbor Services Group, Inc.
PO Box 804660
Chicago, IL 60680-4108
c/o Harbor Services Group, Inc.
PO Box 804660
Chicago, IL 60680-4108
We recommend that you read and retain this notice for your personal files.
Last Updated: December 2020
98
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
Douglas J. Skinner
Trustee
Trustee
Ann M. Spruill
Trustee
Trustee
Erik D. Ojala
Chief Compliance Officer
Chief Compliance Officer
Anmarie S. Kolinski
Treasurer
Treasurer
Kristof M. Gleich
Vice President
Vice President
Gregg M. Boland
Vice President
Vice President
Diana R. Podgorny
Secretary
Secretary
Jodie L. Crotteau
Assistant Secretary
Assistant Secretary
Lana M. Lewandowski
AML Compliance Officer
& Assistant Secretary
AML Compliance Officer
& Assistant Secretary
Lora A. Kmieciak
Assistant Treasurer
Assistant Treasurer
John M. Paral
Assistant Treasurer
Assistant Treasurer
Investment Adviser
Harbor Capital Advisors, Inc.
111 South Wacker Drive, 34th Floor
Chicago, IL 60606-4302
312-443-4400
111 South Wacker Drive, 34th Floor
Chicago, IL 60606-4302
312-443-4400
Distributor
Harbor Funds Distributors, Inc.
111 South Wacker Drive, 34th Floor
Chicago, IL 60606-4302
312-443-4600
111 South Wacker Drive, 34th Floor
Chicago, IL 60606-4302
312-443-4600
Shareholder Services
Harbor Services Group, Inc.
P.O. Box 804660
Chicago, IL 60680-4108
800-422-1050
P.O. Box 804660
Chicago, IL 60680-4108
800-422-1050
FD.AR.FI.1020
Annual Report
October 31, 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 2020 fiscal year has been a historic period that will undoubtedly live on in our memories as much as we might like to forget the massive disruptions caused by the coronavirus pandemic and the toll it has taken on human lives.
The period began quietly in investment markets, extending a lengthy stretch of subdued volatility. That relative calm came to a dramatic end in late February when the extent of the pandemic became clear, sending shockwaves across global investment markets. Volatility spiked sharply higher, market liquidity became challenged, and government bond yields plunged in a flight to safety. From its peak on February 19 to its March 23 trough, the S&P 500 tumbled 33.8% for its fastest ever descent into bear-market territory. International markets followed suit, with the MSCI All Country World Ex. US (ND) Index falling 32.9% over the same period. Although U.S. Treasuries served as a ballast during the period, corporate bonds did not escape the sharp selloff, with both investment-grade and high-yield credit indexes experiencing double-digit losses.
Governments and central banks acted swiftly and forcefully to support the global economy with massive fiscal and monetary stimulus. This jolt of liquidity put a floor under markets and set the stage for a sharp rebound. Broad stock and bond indexes gained ground throughout much of the rest of the year, shrugging off concerns about the pandemic, inconsistent policy responses, uncertainty around the U.S. election, and escalating social tensions.
As time marched on, economic data has improved. We see GDP is growing again, unemployment appears to have bottomed, and many market measures ended the fiscal year in positive territory. However, economic and market recovery has been uneven. The re-emergence of volatility has brought about significant dispersion across markets. For example, the difference between the best and worst sectors reached its widest levels in many years. Similarly, growth stocks outperformed value stocks by the widest margin in more than 20 years.
This volatile environment, though challenging, has been welcome news for talented active managers, because it has provided them with more opportunities to add value and distance themselves from the pack. Our research shows that the difference between top performing and bottom performing managers in many categories is at its highest level in 20 years.
Harbor believes there are many ways to seek to reach long-term financial goals. Drawing upon experienced portfolio managers who stay true to a strategy grounded in enduring investment principles is one way we believe offers the potential to achieve positive outcomes over time. Even though volatility is likely to be with us for some time to come, we are confident that all our subadvisers continue to strive to skillfully execute their strategies to benefit shareholders over the long haul.
It is important to acknowledge that while market gyrations provide opportunities for skillful professional managers, they can pose behavioral challenges for the rest of us. The sharp selloff in the first quarter was enough to test the mettle of the calmest investor. However, those who stayed the course and stuck to their long-term plans likely benefitted from the sharp recovery that followed. We will look back on this period as a time that underscored the value of thoughtful active management and timeless investment principles such as diversification, discipline, and a long-term view.
I hope that you and your families continue to fare well during these ongoing challenging times. Thank you for your continued investment in Harbor Funds.
December 21, 2020
Charles F. McCain |
Chairman |
1
Harbor Target Retirement Funds
Manager’s Commentary (Unaudited)
Manager’s Commentary (Unaudited)
Adviser
Harbor Capital Advisors, Inc.
111 South Wacker Dr. 34th Floor
Chicago, IL 60606
Portfolio Managers
Paul C. Herbert, CFA, CAIA
Since Inception
Matthew G. Pallai
Since 2020
Since 2020
Linda M. Molenda
Since Inception
Since Inception
Harbor Capital has managed the Funds since inception.
Market Review
A fiscal year unlike any other began relatively calmly but turned tumultuous in the wake of the COVID-19 pandemic. Steep market declines, driven by fear and uncertainty over the pandemic’s unknown impact on economic growth and life in general gave way to optimism fueled by unprecedented government support programs and eventual incremental improvements in activity. By the period’s end, U.S. stocks and bonds and emerging markets generated gains during the November 1, 2019 to October 31, 2020 period. Non-U.S. developed markets finished below where they began the period, though much higher than in the spring.
The Russell 3000® Index, a measure of U.S. equity performance, gained a solid 10.15% for the year. As in recent periods, and pervasively throughout the 12-month stretch, growth stocks outperformed value stocks and large-cap stocks topped mid- and small-cap stocks. Information Technology stocks’ gains led all U.S. equity sectors.
Non-U.S. developed markets equities, as represented by the MSCI EAFE (ND) Index, failed to keep pace, with the index declining by 6.86%. Performance in Europe and Asia ex-Japan weighed on the index’s results, and its lower weighting and less positive performance in Information Technology limited the impact of the sector’s contribution to returns. The MSCI Emerging Markets (ND) Index, measuring emerging-markets stocks, gained 8.25%, buoyed by the strong performance of Chinese equities, with China making up 38.58% of the index and the segment gaining 35.25%.
Investment-grade bonds, helped greatly by declining interest rates, performed well. The Bloomberg Barclays U.S. Aggregate Bond Index gained 6.19%. The benchmark’s corporate bond allocation led the way, gaining 7.05%. Despite a dramatic swoon in February and March 2020, high-yield corporate bonds also rose for the period, gaining 3.07%, per the ICE BofA U.S. Non-Distressed High Yield Index.
Performance
Each of the 10 Harbor Target Retirement Funds performed well in absolute terms, as well as relative to their Composite Index benchmarks, during the fiscal year. Tables showing the returns of the Funds and Composite Indices accompany this section. Details on select contributors to and detractors from performance are included below. All Harbor funds returns are for the Institutional share class.
Harbor Capital Appreciation Fund, an equity fund focused on U.S. large cap growth stocks, and a significant allocation in the longer-dated funds (for investors earlier in their careers), was a meaningful contributor, gaining 42.68% while the Russell 1000® Growth Index, its benchmark, climbed 29.22%. The leading contributor to their absolute and relative performance was its stake in automaker Tesla, which has seen strong revenue growth and has set the stage for the future with an expanded lineup and technology gains. The fund’s overweight in and strong stock selection within the Information Technology sector also boosted performance.
Harbor Core Bond Fund, a fixed-income fund owning investment grade U.S. bonds, and a large component of the nearer-dated funds (designed for investors in or nearing retirement), posted strong performance. The fund rose 7.28%, 1.09% more than the Bloomberg Barclays U.S. Aggregate Index. The fund was helped by its overweight position relative to the index in corporate bonds. It entered the COVID-19 dislocation period in February and March with an underweight position in the sector, and added position in winning bonds including J.P. Morgan Chase, Toyota, and Hyundai Motor America.
The Funds’ returns were negatively impacted by their allocations to Harbor Diversified International All Cap Fund, which declined by 6.33%, lagging the MSCI All Country World Ex. U.S. (ND) Index’s 2.61% loss. A significant portion of the fund’s underperformance was driven by two factors: its unweight position—due to a lack of opportunities meeting the portfolio managers’ criteria—in the rallying Chinese market and a preference for value-oriented stocks in Japan, which significantly lagged growth-oriented names and the broader index in that market.
2
Harbor Target Retirement Funds
Manager’s Commentary—Continued
Manager’s Commentary—Continued
Outlook
While market and Fund performance during the period were promising, the situation from today’s vantage point is far from settled, with key crosscurrents manifesting themselves. It seems likely that the U.S. Federal Reserve will continue its accommodative stance on interest rates, which is expected to benefit risk assets, in our view. However, the future course of the pandemic and how governments may respond are unknowns.
As ever, we believe our focus on building diversified portfolios made up of funds led by insightful and adaptive managers provides a solid foundation with the potential to deliver strong performance through various environments.
3
Harbor Target Retirement Funds
Manager’s Commentary—Continued
Manager’s Commentary—Continued
HARBOR TARGET RETIREMENT FUNDS | Total Return Year Ended October 31, 2020 |
Harbor Target Retirement Income Fund | 6.37% |
Harbor Target Retirement 2020 Fund | 6.74 |
Harbor Target Retirement 2025 Fund | 7.26 |
Harbor Target Retirement 2030 Fund | 7.62 |
Harbor Target Retirement 2035 Fund | 7.98 |
Harbor Target Retirement 2040 Fund | 8.15 |
Harbor Target Retirement 2045 Fund | 8.21 |
Harbor Target Retirement 2050 Fund | 8.55 |
Harbor Target Retirement 2055 Fund | 8.83 |
Harbor Target Retirement 2060 Fund | 7.32 |
COMMONLY USED MARKET INDICES | Total Return Year Ended October 31, 2020 |
Bloomberg Barclays U.S. Aggregate Bond (domestic bonds) | 6.19% |
MSCI EAFE (ND) (foreign stocks) | -6.86 |
Russell 3000® (entire U.S. stock market) | 10.15 |
HARBOR TARGET RETIREMENT FUND COMPOSITE INDICES | Total Return Year Ended October 31, 2020 |
Composite Index Income | 4.99% |
Composite Index 2020 | 5.07 |
Composite Index 2025 | 4.97 |
Composite Index 2030 | 4.58 |
Composite Index 2035 | 4.28 |
Composite Index 2040 | 3.91 |
Composite Index 2045 | 3.61 |
Composite Index 2050 | 3.19 |
Composite Index 2055 | 2.68 |
Composite Index 2060 | 1.56 |
Underlying Harbor Funds Performance (Institutional Class Shares)
Total Return for the Year Ended October 31, 2020 | |||||||||||||||||
EQUITY | One Year | Five Yearsa | Ten Yearsa | Since Inceptiona | Current 7-Day SEC Yield | Inception Date | Expense Ratios* | ||||||||||
Subsidized b | Unsubsidized c | Net | Gross | ||||||||||||||
Harbor Capital Appreciation Fund | 42.68% | 18.36% | 17.07% | 12.55% | N/A | N/A | 12/29/1987 | 0.67% d | 0.72% | ||||||||
Harbor Diversified International All Cap Fund | -6.33 | N/A | N/A | 2.75 | N/A | N/A | 11/02/2015 | 0.80 e | 0.95 | ||||||||
Harbor Global Leaders Fund | 16.46 | 13.66 | 12.51 | 17.18 | N/A | N/A | 03/01/2009 | 0.86 d,e | 1.00 | ||||||||
Harbor International Fund | -3.43 | 1.44 | 2.84 | 9.55 | N/A | N/A | 12/29/1987 | 0.77 e | 0.88 | ||||||||
Harbor International Growth Fund | 20.42 | 9.79 | 6.55 | 4.46 | N/A | N/A | 11/01/1993 | 0.85 e | 0.91 | ||||||||
Harbor Large Cap Value Fund | 5.72 | 10.79 | 12.53 | 9.95 | N/A | N/A | 12/29/1987 | 0.69 e | 0.73 | ||||||||
Harbor Mid Cap Growth Fund | 45.84 | 19.99 | 16.06 | 7.32 | N/A | N/A | 11/01/2000 | 0.88 d | 0.91 | ||||||||
Harbor Mid Cap Value Fund | -16.64 | 0.50 | 7.34 | 5.94 | N/A | N/A | 03/01/2002 | 0.86 d | 0.89 | ||||||||
Harbor Small Cap Growth Fund | 24.87 | 13.82 | 13.35 | 9.63 | N/A | N/A | 11/01/2000 | 0.88 | 0.88 | ||||||||
Harbor Small Cap Value Fund | -4.33 | 7.66 | 10.34 | 9.30 | N/A | N/A | 12/14/2001 | 0.88 | 0.88 | ||||||||
Harbor Strategic Growth Fund | 12.54 | 11.83 | N/A | 13.87 | N/A | N/A | 11/01/2011 f | 0.71 e | 0.80 | ||||||||
FIXED INCOME | |||||||||||||||||
Harbor Bond Fund | 6.72% | 4.59% | 3.73% | 6.91% | N/A | N/A | 12/29/1987 | 0.51% d,e | 1.15% | ||||||||
Harbor Core Bond Fund | 7.28 | N/A | N/A | 7.26 | N/A | N/A | 06/01/2018 | 0.45 e | 0.54 | ||||||||
Harbor High-Yield Bond Fund | 2.09 | 4.82 | 4.93 | 6.53 | N/A | N/A | 12/01/2002 | 0.65 d | 0.74 | ||||||||
MONEY MARKET | |||||||||||||||||
Harbor Money Market Fund | 0.64% | 1.02% | 0.55% | 3.04% | 0.04% | -0.14% | 12/29/1987 | 0.28% d,e | 0.35% |
4
Harbor Target Retirement Funds
Manager’s Commentary—Continued
Manager’s Commentary—Continued
Effective November 2, 2020, Matthew G. Pallai is a co-portfolio manager for each of the Funds, joining Paul C. Herbert and Linda M. Molenda. Ms. Molenda will no longer serve as portfolio manager effective at the close of business on December 31, 2020.
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 at harborfunds.com or by calling 800-422-1050.
The Funds invest in a variety of underlying Harbor funds that are subject to risks associated with their particular investment strategies. By investing in several underlying funds, the Funds have partial exposure to the risks of many different areas of the market. Investments in the Funds are not guaranteed. An investor may experience losses. There is no guarantee that the Funds will provide adequate income through retirement. For information on the different share classes and the risks associated with an investment in the Funds, please refer to the current prospectus.
This report contains the current opinions of Harbor Capital Advisors, Inc. as of the date of this report and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Such opinions are subject to change without notice and securities described herein may no longer be included in, or may at any time be removed from, the Fund’s portfolio. This report is distributed for informational purposes only. Information contained herein has been obtained from sources believed reliable, but not guaranteed.
