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Harbor to Merge Growth Funds, Fire Subadvisor

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Aug. 5, 2002 — Harbor Funds said it plans to merge the $73-million Harbor Small Cap Growth Fund (HASGX) into the $92-million Harbor Growth Fund (HAGWX), subject to the approval of shareholders of the Small Cap fund.

On completion of the merger, Harbor Growth Fund will be renamed Harbor Small Cap Growth fund.

William Muggia, president and chief investment officer of Westfield Capital Management, an outside subadvisor, has managed Harbor Small Cap Growth since its inception in November 2000. Muggia will continue as manager of the surviving portfolio following the merger.

Harbor Funds said it decided to merge the two funds since they have similar strategies. Both invest in smaller capitalization companies with favorable prospects for long-term growth. However, Harbor Small-Cap Growth fund’s holdings typically have been more broadly diversified than those of Harbor Growth, which have been more concentrated in the tech sector, the fund complex said.

For the one year-period ended June 28, Harbor Growth fund lost 43.9%, versus a loss of 22.9% for the average small-cap growth portfolio tracked by Standard & Poor’s. Harbor Small-Cap Growth lost 7.9% during the same period.

Harbor Funds said it will terminate its subadvisory agreement with Emerging Growth Advisors, which oversees Harbor Growth fund. Harbor Growth has been managed by Peter Welles, president of Emerging Growth Advisors. Welles has managed the portfolio since May 1997.

Welles was could not be reached for comment.