HARDING, LOEVNER FUNDS, INC.
Annual Report
October 31, 1998
Portfolios managed by
Harding, Loevner Management, L.P.
International Equity Portfolio
Global Equity Portfolio
Multi-Asset Global Portfolio
600 Fifth Avenue
26th Floor
New York, NY 10020
Harding, Loevner Funds, Inc.
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
December 3, 1998
Dear Shareholder:
Enclosed is the Annual Report to Shareholders for the fiscal year ended October
31, 1998, as required by regulation.
Our regular quarterly narrative discussing developments in the calendar quarter
ended December 31, 1998, will be sent to you shortly.
Sincerely,
David R. Loevner
President
Harding, Loevner Funds, Inc.
- ------------------------------------------------------------------------------
Table of Contents
- ------------------------------------------------------------------------------
Performance Information and Statements of Net Assets
International Equity Portfolio.........................................1
Global Equity Portfolio................................................6
Multi-Asset Global Portfolio..........................................11
Statements of Operations.....................................................16
Statements of Changes in Net Assets..........................................17
Financial Highlights.........................................................19
Notes to Financial Statements................................................21
Report of Independent Auditors...............................................25
Supplemental Tax Information.................................................26
Harding, Loevner Funds, Inc.
- ------------------------------------------------------------------------------
International Equity Portfolio - Overview
October 31, 1998
- ------------------------------------------------------------------------------
[Graph] Comparison of Changes of $10,000 Investment in Harding, Loevner Funds,
Inc. - International Equity Portfolio And The MSCI All Country World
Ex-US Index (Gross Dividends Reinvested) And The Lipper International
Equity Fund Index. This is an x-y line graph with x being the date
(starting 5/11/94 and ending at 10/31/98) and y being the value of
the $10,000 investment in the Fund and the Lipper International Equity
Fund Index. At 10/31/98 the value of the $10,000 investment in the
Fund was $12,189 and the value of the same investment in the Lipper
International Equity Fund Index was $13,820 and the value of the
same investment in the MSCI All Country World Ex-US Index was $12,558.
<TABLE>
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
Returns For the Periods Ended October 31, 1998
Cumulative Total Return Average Annual Total Return
------------------------------------------------- -------------------------------
Twelve Months Since Inception* Since Inception*
International Equity Portfolio 0.06% 21.89% 4.52%
MSCI All Country World Ex-US Index 4.52% 25.58% 5.22%
(gross dividends reinvested)
Lipper International Equity Fund Index 4.64% 38.20% 7.50%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------
* The International Equity Portfolio [formerly the AMT Capital Fund, Inc. - HLM
International Equity Portfolio ("AMT Capital Portfolio")] commenced operations
on May 11, 1994. On October 31, 1996, the net assets of the AMT Capital
Portfolio were merged into the International Equity Portfolio pursuant to an
agreement and plan of reorganization dated October 14, 1996.
- ------------------------------------------------------------------------------
The International Equity Portfolio provided a total return of 0.06% for
the twelve months ended October 31, 1998. The Portfolio and its predecessor, the
HLM International Equity Portfolio of the AMT Capital Fund, Inc., have provided
an annualized return of 4.52%, since the latter's inception on May 11, 1994. The
Portfolio's benchmark, the MSCI All Country World ex-US Index, returned 4.52%
for the fiscal year, and 5.22% for the period since inception. An index of
international equity mutual funds compiled by Lipper returned 4.64% and 7.50%
for the same periods, respectively. As of December 3, 1998, the net assets of
the Portfolio are $333 million.
Review
The past twelve months have been difficult for the International Equity
Portfolio. Returns from the Portfolio trailed the passive and active indices by
similar amounts. The primary reasons for
this under-performance are:
First, Southeast Asian markets were poor. The Portfolio had holdings
throughout the year in Thailand, but sold Malaysian stocks before the imposition
of capital controls in that country. Prices in Singapore were also weak.
Overall, returns from Southeast Asian holdings were negative, but losses were
much mitigated by the excellent performance of the Portfolio's holdings in Hong
Kong, where Johnson Electric and Li & Fung's share prices ended the year at
close to their all-time highs.
Second, emerging markets were weak overall and the Portfolio had
significant exposure. In addition to those from holdings in Southeast Asia,
returns were negative in Latin America (Mexico and Argentina) and from the
single holding in South Africa. Overall, returns would have been 2% higher if
the Portfolio had had no emerging market holdings. Our objective is to build a
diversified portfolio of high quality companies, whose stocks trade at
reasonable prices. The fundamental attractions of companies in emerging markets
remain, based upon economies that will, over the long term, grow faster than
developed ones. The Portfolio attractions also remain -- emerging markets still
provide the opportunity to diversify portfolio risk, despite fears that they
would become increasingly correlated with developed markets. On a cyclical
basis, markets in Southeast Asia appear to have seen their worst: current
account surpluses are re-emerging, and the subsequent restoration of liquidity
has enabled interest rates to fall sharply across the region. Currency and stock
markets have recovered sharply in these circumstances despite widespread
cynicism from the pundits. It remains difficult to find companies that meet our
qualitative criteria, but in recent months we have bought a number of holdings
in companies such as Singapore media and publishing company, Singapore Press,
and regional retailer Dairy Farm. Prices have been savaged, and, as the
operating environment improves, the prospects for very high rates of return are
good.
Finally, European markets were generally good, but our stock selection
was poor. The exception to this was in the UK, where returns were far higher
than those of the market averages, paced by Railtrack, and by Rentokil Initial.
On the Continent, our holdings in lowly-valued, cyclical companies hurt absolute
returns as well as relative ones. Prices of stocks in companies such as
Michelin, IHC, ABB and Surveillance were down in absolute terms during the year.
Sentiment was damaged initially by their exposure to Southeast Asia, and then by
the fears of a more widespread slowdown in economic activity that followed the
Russian debt default and subsequent contraction in credit availability.
Market instability enabled us to do two things. First, we bought shares
for the first time in companies we have long admired at, finally, reasonable
prices. Examples are French consumer goods manufacturer, Bic, and Hays, the
English distribution and logistics company. Second, we added to positions in
companies where we see the possibility of secular growth even in a slowing
economic environment, but where the market is skeptical. Examples are WPP, the
global advertising giant, CBT, the software training company, and Luxottica, the
Italian eyeglass manufacturer with extensive retail interests in the United
States.
The savage downturn in global financial markets in the second half of
the year raised the risks of severe economic downturn, and widespread
deflationary conditions. To date, the response of monetary authorities led by
the Federal Reserve and the Bank of England has been wholely appropriate, and
has restored confidence to financial markets. The Portfolio companies' strong
management, and great financial strength will enable them to cope successfully
with a more difficult environment. Just as importantly, it will enable them to
prosper. Ultimately, the success of the Portfolio depends on the success of the
companies in which it invests. We believe the stocks are attractively priced,
and that the next year promises to be one in which returns will be high.
Harding, Loevner Funds, Inc.