* | All mutual funds have expense ratios which represent what shareholders pay for operating expenses and management fees. Expense ratios are expressed as an annualized percentage of a fund’s average net assets paid out in expenses. Net expense ratios reflect adjustments due to voluntary or contractual fee waivers or expense reimbursements. Expense ratio information is as of the fund’s current prospectus, as revised and supplemented to date. |
a | Annualized |
b | Reflects reimbursements or waivers in effect during the period |
c | Does not reflect reimbursements or waivers currently in effect |
d | Reflects a contractual management fee waiver effective through February 28, 2021 |
e | Reflects an expense limitation agreement (excluding interest expense, if any) effective through February 28, 2021 |
f | 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’s 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 OCTOBER 31, 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% | 5% | 5% | 4% | 2% | 2% | 1% | |||||||||
Harbor Diversified International All Cap Fund | 12 | 11 | 10 | 9 | 8 | 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 | 11 | 11 | 10 | 9 | 9 | 7 | 6 | 5 | 3 | 3 | |||||||||
Harbor Large Cap Value Fund | 14 | 14 | 12 | 11 | 10 | 8 | 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 | 7 | 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 | 7 | 7 | 6 | 5 | 5 | 4 | 4 | 3 | 2 | 1 | |||||||||
Harbor Strategic Growth Fund | 4 | 4 | 3 | 3 | 3 | 2 | 2 | 3 | 2 | 1 | |||||||||
Total Equity | 93 | 91 | 81 | 73 | 67 | 57 | 48 | 40 | 29 | 20 | |||||||||
Fixed Income | |||||||||||||||||||
Harbor Bond Fund | 4% | 5% | 7% | 11% | 11% | 13% | 16% | 20% | 23% | 26% | |||||||||
Harbor Core Bond Fund | 0 | 0 | 4 | 7 | 10 | 13 | 16 | 20 | 23 | 26 | |||||||||
Harbor High-Yield Bond Fund | 3 | 4 | 8 | 9 | 12 | 17 | 20 | 20 | 18 | 18 | |||||||||
Total Fixed Income | 7 | 9 | 19 | 27 | 33 | 43 | 52 | 60 | 64 | 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 —October 31, 2020 (Unaudited)
Fund Summary —October 31, 2020 (Unaudited)
Asset Allocation (% of investments)
FUND PERFORMANCE
The graph compares a $10,000 investment in the Institutional Class shares of the Fund with the performance of the broad based market indices. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
CHANGE IN A $10,000 INVESTMENT
For the period 11/01/2010 through 10/31/2020
TOTAL RETURNS For the periods ended 10/31/2020 | 1 Year | Annualized | Inception Date | ||||||||
5 Years | 10 Years | ||||||||||
Harbor Target Retirement Income Fund | |||||||||||
Institutional Class | 6.37% | 5.25% | 4.70% | 01/02/2009 | |||||||
Comparative Indices | |||||||||||
Bloomberg Barclays U.S. Aggregate Bond | 6.19% | 4.08% | 3.55% | — | |||||||
MSCI EAFE (ND) | -6.86 | 2.85 | 3.82 | — | |||||||
Russell 3000® | 10.15 | 11.48 | 12.80 | — | |||||||
Composite Index Income | 4.99 | 4.89 | 4.65 | — |
As stated in the Fund’s prospectus dated March 1, 2020 and supplemented effective August 12, 2020, the expense ratio was 0.69%. 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 at harborfunds.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—October 31, 2020
Portfolio of Investments—October 31, 2020
Value and Cost in Thousands
EQUITY FUNDS—20.0% | ||||
Shares | Value | |||
2,612 | Harbor Capital Appreciation Fund | $ 259 | ||
50,694 | Harbor Diversified International All Cap Fund | 520 | ||
6,577 | Harbor Global Leaders Fund | 222 | ||
14,209 | Harbor International Fund | 521 | ||
27,125 | Harbor International Growth Fund | 518 | ||
36,503 | Harbor Large Cap Value Fund | 625 | ||
20,545 | Harbor Mid Cap Growth Fund | 264 | ||
24,332 | Harbor Mid Cap Value Fund | 409 | ||
15,251 | Harbor Small Cap Growth Fund | 242 | ||
9,464 | Harbor Small Cap Value Fund | 299 | ||
10,706 | Harbor Strategic Growth Fund | 264 | ||
TOTAL EQUITY FUNDS | ||||
(Cost $3,577) | 4,143 | |||
FIXED INCOME FUNDS—70.0% | |||
| Shares | Value | |
440,769 | Harbor Bond Fund | $ 5,448 | |
492,151 | Harbor Core Bond Fund | 5,443 | |
379,766 | Harbor High-Yield Bond Fund | 3,627 | |
TOTAL FIXED INCOME FUNDS | |||
(Cost $14,144) | 14,518 | ||
MONEY MARKET FUND—10.0% | |||
(Cost $2,080) | |||
2,080,158 | Harbor Money Market Fund | 2,080 | |
TOTAL INVESTMENTS—100.0% | |||
(Cost $19,801) | 20,741 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—0.0% | — a | ||
TOTAL NET ASSETS—100.0% | $20,741 |
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 October 31, 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) | ||||||||
Sales of Affiliated Funds (000s) | Distributions Received from Affiliated Funds (000s) | |||||||||||||
Harbor Bond Fund | $ 4,582 | $ 2,615 | $ (1,940) | $ 90 | $ 101 | $ — | $148 | |||||||
Harbor Capital Appreciation Fund | 221 | 251 | (282) | 41 | 28 | 22 | 1 | |||||||
Harbor Core Bond Fund | 4,581 | 2,647 | (1,989) | 57 | 147 | 38 | 128 | |||||||
Harbor Diversified International Fund | 438 | 437 | (312) | (9) | (34) | — | 11 | |||||||
Harbor Global Leaders Fund | 187 | 187 | (171) | (1) | 20 | 12 | 1 | |||||||
Harbor High-Yield Bond Fund | 1,826 | 2,548 | (654) | (47) | (46) | — | 129 | |||||||
Harbor High-Yield Opportunities Fund | 1,217 | 570 | (1,783) | 4 | (8) | — | 56 | |||||||
Harbor International Fund | 438 | 439 | (323) | 79 | (112) | — | 16 | |||||||
Harbor International Growth Fund | 439 | 376 | (379) | 51 | 31 | — | 10 | |||||||
Harbor Large Cap Value Fund | 524 | 609 | (541) | 20 | 13 | — | 5 | |||||||
Harbor Mid Cap Growth Fund | 227 | 278 | (289) | 67 | (19) | 52 | — | |||||||
Harbor Mid Cap Value Fund | 340 | 597 | (464) | 64 | (128) | 3 | 10 | |||||||
Harbor Money Market Fund | 1,746 | 1,051 | (717) | — | — | — | 13 | |||||||
Harbor Small Cap Growth Fund | 204 | 240 | (247) | 51 | (6) | 9 | (1) | |||||||
Harbor Small Cap Value Fund | 249 | 395 | (334) | 41 | (52) | 3 | 1 | |||||||
Harbor Strategic Growth Fund | 222 | 230 | (214) | 7 | 19 | 4 | 1 | |||||||
Total | $17,441 | $13,470 | $(10,639) | $515 | $ (46) | $143 | $529 |
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 —October 31, 2020 (Unaudited)
Fund Summary —October 31, 2020 (Unaudited)
Asset Allocation (% of investments)
FUND PERFORMANCE
The graph compares a $10,000 investment in the Institutional Class shares of the Fund with the performance of the broad based market indices. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
CHANGE IN A $10,000 INVESTMENT
For the period 11/01/2010 through 10/31/2020
TOTAL RETURNS For the periods ended 10/31/2020 | 1 Year | Annualized | Inception Date | ||||||||
5 Years | 10 Years | ||||||||||
Harbor Target Retirement 2020 Fund | |||||||||||
Institutional Class | 6.74% | 6.06% | 5.74% | 01/02/2009 | |||||||
Comparative Indices | |||||||||||
Bloomberg Barclays U.S. Aggregate Bond | 6.19% | 4.08% | 3.55% | — | |||||||
MSCI EAFE (ND) | -6.86 | 2.85 | 3.82 | — | |||||||
Russell 3000® | 10.15 | 11.48 | 12.80 | — | |||||||
Composite Index 2020 | 5.07 | 5.73 | 5.66 | — |
As stated in the Fund’s prospectus dated March 1, 2020 and supplemented effective August 12, 2020, the expense ratio was 0.71%. The Adviser has contractually agreed to limit the Fund’s operating expenses to: (i) the amount of the acquired funds’ fees and expenses; (ii) compensation of the Independent Trustees; and (iii) certain other expenses such as extraordinary items. The expense ratio in the prospectus may differ from the actual expense ratio for the period disclosed within this report. The expense ratio shown in the prospectus is based on the prior fiscal year, adjusted to reflect changes, if any, in contractual arrangements that occurred prior to the date of the prospectus (or supplement thereto, if applicable).
Performance data shown represents past performance and is no guarantee of future results. Past performance is net of management fees and expenses and reflects reinvested dividends and distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or upon the redemption of Fund shares. Past performance reflects the beneficial effect of any expense waivers or reimbursements, without which returns would have been lower. Investment returns and principal value will fluctuate so that Fund shares, when redeemed, may be worth more or less than their original cost. Returns for periods less than one year are not annualized. Current performance may be higher or lower and is available through the most recent month end at harborfunds.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—October 31, 2020
Portfolio of Investments—October 31, 2020
Value and Cost in Thousands
EQUITY FUNDS—29.5% | ||||
Shares | Value | |||
4,356 | Harbor Capital Appreciation Fund | $ 432 | ||
86,263 | Harbor Diversified International All Cap Fund | 884 | ||
10,529 | Harbor Global Leaders Fund | 356 | ||
24,155 | Harbor International Fund | 885 | ||
46,099 | Harbor International Growth Fund | 880 | ||
60,509 | Harbor Large Cap Value Fund | 1,035 | ||
35,851 | Harbor Mid Cap Growth Fund | 462 | ||
41,101 | Harbor Mid Cap Value Fund | 692 | ||
26,827 | Harbor Small Cap Growth Fund | 425 | ||
16,290 | Harbor Small Cap Value Fund | 515 | ||
17,846 | Harbor Strategic Growth Fund | 440 | ||
TOTAL EQUITY FUNDS | ||||
(Cost $5,922) | 7,006 | |||
FIXED INCOME FUNDS—63.5% | |||
| Shares | Value | |
434,177 | Harbor Bond Fund | $ 5,366 | |
484,581 | Harbor Core Bond Fund | 5,360 | |
458,255 | Harbor High-Yield Bond Fund | 4,376 | |
TOTAL FIXED INCOME FUNDS | |||
(Cost $14,700) | 15,102 | ||
MONEY MARKET FUND—7.0% | |||
(Cost $1,672) | |||
1,672,265 | Harbor Money Market Fund | 1,672 | |
TOTAL INVESTMENTS—100.0% | |||
(Cost $22,294) | 23,780 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—0.0% | — a | ||
TOTAL NET ASSETS—100.0% | $23,780 |
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 October 31, 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) | ||||||||
Sales of Affiliated Funds (000s) | Distributions Received from Affiliated Funds (000s) | |||||||||||||
Harbor Bond Fund | $ 5,189 | $ 2,409 | $ (2,430) | $ 40 | $ 158 | $ — | $149 | |||||||
Harbor Capital Appreciation Fund | 504 | 340 | (536) | 56 | 68 | 44 | — | |||||||
Harbor Core Bond Fund | 5,187 | 2,435 | (2,472) | 30 | 180 | 38 | 130 | |||||||
Harbor Diversified International All Cap Fund | 1,025 | 504 | (577) | (31) | (37) | — | 22 | |||||||
Harbor Global Leaders Fund | 400 | 215 | (294) | (24) | 59 | 23 | 1 | |||||||
Harbor High-Yield Bond Fund | 2,729 | 2,667 | (910) | (55) | (55) | — | 164 | |||||||
Harbor High-Yield Opportunities Fund | 1,821 | 442 | (2,264) | 7 | (6) | — | 71 | |||||||
Harbor International Fund | 1,030 | 492 | (583) | 255 | (309) | — | 33 | |||||||
Harbor International Growth Fund | 1,038 | 407 | (721) | 69 | 87 | — | 19 | |||||||
Harbor Large Cap Value Fund | 1,183 | 706 | (915) | (29) | 90 | — | 10 | |||||||
Harbor Mid Cap Growth Fund | 541 | 348 | (511) | 107 | (23) | 106 | — | |||||||
Harbor Mid Cap Value Fund | 795 | 812 | (806) | 119 | (228) | 5 | 20 | |||||||
Harbor Money Market Fund | 1,712 | 671 | (711) | — | — | — | 11 | |||||||
Harbor Small Cap Growth Fund | 495 | 290 | (449) | 79 | 10 | 17 | — | |||||||
Harbor Small Cap Value Fund | 592 | 521 | (584) | 65 | (79) | 6 | 3 | |||||||
Harbor Strategic Growth Fund | 502 | 262 | (372) | — | 48 | 7 | 2 | |||||||
Total | $24,743 | $13,521 | $(15,135) | $688 | $ (37) | $246 | $635 |
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 —October 31, 2020 (Unaudited)
Fund Summary —October 31, 2020 (Unaudited)
Asset Allocation (% of investments)
FUND PERFORMANCE
The graph compares a $10,000 investment in the Institutional Class shares of the Fund with the performance of the broad based market indices. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
CHANGE IN A $10,000 INVESTMENT
For the period 11/01/2010 through 10/31/2020
TOTAL RETURNS For the periods ended 10/31/2020 | 1 Year | Annualized | Inception Date | ||||||||
5 Years | 10 Years | ||||||||||
Harbor Target Retirement 2025 Fund | |||||||||||
Institutional Class | 7.26% | 6.56% | 6.15% | 01/02/2009 | |||||||
Comparative Indices | |||||||||||
Bloomberg Barclays U.S. Aggregate Bond | 6.19% | 4.08% | 3.55% | — | |||||||
MSCI EAFE (ND) | -6.86 | 2.85 | 3.82 | — | |||||||
Russell 3000® | 10.15 | 11.48 | 12.80 | — | |||||||
Composite Index 2025 | 4.97 | 6.15 | 6.04 | — |
As stated in the Fund’s prospectus dated March 1, 2020 and supplemented effective August 12, 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 at harborfunds.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—October 31, 2020
Portfolio of Investments—October 31, 2020
Value and Cost in Thousands
EQUITY FUNDS—40.4% | |||
Shares | Value | ||
5,575 | Harbor Capital Appreciation Fund | $ 553 | |
109,590 | Harbor Diversified International All Cap Fund | 1,123 | |
13,050 | Harbor Global Leaders Fund | 441 | |
30,681 | Harbor International Fund | 1,124 | |
58,762 | Harbor International Growth Fund | 1,122 | |
76,367 | Harbor Large Cap Value Fund | 1,307 | |
46,500 | Harbor Mid Cap Growth Fund | 598 | |
52,334 | Harbor Mid Cap Value Fund | 881 | |
34,654 | Harbor Small Cap Growth Fund | 549 | |
20,928 | Harbor Small Cap Value Fund | 662 | |
22,598 | Harbor Strategic Growth Fund | 557 | |
TOTAL EQUITY FUNDS | |||
(Cost $7,695) | 8,917 | ||
FIXED INCOME FUNDS—59.6% | |||
| Shares | Value | |
358,989 | Harbor Bond Fund | $ 4,437 | |
401,049 | Harbor Core Bond Fund | 4,436 | |
447,655 | Harbor High-Yield Bond Fund | 4,275 | |
TOTAL FIXED INCOME FUNDS | |||
(Cost $12,885) | 13,148 | ||
