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Previous: HARDING LOEVNER FUNDS INC, NSAR-B, 1997-12-30 |
Next: GE LIFESTYLE FUNDS, N-1A/A, 1997-12-30 |
Harding, Loevner Funds, Inc.
Annual Report
October 31, 1997
Portfolios managed by
Harding, Loevner Management, L.P.
International Equity Portfolio
Global Equity Portfolio
Multi-Asset Global Portfolio
Distributor:
AMT Capital Services, Inc.
600 Fifth Avenue, New York, New York 10020
Telephone (212) 332-5210 Facsimile (212) 332-5190
<PAGE>
Harding, Loevner Funds, Inc.
===============================================================================
President's Letter
===============================================================================
December 3, 1997
Dear Shareholder:
We are pleased to present the Annual Report to
Shareholders for the fiscal periods ended October 31, 1997.
We greatly appreciate your participation in the
Harding, Loevner Funds. We welcome the opportunity to
discuss the objectives and results of our funds. Please do
not hesitate to contact us with questions or comments
regarding this report, or for assistance in general.
Sincerely,
/s/ David R. Loevner
David R. Loevner
President
<PAGE>
Performance Information and Statements of Net Assets
International Equity Portfolio........................................1
Global Equity Portfolio...............................................7
Multi-Asset Global Portfolio.........................................13
Statements of Operations....................................................19
Statements of Changes in Net Assets.........................................20
Financia Highlights.........................................................22
Notes to Financial Statements...............................................24
Report of Independent Auditors..............................................29
Supplemental Tax Information................................................30
<PAGE>
Graph
<PAGE>
Harding, Loevner Funds, Inc.
===============================================================================
International Equity Portfolio - Statement of Net Assets
===============================================================================
===============================================================================
October 31, 1997
===============================================================================
<TABLE>
<S> <C> <C>
Long-Term Investments - 96.0%
Common Stocks - 94.0%
Shares Value (1)
--------------- ----------------
Argentina - 1.4%
Quilmes Industrial SA - ADR (Foods/Beverages)
75,600 $ 935,550
Quilmes Industrial SA (Foods/Beverages)
344,600 4,307,500
-----------------
5,243,050
-----------------
Bermuda - 1.4%
PartnerRe Ltd. (Insurance)
136,300 5,588,300
-----------------
Canada - 2.8%
Imperial Oil Ltd. (Oil/Gas)
175,100 10,899,975
-----------------
France - 5.2%
Financiere et Industrielle Gaz et Eaux (Diversified Holdings)
20,215 8,145,688
Michelin (CGDE) - Class B (Manufacturing)
229,748 11,807,631
-----------------
19,953,319
-----------------
Germany - 8.9%
Bayer AG (Chemicals)
324,000 11,399,163
Daimler-Benz AG (Automotive)
127,100 8,536,898
Deutsche Bank AG (Financial)
223,600 14,667,411
-----------------
34,603,472
-----------------
Hong Kong - 5.7%
Hutchison Whampoa Ltd. (Diversified Holdings)
1,921,000 13,295,407
Johnson Electric Holdings Ltd. (Electrical Equipment)
3,240,824 8,846,234
-----------------
22,141,641
-----------------
Japan - 16.7%
Atlantis Japan Growth Fund (Investment Company)*
727,000 3,283,568
Canon, Inc. (Office Equipment)
480,000 11,655,717
Hirose Electric Co., Ltd. (Electrical Equipment)
145,400 9,491,809
Honda Motor Co. Ltd. (Automotive)
126,000 4,243,659
Kurita Water Industries Ltd. (Manufacturing)
397,000 6,999,085
Mitsubishi Corp. (Distribution/Wholesale)
805,000 6,895,218
Mitsubishi Heavy Industries Ltd. (Aerospace)
1,654,000 8,129,015
Denso Corp. (Electrical Equipment)
478,000 10,335,135
Tokio Marine & Fire Insurance Co. (Insurance)
350,000 3,492,724
--------------------
64,525,930
--------------------
Malaysia - 0.9%
Nestle Berhad (Foods/Beverages)
667,000 3,374,940
-------------------
Mexico - 1.8%
Kimberly-Clark de Mexico, SA de CV (Manufacturing)
1,621,300 7,084,753
</TABLE>
Harding, Loevner Funds, Inc.
==============================================================================
International Equity Portfolio - Statement of Net Assets (continued)
October 31, 1997
==============================================================================
<TABLE>
<S> <C> <C>
Shares Value (1)
---------------- ----------------
Netherlands - 11.9%
IHC Caland NV (Transportation)
143,000 $8,806,581
ING Groep NV (Financial)
207,300 8,714,127
Royal Dutch Petroleum Co. - ADR (Oil/Gas)
320,000 16,840,000
Wolters Kluwer NV (Publishing)
95,100 11,693,749
----------------
46,054,457
----------------
Singapore - 2.6%
Acer Computer International Ltd. (Computers)
610,000 719,800
Courts Ltd. (Retail)
907,500 357,579
Development Bank of Singapore (Financial)
966,000 9,024,594
----------------
10,101,973
----------------
South Africa - 1.7%
LibLife Strategic Investments Ltd. (Diversified Holdings)
2,147,800 6,695,137
----------------
Spain - 3.2%
Banco Intercontinental Espanol (Financial)
253,000 12,436,627
----------------
Sweden - 4.0%
Investor AB - Class B (Holding Company)
335,500 15,661,004
----------------
Switzerland - 13.9%
ABB AG - Registered Shares (Engineering)
58,400 15,148,180
Nestle SA - ADR (Foods/Beverages)
214,300 15,139,566
Novartis AG (Pharmaceuticals)
6,935 10,778,668
SGS Societe Generale de Surveillance Holding SA - Registered Shares
(Commercial Services) 32,250 12,594,046
----------------
53,660,460
----------------
Thailand - 0.6%
The Siam Cement Co., Ltd. (Manufacturing/Distribution)
282,500 2,403,358
----------------
United Kingdom - 11.3%
Glaxo Wellcome plc - ADR (Pharmaceuticals) 200,000 8,562,500
Railtrack Group plc (Transportation/Rail) 649,000 10,374,669
Rentokil Initial plc (Commercial Services)
3,621,000 14,577,277
Rio Tinto plc (Mining)
801,000 10,318,828
----------------
43,833,274
----------------
Total Common Stocks - (Cost - $357,074,071)
364,261,670
----------------
Rights & Warrants - 0.0%
Acer Computer Int'l. Ltd. Warrants Expiring 7/31/01 (Singapore)* 112,000 14,236
Atlantis Japan Growth Fund Warrants Expiring 4/30/10 (Japan)* 53,000 18,815
---------------
Total - (Cost - $43,680) 33,051
----------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Face Amount Value (1)
----------- -----------------
Convertible Bonds - 2.0%
Bangkok Bank Public Co., 3.250% due 3/3/04 (Thailand) $ 8,400,000 $ 4,494,000
Keppel FELS Ltd., 1.500% due 5/2/01 (Singapore) 3,840,000 3,316,800
-------------------
Total - (Cost - $12,385,595) 7,810,800
-------------------
Total Long-Term Investments - (Cost - $369,503,346) 372,105,521
-------------------
Cash Equivalents - 2.1%
Investors Bank & Trust Company Repurchase Agreement, 5.250% due 11/3/97
in the amount of $8,001,058; Issued 10/31/97 (Collateralized by
$3,190,259 par of Federal Home Loan Mortgage Corp. ARM #876432, 7.871%
due 2/1/24; $1,734,409 par of Federal National Mortgage Assoc. ARM
#158615, 7.600% due 4/1/22; $3,110,233 par of Federal National Mortgage
Assoc. ARM #223556, 7.929% due 7/1/23; with a total market value
$8,397,612)
(Cost - $7,997,560) 7,997,560 7,997,560
------------------
Total Investments - 98.1% (Cost - $377,500,906) 380,103,081
------------------
Other Assets Net of Liabilities - 1.9%
Foreign Currency Holdings (Cost - $5,206)
4,596
Other assets 12,803,923
Payable to Investment Adviser
(3,536)
Other liabilities (5,603,797)
----------------------
Other assets and liabilities, net 7,201,186
----------------------
Net Assets - 100.0%
Applicable to 32,837,636 outstanding $.001 par value
shares
(authorized 500,000,000 shares) $ 387,304,267
=====================
Net Asset Value, Offering and Redemption Price Per Share
$11.79
------------
Components of Net Assets as of October 31, 1997 were as follows:
Capital Stock at par value ($.001)
$32,838
Capital Stock in excess of par value 379,729,409
Undistributed investment income, net 2,760,244
Accumulated net realized gain on investments and foreign currency-related
transactions 2,200,364
Net unrealized appreciation on investments and on
assets and liabilities denominated in foreign currencies 2,581,412
------------------
$387,304,267
</TABLE>
* non-income producing security
(1) See Note 2 to Financial Statements
ADR American Depositary Receipt
ARM Adjustable Rate Mortgage
See Notes to Financial Statements
<PAGE>
GRAPH
<PAGE>
Harding, Loevner Funds, Inc.
