<PAGE>
[LOGO]
HARDING, LOEVNER FUNDS, INC.
ANNUAL REPORT
OCTOBER 31, 2000
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
<PAGE>
HARDING, LOEVNER FUNDS, INC.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
December 14, 2000
Dear Shareholder:
Enclosed is the Annual Report to Shareholders for the fiscal year ended
October 31, 2000, as required by regulation.
Our regular quarterly narrative discussing developments in the calendar
quarter ended December 31, 2000 will be sent to you shortly.
Sincerely,
[LOGO]
David R. Loevner
President
<PAGE>
HARDING, LOEVNER FUNDS, INC.
--------------------------------------------------------------------------------
TABLE OF CONTENTS
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
Performance Information and Statements of Net
Assets
International Equity Portfolio................ 1
Global Equity Portfolio....................... 7
Multi-Asset Global Portfolio.................. 13
Emerging Markets Portfolio.................... 20
Statements of Operations.......................... 26
Statements of Changes in Net Assets............... 27
Financial Highlights.............................. 29
Notes to Financial Statements..................... 33
Report of Independent Auditors.................... 38
Supplemental Tax Information...................... 39
</TABLE>
<PAGE>
HARDING, LOEVNER FUNDS, INC.
--------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO -- OVERVIEW
OCTOBER 31, 2000
--------------------------------------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
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
<S> <C> <C> <C>
Equity Portfolio World Ex-US Index Equity Fund Index
5/11/94 $10,000 $10,000 $10,000
5/31/94 $9,920 $10,072 $9,985
6/30/94 $9,750 $10,142 $9,828
7/31/94 $10,040 $10,329 $10,130
8/31/94 $10,330 $10,682 $10,481
9/30/94 $10,100 $10,458 $10,210
10/31/94 $10,330 $10,706 $10,392
11/30/94 $9,700 $10,196 $9,908
12/31/94 $9,753 $10,184 $9,775
1/31/95 $9,120 $9,693 $9,290
2/28/95 $9,311 $9,639 $9,288
3/31/95 $9,532 $10,176 $9,532
4/30/95 $9,929 $10,538 $9,883
5/31/95 $10,402 $10,481 $9,980
6/30/95 $10,382 $10,336 $10,018
7/31/95 $10,659 $10,899 $10,569
8/31/95 $10,254 $10,511 $10,390
9/30/95 $10,477 $10,705 $10,564
10/31/95 $10,394 $10,421 $10,344
11/30/95 $10,455 $10,639 $10,452
12/31/95 $10,923 $11,053 $10,755
1/31/96 $11,278 $11,176 $11,009
2/29/96 $11,379 $11,178 $11,056
3/31/96 $11,592 $11,396 $11,229
4/30/96 $11,734 $11,801 $11,595
5/31/96 $11,907 $11,604 $11,583
6/30/96 $12,211 $11,672 $11,689
7/31/96 $11,815 $11,272 $11,295
8/31/96 $11,980 $11,336 $11,442
9/30/96 $12,132 $11,615 $11,699
10/31/96 $11,994 $11,495 $11,652
11/30/96 $12,500 $11,931 $12,198
12/31/96 $12,606 $11,788 $12,307
1/31/97 $12,441 $11,580 $12,327
2/28/97 $12,317 $11,798 $12,550
3/31/97 $12,244 $11,778 $12,616
4/30/97 $12,224 $11,885 $12,671
5/31/97 $12,864 $12,603 $13,385
6/30/97 $13,309 $13,306 $14,027
7/31/97 $13,650 $13,579 $14,473
8/31/97 $12,616 $12,541 $13,431
9/30/97 $13,319 $13,174 $14,293
10/31/97 $12,182 $12,016 $13,207
11/30/97 $12,151 $11,862 $13,097
12/31/97 $12,074 $11,989 $13,201
1/31/98 $12,168 $12,345 $13,520
2/28/98 $13,102 $13,185 $14,386
3/31/98 $13,564 $13,631 $15,167
4/30/98 $13,595 $13,715 $15,400
5/31/98 $13,763 $13,449 $15,420
6/30/98 $13,532 $13,389 $15,286
7/31/98 $13,448 $13,518 $15,520
8/31/98 $11,445 $11,607 $13,287
9/30/98 $11,298 $11,368 $12,874
10/31/98 $12,189 $12,558 $13,820
11/30/98 $12,945 $13,231 $14,513
12/31/98 $13,305 $13,679 $14,870
1/31/99 $13,007 $13,665 $14,960
2/28/99 $12,709 $13,375 $14,573
3/31/99 $13,359 $14,034 $15,060
4/30/99 $14,488 $14,752 $15,762
5/31/99 $13,742 $14,083 $15,176
6/30/99 $14,775 $14,765 $15,896
7/31/99 $15,425 $15,079 $16,251
8/31/99 $15,606 $15,166 $16,379
9/30/99 $15,905 $15,246 $16,432
10/31/99 $16,512 $15,822 $17,005
11/30/99 $17,588 $16,449 $18,252
12/31/99 $19,931 $18,029 $20,495
1/31/00 $18,955 $17,114 $19,296
2/29/00 $19,221 $17,571 $20,569
3/31/00 $19,388 $18,226 $20,623
4/30/00 $18,534 $17,193 $19,315
5/31/00 $17,681 $16,770 $18,784
6/30/00 $18,967 $17,476 $19,654
7/31/00 $18,434 $16,789 $19,017
8/31/00 $18,867 $16,992 $19,339
9/30/00 $17,647 $16,037 $18,211
10/31/00 $16,871 $15,514 $17,592
</TABLE>
Past performance is not indicative of future performance
<TABLE>
----------------------------------------------------------------------------------------------
RETURNS FOR THE PERIODS ENDED OCTOBER 31, 2000
--------------------------------------------------------------
CUMULATIVE AVERAGE ANNUAL
TOTAL RETURN TOTAL RETURN
------------------------------- -----------------------------
TWELVE MONTHS SINCE INCEPTION* 5 YEAR SINCE INCEPTION*
<S> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO 2.18% 68.71% 10.16% 8.40%
MSCI All Country World Ex-US
Index
(gross dividends reinvested) (1.95%) 55.14% 8.27% 7.01%
Lipper International Equity
Fund Index 3.45% 75.92% 11.19% 9.10%
</TABLE>
* The International Equity Portfolio [formerly the AMT Capital Fund, Inc. --
HLM International Equity Portfolio ("AMT Capital Portfolio")] commenced
operations on May 11, 1994. On October 31, 1996, the net assets of the AMT
Capital Portfolio were merged into the International Equity Portfolio
pursuant to an agreement and plan of reorganization dated October 14, 1996.
1
<PAGE>
HARDING, LOEVNER FUNDS, INC.
--------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO -- OVERVIEW
OCTOBER 31, 2000
--------------------------------------------------------------------------------
The Portfolio rose in value by 2.2% in the financial year to the end of October
2000. In doing so, it outperformed its benchmark -- the MSCI All Country World
ex-USA Index -- which fell by 2.0%. Stock selection was the primary driver of
returns.
During the year, interest rates rose in all major regions of the world. In the
United States, they rose as the Federal Reserve attempted to rein in a long
period of growth that was increasingly threatening an end to a long period of
quiescent inflation; in Europe the first signs of renewed growth were met by
higher rates, perhaps because the newly-formed European Central Bank wanted to
establish its anti-inflation credentials; in Japan, an end to the "zero interest
rate" policy was surprising to us, given the economy's inability to grow. Equity
markets ignored central bank action over the course of the first half of the
fiscal year, most especially in the technology, media and telecommunications
("TMT") sectors where valuations reached extraordinary extremes in early March.
As rapidly as they rose, shares in the TMT sector collapsed in the second half,
forming a near-perfect parabola over the full course of the fiscal year.
The Portfolio reflects a world where competitive pressures have been intense and
where an excess of manufacturing capacity has kept downward pressure on returns
in traditional industries. For example, the Portfolio owns no automobile
manufacturers, who are prime victims of overcapacity and globalisation. They
have responded by squeezing their own suppliers. During the year we sold two
holdings that are exposed to this continuing trend. Tire-maker Michelin was a
disappointing investment, but Johnson Electric, the manufacturer of
micro-motors, was an extraordinarily successful investment over the long period
in which the Portfolio held it. When revenues fall, carmakers' profits suffer
disproportionately from lower demand, as they are unable to reduce their fixed
cost base quickly enough. The same can be said of the fixed-line telephone
business, a large part of the world's stock markets, but where the portfolio has
only had very modest holdings (British Telecom and Telefonos de Mexico), both
sold during the year. Telephone companies have benefited from increased demand
for data transmission, but have not been able to grow revenues or cut costs
quickly enough to compensate for tumbling prices and rising capital investment
requirements. The Portfolio has been significantly underweight the
telecommunications sector all year, helping returns, and remains so presently.
A year ago the Portfolio was significantly overweight media, publishing and
related stocks, and this remains the case today. Stock selection within the
consumer discretionary sector has been good, aided in no small part by our media
holdings. We believe that the very problems of falling prices, and new
technologies, that have caused such woe for the telephone companies provide
great opportunities for the owners and developers of content, such as Televisa
in Mexico, or Pearson, as well as for advertising companies such as WPP, the
global giant, and its affiliated company, Asatsu, in Japan.
The Portfolio has emphasized less cyclical, and less asset-intensive businesses,
where we can see secular growth. The Portfolio has a disproportionately large
holding in the business services industry, including companies such as ISS, the
global cleaning company, and Securitas, a provider of security services, both
newly added during the year. The Portfolio also has holdings in pharmaceuticals.
Ageing populations will ensure increased demand for cost-effective solutions to
medical problems. Stock selection in the healthcare sector was excellent over
the course of the past year; the Portfolio's stocks outperformed their sector
benchmark by over 1000 basis points.
Looking forward, tighter money and concurrent slowing growth add up to an ugly
picture for both corporate profits and for the price that investors are prepared
to pay for them. We cannot predict whether the global economy faces a recession,
or the much-mooted "soft landing", in which growth slows but does not contract.
We do know that the risks of a HARD landing have increased, as a result of the
fall is stock prices in the US (the so-called "wealth effect"), higher energy
costs, and the contraction of credit by financial institutions. On the other
hand, deregulation, globalization and governmental fiscal rectitude continue to
drive forward, spurring companies to cut costs, and to seek new markets that
were previously closed, whilst giving governments new flexibility to step up
their own spending.
We said last year that it was hard to be confident about the coming year --
"stocks ... are simply not as attractively priced as they were a year ago". As
we look ahead to coming year, we must acknowledge that the economic environment
in which our companies operate is turning more difficult. Having said that, we
continue to emphasize the qualities of good management, financial strength and
global competitive advantage in our growing companies. These are the attributes
that determine success in challenging circumstances. They underpin our
confidence in our companies' business prospects, and in the returns that the
Portfolio can expect to achieve.
2
<PAGE>
HARDING, LOEVNER FUNDS, INC.
--------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
OCTOBER 31, 2000 SHARES VALUE (1)
<S> <C> <C>
----------------------------------------------------------------------------------
LONG TERM INVESTMENTS - 96.6%
---------------------------
COMMON STOCKS - 96.1%
---------------------
AUSTRALIA - 2.1%
--------------
Rio Tinto Ltd. (Diversified Metal
Producers) 525,700 $ 7,218,343
-------------------------
BRAZIL - 1.0%
-----------
Embraer Aircraft Corp - ADR (Aerospace &
Defense)* 122,900 3,556,419
-------------------------
CANADA - 3.4%
------------
Imperial Oil Ltd. (Integrated
International Oil Producers) 340,000 8,581,600
Nortel Networks Corp.
(Telecommunications) 69,800 3,175,900
-------------------------
11,757,500
-------------------------
DENMARK - 1.4%
--------------
ISS A/S (Service Organizations)* 82,700 5,088,361
-------------------------
FINLAND - 1.1%
------------
Nokia Corp.- ADR (Communications) 87,800 3,753,450
-------------------------
FRANCE - 9.2%
------------
Air Liquide (Industrial Chemicals &
Gases Manufacturers) 40,800 4,821,262
Carrefour SA (Miscellaneous Retailers) 106,300 7,132,786
Compagnie Generale d' Industrie et de
Participations (General Diversified) 234,900 9,843,724
Societe BIC SA (General Diversified) 98,800 3,423,722
Suez Lyonnaise des Eaux SA (Water
Companies) 46,500 7,092,382
-------------------------
32,313,876
-------------------------
GERMANY - 4.9%
--------------
Allianz AG (Insurance Companies) 22,280 7,569,500
Deutsche Bank AG (Commercial Banks) 114,200 9,396,958
-------------------------
16,966,458
-------------------------
HONG KONG - 7.2%
---------------
China Mobile HK Ltd. ADR (Telephone
Systems)* 205,900 6,305,688
Hutchison Whampoa Ltd. (General
Diversified) 920,600 11,420,445
Li & Fung Ltd. (Wholesalers) 4,080,000 7,585,588
-------------------------
25,311,721
-------------------------
IRELAND - 5.6%
------------
Elan Corp. plc - ADR (Ethical Drug
Manufacturers)* 195,900 10,174,556
SmartForce plc - ADR (Electronic Data
Processing Equipment)* 185,780 9,349,954
-------------------------
19,524,510
-------------------------
</TABLE>
See Notes to Financial Statements
3
<PAGE>
HARDING, LOEVNER FUNDS, INC.