TOTAL INVESTMENTS—100.0% | |||
(Cost $20,580) | 22,065 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—0.0% | — a | ||
TOTAL NET ASSETS—100.0% | $22,065 |
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 October 31, 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) | ||||||||
Sales of Affiliated Funds (000s) | Distributions Received from Affiliated Funds (000s) | |||||||||||||
Harbor Bond Fund | $ 3,607 | $ 2,751 | $ (2,065) | $ 28 | $ 116 | $ — | $110 | |||||||
Harbor Capital Appreciation Fund | 535 | 378 | (504) | 76 | 68 | 48 | 1 | |||||||
Harbor Core Bond Fund | 3,607 | 2,748 | (2,070) | 4 | 147 | 27 | 96 | |||||||
Harbor Diversified International All Cap Fund | 1,082 | 609 | (484) | (45) | (39) | — | 24 | |||||||
Harbor Global Leaders Fund | 422 | 248 | (270) | (11) | 52 | 25 | 1 | |||||||
Harbor High-Yield Bond Fund | 2,585 | 2,686 | (895) | (24) | (77) | — | 160 | |||||||
Harbor High-Yield Opportunities Fund | 1,722 | 565 | (2,292) | 2 | 3 | — | 69 | |||||||
Harbor International Fund | 1,086 | 605 | (500) | 260 | (327) | — | 36 | |||||||
Harbor International Growth Fund | 1,094 | 530 | (684) | 104 | 78 | — | 21 | |||||||
Harbor Large Cap Value Fund | 1,247 | 809 | (818) | 18 | 51 | — | 12 | |||||||
Harbor Mid Cap Growth Fund | 581 | 435 | (523) | 136 | (31) | 118 | — | |||||||
Harbor Mid Cap Value Fund | 834 | 940 | (757) | 139 | (275) | 6 | 22 | |||||||
Harbor Small Cap Growth Fund | 528 | 368 | (453) | 107 | (1) | 20 | — | |||||||
Harbor Small Cap Value Fund | 628 | 615 | (559) | 69 | (91) | 6 | 4 | |||||||
Harbor Strategic Growth Fund | 534 | 306 | (338) | 14 | 41 | 8 | 2 | |||||||
Total | $20,092 | $14,593 | $(13,212) | $877 | $(285) | $258 | $558 |
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 —October 31, 2020 (Unaudited)
Fund Summary —October 31, 2020 (Unaudited)
Asset Allocation (% of investments)
FUND PERFORMANCE
The graph compares a $10,000 investment in the Institutional Class shares of the Fund with the performance of the broad based market indices. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
CHANGE IN A $10,000 INVESTMENT
For the period 11/01/2010 through 10/31/2020
TOTAL RETURNS For the periods ended 10/31/2020 | 1 Year | Annualized | Inception Date | ||||||||
5 Years | 10 Years | ||||||||||
Harbor Target Retirement 2030 Fund | |||||||||||
Institutional Class | 7.62% | 6.92% | 6.65% | 01/02/2009 | |||||||
Comparative Indices | |||||||||||
Bloomberg Barclays U.S. Aggregate Bond | 6.19% | 4.08% | 3.55% | — | |||||||
MSCI EAFE (ND) | -6.86 | 2.85 | 3.82 | — | |||||||
Russell 3000® | 10.15 | 11.48 | 12.80 | — | |||||||
Composite Index 2030 | 4.58 | 6.38 | 6.43 | — |
As stated in the Fund’s prospectus dated March 1, 2020 and supplemented effective August 12, 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 at harborfunds.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—October 31, 2020
Portfolio of Investments—October 31, 2020
Value and Cost in Thousands
EQUITY FUNDS—48.3% | |||
Shares | Value | ||
11,198 | Harbor Capital Appreciation Fund | $ 1,111 | |
181,009 | Harbor Diversified International All Cap Fund | 1,855 | |
21,281 | Harbor Global Leaders Fund | 720 | |
50,686 | Harbor International Fund | 1,857 | |
96,899 | Harbor International Growth Fund | 1,850 | |
125,635 | Harbor Large Cap Value Fund | 2,150 | |
76,833 | Harbor Mid Cap Growth Fund | 989 | |
86,441 | Harbor Mid Cap Value Fund | 1,455 | |
57,540 | Harbor Small Cap Growth Fund | 911 | |
34,718 | Harbor Small Cap Value Fund | 1,098 | |
28,794 | Harbor Strategic Growth Fund | 709 | |
TOTAL EQUITY FUNDS | |||
(Cost $12,638) | 14,705 | ||
FIXED INCOME FUNDS—51.7% | |||
| Shares | Value | |
396,863 | Harbor Bond Fund | $ 4,905 | |
443,193 | Harbor Core Bond Fund | 4,902 | |
623,680 | Harbor High-Yield Bond Fund | 5,956 | |
TOTAL FIXED INCOME FUNDS | |||
(Cost $15,417) | 15,763 | ||
TOTAL INVESTMENTS—100.0% | |||
(Cost $28,055) | 30,468 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—0.0% | — a | ||
TOTAL NET ASSETS—100.0% | $30,468 |
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 October 31, 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) | ||||||||
Sales of Affiliated Funds (000s) | Distributions Received from Affiliated Funds (000s) | |||||||||||||
Harbor Bond Fund | $ 4,495 | $ 2,793 | $ (2,561) | $ 48 | $ 130 | $ — | $129 | |||||||
Harbor Capital Appreciation Fund | 1,236 | 577 | (1,031) | 152 | 177 | 107 | 1 | |||||||
Harbor Core Bond Fund | 4,494 | 2,805 | (2,584) | (11) | 198 | 32 | 112 | |||||||
Harbor Diversified International All Cap Fund | 1,945 | 676 | (628) | (130) | (8) | — | 42 | |||||||
Harbor Global Leaders Fund | 757 | 251 | (364) | (37) | 113 | 43 | 2 | |||||||
Harbor High-Yield Bond Fund | 3,862 | 3,905 | (1,670) | (5) | (136) | — | 233 | |||||||
Harbor High-Yield Opportunities Fund | 2,575 | 831 | (3,415) | 6 | 3 | — | 102 | |||||||
Harbor International Fund | 1,947 | 665 | (646) | 413 | (522) | — | 63 | |||||||
Harbor International Growth Fund | 1,969 | 538 | (985) | 123 | 205 | — | 37 | |||||||
Harbor Large Cap Value Fund | 2,246 | 998 | (1,229) | (80) | 215 | — | 20 | |||||||
Harbor Mid Cap Growth Fund | 1,068 | 581 | (855) | 192 | 3 | 209 | — | |||||||
Harbor Mid Cap Value Fund | 1,491 | 1,435 | (1,242) | 196 | (425) | 11 | 37 | |||||||
Harbor Small Cap Growth Fund | 954 | 490 | (725) | 179 | 13 | 34 | 1 | |||||||
Harbor Small Cap Value Fund | 1,142 | 887 | (901) | 75 | (105) | 11 | 6 | |||||||
Harbor Strategic Growth Fund | 697 | 291 | (355) | 22 | 54 | 10 | 3 | |||||||
Total | $30,878 | $17,723 | $(19,191) | $1,143 | $ (85) | $457 | $788 |
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 —October 31, 2020 (Unaudited)
Fund Summary —October 31, 2020 (Unaudited)
Asset Allocation (% of investments)
FUND PERFORMANCE
The graph compares a $10,000 investment in the Institutional Class shares of the Fund with the performance of the broad based market indices. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
CHANGE IN A $10,000 INVESTMENT
For the period 11/01/2010 through 10/31/2020
TOTAL RETURNS For the periods ended 10/31/2020 | 1 Year | Annualized | Inception Date | ||||||||
5 Years | 10 Years | ||||||||||
Harbor Target Retirement 2035 Fund | |||||||||||
Institutional Class | 7.98% | 7.40% | 7.26% | 01/02/2009 | |||||||
Comparative Indices | |||||||||||
Bloomberg Barclays U.S. Aggregate Bond | 6.19% | 4.08% | 3.55% | — | |||||||
MSCI EAFE (ND) | -6.86 | 2.85 | 3.82 | — | |||||||
Russell 3000® | 10.15 | 11.48 | 12.80 | — | |||||||
Composite Index 2035 | 4.28 | 6.65 | 6.89 | — |
As stated in the Fund’s prospectus dated March 1, 2020 and supplemented effective August 12, 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 at harborfunds.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—October 31, 2020
Portfolio of Investments—October 31, 2020
Value and Cost in Thousands
EQUITY FUNDS—57.4% | |||
Shares | Value | ||
9,435 | Harbor Capital Appreciation Fund | $ 936 | |
142,459 | Harbor Diversified International All Cap Fund | 1,460 | |
16,686 | Harbor Global Leaders Fund | 564 | |
39,917 | Harbor International Fund | 1,463 | |
76,540 | Harbor International Growth Fund | 1,461 | |
98,700 | Harbor Large Cap Value Fund | 1,689 | |
60,476 | Harbor Mid Cap Growth Fund | 778 | |
67,188 | Harbor Mid Cap Value Fund | 1,131 | |
45,211 | Harbor Small Cap Growth Fund | 716 | |
27,095 | Harbor Small Cap Value Fund | 857 | |
19,540 | Harbor Strategic Growth Fund | 481 | |
TOTAL EQUITY FUNDS | |||
(Cost $10,043) | 11,536 | ||
FIXED INCOME FUNDS—42.6% | |||
| Shares | Value | |
212,774 | Harbor Bond Fund | $ 2,630 | |
237,642 | Harbor Core Bond Fund | 2,628 | |
346,475 | Harbor High-Yield Bond Fund | 3,309 | |
TOTAL FIXED INCOME FUNDS | |||
(Cost $8,419) | 8,567 | ||
TOTAL INVESTMENTS—100.0% | |||
(Cost $18,462) | 20,103 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—0.0% | — a | ||
TOTAL NET ASSETS—100.0% | $20,103 |
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 October 31, 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) | ||||||||
Sales of Affiliated Funds (000s) | Distributions Received from Affiliated Funds (000s) | |||||||||||||
Harbor Bond Fund | $ 2,310 | $ 1,851 | $ (1,622) | $ (13) | $ 104 | $ — | $ 68 | |||||||
Harbor Capital Appreciation Fund | 989 | 539 | (869) | 111 | 166 | 87 | 1 | |||||||
Harbor Core Bond Fund | 2,308 | 1,853 | (1,628) | (27) | 122 | 17 | 58 | |||||||
Harbor Diversified International All Cap Fund | 1,507 | 502 | (441) | (111) | 3 | — | 33 | |||||||
Harbor Global Leaders Fund | 583 | 205 | (282) | (30) | 88 | 34 | 1 | |||||||
Harbor High-Yield Bond Fund | 2,052 | 2,436 | (1,104) | 9 | (84) | — | 127 | |||||||
Harbor High-Yield Opportunities Fund | 1,368 | 620 | (1,996) | (2) | 10 | — | 56 | |||||||
Harbor International Fund | 1,507 | 522 | (481) | 291 | (376) | — | 49 | |||||||
Harbor International Growth Fund | 1,512 | 402 | (708) | 88 | 167 | — | 29 | |||||||
Harbor Large Cap Value Fund | 1,731 | 788 | (928) | (66) | 164 | — | 16 | |||||||
Harbor Mid Cap Growth Fund | 810 | 518 | (705) | 143 | 12 | 163 | — | |||||||
Harbor Mid Cap Value Fund | 1,153 | 1,065 | (908) | 131 | (310) | 8 | 30 | |||||||
Harbor Small Cap Growth Fund | 738 | 360 | (532) | 130 | 20 | 27 | — | |||||||
Harbor Small Cap Value Fund | 880 | 646 | (643) | 40 | (66) | 9 | 4 | |||||||
Harbor Strategic Growth Fund | 496 | 172 | (240) | 19 | 34 | 7 | 2 | |||||||
Total | $19,944 | $12,479 | $(13,087) | $ 713 | $ 54 | $352 | $474 |
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 —October 31, 2020 (Unaudited)
Fund Summary —October 31, 2020 (Unaudited)
Asset Allocation (% of investments)
FUND PERFORMANCE
The graph compares a $10,000 investment in the Institutional Class shares of the Fund with the performance of the broad based market indices. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
CHANGE IN A $10,000 INVESTMENT
For the period 11/01/2010 through 10/31/2020
TOTAL RETURNS For the periods ended 10/31/2020 | 1 Year | Annualized | Inception Date | ||||||||
5 Years | 10 Years | ||||||||||
Harbor Target Retirement 2040 Fund | |||||||||||
Institutional Class | 8.15% | 7.83% | 7.83% | 01/02/2009 | |||||||
Comparative Indices | |||||||||||
Bloomberg Barclays U.S. Aggregate Bond | 6.19% | 4.08% | 3.55% | — | |||||||
MSCI EAFE (ND) | -6.86 | 2.85 | 3.82 | — | |||||||
Russell 3000® | 10.15 | 11.48 | 12.80 | — | |||||||
Composite Index 2040 | 3.91 | 6.89 | 7.36 | — |
As stated in the Fund’s prospectus dated March 1, 2020 and supplemented effective August 12, 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 at harborfunds.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—October 31, 2020
Portfolio of Investments—October 31, 2020
Value and Cost in Thousands
EQUITY FUNDS—67.0% | |||
Shares | Value | ||
17,145 | Harbor Capital Appreciation Fund | $ 1,700 | |
258,086 | Harbor Diversified International All Cap Fund | 2,645 | |
30,535 | Harbor Global Leaders Fund | 1,032 | |
72,304 | Harbor International Fund | 2,649 | |
139,880 | Harbor International Growth Fund | 2,670 | |
179,860 | Harbor Large Cap Value Fund | 3,078 | |
109,626 | Harbor Mid Cap Growth Fund | 1,411 | |
121,495 | Harbor Mid Cap Value Fund | 2,045 | |
81,429 | Harbor Small Cap Growth Fund | 1,290 | |
48,981 | Harbor Small Cap Value Fund | 1,549 | |
34,881 | Harbor Strategic Growth Fund | 860 | |
TOTAL EQUITY FUNDS | |||
(Cost $18,359) | 20,929 | ||
FIXED INCOME FUNDS—33.0% | |||
| Shares | Value | |
267,689 | Harbor Bond Fund | $ 3,309 | |
298,877 | Harbor Core Bond Fund | 3,306 | |
388,393 | Harbor High-Yield Bond Fund | 3,709 | |
TOTAL FIXED INCOME FUNDS | |||
(Cost $10,071) | 10,324 | ||
TOTAL INVESTMENTS—100.0% | |||
(Cost $28,430) | 31,253 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—0.0% | — | ||
TOTAL NET ASSETS—100.0% | $31,253 |
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 October 31, 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) | ||||||||
Sales of Affiliated Funds (000s) | Distributions Received from Affiliated Funds (000s) | |||||||||||||
Harbor Bond Fund | $ 2,495 | $ 2,316 | $ (1,604) | $ 10 | $ 92 | $ — | $ 76 | |||||||
Harbor Capital Appreciation Fund | 1,641 | 857 | (1,266) | 210 | 258 | 140 | 1 | |||||||
Harbor Core Bond Fund | 2,492 | 2,322 | (1,614) | (7) | 113 | 18 | 66 | |||||||
Harbor Diversified International All Cap Fund | 2,509 | 791 | (467) | (194) | 6 | — | 53 | |||||||
Harbor Global Leaders Fund | 973 | 340 | (381) | (12) | 112 | 54 | 3 | |||||||
Harbor High-Yield Bond Fund | 2,040 | 2,696 | (950) | 19 | (96) | — | 134 | |||||||
Harbor High-Yield Opportunities Fund | 1,354 | 858 | (2,223) | 1 | 10 | — | 57 | |||||||
Harbor International Fund | 2,520 | 807 | (532) | 223 | (369) | — | 79 | |||||||
Harbor International Growth Fund | 2,539 | 664 | (972) | 200 | 239 | — | 46 | |||||||
Harbor Large Cap Value Fund | 2,889 | 1,218 | (1,187) | (122) | 280 | — | 26 | |||||||
Harbor Mid Cap Growth Fund | 1,344 | 701 | (908) | 258 | 16 | 260 | — | |||||||
Harbor Mid Cap Value Fund | 1,939 | 1,849 | (1,443) | 168 | (468) | 13 | 47 | |||||||
Harbor Small Cap Growth Fund | 1,222 | 521 | (701) | 279 | (31) | 43 | — | |||||||
Harbor Small Cap Value Fund | 1,459 | 1,134 | (998) | 31 | (77) | 14 | 7 | |||||||
Harbor Strategic Growth Fund | 820 | 266 | (311) | 54 | 31 | 11 | 4 | |||||||
Total | $28,236 | $17,340 | $(15,557) | $1,118 | $ 116 | $553 | $599 |
The accompanying notes are an integral part of the Financial Statements.