- -------------------------------------------------------------------------------
International Equity Portfolio-Statement of Net Assets
October 31, 1998
<TABLE>
<S> <C> <C>
Value (1)
- -------------------------------------------------------------------------------
Long Term Investments - 93.3%
Common Stocks - 93.3%
Argentina - 0.9%
Quilmes Industrial SA (Foods/Beverages) 348,600 $ 2,963,100
------------------
Australia -2.5%
Rio Tinto Ltd. (Mining) 661,400 8,254,669
------------------
Bermuda -1.4%
PartnerRe Ltd. (Insurance) 114,300 4,543,425
------------------
Canada - 2.1%
Imperial Oil Ltd. (Oil/Gas) 441,000 6,945,750
------------------
France - 7.4%
Bic (Manufacturing) 135,000 8,323,118
Financiere et Industrielle Gaz et Eaux (Diversified Holdings) 178,050 7,857,413
Michelin (CGDE) - Class B (Manufacturing) 192,748 7,957,040
------------------
------------------
24,137,571
------------------
Germany 3.6%
Allianz AG (Insurance) 20,100 6,898,369
SGL Carbon AG (Chemicals) 60,200 4,765,075
------------------
11,663,444
------------------
Hong Kong - 6.8%
Dairy Farm International Holdings (Retail/Manufacturing/Wholesale) 2,800,000 3,444,000
Hutchison Whampoa Ltd. (Diversified Holdings) 1,085,000 7,774,514
Johnson Electric Holdings (Electrical Equipment) 3,183,648 7,398,575
Li & Fung Ltd. (Distribution/Wholesale) 2,336,000 3,649,293
------------------
------------------
22,266,382
------------------
Ireland - 0.7%
CBT Group plc - ADR (Computers)* 174,000 2,077,125
------------------
Italy - 1.0%
Luxottica Group SpA - ADR (Optical Supplies) 367,500 3,307,500
------------------
Japan - 10.8%
Atlantis Japan Growth Fund (Investment Company)* 600,000 1,882,260
Canon, Inc. (Office Equipment) 403,000 7,623,670
Denso Co. Ltd. (Electrical Equipment) 403,000 7,589,096
Hirose Electric (Electrical Equipment) 122,000 7,065,031
Kurita Water Industries (Manufacturing) 370,000 4,920,213
Mitsubishi Corp. (Distribution/Wholesale) 545,000 2,884,909
Tokio Marine & Fire Insurance Co. (Insurance) 293,000 3,330,688
------------------
------------------
35,295,867
------------------
Mexico - 2.3%
Desc Sociedad de Fomento Industrial SA de CV (Chemicals)* 3,577,000 3,287,814
Kimberly-Clark de Mexico SA de CV (Manufacturing) 1,424,400 4,167,053
------------------
------------------
7,454,867
------------------
Netherlands - 11.7%
IHC Caland NV (Transportation) 171,640 $ 7,767,972
ING Groep NV (Financial) 180,200 8,724,803
Royal Dutch Petroleum Co. - NY Shares (Oil/Gas) 275,000 13,543,750
Wolters Kluwer NV (Publishing) 42,500 8,240,051
------------------
------------------
38,276,576
------------------
Singapore - 3.2%
Development Bank of Singapore (Financial) 1,231,900 7,716,870
Singapore Press Holdings Ltd. (Publishing) 333,000 2,863,109
------------------
10,579,979
------------------
South Africa - 1.3%
LibLife Strategic Investments Ltd. (Diversified Holdings) 1,792,995 4,290,381
------------------
Spain - 2.0%
Banco Intercontinental Espana (Financial) 217,100 6,656,951
------------------
Sweden - 3.4%
Investor AB - Class B (Holding Company) 281,700 10,963,194
------------------
Switzerland - 15.1%
Abb Ag Namen (Engineering) 49,000 11,938,866
Nestle SA - ADR (Foods/Beverages) 147,400 15,675,135
Novartis AG (Pharmaceuticals) 5,815 10,481,555
SGS Societe Generale de Surveillance Holding SA - Class R (Commercial Services) 26,510 5,186,909
United Bank of Switzerland (Financial) 21,200 5,814,973
------------------
------------------
49,097,438
------------------
Thailand - 1.5%
The Siam Cement Co., Ltd. (Manufacturing/Distribution) 380,700 4,770,417
------------------
United Kingdom - 15.6%
Glaxo Wellcome plc - ADR (Pharmaceuticals) 162,100 10,090,725
Hays plc (Distribution) 230,000 3,389,494
Pearson plc (Multimedia) 462,800 8,071,211
Railtrack Group plc (Transportation/Rail) 423,000 11,363,000
Rentokil Initial plc (Commercial Services) 2,072,000 12,701,554
WPP Group plc (Advertising) 1,032,000 5,095,412
------------------
50,711,396
------------------
Total Common Stocks - (Cost - $302,936,403) 304,256,032
------------------
Total Long-Term Investments - (Cost - $302,936,403) 304,256,032
------------------
Cash Equivalents - 6.6% Face Amount
- ----------------------- -----------
Investors Bank & Trust Company Repurchase Agreement, 4.77% due 11/2/98 in the
amount of $21,500,194; Issued 10/30/98 (collateralized by $10,000,000 par of
Federal Home Loan Mortgage Corporation FHR 1977 D, 7.00% due 06/15/11 with a
market value of $10,356,389, $10,303,640 par of Federal National Mortgage
Association CMT FLTR 92-4 F, 4.57% due 12/25/21 with a market value of
$10,506,567 and $1,645,038 par of Federal National Mortgage Association FN
238568, 7.89% due 12/1/23 with a market value of $1,703,296)
(Cost - $21,491,651) $ 21,491,651 21,491,651
------------------
Total Investments - 99.9% (cost - $324,428,054) $ 325,747,683
------------------
Other Assets, Net of Liabilities - 0.1%
Other assets $ 1,176,022
Payable to Investment Adviser (35,890)
Other liabilities (831,511)
------------------
308,621
------------------
Net Assets - 100%
Applicable to 28,070,832 outstanding $.001 par value shares
(authorized 500,000,000 shares) $ 326,056,304
==================
Net Asset Value, Offering and Redemption Price Per Share $ 11.62
==================
Components of Net Assets as of October 31, 1998 were as follows:
Capital Stock at par value ($.001) $ 28,071
Capital Stock in excess if par value 322,320,447
Undistributed investment income, net 3,740,249
Distributions in excess of net realized gain on investments
and foreign currency-related transactions (1,406,805)
Net unrealized appreciation in investments and on
assets and liabilities denominated
in foreign currencies 1,374,342
------------------
==================
$ 326,056,304
==================
</TABLE>
* Non-income producing security
ADR American Depositary Receipt
(1) See Note 2 to Financial Statements
See Accompanying Notes to Financial Statements
Harding, Loevner Funds, Inc.
- -------------------------------------------------------------------------------
Global Equity Portfolio - Overview
October 31, 1998
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
- -------------------------------------------------------------------------------
[Graph] Comparison of Changes of $10,000 Investment in Harding, Loevner Funds,
Inc. - Global Equity Portfolio And The MSCI All Country World
Index (Gross Dividends Reinvested) And The Lipper Global
Equity Fund Index. This is an x-y line graph with x being the date
(starting 12/1/96 and ending at 09/30/98) and y being the value of
the $10,000 investment in the Fund and the Lipper Global Equity
Fund Index. At 09/30/98 the value of the $10,000 investment in the
Fund was $10,384 and the value of the same investment in the Lipper
Global Equity Fund Index was $11,907 and the value of the
same investment in the MSCI All Country World Index was $12,395.
Returns For the Periods Ended October 31, 1998
Cumulative Total Return Average Annual Total Return
------------------------------------------------- -------------------------------
Twelve Months Since Inception* Since Inception*
Global Equity Portfolio (2.46%) 3.84% 1.98%
MSCI All Country World Index 12.76% 23.95% 11.85%
(gross dividends reinvested)
Lipper Global Fund Index 5.73% 19.07% 9.53%
* The Global Equity Portfolio commenced operations on December 1, 1996.
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Portfolio commenced operations on December 1, 1996, following a tax
free merger with Harding, Loevner Management's Global Equity LP. For the fiscal
year ended October 31, 1998, the HLF Global Equity Portfolio provided a total
return of (2.46%). The MSCI All Country World Index increased 12.76% over the
same period, while the Lipper Global Fund Index increased 5.73%. As of December
3, 1998, net assets of the Portfolio are $30 million.
