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Global Leaders Fund —
Strengthening economic data drove global market gains
2nd Quarter, 2017
"Macro conditions had a positive impact on the share prices of our businesses. However, we believe business-specific factors and fundamentals will be the main drivers of investment results over the long-term. "
– Sands Capital Management, LLC

While the post-election rally in U.S. markets in late 2016 was largely attributed to the new administration’s stimulus promises, strengthening underlying economic data—including employment, durable goods, and home sales—and strong business fundamentals propelled the continued rise in U.S. growth equities in the second quarter of 2017.
In Europe, Emmanuel Macron’s victory in the French presidential election was perceived as salving the populist sentiment sweeping Europe, leading to gains in stocks and the Euro. Improving data—including eurozone nominal Gross Domestic Product (GDP) growth, Purchasing Managers’ Index readings, and a strengthening German business environment—further supported gains in shares. These developments likely contributed to a renewed interest in European equities, as seen in record flows into equity funds.
For emerging markets, equities (as measured by the MSCI Emerging Markets Index) rose in the second quarter, largely driven by the Information Technology sector. Unlike in 2016, when Energy and Materials were among the index’s largest contributors, 2017 has thus far seen a resurgence in growth-oriented sectors in emerging markets, including Information Technology and Consumer Discretionary. In addition, the U.S. Dollar fell nearly 5% during the quarter, providing a tailwind for emerging markets more broadly.
The Harbor Global Leaders Fund advanced in the second quarter, returning 8.96% and outperforming its benchmark, the MSCI All Country World (ND) Index, which advanced 4.27%. The Information Technology and Industrials sectors were the top contributors to relative investment results, due to stock selection. The strength of the businesses in the Information Technology sector continued in the second quarter, as positive investor sentiment and solid business results from the sector buoyed share prices globally. Consumer Discretionary was the only sector that detracted, also due to stock selection. On a country basis, stock selection made the United States the top contributor, whereas lack of exposure to Switzerland detracted the most.
Sands Capital Management’s comments were presented in a July, 2017 report. Highlights adapted from the report appear below. All comments relate to the quarter ended June 30, 2017, unless otherwise indicated. All references to the year-to-date are for the period January 1 through June 30, 2017.

Interview Highlights

Sector and Country Weightings Remained Stable
Our sector and country allocations, which are by-products of our bottom-up investment approach, did not change materially during the quarter. At the end of the second quarter, the largest sector overweights relative to the Fund’s benchmark were Consumer Discretionary and Information Technology, while the largest sector underweights were Financials and Energy. From a regional perspective, the largest country overweights during the quarter were France and China; the United Kingdom and Japan were the largest underweights.
Focused on Fundamental Strengths
For our U.S. businesses, we believe the biggest factor that impacted our portfolio during the second quarter was investors’ continued focus on fundamentals. Macro-level developments positively affected our portfolio, but did not change our outlook. Given the long-term and business-focused nature of our investment approach, we tend not to make calls on the direction of the market. Instead, we remain focused on the fundamental strengths and long-term growth prospects of our portfolio businesses, which are typically independent of macro events and/or conditions. We are optimistic about the growth prospects of the businesses in the Fund’s portfolio. We believe that they are positioned to potentially deliver strong results and earnings growth over our five-year investment horizon.

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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.

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