18
Harbor Target Retirement 2045 Fund
Fund Summary —October 31, 2020 (Unaudited)
Fund Summary —October 31, 2020 (Unaudited)
Asset Allocation (% of investments)
FUND PERFORMANCE
The graph compares a $10,000 investment in the Institutional Class shares of the Fund with the performance of the broad based market indices. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
CHANGE IN A $10,000 INVESTMENT
For the period 11/01/2010 through 10/31/2020
TOTAL RETURNS For the periods ended 10/31/2020 | 1 Year | Annualized | Inception Date | ||||||||
5 Years | 10 Years | ||||||||||
Harbor Target Retirement 2045 Fund | |||||||||||
Institutional Class | 8.21% | 8.14% | 8.30% | 01/02/2009 | |||||||
Comparative Indices | |||||||||||
Bloomberg Barclays U.S. Aggregate Bond | 6.19% | 4.08% | 3.55% | — | |||||||
MSCI EAFE (ND) | -6.86 | 2.85 | 3.82 | — | |||||||
Russell 3000® | 10.15 | 11.48 | 12.80 | — | |||||||
Composite Index 2045 | 3.61 | 7.16 | 7.77 | — |
As stated in the Fund’s prospectus dated March 1, 2020 and supplemented effective August 12, 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 at harborfunds.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—October 31, 2020
Portfolio of Investments—October 31, 2020
Value and Cost in Thousands
EQUITY FUNDS—72.9% | |||
Shares | Value | ||
10,835 | Harbor Capital Appreciation Fund | $ 1,075 | |
160,170 | Harbor Diversified International All Cap Fund | 1,642 | |
19,420 | Harbor Global Leaders Fund | 656 | |
44,821 | Harbor International Fund | 1,642 | |
86,018 | Harbor International Growth Fund | 1,642 | |
112,439 | Harbor Large Cap Value Fund | 1,924 | |
67,273 | Harbor Mid Cap Growth Fund | 866 | |
75,795 | Harbor Mid Cap Value Fund | 1,276 | |
50,075 | Harbor Small Cap Growth Fund | 793 | |
30,337 | Harbor Small Cap Value Fund | 959 | |
21,944 | Harbor Strategic Growth Fund | 541 | |
TOTAL EQUITY FUNDS | |||
(Cost $11,534) | 13,016 | ||
FIXED INCOME FUNDS—27.1% | |||
| Shares | Value | |
159,666 | Harbor Bond Fund | $ 1,973 | |
105,568 | Harbor Core Bond Fund | 1,168 | |
177,869 | Harbor High-Yield Bond Fund | 1,699 | |
TOTAL FIXED INCOME FUNDS | |||
(Cost $4,733) | 4,840 | ||
TOTAL INVESTMENTS—100.0% | |||
(Cost $16,267) | 17,856 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—0.0% | — a | ||
TOTAL NET ASSETS—100.0% | $17,856 |
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 October 31, 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) | ||||||||
Sales of Affiliated Funds (000s) | Distributions Received from Affiliated Funds (000s) | |||||||||||||
Harbor Bond Fund | $ 1,512 | $1,438 | $(1,031) | $ (5) | $ 59 | $ — | $ 45 | |||||||
Harbor Capital Appreciation Fund | 928 | 488 | (615) | 177 | 97 | 81 | 1 | |||||||
Harbor Core Bond Fund | 756 | 977 | (599) | (7) | 41 | 6 | 21 | |||||||
Harbor Diversified International All Cap Fund | 1,399 | 526 | (187) | (99) | 3 | — | 31 | |||||||
Harbor Global Leaders Fund | 560 | 197 | (164) | 15 | 48 | 32 | 2 | |||||||
Harbor High-Yield Bond Fund | 956 | 1,273 | (500) | 13 | (43) | — | 61 | |||||||
Harbor High-Yield Opportunities Fund | 633 | 396 | (1,038) | (4) | 13 | — | 26 | |||||||
Harbor International Fund | 1,404 | 519 | (208) | 92 | (165) | — | 46 | |||||||
Harbor International Growth Fund | 1,415 | 363 | (398) | 172 | 90 | — | 27 | |||||||
Harbor Large Cap Value Fund | 1,631 | 704 | (521) | 23 | 87 | — | 15 | |||||||
Harbor Mid Cap Growth Fund | 746 | 380 | (424) | 184 | (20) | 148 | — | |||||||
Harbor Mid Cap Value Fund | 1,082 | 1,049 | (708) | 122 | (269) | 8 | 27 | |||||||
Harbor Small Cap Growth Fund | 675 | 281 | (313) | 189 | (39) | 24 | — | |||||||
Harbor Small Cap Value Fund | 810 | 631 | (468) | 76 | (90) | 8 | 4 | |||||||
Harbor Strategic Growth Fund | 463 | 160 | (134) | 39 | 13 | 7 | 2 | |||||||
Total | $14,970 | $9,382 | $(7,308) | $987 | $(175) | $314 | $308 |
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 —October 31, 2020 (Unaudited)
Fund Summary —October 31, 2020 (Unaudited)
Asset Allocation (% of investments)
FUND PERFORMANCE
The graph compares a $10,000 investment in the Institutional Class shares of the Fund with the performance of the broad based market indices. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
CHANGE IN A $10,000 INVESTMENT
For the period 11/01/2010 through 10/31/2020
TOTAL RETURNS For the periods ended 10/31/2020 | 1 Year | Annualized | Inception Date | ||||||||
5 Years | 10 Years | ||||||||||
Harbor Target Retirement 2050 Fund | |||||||||||
Institutional Class | 8.55% | 8.52% | 8.77% | 01/02/2009 | |||||||
Comparative Indices | |||||||||||
Bloomberg Barclays U.S. Aggregate Bond | 6.19% | 4.08% | 3.55% | — | |||||||
MSCI EAFE (ND) | -6.86 | 2.85 | 3.82 | — | |||||||
Russell 3000® | 10.15 | 11.48 | 12.80 | — | |||||||
Composite Index 2050 | 3.19 | 7.37 | 8.13 | — |
As stated in the Fund’s prospectus dated March 1, 2020 and supplemented effective August 12, 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 at harborfunds.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—October 31, 2020
Portfolio of Investments—October 31, 2020
Value and Cost in Thousands
EQUITY FUNDS—81.5% | |||
Shares | Value | ||
19,391 | Harbor Capital Appreciation Fund | $ 1,923 | |
286,243 | Harbor Diversified International All Cap Fund | 2,934 | |
35,141 | Harbor Global Leaders Fund | 1,188 | |
80,303 | Harbor International Fund | 2,942 | |
154,958 | Harbor International Growth Fund | 2,958 | |
201,799 | Harbor Large Cap Value Fund | 3,453 | |
119,883 | Harbor Mid Cap Growth Fund | 1,543 | |
134,958 | Harbor Mid Cap Value Fund | 2,271 | |
88,913 | Harbor Small Cap Growth Fund | 1,409 | |
53,735 | Harbor Small Cap Value Fund | 1,700 | |
39,161 | Harbor Strategic Growth Fund | 965 | |
TOTAL EQUITY FUNDS | |||
(Cost $20,322) | 23,286 | ||
FIXED INCOME FUNDS—18.5% | |||
| Shares | Value | |
160,566 | Harbor Bond Fund | $ 1,984 | |
89,662 | Harbor Core Bond Fund | 992 | |
242,961 | Harbor High-Yield Bond Fund | 2,320 | |
TOTAL FIXED INCOME FUNDS | |||
(Cost $5,243) | 5,296 | ||
TOTAL INVESTMENTS—100.0% | |||
(Cost $25,565) | 28,582 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—0.0% | — a | ||
TOTAL NET ASSETS—100.0% | $28,582 |
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 October 31, 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) | ||||||||
Sales of Affiliated Funds (000s) | Distributions Received from Affiliated Funds (000s) | |||||||||||||
Harbor Bond Fund | $ 1,497 | $ 1,647 | $ (1,225) | $ 1 | $ 64 | $ — | $ 46 | |||||||
Harbor Capital Appreciation Fund | 1,809 | 743 | (1,118) | 239 | 250 | 157 | 1 | |||||||
Harbor Core Bond Fund | 748 | 826 | (616) | (8) | 42 | 5 | 21 | |||||||
Harbor Diversified International All Cap Fund | 2,724 | 747 | (328) | (208) | (1) | — | 59 | |||||||
Harbor Global Leaders Fund | 1,102 | 281 | (302) | 27 | 80 | 63 | 2 | |||||||
Harbor High-Yield Bond Fund | — | 2,470 | (107) | (42) | (1) | — | 27 | |||||||
Harbor High-Yield Opportunities Fund | 1,827 | 1,250 | (3,088) | (8) | 19 | — | 77 | |||||||
Harbor International Fund | 2,728 | 771 | (390) | 115 | (282) | — | 88 | |||||||
Harbor International Growth Fund | 2,738 | 508 | (753) | 295 | 170 | — | 52 | |||||||
Harbor Large Cap Value Fund | 3,186 | 957 | (862) | (29) | 201 | — | 29 | |||||||
Harbor Mid Cap Growth Fund | 1,443 | 605 | (779) | 262 | 12 | 285 | — | |||||||
Harbor Mid Cap Value Fund | 2,107 | 1,704 | (1,213) | 123 | (450) | 15 | 52 | |||||||
Harbor Small Cap Growth Fund | 1,306 | 414 | (570) | 258 | 1 | 47 | — | |||||||
Harbor Small Cap Value Fund | 1,573 | 1,009 | (831) | 10 | (61) | 15 | 8 | |||||||
Harbor Strategic Growth Fund | 904 | 213 | (241) | 68 | 21 | 13 | 4 | |||||||
Total | $25,692 | $14,145 | $(12,423) | $1,103 | $ 65 | $600 | $466 |
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 —October 31, 2020 (Unaudited)
Fund Summary —October 31, 2020 (Unaudited)
Asset Allocation (% of investments)
FUND PERFORMANCE
The graph compares a $10,000 investment in the Institutional Class shares of the Fund with the performance of the broad based market indices. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
CHANGE IN A $10,000 INVESTMENT
For the period 11/01/2014 through 10/31/2020
TOTAL RETURNS For the periods ended 10/31/2020 | 1 Year | Annualized | Inception Date | ||||||||
5 Years | Life of Fund | ||||||||||
Harbor Target Retirement 2055 Fund | |||||||||||
Institutional Class | 8.83% | 8.72% | 7.62% | 11/01/2014 | |||||||
Comparative Indices | |||||||||||
Bloomberg Barclays U.S. Aggregate Bond | 6.19% | 4.08% | 3.72% | — | |||||||
MSCI EAFE (ND) | -6.86 | 2.85 | 2.36 | — | |||||||
Russell 3000® | 10.15 | 11.48 | 10.29 | — | |||||||
Composite Index 2055 | 2.68 | 7.41 | 6.18 | — |
As stated in the Fund’s prospectus dated March 1, 2020 and supplemented effective August 12, 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 at harborfunds.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—October 31, 2020
Portfolio of Investments—October 31, 2020
Value and Cost in Thousands
EQUITY FUNDS—90.9% | |||
Shares | Value | ||
6,553 | Harbor Capital Appreciation Fund | $ 650 | |
95,826 | Harbor Diversified International All Cap Fund | 982 | |
11,939 | Harbor Global Leaders Fund | 404 | |
26,831 | Harbor International Fund | 983 | |
51,680 | Harbor International Growth Fund | 987 | |
67,825 | Harbor Large Cap Value Fund | 1,160 | |
40,214 | Harbor Mid Cap Growth Fund | 518 | |
45,302 | Harbor Mid Cap Value Fund | 762 | |
29,602 | Harbor Small Cap Growth Fund | 469 | |
17,994 | Harbor Small Cap Value Fund | 569 | |
13,205 | Harbor Strategic Growth Fund | 325 | |
TOTAL EQUITY FUNDS | |||
(Cost $7,029) | 7,809 | ||
FIXED INCOME FUNDS—9.1% | |||
| Shares | Value | |
34,833 | Harbor Bond Fund | $ 431 | |
36,669 | Harbor High-Yield Bond Fund | 350 | |
TOTAL FIXED INCOME FUNDS | |||
(Cost $776) | 781 | ||
TOTAL INVESTMENTS—100.0% | |||
(Cost $7,805) | 8,590 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—0.0% | — a | ||
TOTAL NET ASSETS—100.0% | $8,590 |
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 October 31, 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) | ||||||||
Sales of Affiliated Funds (000s) | Distributions Received from Affiliated Funds (000s) | |||||||||||||
Harbor Bond Fund | $ 239 | $ 419 | $ (240) | $ 1 | $ 12 | $ — | $ 9 | |||||||
Harbor Capital Appreciation Fund | 483 | 330 | (316) | 113 | 40 | 43 | — | |||||||
Harbor Diversified International All Cap Fund | 724 | 432 | (120) | (48) | (6) | — | 16 | |||||||
Harbor Global Leaders Fund | 299 | 141 | (73) | 20 | 17 | 17 | 1 | |||||||
Harbor High-Yield Bond Fund | — | 369 | (13) | (6) | — | — | 4 | |||||||
Harbor High-Yield Opportunities Fund | 194 | 255 | (453) | (2) | 6 | — | 10 | |||||||
Harbor International Fund | 724 | 438 | (139) | 93 | (133) | — | 24 | |||||||
Harbor International Growth Fund | 730 | 321 | (213) | 125 | 24 | — | 14 | |||||||
Harbor Large Cap Value Fund | 851 | 441 | (191) | 39 | 20 | — | 8 | |||||||
Harbor Mid Cap Growth Fund | 382 | 223 | (179) | 111 | (19) | 78 | — | |||||||
Harbor Mid Cap Value Fund | 557 | 598 | (309) | 38 | (122) | 4 | 14 | |||||||
Harbor Small Cap Growth Fund | 343 | 155 | (110) | 98 | (17) | 13 | — | |||||||
Harbor Small Cap Value Fund | 415 | 355 | (193) | 40 | (48) | 4 | 2 | |||||||
Harbor Strategic Growth Fund | 242 | 117 | (62) | 22 | 6 | 4 | 1 | |||||||
Total | $6,183 | $4,594 | $(2,611) | $644 | $(220) | $163 | $103 |
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 —October 31, 2020 (Unaudited)
Fund Summary —October 31, 2020 (Unaudited)
Asset Allocation (% of investments)
FUND PERFORMANCE
The graph compares a $10,000 investment in the Institutional Class shares of the Fund with the performance of the broad based market indices. The Fund’s performance assumes the reinvestment of all dividend and capital gain distributions.
