(PUB) Morningstar FundInvestor

January 2 014

Morningstar FundInvestor

5

Data through December 31, 2013 Harbor Bond Institutional

Ticker Status Yield SEC Yield Total Assets Mstar Category HABDX Open 2.9% 1.49% $6,476 mil Intermediate-Term Bond

Morningstar Analyst Rating 12-31-13

Investment Style Fixed Income Income Rtn %Rank Cat

Historical Profile Return Risk Rating Above Avg Above Avg Above Avg

84

34

49

13

44

49

69

82

32

Œ

Manager Change Partial Manager Change

Morningstar Pillars Process Performance

12.0 14.0 16.0 18.4

Positive Positive Positive Positive Positive

∞ ∞ ∞ ∞ ∞

Growth of $10,000

NAV Total Return % +/-BC Agg Bnd +/-BC Agg Bnd Income Return % Capital Return % Capital Gains $ Expense Ratio % Income Ratio % Turnover Rate % Net Assets $mil Total Rtn % Rank Cat Income $ Investment Values of Fund Investment Values of BC Agg Bnd Performance Quartile (within Category) History

People Parent Price

10.0

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 12-13

Morningstar Analyst Rating Morningstar evaluates mutual funds based on five key pillars, which its analysts believe lead to funds that are more likely to outperform over the long term on a risk-adjusted basis. Analyst Rating Spectrum Œ „ ´ˇ ¨

11.42 9.03 -1.23 -1.23 4.88 4.15

11.70 10.63

11.83

11.83

11.62 2.57 -1.76 -1.76 4.26 -1.69

11.56 3.91 -3.06 -3.06 4.42 -0.51

11.91

11.30 3.34 -2.59 -2.59 4.87 -1.53

12.14 13.84

12.10

12.19 3.48 -0.73 -0.73 2.52 0.96

11.95 -1.46 0.56 0.56 2.82 -4.28

5.30 0.96 0.96 2.59 2.71 0.30 0.19 0.57 2.21 32

5.47 3.04 3.04 2.94 2.53 0.34 0.30 0.58 3.39 7

8.69 3.45 3.45 5.34 3.35 0.61 0.02 0.55 4.47 514 2

7.96 0.12 0.12 3.25 4.71 0.39 0.61 0.53 2.73 666 38

6.53 6.53 5.80 4.83 0.65 0.26 0.58 3.43 6

7.30 7.30 4.73 9.11 0.53 0.18 0.55 2.34 675 46

15

11

53

19

91

19

Pillar Spectrum Positive ∞

0.54 0.27 0.58 4.37 293

0.50 0.01 0.58 4.34 312

0.51 0.00 0.56 4.73 213

0.57 0.42 0.57 4.34 574

0.30 0.02 0.54 2.88 473

0.35 0.00

§ Negative

¶ Neutral

. . .

Performance 12-31-13 1st Qtr 2nd Qtr

3rd Qtr

4th Qtr

Total 3.34

333 . .

2009 2010 2011 2012 2013

0.81 5.97 2.53 3.02 1.17 1.89 2.55 2.40 0.67 -3.33

5.45 1.05

1,417

1,527

1,613

1,983

2,370

2,809

3,942

6,016

7,273

7,300

7,687

6,344

3.36 -1.12 13.84

-1.44 1.85 3.19 0.89 1.04 0.22

7.96 3.48 9.32

Portfolio Analysis 09-30-13

Rating and Risk Time Load-Adj

Date of Maturity

Amount

Value % Net $000 Assets

Morningstar

Morningstar Risk vs Cat

Morningstar Risk-Adj Rating

Period Return % Rtn vs Cat

Total Fixed-Income:2107

$000

1 Yr 3 Yr 5 Yr

-1.46 3.68 6.50 5.63 7.64

Trailing

Total

+/- BC

+/- BC %Rank Growth of

90day Eurodollar Futures Swu0566v5 Irs Usd R F 1. 90day Eurodollar Futures 90day Eurodollar Futures Us 5yr Note (Cbt) Dec13 US Treasury Note 1.5% Bwu0617t9 Irs Usd R V 03 Fed Natl Mort Assc 4% Swu003fj4 Irs Usd R F 1. Fannie Mae Single Family US Treasury Note 1.375% Us 10yr Note (Cbt)dec13 US Treasury Note 0.75% Bwu004x94 Irs Usd R V 03 US Treasury Note 1% Fed Natl Mort Assc 5% 90day Eurodollar Futures Fannie Mae Single Family US Treasury Note 0.875% US Treasury Note 0.625%

06-15-15 2,040,000 2,024,394 Cme 03-18-16 965,800 971,399 14.11 12-14-15 890,000 879,276 12.78 09-14-15 485,750 481,087 6.99 12-31-13 375,500 454,531 6.60 08-31-18 316,800 318,941 4.63 06-15-41 312,200 312,200 4.54 10-15-43 297,000 311,618 4.53 10-15-17 277,800 274,714 3.99 11-01-43 239,000 254,610 3.70 06-30-18 248,900 249,571 3.63 12-19-13 195,100 246,588 3.58 03-31-18 218,500 213,882 3.11 12-18-43 211,900 211,900 3.08 09-30-19 220,100 210,866 3.06 10-15-43 172,500 187,082 2.72 03-14-16 156,500 154,207 2.24 11-01-43 143,000 149,547 2.17 07-31-19 156,500 149,433 2.17 04-30-18 135,600 131,818 1.92 4 Agency MBS Pass-Through 16 Agency MBS ARM 0 Agency MBS CMO 1 Non-Agency Residential MBS 2 Commercial MBS 1 Asset-Backed 1 Municipal 2 Cash & Equivalents 4 Other 0 Composition - Net Cash -71.3 Bonds 166.6 Stocks 0.0 Other 4.8 Special Securities Restricted/Illiquid Secs Exotic Mortgage-Backed Emerging-Markets Secs 2 Options/Futures/Warrants Yes 6 0 3 Sector Breakdown % of assets US Treasury 11 Non US Government Government Related 1 45 Corporate

