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Global Growth Fund —
Global Growth Fund posts solid Q4, returns 41% for 2013
4th Quarter, 2013
"Heading into 2014, the market pendulum appears poised to swing back in favor of high-quality growth companies — names that have been able to post improving fundamentals in a variety of market environments. "
– Marsico

The Harbor Global Growth Fund concluded a strong year with a double-digit percentage gain in the fourth quarter of 2013. The Fund returned 11.34% for the three months ended December 31, 2013, and 41.36% for the calendar year.
The Fund outperformed its benchmark, the MSCI All Country World (ND) Index, by substantial margins for both the quarter and full year. The index returned 7.31% for the fourth quarter and 22.80% for the year. Favorable stock selection was the primary driver of outperformance relative to the index for both periods. In the fourth quarter, Fund returns surpassed those of the benchmark in seven of nine sectors, with especially strong relative performance in Industrials and Consumer Discretionary stocks.
Leading individual contributors to Fund returns in the fourth quarter included Information Technology holdings Qiwi and Google, aircraft engine manufacturer Rolls-Royce, and Health Care names Gilead Sciences and Biogen Idec. Detractors from performance in the quarter included Latin American e-commerce company MercadoLibre and athletic apparel retailer Lululemon Athletica, both of which were eliminated from the portfolio.
Portfolio Managers Thomas Marsico and James Gendelman believe that equity investors have begun to place greater emphasis on company-by-company performance, rather than on macroeconomic and geopolitical factors. This kind of environment, in their view, should present opportunities for active portfolio managers to identify individual stocks with potential to outperform the broad market.
The investment team's comments were made in a January 13, 2014, report. Highlights adapted from the report appear below. All comments relate to the quarter ended December 31, 2013, unless otherwise indicated. All references to year-to-date are for the period January 1 through December 31, 2013.

Interview Highlights

Improving fundamentals
Heading into 2014, the market pendulum appears poised to swing back in favor of high-quality growth companies — names that have been able to post improving fundamentals in a variety of market environments. We believe we are entering a period of low inflation, lower correlations among stocks, and modest economic growth.
Aircraft upgrades
Within the Industrials sector, the Fund's holdings continue to emphasize investments in companies that we believe are poised to benefit from increased air travel. The global wide-body aircraft fleet is undergoing a replacement cycle as an aging existing fleet is being replaced by more-fuel-efficient aircraft. Airbus Group, Lockheed Martin, and aircraft engine manufacturer Rolls-Royce each made a material, positive contribution to performance results in the fourth quarter.
IT holdings
Information Technology holdings Qiwi and Google rose 80% and 28%, respectively in the fourth quarter. Qiwi is Russia's leading online payment processor. The company's stock price rose after it announced strong increases in revenue from its e-wallet business, a payment service similar to PayPal. Google's stock was bolstered by an acceleration in online spending and increased product advertisements on mobile devices.
Economic Outlook
Even while allowing for modest growth expectations for the global economy, select companies appear poised to outperform their peers. Such companies feature steadily expanding earnings, strong cash flows, increasing margins, rising market share, improving profitability, development of innovative products, and effective allocation of capital to fuel further growth. These are the characteristics of companies we seek to hold in the Fund.
Stock-picking opportunities
In the unfolding market environment marked by more-modest returns for many stocks, we believe that individual equities have more of an opportunity to excel. This makes active portfolio management all the more essential for investors seeking to outperform broad benchmarks.

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.