===============================================================================
Global Equity Portfolio - Statement of Net Assets
===============================================================================
October 31, 1997
<TABLE>
<S> <C> <C>
Long-Term Investments - 98.4%
Common Stocks - 95.6%
Shares Value (1)
---------------- -------------------------
Argentina - 1.0%
Quilmes Industrial SA (Foods/Beverages)
50,000 $ 625,000
-------------------------
Bermuda - 1.6%
PartnerRe Ltd. (Insurance)
25,000 1,025,000
-------------------------
France - 2.6%
Financiere et Industrielle Gaz et Eaux (Diversified
Holdings) 4,175 1,682,327
-------------------------
Germany - 6.2%
Bayer AG (Chemicals)
30,000 1,055,478
Daimler-Benz AG (Automotive)
20,000 1,343,336
Deutsche Bank AG (Financial)
25,000 1,639,916
-------------------------
4,038,730
-------------------------
Hong Kong - 4.8%
Hutchison Whampoa Ltd. (Diversified Holdings)
266,000 1,841,009
Johnson Electric Holdings Ltd. (Electrical Equipment)
480,000 1,310,220
-------------------------
3,151,229
-------------------------
Japan - 6.2%
Atlantis Japan Growth Fund (Investment Company)*
150,000 677,490
Canon, Inc. (Office Equipment)
50,000 1,214,137
Hirose Electric Co., Ltd. (Electrical Equipment)
10,000 652,807
Mitsubishi Corp. (Distribution/Wholesale)
175,000 1,498,960
-------------------------
4,043,394
-------------------------
Malaysia - 0.8%
Nestle Berhad (Foods/Beverages)
100,000 505,988
-------------------------
Mexico - 1.0%
Kimberly-Clark de Mexico, SA de CV (Manufacturing)
150,000 655,470
-------------------------
Netherlands - 6.9%
Royal Dutch Petroleum Co. - ADR (Oil/Gas) 50,000 2,631,250
Wolters Kluwer NV (Publishing) 15,000 1,844,440
4,475,690
-------------------------
South Africa - 0.9%
LibLife Strategic Investments Ltd. (Diversified Holdings) 196,957 613,956
-------------------------
</TABLE>
<PAGE>
Harding, Loevner Funds, Inc.
===============================================================================
Global Equity Portfolio - Statement of Net Assets (continued)
October 31, 1997
===============================================================================
<TABLE>
<S> <C> <C>
Shares Value (1)
--------------- ---------------------
Sweden - 2.9%
Investor AB - Class B (Holding Company) 40,000 $1,867,184
---------------------
Switzerland - 8.0%
ABB AG - Registered Shares (Engineering)
7,000 1,815,706
Nestle SA - ADR (Foods/Beverages)
20,000 1,412,932
SGS Societe Generale de Surveillance Holding SA - Registered Shares
(Commercial Services) 5,000 1,952,566
---------------------
5,181,204
---------------------
Thailand - 0.4%
The Siam Cement Co., Ltd. (Manufacturing/Distribution)
30,000 255,224
---------------------
United Kingdom - 6.7%
Railtrack Group plc (Transportation/Rail)
75,000 1,198,921
Rentokil Initial plc (Commercial Services)
400,000 1,610,304
Rio Tinto plc (Mining)
120,000 1,545,892
---------------------
4,355,117
---------------------
United States - 45.6%
Airgas, Inc. (Manufacturing/Distribution)*
70,000 1,089,375
Allied Capital Corp. (Investment Company)
100,285 2,055,843
Allied Signal, Inc. (Aerospace/Defense)
40,000 1,440,000
Baxter International, Inc. (Medical Products)
35,000 1,618,750
Boeing Co. (Aerospace/Defense)
25,000 1,196,875
Colgate-Palmolive Co. (Consumer Products)
25,000 1,618,750
Deere & Co. (Manufacturing)
25,000 1,315,625
Dover Corp. (Manufacturing)
40,000 2,700,000
Exxon Corp. (Oil/Gas)
35,000 2,150,313
FNMA (Financial)
50,000 2,421,875
Motorola, Inc. (Electronics)
25,000 1,543,750
Pfizer, Inc. (Pharmaceuticals)
20,000 1,415,000
Schlumberger, Ltd. (Oil/Gas)
30,000 2,625,000
ServiceMaster LP (Commercial Services)
37,500 897,656
Thermo Electron Corp. (Manufacturing)*
60,000 2,238,750
Union Pacific Resources Group, Inc. (Oil/Gas)
21,173 521,385
Wellman, Inc. (Manufacturing)
25,000 507,812
Wisconsin Central Transportation Corp. (Transportation/Rail)*
20,000 622,500
Wrigley (WM) Jr. Co. (Foods/Confectionery)
22,000 1,592,250
---------------------
29,571,509
---------------------
Total Common Stocks - (Cost - $47,446,923) 62,047,022
---------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Shares Value (1)
-------------------- ------------------------
Rights & Warrants - 0.1%
Atlantis Japan Growth Fund Warrants Expiring 4/30/10 (Japan)* 16,000 $ 5,680
Scania AB Warrants Expiring 6/4/99 (Sweden)* 30,000 29,693
------------------------
Total - (Cost - $179,125) 35,373
------------------------
Fixed Income - 2.7%
Face Amount
--------------------
Thailand - 1.2%
Bangkok Bank Public Co. CVT, 3.250% due 3/3/04 $ 1,500,000 802,500
------------------------
United States - 1.5%
JP Morgan Co. FRN, 5.616% due 2/15/12 1,000,000
966,419
------------------------
Total Fixed Income - (Cost - $2,353,355)
1,768,919
------------------------
Total Long-Term Investments - (Cost - $49,979,403)
63,851,314
------------------------
Cash Equivalents - 1.9%
Investors Bank & Trust Company Repurchase Agreement, 5.250% due
11/3/97
in the amount of $1,213,014; Issued 10/31/97
(Collateralized by
$1,215,688 par of Federal Home Loan Mortgage Corp. ARM
#876859, 8.042% due 5/1/24 with a market value of
$1,273,229)
(Cost - $1,212,484) 1,212,484
1,212,484
------------------------
Total Investments - 100.3% (Cost - $51,191,887)
65,063,798
------------------------
Other Assets Net of Liabilities - (0.3%)
Receivable from Investment Adviser
1,273
Other assets
1,274,862
Other liabilities
(1,457,799)
------------------------
Other assets and liabilities, net
(181,664)
------------------------
Net Assets - 100.0%
Applicable to 3,470,453 outstanding $.001 par value shares
(authorized 500,000,000 shares) $64,882,134
========================
Net Asset Value, Offering and Redemption Price Per Share
$ 18.70
========================
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Components of Net Assets as of October 31, 1997 were as follows:
Capital Stock at par value ($.001)
$3,470
Capital Stock in excess of par value 43,950,505
Undistributed investment income, net 571,273
Accumulated net realized gain on investments and foreign currency-related
transactions 6,491,735
Net unrealized appreciation on investments and on
assets and liabilities denominated in foreign currencies
13,865,151
----------------------------
$ 64,882,134
============================
</TABLE>
<PAGE>
GRAPH
<PAGE>
Harding, Loevner Funds, Inc.
