5
Morningstar FundInvestor
January 2
014
Morningstar Analyst Rating
12-31-13
Œ
Morningstar Pillars
Process
Performance
People
Parent
Price
Positive
Positive
Positive
Positive
Positive
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 ¨
Pillar Spectrum
Positive
§
Negative
¶
Neutral
NAV
11.95
12.19
12.10
12.14
11.30
11.91
11.56
11.62
11.83
11.83
11.70
11.42
Total Return %
-1.46
3.48
7.96
13.84
3.34
8.69
3.91
2.57
5.47
5.30
10.63
9.03
+/-BC Agg Bnd
0.56
-0.73
0.12
7.30
-2.59
3.45
-3.06
-1.76
3.04
0.96
6.53
-1.23
+/-BC Agg Bnd
0.56
-0.73
0.12
7.30
-2.59
3.45
-3.06
-1.76
3.04
0.96
6.53
-1.23
Income Return %
2.82
2.52
3.25
4.73
4.87
5.34
4.42
4.26
2.94
2.59
5.80
4.88
Capital Return %
-4.28
0.96
4.71
9.11
-1.53
3.35
-0.51
-1.69
2.53
2.71
4.83
4.15
Total Rtn % Rank Cat
19
91
38
46
19
2
53
11
7
32
6
15
Income $
0.35
0.30
0.39
0.53
0.57
0.61
0.51
0.50
0.34
0.30
0.65
0.54
Capital Gains $
0.00
0.02
0.61
0.18
0.42
0.02
0.00
0.01
0.30
0.19
0.26
0.27
Expense Ratio %
.
0.54
0.53
0.55
0.57
0.55
0.56
0.58
0.58
0.57
0.58
0.58
Income Ratio %
.
2.88
2.73
2.34
4.34
4.47
4.73
4.34
3.39
2.21
3.43
4.37
Turnover Rate %
.
473
666
675
574
514
213
312
333
. .
293
Net Assets $mil
6,344
7,687
7,300
7,273
6,016
3,942
2,809
2,370
1,983
1,613
1,527
1,417
Performance
12-31-13
1st Qtr
2nd Qtr
3rd Qtr
4th Qtr
Total
2009
2010
2011
2012
2013
0.81 5.97
5.45 1.05
3.34
2.53 3.02
3.36 -1.12 13.84
1.17 1.89
-1.44 1.85
7.96
2.55 2.40
3.19 0.89
3.48
0.67 -3.33
1.04 0.22
9.32
Trailing
Total
+/- BC
+/- BC %Rank Growth of
Return% Agg Bnd Agg Bnd
Cat
$10,000
3 Mo
6 Mo
1 Yr
3 Yr Avg
5 Yr Avg
10 Yr Avg
15 Yr Avg
0.22 0.36
0.36
49 10,022
1.26 0.83
0.83
33 10,126
-1.46 0.56
0.56
44 9,854
3.68 0.42
0.42
47 11,145
6.50 2.06
2.06
45 13,701
5.63 1.08
1.08
9 17,293
6.12 0.89
0.89
7 24,376
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
Rating and Risk
Time Load-Adj
Morningstar
Morningstar
Morningstar
Period Return % Rtn vs Cat
Risk vs Cat
Risk-Adj Rating
1 Yr
-1.46
3 Yr
3.68
Avg
+Avg
5 Yr
6.50
Avg
+Avg
10 Yr
5.63
High
+Avg
Incept
7.64
Other Measures
Standard Index
Best Fit Index
BC Agg Bnd
BC US Credit
Alpha
0.7
0.1
Beta
0.91
0.71
R-Squared
47
71
Standard Deviation
3.63
Mean
3.68
Sharpe Ratio
1.00
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
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.
Address:
Harbor Funds
Chicago, IL 60606
800-422-1050
Web Address:
Inception:
12-29-87
Advisor:
Harbor Capital Advisors Inc
Subadvisor:
Pacific Investment Management Co LLC
NTF Plans:
N/A
Minimum Purchase:
$1000
Add: $0 IRA: $1000
Min Auto Inv Plan:
$0
Add:
.
Sales Fees:
No-load
Management Fee:
0.48% mx./0.46% mn.
Actual Fees:
Mgt:0.48% Dist:
.
Expense Projections:
3Yr:$181
5Yr:$316 10Yr:$712
Income Distribution:
Quarterly
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
84
34
49
13
44
49
69
82
32
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 12-13
Historical Profile
Return
Risk
Rating
Above Avg
Above Avg
Above Avg
Investment Style
Fixed Income
Income Rtn %Rank Cat
Manager Change
Partial Manager Change
Growth of $10,000
Investment Values of
Fund
Investment Values of
BC Agg Bnd
Performance Quartile
(within Category)
History
10.0
12.0
14.0
16.0
18.4
Portfolio Analysis
09-30-13
Date of
Amount
Value % Net
Total Fixed-Income:2107
Maturity
$000
$000 Assets
90day Eurodollar Futures
06-15-15 2,040,000 2,024,394 Cme
Swu0566v5 Irs Usd R F 1.
03-18-16 965,800 971,399 14.11
90day Eurodollar Futures
12-14-15 890,000 879,276 12.78
90day Eurodollar Futures
09-14-15 485,750 481,087 6.99
Us 5yr Note (Cbt) Dec13
12-31-13 375,500 454,531 6.60
US Treasury Note 1.5%
08-31-18 316,800 318,941 4.63
Bwu0617t9 Irs Usd R V 03
06-15-41 312,200 312,200 4.54
Fed Natl Mort Assc 4%
10-15-43 297,000 311,618 4.53
Swu003fj4 Irs Usd R F 1.
10-15-17 277,800 274,714 3.99
Fannie Mae Single Family
11-01-43 239,000 254,610 3.70
US Treasury Note 1.375%
06-30-18 248,900 249,571 3.63
Us 10yr Note (Cbt)dec13
12-19-13 195,100 246,588 3.58
US Treasury Note 0.75%
03-31-18 218,500 213,882 3.11
Bwu004x94 Irs Usd R V 03
12-18-43 211,900 211,900 3.08
US Treasury Note 1%
09-30-19 220,100 210,866 3.06
Fed Natl Mort Assc 5%
10-15-43 172,500 187,082 2.72
90day Eurodollar Futures
03-14-16 156,500 154,207 2.24
Fannie Mae Single Family
11-01-43 143,000 149,547 2.17
US Treasury Note 0.875%
07-31-19 156,500 149,433 2.17
US Treasury Note 0.625%
04-30-18 135,600 131,818 1.92
Current Investment Style
1
1
Avg Eff Duration
6.0 Yrs
Avg Eff Maturity
7.0 Yrs
Avg Credit Quality
BBB
Avg Wtd Coupon
3.05%
Avg Wtd Price
102.75% of par
figure provided
by fund
Duration
Ltd Mod Ext
Quality
High
Med Low
Special Securities
Restricted/Illiquid Secs
6
Exotic Mortgage-Backed
0
Emerging-Markets Secs
2
Options/Futures/Warrants Yes
Credit Analysis
% bonds 09-30-13
AAA
71
AA
9
A
6
BBB
8
BB
3
B
1
Below B 3
NR/NA 0
Sector Breakdown
% of assets
US Treasury
11
Non US Government
1
Government Related
45
Corporate
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
Coupon Range
% of Bonds Rel Cat
1.00=Category Average
0% PIK
23.3 8.2
0% to 6%
73.2 0.9
6% to 8%
3.2 0.3
8% to 10%
0.3 0.1
More than 10%
0.1 0.1
©
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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