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Mid Cap Growth Fund —
U.S. equity markets advance for the fourth consecutive quarter
3rd Quarter, 2016
"The renewed risk-on market environment was a tailwind for the Fund, favorable to both our investment approach and the portfolio. "
– Wellington Management Company LLP

Bolstered by gains in July that followed a solid start to the corporate earnings season as well as encouraging housing and employment economic data, the U.S. equities market advanced during the third quarter of 2016 for the fourth consecutive quarter. Additionally, the S&P 500 rose 3.85%. Stocks were essentially flat in August and September, as investors remained focused on the U.S. Federal Reserve (Fed) and the potential timing of an interest rate hike. A confluence of worries contributed to increased volatility during September, including uncertainty surrounding the November U.S. presidential election, tepid economic data and valuation concerns. However, some fairly dovish takeaways from the Fed's September meeting helped equities to rebound in the second half of the month.
During the quarter, Harbor Mid Cap Growth Fund advanced 6.63%, outperforming its benchmark, the Russell Midcap® Growth Index, which experienced a return of 4.59%. The Fund’s relative performance was driven primarily by security selection in the Consumer Discretionary and Consumer Staples sectors, which far outweighed modest relative detraction from stock selection in the Materials and Industrials sectors.
Wellington Management Company’s comments were made in an October, 2016 report. Highlights adapted from the report appear below. All comments relate to the quarter ended September 30, 2016, unless otherwise indicated. All references to the year-to-date are for the period January 1 through September 30, 2016.

Interview Highlights

Macro Environment Favorable
The renewed risk-on market environment was a tailwind for the Fund, favorable to both our investment approach and the portfolio. The market shrugged off its defensive posture, and traditionally defensive sectors such as Utilities and Consumer Staples lagged. Once again, investors began rewarding companies that are growing rapidly, taking market share and executing their business plans.
Finding Opportunity in the Energy Sector
The portfolio is overweight in the Energy sector, and during the quarter we increased that overweight, reflecting where we find the most attractive opportunities in the current market environment. We believe in our differentiated view of some Energy companies’ earning potential, in part because we believe oil prices will improve relative to the first half of 2016 and help these companies achieve our anticipated acceleration.
We Are Fairly Constructive After Likely Election Volatility
Rising protectionism, record debt levels and a continuing economic malaise in wealthy countries may continue to strain global growth, and will likely support increased market volatility in the short- to medium-term. Additionally, we expect investors to remain focused on the Fed and the timing of the next rate hike, along with the uncertainty surrounding the U.S. presidential election. While we don’t see a major catalyst on the horizon to boost U.S. economic growth, the prior headwinds to growth are dissipating, and we are fairly constructive on the prospects for U.S. growth going into 2017, with short-term volatility driven by the U.S. presidential election.

Performance data shown represents past performance, which is no guarantee of future results. Current performance may be higher or lower than the past performance data shown. Investment returns and the value of an investment will fluctuate, and an investor's shares, when sold, may be worth more or less than their original cost. You can obtain performance data current to the most recent month-end (available within seven business days after the most recent month-end) by calling 800-422-1050 or visiting

Performance figures discussed reflect that of the institutional class shares.

The views expressed herein are those of the portfolio manager at the time of the interview and may not be reflective of their current opinions or future actions.  These views are not necessarily those of the fund company and should not be construed as such.

This information should not be considered as a recommendation to purchase or sell a particular security and the holdings or sectors mentioned may change at any time and may not represent current or future investments.