--------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
OCTOBER 31, 2000 (CONTINUED) SHARES VALUE (1)
<S> <C> <C>
----------------------------------------------------------------------------------
ITALY - 1.4%
----------
Luxottica Group SPA - ADR (Miscellaneous
Retailers) 333,000 $ 4,807,688
-------------------------
JAPAN - 19.6%
------------
Asatsu-DK, Inc. (Advertising Agencies) 230,800 6,154,949
Atlantis Japan Growth Fund (Mutual
Funds)* 471,000 5,063,250
Canon, Inc. (Business Machines & Office
Equipment) 202,000 8,015,579
Daiichi Pharmaceutical (Pharmaceuticals) 334,000 9,488,636
Fujitsu Ltd. (Computer Software &
Processing) 161,000 2,868,255
Hirose Electronics Co., Ltd. (Parts &
Components) 50,500 5,831,195
Mitsubishi Corp. (Wholesalers) 573,000 4,725,990
Mizuho Holdings, Inc. (Financial
Services)* 939 7,219,767
NTT Mobile Communications
(Telecommunications) 435 10,723,515
Sony Corp. - ADR (Radio, TV, &
Phonograph Manufacturers) 100,200 8,316,600
-------------------------
68,407,736
-------------------------
MEXICO - 2.4%
------------
Grupo Televisa SA - GDR (Radio & TV
Broadcasters)* 70,720 3,827,720
Wal-Mart de Mexico SA de CV - ADR
(Discount Stores)* 187,700 4,520,792
-------------------------
8,348,512
-------------------------
NETHERLANDS - 10.1%
-----------------
IHC Caland NV (Shipbuilding) 191,330 8,439,872
ING Groep NV (Insurance Companies) 134,200 9,212,083
Royal Dutch Petroleum Co. - NY Shares
(Holding Companies) 204,500 12,142,187
Wolters Kluwer NV (Miscellaneous
Printing & Publishing) 242,580 5,457,302
-------------------------
35,251,444
-------------------------
SINGAPORE - 4.1%
--------------
Dairy Farm International Holdings Ltd.
(Miscellaneous Retailers) 776,800 318,488
DBS Group Holdings Ltd. (Commercial
Banks) 90,000 1,061,236
DBS Local Certificates (Commercial
Banks) 790,000 9,315,295
Singapore Press Holdings (Newspaper
Publishers) 255,000 3,645,970
-------------------------
14,340,989
-------------------------
SWEDEN - 5.6%
------------
Investor AB - Class B (Miscellaneous
Companies)* 634,000 8,371,730
Securitas AB - B Shares (Service
Organizations) 283,400 6,038,533
Telefonaktiebolaget LM Ericsson - ADR
(Miscellaneous Electronics) 372,000 5,161,500
-------------------------
19,571,763
-------------------------
SWITZERLAND - 5.5%
----------------
ABB Ltd. (Power Transmission Equipment) 85,000 7,555,083
Nestle SA - ADR (Diversified Food) 67,700 7,012,508
Union Bank of Switzerland AG (Commercial
Banks) 32,798 4,543,872
-------------------------
19,111,463
-------------------------
TAIWAN - 1.4%
------------
Taiwan Semiconductor (Parts &
Components)* 1,617,523 4,915,264
-------------------------
</TABLE>
See Notes to Financial Statements
4
<PAGE>
HARDING, LOEVNER FUNDS, INC.
--------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
OCTOBER 31, 2000 (CONTINUED) SHARES VALUE (1)
<S> <C> <C>
----------------------------------------------------------------------------------
Taiwan (continued)
UNITED KINGDOM - 10.1%
---------------------
Close Brothers Group plc (Investment
Companies) 226,000 $ 3,791,722
Pearson plc (Miscellaneous Printing &
Publishing) 406,109 10,907,509
Railtrack Group plc (Other
Transportation) 493,251 7,637,852
Rentokil Initial plc (Service
Organizations) 1,542,200 3,561,918
Rio Tinto plc (Diversified Metal
Producers) 80,000 1,195,199
Vodafone Group plc - Sponsored ADR
(Telephone Systems) 101,500 4,320,094
WPP Group plc (Advertising Agencies) 284,500 3,822,698
-------------------------
35,236,992
-------------------------
Total Common Stocks (Cost $274,927,367) 335,482,489
-------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
CURRENCY AMOUNT
FIXED INCOME - 0.5% -------- -----------
<S> <C> <C> <C>
NETHERLANDS - 0.5%
----------------
Gentronics NV Convertible, 0.25% due
4/21/04 (Cost $1,782,508) EUR 2,000,000 1,881,360
--------------
TOTAL LONG TERM INVESTMENTS (COST
$276,709,875) 337,363,849
--------------
</TABLE>
<TABLE>
<CAPTION>
CASH EQUIVALENTS - 4.3%
<S> <C> <C>
Investors Bank & Trust Company
Repurchase Agreement, 5.690% due
11/01/2000 in the amount of $14,897,213,
issued 10/31/2000 (collateralized by
$15,396,461 par of U.S. Government and
Agency Obligations, with interest rates
ranging from 6.996% to 7.910% and
maturity dates ranging from 01/01/21 to
08/01/25 with a total market value of
$15,639,667)
(Cost $14,894,859) $14,894,859 14,894,859
---------------------------
TOTAL INVESTMENTS - 100.9% (COST
$291,604,734) 352,258,708
---------------------------
</TABLE>
<TABLE>
<CAPTION>
CASH EQUIVALENTS - 4.3%
<S> <C> <C>
LIABILITIES, NET OF OTHER ASSETS -
(0.9)%
---------------------------------
Receivable for securities sold $10,302,935
Receivable for fund shares sold 1,200,000
Dividend receivable 164,009
Tax reclaim receivable 516,314
Other assets 74,652
Payable for securities purchased (15,098,846)
Payable for fund shares redeemed (58,236)
Payable to Investment Advisor (257,538)
Other liabilities (55,620)
---------
(3,212,330)
---------
NET ASSETS - 100%
---------------
Applicable to 22,926,774 outstanding
$.001 par value shares
(authorized 500,000,000 shares) $349,046,378
=========
Net Asset Value, Offering and Redemption Price Per
Share
$ 15.22
=========
</TABLE>
See Notes to Financial Statements
5
<PAGE>
HARDING, LOEVNER FUNDS, INC.
--------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
OCTOBER 31, 2000 (CONTINUED) VALUE (1)
<S> <C>
COMPONENTS OF NET ASSETS AS OF OCTOBER 31, 2000 WERE
AS FOLLOWS:
-----------------------------------------------------
Paid-in capital $ 262,832,277
Accumulated distributions in excess of net investment
income (1,068,127)
Accumulated undistributed net realized gain on
investments and foreign currency related
transactions 26,611,629
Net unrealized appreciation on investments and on
assets and liabilities denominated in foreign
currencies (Note 4) 60,670,599
---------------------------
$ 349,046,378
===========================
</TABLE>
Summary of Abbreviations
ADR American Depositary Receipt
EUR Euro
GDR Global Depositary Receipt
(1) See Note 2 to Financial Statements
* Non-income producing security
See Notes to Financial Statements
6
<PAGE>
HARDING, LOEVNER FUNDS, INC.
--------------------------------------------------------------------------------
GLOBAL EQUITY PORTFOLIO -- OVERVIEW
OCTOBER 31, 2000
--------------------------------------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
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
<S> <C> <C> <C>
Equity Portfolio World Index Equity Fund Index
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 $10,281 $10,311
5/31/97 $10,685 $10,887 $10,938
6/30/97 $11,134 $11,449 $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 $11,712 $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 $12,946 $13,058
7/31/98 $11,290 $12,951 $13,064
8/31/98 $9,542 $11,134 $11,161
9/30/98 $9,651 $11,357 $11,167
10/31/98 $10,384 $12,394 $11,907
11/30/98 $10,846 $13,145 $12,562
12/31/98 $11,142 $13,751 $13,084
1/31/99 $11,045 $14,031 $13,358
2/28/99 $10,746 $13,688 $12,972
3/31/99 $11,251 $14,310 $13,418
4/30/99 $12,138 $14,937 $14,027
5/31/99 $11,688 $14,420 $13,614
6/30/99 $12,388 $15,156 $14,300
7/31/99 $12,504 $15,081 $14,339
8/31/99 $12,574 $15,083 $14,324
9/30/99 $12,240 $14,911 $14,200
10/31/99 $12,857 $15,668 $14,752
11/30/99 $13,706 $16,154 $15,743
12/31/99 $15,279 $17,508 $17,493
1/31/00 $15,195 $16,596 $16,809
2/29/00 $15,540 $16,654 $17,847
3/31/00 $16,126 $17,740 $18,292
4/30/00 $15,766 $16,933 $17,379
5/31/00 $15,372 $16,502 $16,863
6/30/00 $16,176 $17,059 $17,531
7/31/00 $15,838 $16,559 $17,175
8/31/00 $16,578 $17,069 $17,872
9/30/00 $15,449 $16,125 $16,921
10/31/00 $15,378 $15,803 $16,508
</TABLE>
Past performance is not indicative of future performance
<TABLE>
--------------------------------------------------------------------------------------------------------------------
RETURNS FOR THE PERIODS ENDED OCTOBER 31, 2000
---------------------------------------------------------------------
CUMULATIVE
TOTAL RETURN AVERAGE ANNUAL TOTAL
------------------------------------ RETURN
SINCE --------------------------
TWELVE MONTHS INCEPTION* SINCE INCEPTION*
<S> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------------
GLOBAL EQUITY PORTFOLIO 19.66% 53.78% 11.60%
MSCI All Country World Index
(gross dividends reinvested) 0.85% 58.03% 12.38%
Lipper Global Fund Index 11.90% 65.08% 13.64%
</TABLE>
<TABLE>
<C> <S>
* The Global Equity Portfolio commenced operations on
December 1, 1996.
</TABLE>
7
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HARDING, LOEVNER FUNDS, INC.
--------------------------------------------------------------------------------
GLOBAL EQUITY PORTFOLIO -- OVERVIEW
OCTOBER 31, 2000
--------------------------------------------------------------------------------
In our annual letter to investors last year, we characterized the fiscal year
ended October 1999 as a year of 'global healing'. Central banks had eased policy
rapidly in response to the troubles of Long Term Capital Management and the
systemic risk posed by its prospective failure. The 'parabolic rise and fall of
Global TMT' seems the most apt characterization of fiscal year 2000, just ended.
An unintended consequence of the prior year's monetary easing was an increase in
speculative activity, which spilled into 2000. This included, most
conspicuously, further inflation in the market valuation of companies in the
technology, media and telecommunications ('TMT') sectors globally. Prices of
TMT-related shares rose rapidly to extraordinary levels in the first half of
this fiscal year. Then, as central bankers' anxieties turned from deflation to
inflation and liquidity was withdrawn, they retreated equally rapidly in the
second half.
Performance in the Portfolio has been very good over the course of the past
twelve months. The Portfolio outperformed its benchmark, the MSCI All Country
World Index, by over 1900 basis points, with good stock selection being the key
determinant.
A year ago, the Portfolio was overweight technology stocks relative to its
benchmark. Stock selection in the sector proved to be excellent, with Oracle,
Sun Microsystems and SmartForce contributing greatly to the Portfolio's returns.
During the course of the year we reduced our holdings in technology, such that
at year end the Portfolio's exposure in the technology sector was 14.5%, some
550 basis points below the benchmark. The reduction in our technology exposure
came about company by company, as our analysis led us to conclude that stock
market valuations reached by several of our holdings were unsustainable.
In similar fashion, we began the year overweight media, publishing and related
stocks within the consumer discretionary sector. The means and channels of
delivery for informational content, such as news, entertainment, sports and
data, have exploded -- from cable to the Internet to satellite to DVD to
broadband wireless. But the creation of content has not kept pace, and therein
lies, we believe, an enduring demand-supply imbalance. The Portfolio was well
served by its investments in Pearson, CBS (now Viacom), WPP and Sony, among
others. As with technology, we reduced the Portfolio's overweight position in
the media sector for market valuation reasons over the course of the fiscal
year.
In contrast to these declining commitments, the Portfolio began the year
underweight the telecommunications services sector and remains so today. We have
been uncomfortable for some time with the prevailing business strategy among
diversified telecommunications companies. Their plans require huge capital
expenditures to build high-speed optical networks. To nearly all customers,
competing telecom services are undifferentiated and commodity-like and, with
deregulation, the cost of switching from one provider to another is effectively
zero. Whatever pricing power might survive this rising competition among
established providers is now being destroyed by the entry of new competitors,
many of whom are heavily indebted, starved for cash flow, and thus not
particular about price. Our investments in telecommunications have been focused
on US Baby Bells, such as BellSouth, and on wireless operators in growing
markets such as China Mobile and Vodafone.
