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[LOGO]
H A R D I N G L O E V N E R HARDING LOEVNER FUNDS, INC.
ANNUAL REPORT
OCTOBER 31, 1999
Portfolios managed by
Harding, Loevner Management, L.P.
INTERNATIONAL EQUITY PORTFOLIO
GLOBAL EQUITY PORTFOLIO
MULTI-ASSET GLOBAL PORTFOLIO
EMERGING MARKETS PORTFOLIO
P.O. Box 9130
Boston, MA 02117-9130
Telephone: 877-435-8105
Fax: 617-927-8400
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HARDING, LOEVNER FUNDS, INC.
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December 10, 1999
Dear Shareholder:
Enclosed is the Annual Report to Shareholders for the fiscal year ended October
31, 1999, as required by regulation.
Our regular quarterly narrative discussing developments in the calendar quarter
ended December 31, 1999 will be sent to you shortly.
Sincerely,
/s/ David R. Loevner
--------------------
David R. Loevner
President
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HARDING, LOEVNER FUNDS, INC.
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TABLE OF CONTENTS
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<TABLE>
<S> <C>
Performance Information and Statements of Net Assets
International Equity Portfolio .................................... 1
Global Equity Portfolio ........................................... 6
Multi-Asset Global Portfolio ...................................... 11
Emerging Markets Portfolio ........................................ 16
Statements of Operations .................................................. 21
Statements of Changes in Net Assets ....................................... 22
Financial Highlights ...................................................... 24
Notes to Financial Statements ............................................. 28
Report of Independent Auditors ............................................ 33
Supplemental Tax Information .............................................. 34
</TABLE>
<PAGE>
HARDING, LOEVNER FUNDS, INC.
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INTERNATIONAL EQUITY PORTFOLIO -- OVERVIEW
OCTOBER 31, 1999
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COMPARISON OF CHANGES IN VALUE 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
<TABLE>
<CAPTION>
INTERNATIONAL MSCI ALL COUNTRY LIPPER INTERNATIONAL
EQUITY PORTFOLIO WORLD EX-US INDEX EQUITY FUND INDEX
<S> <C> <C> <C>
5/11/94 $ 10,000.00 $ 10,000.00 $ 10,000.00
5/31/94 $ 9,920.00 $ 10,072.20 $ 9,985.00
6/30/94 $ 9,750.00 $ 10,141.60 $ 9,827.50
7/31/94 $ 10,040.00 $ 10,328.60 $ 10,130.40
8/31/94 $ 10,330.00 $ 10,682.20 $ 10,480.60
9/30/94 $ 10,100.00 $ 10,458.30 $ 10,210.10
10/31/94 $ 10,330.00 $ 10,705.90 $ 10,392.40
11/30/94 $ 9,700.00 $ 10,196.30 $ 9,907.50
12/31/94 $ 9,753.30 $ 10,184.00 $ 9,775.30
1/31/95 $ 9,120.40 $ 9,692.50 $ 9,290.30
2/28/95 $ 9,311.30 $ 9,638.90 $ 9,287.90
3/31/95 $ 9,532.30 $ 10,176.00 $ 9,532.30
4/30/95 $ 9,929.00 $ 10,538.30 $ 9,882.70
5/31/95 $ 10,401.80 $ 10,481.40 $ 9,980.10
6/30/95 $ 10,381.70 $ 10,335.60 $ 10,018.00
7/31/95 $ 10,658.70 $ 10,898.80 $ 10,568.70
8/31/95 $ 10,254.20 $ 10,511.10 $ 10,390.10
9/30/95 $ 10,476.70 $ 10,705.10 $ 10,563.90
10/31/95 $ 10,394.30 $ 10,420.70 $ 10,343.90
11/30/95 $ 10,455.10 $ 10,638.80 $ 10,451.90
12/31/95 $ 10,922.80 $ 11,053.10 $ 10,755.00
1/31/96 $ 11,277.80 $ 11,176.40 $ 11,009.20
2/29/96 $ 11,379.20 $ 11,178.20 $ 11,056.40
3/31/96 $ 11,592.20 $ 11,395.50 $ 11,229.10
4/30/96 $ 11,734.10 $ 11,800.60 $ 11,595.00
5/31/96 $ 11,906.50 $ 11,603.50 $ 11,583.20
6/30/96 $ 12,210.80 $ 11,671.90 $ 11,689.10
7/31/96 $ 11,815.30 $ 11,271.60 $ 11,295.40
8/31/96 $ 11,979.80 $ 11,336.10 $ 11,442.40
9/30/96 $ 12,132.20 $ 11,614.90 $ 11,699.10
10/31/96 $ 11,993.80 $ 11,495.00 $ 11,652.10
11/30/96 $ 12,500.00 $ 11,931.20 $ 12,198.20
12/31/96 $ 12,605.90 $ 11,787.50 $ 12,306.70
1/31/97 $ 12,440.60 $ 11,580.10 $ 12,326.90
2/28/97 $ 12,316.60 $ 11,797.70 $ 12,549.70
3/31/97 $ 12,244.30 $ 11,777.70 $ 12,616.10
4/30/97 $ 12,223.60 $ 11,885.00 $ 12,671.20
5/31/97 $ 12,864.20 $ 12,603.10 $ 13,385.00
6/30/97 $ 13,308.50 $ 13,305.80 $ 14,027.40
7/31/97 $ 13,649.50 $ 13,578.70 $ 14,473.30
8/31/97 $ 12,616.30 $ 12,540.50 $ 13,430.70
9/30/97 $ 13,318.90 $ 13,174.20 $ 14,292.60
10/31/97 $ 12,182.30 $ 12,015.70 $ 13,207.30
11/30/97 $ 12,151.30 $ 11,862.30 $ 13,097.10
12/31/97 $ 12,074.00 $ 11,989.20 $ 13,200.70
1/31/98 $ 12,168.40 $ 12,345.00 $ 13,520.20
2/28/98 $ 13,102.10 $ 13,185.10 $ 14,385.50
3/31/98 $ 13,563.60 $ 13,630.80 $ 15,166.60
4/30/98 $ 13,595.10 $ 13,714.80 $ 15,399.60
5/31/98 $ 13,762.90 $ 13,449.00 $ 15,420.30
6/30/98 $ 13,532.10 $ 13,389.40 $ 15,285.50
7/31/98 $ 13,448.20 $ 13,518.20 $ 15,520.00
8/31/98 $ 11,444.60 $ 11,606.80 $ 13,287.40
9/30/98 $ 11,297.80 $ 11,368.20 $ 12,873.70
10/31/98 $ 12,189.40 $ 12,558.40 $ 13,820.30
11/30/98 $ 12,944.70 $ 13,230.90 $ 14,512.50
12/31/98 $ 13,305.20 $ 13,678.80 $ 14,869.60
1/31/99 $ 13,007.00 $ 13,664.70 $ 14,960.00
2/28/99 $ 12,708.70 $ 13,374.80 $ 14,573.00
3/31/99 $ 13,358.50 $ 14,034.10 $ 15,060.20
4/30/99 $ 14,487.70 $ 14,751.80 $ 15,762.00
5/31/99 $ 13,742.00 $ 14,082.80 $ 15,176.30
6/30/99 $ 14,775.30 $ 14,764.60 $ 15,896.00
7/31/99 $ 15,425.10 $ 15,078.80 $ 16,250.90
8/31/99 $ 15,606.20 $ 15,165.50 $ 16,379.30
9/30/99 $ 15,904.50 $ 15,245.70 $ 16,431.90
10/31/99 $ 16,511.70 $ 15,821.70 $ 17,005.30
</TABLE>
<TABLE>
<CAPTION>
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RETURNS FOR THE PERIODS ENDED OCTOBER 31, 1999
CUMULATIVE TOTAL RETURN AVERAGE ANNUAL TOTAL RETURN
-------------------------------------------------- --------------------------------
<S> <C> <C> <C>
TWELVE MONTHS SINCE INCEPTION* SINCE INCEPTION*
INTERNATIONAL EQUITY PORTFOLIO 35.46% 65.12% 9.58%
MSCI All Country World Ex-US Index 25.99% 58.22% 8.73%
(gross dividends reinvested)
Lipper International Equity Fund Index 23.05% 70.05% 10.17%
* 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.
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</TABLE>
It was an excellent year for the International Equity Portfolio. The return
of 35.5% was substantially more than either the MSCI All Country World ex US
Index, which rose by 26.0% or the Lipper International Fund Index, which
returned 23.1%. There were several reasons for this good performance, but
overwhelming all others, was the return to favor of markets in Asia. The
Portfolio has a number of holdings in Hong Kong and Singapore, and has
significantly added to holdings in Japan in the last twelve months.
1
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HARDING, LOEVNER FUNDS, INC.
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INTERNATIONAL EQUITY PORTFOLIO -- OVERVIEW
OCTOBER 31, 1999
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A year ago, Asian markets outside of Japan had been battered by the lingering
impact of 1997's currency crisis and 1998's economic slowdown, and had been
further hit by the Russian debt default and consequent collapse of the giant
hedge fund LTCM. As we reported last year, we took advantage of price
weakness in the Fall of 1998 to add to holdings in Asia, by buying shares in
Singapore media company SINGAPORE PRESS and retailer DAIRY FARM, and to add
to companies such as the UK advertising giant WPP, and Italian eyeglass maker
LUXOTTICA. We also bought shares for the first time in the UK commercial
service company HAYS. These tactics paid off handsomely, as the timing proved
to be good. Our timing was good, but even more importantly, our companies
continued to justify our confidence in them. In Hong Kong alone, all three
companies held in the Portfolio -- motor maker JOHNSON ELECTRIC, conglomerate
HUTCHISON WHAMPOA and trading company LI & FUNG -- demonstrated that they
have emerged as global competitors in their various industries, and stock
prices outperformed the regional markets by a wide margin.
The Portfolio has consistently had a significant exposure to Asian companies,
and holdings have been limited to those few companies that can both grow and
meet our demanding standards of corporate governance -- transparency, and
management that demonstrates it is acting in the interests of all
shareholders. These criteria have consistently prevented us from owning more
Japanese companies. We have often been attracted to companies because of
their products, but have been unable to stomach the all-too-frequent derision
that most Japanese management has had for its most important constituency,
its shareholders. That is now beginning to change. Ten years of a bear market
in stocks, and sluggish economic performance have led to radical change in
the Japanese financial system. The old relationships between banks and
industry are breaking down, and companies are being forced to compete for
capital as they have always competed for customers. The result is an emerging
revolution in Japanese standards of corporate governance. Companies such as
FUJITSU, and SONY, which we added to the Portfolio this year, have
world-class products and are now restructuring their operations so
shareholders can benefit from growth in demand for them. We think this
presents tremendous opportunity for investors and have devoted a significant
amount of our research efforts to finding suitable candidates for investment.
In the past year, those efforts have paid off, both in terms of the number of
companies owned and, more importantly, in their contribution to Portfolio
returns.
In Europe, the process of corporate restructuring began earlier in the
decade, stimulated by deregulating the European Union. The EU's goal of
removing the barriers to commercial activity between its members took a giant
step forward this year with the first, most important, step towards currency
union. The introduction of the Euro as a global currency was smoother than
many feared. Initial currency weakness has also given a boost to sluggish
economic performance at the heart of Europe, especially in Germany. Hopes for
an end to Europe's economic malaise of recent years led shares of some of our
more cyclically oriented companies, such as engineering giant ABB, mining
company RIO TINTO, and Swedish holding company INVESTOR to perform well, but
results were not consistently good. Company performance, rather than market
trends, was the key to good stock performance this year. Companies such as
RENTOKIL, whose earnings growth rate has slipped below what investors had
come to expect saw their share prices punished severely.