CHANGE IN A $10,000 INVESTMENT
For the period 11/01/2019 through 10/31/2020
TOTAL RETURNS For the periods ended 10/31/2020 | 1 Year | 5 Years | Annualized | Inception Date | |||||||
Life of Fund | |||||||||||
Harbor Target Retirement 2060 Fund | |||||||||||
Institutional Class | 7.32% | N/A | 7.32% | 11/01/2019 | |||||||
Comparative Indices | |||||||||||
Bloomberg Barclays U.S. Aggregate Bond | 6.19% | N/A | 6.19% | — | |||||||
MSCI EAFE (ND) | -6.86 | N/A | -6.86 | — | |||||||
Russell 3000® | 10.15 | N/A | 10.15 | — | |||||||
Composite Index 2060 | 1.56 | N/A | 1.56 | — |
As stated in the Fund’s prospectus dated March 1, 2020 and supplemented effective August 12, 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 at harborfunds.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—October 31, 2020
Portfolio of Investments—October 31, 2020
Value and Cost in Thousands
EQUITY FUNDS—93.0% | |||
Shares | Value | ||
457 | Harbor Capital Appreciation Fund | $ 46 | |
6,637 | Harbor Diversified International All Cap Fund | 68 | |
830 | Harbor Global Leaders Fund | 28 | |
1,857 | Harbor International Fund | 68 | |
3,563 | Harbor International Growth Fund | 68 | |
4,693 | Harbor Large Cap Value Fund | 80 | |
2,773 | Harbor Mid Cap Growth Fund | 36 | |
3,136 | Harbor Mid Cap Value Fund | 53 | |
2,042 | Harbor Small Cap Growth Fund | 32 | |
1,238 | Harbor Small Cap Value Fund | 39 | |
920 | Harbor Strategic Growth Fund | 23 | |
TOTAL EQUITY FUNDS | |||
(Cost $481) | 541 | ||
FIXED INCOME FUNDS—7.0% | |||
| Shares | Value | |
1,839 | Harbor Bond Fund | $ 23 | |
1,937 | Harbor High-Yield Opportunities Fund | 18 | |
TOTAL FIXED INCOME FUNDS | |||
(Cost $41) | 41 | ||
TOTAL INVESTMENTS—100.0% | |||
(Cost $522) | 582 | ||
CASH AND OTHER ASSETS, LESS LIABILITIES—0.0% | — a | ||
TOTAL NET ASSETS—100.0% | $582 |
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 October 31, 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) | |||||||||
Sales of Affiliated Funds (000s) | Distributions Received from Affiliated Funds (000s) | |||||||||||||
Harbor Bond Fund | $— | $ 33 | $ (10) | $— | $ — | $— | $— | |||||||
Harbor Capital Appreciation Fund | — | 55 | (16) | 7 | — | 1 | — | |||||||
Harbor Diversified International All Cap Fund | — | 88 | (22) | 4 | (2) | — | — | |||||||
Harbor Global Leaders Fund | — | 34 | (9) | 3 | — | — | — | |||||||
Harbor High-Yield Bond Fund | — | 20 | (2) | — | — | — | — | |||||||
Harbor High-Yield Opportunities Fund | — | 21 | (22) | — | 1 | — | — | |||||||
Harbor International Fund | — | 88 | (22) | 4 | (2) | — | — | |||||||
Harbor International Growth Fund | — | 83 | (24) | 10 | (1) | — | — | |||||||
Harbor Large Cap Value Fund | — | 99 | (25) | 7 | (1) | — | 1 | |||||||
Harbor Mid Cap Growth Fund | — | 41 | (13) | 8 | — | 1 | 1 | |||||||
Harbor Mid Cap Value Fund | — | 71 | (20) | 6 | (4) | — | — | |||||||
Harbor Small Cap Growth Fund | — | 38 | (11) | 5 | — | — | — | |||||||
Harbor Small Cap Value Fund | — | 50 | (13) | 4 | (2) | — | — | |||||||
Harbor Strategic Growth Fund | — | 28 | (7) | 2 | — | — | — | |||||||
Total | $— | $749 | $(216) | $ 60 | $(11) | $ 2 | $ 2 |
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—October 31, 2020
StatementS of Assets and Liabilities—October 31, 2020
(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 | $19,801 | $22,294 | $20,580 | $28,055 | $18,462 | $28,430 | $16,267 | $25,565 | $7,805 | $ 522 | ||||||||||
Investments in affiliated funds, at value | $20,741 | $23,780 | $22,065 | $30,468 | $20,103 | $31,253 | $17,856 | $28,582 | $8,590 | $ 582 | ||||||||||
Receivables for: | ||||||||||||||||||||
Capital shares sold | 11 | 13 | 57 | 51 | 32 | 32 | 61 | 51 | 36 | 6 | ||||||||||
Total Assets | 20,752 | 23,793 | 22,122 | 30,519 | 20,135 | 31,285 | 17,917 | 28,633 | 8,626 | 588 | ||||||||||
LIABILITIES | ||||||||||||||||||||
Payables for: | ||||||||||||||||||||
Investments in affiliated funds purchased | 11 | 13 | 57 | 51 | 32 | 32 | 61 | 51 | 36 | 6 | ||||||||||
Total Liabilities | 11 | 13 | 57 | 51 | 32 | 32 | 61 | 51 | 36 | 6 | ||||||||||
NET ASSETS | $20,741 | $23,780 | $22,065 | $30,468 | $20,103 | $31,253 | $17,856 | $28,582 | $8,590 | $ 582 | ||||||||||
Net Assets Consist of: | ||||||||||||||||||||
Paid-in capital | $20,153 | $22,258 | $20,742 | $27,854 | $18,201 | $27,909 | $16,282 | $25,228 | $7,906 | $ 530 | ||||||||||
Total distributable earnings/(loss) | 588 | 1,522 | 1,323 | 2,614 | 1,902 | 3,344 | 1,574 | 3,354 | 684 | 52 | ||||||||||
$20,741 | $23,780 | $22,065 | $30,468 | $20,103 | $31,253 | $17,856 | $28,582 | $8,590 | $ 582 | |||||||||||
NET ASSET VALUE PER SHARE BY CLASS | ||||||||||||||||||||
Institutional Class | ||||||||||||||||||||
Net assets | $20,741 | $23,780 | $22,065 | $30,468 | $20,103 | $31,253 | $17,856 | $28,582 | $8,590 | $ 582 | ||||||||||
Shares of beneficial interest1 | 2,168 | 2,336 | 1,738 | 3,302 | 1,371 | 3,475 | 1,175 | 2,892 | 712 | 55 | ||||||||||
Net asset value per share2 | $ 9.57 | $ 10.18 | $ 12.70 | $ 9.23 | $ 14.67 | $ 8.99 | $ 15.20 | $ 9.88 | $12.06 | $10.60 |
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—Year Ended October 31, 2020
StatementS of Operations—Year Ended October 31, 2020
(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 | $ 529 | $ 635 | $ 558 | $ 788 | $ 474 | $ 599 | $ 308 | $ 466 | $ 103 | $ 2 |
Total Investment Income | 529 | 635 | 558 | 788 | 474 | 599 | 308 | 466 | 103 | 2 |
Net Investment Income/(Loss) | 529 | 635 | 558 | 788 | 474 | 599 | 308 | 466 | 103 | 2 |
Realized and Change in Net Unrealized Gain/(Loss) on Investment Transactions | ||||||||||
Net realized gain/(loss) on: | ||||||||||
Sale of affiliated funds | (46) | (37) | (285) | (85) | 54 | 116 | (175) | 65 | (220) | (11) |
Distributions received from affiliated funds | 143 | 246 | 258 | 457 | 352 | 553 | 314 | 600 | 163 | 2 |
Change in net unrealized appreciation/(depreciation) on: | ||||||||||
Affiliated funds | 515 | 688 | 877 | 1,143 | 713 | 1,118 | 987 | 1,103 | 644 | 60 |
Net gain/(loss) on investment transactions | 612 | 897 | 850 | 1,515 | 1,119 | 1,787 | 1,126 | 1,768 | 587 | 51 |
Net Increase/(Decrease) in Net Assets Resulting from Operations | $1,141 | $1,532 | $1,408 | $2,303 | $1,593 | $2,386 | $1,434 | $2,234 | $ 690 | $ 53 |
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 October 31, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | ||||
INCREASE/(DECREASE) IN NET ASSETS | |||||||||||
Operations: | |||||||||||
Net investment income/(loss) | $ 529 | $ 376 | $ 635 | $ 677 | $ 558 | $ 489 | $ 788 | $ 722 | |||
Net realized gain/(loss) on sale of affiliated funds | (46) | (130) | (37) | 55 | (285) | 41 | (85) | 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 | 515 | 801 | 688 | 1,081 | 877 | 933 | 1,143 | 1,206 | |||
Net increase/(decrease) in assets resulting from operations | 1,141 | 1,285 | 1,532 | 2,625 | 1,408 | 2,172 | 2,303 | 3,396 | |||
Distributions to Shareholders | |||||||||||
Institutional Class | (535) | (618) | (1,009) | (1,480) | (1,350) | (1,339) | (2,233) | (1,951) | |||
Total distributions to shareholders | (535) | (618) | (1,009) | (1,480) | (1,350) | (1,339) | (2,233) | (1,951) | |||
Net Increase/(Decrease) Derived from Capital Share Transactions | 2,694 | 4,213 | (1,486) | (1,956) | 1,915 | 1,608 | (480) | 1,460 | |||
Net increase/(decrease) in net assets | 3,300 | 4,880 | (963) | (811) | 1,973 | 2,441 | (410) | 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 | $20,741 | $17,441 | $23,780 | $24,743 | $22,065 | $20,092 | $30,468 | $30,878 |
a | Inception |
The accompanying notes are an integral part of the Financial Statements.
30
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 October 31, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019a through October 31, 2020 | |||||
$ 474 | $ 367 | $ 599 | $ 474 | $ 308 | $ 226 | $ 466 | $ 317 | $ 103 | $ 45 | $ 2 | |||||
54 | 114 | 116 | 396 | (175) | 99 | 65 | 283 | (220) | 2 | (11) | |||||
352 | 900 | 553 | 1,633 | 314 | 934 | 600 | 1,893 | 163 | 355 | 2 | |||||
713 | 773 | 1,118 | 856 | 987 | 506 | 1,103 | 699 | 644 | 251 | 60 | |||||
1,593 | 2,154 | 2,386 | 3,359 | 1,434 | 1,765 | 2,234 | 3,192 | 690 | 653 | 53 | |||||
(1,534) | (955) | (2,674) | (2,079) | (1,462) | (894) | (2,860) | (1,977) | (483) | (311) | (1) | |||||
(1,534) | (955) | (2,674) | (2,079) | (1,462) | (894) | (2,860) | (1,977) | (483) | (311) | (1) | |||||
100 | 3,621 | 3,305 | 2,906 | 2,914 | 1,689 | 3,516 | 1,086 | 2,200 | 2,085 | 530 | |||||
159 | 4,820 | 3,017 | 4,186 | 2,886 | 2,560 | 2,890 | 2,301 | 2,407 | 2,427 | 582 | |||||
19,944 | 15,124 | 28,236 | 24,050 | 14,970 | 12,410 | 25,692 | 23,391 | 6,183 | 3,756 | — | |||||
$20,103 | $19,944 | $31,253 | $28,236 | $17,856 | $14,970 | $28,582 | $25,692 | $8,590 | $6,183 | $582 |
31
Harbor Target Retirement Funds
Statements of Changes in Net Assets—Capital Stock Activity
Statements of Changes in Net Assets—Capital Stock Activity
(All amounts in thousands)
Harbor Target Retirement Income Fund | Harbor Target Retirement 2020 Fund | Harbor Target Retirement 2025 Fund | Harbor Target Retirement 2030 Fund | ||||||||
November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | ||||
AMOUNT ($) | |||||||||||
Institutional Class | |||||||||||
Net proceeds from sale of shares | $ 6,474 | $ 6,194 | $ 3,363 | $ 3,456 | $ 5,108 | $ 4,684 | $ 4,092 | $ 6,413 | |||
Reinvested distributions | 535 | 618 | 1,009 | 1,480 | 1,350 | 1,339 | 2,233 | 1,951 | |||
Cost of shares reacquired | (4,315) | (2,599) | (5,858) | (6,892) | (4,543) | (4,415) | (6,805) | (6,904) | |||
Net increase/(decrease) in net assets | $ 2,694 | $ 4,213 | $(1,486) | $(1,956) | $ 1,915 | $ 1,608 | $ (480) | $ 1,460 | |||
SHARES | |||||||||||
Institutional Class | |||||||||||
Shares sold | 691 | 683 | 344 | 365 | 415 | 389 | 461 | 739 | |||
Shares issued due to reinvestment of distributions | 58 | 72 | 104 | 169 | 111 | 122 | 252 | 244 | |||
Shares reacquired | (469) | (294) | (606) | (729) | (380) | (365) | (763) | (797) | |||
Net increase/(decrease) in shares outstanding | 280 | 461 | (158) | (195) | 146 | 146 | (50) | 186 |
a | Inception |
The accompanying notes are an integral part of the Financial Statements.
32
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 October 31, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019 through October 31, 2020 | November 1, 2018 through October 31, 2019 | November 1, 2019a through October 31, 2020 | |||||
$ 3,724 | $ 5,670 | $ 4,956 | $ 5,000 | $ 3,759 | $ 3,935 | $ 4,044 | $ 3,823 | $ 2,753 | $2,489 | $ 721 | |||||
1,534 | 955 | 2,674 | 2,079 | 1,462 | 894 | 2,860 | 1,977 | 483 | 311 | 1 | |||||
(5,158) | (3,004) | (4,325) | (4,173) | (2,307) | (3,140) | (3,388) | (4,714) | (1,036) | (715) | (192) | |||||
$ 100 | $ 3,621 | $ 3,305 | $ 2,906 | $ 2,914 | $ 1,689 | $ 3,516 | $ 1,086 | $ 2,200 | $2,085 | $ 530 | |||||
264 | 411 | 577 | 580 | 265 | 270 | 434 | 396 | 245 | 221 | 74 | |||||
109 | 76 | 309 | 268 | 100 | 68 | 299 | 233 | 41 | 32 | — | |||||
(364) | (216) | (498) | (478) | (158) | (215) | (368) | (487) | (92) | (65) | (19) | |||||
9 | 271 | 388 | 370 | 207 | 123 | 365 | 142 | 194 | 188 | 55 |
33
Harbor Target Retirement Funds Financial Highlights
Selected Data for a Share Outstanding for the Periods Presented
Selected Data for a Share Outstanding for the Periods Presented
HARBOR TARGET RETIREMENT INCOME FUND
Institutional Class | |||||
Year Ended October 31, | 2020 | 2019 | 2018 | 2017 | 2016 |
Net asset value beginning of period | $ 9.24 | $ 8.80 | $ 9.25 | $ 8.93 | $ 9.19 |
Income from Investment Operations | |||||
Net investment income/(loss)a | 0.25 | 0.25 | 0.28 | 0.22 | 0.25 |
Net realized and unrealized gain/(loss) on investments | 0.33 | 0.62 | (0.38) | 0.40 | 0.08 |
Total from investment operations | 0.58 | 0.87 | (0.10) | 0.62 | 0.33 |
Less Distributions | |||||
Dividends from net investment income | (0.25) | (0.27) | (0.29) | (0.27) | (0.29) |
Distributions from net realized capital gains | — | (0.16) | (0.06) | (0.03) | (0.30) |
Total distributions | (0.25) | (0.43) | (0.35) | (0.30) | (0.59) |
Net asset value end of period | 9.57 | 9.24 | 8.80 | 9.25 | 8.93 |
Net assets end of period (000s) | $20,741 | $17,441 | $12,561 | $13,746 | $13,805 |
Ratios and Supplemental Data (%) | |||||
Total return | 6.37% | 10.31% | (1.14)% | 7.17% | 3.91% |
Ratio of total expenses to average net assetsb | — | — | — | — | — |
Ratio of net investment income to average net assetsb | 2.63 | 2.85 | 3.13 | 2.46 | 2.87 |
Portfolio turnoverc | 53 | 67 | 28 | 16 | 26 |
HARBOR TARGET RETIREMENT 2020 FUND
Institutional Class | |||||
Year Ended October 31, | 2020 | 2019 | 2018 | 2017 | 2016 |
Net asset value beginning of period | $ 9.92 | $ 9.50 | $ 9.90 | $ 9.29 | $ 9.94 |
Income from Investment Operations | |||||
Net investment income/(loss)a | 0.26 | 0.25 | 0.28 | 0.23 | 0.26 |
Net realized and unrealized gain/(loss) on investments | 0.39 | 0.73 | (0.40) | 0.73 | 0.04 |
Total from investment operations | 0.65 | 0.98 | (0.12) | 0.96 | 0.30 |
Less Distributions | |||||
Dividends from net investment income | (0.27) | (0.28) | (0.28) | (0.24) | (0.32) |
Distributions from net realized capital gains | (0.12) | (0.28) | — | (0.11) | (0.63) |
Total distributions | (0.39) | (0.56) | (0.28) | (0.35) | (0.95) |
Net asset value end of period | 10.18 | 9.92 | 9.50 | 9.90 | 9.29 |
Net assets end of period (000s) | $23,780 | $24,743 | $25,554 | $27,742 | $25,419 |
Ratios and Supplemental Data (%) | |||||
Total return | 6.74% | 11.04% | (1.29)% | 10.77% | 3.56% |
Ratio of total expenses to average net assetsb | — | — | — | — | — |
Ratio of net investment income to average net assetsb | 2.61 | 2.69 | 2.89 | 2.44 | 2.83 |
Portfolio turnoverc | 56 | 64 | 31 | 29 | 33 |
See page 38 for notes to the Financial Highlights.
The accompanying notes are an integral part of the Financial Statements.
34
HARBOR TARGET RETIREMENT 2025 FUND
Institutional Class | |||||
Year Ended October 31, | 2020 | 2019 | 2018 | 2017 | 2016 |
Net asset value beginning of period | $ 12.62 | $ 12.21 | $ 12.76 | $ 11.78 | $ 12.32 |
Income from Investment Operations | |||||
Net investment income/(loss)a | 0.32 | 0.31 | 0.37 | 0.29 | 0.31 |
Net realized and unrealized gain/(loss) on investments | 0.56 | 1.03 | (0.57) | 1.12 | 0.05 |
Total from investment operations | 0.88 | 1.34 | (0.20) | 1.41 | 0.36 |
Less Distributions | |||||
Dividends from net investment income | (0.33) | (0.38) | (0.35) | (0.28) | (0.37) |
Distributions from net realized capital gains | (0.47) | (0.55) | — | (0.15) | (0.53) |
Total distributions | (0.80) | (0.93) | (0.35) | (0.43) | (0.90) |
Net asset value end of period | 12.70 | 12.62 | 12.21 | 12.76 | 11.78 |
Net assets end of period (000s) | $22,065 | $20,092 | $17,651 | $21,218 | $14,293 |
Ratios and Supplemental Data (%) | |||||
Total return | 7.26% | 12.09% | (1.63)% | 12.38% | 3.39% |
Ratio of total expenses to average net assetsb | — | — | — | — | — |
Ratio of net investment income to average net assetsb | 2.65 | 2.57 | 2.92 | 2.42 | 2.69 |
Portfolio turnoverc | 63 | 61 | 36 | 24 | 25 |
HARBOR TARGET RETIREMENT 2030 FUND
Institutional Class | |||||
Year Ended October 31, | 2020 | 2019 | 2018 | 2017 | 2016 |
Net asset value beginning of period | $ 9.21 | $ 8.84 | $ 9.25 | $ 8.60 | $ 9.19 |
Income from Investment Operations | |||||
Net investment income/(loss)a | 0.22 | 0.21 | 0.24 | 0.20 | 0.21 |
Net realized and unrealized gain/(loss) on investments | 0.45 | 0.77 | (0.38) | 0.96 | 0.01 |
Total from investment operations | 0.67 | 0.98 | (0.14) | 1.16 | 0.22 |
Less Distributions | |||||
Dividends from net investment income | (0.24) | (0.25) | (0.25) | (0.21) | (0.26) |
Distributions from net realized capital gains | (0.41) | (0.36) | (0.02) | (0.30) | (0.55) |
Total distributions | (0.65) | (0.61) | (0.27) | (0.51) | (0.81) |
Net asset value end of period | 9.23 | 9.21 | 8.84 | 9.25 | 8.60 |
Net assets end of period (000s) | $30,468 | $30,878 | $27,973 | $28,618 | $24,634 |
Ratios and Supplemental Data (%) | |||||
Total return | 7.62% | 12.21% | (1.57)% | 14.18% | 2.96% |
Ratio of total expenses to average net assetsb | — | — | — | — | — |
Ratio of net investment income to average net assetsb | 2.54 | 2.41 | 2.62 | 2.30 | 2.54 |
Portfolio turnoverc | 57 | 46 | 31 | 29 | 31 |
The accompanying notes are an integral part of the Financial Statements.