Harding, Loevner Funds, Inc.
=============================================================================
Global Equity Portfolio - Overview
=============================================================================
October 31, 1998
Review
The past twelve months have been troublesome for the Global Equity
Portfolio. Returns from the Portfolio have been poor in absolute terms, and
have lagged both passive and peer benchmarks by considerable margins.
Our style of fundamental financial analysis and valuation measures
proved ineffective in producing absolute equity returns in the face of
overwhelming investor flows driven by sentiment and momentum. The stocks of
our US companies--which comprise 45% of the Portfolio--lost 5% in the year,
while the S&P 500 gained 22%. Our concern about the overvaluation of the
"mega-cap" stocks that have driven the increasingly narrow bull market run
in the US has led us to select US stocks that we believed were
comparatively undervalued and hence offered the possibility for returns in
excess of those offered by the "Nifty 20" stocks in the S&P 500. This
approach led directly to the Portfolio's underperformance for the year, as
the US portion of the Portfolio--characterized by the stocks of
reasonably-valued, cyclical companies (Wellman, Deere, Thermo Electron) and
natural resources companies (Schlumberger, Royal Dutch)--was responsible
for the majority of underperformance.
Our stock selection in Europe was the other material source of
underperformance. The broad European index gained 22% in the past twelve
months, while the European stocks in the Portfolio lost value as a whole.
In some measure, this poor performance was again due to issues of style: we
believe that companies with a global reach will provide better returns over
the long run than those with a purely local brief. This precept did not
generally hold in a year where financial accidents plagued countries and
companies around the world. Several of our large European holdings--CBT,
UBS and Surveillance among them--suffered dramatic share price reversals
over the year, as managements we thought capable proved unprepared to deal
effectively with the turmoil in sectors and regions deemed auspicious only
months ago.
Portfolio results from stocks in other regions were mixed: while
Japanese shares declined, reflecting the market's reaction to the halting
steps being taken to jump start the world's second largest economy, the
Portfolio's exposure to the country hovered around a low 5% during the
year. As a whole, emerging markets stocks were a drag on portfolio returns
for the year, but Southeast Asian stocks in the Portfolio performed well,
particularly in the economic entrepots of Singapore and Hong Kong, home now
to 9% of the Portfolio. We think that the benefits of bottom-up stock
picking are beginning to be felt again in the region: the Asia ex-Japan
domiciled stocks in the Portfolio returned 15% in the year, while the
corresponding index fell 15%.
In a year marked by global concerns of slowing growth and deflation,
and real or impending financial crises, investors have flocked to the
assets deemed less risky. In the US, that category today is made up of the
Treasury bond market and the household names of the S&P 500. However, as
market stability returns, in large part fostered by coordinated global
central bank efforts, we believe that the value represented by companies we
own--industry leaders with the competitive advantages of financial strength
and superior managements--will be again recognized by investors.
Looking forward, we remain encouraged by opportunities presented by our
European companies, with the coming of EMU and a single currency, and with
the development of a nascent "equity culture" that will address the issues
of job creation, corporate efficiency and the funding of long-term pension
liabilities. We have been heartened by the recent positive performance by
our holdings in Singapore and Hong Kong, along with emerging markets
companies in Thailand, Mexico and South Africa. Expected returns in these
companies are the highest in our universe--in fact, the highest they have
been this decade.
Harding, Loevner Funds, Inc.
- -------------------------------------------------------------------------------
Global Equity Portfolio-Statement of Net Assets
October 31, 1998
<TABLE>
<S> <C> <C>
Face Amount Value (1)
- -------------------------------------------------------------------------------
Long Term Investments - 97.6%
Common Stocks - 90.9%
Argentina - 1.4%
Quilmes Industrial SA (Foods/Beverages) 50,000 $ 425,000
----------------
Australia - 2.4%
Rio Tinto Ltd. (Mining) 60,000 748,836
----------------
Bermuda - 1.2%
PartnerRe Ltd. (Insurance) 9,000 357,750
----------------
France - 3.0%
Financiere et Industrielle Gaz et Eaux (Diversified Holdings) 20,822 918,883
----------------
Germany - 1.1%
Allianz AG (Insurance) 1,000 343,202
----------------
Hong Kong - 8.0%
Hutchison Whampoa Ltd. (Diversified Holdings) 150,000 1,074,818
Jardine Strategic Holdings Ltd. (Financial)* 465,000 744,000
Johnson Electric Holdings (Electrical Equipment) 275,000 639,081
----------------
----------------
2,457,899
----------------
Ireland - 0.5%
CBT Group plc - ADR (Computers)* 12,000 143,250
----------------
Japan - 4.4%
Hirose Electric (Electrical Equipment) 5,000 289,550
Mitsubishi Corp. (Distribution/Wholesale) 50,000 264,671
Mitsui & Co. (Distribution/Wholesale) 150,000 800,446
----------------
1,354,667
----------------
Mexico - 2.4%
Kimberly-Clark de Mexico SA de CV (Manufacturing) 250,000 731,370
----------------
Netherlands - 5.7%
Royal Dutch Petroleum Co. - NY Shares (Oil/Gas) 20,000 985,000
Wolters Kluwer NV (Publishing) 4,000 775,534
----------------
----------------
1,760,534
----------------
Singapore - 0.6%
Singapore Press Holdings Ltd. (Publishing) 22,500 193,453
----------------
South Africa - 1.3%
LibLife Strategic Investments Ltd. (Diversified Holdings) 117,157 280,340
South African Breweries Ltd. (Foods/Beverages) 6,600 128,229
----------------
----------------
408,569
----------------
Sweden - 2.5%
Investor AB - Class B (Holding Company) 20,000 778,360
----------------
Switzerland - 8.0%
Abb Ag Namen (Engineering) 2,000 $ 487,301
Nestle SA - ADR (Foods/Beverages) 6,500 691,237
SGS Societe Generale de Surveillance Holding SA - Class R (Consumer Cyclical) 2,250 440,232
United Bank of Switzerland (Financial) 1 274
Zuerich Allied AG (Insurance) 1,400 850,709
----------------
----------------
2,469,753
----------------
Thailand - 2.1%
The Siam Cement Co., Ltd. (Manufacturing/Distribution) 50,000 626,532
----------------
United Kingdom - 6.1%
Pearson plc (Multimedia) 45,000 784,798
Rentokil Initial plc (Commercial Services) 120,000 735,611
WPP Group plc (Advertising) 75,000 370,306
----------------
1,890,715
----------------
United States - 40.2%
Allied Capital Corp. (Investment Company) 70,001 1,312,519
AlliedSignal, Inc. (Aerospace/Defense) 20,000 778,750
American International Group (Insurance) 8,000 682,000
Aspen Technologies, Inc. (Computers)* 21,000 294,000
Baxter International, Inc. (Medical Products) 18,000 1,078,875
Colgate-Palmolive Co. (Consumer Products) 12,000 1,060,500
Deere & Co. (Manufacturing) 20,000 707,500
Dover Corp. (Manufacturing) 20,000 635,000
Exxon Corp. (Oil/Gas) 10,000 712,500
Federal National Mortgage Association (Financial) 15,000 1,062,187
Pfizer, Inc. (Pharmaceuticals) 8,500 912,156
Schlumberger, Ltd. (Oil/Gas) 14,000 735,000
Sola International Inc. (Optical Supplies) 15,000 287,812
Thermo Electron Corp. (Manufacturing)* 45,000 897,188
Wisconsin Central Transportation Corp. (Transportation/Rail)* 42,000 635,250
Wrigley (WM) Jr. Co. (Foods/Confectionery) 7,000 566,563
----------------
12,357,800
----------------
Total Common Stocks - (Cost - $27,098,841) 27,966,573
----------------
Rights & Warrants - 0.0%
Scania AB Expiring 6/4/99 (Sweden) 30,000 7,681
----------------
</TABLE>
<TABLE>
<S> <C> <C>
Fixed Income - 6.7% Face Amount
- -------------------- - -----------
United States - 6.7%
J.P. Morgan & Co. (FRN), 2.918% due 2/15/12 $ 1,000,000 941,760
U.S. Treasury Note, 6.125% due 8/15/07 1,000,000 1,102,813
----------------
Total Fixed Income - (Cost - $2,068,838) 2,044,573
----------------
Total Long-Term Investments - (Cost - $29,167,679) 30,018,827
----------------
Cash Equivalents - 2.0%
Investors Bank & Trust Company Repurchase Agreement, 4.77% due 11/2/98 in the
amount of $627,298; Issued 10/30/98 (collateralized by $650,828 par of
Federal National Mortgage Association ARM 86688, 6.10% due
10/1/19 with a market value of $658,401) (Cost - $627,049) $ 627,049 $ 627,049
----------------
Total Investments - 99.6% (Cost - $29,794,728) 30,645,876
----------------
Other Assets, Net of Liabilities - 0.4%
Other assets 146,354
Payable to Investment Adviser (3,485)
Other liabilities (25,249)
----------------
----------------
117,620
----------------
Net Assets - 100%
Applicable to 1,903,641 outstanding $.001 par value shares
(authorized 500,000,000 shares) $ 30,763,496
================
Net Asset Value, Offering and Redemption Price Per Share $ 16.16
================
Components of Net Assets as of October 31, 1998 were as follows:
Capital Stock at par value ($.001) $ 1,904
Capital Stock in excess if par value 30,910,389
Distributions in excess of investment income, net (260,306)
Distributions in excess of net realized gain on investments and foreign currency-related
transactions (742,620)
Net unrealized appreciation in investments and on assets and liabilities denominated
in foreign currencies 854,129
----------------
================
$ 30,763,496
================
</TABLE>
* Non-income producing security
ADR American Depositary Receipt
ARM Adjustable Rate Mortgage
FRN Floating Rate Note
(1) See Note 2 to Financial Statements
See Accompanying Notes to Financial Statements
Harding, Loevner Funds, Inc.