There are few Portfolio holdings outside Asia and Europe. We sold one long
held position in South African investment holding company LIBERTY STRATEGIC
INVESTMENTS. As we had hoped, management took steps to narrow the discount to
underlying value at which its shares traded. One consequence of those steps,
however, was that the shares were delisted. During the year, we did add two
names in Mexico. Over the years, bottom up research has led to our finding a
number of well-run companies in attractive industries in Mexico. Two bought
this year, telephone giant TELMEX, and TV and media company TELEVISA are no
exception. Both have emerged from Government or family control to be
significant competitors on the international stage. Prospects for growth in
their domestic markets continue to be good, making us confident that the
shares will continue to perform well. Our bottom up enthusiasm has frequently
had to be constrained by a requirement not to have too much exposure to a
market where economic and political instability remains a danger, and where
stock prices have been closely correlated with those in the US.
After a year as good as this, it is hard to be as confident about the coming
year -- stocks in aggregate are simply not as attractively priced as they
were a year ago. The success of the Portfolio, however, rests on the success
of the companies in which it invests. We believe that the companies owned are
the best in their industries and will prosper in the new Millenium as they
have prospered in the old.
2
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HARDING, LOEVNER FUNDS, INC.
<TABLE>
<CAPTION>
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INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS
OCTOBER 31, 1999 SHARES VALUE (1)
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<S> <C> <C>
LONG TERM INVESTMENTS - 95.7%
COMMON STOCKS - 94.2%
ARGENTINA - 0.6%
- ----------------
Quilmes Industrial SA (Brewers) 252,100 $ 2,048,312
-----------------
AUSTRALIA - 2.4%
- ----------------
Rio Tinto Ltd. (Diversified Metal Producers) 483,700 7,771,580
-----------------
CANADA - 2.3%
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Imperial Oil Ltd. (Integrated International Oil Producers) 323,800 7,568,825
-----------------
FRANCE - 6.8%
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Air Liquide (Industrial Chemicals & Gases Manufacturers) 31,300 4,818,391
AXA Co. (Insurance Companies) 18,420 2,595,604
Bic (General Diversified) 94,200 4,602,819
Compagnie Generale d'Industrie et de Participations (General Diversified) 42,450 1,960,454
Financiere et Industrielle Gaz et Eaux (Other Financial Services) * 95,785 4,881,568
Michelin (CGDE) - Class B (Rubber & Tire Manufacturers) 78,148 3,399,682
-----------------
22,258,518
-----------------
GERMANY - 3.1%
- --------------
Allianz AG (Insurance Companies) 14,760 4,490,089
Celanese AG (Diversified Chemical Manufacturers) * 5,730 90,316
Hoechst AG (Diversified Chemical Manufacturers) 57,300 2,519,824
SAP AG - Sponsored ADR (Systems & Subsystems) 82,200 3,005,438
-----------------
10,105,667
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HONG KONG - 6.4%
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Hutchison Whampoa Ltd. (General Diversified) 795,000 7,981,722
Johnson Electric Holdings (Diversified Electrical Manufacturers) 1,302,648 7,042,247
Li & Fung Ltd. (Wholesalers) * 3,434,000 5,856,674
-----------------
20,880,643
-----------------
IRELAND - 1.3%
- --------------
CBT Group plc-ADR (Electronic Data Processing Equipment) * 203,400 4,195,125
-----------------
ITALY - 2.0%
- ------------
Luxottica Group SpA - ADR (Miscellaneous Retailers) 337,300 6,471,944
-----------------
JAPAN - 23.4%
- -------------
Asatsu-DK, Inc. (Advertising Agencies) 227,000 8,010,740
Atlantis Japan Growth Fund (Mutual Funds) * 441,000 5,591,880
Canon, Inc. (Business Machines & Office Equipment) 192,000 5,431,530
Fuji Bank (Banking) 265,000 3,633,966
Fujitsu Ltd. (Computer Software & Processing) 300,000 9,033,372
Hirose Electronics Co., Ltd. (Parts & Components) 45,700 7,971,644
Kurita Water Industries Ltd. (Industrial Machinery) 283,000 5,210,587
Mitsubishi Corp. (Wholesalers) 280,000 2,013,809
NTT Mobile Communications (Telecommunications) 627 16,655,063
Shiseido Co. (Cosmetic & Toiletries) 182,000 2,775,029
Sony Corp. - ADR (Radio, TV & Phonograph Manufacturers) 49,000 7,827,750
Tokio Marine & Fire Insurance Co. (Insurance Companies) 212,000 2,775,029
-----------------
76,930,399
-----------------
</TABLE>
See Notes to Financial Statements
3
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HARDING, LOEVNER FUNDS, INC.
<TABLE>
<CAPTION>
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INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
OCTOBER 31, 1999 SHARES VALUE (1)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MEXICO - 2.9%
- -------------
Grupo Televisa SA - GDR (Radio & TV Broadcasters) * 68,700 $ 2,919,750
Kimberly Clark de Mexico SA de CV (Diversified Paper) 1,104,400 3,537,020
Telefonos de Mexico SA - Class L, ADR (Telecommunications) 37,850 3,236,175
-----------------
9,692,945
-----------------
NETHERLANDS - 8.7%
- ------------------
IHC Caland NV (Shipbuilding) 125,930 5,458,499
ING Groep NV (Insurance Companies) 127,800 7,531,109
Royal Dutch Petroleum Co. - NY Shares (Holding Company) 194,900 11,681,819
Wolters Kluwer NV (Miscellaneous Printing & Publishing) 119,080 3,975,357
-----------------
28,646,784
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SINGAPORE - 4.7%
- ----------------
Dairy Farm International Holdings Ltd. (Miscellaneous Retailers) 2,690,000 2,111,650
DBS (Commercial Banks) * 813,817 9,198,433
Singapore Press Holdings (Newspaper Publishers) 244,000 4,180,845
-----------------
15,490,928
-----------------
SPAIN - 1.9%
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Bankinter SA (Commercial Banks) 159,500 6,129,227
-----------------
SWEDEN - 3.6%
- -------------
Telefonaktiebolaget LM Ericsson - ADR (Miscellaneous Electronics) 97,600 4,172,400
Investor AB - Class B (Miscellaneous Companies) * 604,500 7,738,715
-----------------
11,911,115
-----------------
SWITZERLAND - 9.6%
- ------------------
ABB Ltd. (Power Transmission Equipment) * 80,953 8,145,179
Nestle SA - ADR (Diversified Food) 97,000 9,357,900
Novartis AG (Diversified Drugs, Cosmetics & Health Care) 6,365 9,512,454
Union Bank of Switzerland AG (Commercial Banks) 15,599 4,534,712
-----------------
31,550,245
-----------------
UNITED KINGDOM - 14.5%
- ----------------------
British Telecommunications plc (Telecommunications) 161,800 2,928,553
Close Brothers Group plc (Investment Companies) 98,700 1,230,797
Glaxo Wellcome plc - ADR (Ethical Drug Manufacturers) 99,100 5,933,612
Hays plc (Service Organizations) 626,000 7,129,070
Pearson plc (Miscellaneous Printing & Publishing) 339,900 7,468,027
Railtrack Group plc (Other Transportation) 266,200 5,377,311
Rentokil Initial plc (Service Organizations) 1,877,000 6,214,082
Vodafone Group plc (Telecommunications) 678,500 3,102,560
WPP Group plc (Advertising Agencies) 758,500 8,273,630
-----------------
47,657,642
-----------------
Total Common Stocks (Cost $225,160,603) 309,309,899
-----------------
FACE
FIXED INCOME - 1.5% AMOUNT
- ------------------- ----------------------
TAIWAN - 1.5%
- -------------
Taiwan Semiconductor CVT, zero coupon due 7/3/02 * (Cost $4,489,350) $ 3,420,000 5,055,444
-----------------
TOTAL LONG TERM INVESTMENTS (COST $229,649,953) 314,365,343
-----------------
</TABLE>
See Notes to Financial Statements
4
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HARDING, LOEVNER FUNDS, INC.
<TABLE>
<CAPTION>
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INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED) FACE
OCTOBER 31, 1999 AMOUNT VALUE (1)
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<S> <C> <C>
CASH EQUIVALENTS - 4.4%
- -----------------------
Investors Bank & Trust Company Repurchase Agreement,
4.51% due 11/01/99 in the amount of $14,533,579; issued 10/29/99 (collateralized
by $15,101,359 par of FNMA - ARM, 5.978% to 6.886% due 4/1/26 to 9/1/29
with a market value of $15,395,737) (Cost $14,528,119) $14,528,119 $ 14,528,119
-----------------
TOTAL INVESTMENTS - 100.1% (COST $244,178,072) $ 328,893,462
-----------------
LIABILITIES, NET OF OTHER ASSETS - (0.1)%
- -----------------------------------------
Receivable for securities sold $ 774,359
Receivable for fund shares sold 108,413
Tax reclaim receivable 419,273
Dividends receivable 596,297
Other assets 81,776
Payable for securities purchased (1,981,676)
Payable to Investment Advisor (249,259)
Other liabilities (169,434)
-----------------
(420,251)
-----------------
NET ASSETS - 100%
- -----------------
Applicable to 21,186,793 outstanding $.001 par value shares
(authorized 500,000,000 shares) $ 328,473,211
=================
Net Asset Value, Offering and Redemption Price Per Share $ 15.50
COMPONENTS OF NET ASSETS AS OF OCTOBER 31, 1999 WERE AS FOLLOWS:
- ----------------------------------------------------------------
Paid-in capital $ 232,954,217
Undistributed investment income, net 1,079,745
Undistributed net realized gain on investments and foreign currency related transactions 9,733,341
Net unrealized appreciation on investments and on assets and liabilities
denominated in foreign currencies 84,705,908
=================
$ 328,473,211
=================
</TABLE>
ADR - American Depositary Receipt
ARM - Adjustable Rate Mortgage
CVT - Convertible Bond
GDR - Global Depositary Receipt
(1) See Note 2 to Financial Statements
* Non-income producing security
See Notes to Financial Statements
5
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HARDING, LOEVNER FUNDS, INC.
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GLOBAL EQUITY PORTFOLIO -- OVERVIEW
OCTOBER 31, 1999
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COMPARISON OF CHANGES IN VALUE 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
<TABLE>
<CAPTION>
GLOBAL MSCI ALL COUNTRY LIPPER GLOBAL
EQUITY WORLD EQUITY
PORTFOLIO INDEX FUND INDEX
<S> <C> <C> <C>
12/1/96 10,000 10,000 10,000
12/31/96 9,990 9,853 10,016
1/31/97 10,144 10,020 10,240
2/28/97 10,059 10,159 10,302
3/31/97 10,030 9,960 10,178
4/30/97 10,161 10,282 10,311
5/31/97 10,685 10,887 10,938
6/30/97 11,134 11,448 11,407
7/31/97 11,641 11,965 11,977
8/31/97 10,918 11,139 11,313
9/30/97 11,385 11,711 12,018
10/31/97 10,645 10,993 11,262
11/30/97 10,793 11,157 11,285
12/31/97 10,923 11,298 11,419
1/31/98 10,891 11,546 11,547
2/28/98 11,617 12,344 12,326
3/31/98 12,106 12,865 12,946
4/30/98 12,054 12,978 13,135
5/31/98 11,958 12,723 13,013
6/30/98 11,726 12,947 13,058
7/31/98 11,290 12,952 13,064
8/31/98 9,542 11,135 11,161
9/30/98 9,651 11,358 11,167
10/31/98 10,384 12,395 11,907
11/30/98 10,846 13,212 12,562
12/31/98 11,142 13,821 13,084
1/31/99 11,045 14,103 13,358
2/28/99 10,746 13,757 12,972
3/31/99 11,251 14,383 13,418
4/30/99 12,138 15,013 14,027
5/31/99 11,688 14,494 13,614
6/30/99 12,388 15,233 14,300
7/31/99 12,504 15,158 14,339
8/31/99 12,574 15,159 14,324
9/30/99 12,240 14,987 14,200
10/31/99 12,851 15,748 14,752
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
RETURNS FOR THE PERIODS ENDED OCTOBER 31, 1999
CUMULATIVE TOTAL RETURN AVERAGE ANNUAL TOTAL RETURN
------------------------------------------------- -------------------------------
<S> <C> <C> <C>
TWELVE MONTHS SINCE INCEPTION* SINCE INCEPTION*
GLOBAL EQUITY PORTFOLIO 23.76% 142.92% 11.58%
MSCI All Country World Index 26.41% 180.38% 13.57%
(gross dividends reinvested)
Lipper Global Fund Index 23.89% 167.39% 12.91%
* The Global Equity Portfolio commenced operations on December 1, 1996.