Looking forward, we are growing increasingly concerned about the possibility of
a 'hard landing' for the global economy. Higher energy costs, the contraction of
credit availablity from financial institutions, and a reverse wealth effect due
to the sharp decline in the NASDAQ may combine to slow the economy.
Corporations' and households' stocks of capital goods are abundant after an
eight-year investment spree. In the near term, their demand for autos, machinery
and IT equipment will be largely discretionary, and thus highly sensitive to
consumers' level of confidence. In light of the risks, the Portfolio currently
emphasizes companies with strong defensive characteristics in terms of financial
strength and leadership positions in their particular industries. Companies that
epitomize these qualities that we have added to the Portfolio in the last year
include Bristol-Myers Squibb, insurance company Berkshire Hathaway, Deutsche
Bank, and Brazilian commuter aircraft-maker Embraer. Sectors that are overweight
relative to the benchmark include energy, healthcare, industrials and utilities,
while technology and telecommunications are, as discussed, the sectors most
prominently underweight.
8
<PAGE>
HARDING, LOEVNER FUNDS, INC.
--------------------------------------------------------------------------------
GLOBAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
OCTOBER 31, 2000 SHARES VALUE (1)
<S> <C> <C>
------------------------------------------------------------------------------
LONG TERM INVESTMENTS - 98.4%
---------------------------
COMMON STOCKS - 97.7%
---------------------
AUSTRALIA - 1.6%
--------------
Rio Tinto Ltd. (Diversified Metal
Producers) 30,000 $ 411,928
-------------------------
BRAZIL - 0.9%
-----------
Embraer Aircraft Corp - ADR (Aerospace &
Defense)* 7,800 225,712
-------------------------
CANADA - 0.9%
------------
Nortel Networks Corp.
(Telecommunications) 5,000 227,500
-------------------------
DENMARK - 1.6%
--------------
ISS A/S (Service Organizations)* 6,500 399,932
-------------------------
FINLAND - 1.4%
------------
Nokia Corp.- ADR (Communications) 8,000 342,000
-------------------------
FRANCE - 5.2%
------------
AXA (Insurance Companies) 2,000 264,670
Compagnie Generale d' Industrie et de
Participations (General Diversified) 9,570 401,041
Societe BIC SA (General Diversified) 5,000 173,265
Suez Lyonnaise des Eaux SA (Water
Companies) 3,000 457,573
-------------------------
1,296,549
-------------------------
GERMANY - 1.0%
--------------
Deutsche Bank AG (Commercial Banks) 3,000 246,855
-------------------------
HONG KONG - 4.5%
---------------
China Mobile HK Ltd. ADR (Telephone
Systems)* 6,700 205,187
Hutchison Whampoa Ltd. (General
Diversified) 55,000 682,299
Li & Fung Ltd. (Wholesalers) 128,000 237,979
-------------------------
1,125,465
-------------------------
IRELAND - 3.9%
------------
Elan Corp. plc - ADR (Ethical Drug
Manufacturers)* 7,000 363,562
SmartForce plc - ADR (Electronic Data
Processing Equipment)* 12,000 603,937
-------------------------
967,499
-------------------------
ITALY - 1.1%
----------
Luxottica Group SPA - ADR (Miscellaneous
Retailers) 20,000 288,750
-------------------------
JAPAN - 6.3%
-----------
Atlantis Japan Growth Fund (Mutual
Funds)* 35,000 376,250
Mitsubishi Corp. (Wholesalers) 70,000 577,346
</TABLE>
See Notes to Financial Statements
9
<PAGE>
HARDING, LOEVNER FUNDS, INC.
--------------------------------------------------------------------------------
GLOBAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
OCTOBER 31, 2000 (CONTINUED) SHARES VALUE (1)
<S> <C> <C>
------------------------------------------------------------------------------
JAPAN (CONTINUED)
Mizuho Holdings, Inc. (Financial
Services)* 29 $ 222,975
Sony Corp. - ADR (Radio, TV, &
Phonograph Manufacturers) 5,000 415,000
-------------------------
1,591,571
-------------------------
MEXICO - 2.3%
------------
Grupo Televisa SA - GDR (Radio & TV
Broadcasters)* 5,000 270,625
Wal-Mart de Mexico SA de CV - ADR
(Discount Stores)* 12,800 308,291
-------------------------
578,916
-------------------------
NETHERLANDS - 3.3%
----------------
Royal Dutch Petroleum Co. - NY Shares
(Holding Companies) 10,000 593,750
Wolters Kluwer NV (Miscellaneous
Printing & Publishing) 10,000 224,969
-------------------------
818,719
-------------------------
SINGAPORE - 1.0%
--------------
DBS Group Holdings Ltd. (Commercial
Banks) 21,000 247,622
-------------------------
SWEDEN - 3.7%
------------
Investor AB - Class B (Miscellaneous
Companies)* 45,000 594,208
Telefonaktiebolaget LM Ericsson - ADR
(Miscellaneous Electronics) 24,400 338,550
-------------------------
932,758
-------------------------
SWITZERLAND - 3.1%
----------------
ABB Ltd. (Power Transmission Equipment) 3,984 354,111
Nestle SA - ADR (Diversified Food) 4,000 414,328
-------------------------
768,439
-------------------------
TAIWAN - 0.8%
------------
Taiwan Semiconductor (Parts &
Components)* 68,750 208,915
-------------------------
UNITED KINGDOM - 5.0%
--------------------
Pearson plc (Miscellaneous Printing &
Publishing) 13,418 360,388
Vodafone Group plc - Sponsored ADR
(Telephone Systems) 8,900 378,806
WPP Group plc (Advertising Agencies) 38,100 511,933
-------------------------
1,251,127
-------------------------
UNITED STATES - 50.1%
------------------
Agilent Technologies, Inc. (Medical
Supplies)* 1,525 70,627
Air Products & Chemicals, Inc.
(Industrial Chemicals & Gases
Manufacturers) 13,000 485,062
Allied Capital Corp. (Commercial Finance
Companies) 27,301 563,083
American International Group (Insurance
Companies) 7,500 735,000
Baxter International, Inc. (Ethical Drug
Manufacturers) 9,300 764,344
Bellsouth Corp. (Telephone Systems) 13,700 661,881
Berkshire Hathaway, Inc., Class A
(Insurance Companies)* 5 318,500
Bristol-Myers Squibb Co. (Ethical Drug
Manufacturers) 7,000 426,562
Colgate-Palmolive Co. (Cosmetics &
Toiletries) 9,000 528,840
Eastman Kodak Company (Entertainment &
Leisure) 4,600 206,425
Enron Corp. (Crude Oil & Natural Gas
Producers) 10,000 820,625
Exxon Mobil Corp. (Integrated
International Oil Producers) 5,400 481,612
</TABLE>
See Notes to Financial Statements
10
<PAGE>
HARDING, LOEVNER FUNDS, INC.
--------------------------------------------------------------------------------
GLOBAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
OCTOBER 31, 2000 (CONTINUED) SHARES VALUE (1)
<S> <C> <C>
------------------------------------------------------------------------------
UNITED STATES (CONTINUED)
United States (continued)
Federal National Mortgage Association
(Other Financial Services) 5,000 $ 385,000
Hewlett-Packard Company (Electronic Data
Processing Equipment) 8,800 408,650
Honeywell International, Inc.
(Government & Defense Electronic
Equipment) 5,000 269,063
Intel Corp. (Electronic Data Processing
Equipment) 8,800 396,000
International Business Machines Corp.
(Electronic Data Processing Equipment) 5,000 492,500
Oracle Corp. (Computer Software &
Processing)* 14,000 462,000
Pfizer, Inc. (Ethical Drug
Manufacturers) 19,000 820,563
Schlumberger Ltd. (Exploration, Drilling
Service & Equipment) 9,000 685,125
Tyco International Ltd. (Diversified
Electrical Manufacturers) 15,000 850,313
Viacom Inc. Class B (Media)* 9,765 555,384
Wells Fargo & Co. (Commercial Banks) 10,000 463,125
Wisconsin Central Transportation Corp.
(Railroad Holding Companies)* 15,000 192,188
Wrigley (WM.) Jr. Co. (Confectionary
Goods) 6,800 538,475
-------------------------
12,580,947
-------------------------
Total Common Stocks (Cost $19,549,724) 24,511,204
-------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
CURRENCY AMOUNT
FIXED INCOME - 0.7% -------- -----------
<S> <C> <C> <C>
NETHERLANDS - 0.7%
----------------
Gentronics NV Convertible, 0.25% due
4/21/04 (Cost $227,547) EUR $ 200,000 188,136
-----------
TOTAL LONG TERM INVESTMENTS (COST
$19,777,271) 24,699,340
-----------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
CASH EQUIVALENTS - 1.5%
----------------------------------------
Investors Bank & Trust Company
Repurchase Agreement, 5.690% due
11/01/00 in the amount of $364,729;
issued 10/31/00 (collateralized by
$371,607 par of FNMA, 8.477% due
06/01/24 with a market value of
$382,930) (Cost $364,672) 364,672 364,672
-------------------------
TOTAL INVESTMENTS - 99.9% (COST
$20,141,943) $ 25,064,012
-------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
OTHER ASSETS, NET OF LIABILITIES - 0.1%
--------------------------------
Receivable for securities sold $211,493
Dividends receivable 14,984
Tax reclaim receivable 25,961
Other assets 16,724
Payable for securities purchased (202,999)
Payable to Investment Advisor (3,110)
Other liabilities (37,712)
-------
$25,341
-------
</TABLE>
See Notes to Financial Statements
11
<PAGE>
HARDING, LOEVNER FUNDS, INC.
--------------------------------------------------------------------------------
GLOBAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
OCTOBER 31, 2000 (CONTINUED) VALUE (1)
<S> <C>
------------------------------------------------------------------------------
NET ASSETS - 100%
---------------
Applicable to 1,150,503 outstanding $.001 par
value shares
(authorized 500,000,000 shares) $ 25,089,353
=========================
Net Asset Value, Offering and Redemption Price Per
Share $ 21.81
=========================
COMPONENTS OF NET ASSETS AS OF OCTOBER 31, 2000
WERE AS FOLLOWS:
--------------------------------------------------
Paid-in capital $ 17,729,005
Accumulated undistributed net realized gain on
investments and foreign currency related
transactions 2,442,254
Net unrealized appreciation on investments and on
assets and liabilities denominated in foreign
currencies (Note 4) 4,918,094
-------------------------
$ 25,089,353
=========================
</TABLE>
Summary of Abbreviations
ADR American Depositary Receipt
EUR Euro
FNMA Federal National Mortgage Association
GDR Global Depositary Receipt
(1) See Note 2 to Financial Statements
* Non-income producing security
See Notes to Financial Statements
12
<PAGE>
HARDING, LOEVNER FUNDS, INC.