===============================================================================
Multi-Asset Global Portfolio - Statement of Net Assets
October 31, 1997
===============================================================================
<TABLE>
<S> <C> <C>
Long-Term Investments - 95.9%
Common Stocks- 60.1%
Shares Value (1)
--------- ---------------------
France - 2.9%
Financiere et Industrielle Gaz et Eaux (Diversified
Holdings) 274 $ 110,409
Michelin (CGDE) - Class B (Manufacturing)
800 41,115
---------------------
151,524
---------------------
Germany - 4.5%
Bayer AG (Chemicals)
2,500 87,957
Deutsche Bank AG (Financial)
2,200 144,313
---------------------
232,270
---------------------
Hong Kong - 3.1%
Dairy Farm International Holdings Ltd.
(Retail/Manufacturing/Wholesale) 80,000 63,200
Hutchison Whampoa Ltd. (Diversified Holdings)
14,000 96,895
---------------------
160,095
---------------------
Japan - 4.0%
Atlantis Japan Growth Fund (Investment Company)*
7,000 31,616
Canon, Inc. (Office Equipment)
3,000 72,848
Mitsubishi Corp. (Distribution/Wholesale)
12,000 102,786
---------------------
207,250
---------------------
Netherlands - 4.3%
Royal Dutch Petroleum Co. - ADR (Oil/Gas)
3,200 168,400
Wolters Kluwer NV (Publishing)
450 55,333
---------------------
223,733
---------------------
Sweden - 2.7%
Investor AB - Class B (Holding Company)
3,000 140,039
---------------------
Switzerland - 7.1%
ABB AG - Registered Shares (Engineering)
420 108,943
Nestle SA - ADR (Foods/Beverages)
2,000 141,293
SGS Societe Generale de Surveillance Holding SA -
Registered Shares 300 117,154
(Commercial Services)
---------------------
367,390
---------------------
Thailand - 0.3%
The Siam Cement Co., Ltd. (Manufacturing/Distribution) 1,500 12,761
----------------------
United Kindom - 3.2%
Rentokil Initial plc (Commercial Services) 19,000 76,489
Rio Tinto plc (Mining) 7,000 90,177
----------------------
166,666
----------------------
</TABLE>
<PAGE>
Harding, Loevner Funds, Inc.
===============================================================================
Multi-Asset Global Portfolio - Statement of Net Assets (continued)
October 31, 1997
===============================================================================
<TABLE>
<S> <C> <C>
Shares Value (1)
------------------ -----------------------
United States - 28.0%
Allied Capital Corp. (Aerospace/Defense) 5,013 $102,766
Boeing Co. (Aerospace/Defense) 1,200 57,450
Colgate-Palmolive Co. (Consumer Products) 1,800 116,550
Deere & Co. (Manufacturing) 1,700 89,462
Dover Corp. (Manufacturing) 2,200 148,500
Exxon Corp. (Oil/Gas) 2,700 165,882
FNMA (Financial) 2,900 140,469
Johnson & Johnson (Medical Products) 1,800 103,275
Motorola, Inc. (Electronics) 1,000 61,750
Royce OTC Micro-Cap Trust, Inc. (Investment Company) 9,000 97,875
Schlumberger, Ltd. (Oil/Gas) 1,600 140,000
Thermo Electron Corp. (Manufacturing)* 3,000 111,938
Wisconsin Central Transportation Corp. (Transportation/Rail)* 1,600 49,800
Wrigley (WM) Jr. Co. (Foods/Confectionery) 900 65,137
-----------------------
1,450,854
-----------------------
Total Common Stocks - (Cost - $2,825,316) 3,112,582
-----------------------
Rights & Warrants - 0.0%
Atlantis Japan Growth Fund Warrants Expiring 4/30/10 (Japan)* 400 142
Scania AB Warrants Expiring 6/4/99 (Sweden)* 2,000 1,980
-----------------------
Total - (Cost - $2,711) 2,122
-----------------------
Fixed Income - 35.8%
Face Amount
------------------
Singapore - 0.7%
Keppel FELS Ltd., CVT., 1.500% due 5/02/01 $ 40,000 34,550
---------------------
South Africa - 1.8%
Republic of South Africa, 12.000% due 2/28/05 ZAR 500,000 92,370
---------------------
Thailand - 0.9%
Bangkok Bank Public Co. CVT, 3.250% due 3/3/04
$ 82,000 43,870
---------------------
United Kingdom - 2.0%
United Kingdom Treasury, 7.000% due 6/7/02 GBP 60,000 101,997
---------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Face Amount Value (1)
------------------ ----------------------
United States - 30.4%
Capital Cities/ABC, Inc., 8.750% due 8/15/21 $ 25,000 30,282
Comcast Corp., 10.625% due 7/15/12 100,000 122,500
GNMA Pool #18730, 8.000% due 8/15/07 14,957 15,518
GNMA Pool #390577, 7.000%, due 6/15/09 111,916 113,875
GNMA Pool #249503, 8.500% due 5/15/18 19,418 20,346
GNMA Pool #1471, 9.500% due 9/20/20 12,426 13,323
GNMA Pool #447624, 7.500% due 6/15/27 149,466 152,782
GPA Delaware, Inc., 8.750% due 12/15/98 50,000 50,750
Rockefeller Center Property CVT, 0.000% due 12/31/00 100,000 71,000
U.S. Treasury Inflation Index Note, 3.425% due 1/15/07 300,000 300,367
U.S. Treasury Note, 6.375% due 5/15/99 150,000 151,594
U.S. Treasury Note, 8.750% due 8/15/00 125,000 134,687
U.S. Treasury Note, 7.875% due 8/15/01 25,000 26,781
U.S. Treasury Note, 7.000% due 7/15/06 250,000 268,203
U.S. West Cap Funding, Inc., 6.950% due 1/15/37 100,000 102,354
------------------------
1,574,362
------------------------
Total Fixed Income - (Cost - $1,860,883) 1,847,149
------------------------
Total Long-Term Investments - (Cost - $4,688,910) 4,961,853
------------------------
Cash Equivalents - 4.4%
Investors Bank & Trust Company Repurchase Agreement, 5.250% due 11/3/97
in the amount of $228,413; Issued 10/31/97 (Collateralized by $232,325
par of Federal Home Loan Mortgage Corp. CMT Floater, 5.610% due 2/25/22
with a market value of $239,728)
(Cost - $228,313) 228,313 228,313
------------------------
Total Investments - 100.3% (Cost - $4,917,223) 5,190,166
------------------------
Other Assets Net of Liabilities - (0.3%)
Other assets 120,112
Payable to Investment Adviser (3,825)
Other liabilities (131,223)
------------------------
Other assets and liabilities, net (14,936)
------------------------
Net Assets - 100.0%
Applicable to 459,587 outstanding $.001 par value shares
(authorized 500,000,000 shares) $ 5,175,230
========================
Net Asset Value, Offering and Redemption Price Per Share $ 11.26
========================
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Components of Net Assets as of October 31, 1997 were as follows:
Capital Stock at par value ($.001)