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Global Equity Portfolio has shown very good returns over the past twelve
months in absolute terms, and has performed in line with other global mutual
funds, but actually trailed somewhat its passive benchmark, the MSCI All
Country World Equity Index. That relative under-performance stems from the
first fiscal quarter, ending January 1999, after which the Portfolio has
returned significantly more than both its benchmarks.
6
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HARDING, LOEVNER FUNDS, INC.
- -------------------------------------------------------------------------------
GLOBAL EQUITY PORTFOLIO -- OVERVIEW
OCTOBER 31, 1999
- -------------------------------------------------------------------------------
The year has been characterized by an environment of `global healing', as
markets and economies responded vigorously to the interest rate cuts offered
by central banks in the fourth quarter of 1998 to assuage the fears of a
market meltdown. A recovery in growth prospects spurred earnings growth
prospects for most companies, more broadly than had been the case last year.
As a result, stock prices rose, in spite of interest rates rising to reverse
the declines of the second half of 1998, something that normally dampens
investors' enthusiasm for shares. Southeast Asian and Latin American stocks
surged as the recognition dawned that a global recession had been averted or
postponed, with investors scrambling to capture the high prospective returns
implied in the low share prices that we highlighted in our letter a year ago.
One of the most significant changes to the Portfolio over the past year has
been the expansion of the holdings in Japan. We have added three new
companies during the year, and now hold six Japanese companies, comprising
about one eighth of the entire Portfolio. We have been skeptical in the past
of statements by Japanese managements that they are changing corporate
cultures and more aggressively restructuring their businesses to the benefit
of shareholders, as we have repeatedly written. But the evidence of deep and
far-reaching change has now become unmistakable; managements have begun to
take actions that imply that they recognize that Japan's anti-competitive
`convoy' system is dead, and that every company is now in a battle in which
only the fittest will survive. The Portfolio's holdings in Japan have
produced excellent returns this year, but they are still smaller than passive
index weightings in Japan.
A second significant change to the Portfolio over the past year has been
substantial additions to our holdings of technology companies; we now hold
almost a fifth of the Portfolio in that sector. While eschewing the business
model and valuation hazards that accompany the Internet gold rush, we have
striven to identify companies that will be successful as `outfitters' to the
dot-com pioneers bent on staking their claim in cyberspace. Many of the
largest contributors to performance for the Portfolio this year have been
technology stocks, several of them from outside the US. As global investors,
we can own successful technology companies wherever they may be domiciled;
but additionally we attempt to take advantage of spotting trends first
established in the frenetic and fermenting world of US technology becoming
adapted to other markets, often with a lag.
We are spending significant research time in understanding how the Internet
is changing businesses across the globe, and across industrial sectors. We
are exploiting this trend, by buying providers of content (the stuff that
people want to see, play or read), and by buying technology and telecom
companies supplying the backbone of e-commerce. More generally, if GE's Jack
Welch is right, and the Internet `changes everything', the companies that
benefit will be those with the management strength to foresee change and to
impose the changes in corporate structures and culture that will be necessary
to exploit change. Our investment process has always been one that emphasizes
management ability and vision. Internet strategy is now a key component in
our evaluation of management, and competitive advantage.
Amidst all the exciting long-term opportunities that technological
developments have produced, there is one shorter-term danger -- that of the
`Y2K' problem. We have taken extensive measures to ensure that our internal
systems are compliant, that the brokers and custodians with whom we transact
are compliant, and that the companies in which we invest have taken all
possible precautions. We have surveyed all our portfolio companies, and asked
them to tell us their plans for ameliorating the risks. In general, we have
been pleased with the responses we have received, but not surprised -- good
management should by now have the issue in hand.
7
<PAGE>
HARDING, LOEVNER FUNDS, INC.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
GLOBAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS
OCTOBER 31, 1999 SHARES VALUE (1)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG-TERM INVESTMENTS - 95.0%
- -----------------------------
COMMON STOCKS - 94.0%
- ---------------------
ARGENTINA - 1.0%
- ----------------
Quilmes Industrial SA (Brewers) 25,000 $ 203,125
-------------
AUSTRALIA - 1.9%
- ----------------
Rio Tinto Ltd. (Diversified Metal Producers) 25,000 401,674
-------------
DENMARK - 2.5%
- --------------
Ratin A/S - B Shares (Service Organizations) 5,000 519,537
-------------
FRANCE - 2.4%
- -------------
Compagnie Generale d'Industrie et de Participations (General Diversified) 2,659 122,800
Financiere et Industrielle Gaz et Eaux (Other Financial Services) * 7,400 377,132
-------------
499,932
-------------
GERMANY - 1.7%
- --------------
Allianz AG (Insurance Companies) 500 152,103
SAP AG - Sponsored ADR (Systems & Subsystems) 5,500 201,094
-------------
353,197
-------------
HONG KONG - 8.6%
- ----------------
Hutchison Whampoa Ltd. (General Diversified) 65,000 652,594
Jardine Strategic Holdings Ltd. (General Diversified) * 200,000 442,000
Johnson Electric Holdings (Diversified Electrical Manufacturers) 75,000 405,458
Li & Fung Ltd. (Wholesalers) * 180,000 306,989
-------------
1,807,041
-------------
IRELAND - 1.2%
- --------------
CBT Group plc-ADR (Electronic Data Processing Equipment) * 12,000 247,500
-------------
ITALY - 0.9%
- ------------
Luxottica Group SpA - ADR (Miscellaneous Retailers) 10,000 191,875
-------------
JAPAN - 11.0%
- -------------
Fuji Bank (Banking) 15,000 205,696
Fujitsu Ltd. (Computer Software & Processing) 20,000 602,225
Hirose Electronics Co., Ltd. (Parts & Components) 3,000 523,303
Mitsubishi Corp. (Wholesalers) 50,000 359,609
Sony Corp. - ADR (Radio, TV & Phonograph Manufacturers) 4,000 639,000
-------------
2,329,833
-------------
MEXICO - 3.0%
- -------------
Grupo Televisa SA - GDR (Radio & TV Broadcasters) * 5,000 212,500
Kimberly Clark de Mexico SA de CV (Diversified Paper) 50,000 160,133
Telefonos de Mexico SA - Class L, ADR (Telecommunications) 3,000 256,500
-------------
629,133
-------------
NETHERLANDS - 4.4%
- ------------------
Royal Dutch Petroleum Co. - NY Shares (Holding Company) 10,000 599,375
Wolters Kluwer NV (Miscellaneous Printing & Publishing) 10,000 333,839
------------
933,214
------------
</TABLE>
See Notes to Financial Statements
8
<PAGE>
HARDING, LOEVNER FUNDS, INC.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
GLOBAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
OCTOBER 31, 1999 SHARES VALUE (1)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SWEDEN - 4.0%
- -------------
Telefonaktiebolaget LM Ericsson - ADR (Miscellaneous Electronics) 6,100 $ 260,775
Investor AB - Class B (Miscellaneous Companies) * 45,000 576,083
-------------
836,858
-------------
SWITZERLAND - 4.5%
- ------------------
ABB Ltd. (Power Transmission Equipment) * 3,984 400,855
Nestle SA - ADR (Diversified Food) 4,000 385,893
Zurich Allied AG (Insurance) 300 169,704
-------------
956,452
-------------
UNITED KINGDOM - 5.7%
- ---------------------
Pearson plc (Miscellaneous Printing & Publishing) 25,000 549,281
WPP Group plc (Advertising Agencies) 60,000 654,473
-------------
1,203,754
-------------
UNITED STATES - 41.2%
- ---------------------
Allied Capital Corp. (Commercial Finance Companies) 27,301 547,726
AlliedSignal, Inc. (Government & Defense Electronic Equipment) 8,300 472,581
American International Group (Insurance Companies) 5,000 514,687
Aspen Technologies, Inc. (Automatic Controls) * 10,000 127,500
Baxter International, Inc. (Ethical Drug Manufacturers) 9,000 583,875
CBS Corp. (Radio & TV Broadcasters) * 9,000 439,312
Colgate-Palmolive Co. (Cosmetics & Toiletries) 12,000 726,000
Dover Corp. (Diversified Machinery) 8,000 340,500
Exxon Corp. (Integrated International Oil Producers) 5,400 399,937
Federal National Mortgage Association (Other Financial Services) 5,000 353,750
Goldman Sachs Group, Inc. (Securities Brokerage) 1,730 122,830
Intel Corp. (Electronic Data Processing Equipment) 6,500 503,344
MCI Worldcom, Inc. (Telecommunications) * 2,000 171,625
Oracle Corp. (Computer Software & Processing) * 7,000 332,937
Pfizer, Inc. (Ethical Drug Manufacturers) 12,000 474,000
Schlumberger, Ltd. (Exploration, Drilling Service & Equipment) 9,000 545,063
Sun Microsystems, Inc. (Electronic Data Processing Equipment) * 7,000 740,688
Thermo Electron Corp. (Scientific Equipment & Supplies) * 22,000 297,000
Wells Fargo & Co. (Commercial Banks) 10,000 478,750
Wisconsin Central Transportation Corp. (Railroad Holding Companies) * 15,000 208,125
Wrigley (WM.) Jr. Co. (Confectionery Goods) 4,000 319,750
-------------
8,699,980
-------------
Total Common Stocks (Cost $16,195,974) 19,813,105
-------------
FIXED INCOME - 1.0%
- -------------------
FACE
TAIWAN - 1.0% AMOUNT
- ------------- -------------------
Taiwan Semiconductor CVT, zero coupon due 7/3/02 * (Cost $210,750) $ 150,000 221,730
-------------
TOTAL LONG TERM INVESTMENTS (COST $16,406,724) 20,034,835
-------------
</TABLE>
See Notes to Financial Statements
9
<PAGE>
HARDING, LOEVNER FUNDS, INC.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
GLOBAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED) FACE
OCTOBER 31, 1999 AMOUNT VALUE (1)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH EQUIVALENTS - 4.4%
- -----------------------
Investors Bank & Trust Company Repurchase Agreement, 4.51%
due 11/01/99 in the amount of $936,172; issued 10/29/99 (collateralized by
$963,079 par of FNMA - ARM, 6.752% due 6/1/23 with a market
value of $971,958) (Cost $935,821) $ 935,821 $ 935,821
-------------
TOTAL INVESTMENTS - 99.4% (COST $17,342,545) $20,970,656
-------------
OTHER ASSETS, NET OF LIABILITIES - 0.6%
- ---------------------------------------
Receivable for securities sold $ 220,133
Other assets 76,636
Payable for securities purchased (123,476)
Payable to Investment Advisor (13,027)
Other liabilities (43,851)
-------------
116,415
-------------
NET ASSETS - 100%
- -----------------
Applicable to 1,054,100 outstanding $.001 par value shares
(authorized 500,000,000 shares) $21,087,071
=============
Net Asset Value, Offering and Redemption Price Per Share $ 20.00
=============
COMPONENTS OF NET ASSETS AS OF OCTOBER 31, 1999 WERE AS FOLLOWS:
- ----------------------------------------------------------------
Paid-in capital $15,641,123
Undistributed investment income, net 14,428
Undistributed net realized gain on investments and foreign currency related transactions 1,803,770
Net unrealized appreciation on investments and on assets and liabilities
denominated in foreign currencies 3,627,750
=============
$21,087,071
=============
</TABLE>
ADR - American Depositary Receipt
ARM - Adjustable Rate Mortgage
CVT - Convertible Bond
GDR - Global Depositary Receipt
(1) See Note 2 to Financial Statements
* Non-income producing security
See Notes to Financial Statements
10
<PAGE>
HARDING, LOEVNER FUNDS, INC.