- -------------------------------------------------------------------------------
Multi-Asset Global Portfolio - Overview
October 31, 1998
- -------------------------------------------------------------------------------
[Graph] Comparison of Changes of $10,000 Investment in Harding, Loevner Funds,
Inc. - Multi-Asset Global Portfolio And The Constructed Global
Balanced Index* (Gross Dividends Reinvested) And The Lipper Global
Flexible Fund Index. This is an x-y line graph with x being the date
(starting 11/1/96 and ending at 10/31/98 and y being the value of
the $10,000 investment in the Fund, the Constructed Global Balanced
Index* and the Lipper Global Flexible Fund Index. At 10/31/98 the
value of the $10,000 investment in the Fund was $11,916, the value
of the same investment in the Constructed Global Balanced Index* was
$12,695 and the and the value of the same investment in the Lipper
Global Flexible Fund Index was $11,926.
<TABLE>
<S> <C> <C> <C>
Returns For the Periods Ended October 31, 1998
Cumulative Total Return Average Annual Total Return
------------------------------------------------- ----------------------------
Twelve Months Since Inception** Since Inception**
Multi-Asset Global Equity Portfolio 5.53% 19.16% 9.17%
Constructed Global Balanced Index* 13.99% 26.95% 12.69%
Lipper Global Flexible Fund Index 3.03% 19.26% 9.22%
**The Multi-Asset Global Portfolio commenced operations on November 1, 1996.
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Constructed Global Balanced Index is comprised of the weighted sum of 60%
Financial Times World Equity Index and 40% Salomon World Government Bond Index.
The HLF Multi-Asset Global Portfolio provided a total return for the
year ended October 31, 1998, of 5.53%. The Lipper Global Flexible Fund Index
returned 3.03% in the same period, while a Constructed Global Balanced Index
(60% Financial Times Index/40% Salomon World Government Bond Index) returned
13.99%. As of December 3, 1998, the net assets of the Portfolio are $6.5
million.
Harding, Loevner Funds, Inc.
===============================================================================
Multi-Asset Global Portfolio - Overview
===============================================================================
October 31, 1998
Review
In the fiscal year just ended, investors have had to confront the
effects of financial and economic crisis migrating from Asia into the markets
and economies of the US, Western Europe, and other developing countries. The
default of the Russian Government on its own domestic treasury bills in July
caused investors to fear that actual deflation would occur in developed
countries, that other issuers would default, and that these events would
seriously damage the prospects of companies everywhere to maintain and grow
their profits. As stock markets fell, as lenders fled from credit risk, and as
leveraged investors were wiped out, deflation, default, and the de-linking of
equity returns from bond returns became the pivots around which investment
discussions revolved. So far, the worst fears have not been realized, as policy
makers have taken significant steps to keep both markets and the economy on
track.
We had long ago begun a gradual retreat in the Portfolio from riskier
assets towards safer ones, reducing equity exposure from 62% of the Portfolio
last November (and a high of 75% two years ago) to 55% by early August, selling
all holdings of emerging market debt, and shrinking total Asian and emerging
market equity holdings to less than 5% of the whole. The fixed income holdings
consist mostly of AAA Government or Government Agency securities. As a result,
the severe trauma of market dislocations in August and September were weathered
with relative aplomb, although not without some absolute loss of value from the
equity holdings. The asset allocation at October 31 stands with 51% in equities,
44% in fixed income, and 5% in cash equivalents.
The extremely high credit quality of the bonds in the Portfolio allowed
it to sidestep the bloodbath that ensued in fixed income markets, where all
securities with any credit risk either underperformed Treasuries or actually
lost value in an environment of falling benchmark interest rates. The fixed
income holdings were bolstered by purchases of long-term US Government bonds,
British Government undated Consols, and 30-year US Treasury Inflation Protected
Securities to ensure the durability of income, and returned 10.8% for the year,
versus 9.3% for the Lehman Aggregate (US) Bond Index, and 12.5% for the Salomon
World Government Bond Index.
The equities in the Portfolio have performed poorly, especially those
of companies involved in basic industry, natural resources, and capital goods,
whose prices have fallen sharply as investors began to fear a deflationary
recession. Stocks in the Portfolio rose just 3.8% in the year through October,
versus the 12.8% rise in the MSCI All Country World Index. Our stock selection
in the US has been poor, in contrast to last year, with our aversion to the
"mega-cap" US stock market icons proving to be premature and costly. Although
the equity portfolio has always reflected our bias for sound corporate
management and high financial quality, a few of our companies have fallen victim
to the whirlwinds of deflationary forces and financial distress, such as UBS,
which had a large investment in Long Term Capital Management, and Thermo
Electron, which ended a string of 15 consecutive years of 10%-plus earnings and
revenue growth.
Nevertheless, we strongly believe that companies' ability to survive
and prosper in the harsh environment that they now face critically depends on
their management's ability to execute against ferocious competition, and on
their capacity to finance that business plan. The sharp price declines have
provided opportunities to upgrade the Portfolio, where we have been able to buy
companies we have admired but been unwilling to buy for reasons of valuation,
such as Kimberly-Clark de Mexico, American International Group, and Bic, the
French maker of disposable pens, lighters and razors. Just as we retreated from
risk in a gradual and consistent manner in both stocks and bonds, you should now
expect to see us embrace incrementally the high potential returns now offered to
investors willing to accept those risks.
Harding, Loevner Funds, Inc.