--------------------------------------------------------------------------------
MULTI-ASSET GLOBAL PORTFOLIO -- OVERVIEW
OCTOBER 31, 2000
--------------------------------------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
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
<TABLE>
<CAPTION>
MULTI-ASSET CONSTRUCTED GLOBAL LIPPER GLOBAL FLEXIBLE
<S> <C> <C> <C>
Global Portfolio Balanced Index* Fund Index
11/1/96 $10,000 $10,000 $10,000
11/30/96 $10,390 $10,370 $10,426
12/31/96 $10,379 $10,245 $10,441
1/31/97 $10,529 $10,238 $10,639
2/28/97 $10,519 $10,294 $10,700
3/31/97 $10,469 $10,142 $10,525
4/30/97 $10,590 $10,303 $10,625
5/31/97 $11,021 $10,779 $11,072
6/30/97 $11,362 $11,164 $11,382
7/31/97 $11,773 $11,431 $11,850
8/31/97 $11,251 $10,955 $11,512
9/30/97 $11,693 $11,386 $12,004
10/31/97 $11,292 $11,061 $11,575
11/30/97 $11,432 $11,093 $11,611
12/31/97 $11,613 $11,164 $11,711
1/31/98 $11,529 $11,354 $11,739
2/28/98 $12,125 $11,862 $12,269
3/31/98 $12,501 $12,115 $12,681
4/30/98 $12,511 $12,257 $12,793
5/31/98 $12,469 $12,124 $12,677
6/30/98 $12,354 $12,259 $12,668
7/31/98 $12,093 $12,268 $12,544
8/31/98 $11,133 $11,369 $11,156
9/30/98 $11,425 $11,747 $11,334
10/31/98 $11,916 $12,530 $11,926
11/30/98 $12,208 $12,915 $12,460
12/31/98 $12,383 $13,376 $12,759
1/31/99 $12,101 $13,490 $12,911
2/28/99 $11,895 $13,118 $12,596
3/31/99 $12,264 $13,490 $13,006
4/30/99 $13,088 $13,842 $13,705
5/31/99 $12,763 $13,459 $13,487
6/30/99 $13,229 $13,779 $13,986
7/31/99 $13,371 $13,874 $13,977
8/31/99 $13,349 $13,900 $13,928
9/30/99 $13,110 $13,892 $13,851
10/31/99 $13,327 $14,312 $14,132
11/30/99 $13,826 $14,518 $14,628
12/31/99 $14,603 $15,234 $15,611
1/31/00 $14,417 $14,628 $15,293
2/29/00 $14,325 $14,618 $16,143
3/31/00 $14,928 $15,370 $16,064
4/30/00 $14,638 $14,749 $15,526
5/31/00 $14,441 $14,569 $15,282
6/30/00 $14,951 $15,005 $15,829
7/31/00 $14,765 $14,639 $15,634
8/31/00 $15,183 $14,866 $16,168
9/30/00 $14,557 $14,360 $15,691
10/31/00 $14,533 $14,115 $15,386
</TABLE>
Past performance is not indicative of future performance
<TABLE>
--------------------------------------------------------------------------------------------------------------------
RETURNS FOR THE PERIODS ENDED OCTOBER 31, 2000
----------------------------------------------------------------------
CUMULATIVE
TOTAL RETURN AVERAGE ANNUAL TOTAL
------------------------------------- RETURN
SINCE --------------------------
TWELVE MONTHS INCEPTION** SINCE INCEPTION**
<S> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------------
MULTI-ASSET GLOBAL EQUITY PORTFOLIO 9.05% 45.33% 9.79%
Constructed Global Balanced Index* (1.38%) 41.15% 8.99%
Lipper Global Flexible Fund Index 8.87% 53.86% 11.37%
</TABLE>
<TABLE>
<C> <S>
* 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 commenced operations on
November 1, 1996.
</TABLE>
13
<PAGE>
HARDING, LOEVNER FUNDS, INC.
--------------------------------------------------------------------------------
MULTI-ASSET GLOBAL PORTFOLIO -- OVERVIEW
OCTOBER 31, 2000
--------------------------------------------------------------------------------
In our annual letter to investors last year, we characterized the fiscal year
ended October 1999 as a year of 'global healing'. Central banks had eased policy
rapidly in response to the troubles of Long Term Capital Management and the
systemic risk posed by its prospective failure. The 'parabolic rise and fall of
Global TMT' seems the most apt characterization of fiscal year 2000, just ended.
An unintended consequence of the prior year's monetary easing was an increase in
speculative activity, which spilled into 2000. This included, most
conspicuously, further inflation in the market valuation of companies in the
technology, media and telecommunications ('TMT') sectors globally. Prices of
TMT-related shares rose rapidly to extraordinary levels in the first half of
this fiscal year. Then, as central bankers' anxieties turned from deflation to
inflation and liquidity was withdrawn, they retreated equally rapidly in the
second half.
Performance in the Portfolio has been very good over the course of the past
twelve months. The Portfolio outperformed its constructed benchmark, 60% MSCI
All Country World Index/40% Salomon World Government Bond Index, by over one
thousand basis points, with good stock selection being the key determinant. The
Portfolio's allocation to equities remained high throughout the year, peaking at
69% of assets in January, and ending the fiscal year where it began, at around
66% of the total.
A year ago, equities in the Portfolio contained a large exposure to financial
holding companies, pushing its exposure to the financial sector (banks,
insurance, and holding companies) substantially higher than its benchmark. This
industry had generally strong performance in the fiscal year, and our stock
selection made it even better, with strong returns coming from Jardine Strategic
Holdings, Hutchison Whampoa, Investor AB, and Royce MicroCap Trust. We cut
holdings in this sector substantially over the course of the year, in part
because of the valuation bubble that had crept into certain of these companies'
'TMT' holdings.
In similar fashion, we began the year overweight media, publishing and related
stocks within the consumer discretionary sector. The means and channels of
delivery for informational content, such as news, entertainment, sports and
data, have exploded -- from cable to the Internet to satellite to DVD to
broadband wireless. But the creation of content has not kept pace, and therein
lies, we believe, an enduring demand-supply imbalance. The Portfolio was well
served by its investments in Pearson, CBS (now Viacom), WPP, and Sony, among
others. Again, we reduced the Portfolio's overweight position in the media
sector for market valuation reasons over the course of the fiscal year.
In contrast to these declining commitments, the Portfolio began the year
underweight the telecommunications services sector and remains so today. We have
been uncomfortable for some time with the prevailing business strategy among
diversified telecommunications companies. Their plans require huge capital
expenditures to build high-speed optical networks. To nearly all customers,
competing telecom services are undifferentiated and commodity-like and, with
deregulation, the cost of switching from one provider to another is effectively
zero. Whatever pricing power might survive this rising competition among
established providers is now being destroyed by the entry of new competitors,
many of whom are heavily indebted, starved for cash flow, and thus not
particular about price. Our investments in telecommunications have been focused
on US Baby Bells, such as BellSouth, and on wireless operators in growing
markets such as China Mobile and Vodafone.
For bonds, the fiscal year brought a number of potential hazards. First, of
course, was the effect on the US yield curve of the series of short-term
interest moves by the Federal Reserve. Three-month rates began the year at
5.25%, and ended the year at 6.25%, while 30-year rates actually declined,
making the yield curve invert. Secondly, the reappraisal of the prospects of TMT
companies brought with it a dramatic widening of credit risk premiums in the
corporate bond market, especially in high-yield securities. Thirdly, the
strength of the US dollar against all currencies skewed global bond returns,
such that US Government bonds returned nearly 10% while foreign government
bonds, measured in dollars, FELL on average by 5%. In that context, the
Portfolio's bond performance managed to thread the needle, returning nearly 6%.
As the credit risk premia widened over the year, we began incrementally to take
new positions in selected issues of high-yield corporate and emerging market
debt, funded by partial liquidations of the portfolio's substantial holdings of
US Treasuries.
14
<PAGE>
HARDING, LOEVNER FUNDS, INC.
--------------------------------------------------------------------------------
MULTI-ASSET GLOBAL PORTFOLIO
STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
OCTOBER 31, 2000 SHARES VALUE (1)
<S> <C> <C>
---------------------------------------------------------------------------------
LONG TERM INVESTMENTS - 97.9%
---------------------------
COMMON STOCKS - 65.3%
---------------------
BRAZIL - 0.4%
-----------
Embraer Aircraft Corp - ADR (Aerospace &
Defense)* 1,100 $ 31,831
-------------------------
CANADA - 0.5%
------------
Nortel Networks Corp.
(Telecommunications) 800 36,400
-------------------------
FINLAND - 0.9%
------------
Nokia Corp. - ADR (Communications) 1,500 64,125
-------------------------
FRANCE - 3.1%
------------
AXA (Insurance Companies) 350 46,317
Compagnie Generale d' Industrie et de
Participations (General Diversified) 1,540 64,535
Societe BIC SA (General Diversified) 1,050 36,386
Suez Lyonnaise des Eaux SA (Water
Companies) 503 76,720
-------------------------
223,958
-------------------------
GERMANY - 0.6%
--------------
Deutsche Bank AG (Commercial Banks) 500 41,143
-------------------------
HONG KONG - 2.5%
---------------
China Mobile HK Ltd. ADR (Telephone
Systems)* 1,400 42,875
Hutchison Whampoa Ltd. (General
Diversified) 7,700 95,522
Li & Fung Ltd. (Wholesalers) 24,000 44,621
-------------------------
183,018
-------------------------
IRELAND - 1.2%
------------
SmartForce plc - ADR (Electronic Data
Processing Equipment)* 1,700 85,558
-------------------------
JAPAN - 5.0%
-----------
Asatsu-DK, Inc. (Advertising Agencies) 1,000 26,668
Atlantis Japan Growth Fund (Mutual
Funds)* 10,000 107,500
Mitsubishi Corp. (Wholesalers) 15,000 123,717
Mizuho Holdings, Inc. (Financial
Services)* 7 53,821
Sony Corp. - ADR (Radio, TV, &
Phonograph Manufacturers) 600 49,800
-------------------------
361,506
-------------------------
MEXICO - 1.8%
------------
Grupo Televisa SA - GDR (Radio & TV
Broadcasters)* 800 43,300
Wal-Mart de Mexico SA de CV - ADR
(Discount Stores)* 3,600 86,707
-------------------------
130,007
-------------------------
</TABLE>
See Notes to Financial Statements
15
<PAGE>
HARDING, LOEVNER FUNDS, INC.
--------------------------------------------------------------------------------
MULTI-ASSET GLOBAL PORTFOLIO
STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
OCTOBER 31, 2000 (CONTINUED) SHARES VALUE (1)
<S> <C> <C>
---------------------------------------------------------------------------------
NETHERLANDS - 2.7%
----------------
Getronics NV (Systems & Subsystems) 1,200 $ 13,488
Royal Dutch Petroleum Co. - NY Shares
(Holding Companies) 2,500 148,437
Wolters Kluwer NV (Miscellaneous
Printing & Publishing) 1,400 31,496
-------------------------
193,421
-------------------------
SINGAPORE - 1.3%
--------------
DBS Local Certificates (Commercial
Banks) 8,000 94,332
-------------------------
SWEDEN - 2.7%
------------
Investor AB - Class B (Miscellaneous
Companies)* 10,500 138,649
Telefonaktiebolaget LM Ericsson - ADR
(Miscellaneous Electronics) 4,000 55,500
-------------------------
194,149
-------------------------
SWITZERLAND - 2.3%
----------------
ABB Ltd. (Power Transmission Equipment) 696 61,863
Nestle SA - ADR (Diversified Food) 1,000 103,582
-------------------------
165,445
-------------------------
TAIWAN - 1.2%
------------
Taiwan Semiconductor (Parts &
Components)* 27,499 83,563
-------------------------
UNITED KINGDOM - 5.7%
--------------------
Pearson plc (Miscellaneous Printing &
Publishing) 2,545 68,355
Rentokil Initial plc (Service
Organizations) 30,000 69,289
Rio Tinto plc (Diversified Metal
Producers) 6,000 89,640
Vodafone Group plc - Sponsored ADR
(Telephone Systems) 1,300 55,331
WPP Group plc (Advertising Agencies) 9,500 127,647
-------------------------
410,262
-------------------------
UNITED STATES - 33.4%
------------------
Agilent Technologies, Inc. (Medical
Supplies)* 133 6,160
Air Products & Chemicals, Inc.
(Industrial Chemicals & Gases
Manufacturers) 1,600 59,700
Allied Capital Corp. (Commercial Finance
Companies) 6,500 134,063
American International Group (Insurance
Companies) 1,875 183,750
Baxter International, Inc. (Ethical Drug
Manufacturers) 1,000 82,187
Bellsouth Corp. (Telephone Systems) 2,100 101,456
Bristol-Myers Squibb Co. (Ethical Drug
Manufacturers) 1,400 85,312
Colgate-Palmolive Co. (Cosmetics &
Toiletries) 1,500 88,140
Eastman Kodak Company (Entertainment &
Leisure) 1,000 44,875
Enron Corp. (Crude Oil & Natural Gas
Producers) 2,000 164,125
Exxon Mobil Corp. (Integrated
International Oil Producers) 1,800 160,537
Federal National Mortgage Association
(Other Financial Services) 900 69,300
Hewlett-Packard Company (Electronic Data
Processing Equipment) 900 41,794
Honeywell International, Inc.
(Government & Defense Electronic
Equipment) 1,800 96,862
Intel Corp. (Electronic Data Processing
Equipment) 1,200 54,000
International Business Machines Corp.
(Electronic Data Processing Equipment) 1,000 98,500
</TABLE>
See Notes to Financial Statements
16
<PAGE>
HARDING, LOEVNER FUNDS, INC.
--------------------------------------------------------------------------------
MULTI-ASSET GLOBAL PORTFOLIO
STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
OCTOBER 31, 2000 (CONTINUED) SHARES VALUE (1)
<S> <C> <C>
---------------------------------------------------------------------------------
UNITED STATES (CONTINUED)
United States (continued)
Oracle Corp. (Computer Software &
Processing)* 1,200 $ 39,600
Pfizer, Inc. (Ethical Drug
Manufacturers) 3,400 146,837
Quintiles Transnational Corp. (Medical
Services)* 1,800 25,087
Royce Micro-Cap Trust, Inc. (Mutual
Funds) 11,612 120,475
Schlumberger Ltd. (Exploration, Drilling
Service & Equipment) 1,200 91,350
Tyco International Ltd. (Diversified
Electrical Manufacturers) 2,500 141,719
Viacom Inc. Class B (Media)* 2,170 123,419
Wells Fargo & Co. (Commercial Banks) 2,500 115,781
Wisconsin Central Transportation Corp.