- -------------------------------------------------------------------------------
MULTI-ASSET GLOBAL PORTFOLIO -- OVERVIEW
OCTOBER 31, 1999
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMPARISON OF CHANGES IN VALUE OF $10,000 INVESTMENT IN HARDING, LOEVNER FUNDS, INC.-
MULTI-ASSET GLOBAL PORTFOLIO AND THE CONSTRUCTED GLOBAL BALANCED INDEX*
AND THE LIPPER GLOBAL FLEXIBLE FUND INDEX
CONSTRUCTED LIPPER GLOBAL
MULTI-ASSET GLOBAL GLOBAL FLEXIBLE
PORTFOLIO BALANCED INDEX* FUND INDEX
<S> <C> <C> <C>
11/1/96 10,000 10,000 10,000
11/30/96 10,390 10,380 10,426
12/31/96 10,379 10,280 10,441
1/31/97 10,529 10,041 10,639
2/28/97 10,519 10,282 10,700
3/31/97 10,469 10,116 10,525
4/30/97 10,590 10,258 10,625
5/31/97 11,021 10,779 11,072
6/30/97 11,362 11,143 11,382
7/31/97 11,773 11,420 11,850
8/31/97 11,251 10,977 11,512
9/30/97 11,693 11,424 12,004
10/31/97 11,292 11,136 11,575
11/30/97 11,432 11,168 11,611
12/31/97 11,613 11,243 11,711
1/31/98 11,529 11,456 11,739
2/28/98 12,125 11,964 12,269
3/31/98 12,501 12,214 12,681
4/30/98 12,511 12,361 12,793
5/31/98 12,469 12,267 12,677
6/30/98 12,354 12,418 12,668
7/31/98 12,093 12,396 12,544
8/31/98 11,133 11,489 11,156
9/30/98 11,425 11,889 11,334
10/31/98 11,916 12,695 11,926
11/30/98 12,208 13,068 12,460
12/31/98 12,383 13,557 12,759
1/31/99 12,101 13,680 12,911
2/28/99 11,895 13,281 12,596
3/31/99 12,264 13,645 13,006
4/30/99 13,088 14,010 13,705
5/31/99 12,763 13,607 13,487
6/30/99 13,229 13,908 13,986
7/31/99 13,371 14,022 13,977
8/31/99 13,349 14,064 13,928
9/30/99 13,110 14,073 13,851
10/31/99 13,327 14,513 14,132
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
RETURNS FOR THE PERIODS ENDED OCTOBER 31, 1999
CUMULATIVE TOTAL RETURN AVERAGE ANNUAL TOTAL RETURN
-------------------------------------------------- --------------------------------
<S> <C> <C> <C>
TWELVE MONTHS SINCE INCEPTION** SINCE INCEPTION**
MULTI-ASSET GLOBAL EQUITY PORTFOLIO 11.84% 33.27% 10.05%
Constructed Global Balanced Index* 14.32% 45.13% 13.22%
Lipper Global Flexible Fund Index 18.50% 41.32% 12.22%
**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 Multi-Asset Global Portfolio has shown solid returns over the past twelve
months in absolute terms, but has trailed other similar mutual funds and its
passive benchmark. Equities in the Portfolio have contributed very good
returns during the year, up more than 23%. This is in line with the index of
global mutual funds, but trails the passive index, reflecting our poor equity
returns through January 1999. Since then, the equities have significantly
outpaced both other funds as well as the passive index. Bonds in the
Portfolio have performed in line with the global bond index.
11
<PAGE>
HARDING, LOEVNER FUNDS, INC.
- -------------------------------------------------------------------------------
MULTI-ASSET GLOBAL PORTFOLIO -- OVERVIEW
OCTOBER 31, 1999
- -------------------------------------------------------------------------------
The year has been characterized by an environment of `global healing', as
markets and economies responded vigorously to the interest rate cuts offered
by central banks in the fourth quarter of 1998 to assuage the fears of a
market meltdown. A recovery in growth prospects spurred earnings growth
prospects for most companies, more broadly than had been the case last year.
As a result, stock prices rose, in spite of interest rates rising to reverse
the declines of the second half of 1998. Bond prices declined everywhere
except in Japan as a result of the reversal of the interest rate trend, so
that stock and bond prices remained, to a large extent, decoupled. Southeast
Asian and Latin American stocks surged as the recognition dawned that a
global recession had been averted or postponed, with investors scrambling to
capture the high prospective returns implied in the low share prices that we
highlighted in our letter a year ago.
We raised the allocation to equities in the Portfolio, both by direct
purchase and by letting the better performance of equities ride over the
course of the year, with the result that equities accounted for 65% at
October 31, with bonds standing at 33%, and cash at 2%. With the poor
performance of bonds, in hindsight it is clear that we might have embraced
the riskier (higher return) asset class (equity) investments more
aggressively than we did at the end of 1998, but we make no apology for our
incremental style, which has served us well over time.
Our bond holdings remain generally of very high credit quality, concentrated
in issues of the US Government and Federal agencies, with some holdings of
high yield corporate debt, but no emerging market debt. Global bond index
returns were significantly enhanced by the returns from Japanese bonds, which
garnered outsized gains if measured in dollars due to the dramatic
strengthening of the Yen. The fund has no holdings of Japanese bonds, which
carry very low yields. We have added to our significant holdings of Treasury
inflation-indexed bonds (TIPS), which we believe offer a rare combination of
stability, income, and protection from creeping inflation.
Within the equity holdings, two areas have been subjected to more intense
research and activity: Japanese companies and technology companies. We have
made significant shifts and additions to our holdings in both of those
categories. Evidence of deep and far-reaching change in the management
attitudes and corporate cultures of Japanese companies is now unmistakable.
We have seen actions by managements that imply that they recognize that
Japan's anti-competitive `convoy' system is dead, and that every company is
now in a battle in which only the fittest will survive. It is companies with
such managements that we have added to the Portfolio. Within the technology
sector, we have eschewed the business model and valuation hazards that
accompany the Internet gold rush, but have striven to identify companies that
will be successful as `outfitter' to the dot.com pioneers bent on staking
their claim in cyberspace.
We are spending significant research time in understanding how the Internet
is changing businesses across the globe, and across industrial sectors. We
are exploiting this trend, by buying providers of content (the stuff that
people want to see, play or read), and by buying technology and telecom
companies supplying the backbone of e-commerce. More generally, if GE's Jack
Welch is right, and the Internet `changes everything', the companies that
benefit will be those with the management strength to foresee change and to
impose the changes in corporate structures and culture that will be necessary
to exploit change. Our investment process has always been one that emphasizes
management ability and vision. Internet strategy is now a key component in
our evaluation of management, and competitive advantage.
Amidst all the exciting long-term opportunities that technological
developments have produced, there is one shorter-term danger -- that of the
`Y2K' problem. We have taken extensive measures to ensure that our internal
systems are compliant, that the brokers and custodians with whom we transact
are compliant, and that the companies in which we invest have taken all
possible precautions. We have surveyed all our portfolio companies, and asked
them to tell us their plans for ameliorating the risks. In general, we have
been pleased with the responses we have received, but not surprised -- good
management should by now have the issue in hand.
12
<PAGE>
HARDING, LOEVNER FUNDS, INC.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
MULTI-ASSET GLOBAL PORTFOLIO
STATEMENT OF NET ASSETS
OCTOBER 31, 1999 SHARES VALUE (1)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS - 97.7%
- -----------------------------
COMMON STOCKS - 59.4%
- ---------------------
FRANCE - 3.4%
- -------------
Bic (General Diversified) 1,050 $ 51,305
Financiere et Industrielle Gaz et Eaux (Other Financial Services) * 2,398 122,211
Michelin (CGDE) - Class B (Rubber & Tire Manufacturers) 1,200 52,204
----------
225,720
----------
GERMANY - 2.2%
- --------------
Allianz AG (Insurance Companies) 200 60,841
Bayer AG (Diversified Chemical Manufacturers) 1,100 44,964
SAP AG - Sponsored ADR (Systems & Subsystems) 1,000 36,562
----------
142,367
----------
HONG KONG - 4.9%
- ----------------
Hutchison Whampoa Ltd. (General Diversified) 12,000 120,479
Jardine Strategic Holdings Ltd. (General Diversified) * 60,000 132,600
Li & Fung Ltd. (Wholesalers) * 40,000 68,220
----------
321,299
----------
IRELAND - 0.6%
- --------------
CBT Group plc-ADR (Electronic Data Processing Equipment) * 1,700 35,062
----------
JAPAN - 5.7%
- ------------
Asatsu-DK, Inc. (Advertising Agencies) 1,000 35,290
Atlantis Japan Growth Fund (Mutual Funds) * 7,000 88,760
Mitsubishi Corp. (Wholesalers) 15,000 107,883
Sony Corp. - ADR (Radio, TV & Phonograph Manufacturers) 500 79,875
Tokio Marine & Fire Insurance Co. (Insurance Companies) 5,000 65,449
----------
377,257
----------
MEXICO - 1.7%
- -------------
Grupo Televisa SA - GDR (Radio & TV Broadcasters) * 800 34,000
Kimberly Clark de Mexico SA de CV (Diversified Paper) 25,000 80,067
----------
114,067
----------
NETHERLANDS - 3.0%
- ------------------
Royal Dutch Petroleum Co. - NY Shares (Holding Company) 2,500 149,844
Wolters Kluwer NV (Miscellaneous Printing & Publishing) 1,400 46,737
----------
196,581
----------
SINGAPORE - 1.8%
- ----------------
DBS Local Certificates (Commercial Banks) * 10,667 120,564
---------
SWEDEN - 4.0%
- -------------
Telefonaktiebolaget LM Ericsson - ADR (Miscellaneous Electronics) 2,000 85,500
Investor AB - Class B (Miscellaneous Companies) * 14,000 179,226
----------
264,726
----------
SWITZERLAND - 4.6%
- ------------------
ABB Ltd. (Power Transmission Equipment) * 1,296 130,399
Nestle SA - ADR (Diversified Food) 1,300 125,415
Union Bank of Switzerland AG (Commercial Banks) 170 49,420
----------
305,234
----------
UNITED KINGDOM - 7.1%
- ---------------------
British Telecommunications plc (Telecommunications) 400 72,000
Pearson plc (Miscellaneous Printing & Publishing) 3,800 83,491
Rentokil Initial plc (Service Organizations) 30,000 99,319
Rio Tinto plc (Mining) 7,500 128,104
WPP Group plc (Advertising Agencies) 8,000 87,263
----------
470,177
----------
</TABLE>
See Notes to Financial Statements
13
<PAGE>
HARDING, LOEVNER FUNDS, INC.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
MULTI-ASSET GLOBAL PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
OCTOBER 31, 1999 SHARES VALUE (1)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
UNITED STATES - 20.4%
- ---------------------
Air Products & Chemicals, Inc. (Industrial Chemicals & Gases Manufacturers) 1,600 $ 44,000
Allied Capital Corp. (Commercial Finance Companies) 6,500 130,406
AlliedSignal, Inc. (Government & Defense Electronic Equipment) 1,800 102,487