- -------------------------------------------------------------------------------
Multi-Asset Global Portfolio-Statement of Net Assets
October 31, 1998
<TABLE>
<S> <C> <C>
Shares Value (1)
- --------------------------------------------------------------------------------------------------------------------
Long Term Investments - 94.9%
Common Stocks- 51.3%
France - 2.8%
Financiere et Industrielle Gaz et Eaux (Diversified Holdings) 2,870 $ 126,654
Michelin (CGDE) - Class B (Manufacturing) 1,200 49,538
----------------
----------------
176,192
----------------
Germany - 2.0%
Allianz AG (Insurance) 200 68,640
Bayer AG (Chemicals) 1,500 60,997
----------------
----------------
129,637
----------------
Hong Kong - 3.2%
Hutchison Whampoa Ltd. (Diversified Holdings) 17,000 121,813
Jardine Strategic Holdings Ltd. (Financial Services)* 50,000 80,000
----------------
----------------
201,813
----------------
Japan - 1.3%
Atlantis Japan Growth Fund (Investment Company)* 7,000 21,960
Mitsubishi Corp. (Distribution/Wholesale) 12,000 63,521
----------------
----------------
85,481
----------------
Mexico - 1.2%
Kimberly-Clark de Mexico SA de CV (Manufacturing) 25,000 73,137
----------------
Netherlands - 4.3%
Royal Dutch Petroleum Co. - NY Shares (Oil/Gas) 3,800 187,150
Wolters Kluwer NV (Publishing) 450 87,247
----------------
----------------
274,397
----------------
Singapore - 1.3%
Development Bank of Singapore (Financial) 13,000 81,435
----------------
Sweden - 2.1%
Investor AB - Class B (Holding Company) 3,500 136,213
----------------
Switzerland - 6.8%
Abb Ag Namen (Engineering) 500 121,825
Nestle SA - ADR (Foods/Beverages) 1,800 191,419
SGS Societe Generale de Surveillance Holding SA - Class R (Commercial Services) 300 58,698
United Bank of Switzerland (Financial) 215 58,973
----------------
----------------
430,915
----------------
Thailand - 0.5%
The Siam Cement Co., Ltd. (Manufacturing/Distribution)* 2,400 30,073
----------------
United Kingdom - 2.4%
Rentokil Initial plc (Commercial Services) 11,000 67,431
Rio Tinto plc (Mining) 7,000 84,419
----------------
----------------
151,850
----------------
United States - 23.4%
Allied Capital Corp. (Investment Company) 6,500 $ 121,875
AlliedSignal, Inc. (Aerospace/Defense) 1,800 70,088
American International Group (Insurance) 1,500 127,875
Colgate-Palmolive Co. (Consumer Products) 1,800 159,075
Deere & Co. (Manufacturing) 1,700 60,138
Dover Corp. (Manufacturing) 3,000 95,250
Exxon Corp. (Oil/Gas) 2,100 149,625
Federal National Mortgage Association (Financial) 1,800 127,463
International Business Machines Corp. (Computers) 1,200 178,125
Johnson & Johnson (Medical Products) 1,000 81,500
Monsanto Co. (Life Sciences) 1,200 48,750
Royce OTC Micro-Cap Trust, Inc. (Investment Company) 10,900 96,737
Schlumberger, Ltd. (Oil/Gas) 1,200 63,000
Thermo Electron Corp. (Manufacturing)* 3,500 69,781
Wisconsin Central Transportation Corp. (Transportation/Rail)* 1,900 28,738
----------------
----------------
1,478,019
----------------
Total Common Stock - (Cost - $3,039,263) 3,249,162
----------------
Rights & Warrants - 0.0%
Scania AB Expiring 6/4/99 (Sweden) 2,000 512
Atlantis Japan Growth Fund expiring 4/30/10 (Japan) 400 48
----------------
----------------
Total - (Cost - $2,711) 560
----------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
Fixed Income - 43.6% Face Amount
- -------------------- - -----------
United Kingdom - 3.3%
UK Treasury Consols, 4.000% due (undated) GBP 50,000 64,502
United Kingdom Treasury, 7.000% due 6/7/02 GBP 80,000 142,283
----------------
----------------
206,785
----------------
United States - 40.3%
Capital Cities/ABC, Inc., 8.750% due 8/15/21 $ 25,000 31,833
Comcast Corp., 10.625% due 7/15/12 100,000 123,750
GNMA, 7.000% due 4/15/28 149,260 152,664
GNMA, 7.000% due 6/15/09 104,562 107,274
GNMA, 7.500% due 6/15/27 134,431 138,506
GNMA, 8.000% due 8/15/07 12,023 12,455
GNMA, 8.500% due 5/15/18 16,225 17,138
GNMA, 9.500% due 9/20/20 6,832 7,310
GPA Delaware, Inc., 8.750% due 12/15/98 50,000 49,688
Rockefeller Center Property CVT, 0.000% due 12/31/00 250,000 187,500
U.S. Treasury Bond, 6.125% due 11/15/27 250,000 281,172
U.S. Treasury Inflation Index Note, 3.375% due 1/15/07 150,000 151,981
U.S. Treasury Note, 5.500% due 5/31/03 100,000 104,781
U.S. Treasury Note, 5.625% due 5/15/08 350,000 377,016
U.S. Treasury Note, 6.375% due 5/15/99 150,000 151,453
U.S. Treasury Note, 7.000% due 7/15/06 250,000 287,656
U.S. Treasury Note, 7.875% due 8/15/01 25,000 27,273
U.S. Treasury Note, 8.750% due 8/15/00 175,000 188,125
United States (continued)
U.S. Treasury Inflation Index Note, 3.625% due 4/15/28 $ 150,000 $ 151,527
----------------
----------------
2,549,102
----------------
Total Fixed Income - (Cost - $2,639,864) 2,755,887
----------------
Total Long-Term Investments - (Cost - $5,681,838) 6,005,609
----------------
Cash Equivalents - 4.7%
Investors Bank & Trust Company Repurchase Agreement, 4.77% due 11/2/98 in the
amount of $299,284; Issued 10/30/98 (collateralized by $314,327 par of
Federal National Mortgage Association LBR FLTR G92-65 FA, 6.33% due
11/25/22 with a market value of $315,191) (Cost - $299,165) 299,165 299,165
----------------
Total Investments - 99.6% (Cost - $5,981,003) 6,304,774
- ---------------------------------------------
----------------
Other Assets, Net of Liabilities - 0.4%
Other assets 60,988
Payable to Investment Adviser (16,798)
Other liabilities (21,743)
----------------
----------------
22,447
----------------
Net Assets - 100%
Applicable to 554,503 outstanding $.001 par value shares
(authorized 500,000,000 shares) $ 6,327,221
================
Net Asset Value, Offering and Redemption Price Per Share $ 11.41
================
Components of Net Assets as of October 31, 1998 were as follows:
Capital Stock at par value ($.001) $ 555
Capital Stock in excess if par value 5,794,091
Undistributed investment income, net 125,012
Accumulated net realized gain on investments and foreign currency-related transactions 83,391
Net unrealized appreciation in investments and on assets and liabilities denominated
in foreign currencies 324,172
----------------
================
$ 6,327,221
================
</TABLE>
* Non-income producing security
ADR American Depositary Receipt
CVT Convertible Bond
GBP Great Britain Pound
GNMA Government National Mortgage Association
(1) See Note 2 to Financial Statements
See Accompanying Notes to Financial Statements
Harding, Loevner Funds, Inc.
