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Global Value Fund —
Global equity markets aided by central bank strategies
1st Quarter, 2013
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"The first quarter saw a number of significant developments that for the most part were supportive of the equity markets. "
– Harry Hartford

The Harbor Global Value Fund posted a return of 6.40% for the first quarter of 2013. Continued easing by central banks around the world provided a favorable environment for global equities in the quarter, in the view of Harry Hartford, President of Causeway Capital Management LLC and a Portfolio Manager of the Harbor Global Value Fund. Causeway has managed the Fund since May 25, 2012.
Shares representing a variety of industries were among the top performers in the portfolio, Hartford reports. These included NASDAQ, Reed Elsevier, Novartis, Anadarko Petroleum, and Johnson & Johnson. The biggest detractor was Dutch mail and parcel delivery company PostNL.
The Fund trailed its benchmark the MSCI World (ND) Index, a measure of global equities including the U.S., which registered a return of 7.74%. Virtually every sector in the index had positive returns, with only Materials losing ground in the quarter. Energy stocks weighed on Fund performance in the first quarter but attractive valuations have led the investment team to increase the portfolio's exposure to Energy names in recent months, Hartford reports.
The comments by Harry Hartford were made in an April 10, 2013, interview. Highlights adapted from the interview appear below. All comments relate to the quarter ended March 31, 2013, unless otherwise indicated. All references to year-to-date are for the period January 1 through March 31, 2013.

Interview Highlights

Positive factors
In addition to the generous supply of inexpensive credit from central banks, the quarter also was characterized by a trend that started in Q4, namely an expectation of improvements in economic activity, particularly in China. I think that led to a more risk-on approach on the part of investors, especially in January and February.
Increased Energy exposure
As value managers, we are finding opportunities in Energy stocks at this point in time. Many of the stocks are trading at single-digit earnings multiples with dividend yields ranging from 4% to 6%. We have been gradually increasing our exposure to Energy in the last three to six months. In Q1 we added two energy stocks to the portfolio, Royal Dutch Shell and Imperial Oil.
Money supply
The first quarter saw a number of significant developments that for the most part were supportive of the equity markets. Number one as it relates to equities was the continued generous supply of cheap money from central banks; and obviously the Fed is at the forefront of that.
Moderate expectations
With equities in a number of regions trading at or above previous highs, valuation opportunities today are somewhat harder to find. As a result, our expectations for returns are quite moderate and stock selection is paramount.
Japan richly valued
Although we have 8% to 9% of the portfolio in stocks domiciled in Japan, the valuation argument for increasing our exposure to Japanese securities is a very difficult one to make. From our perspective it is the most expensive developed market.

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.