American International Group (Insurance Companies) 1,250 128,672
Baxter International, Inc. (Ethical Drug Manufacturers) 1,000 64,875
Colgate-Palmolive Co. (Cosmetics & Toiletries) 2,000 121,000
Exxon Corp. (Integrated International Oil Producers) 1,800 133,312
Federal National Mortgage Association (Other Financial Services) 900 63,675
Goldman Sachs Group, Inc. (Securities Brokerage) 290 20,590
Intel Corp. (Electronic Data Processing Equipment) 600 46,463
International Business Machines Corp. (Electronic Data Processing Equipment) 1,000 98,375
Quintiles Transnational Corp. (Medical Services) * 1,800 33,412
Royce Micro-Cap Trust, Inc. (Mutual Funds) 11,266 92,944
Schlumberger, Ltd. (Exploration, Drilling Service & Equipment) 1,200 72,675
Thermo Electron Corp. (Scientific Equipment & Supplies) * 3,500 47,250
Wells Fargo & Co. (Financial) 2,500 119,688
Wisconsin Central Transportation Corp. (Railroad Holding Companies) * 1,900 26,363
----------
1,346,187
----------
Total Common Stocks (Cost $3,224,461) 3,919,241
----------
WARRANTS - 0.0%
- ---------------
JAPAN - 0.0%
- ------------
Atlantis Japan Growth Fund warrants expiring 4/30/01 (Financial) * (Cost $797) 400 1,560
---------
FACE
FIXED INCOME - 38.2% CURRENCY AMOUNT (a)
- -------------------- ------------- --------------
EUROPE - 1.2%
- -------------
Eurotunnel 4.45% Equity Notes due 12/31/03 EUR 37,500 39,405
Eurotunnel 4.45% Equity Notes due 12/31/03 GBP 37,500 39,404
----------
78,809
----------
MULTINATIONAL - 1.5%
- --------------------
International Bank Reconstruction & Development, 4.25% due 9/08/05 * EUR 100,000 101,521
---------
TAIWAN - 1.4%
- -------------
Taiwan Semiconductor CVT, zero coupon due 7/3/02 * 60,000 88,692
---------
UNITED KINGDOM - 2.1%
- ---------------------
Orange plc, 7.625% due 8/1/08 EUR 125,000 136,229
---------
UNITED STATES - 32.1%
- ---------------------
Comcast Corp., 10.625% due 7/15/12 100,000 119,760
Fullerton Global Corp., zero coupon due 4/2/03 175,000 178,395
GNMA, 7.000% due 4/15/28 126,339 123,963
GNMA, 7.000% due 6/15/09 71,868 71,850
GNMA, 7.500% due 6/15/27 100,894 101,215
GNMA, 8.000% due 8/15/07 7,792 7,968
GNMA, 8.500% due 5/15/18 15,857 16,513
GNMA, 9.500% due 9/20/20 3,381 3,608
Rockefeller Center Property CVT, 0.000% due 12/31/00 250,000 210,000
</TABLE>
See Notes to Financial Statements
14
<PAGE>
HARDING, LOEVNER FUNDS, INC.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
MULTI-ASSET GLOBAL PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED) FACE
OCTOBER 31, 1999 AMOUNT (a) VALUE (1)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <S>
UNITED STATES - (CONTINUED)
- ---------------------------
U.S. Treasury Inflation Index Note, 3.504% due 1/15/07 150,000 $ 150,752
U.S. Treasury Note, 7.00% due 7/15/06 250,000 261,094
U.S. Treasury Note, 8.75% due 8/15/00 175,000 179,375
U.S. Treasury Inflation Index Bond, 3.625% due 4/15/28 225,000 213,084
U.S. Treasury Bond, 5.625% due 5/15/08 300,000 289,406
U.S. Treasury Bond, 6.125% due 11/15/27 200,000 193,188
----------
2,120,171
----------
Total Fixed Income (Cost $2,593,138) 2,525,422
----------
TOTAL LONG TERM INVESTMENTS (COST $5,818,396) 6,446,223
----------
CASH EQUIVALENTS - 2.2%
- -----------------------
Investors Bank & Trust Company Repurchase Agreement, 4.51%
due 11/01/99 in the amount of $143,155; issued 10/29/99 (collateralized
by $148,637 par of GNMA - ARM, 6.375% due 1/20/18 with
a market value of $151,122) (Cost $143,101) 143,101 143,101
----------
TOTAL INVESTMENTS - 99.8% (COST $5,961,497) $ 6,589,324
------------
OTHER ASSETS, NET OF LIABILITIES - 0.1%
- ---------------------------------------
Interest receivable $ 32,087
Other assets 14,951
Payable to Investment Advisor (2,571)
Other liabilities (34,487)
---------
9,980
---------
NET ASSETS - 100%
- -----------------
Applicable to 537,249 outstanding $.001 par value shares
(authorized 500,000,000 shares) $ 6,599,304
============
Net Asset Value, Offering and Redemption Price Per Share $ 12.28
========
COMPONENTS OF NET ASSETS AS OF OCTOBER 31, 1999 WERE AS FOLLOWS:
- ----------------------------------------------------------------
Paid-in capital $ 5,589,489
Undistributed investment income, net 108,597
Accumulated net realized gain on investments and foreign currency-related transactions 273,795
Net unrealized appreciation on investments and on assets and liabilities
denominated in foreign currencies 627,423
============
$ 6,599,304
============
</TABLE>
ADR - American Depositary Receipt
ARM - Adjustable Rate Mortgage
CVT - Convertible Bond
EUR - European Monetary Unit (Euro)
GBP - British Pound
GDR - Global Depositary Receipt
(a) Face amount shown in U.S. dollars unless otherwise indicated.
(1) See Note 2 to Financial Statements
* Non-income producing security
See Notes to Financial Statements
15
<PAGE>
HARDING, LOEVNER FUNDS, INC.
- -------------------------------------------------------------------------------
EMERGING MARKETS PORTFOLIO -- OVERVIEW
OCTOBER 31, 1999
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMPARISON OF CHANGES IN VALUE OF $10,000 INVESTMENT IN HARDING, LOEVNER FUNDS, INC.-
EMERGING MARKETS PORTFOLIO AND THE MSCI EMERGING MARKETS FREE INDEX AND THE LIPPER
EMERGING MARKETS FUNDS INDEX (GROSS DIVIDENDS REINVESTED)
EMERGING MARKETS LIPPER EMERGING MSCI EMERGING
PORTFOLIO MARKETS FUNDS INDEX MARKETS FREE
<S> <C> <C> <C>
11/9/98 10,000 10,000 10,000
11/30/98 10,280 10,127 10,202
12/31/98 10,160 10,000 10,054
1/31/99 9,740 9,797 9,892
2/28/99 9,500 9,713 9,988
3/31/99 10,490 10,794 11,305
4/30/99 11,870 12,293 12,703
5/31/99 11,780 12,146 12,629
6/30/99 13,350 13,510 14,063
7/31/99 13,180 13,172 13,681
8/31/99 13,400 13,027 13,805
9/30/99 13,310 12,564 13,338
10/31/99 13,680 12,942 13,622
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
RETURNS FOR THE PERIODS ENDED OCTOBER 31, 1999
CUMULATIVE TOTAL RETURN AVERAGE ANNUAL TOTAL RETURN
------------------------------------------------- ----------------------------
<S> <C> <C>
SINCE INCEPTION* SINCE INCEPTION*
EMERGING MARKETS PORTFOLIO 36.80% 37.76%
MSCI Emerging Markets Free Index 36.23% 37.17%
(gross dividends reinvested)
Lipper Emerging Markets Funds Index 29.43% 30.18%
*The Emerging Markets Portfolio commenced operations on November 9, 1998.
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Emerging Market Portfolio celebrated its first birthday on November 9,
1999. By most measures, the Portfolio has enjoyed a very good start,
returning 36.8% in dollars for the shortened year ended October 31 and
exceeding its the passive and active benchmarks, MSCI Emerging Markets Free
and Lipper Emerging Markets Funds. The Portfolio was initiated at a time of
extreme pessimism towards equity markets in general and emerging equity
markets in particular. Stock valuations of even leading emerging market
companies were deeply depressed. Over the course of 1999, however, it became
apparent that the emerging economies had not fallen into a bottomless pit.
The world was not, as it had appeared, headed into a recession; global growth
was going to be positive and, in fact, accelerating. The restoration of both
financial stability and investor confidence helped emerging equity markets
recover from depressed levels.
16
<PAGE>
HARDING, LOEVNER FUNDS, INC.
- -------------------------------------------------------------------------------
EMERGING MARKETS PORTFOLIO -- OVERVIEW
OCTOBER 31, 1999
- -------------------------------------------------------------------------------
But the story of the Portfolio's performance was by no means wholly a
macroeconomic tale. Returns reflected not only the strong cyclical recovery,
but also, in selected markets, clear progress on deregulation, privatization,
and improved corporate management. We believe that specific stock selection
has been instrumental in generating strong returns. Our strategy, as always,
has been to buy good companies in growing industries, with smart management
and sound balance sheets. We maintained our focus on this strategy over the
course of the past year. The Portfolio's success has been attributable to the
inclusion of good stocks that outperformed their respective markets as well
as to the avoidance of some prominent `index-heavy' stocks that have done
very poorly. Brazilian regional aircraft manufacturer EMBRAER is one of our
largest holdings AND best performing companies, up more than three-fold since
purchase. Embraer is not even included in the Brazilian index. We doubled our
commitment to CHINA TELECOM as we became increasingly comfortable with its
franchise and growth potential. It now has over 13m wireless subscribers and
continues to grow rapidly. On the other hand, we avoided the big electricity
generators in Brazil and Poland, despite their large market capitalizations
and generally favorable opinions within the brokerage community. The
regulatory climate and underlying economics did not pass our quality and risk
hurdles. In each of the portfolio decisions, our process and discipline
served us well.
The Portfolio's broad geographic exposure reflects the success we have had at
finding companies that meet our quality standards. Asia and Latin America are
more heavily represented; Eastern Europe and Africa less so. The reasons for
this boil down to some simple, hard truths: Latin America is `working' at
both the macro and micro level, Asia is recovering (and its companies are, in
many cases, dramatically improving their governance), but only in a few cases
are Eastern European companies `getting it done'. To be fair, Eastern
European companies have had relatively limited experience in the global,
capitalist marketplace, so finding suitable companies there has been a much
greater challenge than in other regions.
The outlook for emerging equity markets in 2000 now looks good -- though
perhaps that observation in itself is a cause for concern! Although stock
valuations have increased and interest rates are at the low end of their
recent ranges, the long-term, secular growth story is still unfolding in a
positive direction. Deregulation continues (Korea), macroeconomic oversight
has been strengthened, and perhaps surprising to many, inflation has been
kept under control (Brazil, Thailand). Commodity prices -- key for a long
list of emerging markets -- are rising, serving to aid current accounts as
well as governments' fiscal budgets. All this makes economic growth more
likely.
Looking back, we can say that 1999 was a `year of recovery' from the emerging
market currency crisis of 1997-8. We look forward to the next few years as
ones hopefully characterized by financial stability and accelerating economic
growth. Our companies are very well positioned to capitalize on a more benign
economic environment, and should deliver strong gains in earnings and cash
flows.