35
Harbor Target Retirement Funds Financial Highlights—Continued
Selected Data for a Share Outstanding for the Periods Presented
Selected Data for a Share Outstanding for the Periods Presented
HARBOR TARGET RETIREMENT 2035 FUND
Institutional Class | |||||
Year Ended October 31, | 2020 | 2019 | 2018 | 2017 | 2016 |
Net asset value beginning of period | $ 14.64 | $ 13.86 | $ 14.44 | $ 12.93 | $ 13.56 |
Income from Investment Operations | |||||
Net investment income/(loss)a | 0.33 | 0.28 | 0.33 | 0.28 | 0.27 |
Net realized and unrealized gain/(loss) on investments | 0.79 | 1.36 | (0.58) | 1.75 | 0.04 |
Total from investment operations | 1.12 | 1.64 | (0.25) | 2.03 | 0.31 |
Less Distributions | |||||
Dividends from net investment income | (0.34) | (0.35) | (0.33) | (0.28) | (0.35) |
Distributions from net realized capital gains | (0.75) | (0.51) | — | (0.24) | (0.59) |
Total distributions | (1.09) | (0.86) | (0.33) | (0.52) | (0.94) |
Net asset value end of period | 14.67 | 14.64 | 13.86 | 14.44 | 12.93 |
Net assets end of period (000s) | $20,103 | $19,944 | $15,124 | $15,005 | $11,496 |
Ratios and Supplemental Data (%) | |||||
Total return | 7.98% | 12.83% | (1.79)% | 16.31% | 2.70% |
Ratio of total expenses to average net assetsb | — | — | — | — | — |
Ratio of net investment income to average net assetsb | 2.34 | 2.05 | 2.26 | 2.06 | 2.17 |
Portfolio turnoverc | 62 | 35 | 29 | 26 | 26 |
HARBOR TARGET RETIREMENT 2040 FUND
Institutional Class | |||||
Year Ended October 31, | 2020 | 2019 | 2018 | 2017 | 2016 |
Net asset value beginning of period | $ 9.15 | $ 8.85 | $ 9.30 | $ 8.42 | $ 9.05 |
Income from Investment Operations | |||||
Net investment income/(loss)a | 0.17 | 0.15 | 0.18 | 0.15 | 0.17 |
Net realized and unrealized gain/(loss) on investments | 0.55 | 0.90 | (0.34) | 1.30 | (0.01) |
Total from investment operations | 0.72 | 1.05 | (0.16) | 1.45 | 0.16 |
Less Distributions | |||||
Dividends from net investment income | (0.20) | (0.20) | (0.19) | (0.17) | (0.20) |
Distributions from net realized capital gains | (0.68) | (0.55) | (0.10) | (0.40) | (0.59) |
Total distributions | (0.88) | (0.75) | (0.29) | (0.57) | (0.79) |
Net asset value end of period | 8.99 | 9.15 | 8.85 | 9.30 | 8.42 |
Net assets end of period (000s) | $31,253 | $28,236 | $24,050 | $24,940 | $19,448 |
Ratios and Supplemental Data (%) | |||||
Total return | 8.15% | 13.43% | (1.84)% | 18.26% | 2.36% |
Ratio of total expenses to average net assetsb | — | — | — | — | — |
Ratio of net investment income to average net assetsb | 2.04 | 1.77 | 1.90 | 1.78 | 2.03 |
Portfolio turnoverc | 53 | 28 | 30 | 21 | 30 |
See page 38 for notes to the Financial Highlights.
The accompanying notes are an integral part of the Financial Statements.
36
HARBOR TARGET RETIREMENT 2045 FUND
Institutional Class | |||||
Year Ended October 31, | 2020 | 2019 | 2018 | 2017 | 2016 |
Net asset value beginning of period | $ 15.46 | $ 14.69 | $ 15.43 | $13.51 | $14.25 |
Income from Investment Operations | |||||
Net investment income/(loss)a | 0.28 | 0.24 | 0.23 | 0.21 | 0.21 |
Net realized and unrealized gain/(loss) on investments | 0.94 | 1.56 | (0.49) | 2.42 | 0.01 |
Total from investment operations | 1.22 | 1.80 | (0.26) | 2.63 | 0.22 |
Less Distributions | |||||
Dividends from net investment income | (0.31) | (0.29) | (0.28) | (0.22) | (0.27) |
Distributions from net realized capital gains | (1.17) | (0.74) | (0.20) | (0.49) | (0.69) |
Total distributions | (1.48) | (1.03) | (0.48) | (0.71) | (0.96) |
Net asset value end of period | 15.20 | 15.46 | 14.69 | 15.43 | 13.51 |
Net assets end of period (000s) | $17,856 | $14,970 | $12,410 | $9,863 | $7,211 |
Ratios and Supplemental Data (%) | |||||
Total return | 8.21% | 13.48% | (1.83)% | 20.37% | 1.91% |
Ratio of total expenses to average net assetsb | — | — | — | — | — |
Ratio of net investment income to average net assetsb | 1.93 | 1.62 | 1.49 | 1.50 | 1.58 |
Portfolio turnoverc | 46 | 29 | 22 | 32 | 24 |
HARBOR TARGET RETIREMENT 2050 FUND
Institutional Class | |||||
Year Ended October 31, | 2020 | 2019 | 2018 | 2017 | 2016 |
Net asset value beginning of period | $ 10.17 | $ 9.81 | $ 10.42 | $ 9.23 | $ 10.39 |
Income from Investment Operations | |||||
Net investment income/(loss)a | 0.17 | 0.12 | 0.13 | 0.12 | 0.12 |
Net realized and unrealized gain/(loss) on investments | 0.66 | 1.08 | (0.33) | 1.81 | (0.03) |
Total from investment operations | 0.83 | 1.20 | (0.20) | 1.93 | 0.09 |
Less Distributions | |||||
Dividends from net investment income | (0.18) | (0.17) | (0.16) | (0.13) | (0.17) |
Distributions from net realized capital gains | (0.94) | (0.67) | (0.25) | (0.61) | (1.08) |
Total distributions | (1.12) | (0.84) | (0.41) | (0.74) | (1.25) |
Net asset value end of period | 9.88 | 10.17 | 9.81 | 10.42 | 9.23 |
Net assets end of period (000s) | $28,582 | $25,692 | $23,391 | $22,821 | $18,728 |
Ratios and Supplemental Data (%) | |||||
Total returnb | 8.55% | 13.92% | (2.06)% | 22.40% | 1.51% |
Ratio of total expenses to average net assetsb | — | — | — | — | — |
Ratio of net investment income to average net assetsb | 1.76 | 1.28 | 1.20 | 1.27 | 1.34 |
Portfolio turnoverc | 47 | 25 | 22 | 33 | 24 |
The accompanying notes are an integral part of the Financial Statements.
37
Harbor Target Retirement Funds Financial Highlights—Continued
Selected Data for a Share Outstanding for the Periods Presented
Selected Data for a Share Outstanding for the Periods Presented
HARBOR TARGET RETIREMENT 2055 FUND
Institutional Class | |||||
Year Ended October 31, | 2020 | 2019 | 2018 | 2017 | 2016 |
Net asset value beginning of period | $11.94 | $11.39 | $11.97 | $10.02 | $10.08 |
Income from Investment Operations | |||||
Net investment income/(loss)a | 0.16 | 0.10 | 0.11 | 0.10 | 0.11 |
Net realized and unrealized gain/(loss) on investments | 0.87 | 1.34 | (0.37) | 2.17 | 0.01 |
Total from investment operations | 1.03 | 1.44 | (0.26) | 2.27 | 0.12 |
Less Distributions | |||||
Dividends from net investment income | (0.18) | (0.16) | (0.16) | (0.12) | (0.14) |
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) |
Net asset value end of period | 12.06 | 11.94 | 11.39 | 11.97 | 10.02 |
Net assets end of period (000s) | $8,590 | $6,183 | $3,756 | $2,728 | $1,240 |
Ratios and Supplemental Data (%) | |||||
Total return | 8.83% | 14.24% | (2.31)% | 23.34% | 1.38% |
Ratio of total expenses to average net assetsb | — | — | — | — | — |
Ratio of net investment income to average net assetsb | 1.44 | 0.90 | 0.91 | 0.95 | 1.13 |
Portfolio turnoverc | 36 | 14 | 29 | 32 | 33 |
HARBOR TARGET RETIREMENT 2060 FUND
Institutional Class | |
Year Ended October 31, | 2020 d |
Net asset value beginning of period | $10.00 |
Income from Investment Operations | |
Net investment income/(loss)a | 0.06 |
Net realized and unrealized gain/(loss) on investments | 0.67 |
Total from investment operations | 0.73 |
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 | 10.60 |
Net assets end of period (000s) | $ 582 |
Ratios and Supplemental Data (%) | |
Total return | 7.32% |
Ratio of total expenses to average net assetsb | — |
Ratio of net investment income to average net assetsb | 0.60 |
Portfolio turnoverc | 71 |
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 | For the period November 1, 2019 (inception) through October 31, 2020 |
The accompanying notes are an integral part of the Financial Statements.
38
Harbor Target Retirement Funds
Notes to Financial Statements—October 31, 2020
Notes to Financial Statements—October 31, 2020
Note 1—Organizational Matters
Harbor Funds (the “Trust”) is registered under the Investment Company Act of 1940, as amended (the “Investment Company Act”), as an open-end management investment company. As of October 31, 2020, the Trust consists of 36 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 (individually referred to as a “Fund” and collectively referred to as the “Funds” or “Target Retirement Funds”). The Funds invest in a combination of other funds of the Trust (the “Underlying Funds”). Harbor Capital Advisors, Inc. (the “Adviser” or “Harbor Capital”) is the investment adviser for the Funds and the Underlying Funds. The Underlying Funds are managed by subadvisers, none of which is affiliated with the Adviser.
The Funds currently offer one class of shares, designated as Institutional Class.
Note 2—Significant Accounting Policies
The following is a summary of significant accounting policies followed by the Trust in the preparation of its financial statements. Each Fund follows the investment company reporting requirements under U.S. Generally Accepted Accounting Principles (“U.S. GAAP”), which includes the accounting and reporting guidelines under Accounting Standards Codification (“ASC”) Topic 946, Financial Services-Investment Companies. The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results may differ from those estimates.
Security Valuation
The holdings of each Target Retirement Fund consist entirely of Institutional Class shares of the Underlying Funds, which are valued at their respective net asset values.
Fair Value Measurements and Disclosures
Various inputs may be used to determine the value of each Fund’s investments, which are summarized in three broad categories defined as Level 1, Level 2, and Level 3. The inputs or methodologies used for valuing securities are not necessarily indicative of the risk associated with investing in those securities. The assignment of an investment to Levels 1, 2, or 3 is based on the lowest level of significant inputs used to determine its fair value.
Level 1– | Quoted prices in active markets for identical securities. |
Level 2– | Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). |
Level 3– | Significant unobservable inputs are used in situations where quoted prices or other observable inputs are not available or are deemed unreliable. Significant unobservable inputs may include each Fund’s own assumptions. |
Each Fund used observable inputs in its valuation methodologies whenever they were available and deemed reliable. At October 31, 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 October 31, 2020 or 2019. For Harbor Target Retirement 2060 Fund, there were no Level 3 investments at October 31, 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.
39
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 of control; however, investments by the Funds may represent a significant portion of an Underlying Fund’s net assets. At October 31, 2020, each Fund held less than 25% of the outstanding shares of any Underlying 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 U.S. 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 U.S. 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, 2017–2019), including all positions expected to be taken upon filing the 2020 tax return, in all material jurisdictions where the Funds operate, and has concluded that no provision for income tax is required in any Fund’s financial statements. The Funds will recognize interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statements of Operations.
Related Parties
The Funds do not invest in the Underlying Funds for the purpose of exercising management or control; however, investments by the Funds may represent a significant portion of an Underlying Fund’s net assets. At October 31, 2020, each Fund held less than 25% of the outstanding shares of any Underlying Fund.
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.
40
Harbor Target Retirement Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
Note 3—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. 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.
Shareholders
As of October 31, 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 | 39,539 | 1.2% | |
Harbor Target Retirement 2035 Fund | 28,699 | 2.1 | |
Harbor Target Retirement 2040 Fund | 4,711 | 0.1 | |
Harbor Target Retirement 2045 Fund | 5,800 | 0.5 | |
Harbor Target Retirement 2050 Fund | 16,762 | 0.6 | |
Harbor Target Retirement 2055 Fund | 7,849 | 1.1 |
Independent Trustees
The Independent Trustees received no remuneration from the Target Retirement Funds for the year ended October 31, 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 amount and character of income and net realized gains to be distributed are determined in accordance with income tax rules and regulations, which may differ from U.S. GAAP. Reclassifications, if any, are made to each Fund’s capital account to reflect income and net realized gains available for distribution (or available capital loss carryovers) under income tax rules and regulations. There were no reclassification amounts on the Statements of Assets and Liabilities between total distributable earnings/(loss) and paid-in capital for the year ended October 31, 2020.
The tax composition of each Fund’s distributions is as follows:
41
Harbor Target Retirement Funds
Notes to Financial Statements—Continued
Notes to Financial Statements—Continued
NOTE 4—TAX INFORMATION—Continued
As of October 31, 2020 | As of October 31, 2019 | ||||||||||
Ordinary Income (000s) | Long-Term Capital Gains (000s) | Total (000s) | Ordinary Income (000s) | Long-Term Capital Gains (000s) | Total (000s) | ||||||
Harbor Target Retirement Income Fund | $535 | $ — | $ 535 | $ 394 | $ 224 | $ 618 | |||||
Harbor Target Retirement 2020 Fund | 761 | 248 | 1,009 | 762 | 718 | 1,480 | |||||
Harbor Target Retirement 2025 Fund | 622 | 728 | 1,350 | 572 | 767 | 1,339 | |||||
Harbor Target Retirement 2030 Fund | 863 | 1,370 | 2,233 | 812 | 1,139 | 1,951 | |||||
Harbor Target Retirement 2035 Fund | 499 | 1,035 | 1,534 | 398 | 557 | 955 | |||||
Harbor Target Retirement 2040 Fund | 628 | 2,046 | 2,674 | 556 | 1,523 | 2,079 | |||||
Harbor Target Retirement 2045 Fund | 316 | 1,146 | 1,462 | 250 | 644 | 894 | |||||
Harbor Target Retirement 2050 Fund | 468 | 2,392 | 2,860 | 391 | 1,586 | 1,977 | |||||
Harbor Target Retirement 2055 Fund | 97 | 386 | 483 | 59 | 252 | 311 | |||||
Harbor Target Retirement 2060 Fund | 1 | — | 1 | N/A | N/A | N/A |
As of October 31, 2020, the components of each Fund’s distributable earnings on a tax basis are as follows:
Undistributed Ordinary Income (000s) | Undistributed Long-Term Capital Gains (000s) | Unrealized Appreciation/ (Depreciation) (000s) | |||
Harbor Target Retirement Income Fund | $105 | $ 179 | $ 305 | ||
Harbor Target Retirement 2020 Fund | 358 | 793 | 370 | ||
Harbor Target Retirement 2025 Fund | 297 | 819 | 208 | ||
Harbor Target Retirement 2030 Fund | 390 | 1,590 | 634 | ||
Harbor Target Retirement 2035 Fund | 212 | 1,260 | 430 | ||
Harbor Target Retirement 2040 Fund | 247 | 1,792 | 1,305 | ||
Harbor Target Retirement 2045 Fund | 114 | 807 | 654 | ||
Harbor Target Retirement 2050 Fund | 131 | 1,534 | 1,690 | ||
Harbor Target Retirement 2055 Fund | 23 | 308 | 353 | ||
Harbor Target Retirement 2060 Fund | 4 | 2 | 47 |
The identified cost for federal income tax purposes of investments owned by each Fund and its respective gross unrealized appreciation and depreciation at October 31, 2020 are as follows:
Identified Cost (000s) | Gross Unrealized | Net Unrealized Appreciation/ (Depreciation) (000s) | |||||
Appreciation (000s) | (Depreciation) (000s) | ||||||
Harbor Target Retirement Income Fund | $20,436 | $ 358 | $ (53) | $ 305 | |||
Harbor Target Retirement 2020 Fund | 23,410 | 451 | (81) | 370 | |||
Harbor Target Retirement 2025 Fund | 21,857 | 259 | (51) | 208 | |||
Harbor Target Retirement 2030 Fund | 29,834 | 699 | (65) | 634 | |||
Harbor Target Retirement 2035 Fund | 19,673 | 467 | (37) | 430 | |||
Harbor Target Retirement 2040 Fund | 29,948 | 1,697 | (392) | 1,305 | |||
Harbor Target Retirement 2045 Fund | 17,202 | 886 | (232) | 654 | |||
Harbor Target Retirement 2050 Fund | 26,892 | 2,225 | (535) | 1,690 | |||
Harbor Target Retirement 2055 Fund | 8,237 | 432 | (79) | 353 | |||
Harbor Target Retirement 2060 Fund | 535 | 47 | — | 47 |
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.