$ 460
Capital Stock in excess of par value 4,712,665
Undistributed investment income, net 95,505
Accumulated net realized gain on investments and foreign currency-related
transactions 94,387
Net unrealized appreciation on investments and on
assets and liabilities denominated in foreign currencies 272,213
=======================
$ 5,175,230
</TABLE>
* non-income producing security
(1) See Note 2 to Financial Statements
ADR American Depositary Receipt
CMT Collateralized Mortgage Trust
CVT Convertible Bond
GBP Great British Pound
GNMA Government National Mortgage Association
ZAR South African Rand
See Notes to Financial Statements
<PAGE>
Harding, Loevner Funds, Inc.
===============================================================================
Statements of Operations
===============================================================================
October 31, 1997
<TABLE>
<S> <C> <C> <C>
Global Equity Multi-Asset Global
International Portfolio Portfolio
Equity Portfolio For the Period From For the Period From
Year Ended December 1, 1996* November 1, 1996*
October 31, 1997 to October 31, 1997 to October 31, 1997
--------------------------- ---------------------------- ------------------------
Investment Income
Interest $ 1,414,906 $ 354,790 $ 108,769
Dividends (net of withholding taxes of
$780,087, $83,889 and $4,078, respectively) 5,932,505 1,115,564 60,707
--------------------------- ---------------------------- ------------------------
Total investment income 7,347,411 1,470,354 169,476
--------------------------- ---------------------------- ------------------------
Expenses
Investment advisory fees 2,652,732 639,251 45,226
Administration fees 530,546 95,888 6,774
Custodian fees 337,148 50,881 12,924
Shareholder recordkeeping fees 40,131 15,975 1,711
Legal fees 26,841 5,819 667
Audit fees 25,667 21,500 21,500
Directors' fees and expenses 39,018 8,553 500
Insurance expense 9,274 1,530 -
State registration filing fees 10,127 3,567 3,817
SEC filing fees 29,883 14,788 1,388
Organizational costs 14,564 11,711 3,155
Other fees and expenses 33,375 6,239 273
--------------------------- ---------------------------- ------------------------
Total operating expenses 3,749,306 875,702 97,935
Waiver of investment advisory fee (212,334) (76,638) (41,402)
--------------------------- ---------------------------- ------------------------
Net operating expenses 3,536,972 799,064 56,533
Investment expense 9,860 - -
--------------------------- ---------------------------- ------------------------
Total expenses 3,546,832 799,064 56,533
--------------------------- ---------------------------- -----------------------
Investment income, net 3,800,579 671,290 112,943
--------------------------- ---------------------------- ------------------------
Realized and unrealized gain (loss) on
investments and foreign currency-
related transactions
- -----------------------------------------
Net realized gain from investments 2,200,364 6,498,456 80,702
Net realized gain (loss) from foreign currency-
related transactions (526,733) (57,428) 8,357
Net unrealized appreciation (depreciation)
on investments (6,099,751) (2,616,539) 272,943
Net unrealized (depreciation) on
translation of assets and liabilities
denominated in foreign currencies (15,722) (6,760) (730)
-------------------------- ---------------------------- -------------------------
Realized and unrealized gain (loss)
on investments and foreign
currency-related transactions (4,441,842) 3,817,729 361,272
-------------------------- ---------------------------- -------------------------
Net increase (decrease)
in net assets resulting
from operations
$ (641,263) $ 4,489,019 $ 474,215
========================== ============================ =========================
</TABLE>
*Commencement of Operations
<PAGE>
See Notes to Financial Statements
Harding, Loevner Funds, Inc.
===============================================================================
Statements of Changes in Net Assets
===============================================================================
<TABLE>
<S> <C> <C> <C>
International Equity
Portfolio
---------------------------------------------------------------------
For the For the Ten Months For the Year
Year Ended Ended Ended
October 31, 1997 October 31, 1996 December 31, 1995
---------------------- ------------------------ --------------------
Increase (Decrease) in Net Assets from Operations
Investment income, net $ 3,800,579 $ 1,541,518 436,280
Net realized gain (loss) from investments and foreign
currency-related transactions 1,673,631 2,679,097 (324,304)
Net unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities denominated
in foreign currencies (6,115,473) 4,804,186 3,956,823
---------------------- ------------------------ --------------------
Net increase (decrease) in net assets resulting
from operations (641,263) 9,024,801 4,068,799
---------------------- ------------------------ --------------------
Distributions to Shareholders from:
Investment income, net 59,386 1,541,518 407,463
Excess of investment income, net - 649,872 -
Net realized gain from investments and foreign
currency-related transactions - 2,144,787 -
---------------------- ------------------------ --------------------
Total distributions 59,386 4,336,177 407,463
---------------------- ------------------------ --------------------
Capital Share Transactions, Net 146,647,680 168,942,060 55,161,338
---------------------- ------------------------ --------------------
Net increase in net assets 145,947,031 173,630,684 58,822,674
Net Assets
Beginning of period 241,357,236 67,726,552 8,903,878
---------------------- ------------------------ ---------------------
End of period $ 387,304,267 $ 241,357,236 $67,726,552
====================== ======================== ====================
Undistributed (Distributions in excess of)
Investment Income, $ 2,760,244 $ (460,403) $ 4,694
Net
====================== ======================== ====================
</TABLE>
See Notes to Financial Statements
<PAGE>
Harding, Loevner Funds, Inc.