17
<PAGE>
HARDING, LOEVNER FUNDS, INC.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
EMERGING MARKETS PORTFOLIO
STATEMENT OF NET ASSETS
OCTOBER 31, 1999 SHARES VALUE (1)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LONG TERM INVESTMENTS - 97.8%
- -----------------------------
COMMON STOCKS - 89.5%
- ---------------------
ARGENTINA - 2.5%
- ----------------
Perez Companc - ADR (Integrated International Oil Producers) 2,000 $ 24,292
Quilmes Industrial SA (Brewers) 1,800 14,625
------------------
38,917
------------------
BRAZIL - 6.2%
- -------------
Compania Cervejaria Brahma - ADR (Beverages, Food & Tobacco) 1,500 18,750
Compania Brasileira de Distribuicao Grupo Pao de
Acurcar (National & Regional Food Chains) 1,200 26,250
Telesp Celular SA (Telecommunications) 1,020,000 35,582
Tele Sudeste Celular Participacoes SA - ADR (Telecommunications) 700 14,000
------------------
94,582
------------------
CHILE - 2.8%
- ------------
Cia de Telecomunicaciones de Chile SA - ADR (Telecommunications) 1,500 25,031
Vina Concha Y Toro SA - ADR (Brewers) 500 17,250
------------------
42,281
------------------
EGYPT - 0.5%
- ------------
Suez Cement Co. - GDR (Cement Producers) * 500 8,206
------------------
GREECE - 2.8%
- -------------
Attica Enterprises SA (Shipping) 1,800 42,331
------------------
HONG KONG - 10.1%
- -----------------
China Telecom (Telecommunications) * 12,000 41,086
Johnson Electric Holdings (Diversified Electrical Manufacturers) 11,000 59,467
Li & Fung Ltd. (Wholesalers) * 32,000 54,576
------------------
155,129
------------------
HUNGARY - 3.9%
- --------------
Matav Rt - ADR (Telecommunications) 1,000 28,813
Otp Bank (Savings & Loans) 700 31,710
------------------
60,523
------------------
INDIA - 4.6%
- ------------
Hindustan Lever Ltd. (Diversified Food) 600 31,879
Morgan Stanley Dean Witter India Investment Fund (Mutual Funds) * 3,000 37,875
------------------
69,754
------------------
INDONESIA - 2.6%
- ----------------
Housing Development Finance Corp., Ltd. (Other Financial Services) 6,500 39,621
------------------
ISRAEL - 1.8%
- -------------
Koor Industries Ltd. - ADR (General Diversified) 1,650 27,844
------------------
</TABLE>
See Notes to Financial Statements
18
<PAGE>
HARDING, LOEVNER FUNDS, INC.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
EMERGING MARKETS PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
OCTOBER 31, 1999 SHARES VALUE (1)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MEXICO - 13.2%
- --------------
Alfa SA (Diversified Chemical Manufacturers) 6,500 $ 24,940
Cifra SA - ADR (Discount Stores) * 3,000 46,841
Desc Sociedad de Fomento Industrial SA de CV (Shipping) 18,000 14,599
Grupo Televisa SA - Series CPO (Radio & TV Broadcasters) * 2,200 46,553
Kimberly Clark de Mexico SA de CV (Diversified Paper) 5,000 16,013
Panamerican Beverages Inc - Class A (Soft Drink Producers & Bottlers) 1,250 20,078
Telefonos de Mexico SA - Class L, ADR (Telecommunications) 400 34,200
------------------
203,224
------------------
PHILIPPINES - 2.4%
- ------------------
ABS-CBN Broadcasting Corp. (Radio & TV Broadcasters) 17,500 19,226
International Container Terminal Services, Inc. (Shipping) * 180,000 17,303
------------------
36,529
------------------
POLAND - 2.2%
- -------------
Agora SA (Newspaper Publishers) * 1,400 13,618
Wielkopolski Bank Kredytowy SA (Commercial Banks) 3,500 20,593
------------------
34,211
------------------
SINGAPORE - 1.3%
- ----------------
Natsteel Electronics Ltd. (Miscellaneous Electronics) 5,000 19,540
------------------
SOUTH AFRICA - 2.3%
- -------------------
South Africa Breweries (Brewers) 4,000 35,069
------------------
SOUTH KOREA - 12.4%
- -------------------
Hite Brewery Co. Ltd. (Brewers) * 900 31,526
Korea Fund (Mutual Funds) * 1,000 12,750
Korea Telecom Corp. - ADR (Telecommunications) * 1,500 52,875
Pohang Iron and Steel Co., Ltd. (Steel Producers - Integrated) 360 43,668
Samsung Electronics - GDR - 144A (Diversified Electronics) 500 29,250
South Korea Mobile Telecommunications Corp., Ltd. (Telecommunications) 18 20,792
------------------
190,861
------------------
TAIWAN - 9.3%
- -------------
Asustek Computer Inc. (Electronic Data Processing Equipment) 2,000 21,063
Hon Hai Precision Industry (Parts & Components) * 4,200 28,824
President Chain Store Corp. (National & Regional Food Chains+A94) 5,900 16,700
Taiwan Semiconductor (Parts & Components) * 17,220 76,788
------------------
143,375
------------------
THAILAND - 4.2%
- ---------------
Advanced Information Service plc (Telecommunications) * 3,000 35,020
Pizza Co. Ltd. (Restaurants & Fast Food Franchisers) 6,000 17,588
Siam City Cement Public Co. Ltd. (Cement Producers) * 3,000 11,051
------------------
63,659
------------------
UNITED KINGDOM - 3.4%
- ---------------------
Al Ahram Beverages Co. - GDR (Beverages, Food & Tobacco) * 500 15,237
Standard Chartered plc (Other Financial Services) 2,600 36,663
------------------
51,900
------------------
</TABLE>
See Notes to Financial Statements
19
<PAGE>
HARDING, LOEVNER FUNDS, INC.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
EMERGING MARKETS PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
OCTOBER 31, 1999 SHARES VALUE (1)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
VIETNAM - 1.0%
- --------------
Vietnam Enterprise Investments Ltd. (Investment Companies) * 20,000 $ 15,600
------------------
Total Common Stocks (Cost $1,086,455) 1,373,156
------------------
PREFERRED STOCKS - 8.3%
- -----------------------
BRAZIL - 8.3%
- -------------
Banco Itau SA (Commercial Banks) 690,000 39,610
Embraer - Empresa Brasileira de Aeronauntica SA
(Military & Commercial Aircraft Manufacturers) 26,500 88,288
------------------
Total Preferred Stocks (Cost $66,415) 127,898
------------------
TOTAL LONG TERM INVESTMENTS (COST $1,152,870) 1,501,054
------------------
FACE
CASH EQUIVALENTS - 4.1% AMOUNT
- ----------------------- -------------
Investors Bank & Trust Company Repurchase Agreement, 4.51% due 11/01/99 in the
amount of $62,678; issued 10/29/99 (collateralized by $65,321 par of GNMA - ARM,
6.125% due 11/20/24 with a market
value of $66,239) (Cost $62,655) $ 62,655 62,655
------------------
TOTAL INVESTMENTS - 101.9% (COST $1,215,525) $ 1,563,709
------------------
LIABILITIES, NET OF OTHER ASSETS - (1.9)%
- -----------------------------------------
Receivable from Investment Advisor $ 18,085
Other assets 6,462
Payable for securities purchased (29,438)
Other liabilities (24,899)
------------------
(29,790)
------------------
NET ASSETS - 100%
- -----------------
Applicable to 112,117 outstanding $.001 par value shares
(authorized 500,000,000 shares) $ 1,533,919
==================
Net Asset Value, Offering and Redemption Price Per Share $ 13.68
==================
COMPONENTS OF NET ASSETS AS OF OCTOBER 31, 1999 WERE AS FOLLOWS:
- ----------------------------------------------------------------
Paid-in capital $ 1,124,855
Undistributed net investment income 1,466
Undistributed net realized gain on investments and foreign currency-related transactions 59,289
Net unrealized appreciation on investments and on assets and liabilities
denominated in foreign currencies 348,309
==================
$ 1,533,919
==================
</TABLE>
ADR - American Depositary Receipt
ARM - Adjustable Rate Mortgage
GDR - Global Depositary Receipt
(1) See Note 2 to Financial Statements
* Non-income producing security
See Notes to Financial Statements
20
<PAGE>
HARDING, LOEVNER FUNDS, INC.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
YEAR ENDED OCTOBER 31, 1999
- -----------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL GLOBAL MULTI-ASSET EMERGING
EQUITY EQUITY GLOBAL MARKETS
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO *
---------------- --------------- ------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Interest $ 385,245 $ 43,890 $ 159,796 $ 2,125
Dividends (net of withholding taxes of $662,655, $21,523,
$5,136 and $783, respectively) 5,310,799 444,295 76,627 22,660
---------------- --------------- ------------- --------------
Total investment income 5,696,044 488,185 236,423 24,785
---------------- --------------- ------------- --------------
EXPENSES
Investment advisory fees 2,435,796 256,828 66,181 15,410
Administration fees 409,924 44,414 26,535 21,743
Custodian fees 286,421 31,025 13,955 16,866
Legal fees 69,569 3,949 1,051 242
Directors' fees and expenses 49,694 4,009 1,077 220
Shareholder record keeping fees 38,607 11,941 4,110 4,044
Audit fees 21,500 22,500 21,500 12,500
State registration filing fees 20,290 7,019 4,019 649
Organizational costs 14,564 12,775 3,155 -
Insurance expense 10,801 831 206 26
Other fees and expenses 11,959 8,481 1,224 883
---------------- --------------- ------------- --------------
Total operating expenses 3,369,125 403,772 143,013 72,583
Waiver of investment advisory fee (Note 3) (121,879) (82,406) (60,286) (50,746)
---------------- --------------- ------------- --------------
Total expenses 3,247,246 321,366 82,727 21,837
---------------- --------------- ------------- --------------
Investment income, net 2,448,798 166,819 153,696 2,948
---------------- --------------- ------------- --------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN
CURRENCY-RELATED TRANSACTIONS
Net realized gain from investments 12,178,320 2,694,033 293,597 58,011
Net realized loss from foreign currency-related transactions (250,676) (35,766) (538) (295)
Net change in unrealized appreciation (depreciation) on
investments 83,395,761 2,776,963 304,056 348,184
Net change in unrealized appreciation (depreciation) on
translation of assets and liabilities denominated in
foreign currencies (64,195) (3,342) (805) 125
---------------- --------------- ------------- --------------
Realized and unrealized gain on investments and
foreign currency-related transactions 95,259,210 5,431,888 596,310 406,025
---------------- --------------- ------------- --------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 97,708,008 $ 5,598,707 $ 750,006 $ 408,973
================ =============== ============= ==============
</TABLE>
* For the period from November 9, 1998 (commencement of operations) to October
31, 1999.