(Railroad Holding Companies)* 1,900 24,344
Worldcom, Inc. (Telecommunications)* 1,600 38,000
Wrigley (WM.) Jr. Co. (Confectionary
Goods) 1,000 79,188
-------------------------
2,416,561
-------------------------
Total Common Stocks (Cost $3,825,612) 4,715,279
-------------------------
WARRANTS - 0.0%
--------------
JAPAN - 0.0%
-----------
Atlantis Japan Growth Fund - Warrants -
expiring 04/30/01 (Mutual Funds)* (Cost
$797) 400 339
-------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
CURRENCY AMOUNT (A)
FIXED INCOME - 32.6% -------- ----------
<S> <C> <C> <C>
BRAZIL - 1.9%
-----------
Brazil C Bond Cap, 8.00% due 4/15/14 $ 184,712 137,935
--------------
EUROPE - 0.8%
------------
Eurotunnel 4.450% Equity Notes due
12/31/03 GBP 37,500 28,400
Eurotunnel 4.450% Equity Notes due
12/31/03 EUR 37,500 28,312
--------------
56,712
--------------
MULTINATIONAL - 1.1%
-----------------
International Bank for Reconstruction &
Development, 4.25% due 9/08/05 EUR 100,000 80,912
--------------
NEW ZEALAND - 1.1%
-----------------
New Zealand Government - Series 709,
7.00% due 7/15/09 NZD 200,000 81,121
--------------
UNITED KINGDOM - 1.5%
--------------------
Orange plc, 7.625% due 8/01/08 EUR 125,000 110,088
--------------
UNITED STATES - 26.2%
------------------
AES Corporation, 8.50% due 11/01/07 300,000 284,250
Comcast Corp., 10.625% due 7/15/12 100,000 121,100
</TABLE>
See Notes to Financial Statements
17
<PAGE>
HARDING, LOEVNER FUNDS, INC.
--------------------------------------------------------------------------------
MULTI-ASSET GLOBAL PORTFOLIO
STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
FACE
OCTOBER 31, 2000 (CONTINUED) AMOUNT (A) VALUE (1)
<S> <C> <C> <C>
--
---------------------------------------------------------------------------------
UNITED STATES (CONTINUED)
GNMA, 7.000% due 6/15/09 54,130 54,147
GNMA, 7.000% due 4/15/28 $ 114,737 $ 113,160
GNMA, 7.500% due 6/15/27 90,605 90,944
GNMA, 8.000% due 8/15/07 6,615 6,723
GNMA, 8.500% due 5/15/18 7,501 7,697
GNMA, 9.500% due 9/20/20 2,380 2,442
Penney J.C. & Co, 7.40% due 4/01/37 150,000 106,005
Rockefeller Center Property CVT, zero
coupon due 12/31/00 250,000 215,000
U.S. Treasury Bond, 6.125% due 11/15/27 200,000 204,463
U.S. Treasury Inflation Index Note,
3.613% due 1/15/07 150,000 159,261
U.S. Treasury Inflation Index Note,
3.801% due 4/15/28 225,000 230,857
U.S. Treasury Note, 5.625% due 5/15/08 300,000 295,741
--------------
1,891,790
--------------
Total Fixed Income (Cost $2,554,438) 2,358,558
--------------
TOTAL LONG TERM INVESTMENTS (COST
$6,380,847) 7,074,176
--------------
</TABLE>
<TABLE>
<CAPTION>
CASH EQUIVALENTS - 1.6%
<S> <C> <C>
Investors Bank & Trust Company
Repurchase Agreement, 5.690% due
11/01/00 in the amount of $118,685;
issued 10/31/00 (collateralized by
$133,000 par of FNMA, 5.180% due
06/25/23 with a market value of
$125,227) (Cost $118,666) 118,666 118,666
-------------------------
TOTAL INVESTMENTS - 99.5% (COST
$6,499,513) $ 7,192,842
-------------------------
OTHER ASSETS, NET OF LIABILITIES - 0.5%
--------------------------------
Receivable from Investor Advisor $ 11,329
Dividends receivable 3,113
Tax reclaim receivable 3,307
Other assets 42,330
Payable for fund shares redeemed (685)
Other liabilities (26,270)
-------------------------
33,124
-------------------------
NET ASSETS - 100%
---------------
Applicable to 576,884 outstanding $.001
par value Shares
(authorized 500,000,000 shares) $ 7,225,966
-------------------------
Net Asset Value, Offering and Redemption
Price Per Share $ 12.53
=========================
</TABLE>
See Notes to Financial Statements
18
<PAGE>
HARDING, LOEVNER FUNDS, INC.
--------------------------------------------------------------------------------
MULTI-ASSET GLOBAL PORTFOLIO
STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
OCTOBER 31, 2000 (CONTINUED) VALUE (1)
<S> <C> <C>
--
------------------------------------------------------------------------------
COMPONENTS OF NET ASSETS AS OF OCTOBER
31, 2000 WERE AS FOLLOWS:
----------------------------------------
Paid-in capital $ 6,092,423
Undistributed accumulated net investment
income 112,059
Accumulated undistributed net realized
gain on investments
and foreign currency related
transactions 330,046
Net unrealized appreciation on
investments and on assets and
liabilities denominated in foreign
currencies (Note 4) 691,438
-------------------------
$ 7,225,966
-------------------------
-------------------------
</TABLE>
Summary of Abbreviations
ADR American Depositary Receipt
CVT Convertible Bond
EUR Euro
FNMA Federal National Mortgage Association
GBP British Pound
GDR Global Depositary Receipt
GNMA Government National Mortgage Association
NZD New Zealand Dollar
(1) See Note 2 to Financial Statements
(a) Face amount shown in U.S. dollars unless otherwise indicated.
* Non-income producing security
See Notes to Financial Statements
19
<PAGE>
HARDING, LOEVNER FUNDS, INC.
--------------------------------------------------------------------------------
EMERGING MARKETS PORTFOLIO -- OVERVIEW
OCTOBER 31, 2000
--------------------------------------------------------------------------------
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
COMPARISON OF CHANGES IN VALUE OF $10,000 INVESTMENT IN HARDING, LOEVNER FUNDS,
INC. -
EMERGING MARKETS PORTFOLIO AND THE LIPPER EMERGING MARKETS FUNDS INDEX
AND THE MSCI EMERGING MARKETS FREE INDEX
<TABLE>
<CAPTION>
EMERGING MSCI EMERGING LIPPER EMERGING
<S> <C> <C> <C>
Markets Portfolio Markets Free Markets Funds Index
11/9/98 $10,000 $10,000 $10,000
11/30/98 $10,280 $10,202 $10,127
12/31/98 $10,160 $10,054 $10,000
1/31/99 $9,740 $9,892 $9,797
2/28/99 $9,500 $9,988 $9,713
3/31/99 $10,490 $11,305 $10,794
4/30/99 $11,870 $12,703 $12,293
5/31/99 $11,780 $12,629 $12,146
6/30/99 $13,350 $14,063 $13,510
7/31/99 $13,180 $13,681 $13,172
8/31/99 $13,400 $13,805 $13,027
9/30/99 $13,310 $13,338 $12,564
10/31/99 $13,680 $13,622 $12,942
11/30/99 $15,090 $14,845 $14,370
12/31/99 $17,954 $16,733 $16,895
1/31/00 $17,634 $16,833 $16,699
2/29/00 $18,644 $17,055 $17,197
3/31/00 $19,098 $17,139 $17,248
4/30/00 $17,439 $15,514 $15,372
5/31/00 $16,923 $14,873 $14,554
6/30/00 $18,541 $15,397 $15,276
7/31/00 $17,552 $14,606 $14,653
8/31/00 $17,789 $14,677 $14,803
9/30/00 $16,532 $13,396 $13,388
10/31/00 $15,346 $12,425 $12,388
</TABLE>
Past performance is not indicative of future performance
<TABLE>
--------------------------------------------------------------------------------
RETURNS FOR THE PERIODS ENDED OCTOBER 31,
2000
-------------------------------------------
AVERAGE
ANNUAL
TOTAL
CUMULATIVE RETURN
TOTAL RETURN ----------
------------------------------- SINCE
TWELVE MONTHS SINCE INCEPTION* INCEPTION*
<S> <C> <C> <C>
--------------------------------------------------------------------------------
EMERGING MARKETS PORTFOLIO 12.18% 53.46% 24.14%
MSCI Emerging Markets Free
Index(gross dividends reinvested) (8.79%) 24.25% 11.58%
Lipper Emerging Markets Funds Index (4.28%) 23.88% 11.42%
</TABLE>
* The Emerging Markets Portfolio commenced operations on November 9, 1998.
20
<PAGE>
HARDING, LOEVNER FUNDS, INC.
--------------------------------------------------------------------------------
EMERGING MARKETS PORTFOLIO -- OVERVIEW
OCTOBER 31, 2000
--------------------------------------------------------------------------------
The Portfolio's fiscal year to October proved to be one of great extremes in
market sentiment, but one of solid portfolio performance. The year's results
substantiate, we believe, our approach of owning leading emerging markets
companies that are characterized by the fundamental attributes of growth,
financial strength, management quality and competitive advantage. The Portfolio
returned 12.2% in the period, versus an 8.8% decline in its benchmark, the MSCI
Emerging Markets Free Index. At the end of last year, investor appetite for
technology, media and telecommunications ("TMT") stocks was as ravenous in the
emerging markets as it was in the developed markets. By the fiscal third quarter
of 2000, sentiment toward TMT stocks had very much reversed, dragging down the
prices not only of TMT shares, but highly-priced stocks in general. The
precipitate event was the hugely expensive auction of wireless licenses by
European governments, which highlighted the unrealistic growth expectations
built into the share prices of many telecom operators. The worry that expansion
plans were now constrained by the cost of operating licenses snowballed down the
supply chain, harming the stocks of telecom equipment suppliers and their
emerging markets-based component providers. (Of course, these issues for
DEVELOPED markets wireless telecoms do not apply to EMERGING markets operators,
who are still in the sweet part of the industry development cycle.) Orders in
the PC market began to decelerate by the fourth quarter of the fiscal year as
well, severely affecting Taiwan and Korea, major production bases for computer
chips and PC hardware. It was these issues, together with a worry that the US
economy would slow its importation of the wide variety of emerging markets
exports, which drove the benchmark down. The Portfolio largely avoided the
carnage, by focusing on companies within the TMT sectors with durable business
models overseen by competent managements, achievable expectations for growth,
and realistically-priced shares.
The TMT-heavy stock markets of Taiwan, Korea, India and Israel were propelled by
rising earnings and multiple expansion in the early part of the year. Together,
they accounted for roughly 40% of the benchmark at their end-of-February peak.
However as technology shares were battered later in the year, Korea, and Taiwan
were to be among the worst performing markets in the emerging market world in
fiscal 2000. The Portfolio remained underweight in these countries, for
fundamental company-specific reasons throughout the year. Moreover, the stocks
we own in these countries, selected for their strong competitive positions and
attractive growth outlooks (Hite Brewery and SK Telecom in Korea, and PRESIDENT
CHAIN STORE in Taiwan for example), outperformed their relevant country indices
by wide margins -- 11% in Taiwan and 35% in South Korea. Just as importantly,
our stocks in Brazil (especially aircraft manufacturer EMBRAER), and Hong Kong
(notably CHINA MOBILE and logistics firm LI & FUNG) were large sources of
outperformance.
A look at performance attribution by industrial sector, rather than by country,
again shows a year of solid stock selection. The overall weights of sectors in
the Portfolio loosely mirror those of the benchmark, but the constituents look
nothing like those of the benchmark, as they are selected according to our
investment criteria, without reference to the size of a company's market
capitalization. Stocks in the consumer discretionary (WAL-MART DE MEXICO),
consumer staples (HITE BREWERY), financial (India's HOUSING DEVELOPMENT FINANCE
CORP.), and health care (Israel's TEVA) sectors added 1300 basis to relative
performance. The Portfolio began fiscal 2000 with a heavy (25%) weight in
telecommunications stocks. The sector provided positive returns, but as share
prices rose we moved throughout the year to reduce this exposure to roughly half
of this level. We also reduced the Portfolio's technology exposure, located
mainly in Israel, well below benchmark levels in view of deteriorating company
fundamentals.
Our philosophy served us well this year. It was a good year to be
research-focused, bottom-up stock pickers. Further, we were rewarded for our
policy of avoiding commitments in emerging markets where the macroeconomic,
regulatory, and/or socio-political environment is too onerous an obstacle for
companies. We do not look to invest in the companies in a country just because
it is part of the benchmark. Instead, our stance favoring such secular
underpinnings as the rule of law, the ongoing privatization and deregulation of
government monopolies, and the free flow of capital and technology help
determine the countries in which we search for investment candidates. At year's
end, in large part due to our dim view of the countries' business climates, we
had no investments in countries that make up 14% of the benchmark, including the
important (by size) markets of Turkey, Indonesia and Russia.