================================================================================
Statements of Changes in Net Assets (continued)
================================================================================
<TABLE>
<S> <C> <C>
Global Equity Multi-Asset Global
Portfolio Portfolio
--------------------------------- ------------------------
For the Period From For the Period From
December 1, 1996* November 1, 1996*
to October 31, 1997 to October 31, 1997
---------------------------------- -----------------------
Increase (Decrease) in Net Assets from Operations
Investment income, net $ 671,290 $ 112,943
Net realized gain from investments and foreign
currency-related transactions 6,441,028 89,059
Net unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities
denominated in foreign currencies (2,623,299) 272,213
---------------------------------- -----------------------
Net increase in net assets resulting
from operations 4,489,019 474,215
---------------------------------- -----------------------
Distributions to Shareholders from:
Investment income, net 49,310 12,110
---------------------------------- ----------------------
Capital Share Transactions, Net 60,442,425 4,713,125
---------------------------------- ----------------------
Net increase in net assets 64,882,134 5,175,230
Net Assets
Beginning of period - -
---------------------------------- -----------------------
End of period $ 64,882,134 $5,175,230
================================== ======================
Undistributed Investment Income, Net $ 571,273 $ 95,505
================================= ========================
</TABLE>
* Commencement of operations
See Notes to Financial Statements
<PAGE>
Harding, Loevner Funds, Inc.
===============================================================================
Financial Highlights
October 31, 1997
<TABLE>
<S> <C> <C> <C> <C><C> <C>
International Equity Portfolio
---------------------------------------------------------------------------------------
For the Year For the Ten Months For the Year For the Period
Ended Ended Ended Ended
October 31, 1997 October 31, 1996 December 31, 1995 December 31, 1994*
- -----------------------------------------------------------------------------------------------------------------------------------
Per Share Data
Net asset value, beginning of period
$ 11.61 $ 10.77 $ 9.71 $10.00
Increase (Decrease) in Net Assets
from Operations
Investment income, net 0.13 0.08 0.10 0.04
Net realized and unrealized gain (loss)
on investments and foreign
currency-related transactions 0.05 (d) 0.97 1.06 (0.29)
------------------ -------------------- ------------------ ---------------------
Net increase (decrease) from
investment operations 0.18 1.05 1.16 (0.25)
------------------ -------------------- ------------------ ---------------------
Distributions to Shareholders from:
Investment income, net 0.00 (c) 0.08 0.10 0.03
Excess of investment income, net - 0.03 - -
Net realized gain from investments
and foreign currency-related
transactions - 0.10 - -
Excess of net realized gain on investments
and foreign currency-related
transactions - - - 0.01
------------------ -------------------- ------------------ ---------------------
Total distributions 0.00 0.21 0.10 0.04
------------------ -------------------- ------------------ ---------------------
Net asset value, end of period $ 11.79 $ 11.61 $10.77 $ 9.71
================== ==================== ================== =====================
Total Return 1.57% 9.81% (b) 11.99% (2.47%) (b)
Ratios/Supplemental Data
Net assets, end of period (000's) $ 387,304 $ 241,357 $ 67,727 $8,904
Ratio of net operating expenses to
average net assets 1.00% 1.00% (a) 0.99% 0.95% (a)
Ratio of investment income, net to
average net assets 1.07% 1.29% (a) 1.30% 1.13% (a)
Decrease reflected in above expense
ratios due to waiver of investment
advisory and administration fees,
and reimbursement of other expenses 0.06% 0.14% (a) 0.54% 1.33% (a)
Portfolio turnover 31% 17% 28% 27%
Average commission rate paid** $ 0.0374 $ 0.0229 N/A N/A
</TABLE>
(a) Annualized
(b) Not Annualized
(c) Rounds to less than $0.01
(d) Includes the effect of net realized gains prior to a significant increase
in shares outstanding.
* Commencement of Operations was May 11, 1994
** For fiscal years beginning November 1, 1995, the Portfolio is required to
disclose its average commission rate per share for purchases and sales of
investment securities.
See Notes To Financial Statements
<PAGE>
Harding, Loevner Funds, Inc.
==============================================================================
Financial Highlights
===============================================================================
October 31, 1997
<TABLE>
<S> <C> <C>
Global Equity Portfolio Multi-Asset Global
Portfolio
--------------------------- ----------------------------
For the Period From For the Period From
December 1, 1996* to November 1, 1996** to
October 31, 1997 October 31, 1997
- ---------------------------------------------------------------------------------------------------------------------------------
Per Share Data
Net asset value, beginning of period $ 17.58(a) $ 10.00
Increase in Net Assets from Operations
Investment income, net 0.19 0.25
Net realized and unrealized gain on investments
and foreign currency-related transactions 0.94 1.04
--------------------------- ----------------------------
Net increase from investment operations 1.13 1.29
--------------------------- ----------------------------
Distributions to Shareholders from:
Investment income, net 0.01 0.03
--------------------------- ----------------------------
Net asset value, end of period
$ 18.70 $11.26
=========================== ============================
Total Return 6.45%(b) 12.92%
Ratios/Supplemental Data
Net assets, end of period (000's) $ 64,882 $ 5,175
Ratio of net operating expenses to average net assets 1.25% (c) 1.25%
Ratio of investment income, net to
average net 1.05% (c) 2.50%
assets
Decrease reflected in above expense ratios due to waiver
of investment advisory fees 0.12% (c) 0.92%
Portfolio turnover 39% 36%
Average commission rate paid ***
$ 0.0346 $ 0.0367
</TABLE>
(a) The beginning net asset value of the Portfolio was equal to the total Net
Asset Value, as converted, of the outstanding Partnership Units
of Harding, Loevner Management, L.P.'s - Global Equity Limited Partnership
("GELP") as of November 30, 1996 (See Note 8 to Financial Statements).
(b) Not Annualized
(c) Annualized
* Commencement of Operations was December 1, 1996 following a tax free merger
with GELP which was formed on September 27, 1991.
** Commencement of Operations was November 1, 1996.
*** Represents average commission rate paid per share for purchases and sales of
investment securities
See Notes to Financial Statements
<PAGE>
Harding, Loevner Funds, Inc.
===============================================================================
Notes to Financial Statements
===============================================================================
October 31, 1997
1. Organization
Harding, Loevner Funds, Inc. (the "Fund") was organized as a Maryland
corporation on July 31, 1996 and is registered under the Investment Company
Act of 1940, as amended, as an open-end diversified management investment
company. The Fund currently has four Portfolios, three of which were active
as of October 31, 1997. The three active Portfolios are: International
Equity Portfolio ("International Equity"); Global Equity Portfolio ("Global
Equity"); and Multi-Asset Global Portfolio ("Multi-Asset Global"). The
investment objective of each portfolio is as follows: International Equity
- - to seek long-term capital appreciation through investments in equity
securities of companies based outside the United States; Global Equity - to
seek long-term capital appreciation through investments in equity securities
of companies based both in and outside the United States and; Multi-Asset
Global - to seek long-term capital appreciation and a growing stream of
income through investments in equity and debt securities of companies based
both in and outside the United States and debt securities of the United
States and foreign governments and their agencies and instrumentalities.