See Notes to Financial Statements
21
<PAGE>
HARDING, LOEVNER FUNDS, INC.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO GLOBAL EQUITY PORTFOLIO
-------------------------------------- --------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
1999 1998 1999 1998
---------------- ------------------ ----------------- -----------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Investment income, net $ 2,448,798 $ 4,272,224 $ 166,819 $ 499,821
Net realized gain (loss) from investments,
in kind redemptions and foreign currency-
related transactions 11,927,644 (1,323,216) 2,658,267 9,885,812
Net change in unrealized appreciation
(depreciation) on investments and on
translation of assets and liabilities
denominated in foreign currencies 83,331,566 (1,207,070) 2,773,621 (13,011,022)
---------------- ------------------ ----------------- ------------------
Net increase (decrease) in net assets
resulting from operations 97,708,008 1,741,938 5,598,707 (2,625,389)
---------------- ------------------ ----------------- ------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment income, net 5,059,466 3,375,872 -- 820,550
Net realized gain from investments and foreign
currency-related transactions 337,112 877,148 -- 6,491,751
In excess of net realized gain from investments
and foreign currency-related transactions -- 1,323,152 -- --
---------------- ------------------ ----------------- ------------------
Total distributions 5,396,578 5,576,172 - 7,312,301
---------------- ------------------ ----------------- ------------------
CAPITAL SHARE TRANSACTIONS, NET (89,894,523) (57,413,729) (15,275,132) (24,180,948)
---------------- ------------------ ----------------- ------------------
NET INCREASE (DECREASE) IN NET ASSETS 2,416,907 (61,247,963) (9,676,425) (34,118,638)
NET ASSETS
Beginning of period 326,056,304 387,304,267 30,763,496 64,882,134
---------------- ------------------ ----------------- ------------------
End of period $328,473,211 $ 326,056,304 $ 21,087,071 $ 30,763,496
================ ================== ================= ==================
UNDISTRIBUTED (DISTRIBUTIONS IN EXCESS OF)
INVESTMENT INCOME, NET $ 1,079,745 $ 3,740,249 $ 14,428 $ (260,306)
================ ================== ================= ==================
</TABLE>
See Notes to Financial Statements
22
<PAGE>
HARDING, LOEVNER FUNDS, INC.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------
MULTI-ASSET EMERGING MARKETS
GLOBAL PORTFOLIO PORTFOLIO
--------------------------------------- ---------------------
FOR THE PERIOD FROM
YEAR ENDED YEAR ENDED NOVEMBER 9, 1998*
OCTOBER 31, OCTOBER 31, TO
1999 1998 OCTOBER 31, 1999
------------------ ------------------ ---------------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Investment income, net $ 153,696 $ 155,102 $ 2,948
Net realized gain from investments, in kind
redemptions and foreign currency-related
transactions 293,059 81,404 57,716
Net change in unrealized appreciation (depreciation)
on investments and on translation of assets and
liabilities denominated in foreign currencies 303,251 51,959 348,309
------------------ ------------------ ---------------------
Net increase in net assets resulting
from operations 750,006 288,465 408,973
------------------ ------------------ ---------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment income, net 168,496 121,883 --
Net realized gain from investments and foreign
currency-related transactions 85,013 96,112 --
------------------ ------------------ ---------------------
Total distributions 253,509 217,995 --
------------------ ------------------ ---------------------
CAPITAL SHARE TRANSACTIONS, NET (224,414) 1,081,521 1,124,946
------------------ ------------------ ---------------------
NET INCREASE IN NET ASSETS 272,083 1,151,991 1,533,919
NET ASSETS
Beginning of period 6,327,221 5,175,230 --
------------------ ------------------ ---------------------
End of period $ 6,599,304 $ 6,327,221 $ 1,533,919
================== ================== =====================
UNDISTRIBUTED INVESTMENT INCOME, NET $ 108,597 $ 125,012 $ 1,466
================== ================== =====================
</TABLE>
* Commencement of operations
See Notes to Financial Statements
23
<PAGE>
HARDING, LOEVNER FUNDS, INC.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
-----------------------------------------------------------------------------------------
FOR THE FOR THE FOR THE FOR TEN FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED MONTHS ENDED* YEAR ENDED
OCT. 31, 1999 OCT. 31, 1998 OCT. 31, 1997 OCT. 31, 1996 DEC. 31 1995
--------------- --------------- --------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $11.62 $11.79 $11.61 $10.77 $9.71
---------------- ---------------- ---------------- ---------------- ----------------
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS
Investment income, net 0.10 0.14 0.13 0.08 0.10
Net realized and unrealized gain
(loss) on investments and foreign
currency-related transactions 3.97 (0.13) 0.05 (a) 0.97 1.06
---------------- ---------------- ---------------- ---------------- ----------------
Net increase from investment operations 4.07 0.01 0.18 1.05 1.16
---------------- ---------------- ---------------- ---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment income, net 0.18 0.11 0.00 (b) 0.08 0.10
Excess of investment income, net -- -- -- 0.03 --
Net realized gain from investments
and foreign-currency related
transactions 0.01 0.03 -- 0.10 --
Excess of net realized gain on
investments and foreign currency-
related transactions -- 0.04 -- -- --
---------------- ---------------- ---------------- ---------------- ----------------
Total distributions 0.19 0.18 -- 0.21 0.10
---------------- ---------------- ---------------- ---------------- ----------------
NET ASSET VALUE, END OF PERIOD $15.50 $11.62 $11.79 $11.61 $10.77
================ ================ ================ ================ ================
TOTAL RETURN 35.46% 0.06% 1.57% 9.81%(c) 11.99%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) $328,473 $326,056 $387,304 $241,357 $67,727
Ratio of net operating expenses to
average net assets 1.00% 1.00% 1.00% 1.00% (d) 0.99%
Ratio of investment income, net to
average net assets 0.75% 1.14% 1.07% 1.29% (d) 1.30%
Decrease reflected in above expense
ratios due to waiver of investment
advisory and administration fees,
and reimbursement of other expenses 0.04% 0.04% 0.06% 0.14% (d) 0.54%
Portfolio turnover rate 35% 33% 31% 17% (c) 28%
</TABLE>
(a) Includes the effect of net realized gains prior to a significant increase
in shares outstanding.
(b) Rounds to less than $0.01.
(c) Not annualized
(d) Annualized
* During the period, the Portfolio changed its fiscal year end from
December 31 to October 31.
See Notes to Financial Statements
24
<PAGE>
HARDING, LOEVNER FUNDS, INC.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------------------------------------------------------------
GLOBAL EQUITY PORTFOLIO
----------------------------------------------------------------
FOR FOR FOR
THE YEAR THE YEAR THE PERIOD
ENDED ENDED ENDED
OCT. 31, 1999 OCT. 31, 1998 OCT. 31, 1997 *
------------------- -------------------- ------------------
<S> <C> <C> <C>
PER SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $16.16 $18.70 $17.58 (a)
------------------- -------------------- -------------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Investment income, net 0.05 0.20 0.19
Net realized and unrealized gain (loss) on investments
and foreign-currency related transactions 3.79 (0.55) 0.94
------------------- -------------------- -------------------
Net increase (decrease) from investment operations 3.84 (0.35) 1.13
------------------- -------------------- -------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment income, net - 0.25 0.01
Net realized gain from investments and foreign
currency-related transactions - 1.94 -
------------------- -------------------- -------------------
Total distributions - 2.19 0.01
------------------- -------------------- -------------------
NET ASSET VALUE, END OF PERIOD $20.00 $16.16 $18.70
=================== ==================== ===================
TOTAL RETURN 23.76% (2.46)% 6.45% (b)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) $21,087 $30,763 $64,882
Ratio of net operating expenses to average net assets 1.25% 1.25% 1.25% (c)
Ratio of investment income, net to average net assets 0.65% 0.86% 1.05% (c)
Decrease reflected in above expense ratios due to waiver
of investment advisory and administration fees,
and reimbursement of other expenses 0.32% 0.11% 0.12% (c)
Portfolio turnover rate 44% 67% 39% (b)
</TABLE>
* Commencement of Operations was December 1, 1996 following a tax free
merger with GELP which was formed on September 27, 1991.
(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.
(b) Not annualized
(c) Annualized
See Notes to Financial Statements
25
<PAGE>
HARDING, LOEVNER FUNDS, INC.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- ----------------------------------------------------------------------------------------------------------------------------------
MULTI-ASSET GLOBAL PORTFOLIO
----------------------------------------------------------------
FOR FOR FOR
THE YEAR THE YEAR THE PERIOD
ENDED ENDED ENDED
OCT. 31, 1999 OCT. 31, 1998 OCT. 31, 1997 *
------------------ ------------------- -------------------
<S> <C> <C> <C>
PER SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $11.41 $11.26 $10.00
------------------ ------------------- -------------------
INCREASE IN NET ASSETS FROM OPERATIONS
Investment income, net 0.28 0.52 0.25
Net realized and unrealized gain on investments
and foreign-currency related transactions 1.04 0.09 1.04
------------------ ------------------- -------------------
Net increase from investment operations 1.32 0.61 1.29
------------------ ------------------- -------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Investment income, net 0.30 0.26 0.03
Net realized gain from investments and foreign
currency-related transactions 0.15 0.20 -
------------------ ------------------- -------------------
Total distributions 0.45 0.46 0.03
------------------ ------------------- -------------------
NET ASSET VALUE, END OF PERIOD $12.28 $11.41 $11.26
================== =================== ===================
TOTAL RETURN 11.84% 5.53% 12.92%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) $6,599 $6,327 $5,175
Ratio of net operating expenses to average net assets 1.25% 1.25% 1.25%
Ratio of investment income, net to average net assets 2.32% 2.58% 2.50%
Decrease reflected in above expense ratios due to waiver
of investment advisory and administration fees,
and reimbursement of other expenses 0.91% 0.71% 0.92%
Portfolio turnover rate 31% 29% 36%
</TABLE>
* Commencement of Operations was November 1, 1996.
See Notes to Financial Statements
26
<PAGE>
HARDING, LOEVNER FUNDS, INC.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- ----------------------------------------------------------------------------------------------------------------------------
EMERGING MARKETS
PORTFOLIO
---------------------
FOR THE
PERIOD ENDED
OCT. 31, 1997 *
---------------------
<S> <C>
PER SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
---------------------
INCREASE IN NET ASSETS FROM OPERATIONS
Investment income, net 0.03
Net realized and unrealized gain on investments and foreign-currency related transactions 3.65
---------------------
Net increase from investment operations 3.68
---------------------
NET ASSET VALUE, END OF PERIOD $13.68
=====================
TOTAL RETURN 36.80% (a)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000's) $1,534
Ratio of net operating expenses to average net assets 1.75% (b)
Ratio of investment income, net to average net assets 0.24% (b)
Decrease reflected in above expense ratios due to waiver of investment advisory and
administration fees, and reimbursement of other expenses 4.14% (b)
Portfolio turnover rate 53% (a)
</TABLE>
* Commencement of Operations was November 9, 1998.
(a) Not annualized
(b) Annualized
See Notes to Financial Statements
27
<PAGE>
HARDING, LOEVNER FUNDS, INC.
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1999
- -------------------------------------------------------------------------------
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, all of which were active as
of October 31, 1999: International Equity Portfolio ("International Equity");
Global Equity Portfolio ("Global Equity"); Multi-Asset Global Portfolio
("Multi-Asset Global"), and Emerging Markets Portfolio ("Emerging Markets").
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; Multi-Asset Global
to seek long-term capital appreciation and a growing stream of current 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; Emerging
Markets Portfolio - to seek long-term capital appreciation through
investments in equity securities of companies based in developing markets
outside the United States.
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. Emerging Markets
commenced operations on November 9, 1998. 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, 1999, 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, 1999 was $62,055.
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.
28
<PAGE>
HARDING, LOEVNER FUNDS, INC.
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1999
- -------------------------------------------------------------------------------
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, 1999, the Portfolios reclassified the
following permanent book to tax differences [increases (decreases)]:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
UNDISTRIBUTED INVESTMENT ACCUMULATED NET CAPITAL STOCK
PORTFOLIO INCOME, NET REALIZED GAIN (LOSS) IN EXCESS OF PAR VALUE
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
International Equity $ (49,836) $ (450,386) $ 500,222
Global Equity 107,915 (111,877) 3,692
Multi-Asset Global (1,615) (17,642) 19,257
Emerging Markets (1,482) 1,573 (91)
</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, 1999,
International Equity, Global Equity, Multi-Asset Global and Emerging Markets
had balances of ($9,482), ($361), ($404) and $125, respectively, representing
net unrealized appreciation/(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. The advisory fees are
computed daily at an annual rate of 0.75%, 1.00%, 1.00% and 1.25% of the
average daily net assets of International Equity, Global Equity, Multi-Asset
Global and Emerging Markets, respectively.