42
Harbor Target Retirement Funds
Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
The Board of Trustees and Shareholders of
Harbor Funds
Harbor Funds
Opinion on the Financial Statements
We have audited the accompanying statements of assets and liabilities of Harbor 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 (collectively referred to as the “Funds”), (ten of the funds constituting Harbor Funds (the “Trust”)), including the portfolios of investments, as of October 31, 2020, and the related statements of operations and changes in net assets, and the financial highlights for each of the periods indicated in the table below and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Funds (ten of the funds constituting Harbor Funds), at October 31, 2020, the results of their operations, changes in net assets and financial highlights for each of the periods indicated in the table below, in conformity with U.S. generally accepted accounting principles.
Individual fund constituting the Harbor Funds | Statement of operations | Statement of changes in net assets | Financial highlights |
Harbor Target Retirement Income Fund Harbor Target Retirement 2020 Fund Harbor Target Retirement 2025 Fund Harbor Target Retirement 2030 Fund Harbor Target Retirement 2035 Fund Harbor Target Retirement 2040 Fund Harbor Target Retirement 2045 Fund Harbor Target Retirement 2050 FundHarbor Target Retirement 2055 Fund | For the year ended October 31, 2020 | For each of the two years in the period ended October 31, 2020 | For each of the five years in the period ended October 31, 2020 |
Harbor Target Retirement 2060 Fund | For the period from November 1, 2019 (inception) through October 31, 2020 |
Basis for Opinion
These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on each of the Funds’ financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust’s internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2020, by correspondence with the custodian and the shareholder servicing agent. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Harbor Funds investment companies since 2000.
Chicago, Illinois
December 21, 2020
December 21, 2020
43
Harbor Target Retirement Funds
Fees and Expenses Example (Unaudited)
Fees and Expenses Example (Unaudited)
Example
As a shareholder of a Fund, you incur two types of costs: (1) transaction costs, including redemption fees (if any) and (2) ongoing costs, including management fees, distribution and service (12b-1) fees (if any), and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in a Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The expense ratios reflected below do not include the acquired fund fees and expenses from Underlying Funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period May 1, 2020 through October 31, 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 May 1, 2020 | Ending Account Value October 31, 2020 | |||||
Harbor Target Retirement Income Fund | ||||||||
Institutional Class | 0.00% | |||||||
Actual | $0.00 | $1,000 | $1,073.13 | |||||
Hypothetical (5% return) | 0.00 | 1,000 | 1,025.14 | |||||
Harbor Target Retirement 2020 Fund | ||||||||
Institutional Class | 0.00% | |||||||
Actual | $0.00 | $1,000 | $1,091.10 | |||||
Hypothetical (5% return) | 0.00 | 1,000 | 1,025.14 | |||||
Harbor Target Retirement 2025 Fund | ||||||||
Institutional Class | 0.00% | |||||||
Actual | $0.00 | $1,000 | $1,114.04 | |||||
Hypothetical (5% return) | 0.00 | 1,000 | 1,025.14 | |||||
Harbor Target Retirement 2030 Fund | ||||||||
Institutional Class | 0.00% | |||||||
Actual | $0.00 | $1,000 | $1,128.36 | |||||
Hypothetical (5% return) | 0.00 | 1,000 | 1,025.14 | |||||
Harbor Target Retirement 2035 Fund | ||||||||
Institutional Class | 0.00% | |||||||
Actual | $0.00 | $1,000 | $1,143.41 | |||||
Hypothetical (5% return) | 0.00 | 1,000 | 1,025.14 |
44
Harbor Target Retirement Funds
Fees and Expenses Example—Continued
Fees and Expenses Example—Continued
Annualized Expense Ratios | Expenses Paid During Period* | Beginning Account Value May 1, 2020 | Ending Account Value October 31, 2020 | |||||
Harbor Target Retirement 2040 Fund | ||||||||
Institutional Class | 0.00% | |||||||
Actual | $0.00 | $1,000 | $1,157.01 | |||||
Hypothetical (5% return) | 0.00 | 1,000 | 1,025.14 | |||||
Harbor Target Retirement 2045 Fund | ||||||||
Institutional Class | 0.00% | |||||||
Actual | $0.00 | $1,000 | $1,164.75 | |||||
Hypothetical (5% return) | 0.00 | 1,000 | 1,025.14 | |||||
Harbor Target Retirement 2050 Fund | ||||||||
Institutional Class | 0.00% | |||||||
Actual | $0.00 | $1,000 | $1,179.00 | |||||
Hypothetical (5% return) | 0.00 | 1,000 | 1,025.14 | |||||
Harbor Target Retirement 2055 Fund | ||||||||
Institutional Class | 0.00% | |||||||
Actual | $0.00 | $1,000 | $1,192.88 | |||||
Hypothetical (5% return) | 0.00 | 1,000 | 1,025.14 | |||||
Harbor Target Retirement 2060 Fund | ||||||||
Institutional Class | 0.00% | |||||||
Actual | $0.00 | $1,000 | $1,193.69 | |||||
Hypothetical (5% return) | 0.00 | 1,000 | 1,025.14 |
* | Expenses are equal to the Fund’s annualized expense ratio, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). |
45
Harbor Target Retirement Funds
Additional Information (Unaudited)
Additional Information (Unaudited)
Additional Tax Information
Pursuant to Section 852 of the Internal Revenue Code, the Funds designate the following capital gain dividends for the year ended October 31, 2020:
Amount (000s) | |
Harbor Target Retirement 2020 Fund | $ 248 |
Harbor Target Retirement 2025 Fund | 728 |
Harbor Target Retirement 2030 Fund | 1,369 |
Harbor Target Retirement 2035 Fund | 1,035 |
Harbor Target Retirement 2040 Fund | 2,046 |
Harbor Target Retirement 2045 Fund | 1,146 |
Harbor Target Retirement 2050 Fund | 2,392 |
Harbor Target Retirement 2055 Fund | 386 |
For the fiscal year ended October 31, 2020, each Fund designates up to the maximum amount of such dividends allowable pursuant to the Internal Revenue Code as qualified dividend income eligible for reduced tax rates. These lower rates range from 0% to 20% depending on an individual’s tax bracket. If a Fund pays a distribution during calendar year 2020, complete information will be reported in conjunction with Form 1099-DIV.
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 at harborfunds.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 for their first and third fiscal quarters with the SEC as an exhibit to Form N-PORT. The Funds’ Form N-PORT exhibit is available (i) without charge, upon request, by calling Harbor Funds toll-free at 800-422-1050, (ii) on Harbor Funds’ website at harborfunds.com, and (iii) on the SEC’s website at sec.gov.
46
Harbor Target Retirement Funds
Additional Information—Continued
Additional Information—Continued
Trustees and Officers
As of December 2020
The business and affairs of the Trust shall be managed by or under the direction of the Trustees, and they shall have all powers necessary or desirable to carry out that responsibility. The Trustees shall have full power and authority to take or refrain from taking any action and to execute any contracts and instruments that they may consider necessary or desirable in the management of the Trust. Any determination made by the Trustees in good faith as to what is in the interests of the Trust shall be conclusive. Information pertaining to the Trustees and Officers of Harbor Funds is set forth below. The address of each Trustee and Officer is: [Name of Trustee or Officer] c/o Harbor Funds, 111 South Wacker Drive, 34th Floor, Chicago, IL 60606-4302.
Harbor Funds' Statement of Additional Information includes additional information about the Trust’s Trustees and is available without charge by calling 800-422-1050 or at the Trust’s website at harborfunds.com.
Name (Age) Position(s) with Fund | Term of Office and Length of Time Served1 | Principal Occupation(s) During Past Five Years | Number of Portfolios In Fund Complex Overseen By Trustee | Other Directorships Of Public Companies and Other Registered Investment Companies Held by Trustee During Past Five Years |
INDEPENDENT TRUSTEES | ||||
Scott M. Amero (57) Trustee | Since 2014 | Chairman (2015-Present) and Trustee (2011-2015), Rare (conservation nonprofit); Trustee, Berkshire School (2014-Present); Trustee, The Nature Conservancy, Massachusetts Chapter (2018-Present); Vice Chairman and Global Chief Investment Officer, Fixed Income (2010), Vice Chairman and Global Chief Investment Officer, Fixed Income, and Co-Head, Fixed Income Portfolio Management (2007-2010), BlackRock, Inc., (publicly traded investment management firm). | 36 | None |
Donna J. Dean (69) Trustee | Since 2010 | Chief Investment Officer of the Rockefeller Foundation (a private foundation) (2001-2019). | 36 | None |
Joseph L. Dowling III (56) Trustee | Since 2017 | Chair & Special Advisor to the University’s President (2020-Present), Chief Executive Officer (2018-2020), Interim Chief Financial Officer (2019-2020), and Chief Investment Officer (2013-2018), Brown University Investment Office; Chief Executive Officer, Jaws Acquisition Corp. (blank check company, 2020-Present); Advisory Board Member, Harbor Funds (2016-2017); and Founder and Managing Member, Narragansett Asset Management (private investment management firm) (1998-2013). | 36 | Director of Integrated Electrical Services (2012-Present);Director of Third Point RE (2019- Present). |
Randall A. Hack (73) Trustee | Since 2010 | Founder and Senior Managing Director of Capstone Capital LLC (private investment firm) (2003-Present); Director of Tower Development Corporation (cell tower developer) (2009-2016); Advisory Director of Berkshire Partners (private equity firm) (2002-2013); Founder and Senior Managing Director of Nassau Capital, LLC (private investment firm, investing solely on behalf of the Princeton Endowment) (1995-2001); and President of The Princeton University Investment Company (1990-1994). | 36 | None |
Robert Kasdin (62) Trustee | Since 2014 | Senior Vice President and Chief Operating Officer (2015-Present) and Chief Financial Officer (2018-Present), Johns Hopkins Medicine; Senior Executive Vice President, Columbia University (2002-2015); Trustee and Member of the Finance Committee, National September 11 Memorial & Museum at the World Trade Center (2005-2019); Director, Apollo Commercial Real Estate Finance, Inc. (2014-Present); Director and Executive Committee Member, The Y in Central Maryland (2018-Present); and Director, Noranda Aluminum Holdings Corp. (2007-2014). | 36 | Director of Apollo Commercial Real Estate Finance, Inc. (2014-Present). |
47
Harbor Target Retirement Funds
Additional Information—Continued
Additional Information—Continued
Trustees and Officers—Continued
Name (Age) Position(s) with Fund | Term of Office and Length of Time Served1 | Principal Occupation(s) During Past Five Years | Number of Portfolios In Fund Complex Overseen By Trustee | Other Directorships Of Public Companies and Other Registered Investment Companies Held by Trustee During Past Five Years |
INDEPENDENT TRUSTEES—Continued | ||||
Kathryn L. Quirk (68) Trustee | Since 2017 | Retired; Vice President, Senior Compliance Officer and Head, U.S. Regulatory Compliance, Goldman Sachs Asset Management (2013-2017); Deputy Chief Legal Officer, Asset Management, and Vice President and Corporate Counsel, Prudential Insurance Company of America (2010-2012); Co-Chief Legal Officer, Prudential Investment Management, Inc., and Chief Legal Officer, Prudential Investments and Prudential Mutual Funds (2008-2012); Vice President and Corporate Counsel and Chief Legal Officer, Mutual Funds, Prudential Insurance Company of America, and Chief Legal Officer, Prudential Investments (2005-2008); Vice President and Corporate Counsel and Chief Legal Officer, Mutual Funds, Prudential Insurance Company of America (2004-2005); Member, Management Committee (2000-2002), General Counsel and Chief Compliance Officer, Zurich Scudder Investments, Inc. (1997-2002). | 36 | None |
Douglas J. Skinner (58) Trustee | Since 2020 | Professor of Accounting (2005-Present), Deputy Dean for Faculty (2015-2016, 2017-Present), Interim Dean (2016-2017), University of Chicago Booth School of Business. | 36 | None |
Ann M. Spruill (66) Trustee | Since 2014 | Partner (1993-2008), member of Executive Committee (1996-2008), Member Board of Directors (2002-2008), Grantham, Mayo, Van Otterloo & Co, LLC (private investment management firm) (with the firm since 1990); Member Investment Committee and Chair of Global Public Equities, Museum of Fine Arts, Boston (2000-Present); and Trustee, Financial Accounting Foundation (2014-Present). | 36 | None |
INTERESTED TRUSTEE | ||||
Charles F. McCain (51)* Chairman, Trustee and President | Since 2017 | Chief Executive Officer (2017-Present), Director (2007-Present), President and Chief Operating Officer (2017), Executive Vice President and General Counsel (2004-2017), and Chief Compliance Officer (2004-2014), Harbor Capital Advisors, Inc.; Director and Chairperson (2019-Present), Harbor Trust Company, Inc.; Director (2007-Present) and Chief Compliance Officer (2004-2017), Harbor Services Group, Inc.; Chief Executive Officer (2017-Present), Director (2007-Present), Chief Compliance Officer and Executive Vice President (2007-2017), Harbor Funds Distributors, Inc.; and Chief Compliance Officer, Harbor Funds (2004-2017). | 36 | None |
Name (Age) Position(s) with Fund | Term of Office and Length of Time Served1 | Principal Occupation(s) During Past Five Years |
FUND OFFICERS NOT LISTED ABOVE** | ||
Erik D. Ojala (45) Chief Compliance Officer | Since 2017 | Executive Vice President and General Counsel (2017-Present) and Secretary (2010-Present); Senior Vice President and Associate General Counsel (2007-2017), Harbor Capital Advisors, Inc.; Director and Secretary (2019-Present), Harbor Trust Company, Inc.; Director, Executive Vice President and Chief Compliance Officer (2017-Present), Harbor Funds Distributors, Inc.; Director (2017-Present) and Assistant Secretary (2014-Present), Harbor Services Group, Inc.; and AML Compliance Officer (2010-2017) and Vice President and Secretary (2007-2017), Harbor Funds. |
Anmarie S. Kolinski (49) Treasurer | Since 2007 | Executive Vice President and Chief Financial Officer (2007-Present), Harbor Capital Advisors, Inc.; Director and Treasurer (2019-Present), Harbor Trust Company, Inc.; Chief Financial Officer (2007-Present), Harbor Services Group, Inc.; and Chief Financial Officer (2015-Present) and Treasurer (2012-Present), Harbor Funds Distributors, Inc. |
Kristof M. Gleich (41) Vice President | Since 2019 | President (2018-Present) and Chief Investment Officer (2020), Harbor Capital Advisors, Inc.; Director, Vice Chairperson, President (2019-Present) and Chief Investment Officer (2020-Present), Harbor Trust Company, Inc.; and Managing Director, Global Head of Manager Selection (2010-2018), JP Morgan Chase & Co. |
48
Harbor Target Retirement Funds
Additional Information—Continued
Additional Information—Continued
Trustees and Officers—Continued
Name (Age) Position(s) with Fund | Term of Office and Length of Time Served1 | Principal Occupation(s) During Past Five Years |
FUND OFFICERS NOT LISTED ABOVE**—Continued | ||
Gregg M. Boland (57) Vice President | Since 2019 | Executive Vice President (2020-Present), Vice President (2019-2020), Harbor Capital Advisors, Inc.; President (2019-Present), Senior Vice President – Operations (2016-2019), and Vice President – Operations (2007-2015), Harbor Services Group, Inc.; and Senior Vice President, AML Compliance Officer, and OFAC Officer (2019-Present), Harbor Funds Distributors, Inc. |
Diana R. Podgorny (41) Secretary | Since 2018 | Senior Vice President and Assistant General Counsel (2020-Present), Vice President and Assistant General Counsel (2017-2020), Harbor Capital Advisors, Inc.; Director and Vice President (2020 – Present), Harbor Trust Company, Inc.; Vice President and Counsel, AMG Funds LLC (2016-2017); Assistant Secretary, AMG Funds, AMG Funds I, AMG Funds II and AMG Funds III (2016-2017); Assistant Secretary, AMG Funds IV (2010-2017); and Vice President and Counsel, Aston Asset Management, LLC (2010-2016). |
Jodie L. Crotteau (48) Assistant Secretary | Since 2014 | Senior Vice President and Chief Compliance Officer, Harbor Capital Advisors, Inc. (2014-Present); Chief Compliance Officer and AML/OFAC Officer (2019-Present), Harbor Trust Company, Inc.; Chief Compliance Officer and Secretary (2017-present) and Assistant Secretary (2015-2016), Harbor Services Group, Inc.; Assistant Secretary (2016-present), Harbor Funds Distributors, Inc.; Vice President and Chief Compliance Officer, Grosvenor Registered Funds (2011-2014); and Vice President, Grosvenor Capital Management, L.P. (2010-2014). |
Lana M. Lewandowski (41) AML Compliance Officer and Assistant Secretary | Since 2017 | Legal & Compliance Manager (2016-Present) and Legal Specialist (2012-2015), Harbor Capital Advisors, Inc. |
Lora A. Kmieciak (56) Assistant Treasurer | Since 2017 | Senior Vice President – Fund Administration and Analysis (2017-Present), Senior Vice President - Business Analysis (2015-2017), Harbor Capital Advisors, Inc.; Vice President (2020 – Present), Harbor Trust Company, Inc.; and Assurance Executive Director, Ernst & Young LLP (1999-2015). |
John M. Paral (52) Assistant Treasurer | Since 2013 | Director of Fund Administration and Analysis (2017-Present), Vice President (2012-Present) and Financial Reporting Manager (2007-2017), Harbor Capital Advisors, Inc. |
1 | Each Trustee serves for an indefinite term, until his or her successor is elected. Each Officer is elected annually. |
* | Mr. McCain is deemed an “Interested Trustee” due to his affiliation with the Adviser and Distributor of Harbor Funds. |
** | Officers of the Funds are “interested persons” as defined in the Investment Company Act. |
49
This privacy statement is not part of this report
Harbor’s Privacy Statement
The following privacy statement (“Privacy Statement”) is issued by Harbor Funds and each series of Harbor Funds and its affiliates, Harbor Capital Advisors, Inc., Harbor Services Group, Inc. and Harbor Funds Distributors, Inc. (collectively, “Harbor” “we” or “us”). The measures described in this Privacy Statement reflect the commitments we make to protect the privacy of your personal information. We appreciate the confidence you have shown by entrusting us with your assets.