- ------------------------------------------------------------------------------
Statement of Operations
October 31, 1998
- ------------------------------------------------------------------------------
See Notes to Financial Statements
<TABLE>
<S> <C> <C> <C>
International Equity Global Equity Multi-Asset Global
Portfolio Portfolio Portfolio
Year Ended Year Ended Year Ended
October 31, 1998 October 31, 1998 October 31, 1998
--------------------------- --------------------------- -----------------------
Investment Income
Interest $ 760,229 $ 231,147 $ 154,471
Dividends (net of withholding taxes of
$941,915, $71,364 and $5,958, respectively) 7,264,253 999,392 75,787
--------------------------- --------------------------- ---------------------
Total investment income 8,024,482 1,230,539 230,258
--------------------------- --------------------------- ----------------------
Expenses
Investment advisory fees 2,814,194 584,574 60,125
Administration fees 562,839 87,686 9,019
Custodian fees 287,043 44,439 11,526
Shareholder record keeping fees 76,632 16,802 3,654
Legal fees 15,934 2,275 160
Audit fees 21,400 21,400 21,000
Directors' fees and expenses 52,953 6,899 734
Insurance expense 9,235 1,511 133
State registration filing fees 23,592 10,313 6,769
SEC filing fees - 3,043 330
Organizational costs 14,564 12,775 3,155
Other fees and expenses 25,728 5,989 1,426
--------------------------- --------------------------- ---------------------
Total operating expenses 3,904,114 797,706 118,031
Waiver of investment advisory fee
(151,856) (66,988) (42,875)
--------------------------- --------------------------- ---------------------
Total expenses
3,752,258 730,718 75,156
--------------------------- --------------------------- ---------------------
Investment income, net
4,272,224 499,821 155,102
--------------------------- --------------------------- ---------------------
Realized and unrealized gain (loss) on
investments and foreign currency-
related transactions
- -----------------------------------------
Net realized gain (loss) from (911,586) 304,029 80,618
investments
Net realized gain (loss) from foreign currency-
related transactions (411,630) (45,587) 786
Net realized gain from in-kind redemptions - 9,627,370 -
Net unrealized appreciation (depreciation)
on
Investments (1,282,547) (13,020,763) 50,828
Net unrealized appreciation on
translation of assets and liabilities
denominated in foreign currencies 75,477 9,741 1,131
-------------------------- --------------------------- ----------------------
- -----
Realized and unrealized gain (loss)
on investments and foreign
- -----
currency-related transactions (2,530,286) (3,125,210) 133,363
-------------------------- --------------------------- ---------------------
Net increase (decrease)
in net assets
resulting
from operations $ 1,741,938 (2,625,389) $ 288,465
========================== =========================== =====================
</TABLE>
Harding, Loevner Funds, Inc.
- -----------------------------------------------------------------------------
Statement of Changes in Net Assets
- -----------------------------------------------------------------------------
See Notes to Financial Statements
<TABLE>
<S> <C> <C>
International Equity Portfolio
----------------------------------------------------------------------
For the Year For the Year
Ended Ended
October 31, 1998 October 31, 1997
----------------------- -----------------------
Increase (Decrease) in Net Assets from Operations
Investment income, net $ 4,272,224 3,800,579
Net realized gain (loss) from investments and foreign
currency-related transactions
(1,323,216) 1,673,631
Net unrealized appreciation (depreciation) on
investments and on translation of assets and
liabilities denominated in foreign currencies
(1,207,070) (6,115,473)
----------------------- -----------------------
Net increase (decrease) in net assets resulting
from operations
1,741,938 (641,263)
----------------------- -----------------------
Distributions to Shareholders from:
Investment income, net 3,375,872 59,386
Net realized gain from investments and foreign
currency-related transactions 877,148 -
In excess of net realized gain from
investments and
foreign currency related transactions
1,323,152 -
----------------------- -----------------------
Total distributions
5,576,172 59,386
----------------------- -----------------------
Capital Share Transactions, Net
(57,413,729) 146,647,680
----------------------- -----------------------
Net increase/(decrease) in net assets (61,247,963)
145,947,031
Net Assets
Beginning of period
387,304,267 241,357,236
----------------------- -----------------------
End of period $ 326,056,304 $ 387,304,267
======================= =======================
Undistributed Investment Income, Net $ 3,740,249 $ 2,760,244
======================= =======================
</TABLE>
Harding, Loevner Funds, Inc.
- -------------------------------------------------------------------------------
Statement of Changes in Net Assets (continued)
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Global Equity Multi-Asset Global
Global Equity Portfolio Multi-Asset Global Portfolio
Portfolio For the Period From Portfolio For the Period From
For the Year Ended December 1, 1996* For the Year Ended November 1, 1996*
October 31, 1998 to October 31, 1997 October 31, 1998 to October 31, 1997
--------------------- ------------------------------------------------ ----------------
Increase (Decrease) in Net Assets from Operations
Investment income, net $ 499,821 $ 671,290 $ 155,102 112,943
Net realized gain (loss) from investments,
in-kind redemptions and foreign
currency-related transactions 9,885,812 6,441,028 81,404 89,059
Net unrealized appreciation (depreciation) on
investments and on translation of assets and
liabilities denominated in foreign (13,011,022) (2,623,299) 51,959 272,213
currencies
--------------------- ------------------------ ----------------------- ----------------
Net increase in net assets resulting
from operations (2,625,389) 4,489,019 288,465 474,215
--------------------- ------------------------ ----------------------- ----------------
Distributions to Shareholders from:
Investment income, net 820,550 49,310 121,883 12,110
Net realized gain from investments and
foreign
currency-related transactions 6,491,751 - 96,112 -
--------------------- ------------------------ ----------------------- ----------------
Total distributions 7,312,301 49,310 217,995 12,110
--------------------- ------------------------ ----------------------- ----------------
Capital Share Transactions, Net (24,180,948) 60,442,425 1,081,521 4,713,125
- -------------------------------
--------------------- ------------------------ ----------------------- ---------------
Net increase (decrease) in net (34,118,638) 64,882,134 1,151,991 5,175,230
assets
Net Assets
Beginning of period 64,882,134 - 5,175,230 -
--------------------- ------------------------ ----------------------- ----------------
End of period $ 30,763,496 $ 64,882,134 $ 6,327,221 $ 5,175,230
===================== ======================== ======================= ================
Undistributed (Distributions in excess of)
Investment Income, Net $ (260,306) $ 571,273 $ 125,012 $ 95,505
===================== ======================== ======================= =================
</TABLE>
* Commencement of operations See Notes to Financial Statements
Harding, Loevner Funds, Inc.
- -------------------------------------------------------------------------------
Financial Highlights
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C>
International Equity Portfolio
----------------------------------------------------------------------------------------
For the Year For the Year For the Ten For the Year For the Period
Ended Ended Months Ended Ended Ended
Oct. 31, 1998 Oct. 31, 1997 Oct. 31, 1996 Dec. 31, 1995 Dec. 31, 1994*
---------------- -------------- --------------- ---------------- -------------
Per Share Data
Net asset value, beginning of period $11.79 $11.61 $10.77 $ 9.71 $ 10.00
Increase (Decrease) in Net Assets from Operations
Investment income, net 0.14 0.13 0.08 0.10 0.04
Net realized and unrealized gain (loss) on investments
and foreign currency-related
transactions (0.13) 0.05(d) 0.97 1.06 (0.29)
----------------- -------------- --------------- ---------------- ----------
Net increase (decrease) from
investment operations 0.01 0.18 1.05 1.16 (0.25)
----------------- -------------- --------------- ---------------- ----------
Distributions to Shareholders from:
Investment income, net 0.11 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
0.03 - 0.10 - -
Excess of net realized gain on investments and
foreign currency-related transactions
0.04 - - - 0.01
----------------- -------------- --------------- ---------------- ------------
Total distributions
0.18 - 0.21 0.10 0.04
----------------- -------------- --------------- ---------------- ------------
Net asset value, end of period $11.62 $11.79 $11.61 $10.77 $9.71
- ------------------------------
================= ============== =============== ================ ============
Total Return 0.06% 1.57% 9.81% (b) 11.99% (2.47%) (b)
- ------------
Ratios/Supplemental Data
Net assets, end of period (000's) $326,056 $387,304 $241,357 $67,727 $8,904
Ratio of net operating expenses to
average net assets 1.00% 1.00% 1.00% (a) 0.99% 0.95% (a)
Ratio of investment income, net to
average net assets 1.14% 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 0.04% 0.06% 0.14% (a) 0.54% 1.33% (a)
Portfolio turnover 33% 31% 17% (b) 28% 27% (b)
</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
See Notes To Financial Statements
Harding, Loevner Funds, Inc.