International Equity, previously the HLM International Equity Portfolio of
the AMT Capital Fund, Inc. (the "AMT Capital Portfolio"), commenced
investment operations on May 11, 1994. Effective as of the close of
business on October 31, 1996, the AMT Capital Portfolio merged into
International Equity pursuant to shareholder approval of the tax-free
reorganization. Global Equity commenced operations on December 1, 1996
following the acquisition of net assets of Harding, Loevner Management,
L.P's - Global Equity L. P. ("GELP"), a limited partnership, in a tax free
reorganization. Multi-Asset Global commenced operations on November 1,
1996. The Fund is managed by Harding, Loevner Management, L.P. (the
"Investment Adviser").
2. Summary of Significant Accounting Policies
Securities
All securities transactions are recorded on a trade date basis. Interest
income and expenses are recorded on an accrual basis. Dividend income is
recorded on the ex-dividend date. The Fund amortizes discount or accretes
premium on a daily basis to interest income. The Fund uses the specific
identification method for determining gain or loss on sales of securities.
Income Tax
It is the policy of each Portfolio of the Fund to qualify as a regulated
investment company, if such qualification is in the best interest of its
shareholders, by complying with the applicable provisions of the Internal
Revenue Code, and to make distributions of taxable income sufficient to
relieve it from substantially all Federal income and excise taxes.
Valuation
All investments in the Fund are valued daily at their market price, which
results in unrealized gains or losses. Securities traded on an exchange are
valued at their last sales price on that exchange. Securities for which no
sales are reported are valued at the latest bid price obtained from a
quotation reporting system or from established market makers. Repurchase
agreements are valued at their amortized cost plus accrued interest.
Securities for which market quotations are not readily available are valued
by the Board of Directors. As of October 31, 1997, there were no securities
in the Fund which required valuation by the Board of Directors.
Expenses
Expenses directly attributed to a specific Portfolio of the Fund are charged
to that Portfolio's operations; expenses not directly attributable to a
specific Portfolio are allocated among the Portfolios either equitably or
based on their average daily net assets.
Dividends to Shareholders
It is the policy of the Fund to declare dividends from net investment income
annually. Net short-term and long-term capital gains distributions for the
Portfolios, if any, normally are distributed on an annual basis.
Dividends from net investment income and distributions from net realized
gains from investment transactions have been determined in accordance with
income tax regulations and may differ from net investment income and
realized gains recorded by the Portfolios for financial reporting purposes.
Differences result primarily from foreign currency transactions and timing
differences related to recognition of income, and gains and losses from
investment transactions. To the extent that any differences which are
permanent in nature result in overdistributions to shareholders, the amount
of the overdistribution is reclassified within the capital accounts based on
its federal tax basis treatment. Temporary differences do not require
reclassification. Dividends and distributions which exceed net investment
income and net realized capital gains for financial reporting purposes but
not for tax purposes are reported as distributions in excess of net
investment income and net realized capital gains, respectively. To the
extent that they exceed net investment income and net realized gains for tax
purposes, they are reported as returns of capital.
<PAGE>
Harding, Loevner Funds, Inc.
================================================================================
Notes to Financial Statements (continued)
October 31, 1997
===============================================================================
2. Summary of Significant Accounting Policies (continued)
During the periods ended October 31, 1997, the Portfolios reclassified the
following permanent book to tax differences [increases (decreases)]:
<TABLE>
<S> <C> <C> <C>
Undistributed Investment Accumulated Net Capital Stock
Portfolio Income, Net Realized Gain (Loss) in Excess of Par Value
International Equity $ (520,546) $ 526,733 $ (6,187)
Global Equity (50,707) 50,707 -
Multi-Asset Global (5,328) 5,328 -
</TABLE>
Currency Translation
Assets and liabilities denominated in foreign currencies and commitments
under forward exchange currency contracts are translated into U.S. dollars at
the mean of the quoted bid and asked prices of such currencies against the
U.S. dollar. Purchases and sales of portfolio securities are translated
at the rates of exchange prevailing when such securities were acquired
or sold. Income and expenses are translated at exchange rates prevailing
when accrued. The Fund does not isolate that portion of the results
of operations resulting from changes in foreign exchange rates on
investments from the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
Net realized gains and losses from foreign currency-related transactions
arise from sales of foreign currency, currency gains or losses realized
between the trade and settlement dates on securities transactions, and the
difference between the amounts of dividends, interest, and foreign
withholding taxes recorded on the Portfolio's books, and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized
appreciation or depreciation on translation of assets and liabilities
denominated in foreign currencies arise from changes in the value of
assets and liabilities other than investments in securities at the
period end, resulting from changes in the exchange rate. At October 31, 1997,
International Equity, Global Equity and Multi-Asset Global had balances of
$18,294, $4,898 and $651, respectively, representing net unrealized
depreciation related to the changes in the exchange rate in the value of other
assets and liabilities excluding foreign currency, forward foreign currency
contracts, and investments.
Estimates
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the
financial statements. Actual results could differ from those estimates.
3. Investment Advisory Agreement and Affiliated Transactions
The Fund"s Board of Directors has approved investment advisory
agreements (the "Agreements") with the Investment Adviser. In addition,
the Fund has an administration agreement with AMT Capital Services, Inc.,
which assists in managing and supervising all aspects of the Portfolios
other than investment advisory activities. The advisory fee and
administration fees are computed daily at an annual rate of .75% and .15%,
respectively, of the average daily net assets of International Equity, and
1.00% and .15%, respectively, for
each of Global Equity and Multi-Asset Global. The Investment Adviser has
voluntarily agreed to reduce its fee to the extent that aggregate expenses
(exclusive of brokerage commissions, other investment expenses, interest
on borrowings, taxes and extraordinary expenses) exceed an annual rate of
1.00%, 1.25%, and 1.25%, respectively, of the average daily net assets of
International Equity, Global Equity and Multi-Asset Global.
Directors' fees and expenses of $48,071 were accrued for the period ended
October 31, 1997 to directors who are not employees of the Investment Adviser.
4. Investment Transactions
During the year ended October 31, 1997, Global Equity received
$201,000 in capital gain distributions from other investment companies held
during the year which is included in realized gains from investments.