Personal Information
In the course of providing products and services, we collect personal information about you from the following sources: applications, forms, our website (including any information captured through our use of “cookies”), through mobile applications, by telephone and in correspondence and transactions with us, our affiliates or other parties, including when you contact Shareholder Services or establish an account with us. This Privacy Statement applies to personal information we collect from those sources unless we inform you otherwise.
The personal information collected may include name, address, email address, telephone/fax numbers, account number, social security or taxpayer identification number, investment activity, bank account information, location data (depending on your app settings and device permissions), and other information voluntarily provided by you.
We may also collect certain information automatically when you visit us through our website or a mobile application. For example, we may collect technical and navigational information, such as computer browser type, device type, device ID, Internet protocol address, pages visited average time spent on our website and searches performed on our website. We may use this information to alert you to software compatibility issues; to provide you with or improve or websites, applications, products or services; or to provide you with content that may be of interest to you. We use your IP address to help diagnose problems with our server and to administer our website. Your IP address is also used to gather broad demographic information. This information will be used for internal purposes only. We also collect information in the form of log files that record website and app activity and gather statistics about your browsing habits. These entries are generated automatically, and help us to troubleshoot errors, improve performance and maintain the security of our sites and apps. We use “cookies” and similar files that may be placed on your computer or device for security purposes, to facilitate site navigation and to personalize the appearance of our site. We provide more information regarding cookies and other tracking technologies below.
In addition, we may receive personal information about you that you authorize third parties to provide to us. We also may obtain personal information from third-party service providers to verify your identity, to prevent fraud, or to help us identify products and services that may be of interest to you.
The personal information we collect about you may be transferred to or stored by us or our service providers in the United States or elsewhere, as permitted by law.
If you do not wish to provide personal information to us, we may be unable to provide certain products or services to you.
Information Sharing
We disclose personal information with affiliated and non-affiliated parties: (1) as permitted or required by law or regulation; (2) if we believe that is necessary to: comply with applicable laws, regulations, or industry requirements; respond to requests from a legal, regulatory, or governmental authority; enforce legal terms; detect and resolve any fraud or security concerns, and protect the rights, property, and safety of us, our users, or others; (3) in the event of a merger, acquisition or sale of all or substantially all of our assets; or (4) as otherwise described in this Privacy Statement.
Personal information we collect may be shared with non-affiliated companies that perform support services on our behalf or to other firms that assist us in providing you with products and services (including, without limitation, completing transactions), such as custodians, transfer agents, broker-dealers and marketing service firms (to support our marketing to you), as well as with other financial institutions. We may also share information with affiliates that are engaged in a variety of financial services in order to better service your account(s).
When information is shared with third parties, they are not permitted to use the information for any purpose other than those purposes described in this Privacy Statement or as permitted by law.
If you close your account(s) or if we lose contact with you, we will continue to share information in accordance with our current privacy policy and practices.
If you close your account(s) or if we lose contact with you, we will continue to share information in accordance with our current privacy policy and practices.
50
Harbor’s Privacy Statement—Continued
Security
We maintain physical, electronic and procedural safeguards designed to protect your personal information; however, please be aware that no data security measures can guarantee 100% security.
For shareholders accessing information through our website or a mobile application, various forms of Internet security, such as data encryption firewall barriers, user names and passwords, two-factor authentication, and other tools are used. For additional information regarding our security measures, visit the terms and conditions of use on our website at harborfunds.com.
Linking to
Third Parties
Third Parties
When you visit our website and leave to go to another linked site, we are not responsible for the content or availability of the linked site. Please be advised that if you enter into a transaction on the third-party site, we do not represent either the third party or you. Further, the privacy and security policies of the linked site may differ from those practiced by us.
Cookies and Other Technologies
A cookie is a small text file that is stored on your computer, tablet, or device when you visit a website or a mobile application. Cookies usually store small bits of information about you and what you do on that site or application, which are then used to improve your browsing experience. Some cookies are only used during a single visit, while others are saved on your device until your next visit. Harbor Funds and our third-party providers use both types of cookies to make your visits more productive.
If you are concerned about cookies, they can be blocked from your device, or you can set your browser to notify you when they are being used. Use the Help feature of your browser to learn how.
Our website, mobile application, and emails may use a web beacon. A web beacon helps to measure usage and activity and reports that activity back to the system providers. In some cases, a web beacon triggers the placement of a cookie on your device.
We and our service providers use web beacons and cookies to determine things like if and when you open our emails, what type of device, operating system, email program, or web browser you are using, your IP address, and what links you click within our site or email. These things enable us to gauge the effectiveness, relevance, and value of our content and communications.
We use Google Analytics (which uses a web beacon) to collect information about use of our website and mobile application. For more information on opting out of being tracked by Google Analytics, visit https://tools.google.com/dlpage/gaoptout.
Do Not Track
Our third-party vendors may collect information about users across our website. We do not currently have the capability to respond to a web browser that does not track signals or other mechanisms that provide you with the ability to exercise choice regarding the collection of this information.
Changes to this
Privacy Statement
Privacy Statement
We reserve the right to change or revise this Privacy Statement at any time to reflect changes in the law or our data collection and use practices. New updates to the Privacy Statement will be posted to our website and are include in Harbor Funds’ annual reports to shareholders. Privacy Statement changes will apply to the information collected from the date we post our revised Privacy Statement, as well as to existing information we hold.
Contact Us
If you have any questions or concerns about how we maintain the privacy of your personal information or if you would like to update your personal information on file, please contact us at 800-422-1050 Monday through Friday, between the hours of 8:00 a.m. and 6:00 p.m. Eastern time. You may also write to us at the following postal address:
Harbor Funds
c/o Harbor Services Group, Inc.
PO Box 804660
Chicago, IL 60680-4108
c/o Harbor Services Group, Inc.
PO Box 804660
Chicago, IL 60680-4108
We recommend that you read and retain this notice for your personal files.
Last Updated: December 2020
51
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
52
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.
53
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
Douglas J. Skinner
Trustee
Trustee
Ann M. Spruill
Trustee
Trustee
Erik D. Ojala
Chief Compliance Officer
Chief Compliance Officer
Anmarie S. Kolinski
Treasurer
Treasurer
Kristof M. Gleich
Vice President
Vice President
Gregg M. Boland
Vice President
Vice President
Diana R. Podgorny
Secretary
Secretary
Jodie L. Crotteau
Assistant Secretary
Assistant Secretary
Lana M. Lewandowski
AML Compliance Officer
& Assistant Secretary
AML Compliance Officer
& Assistant Secretary
Lora A. Kmieciak
Assistant Treasurer
Assistant Treasurer
John M. Paral
Assistant Treasurer
Assistant Treasurer
Investment Adviser
Harbor Capital Advisors, Inc.
111 South Wacker Drive, 34th Floor
Chicago, IL 60606-4302
312-443-4400
111 South Wacker Drive, 34th Floor
Chicago, IL 60606-4302
312-443-4400
Distributor
Harbor Funds Distributors, Inc.
111 South Wacker Drive, 34th Floor
Chicago, IL 60606-4302
312-443-4600
111 South Wacker Drive, 34th Floor
Chicago, IL 60606-4302
312-443-4600
Shareholder Services
Harbor Services Group, Inc.
P.O. Box 804660
Chicago, IL 60680-4108
800-422-1050
P.O. Box 804660
Chicago, IL 60680-4108
800-422-1050
FD.AR.TR.1020
ITEM 2 – CODE OF ETHICS
(a) | The Registrant has adopted a code of ethics that applies to the Registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the Registrant or a third party (the “Code of Ethics”). |
(c) | The Registrant has not amended its Code of Ethics during the period covered by this report. |
(d) | The Registrant has not granted any waivers, including an implicit waiver, from any provisions of its Code of Ethics during the period covered by this report. |
ITEM 3 – AUDIT COMMITTEE FINANCIAL EXPERT
The Registrant’s Board has determined that Douglas J. Skinner, a member of the Audit Committee of the Board of Trustees, is an audit committee financial expert as defined by the Securities and Exchange Commission (the “SEC”). Mr. Skinner is the Eric J. Gleacher Distinguished Service Professor of Accounting and Deputy Dean for Faculty at the University of Chicago Booth School of Business, where his prior positions include John P. and Lillian A. Gould Professor of Accounting, Neubauer Family Faculty Fellow, Interim Dean, and Executive Director of the Accounting Research Center. Mr. Skinner is deemed “independent” as defined by the SEC for purposes of audit committee financial expert determinations.
ITEM 4 – PRINCIPAL ACCOUNTANT FEES AND SERVICES
Items 4(a)—4(d): Audit, Audit-Related, Tax and All Other Fees
Fees billed by Ernst & Young:
Fiscal Year Ended October 31, 2020 | Fiscal Year Ended October 31, 2019 | ||||||||||
All fees and services to the Trust that were pre-approved | All fees and services to service affiliates that were pre-approved | All other fees and services to service affiliates that did not require pre-approval | All fees and services to the Trust that were pre-approved | All fees and services to service affiliates that were pre-approved | All other fees and services to service affiliates that did not require pre-approval | ||||||
(a) Audit Fees. | $932,235 | N/A | N/A | $850,089 | N/A | N/A | |||||
(b) Audit-Related Fees. | $ 13,0001 | $58,100 2 | N/A | $ 3,0001 | $52,800 2 | N/A | |||||
(c) Tax Fees. | $520,765 3 | $ — | N/A | $444,431 3 | $ — | N/A | |||||
(d) All Other Fees. | $ 97,8804 | $ 2,3855 | N/A | $ 88,3504 | $ 4,6155 | N/A |
1 | Includes fees related to the issuance of consents for N-1A filings. |
2 | Includes fees related to the procedures performed for Harbor Services Group, Inc. required by Rule 17Ad-13(a)(3) of the Securities Exchange Act of 1934. |
3 | Includes fees related to tax compliance, including foreign tax reclaim filings and tax research and equalization. |
4 | Includes fees billed in connection with the Registrant’s subscription to the Ernst & Young PFIC Analyzer, a database used to determine whether foreign equity securities are passive foreign investment companies. |
5 | Includes fees billed in connection with the Adviser’s subscription to Ernst & Young Online, a database of accounting rules and regulations. |
(e) | (1) | Pre-Approval Policies. |
The policy of the Registrant’s Audit Committee is to consider and, if appropriate, approve before the principal accountant is engaged for such services, all specific audit, review and non-audit services (other than certain de minimis non-audit services) provided to the Registrant. In making a determination, the Audit Committee considers whether the services are consistent with maintaining the principal accountant’s independence.
In the event of a contingency situation in which the principal accountant is needed to provide services in between scheduled Audit Committee meetings, the Audit Committee is authorized to delegate one or more members of the Committee the responsibility for considering and, if appropriate, pre-approving audit or permitted non-audit services in an amount sufficient to complete services and to determine if such services would be consistent with maintaining the accountant’s independence. Such member(s) are required to report to the full Audit Committee as to the nature and amount of such services and fees pre-approved at the next scheduled Audit Committee meeting. The Audit Committee would again consider whether such services and fees are consistent with maintaining the principal accountant’s independence.
The Registrant’s Audit Committee is informed at least annually of all audit and non-audit services provided by the principal accountant to the Registrant.
(2) | None of the principal accountant’s fees or services rendered to the Registrant, the Adviser or Harbor Services Group, Inc. were approved pursuant to the waiver provision of paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. |
(f) | Not applicable. |
(g) | Aggregate Non-Audit Fees. |
Aggregate Non-Audit Fees of the Registrant | |
Fiscal Year Ended October 31, 2020: $631,645 | |
Fiscal Year Ended October 31, 2019: $535,781 | |
Aggregate Non-Audit Fees of Other Entities Required to be Pre-approved Pursuant to Paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X | |
Fiscal Year Ended October 31, 2020: $60,485 | |
Fiscal Year Ended October 31, 2019: $57,415 | |
(h) | For the most recent fiscal year, the Audit Committee has determined that the provision of all non-audit services to service affiliates was compatible with maintaining the principal accountant’s independence. |
ITEM 5 – AUDIT COMMITTEE OF LISTED REGISTRANTS
Not applicable.
ITEM 6 – INVESTMENTS
(a) | The Registrant has elected to include the schedule of investments in securities of unaffiliated issuers as part of the report to shareholders filed under Item 1 of this report on Form N-CSR. |
(b) | Not applicable. |
ITEM 7 – DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES
Not applicable.
ITEM 8 – PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES
Not applicable.
ITEM 9 – PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS
Not applicable.
ITEM 10 – SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no material changes to the procedures by which shareholders may recommend nominees to the Registrant’s Board of Trustees since the date of the Registrant’s prior report on Form N-CSR.
ITEM 11 – CONTROLS AND PROCEDURES
(a) | The Registrant’s Principal Executive and Principal Financial Officers concluded that the Registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the 1940 Act) are effective, based on the evaluation of these disclosure controls and procedures as of a date within 90 days of the filing of this report. |
(b) | There was no change in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting. |
ITEM 12 – DISCLOSURE OF SECURITIES LENDING ACTIVITIES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES
Not applicable.
ITEM 13 – EXHIBITS
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed December 29, 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) | December 29, 2020 |
By: | /s/ Anmarie S. Kolinski Anmarie S. Kolinski | Treasurer (Principal Financial and Accounting Officer) | December 29, 2020 |
Exhibit Index
Number | Description | |
99.CODE ETH | Code of Business Conduct and Ethics. | |
99.CERT1 | Certification for each principal executive officer and principal financial officer of the Registrant as required by Rule 30a-2(a) under the 1940 Act (17 CFR 270.30a-2(a)). | |
99.CERT2 | Certification for each principal executive officer and principal financial officer of the Registrant as required by Rule 30a-2(a) under the 1940 Act (17 CFR 270.30a-2(a)). | |
99.906CERT | Certification as required by Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350). |