ADVISORY AGREEMENT APPROVALS—Continued
The Trustees considered the expertise of Jennison Associates LLC (“Jennison”) in managing assets generally and specifically with respect to the Fund’s asset class, noting that Jennison managed approximately $52.8 billion in assets in this asset class, out of a firm-wide total of approximately $160.7 billion in assets under management. The Trustees also noted the experience of the Fund’s portfolio managers in this asset class, noting that one was a founding member of Jennison, as well as the addition of two portfolio managers to the Fund’s portfolio management team.
The Trustees observed that the Broadridge comparison of contractual management fees for the Fund’s expense group, assuming an asset level of $29.55 billion, showed that the Fund’s contractual management fee was above the group median for the Institutional Class. The actual total expense ratio for the Institutional Class of the Fund, however, was below both the group and universe medians. The Trustees also considered that Harbor Capital had agreed to continue the Fund’s existing contractual fee waiver arrangement until at least February 29, 2020. The Trustees noted that Harbor Capital’s profitability in operating the Fund was not excessive.
Harbor Strategic Growth Fund. The Trustees considered Harbor Strategic Growth Fund (inception date March 1, 2017) and its Institutional Class performance (including predecessor fund performance) in relation to its Broadridge universe and group for the one-, three- and five-year periods ended December 31, 2018, noting that according to the Broadridge data, Harbor Strategic Growth Fund had underperformed its group median for the one- and three-year periods and its universe median for the one-, three- and five-year periods ended December 31, 2018. The Fund had outperformed its group median for the five-year period ended December 31, 2018. The Fund’s one-, three- and five-year rolling returns as of December 31, 2018 each ranked in the third quartile, according to Morningstar. The Trustees also considered that the Fund had underperformed its benchmark, the Russell 1000® Growth Index, for the one-, three- and five-year periods ended December 31, 2018.
The Trustees considered the expertise of Mar Vista Investment Partners, LLC (“Mar Vista”) in managing assets generally and specifically with respect to the Fund’s asset class, noting that Mar Vista had approximately $4.2 billion in assets under advisement in this asset class, out of a firm-wide total of approximately $5.0 billion in assets under advisement. The Trustees also noted the experience of the Fund’s portfolio managers in this asset class, noting that Mar Vista had also managed the predecessor fund since 2011, prior to its reorganization into Harbor Strategic Growth Fund.
The Trustees observed that the Broadridge comparison of contractual management fees for the Fund’s expense group, assuming an asset level of $75 million, showed that the Fund’s contractual management fee was below the group median for the Institutional Class. The actual total expense ratio for the Institutional Class of the Fund was also below both the group and universe medians. The Trustees also considered that Harbor Capital had agreed to a contractual fee waiver/expense reimbursement arrangement with respect to the Fund that will be effective until at least February 29, 2020. The Trustees noted that Harbor Capital’s profitability in operating the Fund was not excessive.
Harbor Mid Cap Growth Fund. The Trustees considered Harbor Mid Cap Growth Fund (inception date November 1, 2000), noting that, according to the Broadridge report, the Fund’s Institutional Class had outperformed its Broadridge group and universe medians for the one-, three - and five-year periods ended December 31, 2018. The Trustees considered the fact that, in comparison to its universe of other mid cap growth funds, as identified by Morningstar, the Fund’s one-, three- and five-year rolling returns ranked in the first, second and second quartiles, respectively, as of December 31, 2018. The Trustees also considered that the Fund had outperformed its benchmark, the Russell Midcap® Growth Index, for the one- and three-year periods ended December 31, 2018, while underperforming its benchmark index for the five- year period ended December 31, 2018.
The Trustees considered the expertise of Wellington Management Company LLP (“Wellington”) in managing assets generally and in the mid cap growth asset class specifically, noting that Wellington managed approximately $2.5 billion in assets in this asset class, out of a firm-wide total of approximately $1.0 trillion in assets under management. The Trustees noted the experience of the Fund’s portfolio managers in this asset class.
The Trustees observed that the Broadridge comparison of contractual management fees for the Fund’s expense group, assuming an asset level of $350 million, showed that the Fund’s contractual management fee was below the group median for the Institutional Class. The Broadridge data also showed that the actual total expense ratio for the Fund’s Institutional Class was below both the group and universe medians. The Trustees noted that Harbor Capital’s profitability in managing the Fund was not excessive.
Harbor Small Cap Growth Fund. The Trustees considered Harbor Small Cap Growth Fund (inception date November 1, 2000), noting that according to the Broadridge report, the Fund’s Institutional Class underperformed its group median for the one- and three-year periods and its universe median for the one-, three- and five-year periods ended December 31, 2018. The Fund slightly outperformed its group median for the five-year period ended December 31, 2018. The Morningstar data presented ranked the Fund’s one-, three- and five-year rolling returns as of December 31, 2018 in the fourth, fourth and third quartiles, respectively. The Trustees also considered the fact that Harbor Small Cap Growth Fund had underperformed its benchmark, the Russell 2000® Growth Index, for the one-, three- and five-year periods ended December 31, 2018.