<PAGE>
4. Investment Transactions (continued)
Purchase cost and proceeds from sales of investment securities, other than
short-term investments, for the periods ended October 31, 1997 were as follows
for each of the Portfolios:
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------------------------------
Purchase Cost of Proceeds from Sales of
Portfolio Investment Securities Investment Securities
- ----------------------------------------------------------------------------------------
International Equity $ 247,162,035 $ 101,517,268
Global Equity 25,978,044 32,542,643
Multi-Asset Global 6,174,990 1,573,103
</TABLE>
The cost of investments for Federal income tax purposes and the components
of net unrealized appreciation on investments at October 31, 1997 for each
of the Portfolios were as follows:
<TABLE>
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
Tax Basis Unrealized Unrealized
Portfolio of Investments Appreciation Depreciation Net
- -------------------------------------------------------------------------------------------------------------
International Equity $ 378,077,227 $ 38,001,379 $ 35,975,525 $ 2,025,854
Global Equity 51,422,900 18,137,868 4,496,970 13,640,898
Multi-Asset Global 4,921,056 440,581 171,471 269,110
</TABLE>
5. Forward Foreign Exchange Contracts
The Portfolios, on occasion, enter into forward foreign exchange contracts in
order to hedge their exposure to changes in foreign currency exchange rates
on their foreign portfolio holdings. A forward foreign exchange contract
is a commitment to purchase or sell a foreign currency at a future date at a
negotiated forward rate. The gain or loss arising from the difference
between the cost of the original contracts and the closing of such
contracts is included in net realized gains or losses on foreign
currency-related transactions. Fluctuations in the value of forward foreign
exchange contracts are recorded for book purposes as unrealized appreciation
or depreciation on assets and liabilities denominated in foreign
currencies by the Portfolio. The Portfolios are also exposed to
credit risk associated with counter party nonperformance on these
forward foreign exchange contracts which is typically limited to the
unrealized gain on each open contract.
At October 31, 1997, International Equity had the following outstanding forward
foreign exchange contracts:
<TABLE>
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
Contract Unrealized
Amount Currency Cost Value (Depreciation)
- ----------------------------------------------------------------------------------------------------------------------------
Forward Foreign Exchange Buy Contracts
Netherlands Guilder closing 11/3/97 $ 1,969,224 $ 1,967,365 $ (1,859)
3,813,600
============================
At October 31, 1997, Global Equity had the following outstanding forward foreign exchange contracts:
- ----------------------------------------------------------------------------------------------------------------------------
Unrealized
Contract Appreciation
Amount Currency Cost/Proceeds Value (Depreciation)
- ----------------------------------------------------------------------------------------------------------------------------
Forward Foreign Exchange Sell Contracts
130,066,497 Japanese Yen closing 11/4/97 $ 1,080,646 $ 1,082,255 $ (1,609)
Forward Foreign Exchange Buy Contracts
Japanese Yen closing 11/4/97
26,529,479 220,418 220,746 328
Netherlands Guilder closing 11/3/97 615,383 614,802 (581)
1,191,750
-----------------
$(1,862)
</TABLE>
<PAGE>
Harding, Loevner Funds, Inc.
===============================================================================
Notes to Financial Statements
==============================================================================
October 31, 1997
5. Forward Foreign Exchange Contracts (continued)
At October 31, 1997, Multi-Asset Global had the following outstanding forward
foreign exchange contracts:
<TABLE>
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
Unrealized
Contract Appreciation
Amount Currency Cost/Proceeds Value (Depreciation)
----------------------------------------------------------------------------------------------------------------------------
Forward Foreign Exchange Sell Contracts
6,503,325 Japanese Yen closing 11/4/97 $ 54,033 $ 54,113 $(80)
Forward Foreign Exchange Buy Contracts
4,244,716 Japanese Yen closing 11/4/97 35,267 35,320 53
Netherlands Guilder closing 11/3/97 55,384 55,332 (52)
---------------
107,258
$(79)
=================
</TABLE>
The Portfolios enter into foreign currency transactions on the spot markets in
order to pay for foreign investment purchases or to convert to dollars the
proceeds from foreign investment sales or coupon interest receipts.
There were no open foreign currency transactions to buy or sell currency on
the spot markets as of October 31, 1997.
6. Capital Share Transactions
Transactions in capital stock for International Equity were as follows for the
periods indicated:
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended Ten Months Ended Year Ended
October 31, 1997 October 31, 1996 December 31, 1995
------------------------------ ------------------------------ -----------------------------
Shares Amount Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------------------------
Shares sold 15,892,968 $ 194,937,235 14,950,392 $ 174,317,309 5,622,926 $57,519,473
Shares issued related to
reinvestment
of dividends 3,525 43,005 301,338 3,510,073 33,936 355,396
------------------------------ ------------------------------ -----------------------------
15,896,493 194,980,240 15,251,730 177,827,382 5,656,862 57,874,869
Shares redeemed 3,843,988 48,332,560 755,840 8,885,322 284,696 2,713,531
------------------------------ ------------------------------ -----------------------------
Net increase 12,052,505 $ 146,647,680 14,495,890 $ 168,942,060 5,372,166 $ 55,161,338
============================== ============================== =============================
</TABLE>
Transactions in capital stock for Global Equity were as follows for the period
indicated:
- ------------------------------------------------------------------------------
December 1, 1996*
to October 31, 1997
----------------------------------
Shares Amount
- ------------------------------------------------------------------------------
Shares issued related to acquisition of GELP 3,866,979 $67,977,294
Shares sold 209,562 3,734,452
Shares issued related to reinvestment
of dividends 2,220 38,964
----------------------------------
4,078,761 71,750,710
Shares redeemed 608,308 11,308,285
----------------------------------
Net increase 3,470,453 $ 60,442,425
==================================
* Commencement of operations
Transactions in capital stock for Multi-Asset Global were as follows for the
period indicated:
- --------------------------------------------------------------------------------
November 1, 1996*
to October 31, 1997
-----------------------------------
Shares Amount
- --------------------------------------------------------------------------------
Shares sold 458,497 $ 4,701,866
Shares issued related to reinvestment
of dividends 1,170 12,110
----------------------------------
459,667 4,713,976
Shares redeemed 80 851
----------------------------------
Net increase 459,587 $ 4,713,125
==================================
* Commencement of Operations
<PAGE>
7. Repurchase and Reverse Repurchase Agreements
Each Portfolio may enter into repurchase agreements under which a bank or
securitiesfirm that is a primary or reporting dealer in U.S. Government
securities agrees, upon entering into a contract, to sell such securities to
a Portfolio and repurchase such securities from such Portfolio at a mutually
agreed upon price and date.
Each Portfolio also is permitted to enter into reverse repurchase
agreements under which a primary or reporting dealer in U.S. Government
securities purchases securities from a Portfolio and such Portfolio agrees
to repurchase the securities at an agreed upon price and date.
Each Portfolio may engage in repurchase and reverse repurchase
transactions with parties selected on the basis of such party's
creditworthiness. Securities purchased subject to repurchase agreements
must have an aggregate market value greater than or equal to the repurchase
price plus accrued interest at all times. If the value of the underlying
securities falls below the value of the repurchase price plus accrued
interest, the Portfolio will require the seller to deposit additional
collateral by the next business day. If the request for additional
collateral is not met, or the seller defaults on its repurchase obligation,
the Portfolio maintains the right to sell the underlying securities at
market value and may claim any resulting loss
against the seller. When a Portfolio engages in reverse repurchase
agreement transactions, such Portfolio will maintain, in a segregated
account with its custodian, liquid securities equal in value to those subject
to the agreement.
8. Fund Mergers and Acquisitions
Effective as of the close of business on October 31, 1996, International
Equity received the net assets of the AMT Capital Portfolio pursuant to an
Agreement and Plan of Reorganization dated October 14, 1996. The
shareholders of the AMT Capital Portfolio approved the tax-free
reorganization on October 30, 1996. All assets and liabilities of the AMT
Capital Portfolio were transferred to International Equity.
