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 January 31, 2023, the Trust consists of the following separate portfolios (individually or collectively referred to as a “Fund” or the “Funds,” respectively). Harbor Capital Advisors, Inc. (“Harbor Capital”) is the investment adviser for the Funds.
Harbor Capital Appreciation Fund
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Harbor International Growth Fund
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Harbor Convertible Securities Fund
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Harbor International Small Cap Fund
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Harbor Large Cap Value Fund
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Harbor Disruptive Innovation Fund
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Harbor Mid Cap Value Fund
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Harbor Diversified International All Cap Fund
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Harbor Overseas Fund (currently, Harbor International
Core Fund)
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Harbor Global Leaders Fund
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Harbor Small Cap Growth Fund
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Harbor High-Yield Bond Fund
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Harbor Small Cap Value Fund
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Harbor International Fund
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Effective March 1, 2023, Harbor Overseas Fund was renamed Harbor International Core Fund.
Note 2—Significant Accounting Policies
Security Valuation
Investments are valued pursuant to valuation procedures approved by the Board of Trustees. The valuation procedures permit
the Adviser 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 rights and warrants) that are traded 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 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 (or average) of 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. Shares 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, 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, 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 asset-backed and mortgage-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