At the end of last fiscal year, we said we believed the prospects for the
emerging markets were generally good. This general sentiment proved wrong! In
hindsight, we should have said that the prospects for OUR KIND OF EMERGING
MARKETS COMPANIES were good. This year, we know better than to offer a general
emerging markets prediction, but we remain highly confident about the prospects
for the companies we own: their financial strength, competitive position, and
how their managements are executing their business plans. In a year when
investor sentiment swung as radically as it did, the best emerging markets
companies saw more clearly than ever that to secure their access to equity
capital, they have to manage their businesses with the interest of the suppliers
of that capital -- investors like the Portfolio -- foremost in their minds.
21
<PAGE>
HARDING, LOEVNER FUNDS, INC.
--------------------------------------------------------------------------------
EMERGING MARKETS PORTFOLIO
STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
OCTOBER 31, 2000 SHARES VALUE (1)
<S> <C> <C>
------------------------------------------------------------------------------
LONG TERM INVESTMENTS - 95.1%
---------------------------
COMMON STOCKS - 87.8%
---------------------
ARGENTINA - 2.4%
--------------
Perez Companac SA - ADR (Financial
Services) 1,114 $ 16,014
Quilmes Industrial SA (Brewers) 5,800 44,950
-------------------------
60,964
-------------------------
BRAZIL - 5.9%
-----------
Companhia De Bebidas - ADR (Beverages,
Food & Tobacco)* 1,900 42,869
Compania Brasileira de Distribuicao
Grupo Pao de Acurcar (National &
Regional Food Chains) 1,300 46,312
Petroleo Brasileiro SA - ADR (Holding
Companies) 1,500 39,779
Telesp Celular Partcipacoes - ADR
(Telecommunications) 700 22,137
-------------------------
151,097
-------------------------
CHILE - 2.3%
----------
Cia de Telecomunicaciones de Chile SA -
ADR (Telecommunications)* 1,100 16,775
Vina Concha Y Toro SA - ADR (Brewers) 1,100 42,212
-------------------------
58,987
-------------------------
EGYPT - 1.0%
-----------
Al Ahram Beverages Company S.A.E.- GDR
(Beverages, Food & Tobacco)* 2,000 25,400
-------------------------
GREECE - 1.5%
------------
Attica Enterprises Holding SA (Shipping) 5,160 39,044
-------------------------
HONG KONG - 9.4%
---------------
Brilliance China Automotive (Automotive) 1,400 46,025
China Telecom (Telecommunications)* 12,000 77,318
Johnson Electric Holdings (Diversified
Electronics) 24,000 47,698
Li & Fung Ltd. (Wholesalers) 16,000 29,747
Yue Yuen Industrial Holdings (Industrial
-Diversified) 22,000 40,762
-------------------------
241,550
-------------------------
HUNGARY - 2.3%
-------------
Matav Rt. - ADR (Telecommunications) 1,100 25,850
Otp Bank (Savings & Loans) 700 32,429
-------------------------
58,279
-------------------------
INDIA - 8.2%
----------
Bharat Petroleum Corp. Ltd. (Oil
Refiners & Distributors)(2) 8,100 29,871
Hero Honda Motors Ltd. (Diversified
Automotive Manufacturers)(2) 2,000 37,739
Hindustan Lever Ltd. (Diversified
Food)(2) 7,000 26,592
Housing Development Finance Corp. Ltd.
(Other Financial Services)*(2) 7,500 75,473
India Fund Inc. (Mutual Funds)* 4,000 42,750
-------------------------
212,425
-------------------------
</TABLE>
See Notes to Financial Statements
22
<PAGE>
HARDING, LOEVNER FUNDS, INC.
--------------------------------------------------------------------------------
EMERGING MARKETS PORTFOLIO
STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
OCTOBER 31, 2000 (CONTINUED) SHARES VALUE (1)
<S> <C> <C>
------------------------------------------------------------------------------
ISRAEL - 4.5%
-----------
Orbotech, Ltd. (Medical, Surgical &
Dental Suppliers)* 750 $ 39,703
Teva Pharmaceutical Industries Ltd. -
ADR (Ethical Drug Manufacturers) 1,300 76,862
-------------------------
116,565
-------------------------
MEXICO - 12.1%
-------------
Cemex SA - ADR (Building Materials) 2,500 52,812
Desc Sociedad de Fomento Industrial SA
de CV (Shipping) 32,000 13,913
Grupo Televisa SA - Series CPO (Radio &
TV Broadcasters)* 22,000 59,438
Panamerican Beverages, Inc. - Class A
(Soft Drink Producers & Bottlers) 2,550 42,075
Telefonos de Mexico SA, Class L - ADR
(Telecommunications) 900 48,544
Wal-Mart de Mexico SA de CV - ADR
(Discount Stores)* 4,000 96,341
-------------------------
313,123
-------------------------
PHILIPPINES - 1.0%
---------------
ABS-CBN Broadcasting Corp. (Radio & TV
Broadcasters) 33,500 25,972
-------------------------
POLAND - 2.4%
------------
Agora SA (Newspaper Publishers)* 2,400 44,031
Wielkopolski Bank Kredytowy SA
(Commercial Banks) 3,800 17,429
-------------------------
61,460
-------------------------
SOUTH AFRICA - 4.7%
-----------------
De Beers Cons Mines - ADR (Diversified
Metal Producers) 2,700 75,262
South Africa Breweries plc (Brewers) 7,500 44,940
-------------------------
120,202
-------------------------
SOUTH KOREA - 10.8%
-----------------
Hite Brewery Co. Ltd. (Brewers) 1,300 58,248
Korea Telecom Corp. - ADR
(Telecommunications) 1,600 59,000
Pohang Iron and Steel Co. Ltd. (Steel
Producers - Integrated) 810 47,131
Samsung Electronics - GDR - 144A
(Diversified Electronics)* 1,700 56,100
SK Telecom Co. (Telecommunications) 180 38,424
SK Telecom Co. Ltd. - ADR
(Telecommunications) 800 20,050
-------------------------
278,953
-------------------------
TAIWAN - 10.5%
-------------
Acer Peripherals (Computers &
Peripherals)* 16,000 19,101
Advantech Co Ltd. (Computers &
Information) 11,500 43,147
Hon Hai Precision Industry (Parts &
Components) 5,460 28,612
President Chain Store Corp. (National &
Regional Food Chains) 19,739 56,310
Synnex Technology International Corp. -
GDR (Systems & Subsystems)* 3,380 28,411
Taiwan Semiconductor (Parts &
Components)* 23,321 70,867
Universal Scientific Industrial Co.,
Ltd. (Parts & Components)* 28,000 25,005
-------------------------
271,453
-------------------------
THAILAND - 2.3%
-------------
Advanced Information Service plc
(Telecommunications)* 3,700 30,476
</TABLE>
See Notes to Financial Statements
23
<PAGE>
HARDING, LOEVNER FUNDS, INC.
--------------------------------------------------------------------------------
EMERGING MARKETS PORTFOLIO
STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
OCTOBER 31, 2000 (CONTINUED) SHARES VALUE (1)
<S> <C> <C>
------------------------------------------------------------------------------
THAILAND (CONTINUED)
Siam City Cement Public Co. Ltd. (Cement
Producers)* 11,800 $ 27,923
-------------------------
58,399
-------------------------
UNITED KINGDOM - 2.6%
--------------------
African Lakes Corp. plc (Parts &
Components)* 41,500 24,113
Standard Chartered plc (Other Financial
Services) 2,900 42,026
-------------------------
66,139
-------------------------
UNITED STATES - 3.3%
-----------------
AES Corporation (Electric Power
Companies)* 1,500 84,750
-------------------------
VIETNAM - 0.6%
-------------
Vietnam Enterprise Investments Ltd.
(Investment Companies)* 20,000 15,600
-------------------------
Total Common Stocks (Cost $2,194,053) 2,260,362
-------------------------
PREFERRED STOCKS - 7.3%
--------------------
BRAZIL - 7.3%
-----------
Banco Itau SA (Commercial Banks) 755,000 58,762
Embraer - Empresa Brasileira de
Aeronautica SA (Military & Commercial
Aircraft Manufacturers) 17,700 130,802
-------------------------
189,564
-------------------------
Total Preferred Stocks (Cost $61,975) 189,564
-------------------------
TOTAL LONG TERM INVESTMENTS (COST
$2,256,028) 2,449,926
-------------------------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT
CASH EQUIVALENTS - 4.8% --------
<S> <C> <C>
Investors Bank & Trust Company
Repurchase Agreement, 5.690% due
11/01/00 in the amount of $123,247;
issued 10/31/00 (collateralized by
$131,544 par of FNMA - Pool# 540398,
7.672% due 05/01/30 with a market value
of $129,389) (Cost $123,227) $123,227 123,227
-------------------------
TOTAL INVESTMENTS - 99.9% (COST
$2,379,255) $ 2,573,153
-------------------------
</TABLE>
See Notes to Financial Statements
24
<PAGE>
HARDING, LOEVNER FUNDS, INC.
--------------------------------------------------------------------------------
EMERGING MARKETS PORTFOLIO
STATEMENT OF NET ASSETS
<TABLE>
<CAPTION>
OCTOBER 31, 2000 (CONTINUED) VALUE (1)
<S> <C>
--------------------------------------------------------------------
OTHER ASSETS, NET OF LIABILITIES - 0.1%
--------------------------------
Receivable from Investment Advisor $ 4,611
Dividends receivable 1,292
Other assets 6,762
Liabilities (11,189)
-------------------------
1,476
-------------------------
NET ASSETS - 100%
---------------
Applicable to 172,892 outstanding $.001
par value shares
(authorized 500,000,000 shares) $ 2,574,629
=========================
Net Asset Value, Offering and Redemption
Price Per Share $ 14.89
=========================
COMPONENTS OF NET ASSETS AS OF OCTOBER
31, 2000 WERE AS FOLLOWS:
----------------------------------------
Paid-in capital $ 2,186,138
Accumulated distributions in excess of
net investment income (1,400)
Accumulated undistributed net realized
gain on investments and foreign
currency-related transactions 195,957
Net unrealized appreciation on
investments and on assets and
liabilities denominated in foreign
currencies (Note 4) 193,934
-------------------------
$ 2,574,629
=========================
</TABLE>
Summary of Abbreviations
144A Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be sold in transactions exempt from
registration, normally to qualified buyers.
ADR American Depositary Receipt
FNMA Federal National Mortgage Association
GDR Global Depositary Receipt
(1) See Note 2 to Financial Statements
* Non-income producing security
(2) Indian-equity-linked notes
See Notes to Financial Statements
25
<PAGE>
HARDING, LOEVNER FUNDS, INC.
--------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
YEAR ENDED OCTOBER 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL GLOBAL MULTI-ASSET EMERGING
EQUITY EQUITY GLOBAL MARKETS
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Interest $ 528,917 $ 39,597 $196,863 $ 4,868
Dividends (Net of foreign
withholding taxes of
$562,457, $17,086, $4,114
and $1,725, respectively) 4,682,104 302,237 69,320 29,652
------------ ---------- -------- ---------
Total investment income 5,211,021 341,834 266,183 34,520
------------ ---------- -------- ---------
EXPENSES
Investment advisory fees (Note
3) 2,721,296 252,774 73,073 31,634
Administration fees (Note 3) 387,704 29,278 12,602 6,623
Custodian fees 268,330 27,247 14,127 12,809
Directors' fees and expenses
(Note 3) 54,810 3,488 1,107 255
Shareholder record keeping
fees 39,068 11,635 4,143 5,723
Audit fees 22,454 21,385 21,385 13,055
State registration filing fees 17,407 5,465 3,283 995
Organizational costs 14,483 12,634 3,138 --
Legal fees 13,693 872 276 62
Insurance expense 13,245 844 269 62
Other fees and expenses 43,880 8,988 1,778 568
------------ ---------- -------- ---------
Total operating expenses 3,596,370 374,610 135,181 71,786
Waiver of investment advisory
fee (Note 3) (221) (58,501) (43,586) (27,378)
------------ ---------- -------- ---------
Net expenses 3,596,149 316,109 91,595 44,408
------------ ---------- -------- ---------
Net investment income (loss) 1,614,872 25,725 174,588 (9,888)
------------ ---------- -------- ---------
REALIZED AND UNREALIZED GAIN
(LOSS) (NOTE 4)
Net realized gain (loss) --
Investment transactions (net
of foreign tax expenses of
$20,328, $892, $357 and
$1,075, respectively) 28,491,525 2,849,443 359,789 202,072
Foreign currency
transactions (733,092) (27,249) (5,692) (690)
------------ ---------- -------- ---------
Net realized gain 27,758,433 2,822,194 354,097 201,382
------------ ---------- -------- ---------
Change in unrealized
appreciation (depreciation)
--
Investments (24,061,416) 1,293,959 65,502 (154,286)
Translation of assets and
liabilities denominated in
foreign currency 26,107 (3,615) (1,487) (89)
------------ ---------- -------- ---------
Net change in unrealized
appreciation
(depreciation) (24,035,309) 1,290,344 64,015 (154,375)
------------ ---------- -------- ---------
Net realized and unrealized
gain 3,723,124 4,112,538 418,112 47,007
------------ ---------- -------- ---------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 5,337,996 $4,138,263 $592,700 $ 37,119
============ ========== ======== =========
</TABLE>
See Notes to Financial Statements
26
<PAGE>
HARDING, LOEVNER FUNDS, INC.