Return% Agg Bnd Agg Bnd

Cat

$10,000

Avg Avg High

+Avg +Avg +Avg

3 Mo 6 Mo 1 Yr

0.22 0.36 1.26 0.83 -1.46 0.56 3.68 0.42 6.50 2.06 5.63 1.08 6.12 0.89

0.36 0.83 0.56 0.42 2.06 1.08 0.89

49 10,022 33 10,126 44 9,854 47 11,145 45 13,701 9 17,293 7 24,376

10 Yr Incept

3 Yr Avg 5 Yr Avg 10 Yr Avg 15 Yr Avg

Other Measures

Standard Index

Best Fit Index BC US Credit

BC Agg Bnd

Alpha

0.7

0.1

Beta

0.91

0.71

R-Squared

47

71

Tax Analysis Tax-Adj Rtn% %Rank Cat Tax-Cost Rat %Rank Cat 3 Yr (estimated) 5 Yr (estimated) 10 Yr (estimated) 2.24 45 1.39 66 4.69 49 1.70 83 3.79 9 1.75 87 Potential Capital Gain Exposure: -1% of assets Morningstar’s Take by Eric Jacobson 12-31-13 Harbor Bond will not be changing its stripes. In institutional lingo, this is a "core-plus" offering. It keeps its rate sensitivity in a range around its benchmark, the Barclays U.S. Aggregate Index, invests in the same sectors as the index, and can add some out-of-benchmark bonds. That gives the fund a broad palette. Manager Bill Gross has historically made large bets using the fund’s benchmark sectors (in particular with agency mortgages), has peppered in nonbenchmark holdings such as emerging-markets and nonagency mortgage debt, and has long used interest-rate bets to try and improve returns. For all of its freedom, though, the fund keeps its duration at plus or minus two years around the bogy’s. It’s also limited to 10% in high yield and 15% in emerging markets. The duration issue is notable as many investors have recoiled from interest-rate risk. PIMCO made headlines thanks to more than $30 billion in outflows from PIMCO Total Return PTTRX during the second and third quarters of 2013, and that trend left the intermediate-bond category with more than $70

Standard Deviation

3.63 3.68 1.00

Mean

Sharpe Ratio

billion in net outflows; about the same amount flowed into the more interest-rate resistant bank-loan and nontraditional bond groups. This fund’s interest-rate limits haven’t been an issue; Gross has yet to near the bottom bound. The direction and magnitude of its rate bets has mattered--the fund was caught short in late 2011 and long during the summer of 2013--but as flows suggest, and as Gross believes, many investors want to give more flexibility to their managers to slash their durations. Neither he nor Harbor see changing this portfolio’s rules as the right solution. Gross believes he has enough tools here to remain competitive and wants to keep the fund intact for shareholders who prefer a corelike offering. For like-minded investors, Gross’ long-term record and massive PIMCO resources remain compelling. For those who want to give their managers much more freedom--along with more freedom to fail--this isn’t the place to be.

Current Investment Style

Duration Ltd Mod Ext

Quality High Med Low

figure provided by fund

1

1 Avg Eff Duration Avg Eff Maturity Avg Credit Quality Avg Wtd Coupon Avg Wtd Price Coupon Range

6.0 Yrs 7.0 Yrs

BBB

3.05%

102.75% of par

% of Bonds Rel Cat

0% PIK 0% to 6% 6% to 8% 8% to 10%

23.3 8.2 73.2 0.9 3.2 0.3 0.3 0.1 0.1 0.1

More than 10%

Address:

Harbor Funds Chicago, IL 60606 800-422-1050

Minimum Purchase: Min Auto Inv Plan:

$1000

Add: $0 IRA: $1000

1.00=Category Average

$0

Add: .

Credit Analysis

% bonds 09-30-13

Sales Fees:

No-load

BB

AAA

71

Web Address: Inception: Advisor: Subadvisor: NTF Plans:

www.harborfunds.com

Management Fee:

0.48% mx./0.46% mn. Mgt:0.48% Dist: .

B 1 Below B 3 NR/NA 0

AA

9 6 8

12-29-87

Actual Fees:

Harbor Capital Advisors Inc

Expense Projections: Income Distribution:

3Yr:$181 Quarterly

5Yr:$316 10Yr:$712

A

Pacific Investment Management Co LLC

BBB

N/A

Mutual Funds ß ®

© 2013Morningstar, Inc.All rights reserved. The information herein isnot representedorwarranted tobe accurate, correct, completeor timely.Pastperformance isnoguaranteeof future results.Accessupdated reports at To order reprints, call 312-696-6100. mfb.morningstar.com.

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