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Global Growth Fund —
Global stocks moved higher in Q2, led by Energy names
2nd Quarter, 2014
"With valuations in line with long-term averages, we believe that skilled stock selection in high quality companies will be the difference in a portfolio's ability to beat its benchmark. "
– Marsico Capital Management, LLC

Global equity markets generated solid gains for the second quarter of 2014. The MSCI All Country World (ND) Index recorded a return of 5.04% for the three months ended June 30, 2014. Energy, up 12%, was the best performing area of the index as all 10 sectors posted positive results.
The Harbor Global Growth Fund posted a return of 4.23% for the quarter, trailing the index. Portfolio Managers Thomas Marsico and James Gendelman report that holdings in the Energy and Industrials sectors outperformed those in the MSCI All Country World benchmark, while stock selection in the Consumer Discretionary and Information Technology sectors detracted from relative performance. From a longer-term perspective, the Fund outperformed the benchmark for the latest 12-month and 5-year periods and since its inception in 2009.
Among the Fund's leading performers in the second quarter were Canadian Pacific Railway, biotechnology company Gilead Sciences, oil producer Continental Resources, and oil-field services provider Schlumberger. Holdings that detracted from performance included Health Care company Novadaq Technologies, discount retailer TJX, mobile gaming company Tencent, and PriceSmart, an operator of membership warehouse clubs in Central America and the Caribbean. TJX and Tencent were eliminated from the portfolio.
The investment team’s comments were made in a July 14, 2014, report. Highlights adapted from the report appear below. All comments relate to the quarter ended June 30, 2014, unless otherwise indicated. All references to year-to-date are for the period January 1 through June 30, 2014.

Interview Highlights

Positive drivers
Positive macroeconomic drivers that should continue to provide tailwinds for the Fund’s holdings include shale, gas, and oil exploration, growing industrial development in the U.S., respectable housing sales, strong auto sales, strengthened personal and corporate balance sheets, and banks’ increased willingness to lend. Furthermore, we anticipate slow, albeit improving, growth, along with remarkably low inflation. That kind of economic environment traditionally has provided a favorable backdrop for the high quality growth companies that we look for.
Market fairly valued
Accommodative monetary policy and an improving economic outlook have buoyed stock performance. We believe the current equity market to be fairly valued. Company earnings trends remain strong, but stocks, broadly speaking, are no longer cheap. With valuations in line with long-term averages, we believe that skilled stock selection in high quality companies will be the difference in a portfolio’s ability to beat its benchmark.
Energy holdings
Stock selection in the Energy sector was strong. Continental Resources, one of the largest operators in the Bakken shale region, gained 27%. Schlumberger rose 21%. Its stock price soared in the final week of the quarter after the company issued positive long-term guidance. We believe Schlumberger’s new oil technologies will gain market share, as the company has an impressive research and development budget that should continue to provide a competitive advantage and high barriers to entry.
Investment themes
Several themes are at work in the portfolio. One is represented through a significant Consumer Discretionary exposure, which includes companies with strong global brands such as BMW and Hermes International. As global travel is on the rise, our view is that airline components company Safran, hospitality companies Starwood Hotels and Wynn Macau, and online travel reservations company Priceline Group are poised for growth. In Health Care, we believe that a number of drug companies, including Gilead Sciences and Biogen Idec, offer robust new product pipelines for unmet clinical needs. Our Information Technology holdings emphasize businesses with “network effect” advantages such as Google, social media company Facebook, and cloud computing provider
Moderate growth
We continue to believe that the U.S. is in a slow growth, low inflation environment. Leading economic indicators support the view that the U.S. economy is continuing on its moderate growth trajectory. U.S. banks have recapitalized and now increasingly boast balance sheets that can support the economy through increased lending. Consumer and business confidence is improving and business travel and tourism are on the rise, suggesting that the recovery has traction. Home sales stalled somewhat in the first quarter, but recent data indicate improving home sales.

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.