Prior to the reorganization, International Equity had no operations.
Effective as of the close of business on November 30, 1996, Global Equity
acquired the net assets of GELP pursuant to approval of a tax-free
reorganization by the Limited Partners of GELP. The acquisition was
accomplished by a tax-free exchange of 38,670 units of GELP for 3,866,979
shares of Global Equity, in a 1:100 exchange on November 30, 1996. The
aggregate net assets of GELP and Global Equity immediately before the
acquisition were $67,977,294 (of which $16,488,450 represented
unrealized appreciation) and $0, respectively. Immediately after the
acquisition, the combined net assets amounted to $67,977,294.
<PAGE>
Harding, Loevner Funds, Inc.
===============================================================================
Report of Ernst & Young LLP, Independent Auditors
===============================================================================
Shareholders and Board of Directors
Harding, Loevner Funds, Inc.
We have audited the accompanying statements of net assets of Harding,
Loevner Funds, Inc. (comprising, the International Equity Portfolio,
the Global Equity Portfolio, and the Multi-Asset Global Portfolio) as
of October 31, 1997, and the related statements of operations for the
periods then ended and the statements of changes in net assets and
financial highlights for each of the periods indicated therein.
These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements
and financial highlights. Our procedures included confirmation of
securities owned as of October 31, 1997 by correspondence with the
custodian and others. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of each of the respective portfolios comprising
Harding, Loevner Funds, Inc., the results of their operations for the
periods then ended, and the changes in their net assets and the
financial highlights for each of the indicated periods, in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
New York, New York
December 3, 1997
<PAGE>
Harding, Loevner Funds, Inc.
===============================================================================
Supplemental Tax Information
===============================================================================
(unaudited)
The International Equity and Global Equity Portfolios have elected to pass
through the credit for taxes paid in foreign countries during its fiscal year
ended October 31, 1997. In accordance with current tax laws, the Foreign
Income and Foreign Tax per share (for a share outstanding on October 31, 1997)
is as follows:
International Equity Global Equity
Gross Gross
Foreign Foreign Foreign Foreign
Country Tax Dividends Tax Dividends
- -------------- ---------- ----------- --------------- -------------
Argentina 0.0000 0.0106 0.0000 0.0131
Bermuda 0.0000 0.0112 0.0000 0.0182
Canada 0.0000 0.0298 0.0000 0.0000
France 0.0654 0.0510 0.0669 0.0505
Germany 0.0769 0.0894 0.0727 0.0530
Hong Kong 0.0000 0.0933 0.0000 0.1278
Japan 0.0681 0.0528 0.0825 0.0623
Malaysia 0.1681 0.0648 0.2231 0.0840
Netherlands 0.2069 0.1452 0.1692 0.1274
Norway 0.0269 0.0208 0.0000 0.0000
Singapore 0.0884 0.0418 0.0423 0.0184
South Africa 0.0000 0.0266 0.0000 0.0250
Spain 0.0822 0.0637 0.0000 0.0000
Sweden 0.0244 0.0189 0.0812 0.0613
Switzerland 0.1092 0.1666 0.1393 0.2060
Thailand 0.0116 0.0135 0.0137 0.0155
United Kingdom 0.0719 0.1000 0.1091 0.1375
Shareholders will receive more detailed information along with their Form
1099-DIV in January 1997.
<PAGE>
Officers & Directors and Other Pertinent Information
Officers and Directors
Custodian and Fund
Accounting Agent
Investors Bank & Trust Company
P.O. Box 9130
Boston, MA 02117
Transfer and Dividend
Disbursing Agent
Investors Bank & Trust Company
P.O. Box 9130
Boston, MA 02117
Legal Counsel
Dechert Price & Rhoads
1500 K Street, N.W.
Washington, D.C. 20005-1208
Independent Auditors
Ernst & Young LLP
787 Seventh Avenue
New York, NY 10019
James C. Brady III
Director of the Fund
Jane A. Freeman
Director of the Fund
Carl W. Schafer
Director of the Fund
David R. Loevner
President and Director
of the Fund
William E. Vastardis
Secretary and Treasurer
of the Fund
Richard Reiter
Assistant Secretary
of the Fund
Carla E. Dearing
Assistant Treasurer
of the Fund
Investment adviser
Harding, Loevner Management, L.P.
50 Division Street, Suite 401
Somerville, NJ 08876
Administrator and
Distributor
AMT Capital Services, Inc.
600 Fifth Avenue, 26th Floor
New York, NY 10020
Custodian and Fund
Accounting Agent
Investors Bank & Trust Company
P.O. Box 9130
Boston, MA 02117
Transfer and Dividend
Disbursing Agent
Investors Bank & Trust Company
P.O. Box 9130
Boston, MA 02117
Legal Counsel
Dechert Price & Rhoads
1500 K Street, N.W.
Washington, D.C. 20005-1208
Independent Auditors
Ernst & Young LLP
787 Seventh Avenue
New York, NY 10019
<PAGE>
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<NAME> INTERNATIONAL EQUITY PORTFOLIO
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<NAME> GLOBAL EQUITY PORTFOLIO
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<NAME> MULTI-ASSET GLOBAL PORTFOLIO
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</TABLE>
Report of Independent Auditors
To the Shareholders and Board of Directors of
Harding, Loevner Funds, Inc.
In planning and performing our audit of the financial
statements of Harding, Loevner Funds, Inc. (comprised of the
International Equity, Global Equity and Multi-Asset Global
Portfolios) for the year ended October 31, 1997, we
considered its internal control, including control
activities for safeguarding securities, in order to
determine our auditing procedures for the purpose of
expressing our opinion on the financial statements and to
comply with the requirements of Form N-SAR, not to provide
assurance on the internal control.
The management of Harding, Loevner Funds, Inc. is
responsible for establishing and maintaining internal
control. In fulfilling this responsibility, estimates and
judgments by management are required to assess the expected
benefits and related costs of controls. Generally, controls
that are relevant to an audit pertain to the entit's
objective of preparing financial statements for external
purposes that are fairly presented in conformity with
generally accepted accounting principles. Those controls
include the safeguarding of assets against unauthorized
acquisition, use or disposition.
Because of inherent limitations in internal control, errors
or irregularities may occur and not be detected. Also,
projection of any evaluation of internal control to future
periods is subject to the risk that it may become inadequate
because of changes in conditions or that the effectiveness
of the design and operation may deteriorate.
Our consideration of the internal control would not
necessarily disclose all matters in the internal control
that might be material weaknesses under standards
established by the American Institute of Certified Public
Accountants. A material weakness is a condition in which
the design or operation of one or more of the internal
control components does not reduce to a relatively low level
the risk that errors or irregularities in amounts that would
be material in relation to the financial statements being
audited may occur and not be detected within a timely period
by employees in the normal course of performing their
assigned functions. However, we noted no matters involving
the internal control and its operation, including controls
for safeguarding securities, that we consider to be material
weaknesses as defined above at October 31, 1997.
This report is intended solely for the information and use
of the board of directors and management of Harding, Loevner
Funds, Inc. and the Securities and Exchange Commission.
ERNST & YOUNG LLP
New York, New York
December 3, 1997
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