In addition, the Fund has an administration agreement with Investors Bank &
Trust Company, which provides certain accounting, clerical and bookkeeping
services, Blue Sky, corporate secretarial services and assistance in the
preparation and filing of tax returns and reports to shareholders and the
Securities and Exchange Commission. The administration agreement became
effective on June 10, 1999. For the period from November 1, 1998 through June
9,1999, the Fund had an administration agreement with Investors Capital
Services, Inc. (formerly AMT Capital Services, Inc.). For the period from
November 1, 1998 through June 9, 1999, the administration fees were computed
daily at an annual rate of 0.15% of each Portfolio's respective net assets.
For the period from June 10, 1999 through October 31, 1999, the Fund paid
Investors Bank & Trust Company an administration fee at an annual rate of
0.09% on the first $500 million of the average daily net assets of the Fund,
0.06% on the next $500 million of the average daily net assets of the Fund
and 0.04% on the average net assets in excess of $1 billion. Under this
agreement with Investors Bank and Trust Company, administration fees were at
an annual minimum of $50,000 for each Fund, prorated for the period from June
10, 1999 through October 31, 1999.
29
<PAGE>
HARDING, LOEVNER FUNDS, INC.
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1999
- -------------------------------------------------------------------------------
3. INVESTMENT ADVISORY AGREEMENT AND AFFILIATED TRANSACTIONS (CONTINUED)
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%, 1.25%, and 1.75% respectively, of the average
daily net assets of International Equity, Global Equity, Multi-Asset Global
and Emerging Markets.
Directors' fees of $2,938 were accrued for the year ended October 31, 1999,
which were payable to directors who are not employees of the Investment
Adviser.
4. INVESTMENT TRANSACTIONS
Purchase cost and proceeds from sales of investment securities, other than
short-term investments, for the year ended October 31, 1999, were as follows for
each of the Portfolios:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
PURCHASE COST OF PROCEEDS FROM SALES OF
PORTFOLIO INVESTMENT SECURITIES INVESTMENT SECURITIES
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
International Equity $ 108,404,233 $ 194,561,291
Global Equity 11,116,772 26,652,251
Multi-Asset Global 2,010,509 2,189,639
Emerging Markets 1,714,265 625,634
</TABLE>
The cost of investments for Federal income tax purposes and the components of
net unrealized appreciation on investments at October 31, 1999, for each of
the Portfolios were as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
UNREALIZED UNREALIZED
PORTFOLIO APPRECIATION DEPRECIATION NET COST
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
International Equity $ 88,807,449 $ 8,236,256 $ 80,571,193 $ 248,322,269
Global Equity 3,674,443 451,867 3,222,576 17,748,080
Multi-Asset Global 911,941 353,729 558,212 6,031,112
Emerging Markets 387,034 40,250 346,784 1,216,925
</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.
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.
International Equity had open foreign currency transactions to buy currency on
the spot markets as of October 31, 1999 as follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
IN EXCHANGE FOR NET UNREALIZED
SETTLEMENT DATE PURCHASE (IN U.S. DOLLARS) DEPRECIATION
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
11/30/99 1,846,132 Euro $ 1,961,700 $ (17,267)
</TABLE>
Global Equity had open foreign currency transactions to buy currency on the spot
markets as of October 31, 1999 as follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
IN EXCHANGE FOR NET UNREALIZED
SETTLEMENT DATE PURCHASE (IN U.S. DOLLARS) DEPRECIATION
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
11/30/99 117,507 Euro $ 123,864 $ (100)
</TABLE>
There were no open foreign currency transactions to buy or sell currency on
the spot markets as of October 31, 1999 for Multi-Asset Global or Emerging
Markets.
30
<PAGE>
HARDING, LOEVNER FUNDS, INC.
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1999
- -------------------------------------------------------------------------------
6. CAPITAL SHARE TRANSACTIONS
Transactions in capital stock for International Equity were as follows for the
periods indicated:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
OCTOBER 31, 1999 OCTOBER 31, 1998
-------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 2,216,774 $ 30,381,144 2,961,007 $ 36,281,392
Shares issued related to
reinvestment of dividends 341,566 4,266,161 356,184 4,099,676
-------------------------------------------------------------------------------
2,558,340 34,647,305 3,317,191 40,381,068
Shares redeemed 9,442,379 124,541,828 8,083,995 97,794,797
-------------------------------------- ---------------------------------------
Net decrease (6,884,039) $ (89,894,523) (4,766,804) $(57,413,729)
====================================== =======================================
</TABLE>
Transactions in capital stock for Global Equity were as follows for the
period indicated:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
OCTOBER 31, 1999 OCTOBER 31, 1998
-------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 10,487 $ 201,051 48,580 $ 861,141
Shares issued related to reinvestment
of dividends -- -- 414,700 7,049,903
------------------------------------------------------------------------------
10,487 201,051 463,280 7,911,044
Shares redeemed 860,028 15,476,183 2,030,092 32,091,992
------------------------------------------------------------------------------
Net decrease (849,541) $ (15,275,132) (1,566,812) $ (24,180,948)
==============================================================================
</TABLE>
Transactions in capital stock for Multi-Asset Global were as follows for the
period indicated:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
OCTOBER 31, 1999 OCTOBER 31, 1998
-------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 36,825 $ 429,658 111,544 $ 1,261,314
Shares issued related to reinvestment
of dividends 21,881 249,664 19,604 217,995
-------------------------------------------------------------------------------
58,706 679,322 131,148 1,479,309
Shares redeemed 75,960 903,736 36,232 397,788
-------------------------------------------------------------------------------
Net increase (decrease) (17,254) $ (224,414) 94,916 $ 1,081,521
===============================================================================
</TABLE>
Transactions in capital stock for Emerging Markets were as follows for the
period indicated:
- -------------------------------------------------------------------------------
PERIOD FROM
NOVEMBER 9, 1998 *
TO OCTOBER 31, 1999
---------------------------------
SHARES AMOUNT
- -------------------------------------------------------------------------------
Shares sold 112,117 $ 1,124,946
Shares issued related to reinvestment
of dividends -- --
---------------------------------
112,117 1,124,946
Shares redeemed -- --
---------------------------------
Net increase 112,117 $ 1,124,946
=================================
* Commencement of Operations
31
<PAGE>
HARDING, LOEVNER FUNDS, INC.
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1999
- -------------------------------------------------------------------------------
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.
32
<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, the Multi-Asset Global Portfolio and the Emerging Markets
Portfolio) as of October 31, 1999, and the related statements of operations
for the period 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, 1999 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 period 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 10, 1999
33
<PAGE>
HARDING, LOEVNER FUNDS, INC.
- -------------------------------------------------------------------------------
SUPPLEMENTAL TAX INFORMATION
(UNAUDITED)
- -------------------------------------------------------------------------------
In order to meet certain requirements of the Internal Revenue Code we are
advising you that $501,108, $80,055, and $65,598 of the capital gains
distributions paid by the International Equity, Global Equity, and
Mulit-Asset Global Portfolios, respectively, during the fiscal year October
31, 1999 are subject to maximum tax rates of 20%.
The Multi-Asset Global Portfolio has designated 12.91% of distributions from
net investment income as qualifying for the dividends received deduction for
corporations.
The Portfolios have elected to pass through the credit for taxes paid in
foreign countries during its fiscal year ended October 31, 1999. In
accordance with current tax laws, the Foreign Income and Foreign Tax per
share (for a share outstanding on October 31, 1999) is as follows:
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY GLOBAL EQUITY MULTI-ASSET GLOBAL EMERGING MARKETS
-------------------------- -------------------------- -------------------------- -------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
GROSS GROSS GROSS GROSS
FOREIGN FOREIGN FOREIGN FOREIGN FOREIGN FOREIGN FOREIGN FOREIGN
COUNTRY TAX DIVIDENDS TAX DIVIDENDS TAX DIVIDENDS TAX DIVIDENDS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Argentina 0.0000 0.0030 0.0000 0.0060 0.0000 0.0000 0.0000 0.0166
Australia 0.0000 0.0149 0.0000 0.0231 0.0000 0.0000 0.0000 0.0000
Bermuda 0.0000 0.0012 0.0000 0.0037 0.0000 0.0000 0.0000 0.0000
Brazil 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0022 0.0507
United Kingdom 0.0023 0.0335 0.0023 0.0226 0.0016 0.0162 0.0003 0.0082
Cayman Islands 0.0023 0.0019 0.0000 0.0000 0.0000 0.0011 0.0000 0.0000
Canada 0.0013 0.0089 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
Chile 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0014
Egypt 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0181
France 0.0038 0.0255 0.0033 0.0344 0.0015 0.0099 0.0000 0.0000
Germany 0.0004 0.0041 0.0002 0.0015 0.0004 0.0037 0.0000 0.0000
Greece 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0029
Hong Kong 0.0000 0.0182 0.0000 0.0631 0.0000 0.0222 0.0000 0.0312
Hungary 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0008 0.0057
Israel 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0008 0.0063
Italy 0.0000 0.0017 0.0000 0.0019 0.0000 0.0000 0.0000 0.0000
Japan 0.0019 0.0125 0.0010 0.0068 0.0004 0.0028 0.0000 0.0000
Mexico 0.0004 0.0171 0.0006 0.0279 0.0004 0.0088 0.0003 0.0291
Netherlands 0.0039 0.0342 0.0039 0.0262 0.0015 0.0101 0.0000 0.0000
Poland 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0013 0.0086
Singapore 0.0096 0.0510 0.0017 0.0065 0.0004 0.0015 0.0001 0.0113
South Africa 0.0000 0.0033 0.0000 0.0030 0.0000 0.0000 0.0000 0.0098
Spain 0.0014 0.0093 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000
Sweden 0.0018 0.0118 0.0028 0.0189 0.0015 0.0099 0.0000 0.0000
Switzerland 0.0045 0.0297 0.0046 0.0305 0.0019 0.0127 0.0000 0.0000
Thailand 0.0327 0.2181 0.1043 0.6951 0.0076 0.0509 0.0122 0.0839
Taiwan 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0003 0.0013
</TABLE>
Shareholders will receive more detailed information along with their Form
1099-DIV in January, 2000.
34
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE>
HARDING, LOEVNER FUNDS, INC.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
OFFICERS & DIRECTORS AND OTHER PERTINENT INFORMATION
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
OFFICERS AND DIRECTORS
R. Kelly Doherty ADMINISTRATOR, CUSTODIAN AND FUND
DIRECTOR OF THE FUND ACCOUNTING AGENT
Jane A. Freeman Investors Bank & Trust Company
DIRECTOR OF THE FUND P.O. Box 9130
Boston, MA 02117
Samuel R. Karetsky
DIRECTOR OF THE FUND
TRANSFER AND DIVIDEND
Carl W. Schafer DISBURSING AGENT
DIRECTOR OF THE FUND
Investors Bank & Trust Company
David R. Loevner P.O. Box 9130
PRESIDENT AND DIRECTOR Boston, MA 02117
OF THE FUND
Susan C. Mosher LEGAL COUNSEL
SECRETARY OF THE FUND
Dechert Price & Rhoads
Timothy F. Osborne 1775 Eye Street, N.W
TREASURER OF THE FUND Washington, D.C. 20006-2401
Richard Reiter
ASSISTANT SECRETARY INDEPENDENT AUDITORS
OF THE FUND
Ernst & Young LLP
787 Seventh Avenue
INVESTMENT ADVISER New York, NY 10019
Harding, Loevner Management, L.P.
50 Division Street, Suite 401
Somerville, NJ 08876
DISTRIBUTOR
AMT Capital Securities, L.L.C.
600 Fifth Avenue, 26th Floor
New York, NY 10020
</TABLE>