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY PORTFOLIO GLOBAL EQUITY PORTFOLIO
------------------------------- -------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
2000 1999 2000 1999
-------------- --------------- ----------- ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS
FROM OPERATIONS
Net investment income $ 1,614,872 $ 2,448,798 $ 25,725 $ 166,819
Net realized gain on
investments and foreign
currency transactions 27,758,433 11,927,644 2,822,194 2,658,267
Net change in unrealized
appreciation
(depreciation) on
investments and
translation of assets and
liabilities denominated in
foreign currency (24,035,309) 83,331,566 1,290,344 2,773,621
------------ ------------- ----------- ------------
Net increase in net assets
resulting from
operations 5,337,996 97,708,008 4,138,263 5,598,707
------------ ------------- ----------- ------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income (2,725,773) (5,059,466) (40,153) -
In excess of net investment
income (1,963,260) - (129,713) -
Net realized gain from
investments and foreign
currency-related
transactions (10,285,092) (337,112) (2,053,997) -
------------ ------------- ----------- ------------
Total distributions to
shareholders (14,974,125) (5,396,578) (2,223,863) -
------------ ------------- ----------- ------------
TRANSACTIONS IN SHARES OF
COMMON STOCK
Proceeds from sale of shares 76,086,955 30,381,144 281,810 201,051
Net Asset Value of shares
issued to shareholders in
payment of distributions
declared 13,829,682 4,266,161 2,099,666 -
Cost of shares redeemed (59,707,341) (124,541,828) (293,594) (15,476,183)
------------ ------------- ----------- ------------
NET INCREASE (DECREASE) IN NET
ASSETS FROM FUND SHARE
TRANSACTIONS 30,209,296 (89,894,523) 2,087,882 (15,275,132)
------------ ------------- ----------- ------------
NET INCREASE (DECREASE) IN NET
ASSETS 20,573,167 2,416,907 4,002,282 (9,676,425)
NET ASSETS
At beginning of year 328,473,211 326,056,304 21,087,071 30,763,496
------------ ------------- ----------- ------------
At end of year $349,046,378 $ 328,473,211 $25,089,353 $ 21,087,071
============ ============= =========== ============
ACCUMULATED UNDISTRIBUTED
(DISTRIBUTIONS IN EXCESS OF)
NET INVESTMENT INCOME INCLUDED
IN NET ASSETS $ (1,068,127) $ 1,079,745 $ - $ 14,428
============ ============= =========== ============
</TABLE>
See Notes to Financial Statements
27
<PAGE>
HARDING, LOEVNER FUNDS, INC.
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MULTI-ASSET GLOBAL
PORTFOLIO EMERGING MARKETS PORTFOLIO
------------------------ ---------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED FOR THE PERIOD ENDED
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
2000 1999 2000 1999*
----------- ----------- ----------- --------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS
FROM OPERATIONS
Net investment income (loss) $ 174,588 $ 153,696 $ (9,888) $ 2,948
Net realized gain on
investments and foreign
currency transactions 354,097 293,059 201,382 57,716
Net change in unrealized
appreciation
(depreciation) on
investments and
translation of assets and
liabilities denominated in
foreign currency. 64,015 303,251 (154,375) 348,309
---------- ---------- ---------- ----------
Net increase in net assets
resulting from
operations 592,700 750,006 37,119 408,973
---------- ---------- ---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income (194,827) (168,496) - -
In excess of net investment
income - - (2,900) -
Net realized gain from
investments and foreign
currency-related
transactions (274,145) (85,013) (59,290) -
---------- ---------- ---------- ----------
Total distributions to
shareholders (468,972) (253,509) (62,190) -
---------- ---------- ---------- ----------
TRANSACTIONS IN SHARES OF
COMMON STOCK
Proceeds from sale of shares 318,535 429,658 1,003,591 1,124,946
Net Asset Value of shares
issued to shareholders in
payment of distributions
declared 456,522 249,664 62,190 -
Cost of shares redeemed (272,123) (903,736) - -
---------- ---------- ---------- ----------
NET INCREASE (DECREASE) IN NET
ASSETS FROM FUND SHARE
TRANSACTIONS 502,934 (224,414) 1,065,781 1,124,946
---------- ---------- ---------- ----------
NET INCREASE IN NET ASSETS 626,662 272,083 1,040,710 1,533,919
NET ASSETS
At beginning of period 6,599,304 6,327,221 1,533,919 -
---------- ---------- ---------- ----------
At end of period $7,225,966 $6,599,304 $2,574,629 $1,533,919
========== ========== ========== ==========
ACCUMULATED UNDISTRIBUTED
(DISTRIBUTIONS IN
EXCESS OF) NET INVESTMENT
INCOME INCLUDED
IN NET ASSETS $ 112,059 $ 108,597 $ (1,400) $ 1,466
========== ========== ========== ==========
</TABLE>
* For the period from November 9, 1998 (commencement of operations) to
October 31, 1999.
See Notes to Financial Statements
28
<PAGE>
HARDING, LOEVNER FUNDS, INC.
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY PORTFOLIO
---------------------------------------------------------------------------------------------
FOR FOR FOR FOR FOR FOR
THE YEAR THE YEAR THE YEAR THE YEAR TEN MONTHS THE YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
OCT. 31, 2000 OCT. 31, 1999 OCT. 31, 1998 OCT. 31, 1997 OCT. 31, 1996* DEC. 31, 1995
------------- ------------- ------------- ------------- ------------------ -------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
NET ASSET VALUE,
BEGINNING OF PERIOD $15.50 $11.62 $11.79 $11.61 $10.77 $ 9.71
---------- ---------- ---------- ---------- ------------- ----------
INCREASE (DECREASE) IN
NET ASSETS FROM
OPERATIONS
Net investment income 0.09 0.10 0.14 0.13 0.08 0.10
Net realized and
unrealized gain
(loss) on
investments and
foreign
currency-related
transactions 0.36 3.97 (0.13) 0.05(a) 0.97 1.06
---------- ---------- ---------- ---------- ------------- ----------
Net increase from
investment operations 0.45 4.07 0.01 0.18 1.05 1.16
---------- ---------- ---------- ---------- ------------- ----------
DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income (0.13) (0.18) (0.11) (0.00)(b) (0.08) (0.10)
Excess of net
investment income (0.10) - - - (0.03) -
Net realized gain
from investments
and foreign
currency-related
transactions (0.50) (0.01) (0.03) - (0.10) -
Excess of net
realized gain on
investments and
foreign
currency-related
transactions - - (0.04) - - -
---------- ---------- ---------- ---------- ------------- ----------
Total distributions (0.73) (0.19) (0.18) (0.00) (0.21) (0.10)
---------- ---------- ---------- ---------- ------------- ----------
NET ASSET VALUE, END OF
PERIOD $15.22 $15.50 $11.62 $11.79 $11.61 $10.77
========== ========== ========== ========== ============= ==========
TOTAL RETURN 2.18% 35.46% 0.06% 1.57% 9.81%(c) 11.99%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
period (000's) $349,046 $328,473 $326,056 $387,304 $241,357 $67,727
Ratio of net
operating expenses
to average net
assets 0.99% 1.00% 1.00% 1.00% 1.00%(d) 0.99%
Ratio of net
investment income
to average net
assets 0.45% 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 -(e) 0.04% 0.04% 0.06% 0.14%(d) 0.54%
Portfolio turnover
rate 49% 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
(e) Rounds to less than 0.01%
* During the period, the Portfolio changed its fiscal year from December 31
to October 31.
See Notes to Financial Statements
29
<PAGE>
HARDING, LOEVNER FUNDS, INC.
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GLOBAL EQUITY PORTFOLIO
---------------------------------------------------------------
FOR FOR FOR FOR
THE YEAR THE YEAR THE YEAR THE PERIOD
ENDED ENDED ENDED ENDED
OCT. 31, 2000 OCT. 31, 1999 OCT. 31, 1998 OCT. 31, 1997*
------------- ------------- ------------- ------------------
<S> <C> <C> <C> <C>
PER SHARE DATA
NET ASSET VALUE, BEGINNING OF
PERIOD $20.00 $16.16 $18.70 $17.58(a)
---------- ---------- ---------- ------------
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS
Net investment income 0.03 0.05 0.20 0.19
Net realized and
unrealized gain (loss)
on investments and
foreign currency-related
transactions 3.89 3.79 (0.55) 0.94
---------- ---------- ---------- ------------
Net increase (decrease) from
investment operations 3.92 3.84 (0.35) 1.13
---------- ---------- ---------- ------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income (0.03) - (0.25) (0.01)
Excess of net investment
income (0.13) - - -
Net realized gain from
investments and foreign
currency-related
transactions (1.95) - (1.94) -
---------- ---------- ---------- ------------
Total distributions (2.11) - (2.19) (0.01)
---------- ---------- ---------- ------------
NET ASSET VALUE, END OF PERIOD $21.81 $20.00 $16.16 $18.70
========== ========== ========== ============
TOTAL RETURN 19.66% 23.76% (2.46)% 6.45%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's) $25,089 $21,087 $30,763 $64,882
Ratio of net operating
expenses to average net
assets 1.25% 1.25% 1.25% 1.25%(c)
Ratio of net investment
income to average net
assets 0.10% 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 0.23% 0.32% 0.11% 0.12%(c)
Portfolio turnover rate 57% 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
30
<PAGE>
HARDING, LOEVNER FUNDS, INC.
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MULTI-ASSET GLOBAL PORTFOLIO
---------------------------------------------------------------
FOR FOR FOR FOR
THE YEAR THE YEAR THE YEAR THE PERIOD
ENDED ENDED ENDED ENDED
OCT. 31, 2000 OCT. 31, 1999 OCT. 31, 1998 OCT. 31, 1997*
------------- ------------- ------------- ------------------
<S> <C> <C> <C> <C>
PER SHARE DATA
NET ASSET VALUE, BEGINNING OF
PERIOD $12.28 $11.41 $11.26 $10.00
--------- --------- --------- ------------
INCREASE IN NET ASSETS FROM
OPERATIONS
Net investment income 0.35 0.28 0.52 0.25
Net realized and
unrealized gain on
investments and foreign
currency-related
transactions 0.77 1.04 0.09 1.04
--------- --------- --------- ------------
Net increase from investment
operations 1.12 1.32 0.61 1.29
--------- --------- --------- ------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income (0.36) (0.30) (0.26) (0.03)
Net realized gain from
investments and foreign
currency-related
transactions (0.51) (0.15) (0.20) -
--------- --------- --------- ------------
Total distributions (0.87) (0.45) (0.46) (0.03)
--------- --------- --------- ------------
NET ASSET VALUE, END OF PERIOD $12.53 $12.28 $11.41 $11.26
========= ========= ========= ============
TOTAL RETURN 9.05% 11.84% 5.53% 12.92%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's) $7,226 $6,599 $6,327 $5,175
Ratio of net operating
expenses to average net
assets 1.25% 1.25% 1.25% 1.25%
Ratio of investment
income, net to average
net assets 2.39% 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 0.60% 0.91% 0.71% 0.92%
Portfolio turnover rate 41% 31% 29% 36%
</TABLE>
* Commencement of Operations was November 1, 1996.
See Notes to Financial Statements
31
<PAGE>
HARDING, LOEVNER FUNDS, INC.
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (CONTINUED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EMERGING MARKETS PORTFOLIO
---------------------------------
FOR FOR
THE YEAR THE PERIOD
ENDED ENDED
OCT. 31, 2000 OCT. 31, 1999*
------------- ------------------
<S> <C> <C>
PER SHARE DATA
NET ASSET VALUE, BEGINNING OF PERIOD $13.68 $10.00
--------- ------------
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS
Net investment income (loss) (0.05) 0.03
Net realized and unrealized gain on
investments and foreign
currency-related transactions 1.79 3.65
--------- ------------
Net increase from investment operations 1.74 3.68
--------- ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Excess of investment income (0.02) -
Net realized gain from investments
and foreign currency-related
transactions (0.51) -
--------- ------------
Total distributions (0.53) -
--------- ------------
NET ASSET VALUE, END OF PERIOD $14.89 $13.68
========= ============
TOTAL RETURN 12.18% 36.80%(a)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's) $2,575 $1,534
Ratio of net operating expenses to
average net assets 1.75% 1.75%(b)
Ratio of net investment income
(loss) to average net assets (0.39)% 0.24%(b)
Decrease reflected in above expense
ratios due to waiver of investment
advisory and administration fees,
and reimbursement of other expenses 1.08% 4.14%(b)
Portfolio turnover rate 28% 53%(a)
</TABLE>
* Commencement of Operations was November 9, 1998.