- ------------------------------------------------------------------------------
Financial Highlights (Continued)
- ------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Global Equity Portfolio Multi-Asset Global Portfolio
--------------------------------------------- -------------------------------------
For the Year For the Period From For the Year For the Period
Ended Dec. 1, 1996* to Ended From Nov. 1, 1996**
Oct. 31, 1998 Oct. 31, 1997 Oct. 31, 1998 To Oct. 31, 1997
------------------- ---------------------- ----------------- -----------------
Per Share Data
Net asset value, beginning of period $18.70 $17.58 (a) $11.26 $10.00
Increase in Net Assets from Operations
Investment income, net 0.20 0.19 0.52 0.25
Net realized and unrealized gain on investments
and foreign currency-related
transactions (0.55) 0.94 0.09 1.04
-------------------- ---------------------- ----------------- ----------------
Net increase from investment (0.35) 1.13 0.61 1.29
operations
-------------------- ---------------------- ----------------- ----------------
Distributions to Shareholders from:
Investment income, net 0.25 0.01 0.26 0.03
Net realized gain from investments and
foreign currency-related transactions
1.94 - 0.20 -
-------------------- ---------------------- ----------------- ----------------
Total distributions
2.19 0.01 0.46 0.03
-------------------- ---------------------- ----------------- -----------------
Net asset value, end of period $16.16 $ 18.70 $ 11.41 $11.26
- ------------------------------
==================== ====================== ================= =================
Total Return (2.46%) 6.45% (b) 5.53% 12.92%
- ------------
Ratios/Supplemental Data
Net assets, end of period (000's) $30,763 $64,882 $6,327 $5,175
Ratio of net operating expenses to
average net assets 1.25% 1.25% (c) 1.25% 1.25%
Ratio of investment income, net to
average net assets 0.86% 1.05% (c) 2.58% 2.50%
Decrease reflected in above expense ratios
due to waiver of investment advisory
and reimbursement of other expenses 0.11% 0.12% (c) 0.71% 0.92%
Portfolio turnover 67% 39% (b) 29% 36%
</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
See Notes to Financial Statements
Harding, Loevner Funds, Inc.
- -----------------------------------------------------------------------------
Notes to Financial Statements
October 31, 1998
- ------------------------------------------------------------------------------
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, 1998. 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, 1998, there were no securities in the Fund which
required valuation by the Board of Directors.
Expenses
The costs incurred by the Fund in connection with the organization and initial
registration of shares are being amortized on a straight-line basis by the Fund
over a sixty-month period. The unamortized balance of organizational expenses at
October 31, 1998 was $92,549.
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.
Harding, Loevner Funds, Inc.
- -------------------------------------------------------------------------------
Notes to Financial Statements (continued)
October 31, 1998
- -------------------------------------------------------------------------------
2. Summary of Significant Accounting Policies
(continued)
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.
During the year ended October 31, 1998, 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 $ 83,653 $ (83,653) $
-
Global Equity (510,850) (10,628,416) 11,139,266
Multi-Asset Global (3,712) 3,712 -
</TABLE>
Such reclassifications had no effect on net assets.
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, 1998, International Equity, Global Equity and Multi-Asset Global had
balances of $54,713, $2,981 and $401, respectively, representing net unrealized
appreciation 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 Investors Capital Services, Inc. (formerly 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 of $60,586 were accrued for the period ended October 31, 1998 to
directors who are not employees of the Investment Adviser.
25
23
4. Investment Transactions
Purchase cost and proceeds from sales of investment securities, other than
short-term investments, for the periods ended October 31, 1998, 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 $ 118,398,229 $ 183,934,285
Global Equity 37,945,100 68,686,318
Multi-Asset Global 2,570,949 1,669,003
</TABLE>
The cost of investments for Federal income tax purposes and the components of
net unrealized appreciation on investments at October 31, 1998, for each of the
Portfolios were as follows:
<TABLE>
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Unrealized Unrealized
Portfolio Appreciation Depreciation Net Cost
- -----------------------------------------------------------------------------------------------------------------------------------
International Equity $ 42,324,606 $ 44,066,244 $ (1,741,638) $ 327,489,321
Global Equity 2,443,007 2,081,107 361,900 30,283,976
Multi-Asset Global 666,931 362,412 304,519 6,000,255
</TABLE>
During the year ended October 31, 1998, Global Equity redeemed $18,724,633 in
kind to shareholders by transferring securities at market value. Net capital
gains from this redemption amounted to $9,627,370. These capital gains are
exempt from taxes for the Portfolio.
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.
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, 1998.
6. Capital Share Transactions
Transactions in capital stock for International Equity were as follows for the
periods indicated:
<TABLE>
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended
October 31, 1998 October 31, 1997
--------------------------------------- --------------------------------------
Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------------------------------
Shares sold 2,961,007 $ 36,281,392 15,892,968 $ 194,937,235
Shares issued related to
reinvestment of dividends 356,184 4,099,676 3,525 43,005
-------------------------------------------------------------------------------
3,317,191 40,381,068 15,896,493 194,980,240
Shares redeemed 8,083,995 97,794,797 3,843,988 48,332,560
--------------------------------------- --------------------------------------
Net (decrease) increase (4,766,804) $ (57,413,729) 12,052,505 $ 146,647,680
======================================= ======================================
</TABLE>
6. Capital Share Transactions (continued)
Transactions in capital stock for Global Equity were as follows for the period
indicated:
<TABLE>
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
Year Ended December 1, 1996*
October 31, 1998 to October 31, 1997
-------------------------------------------------------------------------------
Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------------------------
Shares issued related to acquisition of
GELP - $ - 3,866,979 $ 67,977,294
Shares sold 48,580 861,141 209,562 3,734,452
Shares issued related to reinvestment
of dividends 414,700 7,049,903 2,220 38,964
-------------------------------------------------------------------------------
463,280 7,911,044 4,078,761 71,750,710
Shares redeemed 2,030,092 32,091,992 608,308 11,308,285
-------------------------------------------------------------------------------
Net (decrease) increase (1,566,812) $ (24,180,948) 3,470,453 $ 60,442,425
===============================================================================
</TABLE>
* Commencement of Operations
Transactions in capital stock for Multi-Asset Global were as follows for the
period indicated:
<TABLE>
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
Year Ended November 1, 1996*
October 31, 1998 to October 31, 1997
-------------------------------------------------------------------------------
Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------------------------------
Shares sold 111,544 $ 1,261,314 458,497 $ 4,701,866
Shares issued related to reinvestment
of dividends 19,604 217,995 1,170 12,110
-------------------------------------------------------------------------------
131,148 1,479,309 459,667 4,713,976
Shares redeemed 36,232 397,788 80 851
-------------------------------------------------------------------------------
Net increase 94,916 $ 1,081,521 459,587 $ 4,713,125
===============================================================================
</TABLE>
* Commencement of Operations
7. Repurchase and Reverse Repurchase Agreements
Each Portfolio may enter into repurchase agreements under which a bank or
securities firm 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.