(a) Not annualized
(b) Annualized
See Notes to Financial Statements
32
<PAGE>
HARDING, LOEVNER FUNDS, INC.
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2000
--------------------------------------------------------------------------------
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, 2000: International Equity Portfolio ("International Equity"); Global Equity
Portfolio ("Global Equity"); Multi-Asset Global Portfolio ("Multi-Asset Global")
(collectively, the "Initial Portfolios"), 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
The accounting policies of the Fund are in conformity with generally accepted
accounting principles ("GAAP") for investment companies. The following is a
summary of the Fund's significant accounting policies:
ESTIMATES
The preparation of financial statements in accordance with GAAP 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.
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, 2000, there were no securities in the Fund which
required valuation by the Board of Directors.
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 accretes discount or amortizes 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.
33
<PAGE>
HARDING, LOEVNER FUNDS, INC.
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 2000
--------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
EXPENSES
The costs incurred by the Fund in connection with the organization and initial
registration of shares of the Initial Portfolios 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, 2000 was $31,800.
Expenses directly attributed to a specific Portfolio of the Fund are charged to
that Portfolio's operations; expenses not directly attributable to a specific
Portfolio are allocated among the Portfolios either equitably or based on their
average daily net assets.
DIVIDENDS TO SHAREHOLDERS
It is the policy of the Fund to declare dividends from net investment income
annually. Net short-term and long-term capital gains distributions for the
Portfolios, if any, normally are distributed on an annual basis.
Dividends from net investment income and distributions from net realized gains
from investment transactions have been determined in accordance with income tax
regulations and may differ from net investment income and realized gains
recorded by the Portfolios for financial reporting purposes. Differences result
primarily from foreign currency transactions and timing differences related to
recognition of income, and gains and losses from investment transactions. To the
extent that any differences which are permanent in nature result in
overdistributions to shareholders, the amount of the overdistribution is
reclassified within the capital accounts based on its federal tax basis
treatment. Temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income and net realized capital gains
for financial reporting purposes but not for tax purposes are reported as
distributions in excess of net investment income and net realized capital gains,
respectively. To the extent that they exceed net investment income and net
realized gains for tax purposes, they are reported as returns of capital.
During the year ended October 31, 2000, the Portfolios reclassified the
following permanent book to tax differences [increases (decreases)]:
<TABLE>
------------------------------------------------------------------------------------------------------
UNDISTRIBUTED INVESTMENT ACCUMULATED NET CAPITAL STOCK
PORTFOLIO INCOME, NET REALIZED LOSS IN EXCESS OF PAR VALUE
<S> <C> <C> <C>
------------------------------------------------------------------------------------------------------
International Equity $926,289 $(595,053) $(331,236)
Global Equity 129,713 (129,713) --
Multi-Asset Global 23,701 (23,701) --
Emerging Markets 9,922 (5,424) (4,498)
</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.
34
<PAGE>
HARDING, LOEVNER FUNDS, INC.
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 2000
--------------------------------------------------------------------------------
3. SIGNIFICANT AGREEMENTS AND TRANSACTIONS WITH AFFILIATES
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. Under this agreement, the Fund incurred
$436,207 in administration fees for the year ended October 31, 2000.
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 $11,106 were payable to directors who are not employees of
the Investment Adviser at October 31, 2000.
4. INVESTMENT TRANSACTIONS
Cost of purchases and proceeds from sales of investment securities, other than
short-term investments, for the year ended October 31, 2000, were as follows for
each of the Portfolios:
<TABLE>
---------------------------------------------------------------------------------------
PURCHASE COST OF PROCEEDS FROM SALES OF
PORTFOLIO INVESTMENT SECURITIES INVESTMENT SECURITIES
<S> <C> <C>
---------------------------------------------------------------------------------------
International Equity $192,147,393 $173,600,719
Global Equity 14,319,176 13,799,054
Multi-Asset Global 3,046,868 2,897,277
Emerging Markets 1,564,786 664,773
</TABLE>
The cost of investments for Federal income tax purposes and the components of
net unrealized appreciation on investments at October 31, 2000, for each of the
Portfolios were as follows:
<TABLE>
-------------------------------------------------------------------------------------
UNREALIZED UNREALIZED
PORTFOLIO APPRECIATION DEPRECIATION NET COST
<S> <C> <C> <C> <C>
-------------------------------------------------------------------------------------
International Equity $71,724,221 $13,374,216 $58,350,005 $293,908,703
Global Equity 5,369,791 633,137 4,736,654 20,327,358
Multi-Asset Global 1,200,013 526,273 673,740 6,519,102
Emerging Markets 625,773 433,290 192,483 2,380,670
</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.
35
<PAGE>
HARDING, LOEVNER FUNDS, INC.
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 2000
--------------------------------------------------------------------------------
5. FORWARD FOREIGN EXCHANGE CONTRACTS (CONTINUED)
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. None of the
Portfolios had open foreign currency transactions to buy or sell currency on the
spot markets as of October 31, 2000.
6. CAPITAL SHARE TRANSACTIONS
Transactions in capital stock for International Equity were as follows for the
periods indicated:
<TABLE>
------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
OCTOBER 31, 2000 OCTOBER 31, 1999
------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
------------------------------------------------------------------------------------
Shares sold 4,562,142 $ 76,086,955 2,216,774 $ 30,381,144
Shares issued upon
reinvestment of dividends 769,170 13,829,682 341,566 4,266,161
---------- ------------ ---------- -------------
5,331,312 89,916,637 2,558,340 34,647,305
Shares redeemed (3,591,332) (59,707,341) (9,442,379) (124,541,828)
---------- ------------ ---------- -------------
Net increase (decrease) 1,739,980 $ 30,209,296 (6,884,039) $ (89,894,523)
========== ============ ========== =============
</TABLE>
Transactions in capital stock for Global Equity were as follows for the periods
indicated:
<TABLE>
------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
OCTOBER 31, 2000 OCTOBER 31, 1999
---------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
------------------------------------------------------------------------------------
Shares sold 12,702 $ 281,810 10,487 $ 201,051
Shares issued upon
reinvestment of dividends 96,893 2,099,666 -- --
------- ---------- -------- ------------
109,595 2,381,476 10,487 201,051
Shares redeemed (13,192) (293,594) (860,028) (15,476,183)
------- ---------- -------- ------------
Net increase (decrease) 96,403 $2,087,882 (849,541) $(15,275,132)
======= ========== ======== ============
</TABLE>
Transactions in capital stock for Multi-Asset Global were as follows for the
periods indicated:
<TABLE>
------------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
OCTOBER 31, 2000 OCTOBER 31, 1999
---------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
------------------------------------------------------------------------------------
Shares sold 24,999 $ 318,535 36,825 $ 429,658
Shares issued upon
reinvestment of dividends 36,261 456,522 21,881 249,664
------- --------- ------- ---------
61,260 775,057 58,706 679,322
Shares redeemed (21,625) (272,123) (75,960) (903,736)
------- --------- ------- ---------
Net increase (decrease) 39,635 $ 502,934 (17,254) $(224,414)
======= ========= ======= =========
</TABLE>
36
<PAGE>
HARDING, LOEVNER FUNDS, INC.
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 2000
--------------------------------------------------------------------------------
6. CAPITAL SHARE TRANSACTIONS (CONTINUED)
Transactions in capital stock for Emerging Markets were as follows for the
periods indicated:
<TABLE>
-----------------------------------------------------------------------
PERIOD FROM
YEAR ENDED NOVEMBER 9, 1998*
OCTOBER 31, 2000 TO OCTOBER 31, 1999
------------------ -------------------
SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
-----------------------------------------------------------------------
Shares sold 57,205 $1,003,591 112,117 $1,124,946
Shares issued upon
reinvestment of dividends 3,570 62,190 -- --
------ ---------- ------- ----------
60,775 1,065,781 112,117 1,124,946
Shares redeemed -- -- -- --
------ ---------- ------- ----------
Net increase 60,775 $1,065,781 112,117 $1,124,946
====== ========== ======= ==========
</TABLE>
* Commencement of operations.
7. REPURCHASE AND REVERSE REPURCHASE AGREEMENTS
Each Portfolio may enter into repurchase agreements under which a bank or
securities firm that is a primary or reporting dealer in U.S. Government
securities agrees, upon entering into a contract, to sell such securities to a
Portfolio and repurchase such securities from such Portfolio at a mutually
agreed upon price and date.
Each Portfolio also is permitted to enter into reverse repurchase agreements
under which a primary or reporting dealer in U.S. Government securities
purchases securities from a Portfolio and such Portfolio agrees to repurchase
the securities at an agreed upon price and date.
Each Portfolio may engage in repurchase and reverse repurchase transactions with
parties selected on the basis of such party's creditworthiness. Securities
purchased subject to repurchase agreements must have an aggregate market value
greater than or equal to the repurchase price plus accrued interest at all
times. If the value of the underlying securities falls below the value of the
repurchase price plus accrued interest, the Portfolio will require the seller to
deposit additional collateral by the next business day. If the request for
additional collateral is not met, or the seller defaults on its repurchase
obligation, the Portfolio maintains the right to sell the underlying securities
at market value and may claim any resulting loss against the seller. When a
Portfolio engages in reverse repurchase agreement transactions, such Portfolio
will maintain, in a segregated account with its custodian, liquid securities
equal in value to those subject to the agreement.
37
<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, 2000, and the related statements of operations for the year
then ended, 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 auditing standards generally accepted
in the United States. 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, 2000 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., at
October 31, 2000, the results of their operations for the year then ended, 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 accounting principles generally accepted in the United States.
[ERNST & YOUNG SIGNATURE]
New York, New York
December 12, 2000
38
<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 $3,772,262, $397,514 and $190,114 of the capital gains
distributions paid by the International Equity, Global Equity and Multi-Asset
Global Portfolios, respectively, during the fiscal year October 31, 2000 are
subject to maximum tax rates of 20%.
The Global Equity Portfolio and the Multi-Asset Global Portfolio have designated
41.58% and 10.60%, respectively, of distributions from net investment income as
qualifying for the dividends received deduction for corporations.
The International Equity Portfolio has elected to pass through the credit for
taxes paid in foreign countries during its fiscal year ended October 31, 2000.
In accordance with current tax laws, the Foreign Income and Foreign Tax per
share (for a share outstanding on October 31, 2000) is as follows:
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY
--------------------------
GROSS FOREIGN
COUNTRY FOREIGN TAX DIVIDENDS
<S> <C> <C>
--------------------------------------------------------------------
Australia 0.0000 1.8228
Brazil 0.0000 0.0685
United Kingdom 0.4597 5.1739
Cayman Islands 0.1075 0.7000
Canada 0.1487 0.9960
Denmark 0.0664 0.4428
France 0.7505 4.4719
Germany 0.0466 1.5802
Hong Kong 0.0000 2.2555
Italy 0.0271 0.1800
Japan 0.1236 1.0403
Mexico 0.0100 0.4613
Netherlands 0.4648 4.7882
Singapore 0.0156 0.5349
Spain 0.0305 0.2034
Sweden 0.2095 1.6228
Switzerland 0.3867 2.9701
Taiwan 0.1176 0.5879
</TABLE>
Shareholders will receive more detailed information along with their
Form 1099-DIV in January, 2001.
39
<PAGE>
HARDING, LOEVNER FUNDS, INC.
--------------------------------------------------------------------------------
OFFICERS & DIRECTORS AND OTHER PERTINENT INFORMATION
--------------------------------------------------------------------------------
OFFICERS AND DIRECTORS
R. Kelly Doherty
DIRECTOR OF THE FUND
Jane A. Freeman
DIRECTOR OF THE FUND
Samuel R. Karetsky
DIRECTOR OF THE FUND
Carl W. Schafer
DIRECTOR OF THE FUND
David R. Loevner
PRESIDENT AND DIRECTOR
OF THE FUND
Susan C. Mosher
SECRETARY OF THE FUND
Timothy F. Osborne
TREASURER OF THE FUND
Richard Reiter
ASSISTANT SECRETARY
OF THE FUND
INVESTMENT ADVISER
Harding, Loevner Management, L.P.
50 Division Street, Suite 401
Somerville, NJ 08876
DISTRIBUTOR
First Fund Distributors, Inc.
4455 E. Camelback Road
Suite 261-E
Phoenix, AZ 85018
ADMINISTRATOR, CUSTODIAN AND FUND
ACCOUNTING AGENT
Investors Bank & Trust Company
P.O. Box 9130
Boston, MA 02117
TRANSFER AND DIVIDEND
DISBURSING AGENT
Investors Bank & Trust Company
P.O. Box 9130
Boston, MA 02117
LEGAL COUNSEL
Dechert
1775 Eye Street, N.W
Washington, D.C. 20006-2401
INDEPENDENT AUDITORS
Ernst & Young LLP
787 Seventh Avenue
New York, NY 10019