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, 1998, and the
related statements of operations for the year then ended and the statements of
changes in net assets for each of the two years in the period then ended, 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, 1998 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 year then ended and the changes in their net
assets for each of the two years in the period then ended, and the financial
highlights for each of the periods indicated therein, in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
New York, New York
December 3, 1998
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, 1998. In accordance with current tax laws, the Foreign Income
and Foreign Tax per share (for a share outstanding on October 31, 1998) is as
follows:
<TABLE>
<S> <C> <C> <C> <C> <C>
International Equity Global Equity
Gross Gross
Foreign Foreign Foreign Foreign
Country Tax Dividends Tax Dividends
- -------------- -------------------- ------------------------ --------------------------- ---------------------------
Argentina 0.0000 0.0101 0.0000 0.0167
Australia 0.0009 0.0015 0.0000 0.0000
Bermuda 0.0000 0.0130 0.0000 0.0262
Canada 0.0310 0.0292 0.0280 0.0181
France 0.0772 0.0633 0.0618 0.0632
Germany 0.1775 0.1904 0.0727 0.0707
Hong Kong 0.0000 0.0867 0.0000 0.1524
Italy 0.0069 0.0049 0.0000 0.0000
Japan 0.0419 0.0300 0.0324 0.0210
Malaysia 0.0022 0.0008 0.0030 0.0010
Mexico 0.0000 0.0217 0.0000 0.0278
Netherlands 0.1668 0.1164 0.2418 0.1221
Singapore 0.0383 0.0364 0.0000 0.0163
South Africa 0.0000 0.0208 0.0000 0.0252
Spain 0.0448 0.0357 0.0000 0.0000
Sweden 0.0718 0.0514 0.1062 0.0689
Switzerland 0.1730 0.1238 0.2006 0.1602
United Kingdom 0.1677 0.1639 0.2535 0.2102
</TABLE>
Shareholders will receive more detailed information along with their Form
1099-DIV in January 1999.
OFFICERS & DIRECTORS AND OTHER PERTINENT INFORMATION
OFFICERS AND DIRECTORS
James C. Brady III
Director of the Fund
Jane A. Freeman
Director of the Fund
Samuel R. Karetsky
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
Investors Capital Services, Inc.
600 Fifth Avenue, 26th Floor
New York, NY 10020
DISTRIBUTOR
AMT Capital Securities, L.L.C.
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
1775 Eye Street, N.W
Washington, D.C. 20006-2401
INDEPENDENT AUDITORS
Ernst & Young LLP
787 Seventh Avenue
New York, NY 10019
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001018170
<NAME> HARDING, LOEVNER FUNDS, INC.
<SERIES>
<NUMBER> 1
<NAME> INTERNATIONAL EQUITY PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 324428
<INVESTMENTS-AT-VALUE> 325748
<RECEIVABLES> 1127
<ASSETS-OTHER> 49
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 326924
<PAYABLE-FOR-SECURITIES> 788
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 80
<TOTAL-LIABILITIES> 868
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 322348
<SHARES-COMMON-STOCK> 28071
<SHARES-COMMON-PRIOR> 32838
<ACCUMULATED-NII-CURRENT> 3740
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1406)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1374
<NET-ASSETS> 326056
<DIVIDEND-INCOME> 7264
<INTEREST-INCOME> 760
<OTHER-INCOME> 0
<EXPENSES-NET> 3752
<NET-INVESTMENT-INCOME> 4272
<REALIZED-GAINS-CURRENT> (1323)
<APPREC-INCREASE-CURRENT> (1207)
<NET-CHANGE-FROM-OPS> 1742
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3376
<DISTRIBUTIONS-OF-GAINS> 2200
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2961
<NUMBER-OF-SHARES-REDEEMED> 8084
<SHARES-REINVESTED> 356
<NET-CHANGE-IN-ASSETS> (61248)
<ACCUMULATED-NII-PRIOR> 2760
<ACCUMULATED-GAINS-PRIOR> 2200
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2814
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3904
<AVERAGE-NET-ASSETS> 375226
<PER-SHARE-NAV-BEGIN> 11.79
<PER-SHARE-NII> 0.14
<PER-SHARE-GAIN-APPREC> (0.13)
<PER-SHARE-DIVIDEND> (0.11)
<PER-SHARE-DISTRIBUTIONS> (0.07)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.62
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001018170
<NAME> HARDING, LOEVNER FUNDS, INC.
<SERIES>
<NUMBER> 2
<NAME> GLOBAL EQUITY PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 29795
<INVESTMENTS-AT-VALUE> 30646
<RECEIVABLES> 99
<ASSETS-OTHER> 47
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 30792
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 29
<TOTAL-LIABILITIES> 29
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 30912
<SHARES-COMMON-STOCK> 1904
<SHARES-COMMON-PRIOR> 3470
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 260
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 743
<ACCUM-APPREC-OR-DEPREC> 854
<NET-ASSETS> 30763
<DIVIDEND-INCOME> 999
<INTEREST-INCOME> 231
<OTHER-INCOME> 0
<EXPENSES-NET> 730
<NET-INVESTMENT-INCOME> 500
<REALIZED-GAINS-CURRENT> 9886
<APPREC-INCREASE-CURRENT> (13011)
<NET-CHANGE-FROM-OPS> (2625)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 821
<DISTRIBUTIONS-OF-GAINS> 6492
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 49
<NUMBER-OF-SHARES-REDEEMED> 2030
<SHARES-REINVESTED> 415
<NET-CHANGE-IN-ASSETS> (34119)
<ACCUMULATED-NII-PRIOR> 571
<ACCUMULATED-GAINS-PRIOR> 6492
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 585
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 798
<AVERAGE-NET-ASSETS> 58457
<PER-SHARE-NAV-BEGIN> 18.70
<PER-SHARE-NII> 0.20
<PER-SHARE-GAIN-APPREC> (0.55)
<PER-SHARE-DIVIDEND> (0.25)
<PER-SHARE-DISTRIBUTIONS> (1.94)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.16
<EXPENSE-RATIO> 1.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0001018170
<NAME> HARDING, LOEVNER FUNDS, INC.
<SERIES>
<NUMBER> 2
<NAME> MULTI-ASSET GLOBAL PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-30-1998
<INVESTMENTS-AT-COST> 5981
<INVESTMENTS-AT-VALUE> 6305
<RECEIVABLES> 51
<ASSETS-OTHER> 10
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 6366
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 39
<TOTAL-LIABILITIES> 39
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5795
<SHARES-COMMON-STOCK> 555
<SHARES-COMMON-PRIOR> 460
<ACCUMULATED-NII-CURRENT> 125
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 83
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 324
<NET-ASSETS> 6327
<DIVIDEND-INCOME> 76
<INTEREST-INCOME> 154
<OTHER-INCOME> 0
<EXPENSES-NET> 75
<NET-INVESTMENT-INCOME> 155
<REALIZED-GAINS-CURRENT> 81
<APPREC-INCREASE-CURRENT> 52
<NET-CHANGE-FROM-OPS> 288
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 122
<DISTRIBUTIONS-OF-GAINS> 96
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 112
<NUMBER-OF-SHARES-REDEEMED> 36
<SHARES-REINVESTED> 19
<NET-CHANGE-IN-ASSETS> 1152
<ACCUMULATED-NII-PRIOR> 96
<ACCUMULATED-GAINS-PRIOR> 94
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 60
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 118
<AVERAGE-NET-ASSETS> 6013
<PER-SHARE-NAV-BEGIN> 11.26
<PER-SHARE-NII> 0.52
<PER-SHARE-GAIN-APPREC> 0.09
<PER-SHARE-DIVIDEND> (0.26)
<PER-SHARE-DISTRIBUTIONS> (0.20)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.41
<EXPENSE-RATIO> 1.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
